MINUTE ITEM

4/24/80 Thompson w 40207

36. AUTHORIZATION- OF THE 19804 81 PLAN OF Qt'.•,ELOPMENT AND OPERATIONS AND BUDGET, LONG BEACH UNI!, WILMINGTON OIL FIELD.

Durin~ cons~deration. p~ Calendar Item 36 attached, Mr. w. M. Thompson, Chief, Long Be~ch. Oper~tions, gave a comprehensive rep9r~ on the prqposed ,t986-8l Plan of Development and opera,tio\1s ~nd Bu'dget.

At one point during the. discussi.on, Chairman Kenneth Cory ptgµght up the p9int th~t ~ince -the Long B,each Unit is ~ big consumer or power, that ·the Commission consider generating its own powet and $wapping it. Mr. Thompson stated the staff had prevj.ously investigated this, but had encountered sti!i•t: roadhl9:"!ks .•

Because .of the -~ve·r-d.nc~easing budget of the Long Beach Unit and the niany -p:~lat~d ~xpenditures which come before the Cortlmission e~ch 41)0,nth for ~ppp;>Vl:l.1 ~ Comm:!.ssion-Aiternate Dav.id· Ackerman r.~:i:set.i the question of whethe1r or not the Staff had ever performed· a complete audit on how the mopey is spent by THUMS. Mr. William F. Northt;op, Execut~ve Officer, stated the ~taf£ had completed some audi·ts, but had never c.ompleted an internal one. Chairman Cory requested the ptaff ·to return to the C9mmission with a report on wh~t ~ind of auditors are av~il~bl~ and what the costs would be. Commission-Alternate Roy Bell concurred.

Mr. Thomµson suggest~d that if an audit is done, specific criteria should be set forth to avoid the possibil~ty of unnecessary dupl:f.pation of past audits and to avoid are·as which are not within the intended scope of this audit.

Mr. Northrop advised that Mr. James F. Trout, Assistant E>:.ecutive O.fficer, w<:>uld report back to the Commission at its next meeti11 g on the options available.

Unon motion duly made and ~arrled, the res.elution as presenteci in Calendat Item 36 was approved by a vote of. 3-0.

Attachment: Calendar Item 36.

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CALE~PA:R ITEM 36.

AU~HORIZATION OF THE.1~80~~981 PI.,AN Q~ D~VELOPMENT AND OPERA1'10NS. A~D BUDGET, LONG BEACH Q?HT,

WILMINGTON OIL FIELD, LOS ANGELES COUNTY

4/80 Thompson

In compliance with Section 5, Chapter 138, Statutes pf 1964> 1st E.S. ~nd Articl~ 4 of the. t.ong Beach Unit Agreement, th~ Urty Qf Leng Beach has submitted.the PlBn of D~velopment an4 Operatioq~ an9 Bddget, J.ong Beach Unit, ~uly 1) 1980, ·thr9ugh June 30, 1981, -to the State I.ands Comm~ssiq~ f9~ app;gv~l.

The proposed Plan provicles for continued development of the 1..opg Beach Unit and the or.derly oparat;ioq a11? tnaint(?­nan~e· of nece~.sary facilities~ Jn o1:de'I' t;o ~ccqmpli~li the proposed development a.1'd .tq manage, aper.at~. ~nd rnafal.ta:tn the ·-v~l:'io~s- ~i~trb!~g fe.cil:t t:Le~: a ~'µdget tot:atl~pg $116,821.,000 :ha~ b~~eni prepl,lr~d. The Budget provides $~1,6.65,000 for cap~tal investment,. $90,980,,QOO for expense and $4,176,000 for. adm;i.nistrative overhead •

Investmen\: fµl.1ding inc;ludes $19,-475·,000 to drill 40 new wells, $915,009 for injection weli conv~rs±ons and $1;..,!2.15,-000.for fie:J.d and ·well facili:t;tes. Exp~nse funding provides $77,.720,0QO for o~rating, $6.,147,00Q fo.r ~dminis­trat:t. v~ and $813, 000 for other expense. .$6, 300, 000 is provided for tax~s, licenses and asse~sments ievil:!d by the City of Long Beach, the County of Los Angeles and the State.

This budget provides for operating 7 dr~lling rlgs to drill new wells and redrill and workover el\isting wells. MQst items w~rli! funded with what appeared to be ade:iuate increases for inflation a.t the tima the budget was being prepared e~rly chis year. Recent consumer price indices, however., indica~e t·hat some of these funds may prove to be low. In addition, the unlt cost of pur~hased e~ectrici,ty already exceeds the flgure used in preparing the budget. The factor usetj. f.or wage increases al~o appears low 'based on federal. guidelines and recent union contract settle11ents. There is t:tierefore a strong possibility that additional funds may be required if the level of activity provided for in the Phm ·is to be maintained.

The Economic Projections, Exhibits C-3 and C-4, show estimated ann~al crucle oil production of 23.5 million barrels •

A 52, 57, 58

::> 27, 31 -1-

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C!\LENDAR ITEM No. 36. c co,~ cro >

Oil and ga~ income for t;he Unit, before cc;:msideration of any federal excise tax, is est:imated to be $635,26'8,000.

The oil income is based on S°h1average composite price of $26.49 per barrel, before consf~~r~tion of any payment of applicable federal crude oil excise taxes. Recent actions by the f ~deral government that released largg volumes of U~it production f+om price ~ontrols have resulted in abou~ 95% of the ur,it oil prodtictiot) 'qua1n:ytng for unci:>ncro-p:eci prices. T~is action by the federal government has re~ulted in a f3i&ntfic!lnt composite crµde oil price· incl."ea·se.

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The Com~ission's staff has worked in cooperatiQP Mtth repres~ntatives -of the City -0£ Long ~each, during ~h~ preparation Qf t;.he 1980-1981 Plan a~d Budget, in deterr?Jining tha~ each .planneq project· ~s necessa-ty ~nd that: th~ -\?ugget funqing re~ommend~d pre~ents a reason~ble estimat~ of .fu~ure costs-, -E~il:t:·btt !~A_!', which' i·s ~ part: of eh.is 'Calendar It~m., graphicqlly -provi9,es addi_tional economic information.

The City Cpunc'i~ of the City of Long Beach, at its meeting Qf Marc~ 4, 1980, ~dopted tnis proposed Plan of Development and Operations and Budget, and authorized its submittal to the State Lands COl'1mission for consideration and apptov~i. The Plan and Budge·t .was submitted to the State by th~ City on Ma,rch 18, 19~0.

IT IS RECOMMENDED THAT THE COMMISSION:

1. DETERMINE THAT THE ACTIVI'l'!'ES CONTEMPLA'."CED BY THE "PLAN QF D'Ev~~OPMENT AND OPERATIONS ANP . BUDGET' LONG BEACH' UNI'f, JULY 1, 1980 THROUGH JUNE 30, +981" ARB PLANNED TO BE CARRIED OUT PciRSUANT TO AG~EEMENTS APPROVED BY THE COMMI&SION BEfORE APR!~ 5, 1973, AND ARE THERE~ORE ONGOING PROJEC1S WITHIN THE MEANING OF 14 CAL. Ai1M. CODE ~.S0-7-0 { B) ( 3 ) : A~D no N01' RgQUIRE THE PREPARATION OF EITHER AN EIR OR A NEGATIVE D~CLARA~ION.

2. PURSUANT TO THE PROVISIONS OF SEGTION 5, CHAPTER 138, STATUTES OF 1964, lST E.S., AND ARTICLE 4, OF THE LONG BEACH UNIT AGREEMENT, -APPROVE THE "PLAN OF DEVELOPMENT AND OPERATIONS AND BUDGET, LONG BEACH UNIT, JULY 1, 1980, THROUGH JUNE 30, 198!."

Attachment: Exhibit "A" - Economic Informati.on Sheet

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(Rev. ·4/ 22/ 80)

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EXHIJ!IT A = ====-=

CALENDAR ITEM 36

4/80 Thompso~

CALENDAR PAGE 1 7 2 a

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