    [From the U.S. Government Printing Office, www.gpo.gov]

            Huntington Beach Energy Se

            Report + 1

            Preserving Surface Access to Underground
                    Oil Reserves in Developed Areas

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          TD
          195
          T4
          P74
          1981
          no. 1
          CA    City of Huntington Beach
           Department of Development Services
                    Planning Division
                     February, 1981

            CITY OF HUNTINGTON BEACH

            CITY COUNCIL
                Ruth S. Bailey, Mayor
                Ruth Finley, Mayor Pro-Tem
                Jack Kelly
                Don MacAllister
                Bob Mandic
                Ron Pattinson
                John Thomas

            PLANNING COMMISSION
                Mark Porter, Chairman
                Grace H. Winchell, Vice-Chairman
                Wesley Bannister
                Ralph H. Bauer
                Bruce Greer
                Beverly J. Kenefick
                Jean Schumacher

            Frank B. Arguello
            Acting City Administrator

           HUNTINGTON BEACH ENERGY SERIES

           REPORT #1

           --jr

                        PRESERVING SURFACE ACCESS TO UNDERGROUND
           Ln
                              OIL RESERVES IN DEVELOPED AREY

           CITY OF HUNTINGTON BEACH
           DEPARTMENT OF DEVELOPMENT SERVICES
           JAMES W. PALIN, DIRECTOR

           FEBRUARY, 1981

                                                  Table of Contents

                                                                                                    PAGE

                FORWARD                                                                                1

                DEFINITIONS                                                                            2

                1.0    INTRODUCTION                                                                    4

                2.0    COASTAL ZONE MANAGEMENT AND ACCESS TO OIL RESERVES                              7

                3.0    UNITIZATION, WATERFLOODS, AND THE ACCESS PROBLEM                                9
                       3.1      Primary, Secondary and Enhanced Oil Recovery Technology                10
                       3.2      Difficulties in Achieving Unit Operations                              11
                       3.3      Voluntary Unitization: Difficulties in Assigning
                                Costs and Benefits                                                     12
                       3.4      Compulsory Unitization                                                 14
                       3.5      Advantage of Unitization                                               15

                4.0    ROLES FOR CITY GOVERNMENTS IN PROTECTING ACCESS                                 17
                       TO UNDERGROUND OIL POOLS

                5.0    TOWNLOT/DOWNTOWN ANALYSIS                                                       19
                       5.1      Brief History                                                          19
                       5.2      Remaining, Recoverable Oil                                             22
                       5.3      The Possibility of a Unitization and Enhanced Recovery
                                Project                                                                27
                       5.4      Surface Area Requirements                                              30

                6.0    POLICY OPTIONS FOR THE CITY                                                     36
                       6.1      Existing Land Use Regulations                                          37
                       6.2      Strategies to Help Preserve Existing Drill Sites                       37
                       6.3      Strategies to Help Preserve Other Oil Operation Sites                  39
                       6.4      Permitting New Wells in the Townlot Area                               39
                       6.5      New Oil Sites                                                          40
                       6.6      Other Possible Actions                                                 42

                7.0    CONCLUSION                                                                      43

                8.0    NOTES                                                                           44

                APPENDICES                                                                             45
                       Appendix A:      Questionnaire and Cover Letter                                 45
                       Appendix B:      Bibliography                                                   48

                                                        Foreword

                    This is the first in a series of discussion papers on energy-related issues prepared by
               the Planning Division of the City of Huntington Beach. Huntington Beach is a center for
               many energy-related activities including onshore and offshore oil production, an
               electric ity-generating power plant, and increasingly, solar and conservation technologies.
               The purpose of these reports is to help the City to accommodate the continued production
               of so vital a resource as energy while at the same time mitigating as much as possible any
               adverse impacts on the community that such activities might incur. Other reports in this
               series include the following:

                    #2   Fiscal Impacts of Oil Operations in Huntington Beach
                    #3   Oil Spill Contingency Planning in Huntington Beach
                    #4   Enhanced Oil Recovery Technology
                    #5   Solar and Conservation Policies at the Local Level

                    This publication was prepared with financial assistance from the U.S. Office of
               Coastal Zone Management, National Oceanic and Atmospheric Administration, Linder the
               provisions of the Federal Coastal Zone Management Act of 1972, as amended, and from
               the California Coastal Commission under the provisions of the Coastal Act of 1976.

                                                       Definftions

                   This report necessarily discusses some technical aspects of the oil industry.
              Consequently, some terms are used which may not be familiar to the reader. The
              following definitions section was prepared to help clarify the meaning of some of these
              terms. To ease reference, all words defined in this section are italicized the first time
              they appear in the report's text.
              Consolidation:   The practice of concentrating oil facilities into relatively small,
              intensively-used surrace areas.
              Economies of scale     Lower average costs or greater average profits resulting from a
              larger business entity rather than a smaller one undertaking a particular function.
              Enhanced recovery technology In its broadest sense, any method which is used to recover
              more oil from a petroleum reservoir than would be obtained by primary methods;
              sometimes used to mean tertiary recovery only.
              Free-rider problem: Situation in which one party gains from the efforts of another party,
              without contributing to those efforts.
              Injectors   Wells through which pressurized water, steam or other fluids are driven or
              "injected' into an oil reservoir.
              Joint organization: A cooperative group formed by several oil operators working a
              common reservoir for the purpose of investigating the feasibility of forming a unit.
              Participation formula: An agreement among oil operators who have formed a unit
              regarding the proportion of expenses and profits of the unit each operator will be
              allocated.
              Primary production: Oil driven up through wells by natural pressure in the formation or
              by pumping units, without injecting water or other fluids to help force the oil to the
              surface.

              Producers: Wells used to pump out oil from a reservoir.
              Recycling In this context, refers to the redevelopment of the surface area of an oil field
              for uses such as housing or commerce.
              Secondary production: Oil extracted after primary production usually by injecting gas or
              water into the reservoir.

              Technical committee: A committee established by a joint organization of oil operators
              prior to the formation of a unit which is responsible for investigating variables such as the
              geology of the oil reservoir, characteristics of the oil and the best potential recovery
              techniques.
              Tertiary methods: Oil recovery methods applied after secondary production which usually
              involve the injection of chemicals with water into the reservoir to help push out more oil
              than water alone can. In some cases, these methods are applied after primary production.

              2

               Unit: The entity formed by several different oil companies which work a common oil pool
               in order to share equipment and mineral interests to produce the reservoir as a single
               party. When the interests in a pool are fragmented, units are essential for the use of most
               enhanced oil recovery methods which can only be applied on a coordinated, pool-wide
               basis.

               Unitization: The process of forming a unit.

               Waterflood: A secondary recovery program through which pressurized water is injected
               into a reservoir in order to push more oil from the pores in the rock.

               Water injection: Another term for "waterflood.11
               Well-bore: The hole drilled f rom the surf ace into the underground oil pool f or the purpose
               of-I-njecting materials into the pool and/or extracting materials out of it.

               Zones: The underground rock strata which contain oil.

                                                                                                           3

               1.0 Introduction

               The City of Huntington Beach overlies an                     production rates. Thus, many parts of the
               old and very productive oil field which,                     field are recycling to new uses, especially to
               since its discovery in 1920, has produced                    housing.
               almost a billion barrels of oil. Although the
               field passed its productive peak decades                     In most cases, however, the recoverable oil
               ago, it still produced enough oil during 1979                in the underground reservoir has riot been
               to rank seventh among all California oil                     exhausted      when     the    surface     area     is
               fields in annual output. Over 1,000 wells                    developed.        For       example,        primary
               are    still    active     in   the     field     and        production, simply pumping as much oil as
               approximately 472 acres of the City are                      possible without injecting water or other
               used for oil operations.                                     substances to help force it out, typically
                                                                            extracts only 15 to 20 percent of the oil in
               For several years, however, the amount of                    place. Consequently, when an oil field in
               land devoted to oil extraction in Huntington                 which only primary production techniques
               Beach has declined. The reasons for this are                 have been utilized recycles to new uses, the
               clear. In those parts of the oil field where                 great majority of the oil usually remains in
               ivabar irijection or other enhanced recovery                 the ground.
               technologies      have     not     been      applied,
               ')r0-;Uc1J0[1      levels       have         dropped         Existing      and
               I                                                                                   well-known         secondary
               Significa-Itly. At the same titne, the value                 production      techniques,     such     as    water
               of   the   surface     area   for   new    uses     --       injection, can recover an additional 10 to 30
               especially    for housing      here    in    coastal,        percent of the oil. In addition, several new
               suburban Southern California -- has risen                    technologies,     tertiary methods, are being
               dramatically.      Building on the oil field                 developed and tested to extract the oil
               surface has become more profitable than                      remaining      after     secondary      produc tion.
               continued     oil   extraction     at    very     low

               4

                                                                      tertiary methods as well.
                                  Figure 1.1                          When the interests in an oil pool are highly
                                                                      fragmented, however, the numerous parties
                                                                      must act as a unit before these advanced
                                     Secondary
                                                                      technologies  can be applied. The operators
                                                                      encounter several difficulties in forming a
                                                                      coordinated "unit," and often cannot act
                                                                      together to apply these more efficient
                                                                      production methods.
                         Prima
                                                                      These difficulties are  discussed later in this
                                                                      report.   How-ver, if these problems         are
                                                                      overcome, unitization can be achieved        and
                              Remaining Oil--                         enhanced    recovery    ineth.-AS   3ppliod   to
                              Recovery by   Future                    provide large amounts   of oil.
                              Technology?
                                        �IN,                          Oil   may    riot  I,-) erecovered    (even    if
                                                                      unitization becomes economically feasible)
                                   i@1111 V1,

                                  .:02,
                                                                      if there are no surface areas from which
                                      "N
                                                                      extraction Can     be   accomplished.     It is
                                                                      precisely   those   areas   where     secondary
                       Percentage of Oil in the Ground                methods     are  not    currently   used    that
                       Which is Usually Recovered by                  production has declined so         much that
                       Different Extraction Methods.                  abandonment of the field for redevelopment
                                                                      is  more profitable      than    continued   oil
                                                                      extraction.   Thus, the parts of the field
                       Source: Petroleum Engineer,                    which are most likely to be developed for
                       January,1976                                   residential or commercial uses and to lose
                                                                      future access from the surface are also the
                                                                      ones where secondary methods have not
                                                                      been tried and where their application could
                                                                      potentially produce large amounts of oil in
                Several of these methods are being tried in           the future.
                parts of the Huntington Beach field.
                                                                      Domestic oil supplies are an increasingly
                Secondary and most tertiary techniques                scarce and valuable resource. Their value
                cannot  be applied on an individual well              derives not only from their economic worth
                basis.  Fluids, such as water or water                but   from    other,  less-tangible,    benefits
                treated  with chernicals, are forced through          related to the decreased reliance on foreign
                several   wells (injectors),    sweeping     the      oil sources. These benefits reach beyond
                residual Oil out of the pore spaces and then          the local community and have 2 regional and
                to several other wells (producers) which              even     a    national    importance.       The
                pump the oil to the surface. The injectors            greater-than -local importance of domestic
                and producers are typically arranged in               oil would argue that the preservation of
                patterns so that the injected fluids can              significant   oil  production     opportunities
                efficiently sweep through an oil pool. Thus,          should be the concern of the State or the
                entire oil pools must be treated as a whole           federal government, and not       primarily of
                or a unit and these methods must be applied           the City.
                in a coordinated way.
                                                                      Local governments, however,        traditionally
                When the entire pool is owned by a single             have control over land use. It is the City
                company, use of these methods is relatively           which must control surface activities if land
                easy.   In fact, the major operators          in      for  future   oil  extraction    needs to     be
                Huntington Beach -- Afflinoil, USA and                protected.    The   local   government      also
                Chevron, USA -- have been waterflooding               shares the responsibility of protecting the
                their  parts of    the  field  for  over    two       interests    of  the    present   and     future
                decades, and both companies are testing               community   surrounding oil operations.

                                                                                                                    5

              Consequently,     another    reason    for    City       continuation of a very valuable revenue
              involvement in this issue is to ensure that              source in the community. The purpose of
              any adverse impacts on       nearby uses from            this report is to discuss the protection of
              future   oil   operations    are    reduced     to       access to oil resources as an important
              reasonable levels. One other consideration               consideration for local land use policies. It
              that the City must weigh in assessing the                discusses the numerous variables on which
              access issue is that oil production generates            access preservation can be based, suggests a
              substantial   tax   revenues     to   the    local       range of protection strategies, and analyzes
              government.     Protecting access and the                specific areas in Huntington Beach where
              option     to    apply     future      extraction        they could be applied.
              technologies    m ay    be   crucial    f or   the

              6

                41.0 Coastal Zone Management

                     and Access to Oil Reserves

               The California Coastal Act of 1976 calls for               Among the considerations relevant to the
               the protection of the natural resources of                 long-term     utilization    of    these     Coastal
               California's coastal zone. Among the goals                 resources is the need to protect surface
               of the Act is to:                                          access to the oil reserves. The area of the
                                                                          City where the most significant deposits
               "Assure orderly, balanced utilization and                  still in primary production are found, and
               conservation     of   coastal    z one    resources        where future access is most jeopardized, is
               taking into account the social and economic                the    Town lot/Downtown        area,   wh ich     is
               needs of the people of the state."i                        partially in the coastal zone. (See Figure
                                                                          2.1). The City recognized this issue in the
               Certainly    the    most    significant     natural        Land Use Plan of its LCP, which includes
               resources in and near the Huntington Beach                 policies to amend the municipal code, if
               coastal zone include the long-productive                   necessary, to help ensure that such surface
               deposits of oil.      In accordance with the               access is reserved, if it is essential to the
               intent of the Coastal Act, the City is                     future    development       of    significant     oil
               concerned with the orderly utilization of                  resources. This report is intended to help
               these deposits. The City's Local Coastal                   the City analyze these issues, as a step
               Plan    (LCP)    policies    are    intended      to       toward refining its policies and ordinances
               accommodate the legitimate needs of the                    aimed at ensuring the efficient, long-term
               oil industry while also protecting other                   use of these important coastal resources.
               important coastal resources such as the
               recreational and visual amenities of the
               shoreline.

                                                                                                                              7

        00

                                                                       Coastal Zone Boundary

                                                                        A

                        ------------

                  I mED '-DD 0M 0   ED @Dj zflD ED M ED ED uM EE
                  M ED ED M   M ED  ED PD Ed DD M ED M ED ED ED ff,
                  M ED  ED ED M @7 ED ED ED ED ED ED M ED Dj ED  EDI
                     T  ED ED M ED ED M ED ED M ED ED M ED ED    T M ED Ul   'D@
                              6 z   V
                              'i X2
                              2
                       UD'
                  LI-11 11-LI 17,1710 [111 Ell] 1111111111
                                                        11 1111
                  1:1 F1 1:11 F1 F1 L11 El El El El EJ E-1 = = =
                        -AN                                      A-         -A.

              Xft         Figure 2.1 Townlot/Downtown, Huntington Beach.
                                    Source: Huntington Beach Planning Division.
                            huntington beach planning division

              3.0 Unitization, Enhanced Recovery

                   and the Access Problem

              Providing future access to underdeveloped      apply  secondary  or  tertiary produc tion
              oil reserves is usually a concern only where   technologies. Consequently, a diSCLJSSiOr- nf
              many operators work a common reservoir         how unitization is related to these rneth,),i
              and they have not been able to tinitizc and    and why unitization is sometimes diffii,,"'

                                                     Figure 3.1
                         Pressurized
                               Water                                       Oil
                                   IQ     Injection Pump
                                                             Producing
                        Injection                                 Well

                             Well

                                                                        Oil Pushed by
                                     Pressurized Water                  Injected Water
                                     Enters oil Zone
                                              Side View of a Waterflood Section.
                                              Source: Chevron, USA.                                     9

              to achieve is very important to an analysis             Much more of the oil can often be recovered
              of the access issue.                                    if pressurized water is injected into the oil
                                                                      pool. The water helps to move the oil
              3.1    Primary, Secondary and "Enhanced"                through the pores in the rock.           In this
                     Oil Recovery Technology                          technique, the pressurized water is forced
                                                                      into the reservoir through "injector" wells.
              The simplest and most common method of                  The water moves out in all directions from
              extracting oil is to drill a well into the              these wells, sweeping oil in front of it. (See
              oil-laden rock (usually sandstone in this               Figure 3.1.)
              area) and pump as much of the oil as
              possible. However, oil is a sticky, thick               Other      we 11s,  called   "produc ing,"     are
              substance which does not flow very easily               arranged around the injectors to pump out
              through the pores between the grains of                 the oil and water. (See Figure 3.2.)
              sand in the rock.       Often, more than 80
              percent of the original oil in place remains            To efficiently use     the pressurized water,
              in   the   reservoir   after    th is  "primary"        producing and injector wells are arranged in
              technique is accomplished.                              patterns which allow most of the oil pushed
                                                                      by the water to be pumped out. (See Figure
                                                                      3.3.)
                                  Figure 3.2

                    ..,-5                                                               Figure 3.3

                                                                                 X                     X
                                                                                        X     X              X

                                                                                   0      0       0      0

                                                                                 X      X     X        X     X

                                                                                   0      0       0      0

                                                                                 X      X     X        X     X
                             water

                                                                                 X
                                                                                        injection well
                                                                                 0
                                                                                        production well
                                                      ......... .

                                                                                 Example of Well Pattern    in
                                                                                 Waterflood Program.

                                                                                 Source: Oil Well Drilling
                                                                                 Technology, McCray and
                     ressu   ized water from     the                             Cole, 1973.
                    injection well () forces oil
                    toward tne producing wells        0

                    Top View of Waterflood.                           These patterns are not always reflected in
                                                                      the surface locations of the wells because
                    Source: Huntington Beach Planning                 wells can be drilled I'directionally," that is,
                                                                      at an angle, and it is the location of the
                              Division.                               bottoms of the wells in the oil pool itself
                                                                      which is so important to the application of
                                                                      these      techniques.    An     advantage      of
                                                                      directional drilling is that a few, centralized
                                                                      surface       parcels        can       sometimes
                                                                                                     wwe
                                                                                                       el

                 The practice of concentrating facilities             accommodate         many     directionally-drilled
              into small, intensively-used surface areas, is          wells      through     which     much       larger
       10     called consolidatio?l.                                  underground areas can be tapped.*

                Clearly, this method which is called "water               program. In fact, an important reason why
                injection" or "waterflood," cannot be applied             unitization is not tried in many cases is that
                through a single well. Rather, many wells                 there is no large company with enough of an
                are involved which must be worked in a                    interest in the reservoir to warrant the
                coordinated way; the location and depth of                costs and risks of trying to form a unit.
                the wells, the timing of the injecting and                Small oil companies usually do not have the
                producing phases, the pressure applied at                 technical or financial resources tb instigate
                different times and locations, and many                   a unit.
                other variables must be planned together to
                get the best use of the technique.             The        However, even when a large corporation has
                entire pool must be treated as a whole, or as             an interest in the pool, it must overcorne
                a flunit" -- otherwise a significant part of              several barriers before unitization can be
                the investment in drilling the well and                   achieved.
                injecting water under pressure may be lost
                because much of the oil may be pushed                     First of all, there is a significant incentive
                al)out but not collected.                                 for   any    individual     operator    not     to
                                                                          participate  in a unit while hoping that his
                When a single company works an entire oil                 more numerous neighbors instigate the
                pool, this type of production method is                   project anyway. In this situation, the other
                easily     accomplished.        When        several       operators in the field incur the cost of
                operators are pumping from the same pool,                 developing the secondary recovery program,
                they must agree to work together as a unit.               while at the same time, if his wells are
                This, however, is often very difficult. These             favorably located, the hold-out is able to
                difficulties will be discussed more fully in              recover some of the oil swept by the unit's
                the next section.                                         injection pattern.     The hold-out does not
                                                                          share in the costs of implementing the
                Even after secondary recovery, more than                  program, but he shares in the increased
                50 percent of the oil remains in the ground.              production.    Often,    so    many     operators
                New     methods     are   being    developed     to       refuse to join a unit for this reason, that the
                recover some of this oil. Many of these                   program     cannot    be    undertaken.       This
                involve injecting substances into the oil                 predicament is often referred to as the
                zones along with water; these substances                  free-rider problem.
                help push out more oil than water can
                alone. Again, however, these techniques are               Federal price controls on oil have often
                most efficiently     applied on a pool-wide               been cited as inhibiting unitization.          The
                basis.*     These     technologies     are    often       federal government has recently taken steps
                called   "tertiary     production"   when      they       to deregulate the price of all domestic
                follow an earlier    water injection program,             production, so price controls are no longer
                However,     in   a   reservoir    where     water        an important consideration in analyzing a
                injection has not    occured, these techniques            unit's potential profits.
                might be applied simultaneously with or
                instead of a simple waterflood, to increase               Some parties may not be interested in
                the efficiency of production.                             joining a unit because the oil operations are,
                                                                          in fact, owned by firms whose principal
                3.2     Difficulties     In     Achieving      Unit       interest is in redeveloping the very valuable
                        Operations                                        surface land at a time when it is most
                                                                          profitable.   Such firms do not want to
                A large      oil   company      which    holds    a       commit      the ir  surface    holdings    to     a
                substantial fraction of an oil pool will be the           long-term      un it    agreement       for     oil
                party most likely to try a unitization                    production.      Th is   problem      could     be
                                                                          overcome if these operators are willing to
                                                                          join on the basis of mineral rights, but not
                     However, not all such technologies are so            surface area or equipment -- provided
                     applied.    See Report 4 in this series,             enough surface land still rernains to produce
                     "Enhanced Oil Recovery," for a fuller                the field economically.
                     discussion of these methods.

               Another potential problem involves the                        that could be recovered and the suitability
               liability of a unit for production decline                    of       the       reservoir       to       secondary
               among       non-participants.          if      enough         production--and hence the potential profits
               operators are willing to participate          that a          that could be realized from a unitization
               un it   waterflood        is    undertaken,        the        prograrn--leads some of the parties holding
               operations could result in     a non-partic ip ant's          an interest in the reservoir to pursue a
               production     declining (although         often      it      voluntary unit agreement.
               increases as explained above).*            The unit
               may     then     be   liable   for    the    loss    in       Usually,     a    major      operator     holding      a
               production.     Court     cases    in   Texas      and        substantial fraction of the interest in the
               Kansas have absolved units of such liability;                 reservoir contacts other ownership interests
               however, some companies have cited the                        and invites them to a meeting to explain
               risk that the unit might be held liable as a                  why a unit operation and a field-wide
               reason for not participating.                                 recovery project may be desirable. Often,
                                                                             many operators are not interested because
               Thus, for all these reasons,      it is difficult to          they     have      no     first-hand       unitization
               get all the parties that hold     an interest in an           experience,      or   they     do   not have        the
               oil pool to join a unit voluntarily. In light of              technical background to assess the potential
               this, and the fact that unitization and                       value of the project. Many operators are
               enhanced recovery is the most efficient                       simply suspicious of the true intentions of a
               method of extracting a very                  valuable         major company, doubting that small firms
               resource,     most    states    have      established         will     get   fair   treatment       in   the     joint
               compulsory unitization laws. These require                    arrangement. Other reasons why individual
               hold-outs    to    join a    unit    if a      certain        operators      might      not   express      even      a
               percentage   of the total interest in a field is              tentative     interest     in  the    project were
               willing   to participate.        This percentage              discussed above.
               varies from 60 percent to 85 percent. (See
               Table 3.1.)                                                   In some cases, however, several of the
                                                                             parties    are    tentatively     interested     in    a
               The     compulsory       unitization       laws      in       common operation and they begin to work
               California, however, are limited in their                     on a unitization agreement. This is usually
               application and may not be relevant to                        a very long, difficult and costly process.
               Huntington         Beach.        Voluntary         and        The first step is the initiation of a joint
               compulsory    unitization are the topics of the               organization.
               next sections.
                                                                             The joint organization usually establishes
               3.3     Voluntary Unitization: Difficulties in                several committees to research information
                       Assigning Costs and Benefits                          necessary for developing the unit. The most
                                                                             important of these is probably the technical
               Despite the risks and costs of trying to put                  committee whose task is to determine the
               together a unit, sometimes the amount of oil                  geology of the reservoir and to recommend
                                                                             the best recovery technique to be applied.
                                                                             This committee analyzes such factors as the
               *This could occur if the hold-out's well were                 areal extent of the oil zones, their depth
               so close to the unit's injectors that the oil in              and thickness, faulting patterns, existing
               the zone near his well is swept away by the                   well-bore distribution, and surface areas
               pressurized water. The result would be a                      available for new wells and equipment. The
               large increase in the amount of water                         committee then evaluates possible recovery
               pumped from his well, but not in the amount                   methods. Historically, most units were put
               of oil.                                                       together        to     apply       simple        water

               12

                                        Percent of Working                     Percent of Working                     Percent of working
                                        Interest Required                      Interest Required                      Interest Required
                             State      For Compulsory Unit        State       For Compulsory Unit         State      For Compulsory Unit

                             Alabama             75                Louisiana            75                 Ohio                65
                             Alaska              62.5              Maine                85                 oklabpma            63
                             Arizona             63                Michigan             75                 Oregon              75
                             Arkansas            75                Missouri             75                 South Dakota        75
                             California          75                Montana              80                 Tennessee           50
                             Colorado            80                Nebraska             75                 Utah                80
                             Florida             75                Nevada               62.5               West Virginia       75
                             Illinois            75                New Mexico           75                 Wyoming             80

                             Kansas              75                New York             60

                             Kentucky            75                North Dakota         80

                  AMEX               Table 3.1     Percent of Working Interest Required for Compulsory Unitization
                                                   Statutes.

                                                   Source: EOR Potential in U.S., OTA, 1976
                                         huntington beach planning division

               injection. However, future units may use                   Surface areas are likewise unequally valued
               enhanced recovery technology with the                      -- some locations are more critical than
               waterflood to recover more oil quicker,                    others.     Different     operators     will     also
               rather    than     waiting     to    apply      such       contribute more wells, more mineral rights,
               technologies     after    a    simple      injection       more storage or processing equipment or
               project. The     collection of data and the                more surface area        than others. Pride in
               evaluation may take years, depending on the                property ownership or           in control over
               complexity of the geology and whether the                  individual operations    is another less tangible
               field is well-known or not. The committee's                factor affecting the     value an individual may
               recommendations must be brought before                     place on his interests in the reservoir.
               the full joint organization for approval.
                                                                          Clearly, assigning costs and benefits in a
               A legal committee researches land and                      way that is considered fair by all parties is a
               interest titles and royalty agreements and                 very difficult process involving long-term
               tries to determine if there are any legal                  negotiations.      Usually,     the  greater      the
               restrictions or problems related to property               number of parties, the more difficult it is to
               rights which could jeopardize the               unit       reach an acceptable agreement
               project. This committee is also responsible
               for working with the Division of Oil and                   Once a participation formula        is arrived at,
               Gas, the State regulatory agency, to ensure                unit agreements are drawn up for the
               that   the    proposed     un it    satisfies   any        operators and the royalty owners.
               statutory and administrative requirements
               related to multi-company oil operations.                   The      time     fro m      initiation,     through
                                                                          negotiations, to agreement can take up to
               A land committee identifies all the parties                four or more years. The length of time and
               holding surface and mineral rights and                     concurrent expense of these negotiations, as
               informs them of the possible unit agreement.               well as the risk that the negotiations may
                                                                          reach an impasse and the project may be
               An    accounting     committee       records    the        precluded, contribute to the reluctance of
               expenses of the joint organization during                  many     operators     to   tr y to    initiate    or
               this planning process. This committee will                 participate in such a program.
               work with the technical committee in
               determining the most profitable technique                  3.4     Compulsory Unitization
               to   be    applied      (considering     tax    and
               depreciation regulations, etc.).                           Many states, recognizing that unitization
                                                                          increases the efficiency of production as
               Probably the most difficult          part of the           well as the total amount of oil ultimately
               voluntary unit agreement is         to determine           recovered,      have       enacted     compulsory
               the participation formula -- the share of the              unitization statutes. These laws require all
               costs each participant must pay and the                    interest-holding parties in an oil     pool to join
               amount each will later receive from the                    in a unit, if a certain majority percentage of
               unit's profits. The input of the technical                 the parties agree to unitize.
               committee      is   very    important      in   this
               determination. The value to the unit of                    California actually has          two compulsory
               certain mineral rights, for example, will                  unitization     laws.      The     f irst   requires
               depend on how much of the oil reservoir is                 unitization   in order to waterflood and thus
               included and where it is located in the                    to repressurize an oil field if subsidence is
               oil-laden formation. The same is true for                  injuring or imperiling buildings, harbors and
               the valuation of existing wells -- the                     other improvements or may be interferring
               location, depth, age and condition of a well               with commerce, navigation or fishery, or
               will affect how important it is to a unit.                 where sub si dence -induced inundation could

               14

                 endanger life, health, safety, public peace,                 There are numerous related advantages that
                 welfare or property.                                         result from this.
                 This law is inapplicable to Huntington Beach                 First, by all measures, this is a more
                 at this time because there are presently no                  efficient production technique:          the total
                 serious threats from subsidence in the City.                 volume of oil recovered increases; the time
                                                                              it takes to produce that oil is reduced; the
                 The second statute is sometimes referred to                  amount of capital invested (equipment,
                 as the Townsite Law. If 75 percent of the                    well-bores) per volume of oil is reduced.
                 working interest of an oil pool agree to a
                 unit operation, this law enables the State to                Second,     consolidation     of    surface      area
                 require the remaining interests to join the                  usually accompanies unitization. By state
                 unit as well. The Townsite law, however,                     law, a unit agreement can only be approved
                 applies only to fields which were discovered                 if it provides:
                 before 1934 and which are at least 75
                 percent within an incorporated city. It is                   "To   the   full extent      practical, for       the
                 not clear that this law could be applied in                  organization and consolidation of surface
                 Huntington Beach because large parts of                      facilities, including oil production, storage,
                 this field extend offshore and into the Bolsa                treatment and transportation facilities, in
                 Chica which is unincorporated county land.                   such a manner as will eliminate wasteful
                                                                              and excessive use of land surface areas,
                 The rationale behind the law is "that the                    freeing suc@ areas for other productive use
                 management, development and operation of                     and develop  .ment ... vv3
                 lands as a unit for the production of oil and
                 gas aids in preventing waste, increases the                  For example, the many small tank systems
                 ultimate recovery of oil and gas, and                        associated with small groups of wells can be
                 facilitates    increased    concurrent      use     of       eliminated      and     a   larger,      centralized
                 surface      lands     for     other      beneficial         separation and treatment plant utilized.
                 purposes."2                                                  New     wells   and    redrills    can   often     be
                                                                              consolidated into walled and landscaped
                 Under the     law, non-joiners may        sell their         islands.    Existing wells which           are not
                 interest in   the pool at a fair-market value.               important to the injection pattern may be
                 This value    is determined by an assessment                 plugged and abandoned.
                 of the "primary tract value" based on the
                 projected future primary production if no                    A workshop on urban oil development held in
                 secondary      were     undertaken,      plus     the        the Southern California area recognized
                 11secondary tract value" based on estimates                  these kinds of advantages to unitization,
                 of secondary recovery. The members of the                    conc lud ing:
                 unit must purchase these interests if they
                 are offered for sale. If the buyer and seller                to. . . unitization was a beneficial tool to be
                 disagree     on   a    fair   selling    price,     2n       used in older fields for improving oil
                 arbitration procedure has been established                   recovery, aesthetically improving oil field
                 to determine a fair valuation.                               operations and eliminating deserted, idle or
                                                                              unneeded wells.',4
                 3.5     Advantages of Unitization
                                                                              The benefits of unitization extend to the
                 It is clear that unitization is important for                fiscal status of the City as well. In another
                 the application of waterflooding and other                   study,    the    Huntington      Beach      Planning
                 enhanced recovery techniques.                                Division has analyzed the fiscal impact of
                                                                              oil operations on the City.           The findings
                                                                              indicate      that     consolidated        facilities,
                                                                              employing waterflood and other enhanced

                                                                                                                                  15

              recovery       technologies       are     significant         plant   may     require    the    laying    of new
              net-revenue      generators.*       For     example,          pipelines in public right-of-way, causing
              Aminoil       and     Chevron,       with       highly        temporary disruption of the street system.
              consolidated      operations,     use    about      60        Increased      waterflooding       may       increase
              percent of the wells in the        City to produce            de mand    on public sewerage and water
              about 85 percent of the oil and 85 percent                    disposal systems. Nonetheless, from a fiscal
              of the oil-related revenues. The reasons for                  perspec tive,    the   revenues generated           by
              this are that costs tend to        decrease as the            unitization usually greatly outweigh the few
              facilities are consolidated and less acreage                  costly effects.
              is used and that revenues              increase     as
              production increases.                                         The operations also tend to improve because
                                                                            the oil pool is now worked by a larger
              The cost of police patroling, for example, is                 company or unit with a wider financial base
              more sensitive to the number of oil sites                     than many of the individual operators. This
              than to the number of oil wells. Thus, in a                   tends to make financing of mitigations for
              unitization and consolidation project if the                  adverse      aesthetic      and       environmental
              number of wells stay the same or even                         impacts     associated     with    oil    production
              increase, but less sites are used, police costs               easier.    The    un it  can    typically provide
              attributable to oil can decline. For another                  better       fencing         and        landscaping
              example,      the   costs    of    the    City     for        sound-proofing and odor emission controls
              recordkeeping,       inspection,     taxation      and        than    individual     operators.      The     higher
              billing all tend to decline when the City can                 production experienced with a unit and
              deal with a large, single entity rather than                  waterflood allows the larger companies or
              scores of individual oil companies.                           units to expend monies for better equipment
                                                                            and    maintenance       so    that    the      newer
              Revenues to the City are tied especially to                   operations are usually quieter, cleaner and
              the property tax on the mineral rights and                    less polluting than older facilities. Larger
              to   severance      or   "p er   barrel"    tax     on        companies       or    units     also      experience
              production.      Interestingly,    mineral rights             economiesof scale -- it is       less expensive to
              assessment is tied to past productivity; thus,                landscape or soundproof a few intensively
              if   productivity       rises,    mineral       rights        used islands than hundreds of individual well
              valuation rises, too.       (Although there are               and tank sites; the one larger unit can deal
              important limits to how quickly valuation                     with these problems more efficiently than
              can rise as a result of Proposition 13.) Also,                dozens of individual operators.
              as productivity increases, revenues from the
              severance tax which is simply a production                    In summary, unitization and consolidation of
              tax must increase, too.                                       urban oil operations can be desirable for the
                                                                            following reasons:
              Of    course,     there    are    some       negative
              impacts. Use of a centralized treatment                       -    Oil production increases.
                                                                            -    Less land is used and         unnecessary or
                                                                                 inefficient tanks and wells are removed.
                See Report #2 in this series, "The Fiscal                        The    appearance       of   the     operations
                Impacts of Oil Operations in Huntington                          improves; better mitigation of other
                Beach,"      Huntington       Beach        Planning              adverse impacts is usually achieved.
                Division, March, 1981.                                           Costs to the City tend to decline but
                                                                                 revenues tend to increase.

              16

                4.0 Roles for City Governments
                       in Protecting Access to Oil Pools

                  The value of the increased domestic oil                    De-regulatibn and the rapidly escalating
                  production     that   may     be    afforded      by       price of oil should help to improve the
                  enhanced recovery technologies, as well as                 profitability    of potential      units   in   the
                  the     advantages      of     unitization       and       future. Another pricing problem is that         the
                  consolidation discussed above, argue that                  value of domestic oil to the society may        not
                  protecting surface access to underground oil               be fully reflected in its (even de-regulated)
                  pools and encouraging the formation of unit                price because domestic production provides
                  operations to work those pools may be                      other, less tangible, benefits to the country
                  desirable policy objectives.        This section           related to the reduction of our reliance on
                  discusses the kinds of roles which might be                foreign sources for oil. This situation might
                  appropriate     for    local    governments       in       argue for federal incentives for increased
                  promoting these objectives.                                domestic production.

                  First of all, it should be noted that two of               All   these    considerations,     however,     are
                  the principal problems which have inhibited                national in scope and            lie within the
                  unitization and the subsequent application                 jurisdiction of the federal government, not
                  of secondary and tertiary recovery methods                 the municipality.
                  are clearly outside the purview of the local
                  jurisdiction.                                              Another     important     problem     related     to
                                                                             unitization is the cost of       forming a unit,
                  Many oil companies have cited low oil                      espec ially   the   cost    of   getting     enough
                  prices, compounded by price controls, as an                operators     to   join.   The    existing     State
                  important reason why many potential units                  compulsory    unitization  laws  are examples of
                  would not have been profitable in the past.                ways to reduce these costs.

                                                                                                                               17

              Note that the State regulates mineral rights             solutions to these problems lie outside the
              and the unitization of oil pools; thus, the              City's purview. However, the City can help
              State, and not the City, is the appropriate              to    implement      any    future      corrective
              jurisdiction   f or  instigating   policies    and       measures      by    the    State    or     federal
              statutes    aimed    at   reducing    the    costs       governments by not excessively restricting
              currently associated with forming a unit.                future oil operations from the surface of the
                                                                       field and by developing ordinances and
              In both of these cases, the appropriate        role      policies aimed at keeping enough surface
              of the local government could be to adopt                area open in the face of encroaching
              ordinances and policies which would not                  urbanization      to     accomodate         future
              preclude future ameliorative actions by        the       unitization and enhanced recovery programs.
              federal or State governments.
                                                                       The principal tools for achieving this are the
              Traditionally, control over land use has been            City's    General     Plan    and    its    zoning
              the   domain     of   the    local    government         ordinances. Options for Huntington Beach
              (although legally, States have pre-emptive               regarding its land use policies are discussed
              control over land use.) The City should                  in Section 6.0.      Before reviewing policy
              recognize the two problems noted above:                  options, however, it is important to discuss
              inappropriate pricing and the sometimes                  the particular situation in Huntington Beach
              excessive costs of forming a unit. The City              where these issues are especially relevant.
              should also understand that the appropriate              That is the topic of the next section.

            18

                 5.0 Townlot/Downtown Analysis

                 As    mentioned      in   Section    2.0,     the      over 35 oil companies operate only 98
                 "Townlot/Downtown" part of Huntington                  active wells. Chevron has the largest single
                 Beach appears to be the most likely                    interest in this part of the field, but it
                 candidate for a unitization and secondary              accounts for less than      20 percent of the
                 recovery project. It is also an area where             total interest. Aminoil,    the other major oil
                 rapid redevelopment of oil parcels and                 company in the City, has virtually no
                 vacant land is probable.       Therefore, this         holdings in this part       of the oil field;
                 area was analyzed specifically with regard             (Aminoil does own some      surface areas there
                 to the importance of preserving access to              from which wells have been directionally
                 remaining oil reserves.                                drilled to offshore pools).

                 The area studied is located between Pacific            Thus, unitization has been difficult not only
                 Coast Highway and Palm Avenueq from                    because there are so many operators, but
                 Goldenwest     to   Lake    Street.    Also,    a      also because neither of the large companies
                 relatively large oil lease near Lake Street            which have the resources to instigate a
                 and Atlanta Avenue was included. A large               unitization program has a particularly large
                 portion of this area lies within the coastal           stake in this part of the field.
                 zone.     (See    Figure     2-1).    Of      the
                 approximately 350 acres, only about 14 are             5.1    A Brief History
                 still being used for oil production.
                                                                        Oil was first discovered in Huntington Beach
                 This part of the field has never been                  in   1920,   at a site near the           present
                 waterflooded, largely because ownership of             intersection of Goldenwest Street and Clay
                 the    f ield  is   highly   f rag mented     and      Avenue. During the next several years, oil
                 unitization has not been achieved.                     was    discovered     throughout      Huntington

                                                                                                                      19

              Beach but the City prohibited           oil drilling in         Since that time, production has declined to
              the Townlot and Downtown areas. However,                        a relative trickle.         In 1979-80, 138,983
              the continued success of oil operations north                   barrels were recovered, an average of only
              of 23rd Street (Goldenwest Street) in a                         380 barrels per day for the entire area and
              barley field (which is now the "Seacliff" golf                  only about four barrels per day per well.8
              course       and      residential        development)
              prompted the City to lift these restrictions                    In other parts of the City, notably the leases
              in 1926 and to allow drilling between 23rd                      north    of    Goldenwest,       the     two     major
              and 17th Streets. Two very important oil                        companies, Chevron and Aminoil, run highly
              zoneq, the "Jones" and the "Main," were                         consolidated operations which tap very large
              quickly discovered. The State Division of                       underground areas. These companies began
              Oil  and Gas noted that:                                        applying water injection in the late 1,950's
                                                                              and now have extensive water and steam
                    "Intensive     drilling    activity     followed          flood projects     as well as several tertiary
                    these two discoveries, resulting in the                   recovery pilot     programs. These companies
                    fastest development and closest spacing                   have employed these technologies to work
                    experienced in California to that date.                   these areas much more completely and
                    Some wells were drilled on 25-foot                        efficiently than other areas in the field
                    lots.,,5                                                  where fragmented ownership has precluded
                                                                              unitization. The Townlot is one of those
              Another important zone, the "Tar" or                            areas which has not yet been waterflooded
              "Bolsa,"    was found later           in 1926.        In        because the large number of operators there
              November of that year, the City opened the                      have not formed a unit.
              rest of the Townlot and Downtown to
              drilling, except for      a "fire zone" between                 In recent years, the increasing value of land
              5th and 3rd Streets        which was excluded in                near the coast for new uses (especially for
              order     to   protect     the     City's     principal         housing) along with declining production
              commercial district       - - a short strip along               have prompted many oil operators in the
              Main Street.         On     December 24, 1926                   Townlot to abandon their wells and to
              production peaked at       63,400 barrels from 78               redevelop their sites. Also, after the Local
              wells. Production dropped quickly from this                     Coastal Plan is completed, development
              early peak and then gradually declined until                    pressures on the many oil sites in the
              the late 19401s.6                                               coastal zone will likely intensify. In light of
                                                                              these effects, it appears very possible that
              During     the    early years of the              field,        so many of the oil sites in the Townlot area
              development of the Tar zone was inhibited                       will be redeveloped that there will not be
              because the oil in these pools is very thick.                   enough     active     we 11   holes nor         enough
              The viscous ooze carried large amounts of                       available     surface      area    for     a    future
              sand in it which often clogged the wells and                    secondary recovery project.
              complicated later processing. The growth in
              automobile use after World War 11 spurred                       This possibility raises several questions.
              such a high demand for oil that even thick                      First, how much oil could be recovered if an
              crude became profitable to extract and                          enhanced         recovery         program         were
              process. This prompted a second drilling                        undertaken? Second, even if there is a            large
              campaign in the Townlot area as operators                       amount of remaining oil, how                likely is
              began to exploit the previously neglected                       unitization and a future secondary           recovery
              Tar zones.                                                      program? Third, should the City take steps
                                                                              to help preserve access to these oil reserves
              In 1954 oil pools were located farther south                    and, if so, what should those steps         be? The
              in the field, near the Downtown. Intensive                      remainder of this report tries to give
              drilling in this "southeast extension" of the                   tentative answers to each of these questions.
              Townlot resulted in another production peak
              in the mid-1950's.7

              20

                5.2    Remaining, Recoverable Oil                                       Figure 5.1

                The most important variable for deciding                  PCH                            Palm Ave
                whether the City should take steps to
                protect surface areas for future access to
                oil pools is the amount of oil that would be
                lost if the surface is completely developed.
                Using data from the State Division of Oil
                and Gas (DOG) and from the major oil                                                         -1000
                companies in Huntington Beach, the City
                Planning Division estimated the remaining,
                recoverable oil in the Townlot area. The
                purpose of these studies is not to establish
                an exact numerical figure for the remaining                       I  le bolsa
                oil, but to indicate whether there is enough
                                                                                                             -2000
                oil to make an enhanced recovery program
                possible and, thus, if protecting surface                       10   r bo
                areas and access for such a program is
                important.
                                                                            stray
                The first technique used to estimate the                                                     -3000
                remaining    reserves    is  the     "volumetric
                method," which uses data about the physical
                parameters of the field to estimate the
                volume of the original oil in place (OOIP).                 iones
                Then,    certain     recovery     factors"
                estimates of the percentage of the oil that                                                  -4
                                                                                                                000
                can be recovered by different extraction
                technologies -- are applied to the OOIP                     main
                estimate. In this way, one can determine
                                                                                    .............
                how much oil could be recovered by an
                enchanced recovery program.

                Th is   method     requires    much     geologic
                information. First, one must know what oil
                zones underlie this part of the field.                      Example of Cross-Section Underlying
                                                                            Townlot.
                Figure 5.1 illustrates a typical cross-section
                under the Townlot area, and Figures 5.2 and                 Source: Division of Oil and Gas.
                5.3 show their areal extent. The important
                oil-bearing strata include the Middle Bolsa,
                Lower Bolsa, Stray or AC, Upper Jones and
                Main zones. However, because of the lack               of course, are not liquid pools, 'but are rocks
                of reliable data, the Stray and Main zones             which contain oil in small pores i_)etween
                were    not   included    in   the    volumetric       grains of solid material.      Thus, the total
                estimates. Thus, the results should be on              volume in acre-feet must be multiplied by a
                the conservative side.                                 "porosity factor" -- the percentage of the
                                                                       rock which is not solid, but is actually
                By multiplying the area of a zone in acres             spaces or pores between the solid materials,
                by its net thickness in feet, the total volume         and can hold the fluids. However, not all of
                of the zone can be determined. The zones,              that space is filled with oil. Water is also

                                                                                                                        21

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               ALAM&         Figure 5.2 Areal Extent of Bolsa Zone.

                                        Source: Division of Oil and Gas.
                                huntington beach planning division

                 found in the pores between the solid                      Table    5.2     summarizes     the   data    and
                 materials. Thus, the total volume must be                 calcuations for OOIP in the Townlot. The
                 further reduced by a "water saturation"                   OOIP is estimated at 112.1 million barrels.
                 factor.    By    multiplying      area   by:     1)
                 thickness, 2) porosity percentage, and 3) a               The next step is to determine how much of
                 water saturation factor, the number of                    the   OOIP     can   still   be recovered        by
                 "acre-feet" of oil is determined. There are               secondary and tertiary technologies. After
                 7,758 barrels of oil in an acre-foot and one              discussing the performance of different
                 can estimate barrels by using this factor.                extraction techniques in Huntington Beach
                 Finally, another variable called an "oil                  and other nearby fields with engineers from
                 formation      volume      factor"     mu st     be       the   DOG,     Aminoil     and    Chevron, the
                 considered.    This simply adjusts for any                following recovery factors were established
                 difference between the volume of the oil                  for the Town lot/Downtown area: primary,
                 underground and its volume at the surface.                .30; secondary, .12; and tertiary, .07 of
                                                                           OOIP. Usually, the primary rate is lower and
                 Table 5.1 summarizes these variables and                  secondary     rate    higher;     however,    the
                 the formula used to determine OOIP.                       engineers suggested that the very long term
                                                                           and   unusually     intensive   production    has
                                    Table 5.1                              probably accounted for a higher primary
                                                                           rate and thus a lower potential secondary
                                                                           one in the Townlot area.
                             VOLUMETRIC METHOD
                                                                           These data and these recovery factors
                                                                           suggest that over 20 million barrels of oil
                    A               area in acres                          may still be recovered in the Townlot area
                    P               porosity                               if secondary and tertiary technologies can
                    H               net thickness   in feet                be applied.
                    Sw              water saturation
                    B               oil formation factor                   To help confirm the reasonableness of this
                    7,758           bbls/acre-foot                         estimate, the Planning Division calculated
                    OOIP            original oil in place                  recoverable reserves using another method,
                                                                           the "decline curve technique." This method
                                                                           uses the past performance of the field for
                    A x h x P  x (1-Sw) x 7,758 = OOIP                     estimating future production.
                                    B
                       Formula for Volumetric Method.                      The estimate would be most accurate if the
                                                                           annual production records of every well ever
                       Source: "Valuation of Oil Producing                 drilled in the Town lot /Downtown since 1926
                       Properties", State Board of                         were located, reviewed and totaled. This
                       Equalization, 1972.                                 kind of research is very difficult and
                                                                           time-consuming.       Instead,    the    Planning
                 Reliable data for these variables wer@                    Division     researched        the     production
                 difficult to obtain. Net thicknesses of the               summaries for this part of the field found in
                 zones in the Townlot area were unavailable,               several DOG Annual Summary         of Operations
                 and were estimated from cross-sections and                and the recent production records of active
                 f rom  discussions in several DOG reports.                wells. A reasonable decline curve was         then
                 Areal extent was estimated from contour                   interpolated between the few known data
                 maps   of the zones in DOG reports. The                   points. Cummulative production was            then
                 other   variables were obtained from DOG                  estimated from this decline curve.            See
                 and    industry   estimates.      As    mentioned         Figure 5.4.    The total production for the
                 above, the Stray and Main zones were                      Town lot /Downtown      is   approximately      43
                 excluded due to lack of data; thus the                    million barrels.
                 estimates are probably low.

                                                                                                                       23

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                                                                                                                                                 'ACIFIC

                                                                                                                                                                                                                                                                                                                           "'Mc

                                                                                                Figure 5.3                           Areal Extent of Jones Zone.

                                                                                                                                     Source: Division of Oil and Gas.
                                                                                                       huntington beach planning division

                                         @ I                                     1 11 1 1 . I I---        I I                  I ". 10

                                       Average
                                       blil/day
                                       90,000  -

                                                           Townlot
                                       80,000  -          Discovery                                            Total for Townlot: 40-50 million bhI

                                       70,000  -
                                       60,000  -                     Field-wide onshore production

                                       50,000  -
                                                                        5-Points  Bolsa Chica   2nd Townlot              Waterflood
                                       40,000  -                        Dis very  Discovery         (Tar)                Begins

                                       30,000  -                                                                                            Known data points

                                       20,000
                                                  6 .4--"
                                                  average           Townlot Production
                                       10,000
                                                                  %

                                                                    %

                                                                                                             - - - - - - - - - --r
                                             1920                1930                 1940                 1950                 1960                1970

                                                Figure 5.4        Decline Curve for Townlot/Downtown.

                                                                  Source: Huntington Beach Planning Division and DOG.
         IQ                                        huntington beach planning division
         U1

                                                            Table 5.2

                ZONE                    Al                  H2                 p3                 SW4             B5

                Middle Bolsa            350                 80                 .28                .30             1.07
                Lower Bolsa             350                 100                .28                .30             1.07
                Upper Jones             150                 100                .32                .35             1.07

                1          DOG "Summary of Operations", 1958, contour maps
                2          Estimated from various DOG reports
                3          DOG and industry estimates
                4          DOG estimates
                5          DOG estimates

                OOIP = A h P (1-Sw) 7,758 -.' 1.07
                Middle Bolsa       350 x 80 x .28 (1 - .30) (7,758) -' 1.07                39.8 million barrels
                Lower Bolsa        350 x 100 x N (1 - .30) (7,758)      1.07 =             49.7 million barrels
                Upper Jones        150 x 100 x .32 (1 - .35) (7,758)    1.07 =             22.6 million barrels

                                   TOTAL                                                  112.1 million barrels

                Recovery factors                         Primary 30 percent               33.6 million
                                                         Secondary 12 percent              13.5 million
                                                         Tertiary 7 percent                7.8 million

                Remaining recoverable oil       Secondary and Tertiary = 21.3 million barrels

                                Calculation of OOIP and Remaining Recoverable Oil Using
                                Volumetric Method.

                                Source: Huntington Beach Planning Division.

          26

                The curve clearly indicates that production             barrels could still be extracted if unitization
                in   th is area    using   current     extraction       and     the     application      of     enhanced
                methods is approaching its limit.           Thus,       technologies were successful.
                cumulative production should approximate
                all of primary production, which is (using              These    calculations    were      reviewed     by
                the same recovery         factor    as   in    the      engineers    at    the   DOG,     Aminoil     and
                volumetric method) .30 of OOIP.            If 43        Chevron. They concurred with City staff
                million barrels is .30 of OOIP, then OOIP               that the methods used were sound, but that
                must be 143 million barrels. Using the same             the available data may not be completely
                recovery factors as the volumetric method               accurate. Thus, the value of the analysis is
                for   secondary    (.12)   and   tertiary    (.07)      not so much in the exact numbers as in
                recovery, the staff estimates that about 17             providing an indication that considerable oil
                million barrels     could   be    extracted     by      reserves probably remain beneath this part
                secondary and an additional       10 million by         of the City.
                tertiary. Remaining recoverable oil would
                be about 27 million barrels. See Table 5.3.             5.3        The Possibility of a Unitization
                                                                                   and Enhanced Recovery Project.
                The     decline    curve     method      suggests
                somewhat        larger   reserves     than     the      The analysis above suggests that there is
                volumetric, which is not surprising because             probably    enough    oil   remaining    in the
                certain    known     producing     zones     were       Town lot /Downtown      area    to     make     an
                excluded from the volumetric study due to               enhanced recovery project profitable if
                lack of data. Thus, the two methods give                unitization could be achieved.         The next
                surprisingly similar estimates of recoverable           step, then, is to try to determine what the
                reserves, indicating that perhaps 25 million            obstacles to unitization are and if they are
                                                                        likely to be overcome in the future.

                                                                Table 5.3

                           Primary Production                        .30 OOIP = 43 million
                           OOIP = 43 million W.30)                   143 million
                           Secondary Production                      .12 DOW = .12 (143 million) = 17 million bbl
                           Tertiary Production                       .07 OOIP = .07 (143 million) = 10 million bbl

                           Total remaining, recoverable oil     27 million bb1s.

                                     Calculations of Remaining Recoverable Oil Using Decline Curve
                                     Method.

                                     Source: Huntington Beach Planning Division.

                                                                                                                       27

              In order to do this, the City Planning                      The operators were also asked to indicate
              Division sent a questionnaire to all the oil                the reasons why unitization has never been
              operators in the Town I ot/Downtown area.                   achieved here. Most felt that too many of
              The questionnaire and cover letter are                      the operators were unwilling to join a unit
              includpd in Appendix A.                                     and that past price controls on oil rendered
                                                                          such an undertaking unprofitable. Several
              The    results    of    the   questionnaire       are       respondents       felt     that     City      zoning
              summarized in Table 5.4. Note that these                    restrictions related to drilling new wells had
              results can be measured in two ways: the                    contributed to the problem.         Other reasons
              firs" is simply   by the number of operators                given included the difficulty in securing
              who gave different responses. A problem                     approval from land owners to encumber
              with this is that all companies are weighted                their property for many years.              Another
              equally, although a few own 10 or more                      respondent suggested         that    the lack of
              wells while many have only one. The second                  reliable engineering data would hinder any
              method is to calculate the percentage of the                unitization attempts.
              total interest in the field held by the
              operators who gave a particular response.                   The City staff also noted this lack of readily
              Th is is a       somewhat      more      meaningful         available data.
              measure     because      the   response    of     the
              relatively   large operations will be more                  When asked if these difficulties could be
              important to a unitization project than the                 overcome in the future and unitization made
              very small companies. This method weighs                    possible, the companies were equivocal.
              each operator's response in proportion to the               Seven operators, accounting for 21 percent
              percentage of the field he owns. Interest in                of the interest in the field, answered "        yesit
              the field was considered to correspond to                   six operators, accounting for 41 percent of
              mineral rights valuations made for this area                the field, said, "maybe"; and five companies,
              by the Orange County Assessor's office for                  accounting for 12 percent of the interest in
              property tax purposes.                                      the field, responded "no."

              Questionnaires      were     sent    to    the     36       Finally, when asked if the company would be
              operators in the Town I ot /Downtown area; 21               interested in joining a voluntary unit, seven
              responded. This response is indicative of                   said "yes"; five, "maybe" and nine, "no."
              one of the principal problems facing a                      Yet those responding "yes" and "maybe"
              unitization      prograrn:      getting      enough         account for 61 percent of the total interest
              operators to consider even the possibility of               in the field, while those answering "no"
              forming a unit. However, most of the larger                 account     for   19    percent    of    the    total
              operators did fill out the questionnaire; the               interest. Interestingly, some operators who
              21 respondents account for about 80 pecent                  felt there was likely to be enough oil to
              of the total interest in the Townlot field.                 make a unitization project profitable, and
                                                                          some who felt such a project might be
              The oil companies generally concur with           the       feasible in the future, were also definitely
              analysis in Section 5.2 that there may be                   not interested in joining a unit -- at least at
              significant oil reserves remaining in this                  this time.
              area. Only three respondents felt that it
              was "very unlikely" that there is enough oil                The results of this survey indicate that a
              to    make      a    waterflood       economically          voluntary unitization project in the Townlot
              profitable, and only one cited the lack of oil              area is not imminent.        Although a majority
              as a reason preventing a waterflood at this                 of the working interest in the field appears
              time.     Thirteen        of   the     respondents,         to be interested in          such a project, a
              accounting for about 62 percent of the                      significant minority is opposed to it.              In
              working interest in the field, answered "very               addition, many of the        operators (who hold
              likely" or "perhaps" when asked if there was                about 20 percent of the      interest in the field)
              enough oil to make a waterflood profitable.                 did not respond to the       questionnaire at all.

              28

                    Do you think there is enough recoverable oil in the Townlot/
                    Downtown part of the Huntington Beach Field so that a water-
                    flood would be economically profitable (if unitization could
                    be achieved?

                                                                % Working Interest
                                         No. of Respondents     in Townlot Field

                    very likely                9                      36%
                    perhaps                    4                      26%
                    very unlikely              3                        5%
                    don't know                 5                      13%

                2.  If you think there is enough oil to make unitization and water-
                    flooding in the Townlot area profitable, do you think other
                    obstacles can be overcome so that such a project is possible
                    in the future?

                                                                % Working Interest
                                         No. of Respondents     in Townlot Field

                    yes                        7                      21%
                    Maybe                      6                      41%
                    no                         6                      12%
                    don't know                 3                        6%

                3.  Which of the following reasons do you think have  prevented
                    a waterflood program from happening in the Townlot area?

                                         No. of Respondents

                    not enough oil             1
                    not enough operators       12
                        willing to join
                    price controls on oil      11
                    zoning restrictions        6
                    7her: answer included:    lack of data, difficulty in getting
                        approval of land owners to encumber surface properties.

                4.  Would your company be interested in joining a voluntary unit
                    for the purpose of waterflooding?

                                                                % Working Interest
                                         No. of Respondents     of Townlot Field

                    definitely inter-          7                      24%
                        L- & t P- d
                    maybe interested           5                      37%
                    definitely not             9                      19%
                        interested

                            Table 5.4 Questionnaire Results.

                                      Source: Huntington Beach Planning Division.

                                                                                      29

                Th is     lack    o f   response       underlines       the        Figure 5.5 illustrates the areas in and near
                difficulty in achieving unitization at this                        the Townlot area where oil well drilling is
                time. The companies are also equivocal on                          currently allowed. These are limited to the
                whether unitization can be achieved in the                         leases operated by Chevron and Aminoil
                future.       The principal reason holding up                      northwest of Goldenwest (sites #1 and #2),
                unitization, now that price decontrols are                         an island operated by Chevron at 17th
                effected, will be the inability to get enough                      Street and Palm Avenue (site #3), a
                operators interested. The many reasons why                         relatively large area operated by Chevron
                operators may not join a unit have been                            near Lake Street and Atlantas Avenue (site
                discussed above.                                                   #4) and a small island owned by Aminoil
                                                                                   between 18th and 19th Streets along Pacific
                A unitization project in the future is still                       Coast Highway (site #5). This last site is
                possible, especially if either of the following                    intensively      used     for    wells directionally
                "scenarios" develops. First, as the value of                       drilled under the ocean and it is unclear
                the land increases many of the operators                           whether this area would be available for
                will choose to sell their sites. The smaller                       wells tapping the Townlot area, at least in
                companies        with      few     we Ils     and      low         the near term. All of the other sites would
                productivity will tend to recycle their land                       very likely be able to accomodate wells and
                first. Increasingly, the working interests in                      other facilities in a Townlot unitization and
                the     field   will be       held     by     companies            secondary recovery project.                 Figure 5.5
                interested in continued oil production.                            shows all the existing oil sites in the
                                                                                   Townlot area.          City ordinances currently
                Second,       in  the    face of        domestic        oil        allow existing wells and redrilling on most
                shortages, the State or federal government                         of these parcels, but prohibit new wells.
                may enact a strict compulsory unitization
                law     so    that      secondary       and      tertiary          The surface area needed for an enhanced
                extraction technologies can be applied to                          recovery project depends largely on the
                domestic      oil fields.       These laws would                   number of wells needed to produce the
                require agreement among a smaller majority                         pool. As discussed in Section 3.0 above,
                percentage of the operators before enacting                        injection and production wells are usually
                compulsory unitization. For example, some                          arranged      in patterns        to    facilitate     the
                States require as little as 60 percent of the                      efficient sweeping and subsequent collection
                interest of the field to agree to a unit                           of oil in the zone. Consequently, rough
                b e fore   forcing      the    remainder       to jo in.           estimates of the number of wells needed in
                Currently, companies holding more than 60                          an enhanced recovery project can be made
                percent of the Townlot working interest                            by calculating the spacing of wells in a
                may     be    already,      at   least      tentatively,           pattern and dividing that factor into                 the
                interested in a unit project.                                      total number of acres in the zone to be
                                                                                   worked.      For example, engineers at                the
                5.4           Surface Area Requirements                            Division of Oil and Gas estimated that                the
                                                                                   spacing for a waterflood project in                   the
                As the City considers the issue of helping to                      Jones zone would be approximately one well
                preserve      surface     areas     for    future       oil        per 10 acres; and that only about 25 wells
                operations in the Townlot, two key questions                       would be necessary for this kind of project
                arise:   1) how much area is needed to                             there.
                accomodate        a    waterflood       or     enhanced
                recovery project? and 2) where must these                          The characteristics of the zone will affect
                sites be located? Much of the information                          the kind of recovery method used, which
                used in answering these questions was                              could in turn affect the spacing and the
                supplied by the DOG and by Eastman                                 number of wells needed. The Bolsa zone,
                Whipstock,        Incorporated,         a       company            for example, holds a very viscous oil; thus,
                involved in directional drilling projects.                         steam, rather than water, would likely be

                30

                                                         Drill Sites (zoned Ol or 02)

                                                         Other Oil Sites--No New Wells
                                                                           Allowed (zoned 0)

                                                                                                                C)

                                ------------
                                           o)d
                                                                 [10
                                                                 Uj MOM, I I
                                                  P]     @D ED PD M PD m m PD
                       I LD @D M IJ E
                                                  m 171 M ED M ED ED M ED 11
                               01INGE
                               L@ lit     91 9P M M          EH ED M @J 27 M M M M ED DD' ,

             ..........
             ...... ....                                                 J7
                        7 F
                       Ej A       JM MW 6D        W@_i IM II[I [I] Fl@i
              ................            L@] III LIJ [1119 El El L-1 0 V
                               oc",                                                                 ocEII

                                 Figure 5.5  Drill Sites and Other Oil Operation Sites in TownI ot/Down town.
                    VIP
                                             Source: Huntington Beach Planning Division.
                         3.111,
                      M
                                    huntington beach planning division

             injected into the formation because the hot               Thus, the surface area currently afforded by
             steam helps the thick oil to flow more                    the drill sites (#1-5 in Figure 5.5) in and
             freely. Because the oil must be kept warm                 near the Town lot /Downtown could probably
             for this technique to work, and because the               accomodate the wells needed in a secondary
             Steam and oil tends to cool as it moves                   or tertiary recovery project, even in a
             through a formation, the spacing of the                   closely spaced stearnflood.
             wells must usually be much closer in a
             steam program        than   in 2      waterflood.         Another important consideration, though, is
             Engineers at the DOG estimated that one                   the location of these surface areas relative
             well per 5 acres or even one well per 2.5                 to the underground oil pools. As mentioned
             acres might be needed to effect this kind of              in Section 1.0, wells can be directionally
             program. Thus, from 64 to as many as 128                  drilled so that a few centralized surface
             wells might be needed in a stearnflood of                 areas can accomodate wells that produce a
             the Townlot BoIS2 zones.                                  much larger subsurface area.         The most
                                                                       important constraint on how far a well can
             Considering the usual setbacks from public                extend from a surface site is the     -depth of
             right-of-way and from nearby uses,             the        the zone the well is tapping. The shallower
             surface area needed for well drilling          and        zones are more difficult to reach because
             maintenance, 25 wells or more could be                    the angle of the well must be more acute.
             easily accomodated on an oil operation         site       Eastman Whipstock calculated the distance
             roughly the size of a square block in the                 that a well could be drilled in the Townlot
             Townlot area.                                             area under usual economic and geologic
                                                                       conditions. Wells tapping the Bolsa zone
                                                                       could reach only about 1,500 feet from the
                                Figure 5.6                             surface bore hole; wells into the much
                                                                       deeper Jones zone could extend about 2,400
                                                                       feet from the bore hole; (see Figures 5.6 and
                                                                       5.7). Using these estimates, Figures 5.8 and
               Depth                                                   5.9 illustrate how much of the subsurface
                                                                       Town lot/Downtown field can be reached
                                                                       from the existing drill sites. If part of site
                -1000                                                  #5 is considered available for this kind of
                                                                       project, then virtually all of the Jones zone
                                                                       can be reached from the presently available
                                                                       drilling sites. Likewise, a very substantial
                                                                       part of the Bolsa zone is also accessible
                                                                       f rom   the   existing    sites,   although      a
                   2000                                                considerable area in the middle of the
                                                                       Townlot may be inaccessible.
                                                                       Engineers    from     Chevron     and     Aminoil
                   3000                                                indicated that wells could be extended even
                                                                       farther than     these   estimated limits if
                                                                       necessary, although such wells would be
                                   1000         2000                   more difficult to drill and more expensive.
                                  Lateral Exten-c                      A steam project adds a further factor into
                                                                       the analysis.    As discussed above, steam
                                                                       tends to lose its heat after it moves away
                   Directional Drilling Pattern for Wells              from its source (a boiler). The bottom of
                                                                       the steam injection well cannot be more
                   Reaching the Bolsa Zone.                            than 1,000 - 1,500      feet from the boiler,
                                                                       otherwise the steam     loses so much heat as
                   Source: Eastman Whipstock.                          it travels through      the well that it is
                                                                       ineffective when it     reaches the oil pool.

                                                                                  :uffiff4wi
                                                                                         Portion of the zone not within 2400 feet
                                                                                         of an existinn driil site

                                                                                         Drill site

                                   ...... - --------
                                                  77                        F-
                         IQ                 R] I
                                                                                           HIL

                      @4:::::  Li
                               F
                                jj
                                !                                              (L
                                       [7 F      F-I
                                                              [77 1
                                                                                                    ]i
                               L
                                         -1   LJ L-J   L
                                   EL
                                        LILJI                                                                             L\I

                                                     L-L--j
                                                                                                                              ................
                                                  E-1 171 F-71     1=1
                               E7 r          -                                                     01 E.] ED        Ell
                               =1 n L@j 0            F-I      LI E]
             Nam                                                                                                E                    ---------------------

                   Air                Figure 5.8    Approximate Coverage of Jones Zone from Exist
                             W
                                                    Source: Huntington Beach Planning Division and
                                         huntington beach planning division

                                                                                 Portion of the zone not witnin 1500 fee'
                                                                          jQ!           existinq dr-*Il site
                                                                                 of an

                                                                                 Drill  sitc

                                        J
                                                           J LI U,     1. "A

                                                                                                                            >
                              EO ML    ;E @Kg      T                                               11 LE EO
                                  o-I

                             i   Z
                         EEI MCI] 00 IIEI IIEI EIEI ED E[I
                                                                                                          M
                                               -1 F-I F-I El
                                                                                                                   -7 F-

                                                                                       I.v

                   ACE&              Figure 5.9   Approximate Coverage of Bolsa Zone from Existing Drill Sites.
                                                  Source: Huntington Beach Planning Division and DOG.

                                        huntington beach planning division

                                                                         Another way of looking at the situation is
                                Figure 5.7                               that in order to undertake a comprehensive
                                                                         enhanced     recovery     program      for    the
                                                                         Town lot/Downtown,       new    wells   or    the
                   Depth                                                 redrilling of existing wells may be    needed in
                                                                         the area roughly between 6th           and 13th
                                                                         Streets.    Furthermore,     because     of   the
                                                                         problem of heat loss in a steam       project, a
                    -1000                                                steam generator (boiler) may also     need to be
                                                                         located in this area.      The current zoning
                                                                         laws affecting the existing oil sites in this
                                                                         area   allow    the   boiler   equipment      and
                                                                         redrilling, but do not permit new wells.
                      2000
                                                                         In summary, a waterflood or other enhanced
                                                                         recovery project for the Jones zone, and
                                                                         presumably for the deeper Main zone, could
                                                                         probably be accomodated from the existing
                    -3000-                                               drilling sites in the Town lot/Down town
                                                                         area.   A comprehensive program for the
                                                                         shallower Bolsa zone would probably involve
                                                                         steaming, and might require some new
                    -4000                                                wells, the redrilling of existing wells and the
                                                                         location of steam producing equipment
                                                                         outside the existing drill sites in an area
                                      1000        2000                   between 6th and 13th Streets.
                                    Lateral Extent
                                                                         There are currently several oil operation
                                                                         sites in this area which could be utilized in
                    Directional Drilling Pattern for Wells               such a project. The zoning an these sites
                    Reaching the Jones Zone.                             allows the redrilling of wells and the
                                                                         installation of oil recovery equipment, but
                    Source: Eastman Whipstock.                           does not allow for the drilling of new wells.

                 This fact suggests that a secondary recovery
                 P
                  rogram (steamflood), which utilized only
                 the existing drill sites, might not be able to
                 include a significant part of the Bolsa zone,
                 (roughly between 6th and 13th Streets).

                                                                                                                         35

              6.0 Policy Options for the City'

              The discussion in Section 5.0 suggests that a          urbanization for the facilities necessary for
              considerable arnount of oil can probably be            an enhanced recovery project if unitization
              recovered from the Town I ot/Downtown area             is realized in the future, and 2) ensuring
              if   unitization    occured    and     enhanced        that any adverse impacts on nearby uses
              recovery methods were applied. Although a              such as housing and coastal recreation are
              majority of the oil operators there have               mitigated to acceptable levels.*
              indicated a tentative interest in such a
              project, unitization does not appear likely in
              t1he short-term.
                                                                          Analysis by the City Planning staff
              Section   4.0   argued   that   the   kinds of              indicates    that   potentially     adverse
              government policies which would directly                    impacts resulting from an enhanced
              encourage      unitization     and     enhanced             recovery    project    can    usually     be
              recovery do not lie within the jurisdiction of              mitigated; and, in fact, such projects
              the local government.        Still, there are               tend to reduce undesirable effects and
              important roles for a City government;                      increase beneficial ones in areas like
              namely, 1)     helping to preserve enough                   the Town lot /Downtown.      A discussion
              surface    area   in   the    face   of     rapid           of    potential    impac ts    and    the ir
                                                                          mitigations    is  included   in    another
                                                                          report in this series, #4: "Enhanced Oil
                                                                          Recovery Technology".

              36

                 This section discusses the policy options                 greater than three acres. Drill site #1 in
                 available to the City for preserving surface              Figure 5.5 is designated 0-2. For purposes
                 areas until a future unitization project is               of this discussion, there is no practical
                 instigated or until it is apparent that such a            difference between 0-1 and 0-2.                  The
                 project   is   so   unlikely   that     restrictive       important point is that both permit new
                 land-use policies are unreasonable or unwise.             wells, while the 0 suffix does not.

                 6.1 Existing         Land-use          Regulations        The discussion in Section 5.4 indicated that
                      Affecting     Oil    Operations      in    the       the five existing drill sites could probably
                       Townlot/Downtown                                    accommodate         an     enhanced        recovery
                                                                           program,       except       perhaps       for      a
                 Considering     the    long    history    of     oil      comprehensive stearnflood          in the Bolsa
                 operations in Huntington Beach, as well as                zone.     The     stearnflood     might     require
                 the benefits that oil production contributes              additional surface area outside the drill
                 to the community such as employment and                   sites, somewhere between 13th and 6th
                 revenues, the City's land-use regulations                 Streets.    There are several existing oil
                 have     traditionally     accommodated          oil      operation sites in this area which are zoned
                 activities.                                               0; thus steam equipment and redrilling are
                                                                           permitted, but no new wells.
                 The   City    currently    uses    three     zoning
                 districts, called "0,"    '10-1" and "0-2," to            Th is   indicates    that   current     regulations
                 allow oil operations.        More specifically,           wou Id    allow    unitization    and     enhanced
                 each of these is a zone suffix which is                   recovery. The relevant question, however,
                 attached to a base zoning designation such                is how long will these sites be available for
                 as residential, commercial or industrial.                 such a project?
                 Both the uses permitted in the base zone, as
                 well as the oil-related activities permitted              Because the 0, 0-1 and 0-2 districts are
                 by the suffix zone, can be legally conducted              only    suf f ixes, other    uses    are    already
                 on the site.                                              permitted on these sites. At any time, the
                                                                           operator may abandon his oil operations, and
                 The "0" is    the most restrictive of the oil             new development can be constructed on the
                 suf f ixes.  It    permits   wells    and     other       site. The loss of any of the remaining drill
                 oil-related  equipment, including those which             sites and the loss of the other oil operation
                 might be     used in an enhanced recovery                 sites, particularly in some parts of the
                 project. It allows the redrilling of existing             Townlot, could potentially preclude a future
                 wells, but does not allow any new wells to                enhanced recovery project.
                 be drilled. The principal purpose of this
                 suffix is to allow existing wells and the                 Through its land use regulations the City
                 kinds of activities which could be reasonably             can     go    beyond     simply      accomodating
                 expected in association with these wells.                 enhanced recovery projects now, and help to
                 This is the designation on most of the oil                keep sites available for such use in the
                 operation      sites     remaining       in     the       future.    Strategies for achieving this are
                 Townlot /Downtown area. They are shown in                 discussed in the following sections.
                 black in Figure 5.5.
                                                                           6.2 Strategies to Help Preserve Existing
                 The "0-1" designation allows all the uses                       Drill Sites
                 permitted under the 0 suffix, but also
                 allows new wells to be drilled. Drill sites 2             Any   enhanced recovery project will require
                 through 5 in Figure 5.5 are designated 0-1.               a significant number of new wells.

                 The "0-2" suffix allows the same uses as                  The existing drill sites are large enough
                 0-1, but applies to oil operation sites

                                                                                                                            37

               to accommodate the anticipated number of                                 Permit only new uses which do not
               wells and are distributed over the oil zones                             cover the drill site (or parts of the drill
               in such a way that most of the strata can be                             site)      extensively        with       permanent
               reached by directionally drilled wells. Thus,                            struc tures.     These uses might include
               protection of these existing drill sites is                              commercial recreation facilities such
               probably highest priority for keeping open                               as      11miniature        golf ",     or       other
               the option of a future enhanced recovery                                 commercial establishments like garden
               project. The following strategies might help                             supply      outlets,      or     self -serve      gas
               to protect these sites:                                                  stations. Such uses would have to be
                                                                                        reasonably feasible considering their
               Change 0-1 to base designation rather than                               location and appropriate considering
               a suffix:      If the existing base zone were                            other nearby uses.
               removed, and the 0-1 suffix were to become
               the base zone for the site, then a developer                       The   City might also establish regular review
               would need to come to the City for a zone                          periods after which the owner or developer
               change       before       new      uses      could       be        could request a re-evaluation of the site for
               constructed on the drill site.              Before the             an enhanced recovery project. If the City
               zone change          would be permitted,                the        determined        that an        enhanced recovery
               Planning Commission and City Council                               project was no longer practical or that the
               would have to approve the zone change and                          site was no longer important for the success
               the new use. The City might require one or                         of such a project, the restrictions on the use
               all of the following before allowing new uses                      of the surface could be removed.
               on the drill site:
                                                                                  Change General Plan designation on all drill
                     An analysis by a petroleum engineer                          sites to "Resource Production":                   Another
                     showing whether an enhanced recovery                         important "tool" for regulating land uses
                     project      in    the     Townlot       area       is       besides zoning is the City's General Plan.
                     impractical or not.        If such a project is
                     still   possible,       the    analysis       should         The General Plan indicates, in general
                     indicate     whether       the    drill   site      in       terms,      the     kinds     of    uses     wh ich     are
                     question      is   necessary       for    such      a        appropriate in different parts of the City.
                     project.      The     analysis      should       also        For example, drill site #1 in Figure 5.5 is
                     indicate if   only part of the surface area                  currently designated "resource production."
                     in the drill site is essential to such a                     This means that activities related to oil
                     project.                                                     extraction are the most appropriate ones in
                                                                                  this area during the "planning period" (which
                     Retention of part of the drill site                          is usually 20 years).             Before other uses
                     surface as open space, available for                         would be permitted there, the developer
                     future oil operations. This open surface                     would have          to obtain a General Plan
                     area should be large enough to not only                      amendment from the City. Drill site #2 is
                     accommodate the equipment necessary                          designated "planned development" and drill
                     for the enhanced recovery project, but                       sites #3-5 are in residential designations. If
                     also any buffers, walls, screens and                         these sites were also changed to "resource
                     sound-proofing barriers used to protect                      production" then oil extraction would be the
                     the nearby uses from any adverse                             principal permitted use, and a General Plan
                     impacts related to the future oil                            amendment would be necessary before new
                     operations. These open spaces could be                       uses would be allowed.
                     incorporated into the design of the new
                     development and used for such things as                      The advantage of requiring a General Plan
                     recreation facilities or gardens, so long                    amendment rather than a zone change is
                     as there were a clear understanding                          that the former usually entails a much more
                     that such areas might also be used for                       extensive review by the City's staff and
                     oil operations at a future date.                             policy-makers.

               38

                This might ensure that considerations like               A disadvantage to this approach is that it
                future recovery projects will be more                    adds, (almost literally), a new layer of City
                completely analyzed before changes are                   land use restrictions, in addit      'ion to the
                permitted. The kinds of restrictions that                existing     General      Plan     and     zoning
                might be placed on the site by the City                  ordinances. New review procedures would
                before allowing new uses would be the same               need to be developed in order to implement
                as in the zone change case discussed above.              this approach. The advantage of the overlay
                However, the mechanisms for the detailed                 is that it emphasizes the importance of
                review which would be required in that case              protecting areas for enhanced recovery
                are already established for General Plan                 projects and it helps to focus the analysis of
                amendments, but are not normally exercised               new uses on the enhanced recovery issue and
                currently for zone changes.                              not other peripheral ones.

                A disadvantage is that the General Plan                  6.3 Preserving Other Oil Operation Sites
                currently does not usually differentiate land                 (Zoned 0) in the Town lot /Downtown
                use categories on areas smaller than 20
                acres. The intent of the General Plan is to              The  City may want to consider applying the
                indicate general uses for relatively large               strategies discussed above to the other oil
                areas in the City, leaving more detailed                 operation sites in the Town lot /Downtown
                restrictions an a site-by-site ba@is to zoning           area which are currently zoned 0. Some of
                ordinances. A significant exception to this              these   sites   could   be    important    to    a
                is  the   coastal    zone,   where     land    use       comprehensive enhanced recovery project.
                designations have been applied to sites much             Many of these sites, however, are very small
                smaller than 20 acres because of the special             and very close to other uses. The minimum
                resources associated with the coast which                surface area necessary to accommodate a
                require more detailed planning, even at the              drilling rig recommended by numerous oil
                General Plan level. Drill sites #1, 2, 4, and            companies and well drilling companies is
                5 are in the coastal zone, so this kind of               approximately 100 by 200 feet.*              Sites
                specificity in the land use designation would            which are smaller than this minimum may
                not be unprecedented.                                    not be appropriate for future re-drilling and,
                                                                         thus, might be excluded from consideration
                Overlays     and    conditional-use     permits          in a future enhanced recovery project.
                Another method by which the City could
                help protect surface areas for future oil                6.4 Permitting New Wells in the Townlot
                operations. would be through an "overlay"
                and a conditional-use permit.          The City          Besides protecting the existing drill sites
                could indicate that the Town lot/Downtown                and some of the larger O-zoned sites, the
                area is a special resource production district           City might also consider allowing new wells
                by a general "overlay" designation. Before               in the Townlot, if the new wells were part
                certain sites in the overlay district could be           of a unitization and consolidation program.
                used for activities other than oil operations,           New wells outside an existing drill site may
                the developer would be required to apply for             be important to an enhanced recovery
                and receive a conditional use permit -- that
                is, a permit allowing new uses, but only
                after a City review and analysis, and only if
                any conditions placed on the new uses by the
                City are accepted by the developer. These                     Planning staff contacted the following
                conditions    could   include    the    enhanced              companies:      Chevron,     Aminoil      and
                recovery analysis and reservation of open                     California Production Services, as well
                space which were discussed in the zone                        as the DOG.
                change option above.

                                                                                                                       39

               project if existing wells cannot be redrilled                  The aim of this policy is to protect and
               or if there are simply insufficient existing                   enhance       the     visual    and      recreational
               wells to complete the injection patterns.                      amenities afforded by the beach while
               New wells should only be permitted if they                     permitting oil activities which must be
               meet the following criteria: 1) the site is                    located there. In view of this approach,
               larger than a minimum size; 2) mitigations                     reservation of Bolsa Chica Beach for future
               of   any    potential     adverse      impacts      are        oil     facilities      appears        inappropriate.
               incorporated into the project; and '3) the                     However, if new facilities essential to the
               new well is part of an overall unitizafion or                  recovery of the oil deposits underneath the
               consolidation        program.          Implementing            Townlot could not be sited any where else,
               strategies include developing a new zoning                     then    the    City may still permit those
               ordinance or utilizing an overlay district                     facilities to be located on the beach if all of
               with a conditional-use permit requirement,                     the    conditions      listed    above     are     met.
               similar to the strategies discussed in Section                 However, because this is a State beach, the
               6.2.                                                           California      Department         of    Parks      and
                                                                              Recreation would also have to give its
               6.5  Other Possibilities for New Drill Sites                   permission before new wells could be drilled.

               Besides the drill sites discussed above, there                 Offshore       Locations:       Another        possible
               are    other possiblities which should be                      location for oil facilities needed in an
               d iscussed.                                                    enhanced recovery project is offshore.

               Bolsa Chica State Beach: Part of Bolsa                         In this case, preserving surface locations in
                   ica State Beach lies across Pacific Coast                  the Townlot itself would not be important,
               Highway along a large section of the                           although some onshore sites might be
               Towni ot /Downtown area. Several wells and                     necessary       to    tap     the     more       inland
               related equipment are active in this area                      extremities of the oil pools.              Wells and
               which     is   currently      zoned      0.       Wells        related     equipment      can     be located         on
               directionally drilled inland from this strip                   offshore platforms, man-made islands or
               could cover a large part of the Townlot and                    piers extending from the shore.                Because
               could be very useful in a comprehensive                        these wells would be reaching inland, they
               enhanced      recovery      project.     A    serious          would be located as close as possible to the
               problem with using this area for more                          shore. Thus, a pier would be the most likely
               intensive oil      operations     is   the    conflict         facility used if an offshore location were
               between those activities and the area's use                    chosen.
               as    a   heavily-visited,       public   recreation
               facility. In light of the high priority in the                 The disadvantages of using a pier for oil
               Coastal Act given to public recreation along                   facilities include the following: 1) risk of
               the shoreline, the City's LCP                 includes         spills which could adversely affect the
               policies which encourage the "phase-out" of                    recreation beaches, 2) degradation of visual
               wells on Bolsa Chica Beach. New wells are                      resources associated with the shoreline, 3)
               not prohibited from locating on the beach,                     conflict between industrial and recreational
               but can only be sited there if all the                         uses of the shoreline and 4) conflicts
               following condition are met:                                   between mobile, portable oil equipment and
                                                                              other traffic.
               1) The resources are not recoverable from
               any    other onshore location or              existing         Advantages      of using a pier include the
               platform, 2) the site is improved to          become           following: 1) valuable surface areas onshore
               compatible with recreation uses               of the           could be freed for other uses, and 2) the pier
               beach, 3) public health, safety and           we If are        could be designed to accommodate public
               are      not      jeopardized,         4)     adverse          recreation facilities such as fishing areas
               environmental impacts are mitigated to the                     and look-outs, and the private sector would
               maximum extent feasible, 5) the net overall                    probably be willing to finance the entire
               impact of oil production facilities on visual                  proposal.      The    pier would have to be
               resources is improved, and 6) safe access to                   designed to reduce any conflicts between
               the beach is provided.                                         the oil activities and the public recreation
                                                                              f ac ilities.

               40

                                                                                   Park
                                                                                                                      Id
                                                                                                                       House

                                 ----- ......
                                     -- - ---------
                                                                        ED ED ED
                                                                                                      bra
                                                                                                          Y
                            PID ED T ED ED ED DE M, ED ED ED IJ 11 ED ELLJI L-JLJrLil
                            F71 FIF1 FTI F-117                                                  FF-1 F_1F_1 T
                        Senior Rec. Cen                                          Fj [S7enior Center
                                                @j                                         L@Lj I ILJ LJLJ L-i                          'Mobile Home Park
                                               t r
                            LJLJ LJLJ LJLJ LJLJ L-i I EU, F1D ED EO LO                  _j                     I
                                      EU ED                                                     LTJ LU LH
                                                                                      L           arkin4' L
                                               Ell] ED P@D F Ell] E'1@ [I,], F]            Ell]      r .....3           DD [110:i                    Motel
                                                                                                                                se, Commercial
                                                                                                                             -a
                                                                       IL
                            EF1 ED Ell EO ELl [1100 ED ED EEI 110 ED El [70 ED EDEID ED OEv@a@an7
                                                                                                                              1@_ @1 Vacant
                                                                                                                             0C."
                                                                                        Lease, Commercial
                                                                                                                                  Public Beach

                                                                                                                         Pier

                                         Figure 6.1     City-owned Properties in Town lot/Downtown.
                                                        Source: Huntington Beach Planning Division.
                                            huntington beach planning division

             The City's planning and zoning jurisdiction              6.6 Other Possible Actions
             does not extend beyond the mean high tide
             line. The State Land Commission regulates                There are other kinds of actions related to
             development in this area. Thus, the City                 protecting surface areas which the City
             can only discourage or encourage offshore                should consider. First, the City may want
             development,     but cannot regulate         such        to hire a professional petroleum engineer to
             development directly.                                    analyze the possibility of unitization and
                                                                      enhanced           recovery         in         the
             City-owned Property: Another option for                  Town lot/Downtown more completely before
             preserving surface areas for future oil                  enacting zoning ordinances or other land use
             facilities is for the City to retain properties          restrictions.   Such a study may establish
             it owns itself and to restrict uses on the               more exactly the        likelihood of such a
             surface or parts of the surface. Figure 6.1              project,    as  we 11   as   its  surface     area
             shows the City-owned properties in and near              requirements. This     in turn could allow for
             the Town lot/Downtown and indicates the                  the development of more precise regulations.
             uses   currently    located   on    each.     The
             implementation approach would be to limit                Secondly, an analysis of the remainder of
             structures   so     that  sections    of    these        the City may be helpful to locate other
             properties are preserved until such time                 parts of the field where unitization and
             that   an   enhanced    recovery     project     is      enhanced recovery projects are possible and
             proposed. The City would then sell or lease              where protection strategies similar to those
             the surface areas to the unit proposing the              discussed    for   the    Townlot     might     be
             project.   The City     could still use these            appropriate.
             properties until that   time for facilities like
             parks or parking lots   which leave large parts
             of   the    surface     free    of    permanent
             structures.   The City would periodically
             review the properties reserved for potential
             enhanced recovery projects to determine if
             such projects are       still possible   and    if
             particular properties would be important for
             the projects.

             42

                7.0 Conclusion

               For the forseeable future, energy sources                The City's principal role in this issue is to
               and especially oil -- will continue to be                control land uses so that enough surface
               increasingly      more       expensive.       New        area is preserved until these technologies
               technologies    will also      continue   to    be       can be applied or until it is clear that
               developed to help increase energy        supplies.       application    of    those     technologies      is
               In light of this situation, oil remaining in the         impractical.    More direct actions which
               ground after primary production which may                would encourage unitization and the use of
               be recovered by new technology is a very                 enhanced     recovery     methods    are     more
               valuable natural resource.                               appropriately within the jurisdictions of
                                                                        State and federal governments. The City
               Th is     report       shows        that       the       should    monitor    policy    and     legislative
               Townl ot /Downtown       area   of     Huntington        developments at these levels of government
               Beach may overlie such oil resources. It                 related    to    unitization    and     enhanced
               also discussed     strategies    for   protecting        recovery, as well as to developments in the
               surface areas necessary for access to those              oil industry itself, to better determine if
               resources    in   the    face  of     encroaching        such programs are likely in Huntington
               development, so that new technologies May                Beach. By watching these developments, as
               someday     be    applied    to   recover      the       we 11 as by      periodically   evaluating     the
               remaining oil.     The City should consider              potential for new projects in Huntington
               evaluating other areas in the Huntington                 Beach, the City can continue to promote
               Beach oil field where conditions are similar             policies which help to protect and carefully
               to those in the Townlot; namely, where 1)                utilize its important oil resources.
               significant quantities of oil may still exist in
               the ground because secondary and other
               enhanced recovery methods have not been
               applied, and where 2) new development is
               rapidly   encroaching      on   the    oil   field,
               threatening to cover the surface to such an
               extent    that    the    necessary     extraction
               equipment can not be accomodated.

                                                                                                                        43

                                                      NOTES

              1.  California Coastal Act of 1976.

              2.  California Public Resources Code, Division 3; Chapter 3.5.

              3.  Ibid.

              4.  Hill, F. L., Proceedings: Workshop on Urban Oil and Gas Development 1978.

              5.  Hagenbush, G. C., and Allen D. R., "Huntington Beach Oil Field," Summary of
                  Operations, Vol. 44, 1958.

              6.  Ibid.

              7.  Hunter, A. L., Bradford, W. C., and Allen, D. R., "Southeast Extension of the Townlot
                  Area," Summary of Operations Vol. 41, 1955.

              8.  Huntington Beach Planning Division, "Fiscal Impacts of Oil Operations in Huntington
                  Beach," 1981.

               44

                                                 APPENDIX A

                                         Questionnaire and Cover Letter

                                                                                                     45

                COMPANY NAME:

                DEFINITIONS:

                    Waterf load: A method for increasing oi I production by injecting water into oi I zones.
                    Unitization: An agreement among several oil operators to treat a shared oil pool as
                    a 'funit" and to produce the pool together in a coordinated way, as if they were a
                    single company. Unitization is usually required before a waterflood project can be
                    undertaken in all areas where many operators work the same reservoir.

                1.  Do you think there is enough recoverable oil in the Town I ot-Downtown part of the
                    Huntington Beach Field so that a waterf lood would be economically profitable (if
                    unitizations could be achieved).

                    Very likely
                    Perhaps
                    Very unlikely
                    Don't know
                2.  If you think there is enough oi I to make unitization and waterf looding in the Townlot
                    area profitable, do you think other obstacles can be overcome so that such a project
                    is possible in the future?

                    Yes
                    Maybe
                    No
                    Don't know
                3.  Which of the following reasons do you think have prevented a waterflood program
                    from happening in the Townlot area?

                    Not enough oi I
                    Not enough operators willing
                     to join
                    Price controls on oil
                    Zoning restrictions

                    Other

                4.  Would your company be interested in joining a voluntary unit for the purpose of
                    waterf looding?

                    Definitely interested
                    Maybe interested
                    Definitely not interested

               46

                              CITY OF HUNTINGTON BEACH

                              P.O. BOX 190         DEPARTMENT OF DEVELOPMENT SERVICES CALIFORNIA92648
                              BUILDING DIVISION (714) 536-5241                       PLANNING DIVISION 014) 536-5271

                   Dear Sir:

                   A problem facing oil producers in urban areas is the pressure for new development on the
                   surface of oil fields. Houses and commercial structures are built near active oil
                   operations; surface areas, from which new wells could be drilled and new technology
                   could be tried, are covered over. This pressure for new development on oil fields is
                   certainly evident in the City of Huntington Beach, and the City is concerned that
                   potentially valuable oil reserves may be lost in the future if oil fields are completely
                   covered by development.
                   The City Planning Division is studying this potential problem. As part of this study, we
                   are trying to determine if a unitization and waterflood project is possible in the Townlot
                   and Downtown parts of the City. (This is the area bounded by Pacific Coast Highway,
                   Palm Avenue, Goldenwest Street and Lake Street.) Our records show that your company
                   operates a well or wells in this part of the City, and we would very much appreciate your
                   answering the questions on the enclosed sheet. You can just check off your answers on
                   the sheet, put it in the enclosed envelope and drop it in a mailbox.
                   If you have other comments or ideas about the possibility of a waterflood program in the
                   Townlot, or if you have any questions about the City's study, please feel free to write the
                   Planning Division or simply call Mike Multari of our staff at 536-5279.

                   Thank you very much for your help.

                   Sincerely,
                   ames W. Pa&@@
                   Department of Development Services

                   JWP/MM:cw
               L
                     fe
                   io
              V "

                   ames  W. PC
                       rt
                 @Depament
                   JWP/MM.
                            .cw

                                                                                                           47

                                                   APPENDIX B

                                                   Bibliography

              "Coastal Energy Impact Program for the City of Huntington Beach," Huntington Bech
              Planning Division, 1980.
              Enhanced Oil Recovery Potential in the U.S., Office of Technology Assessment, GPO,
              1976.

              "Estimate of Natural Gas Reserves -- Huntington Beach,"            California Railroad
              Commission, 1946.
              "Huntington Beach Oil Field," DOG, Summary of Operations, Vol. 44, 1958.

              "Huntington Beach Oil Field   Old Field Portion," DOG, Summary of Operations, Vol. 28,
              1942.
              "Huntington Beach Oil Field    Southeast Extension of Townlot Area," DOG, Summary of
              Operations, Vol. 41, 1955.

              Oil Property Valuation, Paul Paine, 1942.
              Procedings: Workshop on Urban Oil and Gas Development, F. L. Hill (Editor), DOG and
              Federal Energy Administration, 1978.
              "Recent Developments in Huntington Beach Oil Field," DOG, Summary of Operations, Vol.
              12, 1927.
              "Recent Developments in the Tar Sands in the Townlot Area, Huntington Beach," Division
              of Oil and Gas, Summary of Operations, Vol. 35, 1949.
              "Tar Sands in the Townlot Area of Huntington Beach Oil Field," DOG, Summary of
              Operations, Vol. 13, 1928.
              Valuation of Oil Producing Properties, California Board of Equalization, 1972.

               48

                                                                        DEPARTMENT OF DEVELOPMENT SERVICES

                                                                        Planning Division
                                                                             June W. Catalano, Deputy I)irecti,-)r

                                                                        Pro@ject Director and Principal Author
                                                                             Michael Multari, Planner

                                                                        Special Assistance
                                                                             Aminoil, USA
                                                                             Chevron, USA
                                                                             California Division of Oil and Gas
                                                                             Eastman Whipstock, Inc.

                                                                        Word Processing
                                                                             Patti Schwartz, Word Processing Coordinator
                                                                             Sharon Hojo, Word Processing Specialist
                                                                             Deborah Pledger, Word Processing Senior
                                                                             Caren Winant, Word Processing Senior
                                                                             Dehorah Espinoza, Word Processor

                                                                        Graphics
                                                                             Rohert Sigmon, Planning Draftsman
                                                                             Michael Multari, Planner

                                 CITY OF HUNTINGTON BEACH
                 ,@4 "iff

                                 P.O. BOX 190              DEPARTMENT OF DEVELOPMENT SERVICES CALIFORNIA92648
                                 BUILDING DIVISION (714) 536-5241                                   PLANNING DIVISION (714) 536-5271
                                                                                                                         1111101111
                                                                                                             36 681               .08