The operator of the iconic oil well on the campus of Beverly Hills High School is not taking “no” for an answer.
Despite being given an “unequivocal” notice by the Beverly Hills Unified School District that its lease will end next year, Denver’s Venoco Inc. has launched a bid to extend the lease and continue operating the well for another 10 years.
Venoco is urging some 750 property owners who receive royalties from oil extracted at the site to contact the school board and urge board members to reverse position and extend the lease.
“As you know, that lease is currently set to expire on Dec. 31, 2016, but we have been working to extend it so as to continue to provide Beverly Hills, its schools, and the over 700 individual landowners an important source of revenue,” the recent letter to royalty holders states.
The more than 150-foot-tall well, adorned with its student-painted flowers, was made infamous by noted environmental activist Erin Brockovich a decade ago as she aided in the filing of lawsuits alleging chemical emissions from the well caused cancer among high school alums. The 12 lawsuits against Venoco were dismissed nine years ago this week.
Venoco, which acquired the 90-year-old well 20 years ago, pumps roughly 300 barrels of oil a day out of the ground (about 110,000 barrels a year). At this year’s average price of about $45 a barrel, the oil company will generate nearly $5 million this year from the well, of which it will pay out more than $2 million in leases and royalties.
In 2011, the Beverly Hills City Council voted to end drilling in the city and extraction from existing wells by Dec. 31, 2016, when Venoco’s lease expires. The Beverly Hills High School well is the only active one within city limits.
But the ordinance did allow for continued extraction if there is a finding of public interest – and that’s the exemption Venoco has tried to pursue.
Well done?
In its campaign to extend the lease, the oil company has stressed the importance to the city of the roughly $500,000 in this year’s lease payment to the city and $600,000 to the school district. And Venoco has been trying to convince the 750 royalty holders to contact school board members to let them know about the economic importance of those royalty payments to them.
Venoco outside spokesman Brian Lewis stressed that, contrary to other published reports, there is no drilling activity at the site, just pumping of oil out through the existing well. The company has stated it believes that at current extraction rates, the well has a lifespan of at least 10 more years after 2016. That’s why it is seeking a 10-year lease extension.
Lewis said the well could generate an estimated $5 million to $8 million for the school district, $4 million to $7 million for the city, and approximately $12 million to $15 million for the royalty holders over the lifespan of the 10-year lease extension, depending on the price of oil.
Lewis also stated that Venoco is in “active discussions” with the school district over the lease issue.
But so far, the school district has not been dissuaded from its stated intention to end the lease next year and require Venoco to completely abandon the site by March 31, 2017, which will likely cost hundreds of thousands of dollars to clean up and remediate.
The district’s attorney, Jeffrey Vinnick of downtown law firm Haight Brown Bonesteel conveyed that position to Venoco last month and district Superintendent Steve Kessler reiterated that stance in a statement to the Business Journal last week:
“The Beverly Hills Unified School District has unequivocally informed Venoco that the oil and gas lease between Venoco and the Beverly Hills Unified School District will not be renewed when its term ends on Dec. 31, 2016. Venoco is obligated under the lease to complete the abandonment and remediation of the oil well site on or before March 31, 2017.”
Kessler would not elaborate further or confirm whether the district was in discussions with Venoco. Vinnick did not return a call and email.
