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.

ROUGH ESTIMATES

Updike estimated the oil abandonment costs at between $1 million and $5 million. People in the industry locally say that may be about right, considering the average cost of such a procedure is about $50,000 per well.

But they emphasize that's a best-case scenario. If any of the well bores are damaged, industry observers said, expensive repair work may be in order, dramatically raising the job's total cost.

"The abandonment costs can vary widely depending on the condition of the well," said Steve Layton, president of Bakersfield-based oil producer E&B Natural Resources Management, which is not involved in the negotiations.

He added that estimating the project's costs is a "tricky question" without knowing the details of each well. Abandoning a problem well can cost a "very large sum," he said.

A SPECIAL CASE

Several oil industry professionals said assigning financial responsibility for the work could also be difficult because of the novelty of the situation. They said it's exceedingly rare for landowners to try to shut in oil wells on their property, and that the more common approach taken by someone opposed to petroleum production is to turn over the property to a family member who's not against the practice.

"I just don't know who's liable for that" well-abandonment expense, said Bakersfield resident Ed Hazard, president of the California chapter of the National Association of Royalty Owners.

Never having seen a comparable situation, Hazard said the lease agreement between San Francisco and Chevron probably spells out who has responsibility for abandoning the wells. Even so, he said, leases generally are held "in perpetuity," meaning they remain in effect as long as everyone involved makes money.

LONGSTANDING AGREEMENT

San Francisco's lease to Chevron dates to 1993, when amendments were made to an earlier lease signed in 1963 with Shell Oil Co. San Francisco records state the municipality receives 15.5 percent of the oil revenue from the property, with the rest going to Chevron.

Bakersfield oil and gas consultant Fred Rappleye, who like Hazard had no direct knowledge of Chevron's lease or the company's ongoing negotiations with San Francisco, agreed it's unusual for an oil lease agreement to have an expiration date.

Rappleye said he suspects the company isn't anxious to let the lease end and watch the land revert to habitat.

"Chevron probably doesn't want to do it," he said, "because there's probably still some oil around."

John Cox can be reached at 661-395-7404. Follow him on Twitter: @TheThirdGraf. Sign up at Bakersfield.com for free newsletters about local business.

(9) comments

REMUDA

" . . . wildlife habitat."(?) Perhaps that's where they'll send their homeless "poopers" to re-vitalize the soil (as the self-replenishing surges continue to spill). Lotsa kangaroo rats also there (my cats' treasures).

Gary Crabtree

Shut the wells down and leave them alone. If Frisco wants them abandoned, then they can pay for the capping. And, since we know there is oil in the fields, the assessor can estimate the value of that reserve and send Frisco a tax bill.

RedRover

I was told by a longtime SF city planner that San Francisco city officials plan to improve the oil field property and relocate as much of San Francisco’s homeless population to this garden paradise, which they feel will improve residential livability at both locations.

Lilyrose

Tough....more to come in the future. For the locals here who have a misconception of Chevron bring poor like they are, I have news for you, they're not. Chevron start capping.



No more excuses folks. Fossil fuel use needs to go. Stop killing your self and your kids. If you don't care the industry sure don't care if they abuse you.



Thank you San Francisco.

Jerry Todd

Well, there goes over 21,000 petroleum-based products from fertilizers, to lubricants, roofing, paving (you know that black stuff you drive your electric Hugo on?), to cosmetics, to cell phones, wiring, medical devices, clothing, pharmaceuticals, ad nauseum. The only thing that's killing us is all the smog that blows down from San Francisco and the water they waste flushing the Bay because the cities up there dump raw sewage. That only kills the Breadbasket of the World Agriculture Industry for lack of irrigation water. But, you can always buy canned goods at Whole Foods of course, killing 10 gray whales passing the area doesn't count.



If you want to know about REAL global warming, think about the polar ice cap that extended all the way to the Ohio River 26,500 years ago that melted back so we could migrate from our African origins.

But, of course, Pennsylvania will fill the employment and production gap, relying on a guidable boring tool invented by a former Bakersfield resident friend of mine over 20 years ago.http://ttm-reg.onecount.net/onecount/redirects/index.php?action=get-tokens&js=1&sid=&return=https%3A%2F%2Ftriblive.com%2Flocal%2Fregional%2Ftrump-reschedules-visit-to-beaver-county-cracker-plant%2F&brand=trblv&sid=ehfcvino877qr12quhka11ab31



Your settled science fails to include solar activity. Wonder how we piled up all that ice, then melted it again?

byebyeCA

As many don't understand the environmental problem is actually a population problem, slow population growth of the planet and the environment will respond. Compare the situation to a warehouse with rats, over a period of time they multiply and consume all to eat and pollute their environment to a situation of disease. Nature steps in and kills them all off, same will happen with this planet, only a matter of time. All steps to clean the climate will fail as long as more people populate the earth.

Jerry Todd

As soon as they get that taken care of, they'll want to knock down Hetch Hetchy Dam.

Nevermind

Leave it to our President to try to buy an island that's melting away. Lol

Jerry, volcanic activity, solar activity, even the changing axis of the earth all have an affect on climate change. That doesn't mean humans can't have an affect. Regardless of whether you believe human activity can cause it or not, it's happening right before your eyes. I find it amusing that so many climate amateurs think they know more than people who spent 8 years studying for, and have worked decades in that discipline, and dismiss their conclusions as some kind of belated fraternity prank.

"And I brought you into a plentiful land to enjoy it's fruits and it's good things. But when you came in, you defiled my land and made my heritage an abomination."

Jerry Todd

What I love about our President is he really knows how to pull his opponents' chains. As for Greenland, interesting idea. We've maintained bases there at Thule and I think still emergency landing facilities. The Vikings could establish villages in the once much warmer Greenland, I doubt it's melting away, but I love it that he yanked your chain. Folks like to forget that he developed, built and operates over 500 projects with a 4% failure rate. Even the Feds asked him to do something with the Old Post Office on Pennsylvania Avenue. He did it, made it beautiful and profitable and drew the disdain of the haters - even to the point Dems are now warning foreign diplomats to never use a Trump property or face revenge if they get back in office. Can't get much smaller than that. Reminds me of BHO's dual Iranian/USA citizenship boss Valerie Jarrett who made a big deal about getting revenge when they got back in office. Too bad we can't let him do what he's really good at. More fun chasing conspiracies.



No argument about natural climate change effects. The Earth's axis wobbles full cycle about every 12,600 years, even changing the seasonal angle of attack of the sun's rays. Even earth's internal heat under the oceans can have an effect.

I'm a climate amateur, but have no respect for so-called scientists who test to the template. I've been in the environmental remediation business for over 40 years. My emphasis is on problem solving. My experience with the loudest noises in CC politics is not solving problems, but legislating power and control. The current and ongoing efforts of our evil and addled CA government to cut off water to growers in the San Joaquin Valley has brought me to a point of suggesting it would be best to separate climate politics from water infrastructure and distribution requirements.



IMHO stewardship of the land is key and critical. To measure that against climate change is problematic. To measure it against beauty and utility is quite another matter. Your Biblical quote is priceless and fitting. The header on my climate change paper the Californian won't print is, "Our Stewardship is to create Beauty and Utility in service to one another." Thanks for your comments.

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