Long Beach sees the benefits of drilling

Long Beach Press-Telegram:

One of the solutions to Long Beach's ongoing budget problems may be buried deep underground.

Complex contract negotiations involving the Wilmington Oil Field in and around the Port of Long Beach could uncover a cash gusher for public and private interests.

Preliminary 10-year financial projections associated with the project include eye-popping numbers:

$130 million for the city's general fund, which pays for services such as police and firefighting;

$150 million for the city's Tidelands Fund, which pays for services such as lifeguards and coastal development;

$240 million for Occidental Petroleum, which is under contract with the city to extract oil from the Wilmington field.

Though the formulas being used are proprietary to those in the negotiations, the forecasts are rooted in oil trading at an average of about $80 a barrel, the value of the dollar - which tends to move in the direction opposite of oil prices - anticipated demand, and other factors.

In addition to sharing in the net profits that could result from future drilling, the city could realize other income from a 41-cent-per-barrel tax and utility-users' taxes on electricity and natural gas, both of which are used in oil production, Assistant City Auditor James Johnson said.

The Wilmington field deal is far from done, but if it is realized, it would pump more money into public coffers than any other publicly known project on Long Beach's financial horizon.

"In terms of actual revenue that will fund general fund requirements, additional police, additional recreation, there's nothing like this that I know of," said Mayor Bob Foster, who later added, "If you could see additional revenue without significant environmental impact, why wouldn't you do it?"

Foster made it clear, however, while the project is the biggest thing on the table for the city budget when examined in purely financial terms, it would not mean nearly as many jobs as some of the proposals being discussed for the former Boeing 717 site, such as an electric car plant or film studio.

...

A project like this will produce several well paying jobs and since it does not cost the city anything and actually produces revenue it should not be seen as competing with other projects.

It sounds like Long Beach has over extended itself and looks at this project as a way for paying operating expenses. While that is all well and good, a wiser course would be to put the money from the oil production in separate account that would be invested. The proceeds from the investment would then be used to pay for infrastructure needs of the city. The operating expenses of a city like Long Beach should be paid out of the general revenues of the city.

I am sure the city will have to deal with the anti energy left who seek to strangle domestic production. There are a lot of people like that in California and they have made it a much poorer state.