Long Beach is scheduled to host six events during the 2028 summer Olympics but plans to spend millions on ending oil production could create localized issues, according to a California State University (CSU) professor.
“Revenue could very well suffer and that's going to be a problem mainly for the locals from Long Beach to cope with,” said Robert Michaels, a professor of economics at CSU-Fullerton.
The Los Angeles enclave receives revenues from oil production in which it has a financial interest but is seeking to lower its reliance on these oil revenues and transition to alternatives.
“People in Long Beach have every reason to be concerned about what's going to happen to the revenues that they make and all the plans they have for spending oil money on urban things,” Michaels told the Southern California Record. “There's going to be public expenditures of various kinds on Olympic-related problems and they were counting on oil for some of that.”
Some $18.9 million in oil revenue was available for city services in 2020 alone, according to City of Long Beach data. However, the cost of transitioning out of oil fields, in the long run, is hefty.
“The City has an estimated $81 to $146 million liability for oil field abandonment,” wrote Bob Dowell, Long Beach director of energy resources, in an Oct. 25 memo. “At the current rate of setting funds aside, the City will generate enough to fund the $81 million by 2035. If the liability is closer to $146 million, substantially higher contributions to the abandonment fund and/or longer life for the oil field may be needed to avoid a potential major unfunded liability.”
The memo warned city manager Thomas Modica of looming oil field liabilities and the potential need to increase funding.
"Over the next 15 years (or whenever oil revenue ends), oil revenues must be enough to fund the cost of future oil field abandonment. Otherwise, the multi-million-dollar cost may need to be funded by other sources such as diversion of other non-oil Tidelands revenues," Dowell wrote. "Any actions by the State to reduce or stop oil production before 2035 may also have an additional adverse impact on city oil production over time and may result in less time to adjust to lower oil revenue or a need to increase annual funding to the oil abandonment fund."
The city’s plan to abandon oil as a source of energy is part of Gov. Newsom’s climate goal to phase out oil extraction statewide by 2045. The California Air Resources Board (CARB) is currently evaluating the economic, environmental, and health effects of eliminating oil extraction.
“The alternatives for Long Beach for closing down oil production are going to be dependent on the prices and the outputs that prevail in all the rest of the market,” Michaels added. “Long Beach itself will not be choosing alternatives in an important sense because the oil products, the products, and the oil flow into and out of the basin in the port region are dependent on markets that extend far beyond Long Beach.”