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Discovery Has City Flying High

Energy: Claim of huge natural gas deposit leads Delano to dream of wealth that may result. But some are skeptical.

By GEOFFREY MOHAN, Times Staff Writer

DELANO, Calif.--At the signal from oil wildcatter F. Lynn Blystone, roughnecks opened the valve of a greasy well rig, and with an earsplitting screech, a fat jet of natural gas blasted plumes of dust from the fields outside this San Joaquin Valley town.

City officials covered their ears and dropped their jaws. "That's the sound of money, loud and powerful," said Delano City Manager Adela Gonzalez.

Indeed, the estimated 3 trillion cubic feet of coveted and pricey natural gas that Blystone, president and chief executive of Tri-Valley Corp. in Bakersfield, claims to have tapped could be the biggest natural gas discovery in California since the 1930s, and might rank among the top in the lower 48 states.

And although the full extent of the find remains unproven--and industry veterans urge caution--Blystone's well has set off a frenzy in this impoverished agricultural town more famous for Cesar Chavez and the pickers who touched off a national grape boycott.

Delano is seeing dollar signs in the dust. It's talking power plants, pipelines, big industry, and independence from the grip of the statewide energy crisis. Energy consultants are lining up at City Hall, where visitors are urged to use the stairs instead of the elevators to save electricity. Ordinary residents are scurrying to learn if they own mineral rights, mostly finding that their dreams of overnight riches are about as real as the fictional Clampett family on TV's "The Beverly Hillbillies."

"Everybody is doing their research, to see if they have mineral rights," said Delano Mayor Art Armendares. "We're getting control of our own destiny. We can provide citizens with uninterrupted electricity and gas. Then we can put up our shingle and attract industry."

Beyond grapes, almonds and other crops, industry is sparse in Delano, which recently attracted a Sears distribution center for the West Coast. Seasonal unemployment reaches upward of 30%, Armendares said.

Even if Delano is poised to reap rewards, the state in general won't see much effect. That's because even the optimistic estimates of daily production wouldn't meet more than 1% of the state's whopping 7.5 billion cubic-foot demand, according to the state Department of Conservation.

That hasn't stopped Delano residents from dreaming. Among those who might hit it big are City Manager Gonzalez's secretary, Phyllis Kraft, who hails from one of the area's old farming families. "People aren't exactly treating me differently, but they are saying, 'You're not going to forget me when you get rich and famous, are you?' " said Kraft, who remains cautiously optimistic about the claim. "It would be wonderful if it's true, but let's just wait and see."

For years, children here have learned that, while the soil rendered their food, its hidden riches could one day change their destiny. Few sold their mineral rights, even when they let go of their land. As a result, the original landowners are most likely to get any royalties from leasing those rights--generally 12.5% to 25% of gross production, Blystone said.

Revenue from the field could be $7 billion or more over a predicted lifetime of 85 years, he said. Among the biggest winners so far appears to be the U.S. government, which operates an antenna field for the Voice of America on about 800 acres of the 6,600 that Tri-Valley believes harbor natural gas.

But Emeterio "Butch" Navalta, who owns the plot where Tri-Valley drilled, ignored the screech of the gas well Tuesday and sullenly hoed weeds from his 20-acre plot. He bought the land for $60,000 last year but didn't get the mineral rights. Although he gets $12,000 a year leasing drilling space to Tri-Valley, he is bitter.

"I didn't even think about it," Navalta said. "I'm trying to find someone who knows what to do." Ruth Hiett, 85-year-old matriarch of a farming family with several hundred acres in the claim area, said she'll hold tight to her rights. Surrounded by almond trees and fallow fields, she lives in an aging clapboard house that is part of the family's original 1906 homestead.

"I don't know if it'll make me rich, but it might somebody," Hiett said. "Anybody who knows anything at all likes to think some day we'll hit it. But some company still has to come and explore and do whatever they have to do. Who knows? No telling."

'It's Just a Story as Far as I'm Concerned'

Thus far, no one knows, or no one is telling. But the prospect of 3 trillion cubic feet of unassociated, or "dry," gas--meaning it is not mingled with oil--in an area that has not shown such deposits before raises ample skepticism.

"It's just a story as far as I'm concerned," said Lawrence Chroman Jr., a third-generation farmer who kept the mineral rights to the land he sold Navalta last year. "Whenever the price of gas or oil goes up, they have money to go out and do exploration. It goes through cycles. I'm not willing to go any further until I see whether this thing develops or not."

Experts and regulators likewise cautioned that one gushing well does not prove a major find. "All we can say is we are rooting for him," said Don Drysdale, spokesman for the state Conservation Department. "It would help us all out. But the statements they are making are based on one well. We don't know enough yet."

Industry experts note that with natural gas going for $12 per thousand cubic feet, plenty of wildcat drillers have been scouring overlooked or unlikely places in search of El Dorado. Many find little more than, well, Delano.

Tri-Valley, a public company whose stock trades at about $1.80, has been through bankruptcy protection before, fighting off a hostile takeover by a creditor. And it has made one similar claim near Fresno, which proved dry. When it announced the Delano find April 11, its stock leaped 75%, and has since hovered just under $2.

The company will need about $100 million to drill about 40 wells that it says could yield a total of 80 million cubic feet per day for about 85 years. That is well over the about 50 million cubic feet a day coming from the state's most productive field, Rio Vista, according to the Conservation Department, but still not enough to ease the state's crisis.

But because of the huge amount consumed daily in California, even if optimistic estimates in Delano pan out, the production there won't help ease the state's crisis. "We're not going to be able to materially affect the power needs of California," Blystone cautioned.

Bolstering Blystone's claim is the East Lost Hills find reported in February by Berkley Petroleum 25 miles west. That discovery has shown early promise of being at least as big as the Delano find. The two potential deposits were made public within six weeks of each other, and nothing has been the same since in the area.

"There's almost been the equivalent of a Gold Rush to lease land all around the Berkley field," Kramer said. Drysdale said, however, that his department believes the two finds are separate deposits. Tri-Valley has mapped out 6,600 acres, and so far a substantial wedge lies within Delano boundaries, where the city owns mineral rights.

Virtually everything is speculative about the claim, particularly royalties. But city officials think they could make $3 million a year--in a town with an operating budget of $6 million, dismally paved roads and overcrowded schools.

Not only are they considering forming a municipal power authority, but they say they will waive about $1,000 in fees to landowners willing to annex to the city, which could bring tax benefits on land where the wells might be erected.

"I'm going to make a one-time offer to all these farmers that the city will pick up the cost of annexation," said Matthew Alexander, community development director for Delano. "I see this as a window of opportunity."

Alexander and others have been to Sacramento to study the pros and cons of forming a municipal utility, and are convinced that building a power plant, and using gas royalties to power it, is the answer. "You're looking at a totally different town," Blystone said. Small players like Navalta, however, suspect that Delano will be the same town as ever for them.

"It's supposed to be good for the city," he said. "They're going to get a lot of revenue. I just wish I could get something."

Copyright 2001 Los Angeles Times

-- Swissrose (cellier3@mindspring.com), May 11, 2001