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A group played basketball near a painted tower concealing an oil drill next to Beverly Hills High School. With crude oil topping $140 a barrel this year, California has issued 18 percent more permits for new drilling over the same period last year.

Jonathan Alcorn, Bloomberg News

There's oil in them thar hills! Beverly, that is ...

  • Article by: MICHAEL JANOFSKY and SAMANTHA ZEE
  • Bloomberg News
  • June 27, 2008 - 11:23 PM

Britney Spears, Jay Z, Adam Sandler and Plains Exploration and Production Co. have one thing in common: They've all been sighted at Beverly Center, an eight-level mall near Beverly Hills, where celebrities shop for clothes and the oil company pumps crude.

The rising price of oil, which hit a record $140 a barrel, has sent exploration companies scurrying to squeeze additional supplies from the fields underlying Los Angeles and its celebrity-rich neighbor.

California -- the fourth-biggest U.S. producer of crude behind Louisiana, Texas and Alaska -- has received 16 percent more notices from owners planning to rework old wells this year, while plans to drill new ones are up 23 percent from 12 months ago, according to state Department of Conservation data.

"In the Middle East, you might have 300 barrels of oil per cubic acre, but in the Los Angeles Basin you might have 4,000 barrels per cubic acre," says Mike Edwards, vice president of Denver-based Venoco Inc., which has 24 active wells in the Beverly Hills area, including one alongside Beverly Hills High School. "In terms of the land that produces oil, the basin is very rich."

Beverly Center's kidney-bean shape was designed to accommodate drilling. It's one of two sites within blocks of Beverly Hills, a city of about 35,000 where Houston-based Plains, the fourth-biggest producer in California, is expanding. The 26-year-old mall houses 160 retailers, including Gucci, Louis Vuitton and Burberry. Pumping operations are hidden behind a wall between Macy's and Bloomingdale's.

"This is one of those weird things about Los Angeles," says Jeff Brown, the mall's general manager. "There are oil wells all over the place. Drive down the street, you see hotel, beautiful house, oil well. Here, I don't know if shoppers know there's one or not. They probably don't."

California has been producing oil commercially since 1874, most of it from Kern County in the San Joaquin Basin around Bakersfield, 110 miles northwest of Los Angeles.

The state pumped 243.2 million barrels from onshore and offshore sources last year, a 2.3 percent decline from 2006, according to the annual production report. Los Angeles County, the most populous in the nation with 9.9 million people, had 3,400 of California's 50,856 wells in operation last year.

Production decreased in recent years as reserves and exploration fell. The rate of decline is slowing because rising prices are now encouraging companies to drill new wells and return to old ones, said Hal Bopp, the state oil and gas supervisor.

Production is forecast "to stay flat" in 2008, he said. "Like everywhere else in the world, there's a lot of increased activity here. As the price of oil rises, it's more economical to produce."

California has 3 billion recoverable barrels, according to the conservation department. That's equivalent to 4 percent of North American proved oil reserves as measured by BP's Statistical Review of World Energy 2008.

Almost 8 percent of the state's onshore output in 2007 came from the Los Angeles Basin, which Bopp described as the most densely populated oil-producing region of the world.

About 30,000 wells have been drilled since oil production began in the Los Angeles basin more than 130 years ago, producing 8.6 billion barrels from active wells, according to the department.

The 1,200-acre Beverly Hills field is part of the basin, last year producing almost 1 million barrels from 97 wells, the department said. Wells pay royalties of about one-eighth of revenue to property owners including cities, local businesses and householders, Bopp said.

Drill site triggers suit

One production site has drawn a civil suit by 12 former students at Beverly Hills High who claim that crude pumped from under athletic fields caused breast and thyroid cancers, Hodgkin's disease, non-Hodgkin's lymphoma and testicular and skin cancers.

The five defendants include Chevron Corp., the state's leading producer, and Venoco, ranked 13th. Oil companies have been pumping at the school since 1959. Venoco, the site's current owner, produces about 400 barrels a day from 15 wells, Edwards said.

A lower court dismissed the case in 2006, citing a lack of evidence to link the illnesses to operations at the school. The plaintiffs have appealed.

Like the oil derrick at the high school, now obscured by a 175-foot tower decorated with colorful tiles, other production sites in the Beverly Hills field are hidden from view.

Several miles from Beverly Center, at the foot of a street of million-dollar homes, a six-story, windowless structure houses a Plains well.

"It's not the most lovely thing you have ever seen," says Gene Cooper, a sculptor who lives several houses away.

The only hint of production at Los Angeles' Rancho Park municipal golf course is noise coming from a row of shrubs along the fourth fairway.

"The oil well here is out of the way, there are no homes nearby and they've made an effort to hide it," said Andy Dierken, a golfer in the midst of a game with three cigar-chomping friends. "It doesn't smell, and from the green, you can't hear it."

In addition, he said as the foursome drove off in their carts, "we need the oil."

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