October 28-November 10, 2014, Section A

Focus On The

Oil & Gas Industry

Presented By The Long Beach Business JournalPhotograph by the Business Journal’s Thomas McConville

InsIde• Upcoming Transportation Fuel

Regulation May Have detrimental effects On state economy

• Oil By Rail – Moving By energy• state Continues To develop

Fracking Oversight Rules• Occidential Petroleum Company

spinoff Is Coming down The Pipeline• Plummeting Oil Prices Could Affect

City’s One-Time expenditures

1_Oil&Gas_Pages_Layout 1 10/24/14 9:21 PM

Upcoming TransportationFuel RegulationMay Have Detrimental Effects On State EconomyState Air Resources Board And Stakeholders At Odds Over Proposed Delay� By SAMANTHA MEHLINGER

Senior Writer

Beginning January 1, 2015, distributors of transportation fuels are subject

to a state cap-and-trade program for greenhouse gas emissions reduction,

which will ultimately increase costs to the oil and gas industry. Those

costs are likely to be passed off to consumers to the tune of anywhere between 16

to 76 cents per gallon at the pump, as estimated by the policy’s governing agency,

the California Air Resources Board.

As this date approaches, industry and consumer groups are urging CARB to

delay its implementation of the policy to allow for more discussion of potential

economic impacts.

California Assembly Bill 32, legislation mandating a strategy for the state to re-

duce its greenhouse gas emissions to 1990 levels by 2020, was enacted in 2006.

In 2008, the California Air Resources Board adopted a scoping plan with a series

of programs to achieve that goal, including a mandatory cap-and-trade program

for entities producing at least 25,000 metric tons of greenhouse gas emissions.

These entities must purchase allowances to cover their emissions or invest in pro-

grams that offset the effects of their emissions in order to comply with AB 32.

In 2013, large electric power plants and industrial plants were rolled into the

cap-and-trade program. Those entities have been reporting their greenhouse gas

emissions as required by AB 32 since 2011. “For the last three years, both the in-

dustrial sector and the utilities sectors have been part of the program,” Steve Young,

CARB’s director of communications, told the Business Journal.

The upcoming inclusion of transportation fuel distributors in the program covers

an industry responsible for 40 percent of all greenhouse gas emissions in the state,

Young noted. “We could not pursue a viable climate change policy without ad-

dressing transportation fuels,” he said.

But as the implementation date for including transportation fuels in the cap-and-

trade program looms nearer, oil and gas industry representatives, business and con-

sumer groups and even legislators are growing louder in their requests to delay the

program. All claim that negative financial repercussions to consumers and the

state’s economy as a whole are imminent if the policy is adopted on schedule.

A recently released report commissioned by the California Drivers Alliance, a

group formed this summer to educate drivers about the upcoming policy and as-

sociated costs, predicted dire economic impacts as a result of including transporta-

tion fuels in the cap-and-trade program.

“We anticipate a 76 percent likelihood of allowance prices adding around $0.10

per gallon of gasoline in 2015 and around $0.12 per gallon in 2020 (both in 2012

dollars),” Dr. Justin L. Adams of Encina Advisors, the report’s author, wrote. “This

would cause net job losses in California of 18,050 jobs in 2015 and a net reduction

in economic output of $2.940 billion as households across the state cut back their

spending to afford higher-priced gas.”

However, Adams argued there is an 18 percent chance that the price of al-

lowances sold to fuel distributors would be three times more than anticipated,

amounting to an increase of between 37 to 47 cents per gallon. “If that happened,

there would be net job losses in California of 66,000 and net reductions in eco-

nomic output of $10.871 billion in 2015,” the report stated.

The data was forecast using an output-input model called IMPLAN, which

Focus On The Oil & Gas IndustryLong Beach Business Journal • October 28, 2014 •

(Please Continue To The Next Page)

The California Drivers Alliance, a group dedicated to building awareness about the upcoming inclusion of transportation fuels under a state cap-and-trade program, presented a petitionto the California Air Resources Board on October 17 signed by 115,000 people. The petition asked the board to delay the implementation of the policy until further public discussion andeconomic analysis could be conducted. Pictured in front row from left are: Acquanetta Warren, mayor of the City of Fontana; Bruce Cash, a boardmember of the National Federation ofIndependent Businesses’ (NFIB) California branch; John Kabateck (at podium), executive director of NFIB California; California Assemblymember Curt Hagman; and Ginna Escobar, acouncilmember for the City of Pomona. (Photograph by California Drivers Alliance)

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the report stated “is widely used by

economists and planners for economic

analysis.”

“The bottom line is that when you

take money away from consumers at

the pump and you send it to state gov-

ernment in Sacramento, that has a neg-

ative impact on the economy,” Jerry

Azevedo of the California Drivers Al-

liance told the Business Journal.

“It is pretty simple math. If you are tak-

ing more money away from consumers at

the pump, they have less to spend else-

where. So the places where you are going

to see the job losses are food and bever-

age, retail, and some health care sectors

that are highly impacted. But any indus-

try sectors that rely on discretionary con-

sumer spending are going to be hit

extremely hard,” Azevedo continued.

Catherine Reheis-Boyd, president of

the Western States Petroleum Associa-

tion (WSPA), a nonprofit group repre-

senting oil and gas industry giants such

as Occidental Petroleum Corporation

and Valero, cited the results of Adams’

report as reason to put the next phase of

the cap-and-trade program on hold.

“From a market standpoint, CARB, we

think you should pause and look at this

and fix these design issues before you

double the size of the program,” she said.

Reheis-Boyd emphasized WSPA has

only asked for a delay of the program,

not its elimination.

Young found the alliance-commis-

sioned report’s results suspect for a

number of reasons. “We think those re-

ports are fundamentally flawed,” he

said. “They chose a number of premises

that skewed the results to their favor,”

he added, noting that CARB’s own

analysis of the economic impacts of the

cap-and-trade program was drastically

different than that of Adams.

“We did our own economic analysis

several years ago and took a look at what

impact the cap-and-trade program would

have on the economy. The conclusion

reached there was that, given the size of

the economy and the benefits that would

accrue from the measures under AB 32

and cap-and-trade, that there would be

virtually no impact to the growth of the

California economy,” he stressed. “In

other words, if we did AB 32 or if we did-

n’t, the California economy would grow

at the same rate. The difference being

that under AB 32 cap-and-trade, the Cal-

ifornia economy would grow with a

clean and sustainable energy basis.”

Young noted that the California

Drivers Alliance only recently cropped

up, and did so thanks solely to funding

from WSPA. According to Azevedo,

the alliance did indeed receive seed

funding from WSPA.

“The California Drivers Alliance is

a product of WSPA funding. It did not

exist before WSPA decided it should

exist, and it is one of the groups that

has been created to present the argu-

ment about this canard of the hidden

gas tax,” Young said.

The Drivers Alliance consistently

refers to the inclusion of transportation

fuels in CARB’s cap-and-trade program

as a “hidden gas tax,” arguing that con-

sumers are largely unaware of the pol-

icy because CARB has done little

outreach to educate the public about it.

“They [CARB] haven’t undertaken any

sort of public education or public

awareness effort. Frankly, the only rea-

son people know about this policy is be-

cause the California Drivers Alliance

and other organizations have been rais-

ing it as an issue over the last few

months,” Azevedo said.

WSPA had a similar take on public

awareness of the policy. “When we

went out and did some polling, nobody

knew about it. Nobody knew it was

going to hit January 1. Nobody knew its

impacts. And the public was very con-

cerned about that,” Reheis-Boyd said.

Young disagreed. “The regulation was

developed and undertaken in a series of

Focus On The Oil & Gas Industry • October 28, 2014 • Long Beach Business Journal



open, transparent and public workshops

over a series of years. Those discussions

included all stakeholders, including the

regular attendance of WSPA or its con-

stituent members. And hundreds of thou-

sands of members of the public have

commented on aspects of this program,”

he said. “This was done in one of the

most open and public procedures over

several years, so I think it is incorrect to

say that this is coming out nowhere and

the consumers did not know about it.”

Another report on the design flaws of

the cap-and-trade program was commis-

sioned by WSPA and authored by Jean-

Philippe Brisson, a partner at Latham &

Watkins law firm who specializes in en-

vironmental law. It was released on Oc-

tober 16. The report identifies several

flaws in the ways allowances and offsets

are allowed and traded which could neg-

atively impact the oil and gas industry.

One issue is that allowances are auc-

tioned off infrequently.

“Auctions provide price transparency

and an avenue for companies to rapidly

address unforeseen events that affect

their exposures, such as a surge in their

operations or new asset acquisitions,”

Brisson wrote. “Yet, with only four

auctions per year, companies have rel-

atively few opportunities to avail

themselves of this compliance path-

way under the California cap-and-

trade program. More frequent auctions

would result in increased market liq-

uidity and improved price discovery,

mitigating some of the holding limit’s

negative effects.”

Not all criticisms of the policy are

coming from the oil industry, however.

In June, 16 California assemblymem-

bers sent a letter to CARB Chair Mary

Nichols urging her to delay the inclu-

sion of transportations fuels under the

cap-and-trade program because of the

impact it would have on their con-

stituents. Assemblymember Henry

Perea authored the letter.

“Even a small increase in fuel prices

hurts low-income Californians. Many of

the areas we represent are still struggling

with double-digit unemployment. Resi-

dents of our districts often need to drive

long distances and they will be dispro-

portionately impacted,” Perea wrote.

“We urge you to reconsider the design of

the cap-and-trade program so that Cali-

fornia avoids unnecessarily increasing

fuel costs and putting the brakes on our

economic recovery,” he concluded.

Nichols devoted the first two pages of

her response letter to explaining the rea-

soning behind the program before ad-

dressing the question of its impacts on

low-income Californians. “Finally, it is

important to point out that the recently

passed Senate Bill 525 requires that one

quarter of funds raised from the sale of

cap-and-trade allowances benefit disad-

vantaged communities, which are dis-

proportionately affected by pollution

and climate change,” she wrote. She

added that the state budget now requires

15 percent of cap-and-trade expendi-

tures to be spent on transit operations

“such as expanded bus and rail serv-

ices.” She continued, “An additional 20

percent will be spent on promoting af-

fordable housing and other projects de-

signed to increase the use of transit.”

Azevedo pointed out that, while peo-

ple who live in dense urban areas would

likely benefit from transit infrastructure

projects, those who live in rural areas

would get the short end of the stick.

“There are a lot of people, particularly

in inland communities, who are not

going to have the option of ditching

their car in favor of a light rail or a bus

or BART [Bay Area Rapid Transit]. So

this is just going to be a hit on them

with no benefit in return,” he said.

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“Small businesses will be harmed twice by this policy.

It will hike the cost of doing business, which hurts jobs and business

growth, and it will also take more money from California consumers

at the pump that they won’t be able to spend at retail shops,

restaurants and elsewhere. Instead, these dollars will flow to

Sacramento to support billions in more government spending.”

John Kabateck, California Executive Director for the National Federation of Independent Businesses


Despite the concerns of state legisla-

tors, industry representatives and con-

sumer groups, CARB does not intend to

delay the implementation of the policy or

even to add a discussion of it to any of its

remaining meeting agendas for the year.

“We can’t delay the inclusion of this

[policy in the cap-and-trade program]

for a number of reasons,” Young said.

“In fact, 156 million allowances for

the years 2015, 2016 and 2017 have

already been sold. People bought

those allowances with the full expec-

tation that fuels would come under the

cap as the program was originally de-

signed, so it would be detrimental to

the carbon market to put a sudden

delay on something that had been

known and planned for years,” he ar-

gued. “And it would be fundamentally

unfair to the industrial and the elec-

tricity generation sectors for them to

have to continue to shoulder the bur-

den of the program alone without the

major source of green house gases

being addressed at all.”

Regardless of CARB’s resolve in im-

plementing the policy, concerned oil

industry stakeholders, business groups

and California residents continue to

urge for a delay. On October 23, the

California Driver’s Alliance delivered

a petition signed by 115,000 Califor-

nians asking for a three-year delay. The

alliance was joined by representatives

from local and national business

groups, cities and school districts.

“Small businesses will be harmed

twice by this policy,” John Kabateck,

California executive director for the

National Federation of Independent

Businesses, stated at the conference.

“It will hike the cost of doing busi-

ness, which hurts jobs and business

growth, and it will also take more

money from California consumers at

the pump that they won’t be able to

spend at retail shops, restaurants and

elsewhere. Instead, these dollars will

flow to Sacramento to support billions

in more government spending.”

Ruben Gonzalez, vice president for

public policy at the Los Angeles Area

Chamber of Commerce, expressed

discontent with CARB’s response.

“CARB has been unresponsive to the

pleas of California drivers, commu-

nity organizations and small busi-

nesses to rethink this plan to increase

fuel prices next year,” he said.

The Mayor of Fontana, Acquanetta

Warren, expressed concern for low-in-

come residents. “This hidden gas tax

will harm those who can least afford to

pay more for basic necessities like gas

to get to work and go about their daily

lives,” she said.

Opponents are not asking the inclu-

sion of those fuels under the cap-and-

trade to be nixed – just delayed.

Despite tensions, both sides acknowl-

edge something must be done to lower

greenhouse gas emissions caused by

transportation fuels. If the California

Air Resources Board does not waiver,

that process will begin January 1. �


The photograph at left is from last week at a station in Long Beach. At right,the photograph is from January 2009. The California Air Resources Boardexpects the price at the pump to jump from 16¢ to 76¢ when the state cap-and-trade program for greenhouse gas emissions reduction goes into effect.



Oil By Rail –Moving Energy� By MICHAEL GOUGIS

Contributing Writer

Importing crude oil is actually pretty simple and convenient for the refineries

that are located on the coasts, or – in Southern California’s case – adjacent to

the ports of Long Beach and Los Angeles. You take an ocean-going super-

tanker, fill it with crude, cruise over to the port nearest to a refinery and unload.

Moving crude by supertanker is remarkably efficient. Consider this: The daily

oil and petroleum product consumption of the United States could be completely

met by the capacity of 10 of the largest oil tankers. Just the crude imported via

ship through the Port of Long Beach in 2013 – all by itself – is enough to meet

the nation’s entire petroleum products demand for a week.

The problem is that supertankers don’t work very well on dry land. Right

now, the U.S. is in the middle of an oil and natural gas production boom cen-

tered in North Dakota and Texas – and there is pretty much nothing but dry

land between there and the West Coast.

The result: a forty-fold increase in the amount of rail transport of crude oil

in the past five years.

With the need to move increasing quantities of crude across the country, shipping

crude by rail has become a high-profile issue in the oil transportation industry.

Rail offers flexibility – the ability to ship the product in the quantities desired to

a wide variety of destinations.

Rail officials and government officials say they have made dramatic improve-

ments in recent months in regards to the safety of shipping crude oil by rail.

Indeed, the rail industry says shipping crude in tanker cars is vital to the eco-

nomic health of the nation.

“This will continue to play a critical role in the growth of the U.S. economy and

to power the nation’s drive toward energy independence and economic progress,”

Ed Greenberg, the Washington-based spokesman for the Association of American

Railroads, told the Business Journal.

“Railroads are investing record amounts to expand network capacity, purchase

new equipment and locomotives and hire thousands of new employees to meet the

needs of rail shippers, including energy customers,” Greenberg says.

“For 2013, $25 billion was spent, and in 2014 another $26 billion is forecast to

be invested by the nation’s railroads. Safety overarches all aspects of freight rail

operations and is embedded in all rail protocols and procedures as part of respond-

ing to the shipping requirements of customers.”

But rail shipment of crude in bulk also has drawn criticism from environmen-

talists and safety advocates, who are concerned about the danger of the product

and the tank cars in which it is shipped.

“The type of crude that we are seeing shipped in these old, inadequate rail cars

is not your traditional crude. These are extreme forms of crude,” Devorah Ancel,

staff attorney for the Sierra Club, told the Business Journal. “We have seen several

accidents that have resulted in deaths, injuries, explosions and water pollution.

The cars that are being used to transport it are deficient.”

U.S. Department of Transportation statistics illustrate how dramatically the oil

shipment landscape has changed in a very short period of time. According to the

DOT, in 2008, 9,500 rail-carloads of crude moved through the United States, com-

pared to 415,000 rail-carloads in 2013. And not only have studies shown that the

crude from the Bakken Shale Formation in North Dakota is more flammable and

volatile than other crude oils, it is also transported via rail for a long distance.

“On average, Bakken crude oil shipments travel over 1,000 miles from point of

origin to refineries on the coasts,” the DOT report, released in July, states.

The statistics were included in the supporting material for a proposal to overhaul

of the nation's oil-by-rail system. Published by the federal Pipeline and Hazardous

Materials Safety Administration, the proposed regulations would require changes in

procedures, notifications, and even the actual tanker cars used to transport crude oil.



“We are at the dawn of a promising time for energy production in this country.

This is a positive development for our economy and for energy independence,”

DOT Secretary Anthony Foxx said at a press conference announcing the pro-

posal. “But the responsibilities attached to this production are very serious. More

crude oil is being shipped by rail than ever before. If America is going to be a

world leader in producing energy, our job . . . is to ensure we’re also a world

leader in safely transporting it.”

Under the proposal, older rail tank cars – known as DOT 111 tank cars – would

be phased out of use for transporting modern crude oil unless they are upgraded to

meet new tank car design standards. Sampling and documentation methodology

would be revised to ensure that regulators know what materials actually are in the

tanker cars of any train.

Rail carriers would be required to perform safety assessments of routes and se-

lect the safest routes for hazardous materials. State emergency response officials

would have to be notified of any train carrying more than one million gallons of

Bakken crude (about 30 DOT 111 tank cars), and speed limits would be imposed

on trains including oil tanker cars.

The speed limit would be lowered for trains hauling outdated tank cars that

do not meet the new specifications set to go into effect at the beginning of the

year. Proposals for those new cars include thicker steel walls, enhanced braking

and rollover protection.

The danger of transporting large amounts of crude oil by train was graphically and

tragically illustrated in 2013 by the derailment and ensuing explosion of a tanker car

train in Lac-Mégantic in Quebec. A train of more than 70 DOT 111 tank cars loaded

with Bakken crude was parked on a hill and left unattended; the brakes failed and

the train plummeted into Lac-Mégantic’s downtown and derailed; several of the tanker

cars exploded. Half the downtown area was destroyed and 47 people were killed.

Ancel argues that the proposed new regulations do not go far enough. The DOT

proposal calls for speed limits of 40 mph and 50 mph on “High-Hazard Flammable

Trains” – trains with more than 20 tanker cars – depending on the specification

of the tanker cars. The cars themselves are so inadequate to the task, she says, that

improving them and removing the old ones from the nations’ rail fleet is central

to making the transportation of oil by rail safer.

“They should be banning the use of those immediately for the transport of volatile

hazardous crude. In 2013 alone, more crude spilled from tank cars than had been

spilled in the last four decades. But they want to grow the fleet before they retire

them,” she says. “There is so much oil coming out of the ground, and there is an

immense amount of pressure to move it rapidly to the refineries and to market.” �




State Continues To DevelopFracking OversightRules� By BRANDON FERGUSON

Staff Writer

While a national discussion continues about the divi-

dends and dangers of hydraulic fracturing (frack-

ing), California regulators continue to develop the rules regulating

the practice statewide.

Senate Bill 4 (SB4), sponsored by State Sen. Fran Pavley, was signed into law in

September of 2013. The bill requires oversight by multiple state agencies of fracking

– a process in which operators inject a mixture of chemicals, sand and water deep

underground to break up rock formations, thus releasing trapped oil and natural gas.

Other enhanced practices such as acid stimulation are also regulated by SB 4.

Though SB 4 already requires oil companies to do certain things such as apply

for a permit before conducting fracking operations, the formal rulemaking process

is still underway. On October 9, the Department of Oil Gas and Geothermal Re-

sources (DOGGR) released a revised version of its proposed regulations for en-

hanced well stimulation treatments. The announcement was followed by a 15-day

public comment period, which closed on October 24.

Revised language allows more time for neighboring property owners near fracking

locations to request pre-stimulation water quality testing. The threshold for re-

portable seismic activity near fracking operations was also increased to a magnitude

of 2.7 earthquake or greater. Use of a more precise model for determining the di-

rection and depth of a hydraulic fracture was also incorporated into the legislation.

In a statement, Department of Conservation Director Mark Nechodom, who

oversees DOGGR, said the agency struck a balance between the needs of citi-

zens and the oil industry.

“We believe these regulations will protect the environment and public health

and safety, and also give the oil and gas industry clear direction for the use of

well stimulation going forward,” Nechodom said.

DOGGR must submit the final version of the proposed regulations to the Of-

fice of Administrative Law for review by November 14. The finished law goes

into effect July 2015.

Tupper Hull, vice president of strategic communications for Western States Pe-

troleum Association (WSPA), told the Business Journal that despite some concerns

over the costs to oil operators as well as the workability of some of the proposed

regulations, WSPA is generally pleased with the rulemaking process so far.

“In the big picture, we think the state’s done a good job in developing the most

robust set of regulations impacting not just hydraulic fracturing – these go well

beyond that – but all enhanced oil recovery activities in California. They’ve done

it in as transparent and as participatory process as they could,” Hull said.

He added that, in addition to new rules being developed by DOGGR, the State

Water Board has also been holding public hearings to develop a groundwater-mon-

itoring program as part of the fracking oversight process. Hull explained that this

presents a unique set of challenges to the state’s oil producers.

“The vast majority of oil production in California occurs where basically

there is no groundwater or there is no groundwater that is considered suitable

for domestic uses. Therefore producers want to make sure they’re not being re-

quired to go through time-consuming and costly regulatory steps when those

steps are not relevant to the areas they’re producing in,” Hull said.

He further explained that discussions between oil companies and state regu-

lators are ongoing as SB 4 nears its final implementation. �

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� By BRANDON FERGUSON

Staff Writer

Early this year Occidental Petroleum Corporation (Oxy) announced it

would spin off a separate company to head up its California operations,

while establishing a new headquarters in Texas. The announcement sig-

naled the end of a nearly-century-long relationship with the golden state (Oxy was

founded in 1920 by business magnate and art patron Armand Hammer).

Though Oxy declined the Business Journal’s request to speak directly with a

company executive, a press release issued this month stated that the company’s

board of directors approved the spinoff of the new operation, now named Califor-

nia Resources Corporation. The two companies are expected to be completely sep-

arated on November 30 through the distribution of 80.1 percent of outstanding

shares of California Resources to holders of Oxy’s common stock. The new com-

pany will be independent, publicly traded and sold on the New York Stock Ex-

change under the symbol CRC.

Oxy maintains the new operation will be the largest oil and gas mineral acreage

holder in California with roughly 2.3 million net acres. In a statement, Oxy President

and Chief Executive Officer Stephen I. Chazen said the decision to split operations

was a matter of maintaining a competitive edge.


Occidental Petroleum Company Spinoff Is ComingDown The Pipeline

Frank Komin is the executive vice president – Southern Operations for California Resources Cor-poration, with offices in Downtown Long Beach. According to a statement from the company,“California Resources will be California’s largest natural gas producer and the largest oil andgas producer on a gross-operated barrels of oil equivalent basis. It will be the largest oil and gasmineral acreage holder in California with approximately 2.3 million net acres and will have majoroperations in the state’s high-potential oil and gas basins, including Los Angeles, San Joaquin,Ventura and Sacramento.” (Photographs by the Business Journal’s Thomas McConville)



“Creating two separate energy companies will result in more focused busi-

nesses that will be competitive industry leaders,” the statement read.

Oxy is known to Long Beach residents for the four manmade islands the com-

pany acquired in 2000, located just off the city’s coastline. The company also

has interests in the Wilmington field, which it maintains is one of the 10 largest

oil fields in the country.

In July, Oxy announced that California Resources will be headed by Todd

A. Stevens, a 19-year veteran of Oxy who will serve as president and CEO.

Former Oxy Vice President William E. Albrecht meanwhile will serve as ex-

ecutive chairman of the board. A new board of directors has also been selected

and includes Ronald L. Havner, who also serves as CEO of Glendale-based

Public Storage.

On October 22, California Resources issued its third quarter results announc-

ing a net income of $188 million (compared to $235 million last year).

“As we near separation from Occidental, California Resources Corporation

has posted robust third quarter 2014 results,” Stevens said in a statement. “In-

cluding record oil production of 100,000 barrels per day and strong earning

and operating cash flow from our world class resources.”

In an email to the Business Journal, Margita Thompson, vice president of

communications for California Resources Corporation, explained that while

a permanent headquarters for the new company has yet to be determined, Long

Beach will serve as the base for the company’s Southern California operations.

Declining to offer specific numbers, Thompson stated that the company is ex-

panding office space in Long Beach to accommodate an increase in staff.

“California Resources Corporation will focus on high-growth, high-return oil

and gas assets exclusively in California. We plan to continue growing in Long

Beach, and in our key operating locations throughout the state,” Thompson’s

statement read. �

Plummeting Oil PricesCould Affect City’s One-Time Expenditures� By BRANDON FERGUSON

Staff Writer

The dropping price of oil could spell trouble for the city’s spending plans. Ac-

cording to City Finance Manager John Gross, Long Beach projected this year’s

revenues from the city’s oil production to be $70 barrel – this money is used to

pay for operational expenses such as roads and infrastructure. Oil produced for

one-time expenses, such as the Belmont Pool, is budgeted at $100 a barrel, which

is problematic as there’s little incentive to pay that much when the current aver-

age price is much lower.

“Yes we are concerned from a capital or one-time use of the money because

oil is currently under $80 a barrel,” Gross said late Friday, October 24.

An October 8 letter signed by Gross and sent to the Long Beach City Council

stated that projected revenues may be insufficient to support the Fiscal Year 15

Tidelands Budget.

“Oil prices have recently declined and the Tidelands/Uplands oil producer may

be reevaluating production strategy,” the letter stated, adding “the tight budget,

coupled with a potential oil revenue shortfall, may make it difficult or impossible

to ensure that the necessary cash is currently available to fund Tidelands projects

when their construction contracts are ready for approval by the city council.”

The letter went on to make a series of recommendations including adjusting

the budget of existing projects, as well as adjusting the FY15 Tidelands budget

and capital plan by the end of December 2014.�


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CCELEBRATING ELEBRATING TTHE HE SSUCCESSUCCESSOOF F TTHEHE

CCITY ITY OOF F LLONG ONG BBEACHEACH

O X Y L O N G B E A C H , I N C .

CELEBRATING THE SUCCESSOF THE

CITY OF LONG BEACH


October 28-November 10, 2014, Section A

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Transcript of October 28-November 10, 2014, Section A