Blog Post

Long Beach Government Profits from Unique Oil History, but Challenges Lie Ahead

Mar 12, 2015 | Daniel Raimi

The city of Long Beach, Calif., occupies an unusual position in terms of local government relationships with the oil and gas industry. Due to a complex series of negotiations and legal proceedings with the state of California through the first part of the 20th century, the city government is the working interest owner of the giant Wilmington oil field, which lies beneath part of the city and its harbor in an area known as the Tidelands.

Long Beach Harbor with one of four man-made oil islands in the background.

As the working interest, Long Beach is responsible for investment decisions such as where and when to drill wells, which companies to hire to perform oilfield services, and how to plan for the future of the oilfield. Because of this position, the city enjoys substantial profits from oil and gas production, much of which is used to fund city services and capital projects. In the most recent year, the Long Beach Gas and Oil Department earned a profit of nearly $70 million.

But these benefits have not come without challenges. In the 1940s and 1950s, as oil production boomed, parts of the city began to experience a major problem: it began to sink. As oil was pumped from beneath the beaches and coastal neighborhoods, parts of the city sank by as much as 25 feet, creating flooding hazards and large-scale property damage.

A partial drilling ban was implemented in the 1950s, during which time city officials and oil companies experimented with ways to reduce subsidence. In 1964, a voter referendum lifted the ban and allowed drilling to resume across the field, but with new safeguards to prevent additional subsidence. The city constructed four man-made islands in Long Beach Harbor, where operations now take place.

A drilling rig with production and injection wells at Long Beach Harbor. This drilling rig is housed in a permanent enclosure to reduce noise and visual impacts from the nearby shoreline. It travels a circular path around the island on tracks, drilling dozens of wells per year for oil production and water injection.

We were lucky enough to visit one thanks to the Long Beach Department of Gas and Oil. From these islands, the city pumps millions of gallons of mostly reclaimed water into the oil reservoirs, which keeps reservoir pressure high and prevents subsidence, and which also helps push oil out of the ground and up through new and existing wells.

The Wilmington field has produced more than one billion barrels of oil, and production continues at a steady pace. However, as production declines and eventually ceases in the coming decades, the city will need to continue pumping water into the earth to keep pressure high in the reservoir. It is uncertain how long the city will need to continue pumping in water and there are no current plans for how to decommission the four man-made islands that mark the harbor. The state of California has saved some $300 million for this purpose, but local officials suspect that these funds will be insufficient to handle all of the relevant costs.

The unique and fascinating history of Long Beach oil production is unlike anything we have seen in other parts of the United States. However, it is not unique in that the government has seen substantial revenues associated with oil and gas production. It is also not unique in the sense that important questions and challenges lie ahead.

This research was carried out at the Duke University Energy Initiative with support from the Alfred P. Sloan Foundation.