Monterey County’s oil industry is one of its newest economic drivers — or the oldest.
One beginning dates to November 1947 when the Texas Co. — later to be known as Texaco and today as Chevron — discovered the San Ardo oil field five miles south of the tiny ranch town of San Ardo. The discovery well was called Lombardi 1 and by the time it began daily deliveries of 155 barrels of very thick crude, the county’s far bigger commercial mainstays — agriculture, tourism and military bases — were well established.
But in another way, the origin of the county’s oil industry goes back 6 million to 17 million years, give or take a few million, when the oil-bearing geologic formation that underlies much of California’s Central Coast settled into place.
This Monterey Formation is a huge swath of shale and sandstone that stretches below rolling hills from the Salinas Valley to Ventura County and inland to Kern and Fresno counties. It holds potential for more untapped oil, though estimates of just how much vary widely. But the prospect of a 21st-century oil boom reliant on controversial, water-hungry methods to extract oil from the drought-parched Coast Range has sparked a fierce and growing environmental battle over the past decade.
In Monterey County, where the oil industry has been tucked away in a faraway and nearly forgotten corner for almost 70 years, the new oil war spurred a citizens’ push to put Measure Z on the November ballot. The measure would ban fracking and other “extreme oil extraction methods,” primarily as a protection against potential contamination of groundwater needed by farms and people. It also would prohibit new oil or gas wells, and phase out wells and ponds used to dispose of wastewater from current oil and gas drilling.
Measure Z puts the county’s oil industry squarely before voters throughout Monterey County. (Here’s a link to the website operated by proponents of Measure Z, Protect Monterey County. The opposition hasn’t created a site yet.)
The Monterey Bay Partisan will be delving into the coming shootout between environmentalists and oil industry boosters, but first we look at how we got here.
The story starts near the community of San Ardo, a town town of 500 residents halfway between King City and Paso Robles. That’s where miles and miles of flat Salinas Valley cropland finally give way to rugged hills more fit for grazing cattle.
The town was laid out in 1886 when the railroad arrived and needed a water stopover. After a year, its Spanish-era rancho name of San Bernardo was changed to San Ardo to avoid postal mix-ups with San Bernardino.
From the beginning, the community had closer ties with northern San Luis Obispo County and Paso Robles than it did with the Monterey County seat in Salinas 70 miles to the north. As one old-timer put it in 1980: “In Salinas, they really aren’t sure we’re part of the county.”
After World War II, when operators began tapping wells in the San Ardo oil field, those ties extended eastward over the mountains to where bigger oil-producing areas had already grown up in Fresno and Kern counties.
The Monterey Formation had been extensively mapped and studied by geologists by the 1930s. The presence of oil around San Ardo was obvious to those who’d seen crude seeping from the ground in various spots.
When early oil ventures in Paris Valley, near San Ardo and west of Highway 101, didn’t pan out, oil prospectors turned to the east side of the Salinas River a few miles south of San Ardo. They drilled the 1947 discovery well in the Lombardi pool, and found two other pools in the San Ardo field by the next year. A county use permit was issued in 1949.
Getting the heavy crude out of the ground was a problem. More than 60 wells were drilled in hopes of tapping less viscous oil, to no avail. In oil industry parlance, San Ardo was a “reluctant” field.
This map from the Drilling Edge website shows most of the inactive oil wells (purple) in Monterey County. San Ardo is in the middle of the image. King City is in the upper left corner
MOVING THE OIL
The San Ardo field was largely idle for four years. But as post-war demand for gasoline and other oil products grew, General Petroleum, a West Coast affiliate of Mobil, moved in and spent $36 million to buy half of the San Ardo field to compete with Texaco.
General Petroleum’s idea was to import light oil to mix with San Ardo’s heavy crude and heat the mixture so the blended oil would flow through a pipeline. But with the Korean War going, there was a shortage of steel to build new pipeline, according to the company’s 1972 history.
General Petroleum scavenged material from an oil pipeline between Lebec and Mojave on the southeast side of the Tehachapis. That pipeline had been made obsolete, ironically, by the switch of Santa Fe freight trains from steam to diesel engines. At a factory in San Miguel, the old pipe was reconditioned and fashioned into a 40-mile line from San Ardo to an oil tanker terminal at Estero Bay between Morro Bay and Cayucos in San Luis Obispo County.
The first barrel of San Ardo crude arrived at Estero Bay in June 1951. The ocean-tanker terminal was active until 1999. Today, San Ardo oil is hauled by trucks and southbound trains to refineries in the Los Angeles and San Francisco Bay areas.
Of those early oil days in San Ardo, “Nobody was more surprised than I was that it became lucrative,” Margaret Barbree Rosenberg said in a 1980 interview for a University of California oral history project.
Rosenberg came from a pioneer San Ardo family, and the Rosenbergs, along with other pioneer families, still have some of the most productive wells in the San Ardo field on their land. Rosenburg said her family lost a little pasture from its 12,000-acre ranch, but cattle ranching and the new oil boom were an easy fit.
“Sometimes you go down there and see the cattle wandering through the oil fields,” she said.
Rosenberg said her family didn’t get extravagantly rich off its oil holdings.
“They bought more cars and things like that; but they’d always bought cars, so it really didn’t seem that different,” Rosenberg told the UC interviewer.
But the extra income helped keep ranch fences and roads maintained, and paid for costly irrigation equipment. That argument remains in vogue with South County landowners, who face the boom-or-bust cattle business, when they discuss efforts to block oil development.
BARRELS OF NUMBERS
Monterey County is the fourth-leading county of 20 California counties that produce oil.
Virtually all of it comes from the San Ardo field, which offers motorists and train passengers near the San Luis Obispo County line a few miles of scenery beamed straight out of West Texas.
Today, the San Ardo oil field ranks 41st in terms of productivity among U.S. fields, and is the 13th largest producer in California.
In 2015, 7.8 million barrels of oil were pumped from San Ardo, slightly more than 4 percent of the state’s total onshore production. Kern County alone produces three-quarters of California’s crude. Los Angeles and Ventura counties also out-produce Monterey County.
San Ardo isn’t the only oil field in Monterey County. Others discovered in South County, mostly in the 1950s and 1960s – include Lynch Canyon, McCool Ranch, Monroe Swell, Quinado Canyon and Paris Valley. They have produced little oil. The only one to yield “significant” amounts of oil besides San Ardo is the King City field, located near the hills west of Highway 101 six miles south of King City.
Over the years, wildcat exploratory wells have been drilled in Fort Ord, Laguna Seca, Seaside and the foothills above Spreckels, county planning documents say.
The group Protect Monterey County reported this year that 3,876 oil and gas wells have been sunk countywide, of which 1,108 are active. An oil industry trade publication says this year there are 551 producing wells in the San Ardo field and 3,683 wells on file.
The two big players in San Ardo are Chevron Corp. and Aera Energy LLC, which are also the two biggest oil producers in the state.
This year, Chevron has about 300 producing wells in San Ardo, a trade publication says. By contrast, Chevron has 16,000 wells in the San Joaquin Valley.
Aera Energy, a Bakersfield company formed in 1997 and owned by Shell Oil and ExxonMobil, has about 240 San Ardo wells in production. A smaller operator, Eagle Petroleum, has 22 producing wells.
A 2013 industry study said there were 190 employees in Monterey County working in oil and gas extraction, another 23 in well drilling, 126 in oil-and-gas support jobs, and two in pipeline construction.
A total oil industry work force of 1,233, the study said, included 721 employees in gas station jobs, 117 in petroleum wholesaling, 35 in natural gas distribution and 19 in fuel sales. In all, the number of oil industry jobs represented 0.8 percent of county employment. Total employee income came to $116 million.
A REALLY GOOD YEAR
In Monterey County, 1967 was a special year.
It was the Summer of Love, when performers Jimi Hendrix and Janis Joplin blew minds and ushered in a new era in pop music at the Monterey Pop Festival under oaks at the Monterey Fairgrounds.
At the other end of the county, San Ardo oil field workers labored on another chart-buster. Fifty new wells were drilled that year, a frenetic pace of almost one new well a week. Chevron was pumping 27,000 barrels of crude a day.
By year’s end, 1967 would go down as the most productive year in San Ardo history. The 20-year-old field yielded 18.1 million barrels from 885 producing wells, well more than double its output in 2015.
San Ardo’s biggest years — in which annual output regularly topped 10 million barrels — began in the mid-1950s and lasted through the 1970s. It was regularly among the state’s top 10 producing oil fields.
Though it was by far the biggest, San Ardo wasn’t the only Monterey County field that produced oil in 1967. The King City field yielded about 135,000 barrels, and other fields produced crude by the hundreds and thousands of barrels, state records show.
Technology changed to keep pumping the crude. By the mid-1950s, San Ardo operators were turning to “thermal recovery” techniques, which were widely used in other California oil districts, to coax more of the extremely thick crude from the ground.
In 1957, an estimate for the “ultimate recovery” from the San Ardo field was pegged at 200 million barrels. By the mid-1970s, that estimate rose to 530 million barrels based on San Ardo’s response to “reservoir stimulation” techniques.
The thermal recovery methods to squeeze stubborn crude from the ground go by a variety of names — steam injection, steam flooding, water flooding, steam cycling, fire flooding. They all heat underground oil to make it move more easily through rock and push it toward production wells.
At a 2014 industry conference in Bakersfield, Chevron predicted “many more years of successful production” in San Ardo. Steam injection is now used throughout the field. More new technologies — 3D-modeling and horizontal drilling (where well boreholes turn to the side to follow layers of oil-bearing rock) are being employed, the company said.
Through the 1980s and 1990s, the Monterey County oil industry embodied by San Ardo generated little media attention, aside from occasional feature stories or “local reacts” to wild gyrations in world oil markets. The subject of oil never arose during a decade-long fight over the county general plan.
But the oil industry’s low profile vanished dramatically in recent years. Measure Z puts it front and center.
IN THE SPOTLIGHT
In 2004, Chevron applied in Monterey and Fresno counties to build a 58-mile oil pipeline from San Ardo to Coalinga to connect with a major north-south pipeline on the west side of the San Joaquin Valley.
The big project didn’t attract notice until two years later when Monterey County commissioned the project environmental study. Chevron wanted the pipeline so it could stop using trucks to haul San Ardo crude. The company was using 20 trucks a day, but said increased pumping could require up to 200 trucks per day.
A big increase in South County oil production appeared afoot, but public reaction remained mute. The county approved the pipeline in 2008 and subsequently renewed the permit twice. The pipeline hasn’t been built.
By 2009, the national political winds were shifting dramatically, as fracked natural gas wells in Pennsylvania, Ohio and Colorado were linked to methane contamination in drinking water. A federal oil and gas lease auction in Monterey County — the first in a decade — was blocked over environmental questions about impacts on water and air quality, wildlife and greenhouse gases. Monterey County’s oil industry was no longer a forgotten cousin in a distant town. Increased scrutiny was putting it in the crosshairs of environmental politics.
It’s not the first time the oil industry has roiled county politics. In the 1980s, Congress had stopped auctions of federal oil and gas leases off the Central Coast six straight years. The issue hit the back burner with the 1992 approval of the Monterey Bay National Marine Sanctuary. That put waters from San Francisco to Cambria off limits to oil rigs.
In an earlier watershed event, county residents in 1965 blocked Humble Oil Co. from building a huge oil refinery on Moss Landing wetlands. A referendum drive to reverse a county supervisors’ 3-2 vote for the refinery forced Humble pack up and go away.
What led to the present showdown? Put simply, speculation that there is a lot of untapped oil on the Central Coast.
In 2011, the U.S. Energy Information Administration said the Monterey Formation could yield up to 15.4 billion barrels of shale oil, making it the biggest such reservoir in the country. Hydraulic fracturing, or fracking, is the common technique used to extract shale oil. Opponents say fracking threatens groundwater, increases seismic risks and uses too much water. The oil industry says it’s been safely used for years in California.
That bullish estimate for the Monterey Formation, which cast the Central Coast as the nation’s next oil capital, was dropped to 600 million barrels in 2014. Others have since put it as low as 21 million barrels, figuratively a drop in the barrel.
But a dizzying race for Monterey shale had already started. Oil operators reported inking exploration deals for tens of thousands of acres in Monterey County. Meetings on mineral rights were pitched to rural property owners. Federal auctions were readied for oil and gas rights on new blocks of land in South County.
As the shale-fracking story swelled, the pushback from environmental quarters grew.
In Monterey County, after decades of fights over pesticides, development sprawl, munitions cleanup at Fort Ord and water, the oil rush triggered new alarms.
At first, the concerns were over risks from fracking wells; then over the compatibility of an industry that uses and pollutes great amounts of water with the water needs of Salinas Valley agriculture. The state’s five-year drought sharpened the debate.
In June 2009, local officials tried to slow the express train by delaying U.S. Bureau of Land Management plans to auction mineral leases on 35,000 acres near King City and Lake San Antonio. By 2011, environmental groups were in court over BLM auction plans for land in Monterey and Fresno counties. They said the potential dangers of fracking hadn’t been analyzed. A planned 2012 BLM auction for 12,000 more acres fueled more protest.
In 2011, Denver based Ven0co Inc., which reported having leases for 300,000 acres of Monterey shale, abruptly withdrew its application for nine exploratory fracking wells near Bradley in the face of environmental pushback. The company complained to the county it had already spent $10 million.
This March, Venoco, one of biggest operators in the Monterey Formation, reported filing for financial restructuring under Chapter 11 bankruptcy law. The company website lists two current major oil projects, both in Southern California.
By the end of 2014, San Benito and Santa Cruz counties had anti-fracking laws on the books. Several other local jurisdictions followed suit, accusing the state of dragging its feet on fracking regulations.
Attention turned to longtime oil industry practices to dispose of contaminated wastewater — injection wells and percolation ponds. There were reports of illegal wastewater dumping. And there were concerns that injection wells put aquifers at increased risk of contamination from chemicals in wastewater and fracking material.
In May 2015, environmental groups sought to stop operations of 2,500 oil wastewater wells, which they said were polluting protected aquifers. The group Protect Monterey County says there are 109 oil wastewater injection wells (44 operational) in the county, most of them near the Salinas River in the San Ardo oil field.
Without a phaseout of these disposal methods, Measure Z says, “Water contamination could have devastating impacts on agriculture, our local economy, and our water supplies.”
As the campaign heats up over Major Z in Monterey County, another oil industry battle continues to burn in San Luis Obispo County.
Phillips 66 Co. wants to expand its Santa Maria rail terminal to greatly increase oil train deliveries to its underused Nipomo refinery. Several jurisdictions along the proposed rail lines, including Monterey County, have objected.
Citing the possibility of an environmentally devastating oil-train derailment on the coastal line through Elkhorn Slough, Monterey County’s top planner wrote to San Luis Obispo County officials earlier this year.
He said Phillips 66 hasn’t looked closely enough at bringing crude to its Nipomo refinery via pipeline. And he pointed to Chevron’s long-proposed San Ardo-Coalinga pipeline as evidence “a local pipeline is feasible.”