Oil company plans to drill 481 new wells at Price Canyon oil field

CORRECTION: The original version of this story incorrectly reported the daily amount of water the facility’s water treatment plant can produce.

For most residents of San Luis Obispo County, their only exposure to the Price Canyon oil field is fleeting glimpses of the bobbing heads of oil pump rigs and the occasional smell of rotten eggs as they speed past the field on Price Canyon Road.

But that may change. The owners of the 110-year-old oil field have plans to enter into a new era of oil production — one that could triple the number of active oil wells in coming years.

“This is not a new operation,” said John Martini, director of government affairs for oil field owners Freeport-McMoRan Oil and Gas of Houston. “There’s not a lot of mystery about how much oil is underground.”

But the expansion has raised alarm among neighbors who are worried that the controversial practice of injecting highly contaminated wastewater back into the ground could endanger their domestic water wells.

“When I look into it, I see a lot of room for human error,” said Natalie Beller, who lives near the oil field and relies on a domestic well for her family’s water. “I just want to make sure our precious water supply is protected.”

Oil field today

The oil field is a sprawling facility on 1,480 acres of rolling oak woodland, chaparral and sandstone outcroppings on both sides of Price Canyon Road at Ormonde Road, halfway between San Luis Obispo and Pismo Beach. The field is also called the Arroyo Grande oil field.

Dozens of drill pads are spread throughout the field. These contain clusters of oil pumping rigs and water injection wells.

The oil rigs are a mixture of older conventional pumping units — the familiar bobbing-head wells called pumpjacks — and newer, more compact rigs called linear rod pumps that have no visible moving parts.

The field sits atop an ancient bowl-shaped geologic feature that contains billions of gallons of water with some oil mixed in. Many sandstone outcroppings within the field are stained with dripping oil.

The ground also is dotted with natural oil seeps that emit hydrogen sulfide gas, which produces the telltale rotten egg smell.

“This area is highly active with seeps,” Martini said. “Whatever people smell is natural and not related to production at the oil field.”

Freeport-McMoRan currently has 165 oil wells and 40 injector wells in the field producing about 1,600 barrels a day, or 67,200 gallons. The oil is trucked to a Phillips 66 pump station in Santa Maria. An average of 10 truck trips a day is required to transport the field’s daily production level.

However, the need to truck the oil will end very soon. Phillips 66 is finishing construction of a pipeline that will transport the oil.

“We expect construction of the pipeline to be complete by the end of April and the line to be commissioned soon thereafter,” said Dennis Nuss, Phillips 66 spokesman.

Expansion plans

Meanwhile, plans are in the works to drill 481 new wells at the oil field. These would be a combination of new wells, replacement wells and injector wells installed over a decade. About 100 of the new wells would be replacement wells, and about 381 wells would be added.

In order to drill the new wells, the oil company needs key approvals from the federal Environmental Protection Agency and San Luis Obispo County.

The first step is to get approval from the EPA to expand an area within the oil field into which wastewater containing brine and other liquid byproducts of the oil production process can be injected. The company wants to triple the size of this injection area and says this expansion is crucial to its growth plans.

The overall size of the oil field would not increase. Rather, the injection area within the field would grow from 249 acres to 807 acres.

The original injection area boundaries were set in 1983. Since then, geologic exploration has shown that the area can be three times larger, Martini said.

“Scientific knowledge has improved greatly since 1983,” Martini said.

Injection of wastewater is necessary because 95 percent of what each well in the field produces is water; the remaining 5 percent is the desired oil. Although it varies according to production levels, the oil field is allowed to produce as much as 2.1  million gallons of oil-tainted water on a daily basis that somehow must be disposed of.

Freeport-McMoRan does this in three ways. All of it is first sent to a sprawling water treatment plant that cost the company more than $90 million when it was modernized in 2013.

Nearly half of the treated water is boiled into steam, which is injected into the wells to make the oil more viscous and easier to pump. Forty percent of the water is treated to drinking water standards and released into Pismo Creek, where it provides fish and wildlife habitat and groundwater recharge downstream.

Finally, about 15 percent of the water is highly concentrated brine that is injected back into the ground.

This is the main point of contention. Neighbors, like Beller, say wastewater injection endangers some 100 domestic wells surrounding the field.

Freeport-McMoRan officials say that’s not true. The area beneath the oil field from which the water is pumped and to which it is re-injected is an enclosed multilayer geologic bowl that prevents any water from leaving or entering, they say.

“This is based on 50 years of wastewater injection and monitoring both inside and outside the bowl,” Martini said.

Beller isn’t so sure. Small cracks in the bowl could allow some water in or out, and the planned expansion of the oil field increases that danger, she said.

“In my experience, there is very little, if nothing, that does not have some impact on something else,” she said. “They don’t know everything.”

What’s ahead

In September in San Luis Obispo, state oil officials held a public meeting on the injection-area expansion that drew more than 100 opponents. The main concern at that meeting was water contamination.

The state Division of Oil, Gas and Geothermal Resources is tentatively recommending approval of the expansion, and the Central Coast Regional Water Quality Control Board agrees with the assessment that the oil field does not endanger nearby drinking wells.

The EPA has until February to make its ruling on the expansion of the injection area. Until then, all plans for drilling new wells at Price Canyon are on hold.

If the expansion is approved, the oil company will be able to drill the final 31 wells allowed in the current production phase that was OK’d in 2005. That phase allowed 95 new wells to be drilled, but only 64 were installed because work was stopped in 2012 pending the outcome of the injection area issue.

The current 10-year permit to drill 95 new wells expired in 2015 and Freeport-McMoRan has applied to the county for a three-year extension to drill the final 31 wells. In November, the San Luis Obispo Planning Commission approved the application, but it has been appealed to the Board of Supervisors. No date for the appeal hearing has been set.

Freeport-McMoRan has also applied for a new production phase at the oil field in which 450 more wells would be drilled. That new phase would allow the field to operate for decades to come.

However, that application, too, is on hold until the injection area issue is settled. Any approval of that application would likely be appealed to the Board of Supervisors.

This story was originally published March 26, 2016 at 8:42 PM with the headline "Oil company plans to drill 481 new wells at Price Canyon oil field."