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City Council and BHUSD Seek to Recoup Lost Oil Revenue

An end to drilling in 2016 will mean less money for schools and Beverly Hills' general fund.

A Tuesday of the City Council and Board of Education to discuss plans to halt oil drilling in Beverly Hills ended with an agreement between the two bodies to help the school district deal with the financial impact of the ban.

An passed by the council in January bans oil and gas drilling after Dec. 31, 2016, a date that coincides with the of the Venoco Inc. lease of wells on the Beverly Hills High School campus. The Beverly Hills Unified School District earns about $1 million a year in oil revenue from the well, as does the city. 

But the income is a much more significant part of the BHUSD’s overall budget compared with the city’s general fund.

“Financially, we are in very precarious times,” board President Lisa Korbatov said. “Everyone wants to beat their chest and shut down the oil well right now, but this is a real issue representing real revenue for us.” 

Still, all 10 officials at the meeting agreed that having an oil well on the BHHS grounds was “not a compatible use” for a school campus, as Mayor Barry Brucker described it. They came to such an agreement after several residents said during the public comment period that they favored the ordinance because of the possible health risks of having an oil well on a school campus.

“There is a state law now prohibiting schools from being within 300 feet of an oil well,” Councilwoman Lili Bosse said. “That is telling me something.” 

Several attendees suggested that the BHUSD could make up some of the lost oil revenue by allowing slant drilling of the wells from outside city limits. Slant drilling, however, would add significant costs to obtaining oil and gas from the wells. It is unclear whether Venoco would want to continue operations at BHHS under that circumstance. 

At Bosse’s suggestion, the council and board members agreed to form an ad hoc committee to investigate ways to replace the lost revenue for BHUSD. Bosse said she would serve on the committee, but no board members were named to it.

Korbatov asked that the committee also look at remediation of the well site to ensure that it would be safe for other uses after the well is shut down. She also requested that technical expertise be offered to committee members to help them understand the options that might be available for the site.

Board Vice President Brian Goldberg said he approved of the joint committee idea.

“Lili, your suggestion of a joint task force to look at the revenue issues ensured that concrete action came out of the [Tuesday] meeting,” he wrote in a post on Bosse’s Facebook page. “Thank you for your leadership.” 

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Barry Brucker August 12, 2011 at 06:07 PM
From Mayor Barry Brucker: The joint meeting was very productive. All 10 elected (City & School) agreed that having an oil drilling facility on a school site was an incompatible use. The City Council was unanimous that no $ amount of royalty payment would influence a change in opinion upon the termination of any oil drilling set to end in 2016 per contract. Fact: 1. Per Fire Chief, State Code prohibits any new oil wells to be built w/ in 300ft. of a school site. 2. Royalty rates have ranged from several hundred thousand dollars to just over 1 million/year 3. No one knows when the oil deposits will dry up (thus eliminating any revenue) 4. Both the City and Schools have known about the termination of this contract since 1978 when all parties signed onto the lease and should have anticipated and planned for the oil production/royalties to cease in 2016. 5. Oil production facilities are banned throughout the City limits other than at the high school. The Municipal Code being voted on simply includes the HS site into the Muni Code upon expiration of contract terms with Venoco in 2016. 6. Venoco is obligated to remediate the land back to its original usable state by March 2017. 7. Both the City/Schools agreed to meet to explore other revenue streams to offset the anticipated royalty losses. I am proud to be part of a unanimous Council determined to cease oil production at BHHS and committing to protecting the health and safety of our students and staff.
WM GOLDSTEIN August 13, 2011 at 04:17 AM
Re: Oil Well Forming a committee means kicking the can down the road. So how else you gonna make up that lost $1M?
John Mirisch August 13, 2011 at 04:32 AM
At the joint School Board/City Council meeting I stated that I believe it is the City's responsibility to make the School District whole in regards to the potential revenue loss. While the Council was unanimous that oil production is not an appropriate use for the High School grounds, the land-use decision to prohibit further oil extraction was taken by the Council: in other words, we are responsible for the elimination of the revenue, and so we need to step up and take responsibility. Discussions of alternate revenue sources between the schools and City need to occur. Slant drilling or commercial development of the site are a couple of ideas as to how the revenue loss could be defrayed. However, it needs to be made clear that as I mentioned at the meeting, the City has a responsibility towards the School District to help defray the loss of revenue. As I said at the meeting, a million dollars is a significant amount for the schools and we don't want the quality of education to suffer. The money is important to the schools and the schools are incredibly important to the City. While the health and safety of our students and staff is undoubtedly paramount to all of us, so is the quality of education we offer our kids.

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