The city of Los Angeles, once an oil boomtown in the early 20th century, has passed an ordinance to shut down drilling and phase out existing operations, opening up redevelopment opportunities years from now in the nation's second-largest city.
On Friday, the Los Angeles city council approved an ordinance to ban drilling new oil and gas wells and to phase out current operations by 2042, according to city documents. The move is part of a larger effort within the state of California to wean itself off fossil fuels in response to health concerns and climate change.
The ordinance directs the city's Office of Petroleum and Natural Gas Administration and Safety to study drilling operations during the 20-year amortization period, according to city documents. The amortization period is a necessary agreement between governments and drillers in order for energy companies to recoup losses from previously approved drilling operations. Some drilling operations may be phased out sooner depending on the results of the study.
The city of Los Angeles has 26 oil and gas fields and more than 5,000 oil and gas wells that are active, idle or abandoned, according to city documents. These operations are located across the city, including Downtown, West L.A., the San Fernando Valley and Wilmington. Greater Los Angeles is dotted with thousands of current and former oil and gas drilling operations in addition to properties used to support fossil fuel extraction, located near homes, schools, the Los Angeles International Airport and other sites sought-after for redevelopment.
There were only six rigs actively drilling for oil or natural gas in California the week that ended Dec. 2, according to Baker Hughes' North American rig count, which is considered an important business barometer for the energy industry.
The ordinances alone won't end of drilling, as evidenced by similar legislation elsewhere in California. In October 2021, the city of Culver City in Los Angeles County banned drilling, but the city has spent the past year negotiating with Englewood, Colorado-based driller Sentinel Park Resources on how to end operations. A tentative settlement agreement is expected to be completed by Dec. 31 that may allow Sentinel Park Resources to plug and abandon all remaining wells by December 2029, according to city documents.
Besides Los Angeles and Culver City, Los Angeles County is mulling a ban on one-third of all oil drilling in the county excluding the 1,000-acre Inglewood Oil Field southwest of downtown L.A. It's not known to CoStar News if the city of Long Beach, the second-biggest city in Los Angeles County and a municipality known for its drilling, will pursue an oil and gas drilling ban.
While sites near current and former drilling operations can be sought-after, these properties also can be cumbersome to redevelop. The process can take years, as numerous permits from local, state and federal agencies may be required to redevelop these sites. Former drilling sites also need to be monitored indefinitely afterward for leaks.
California Gov. Gavin Newsom in April 2021called for the end of in-state oil drilling by 2045. A 2020 study found that it may cost $7 billion to close the orphaned oil and gas wells in California.