Oil Fields Yield a New Cash Crop : Business: As wells’ profitability falls, Orange County land is developed for homes and shopping centers.

BREA — The oil company man stands on a rise over this city named for its tar-rich soil, a far cry in his handsome suit from the oil-soaked adventurers who first pumped crude here more than a century ago.

Wielding a cell phone instead of a pickax, Dennis Chapman is a prospector of a different sort. His gaze is fixed beyond the massive pumps lumbering atop Brea’s lakes of oil, on a cluster of men in hard hats working to mine his company’s newest resource--real estate.

“These fields just aren’t producing like they used to. Not here, not anywhere in Southern California,” Chapman says of the tapestry of oil pipes and pumps woven across the hills before him, the frames of new houses rising in between. “The life of the fields is sort of reaching the end of the road.”

As property manager of Unocal Land and Development Co., Chapman is at the forefront of a quiet transformation of oil lands changing the face of Brea and other cities where crude was once king.

All over Orange and Los Angeles counties, where forests of oil rigs once lined the canyons and the coasts, the story is the same. With the surface of oil fields more valuable today than what’s underneath, and drilling an increasingly uncomfortable fit with urban sprawl, oil giants are pulling out pumps and shutting down wells by the thousands. As fast as they can get permits, they are building houses and shopping centers in their place.

In the past 10 years, fewer than 500 oil wells have been drilled in Los Angeles, Riverside, Orange and San Bernardino counties; more than 5,700 have been capped and abandoned over the same period. Last year, Chevron USA sold off the last of its more than 2,000 acres of oil fields in Southern California to developers. Shell, Unocal and other oil giants are on their way out.

“This is the final development of the Los Angeles Basin, and the final chapter in the story of oil in these parts,” said historian Kevin Starr, librarian of the state of California. “This is basically the last land still to be developed, and from the perspective of that dreary march toward filling in the basin, its time has come.”

The oil company’s exit from these lands is drawing a slow close to the uneasy coexistence between petroleum and people that began with the first oil wells dug in California.

It is altering the shapes and sizes of cities, as local governments annex land to cope with development ahead. It is straining municipal finances in cities that had relied on oil tax revenue--replacing those sure-money generators with the unproven promise that more homes and shopping centers can bring new jobs and people to aging regions.

And the surge of building on former oil fields is filling in the last open space in many communities nearly without opposition, despite requiring million-dollar cleanups of oil-saturated land.

“I watched them build the golf course on this oil field. I watched them change the contours of the hill and put up houses on it,” said William Ellis, 71, who has lived in a house edging an oil field in Fullerton for 35 years. A former aerospace engineer, he takes rambling walks in and around the oil company land nearly every day.

“There is just an inevitability about it,” he said. “You come to Southern California and you get used to the idea that someone is always going to find another use for the same land.”

The oil industry’s turn as developer began in some parts of Southern California as long as 20 years ago, when petroleum prices first began to sink. By 1991, the tens of thousands of oil pumps that once lined the shores of Huntington Beach and Long Beach had dwindled to just over 300, and more than 800 acres of former oil company-owned land in those cities had sprouted thousands of tract homes.

Now, with the oil giants eager to pull the last of their oil drilling operations out of much of the Southland, the building boom is accelerating: From La Mirada to Signal Hill, from Fullerton to Huntington Beach, wells are coming out and homes are going in. The building surge is meeting demand for housing that built up during five years of recession in California.

In cities like Brea, Yorba Linda and La Habra, sitting on top of what were once some of California’s richest oil reserves, the building has been particularly explosive. More than 3,000 acres of former oil fields have been approved for development in northern Orange County in the past year alone.

More than 5,400 homes are planned on former oil fields in Huntington Beach. More than 10% of land in Signal Hill, where oil used to rule, is due to be covered with houses and stores by 2000.

But while development proposed along the coast has clashed with concerns over the fate of natural resources such as wetlands, inland the building is proceeding with little opposition.

Pinehurst, a development of upscale homes along a Fullerton ridge still studded with oil wells, is a petroleum company’s modern gusher. Recently sold by Unocal to a developer, the homes winding around a golf course owned by the oil company are going fast.

“I’m surprised at how quiet the pumps are; they’re just sort of a silent part of the landscape,” said Jay Hutchison, 47, a businessman who was putting next to one. “It seems like these old oil fields make pretty good courses. That and old garbage dumps. It’s sort of the California way.”

In nearby Brea, where oil derricks once reached into the sky, construction crews are hammering at homes on old oil fields. Near streets with names such as Carbon Canyon Road, developers are cutting new roads like Shopping Center Way.

Last year, the city annexed the steep hillsides of Olinda Heights, where more than 3,000 oil workers lived in the oil industry’s heyday. In October, city officials approved building 662 homes on the 284-acre site. Of the 400 oil pumps on the land until two years ago, all but 49 are gone, replaced by land sifted and cleaned of gooey, oily residue.

Brea’s neighbors are hurrying to follow its example. In November, the Yorba Linda City Council approved a Shell Oil Co. plan to build 2,100 homes on 843 acres of oil-well-pocked hillside. In La Habra, city officials agreed in January to permit 700 homes on 371 acres Chevron sold off last year.

And in Fullerton, after more than 12 years of debate, Unocal early last year began building hundreds of homes on 400 acres in the East Coyote Hills. The first part to be completed, a golf course that snakes around oil wells painted deep green to match the color of the hillside, opened last spring.

Brea and cities like it were built on oil--and by the people who exploited it.

Seventy years ago or so they were boomtowns, with workers living in tiny frame houses pierced by the noise of the oil wells pumping through the night. The oil days gave rise to a lifestyle all their own.

“You’d work out on the hills drilling wells all night. You’d kill rattlesnakes sometimes. Sometimes we made friends with the wild dogs up there,” said Siebolt Dykstra, 73, who was a “roughneck,” or oil driller, in Orange County for much of his 35 years as an oil worker.

These days he spends hot afternoons on the concrete patio of his home in Brea, squinting at the hills where the oil pumps were.

“You’d come back at the end of your shift and grab a beer and play shuffleboard at Sam’s bar downtown,” Dykstra said. “I don’t imagine Sam’s is there anymore. Sam died a few years back.”

In their rush to pull out as much black gold as they could, the oil companies failed for decades to better the dangerous working conditions and environmental damage of their trade.

Early this century, when the state’s wells produced more oil than any other, fires, explosions and geysers of oil wiped out homes and killed men, women and children. Later, when developers began to build houses on or near oil wells, newspapers were filled with stories of children drowning in open pits of oil.

A drive down the Southern California coastline in the 1960s still meant passing a forest of oil pumps and offshore rigs. Gradually, environmentalist pressures forced oil companies to yank most of the biggest pumps off the coast, though offshore rigs today pump more oil than ever.

It wasn’t until the early 1980s, with oil reserves in California dropping, a glut on the world market sinking petroleum prices, and the value of land skyrocketing, that oil companies decided it was time to clear the wells out of their biggest holdings in the Los Angeles Basin and put homes, shopping centers and office parks in their place.

“Progress, I guess they call it. I liked it as it was, but that’s just not the way the world works now,” said Louise Bleininger, 93, who was 3 years old when her parents traveled from the Midwest to Orange County to live among the towering oil derricks of Olinda.

“When the fields started going and everything just started going downhill it all changed. It’s quite a bit different around here now. I guess you just have to keep up with the world.”

Responding to pressure from environmentalists and local governments worried about the safety of building on or near capped wells, California lawmakers came up with a way to regulate the development.

Under a series of laws and regulations passed in 1986 and enforced since by the state Department of Conservation’s Division of Oil, Gas and Geothermal Resources, cities and developers are required to report proposed development within 1,000 feet of an oil well, and to either maintain the well or abandon it in accordance with modern standards, designed to ensure that neither oil nor gas leaks in significant quantities from the well.

In part because of those regulations, which force oil companies to spend millions of dollars a year cleaning and grading oil-stained soil and capping old wells, it costs more than twice as much to produce a barrel of crude oil in Southern California today as in the Middle East.

Even in other states, it is about 20% cheaper to produce a barrel of crude oil than in the Los Angeles region, said Richard Baker, who heads the Southern California office of the Division of Oil and Gas.

The result for oil companies is dwindling returns, and a dwindling presence in Southern California. Of every 10 oil industry workers employed in Southern California in 1980, eight have been laid off since, according to the American Petroleum Institute, a trade group.

“Any time you’re in a [region] with millions of people and you’re trying to run oil fields, it’s going to be tough,” Baker said. “These days there’s just too much pressure, too many operating costs, it’s just too much. The oil companies are just trying to make the most of the land and then get out.”

Urban planners and city officials applaud the building, saying it can help revitalize older communities otherwise losing out to rapid development in newer areas. They cite hoped-for sales tax revenue from shopping centers and other commercial developments on former oil fields.

“It actually offers some hope to those areas that these lands are opening up for development at this stage, that there are opportunities in older cities beyond redevelopment,” said Mark Baldassare, professor of urban and regional planning at UC Irvine.

“It’s exciting that new land is all of a sudden becoming available,” he said. “And you can be fairly creative with it. It’s not like seeing orange groves go. Nobody’s lamenting the disappearance of oil fields.”

In cities that had depended more heavily on revenue from oil production, the consequences of big oil’s exit are darker.

In Huntington Beach, which taxes oil companies operating within city limits for every barrel produced, revenue from that tax dropped almost $1 million between 1982 and 1995. Since 1992, city revenue from an assessed tax on mineral rights has dropped $357,000.

Fullerton’s oil tax revenue slid from $93,000 in 1986 to about $25,000 last year. In Yorba Linda such revenue is off by more than half since 1986.

The transformation of the oil fields to housing has for the most part met only local opposition. Neighborhood environmental groups have lobbied successfully for the creation of preserves for gnatcatchers and other species. And residents in particular communities have questioned the safety of placing houses close to remaining oil wells.

In Huntington Beach, environmentalists won a 20-year fight in January when the state agreed to purchase 880 acres of wetlands known as Bolsa Chica that two major oil companies had earmarked for development.

But beyond areas like Bolsa Chica, where the survival of a precious natural resource was at stake, no county or statewide environmental group has taken a position opposing building on former oil fields.

Environmentalists say that except for former fertilizer sites and other areas where crude oil was refined, leaving toxic residues, oil fields are generally reusable.

“Cleanup of old oil wells has gotten so advanced that the critical issue is no longer in most cases whether it can be cleaned up, but just making sure that it is,” said Cliff Gladstone, president of the Los Angeles-based Coalition for Clean Air, a nonprofit environmental group. “Unless there are some significant toxic waste issues on the land--and usually on oil fields there are not--it would really not be more than a local issue.”

That leaves the carpenters to hammer new homes into place, the land movers to shovel grimy soil out of former oil fields, and the tractors to clean the dirt relatively undisturbed.

“This is still the frontier in some ways,” said William Ellis, who sees the changes every day in his walks around the oil fields.

“They have taken the orange groves out. They took the strawberry fields out, so where are they going to build? Why, the oil fields, of course. It’s not bad; it’s just what you come to expect living here.”

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Oil Change

Oil derricks and pumps, once a common sight in Orange County, are dropping like dominoes to make way for more lucrative real estate developments. Much of the land atop the county’s six largest oil fields is already covered with homes and other structures. Field locations and where building is planned:

1. Huntington Beach

2. West Coyote

3. East Coyote

4. Richfield

5. Yorba Linda

6. Brea Olinda

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Depleting Oil Revenue

Oil tax revenue for county’s three top oil-producing cities have declined by at least 50% during the last decade, as fields have been shut or worked only when oil’s price rises above $25 per barrel. Revenue in thousands:

*--*

Year Fullerton Huntington Beach Yorba Linda 1986 $93 $1,117 $94 1987 $92 $896 $84 1988 $84 $687 $91 1989 $77 $633 $87 1990 $71 $597 $79 1991 $67 $960 $71 1992 $67 $606 $63 1993 $55 $607 $63 1994 $39 $725 $48 1995 $16 $408 $62 1996 $25* $550 $42

*--*

* Estimate

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Abandonment Issues

During the 1986-95 decade, there were 22 times more wells abandoned in Orange County’s largest fields than were drilled:

*--*

Drilled Abandoned Huntington Beach 42 970 Brea Olinda 32 237 East Coyote 5 111 West Coyote 3 359 Yorba Linda 1 87 Richfield 3 160

*--*

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Producers Decline

Between 1985 and 1995 the number of producing wells fell 44% in Orange County, 43% in Southern California and 20% statewide:

*--*

Orange Southern County California Statewide 1985 2,810 8,549 55,079 1986 2,796 8,370 54,970 1987 2,662 7,772 51,980 1988 2,560 7,497 51,271 1989 2,386 7,001 49,313 1990 2,241 6,788 50,084 1991 2,012 6,363 49,359 1992 1,878 5,796 46,196 1993 1,749 5,425 44,985 1994 1,664 5,125 44,098 1995 1,566 4,900 44,217

*--*

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Before Building

Developers or landowners must follow state-mandated procedures before building on land where there were once wells. The steps include excavating any oil-saturated earth and hauling equipment and pipeline from the site. The procedure:

1. Dig hole to locate oil well head

2. Spray soap solution on well head to test for gas leakage; bubbles appear at point of leak

3. If well leaks gas or oil, well must be vented or site cleaned before building begins

Source: California Department of Conservation, Division of Oil