The Los Angeles Oil Patch

"LA is a great, big freeway," go the words to the song. It is also one of the world’s great oil provinces, with historical oil extraction over the past 110 years of something near 9 billion barrels, and still counting. This volume easily places the oil production from the Los Angeles Basin in the ranks of Prudhoe Bay, Alaska (near 10 billion barrels), and about 50% greater than the East Texas field (about 6 billion barrels). So in this article, let’s discuss Los Angeles and oil.

First, Los Angeles

First, let’s discuss Los Angeles. I have been here before and I know what to expect, but the place never ceases to amaze me.

Just flying into the region, one encounters one of the busiest air traffic corridors in the world. The air controllers land giant airplanes two abreast on parallel runways at Los Angeles International Airport (LAX), with the rest of the airport work force moving about 78 million passengers per year through the jetways. This movement of humanity is the equivalent of about one out of every four people in the United States, although many of those 78 million are from foreign lands. And outside LAX, the freeways are even more crowded, at times and in places just wall to wall with cars and trucks, six lanes in each direction. Who are all these people? Where are they coming from? Where are they going? Driving their hummers to the store to buy some lipstick, maybe? Haven’t they heard about Peak Oil? I guess not, but they will.

The Port of Long Beach, south of LAX, is similarly congested, with just plain miles of waterfront lined with pier facilities, steel forests of massive crane systems, and the adjacent and necessary railroad and heavy road infrastructure. This is all to the purpose of unloading the immense containerships that dock here. The biggest of the big vessels, larger than the old RMS Queen Mary that is now a tourist attraction at Long Beach, are carrying upward of 10,000 20- and 40-foot containers from foreign nations. Can you guess from which foreign nation most of these cargoes originate? Hint: Many of the ships belong to the China Ocean Shipping Co. (COSCO). Oh well, at least the Chinese lend us the money with which to buy their stuff. Or at least they have done so up to now. Something tells me that this also is related to Peak Oil.

And of those 10,000 containers on the large carriers, one port official told me that an average of 7,000 are loaded on rail cars for transport across the country, with about 3,000 containers loaded on motor trucks for the over-the-road, long haul that commences on I-710 and then eventually ends at a Wal-Mart or other fine store near you. And 3,000 trucks is one heck of a lot of trucks. Really, dear readers, the merge point where passenger traffic from Long Beach joins I-710 out of the port area is just a long line of fast-moving 18-wheelers, on occasion totaling something over 100 per hour, according to a uniformed representative of the California Highway Patrol.

And for any road-weary truck drivers who are paying attention, not far up from the Long Beach highway merge point one can see a billboard that the Burlington Northern Santa Fe Railroad (BNSF) has displayed, advertising for locomotive engineers. "It is like having a corner office with a view, except that it moves," states the house-sized help-wanted posting. Need a job? Want to drive a train? They are hiring down at the railroad.

And where else but in Los Angeles could you see none other than Evel Knievel, that daredevil of the road and master of the leaping motorcycle, give himself over to God and be baptized on Palm Sunday at the Crystal Cathedral by the Rev. Dr. Robert Schuller? Yes, dear readers, it is true. Evel Knievel is now among the saved. But does this mean that for all those years, as he was launching himself over dozens of parked school buses and speeding his way through flaming hoops, Evel was not quite right with God? Wow! Talk about a man who took chances and tempted fate. So now Evel is about 80 years old and suffering from a degenerative lung disease. He said that Jesus visited him in a dream and told him to get baptized. Thus, it was off to LA. It is never too late, I suppose, and you are never too old to do the Lord’s bidding. And when you wish to do so, the City of Angels beckons.

The Early Oil Patch

So Los Angeles is a place of many people, a place of much industry, and a place of much of everything else, often to excess. And in that vein, I can say that LA is also a place of much oil.

Oil was certainly not unknown in Southern California long ago. The famous and geologically fascinating La Brea Tar Pits of Los Angeles have been bogging down, trapping, and preserving unwary animals since Pleistocene times. On one wall of the museum at La Brea, there is a display holding the skulls of 1,600 dire wolves, the remains of predators from long ago who thought that they spotted an easy meal trapped in the tar. But the predators quickly found themselves stuck in the goop and fast departing the gene pool as well. Nature had laid an oily trap for the complacent alphas at the top of the food chain, a message that probably has some contemporary meaning. But I need not belabor that point, certainly not to the Peak Oil scholars who read Whiskey & Gunpowder.

And within the archaeological past, the record is that for something over 10,000 years previous to our modern era, the ancestral Native Americans of SoCal collected oil from seeps. These proto-Californians did this in much the same way as did the Seneca tribes of what later became Pennsylvania. The Indians used the tarry oil to waterproof baskets and preserve rope and fishing lines, as well as as an early form of glue. And there was a variety of other uses, chronicled in numerous fine museums in and around LA.

The first "modern" oil well in the Golden State was drilled in Northern California in 1861, a mere two years after Col. Drake pounded down his hole at Titusville, Pa. Things slowed down during the Civil War, but by 1866, oil was being produced in commercial quantities in Humboldt County, north of San Francisco.

In the fall of 1892, a down-on-his-luck prospector named Edward Doheny drifted into Los Angeles from his previous failed adventures elsewhere. Doheny noticed that LA residents were gathering the "brea" (Spanish for "tar") from tar pits to use as fuel in place of scarce coal or lumber. Doheny applied his miner’s knowledge and began to dig pits and follow the oil traces. Before long, LA of the 1890s was in the throes of an oil boom to rival that of Titusville in the 1860s, if not the Gold Rush of 1849. Speculators bought leases, tore down houses, erected derricks, and began to produce the oil from shallow rock formations. Parts of Los Angeles began to resemble a forest of derricks that rivaled any oil boomtown from back East. The coastline, along what would become the Pacific Coast Highway, was in many areas a line of oil derricks. California was on the oil prospector’s map.

The Los Angeles Basin

Oil exploration in the early days of the 20th century pretty much consisted of prospectors following the shows and seeps and drilling the obvious structural features, particularly the folded rock sections called "anticlines." Fortunately for the early prospectors, the Los Angeles sedimentary basin is among the richest oil provinces on the planet, and is filled with shows, seeps, and anticlines.

These shows, seeps, and anticlines are the surface representations of more than two miles worth of layered Miocene and Pliocene sediments filled with a rich, organic, and petroliferous heritage. Adding to the mix, the relatively recent geologic, tectonic, and structural history of the region has provided an almost perfect thermal history to bring the organic matter into what is called the "oil window." That is, the source rocks have been buried within the depths of the Earth and heated to a point at which oil and gas formed. Then the oil and gas migrated into literally thousands of "traps" that are layered like pancakes from near the surface, down more than two miles to the crystalline basement rock that underlies LA. We cannot neglect to mention the extensive faulting of the region. This has been the source not only of the famous earthquakes, but also has contributed to bringing much of the oil and gas into existence, by aiding in its entrapment.

Aside from the hard work involved in finding and lifting out the oil and gas, there are hundreds of lifetimes worth of geologic and other scientific study just in the Los Angeles Basin alone. And there is a small army of geologists, engineers, and other researchers who do exactly that to earn their daily bread. So Los Angeles is not all just movie stars and fancy divorce lawyers. It is a scientific treasure house.

Back to the Oil Biz

With many people following in the oily footsteps of Doheny, by the 1920s and 1930s, there were numerous oil and gas discoveries in Los Angeles that were, by any standards, simply immense.

The Signal Hill oil field, for example, east of Long Beach, was discovered in 1921. The original reserve volumes are estimated at more than 1 billion barrels, and the number will never really be known, due to poor record keeping over many decades up until the 1950s. Early in its development, the locals called it "Pin Cushion Hill," due to the literally thousands of wells that went down to produce oil. The place had more wood on it than many mountains of the Sierra Nevada; the trees of the Sierra Nevada were cut down and used to erect derricks and pumping facilities. Today, the oil operations are still being carried out by a company called, appropriately enough, Signal Hill Petroleum Inc. Oil wells are located side by side with $1 million homes, and peoples’ backyards have easements crossing them for gathering pipelines and water injection lines. Unlike in the past, however, the modern operations are pumping large volumes of water to obtain the relatively smaller volumes of oil. Still, this pays for itself, and overall produces quite a bit of petroleum.

The Wilmington Oil Field, for another example, discovered in 1936, is utterly gigantic. It stretches from Torrance in the northwest to offshore Long Beach and farther to the southeast. It is 16 miles long and 4 miles wide, with original reserves of over 1.4 billion barrels onshore and 1.2 billion barrels offshore, for a total of 2.6 billion barrels. Oil-producing beds have been located at depths between 2,000-10,000 feet, and there are probably additional oil-producing zones that have not been accessed. The field may extend to the southwest, under Pacific Palisades, but we cannot say for certain, because there has been little drilling in that pricey locale over the years. The homeowners in the area have kept the drillers out. Again, much of the original oil has been removed, but there is still a lot left to recover.

There are other oil fields in places that are well known to many people familiar with Los Angeles, but the locales are not exactly known for their oil production in the public perception. There are oil fields beneath such high-end locales as Huntington Beach, Newport Beach, El Segundo, Los Angeles downtown, Century City, Cheviot Hills, and even Beverly Hills. Beverly Hills High School has oil wells right next to the football field. One drill site with more than 60 wells, drilled directionally to as far as a mile from the surface entry and casing, is located in what looks like a 10-story office building, all of two blocks from the Beverly Hills city line. Director Steven Spielberg’s mother lives down the street. And lore has it that the "Jed Clampett" of the TV show The Beverly Hillbillies fame was named after a local Los Angeles mineral rights owner of that same name ("J.D. Clampett") who is now immortalized by the whim of a scriptwriter.

All in all, there are 55 known oil fields in the Los Angeles area, with something over 30,000 producing wells and an equal number of older, plugged, and abandoned wells. (There may be far more than 30,000 wells, but the number is not known, due to poor record keeping in the good old days.) Something like 9 billion barrels of oil has been extracted from the rocks over the past century or so. Much of the contemporary oil production involves pumping "oil-stained water," but as I noted above, it adds up to quite a bit of extraction per day.

There are probably more oil fields that could be found beneath the streets of LA, because almost all of the past exploration in the urban part of the basin was performed before the mid-1960s. By the late 1960s, the public perception of the oil industry had turned negative, and even the likes of the well-connected Armand Hammer and his Los Angeles-based company Occidental Petroleum could not get drilling permits in most parts of the Los Angeles region. So the past 40 years have been a time of oil companies extracting product from existing wells, maintaining what wells they have, and very occasionally extending or redrilling an aging well. There is virtually no "modern" seismic work going on, and very little drilling. Even redrilling old wells takes a lengthy permitting process, and there is quite a bit of political opposition from people who don’t think twice about turning the keys and starting the engines of their nice cars.

The potential for new oil discovery is there, though. There is really no way that the early oil exploration found "all" of it. The hydrocarbon traps are far too subtle and stacked, deeply buried, and truncated by extensive faulting and permeability pinch-outs. So the older forms of exploration found only the obvious deposits, not the more clandestine deposits. In the modern oil industry, advances in the field of sequence stratigraphy, structural modeling, and seismic methodology, coupled with directional drilling and what is called "extended reach drilling," have made it possible to find and extract such deposits. And it would be quite possible, from a technical standpoint, to drill the oil deposits even in a built-up urban area such as Los Angeles. But these oil deposits will probably never be drilled, due to modern city development, coupled with NIMBY attitudes and political opposition.

The Wealth Beneath the Streets

Los Angeles is an immensely wealthy area. There is money from the entertainment industry, manufacturing, transportation, banking, and many other lines of work, both legal and illegal. LA is an immense city, filled with people from every corner of the world. But most people have no idea of the vast oil wealth beneath the streets of metropolitan Los Angeles — even most Angelinos, to include many Angelinos who live literally next door to an oil pump. Why is this? I suppose because all are busy living their own lives and worrying about their own issues.

But one way or another, we are all products of the Oil Age. No one can escape this fact. Oil makes modern society what it is. You drive it, you fly it, you wear it, and you eat it. In Los Angeles, you certainly breathe it. Even NIMBYs drive hummers, and in tony, high-rent Beverly Hills, people live on the oil patch, and I don’t just mean the mythical Jed Clampett.

Until we meet again…
Byron W. King

April 4, 2007

The Daily Reckoning