Venoco drill site vacation vexed by bankruptcy

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Nirav Desai staff writer

The bankruptcy of Venoco Inc., the oil and gas exploration corporation that drills oil on land leased from Beverly Hills Unified School District since 1978, has thrown an obstacle into the path of district officials who hope to secure the vacation of the drilling premises by Dec. 31, 2016.

The Colorado-based company filed for chapter-11 bankruptcy in March after missing an interest payment on its $1 billion debt in February, according to the Denver Post. Aside from being a lessor and a creditor, which the website of the Law Office of Mark J. Markus defines as “an entity that has a right to payment from [a] debtor who is the subject of the bankruptcy filing,” the district also receives an annual royalty payment based off the approximately 300 barrels of crude oil pumped by Venoco’s “Tower of Hope”. This income is then diverted by the district into the General Fund.

“Based on the current price of oil, the royalties from the lease for 2016 are projected to be approximately $300,000,” Board President Howard Goldstein said.

However, Goldstein does not believe the eventual termination of the payment schedule is a key issue for the board.

“The loss of the oil revenues will not cause detrimental harm to the district as the operating budget is in excess of $60 million dollars,” Goldstein said.

Rather, the district is currently focused on getting Venoco to comply with the terms of the lease, as Superintendent Steve Kessler states while sitting in an office containing two copies of “Parts Per Million: The Poisoning of Beverly Hills High School,” a 2007 investigative expose about the wells written by former classmate Joy Horowitz.

“In 2011, the city of Beverly Hills stopped drilling for all underground petroleum products. Prior to that we had a lease that expires Dec. 31, 2016. The board of education has been very straightforward in that we want [Venoco Inc.] to vacate the premises so we can hopefully continue on with our modernization process, because for that area, our master plan actually has a girls softball field and a boys baseball field planned. So we have communicated with Venoco that we wish them to vacate the premises as soon as their lease is up, and that’s the latest on the oil well,” Kessler said.

Should Venoco’s vacation be delayed, a costly cleanup operation that would become a financial burden on the district’s wallet may prove to be the outcome of the situation.

“Remediation of the site is to commence immediately upon the expiration of the lease. Full remediation will take a few years and cost between $10 and $15 million dollars, with the provision that Venoco must have the site cleaned up by March 31, 2017,” Goldstein said.

Accordingly, BHUSD is relying on both Venoco and the California Department of Conservation’s Division of Oil, Gas and Geothermal Resources (DOGGR) to oversee the removal of the entire drilling site within the previously agreed-upon timeframe.

“We anticipate that Venoco will uphold its obligations and relinquish the site timely. The board has long recognized that oil wells are an incompatible land use on school property and have worked tirelessly for years to get the old well shut down. This matter is currently in bankruptcy and legal counsel for the district is currently handling the matter,” Goldstein said.

Kessler reiterated the board’s position in blunter terms.

“It’s just very straightforward: the lease ends on Dec. 31, 2016, we want our property back,” Kessler said.

Venoco Inc. did not respond to Highlights’ request for comment.

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