San Fran looks to wean itself off Kern County oil revenues

Act One

From Bakersfield.com

BY JOHN COX  Aug 3, 2019

For decades, the gift Alfred Fuhrman bestowed on his beloved San Francisco worked just as he hoped it would, paying for upkeep at Golden Gate Park and helping fund the city’s library system.

Few knew, or cared, where the money came from — until about three years ago, that is, when word got out the city had been quietly collecting royalties from petroleum production at the Kern River Oil Field, way down south in Kern County.

Bay Area environmentalists were mortified. The arrangement, still responsible for hundreds of thousands of dollars per year in city revenue, would need to end as soon as possible if San Francisco hopes to remain true to its official policies for fighting climate change.

And so it shall be: According to city staff reports and an email from a city real estate official, San Francisco will walk away from its longstanding lease agreement with Chevron Corp. covering 800 acres of land north and northeast of Bakersfield. Within a year, the parcel’s 82 active oil wells, representing a little less than 1 percent of the field’s total, are to be closed for good.

But turning a perceived environmental liability into a well-intentioned sacrifice isn’t always so simple.

Following San Francisco’s adoption of a “Keep It in the Ground” ordinance in late 2016, city officials had planned to install photoelectric solar panels on all 1,500 acres bequeathed by Fuhrman in 1941, including grazing land and about 40 acres west of Coalinga. That was supposed to raise $484,000 per year, more than enough to make up for the lost oil lease revenue.

That plan has since fallen through. Rather than continue to own the property, as originally envisioned, the city wants to sell it with a deed restriction that the land never again be used for oil production.

Full (Act One) story here

Act Two

From Bakersfield.com

Well-plugging costs add wrinkle to San Francisco’s planned oil pullout

BY JOHN COX Aug 10, 2019

This much is clear about San Francisco’s plan to withdraw itself from Kern County oil production: It isn’t going to be cheap. Question is, who’s going to pay for it?

The answer has yet to emerge from ongoing negotiations between the city and Chevron Corp., which has for decades operated 82 active wells on San Francisco’s behalf in the Kern River Oil field.

From the city’s perspective, Chevron should cover the cost of “abandoning” the wells, a highly regulated and costly process that involves using cement to permanently seal the bores.

“While I can’t get into specifics of our negotiations with Chevron, we believe our lease assigns decommissioning responsibilities to the tenant, in this case, Chevron,” John Updike, senior real estate project manager for the City and County of San Francisco, wrote in an email last week.

Chevron has declined to say publicly whether it agrees with that assessment. But the fact that the matter is still under discussion as part of a broader negotiation may suggest the company is not ready to concede the point as it tries to work out a deal on how to wind down its lease of some 800 acres of city-owned land, a quarter of which is used for oil production.

ENVIRONMENTAL POLICY

The well-abandonment question has arisen as part of San Francisco’s 2016 ordinance requiring that no city-owned property be used for oil production. The keep-it-in-the-ground policy was crafted specifically to address Chevron’s lease, which officials felt was contradictory to San Francisco’s efforts to combat climate change.

Instead of oil production, San Francisco officials said they intend to convert the land, particularly the northern portion used for cattle grazing, into wildlife habitat.

The city did not buy the property but received it in 1941 as part of a 1,500-acre donation. The land’s oil production royalties have averaged lately about $24,000 per month.

That money helps pay for upkeep at Golden Gate Park and fund San Francisco’s public library system. The royalty revenues are expected to end once Chevron’s lease expires at the end of March.

Full (Act Two) story here.

HT/flyfisher