October 09, 2012 - It is safe to say that Chris Garner can feel the pulse of Long Beach. The fourth-generation resident has staked his name and reputation here, having worked for the city since 1984 in numerous roles related to oil and natural gas production.

Garner has the kind of affable charm that leads many to believe he has a bright future in politics. He's the kind of guy that city officials turn to for answers when problems arise. For example, twice Garner has served as acting director of the city's public works department. He also led the city through the statewide energy crisis in 2000 and 2001.

But Garner says he's happy as director of the Long Beach Gas and Oil Department (LBGO), where he oversees the city's gas utility, oil production and trash-to-energy power plant. Garner also serves on several boards of directors, including the American Public Gas Association, California Municipal Utilities Association and California Independent Petroleum Producers.

The LBGO's impact on the community cannot be understated. Through the production and sale of oil and natural gas, the department pumps tens of millions of dollars annually into city coffers, helping to sustain vital public safety services and funding beach restoration projects in a time of severe budget cuts and layoffs. Moreover, the city operates the Wilmington Oil Field, the nation's third largest producer of oil. Long Beach is the single largest oil-producing city in Southern California, pumping out about 12 million barrels each year, the bulk of which is shipped to local refineries for conversion to gasoline. Finally, the city's oil operations have generated more than $2.3 billion for the state and in excess of $380 million in city revenues just over the last 10 years.

A father of three children, Garner graduated with a bachelor's and master's degree in business administration from Loyola Marymount University. He sat down with the Business Journal on September 27 to discuss the ins and outs of the LBGO, where it is headed in the coming years and the unique, important role it plays in the community.

LBBJ: Give us a sense of what the gas and oil department's role and responsibility is?

Garner: We have three main business units. We have our gas utility, which began in 1924. We are the only city in Southern California that has a gas utility – full-service. And then we have our oil operations – the Wilmington oil field and some onshore. Our third business unit is our SERRF (Southeast Resource Recovery Facility) plant, our trash-to-energy power plant. All three enterprises run like businesses. We have customers, we have revenues [and] we have competition. So we run it like a business.

LBBJ: How many oil fields and operations does the department oversee?

Garner: In simple terms, we separate it into uplands and tidelands. The tidelands are in trust for the State of California; the offshore oil islands and some of the oil operations down at the port area.

Everything in the uplands is just above the tidelands borderline. So we have some operations out in Recreation Park, some in the Signal Hill area and down toward Seal Beach.

LBBJ: What are the major differing points between the two?

Garner: The big difference is the tidelands area is a legal designation. We are the trustee for the State of California. So the city owns it but we hold it in trust for the State of California. Revenue that we generate from the oil operations in tidelands has to be spent in the tidelands area. The oil built the convention center. We pay lifeguards out of this.

LBBJ: So the uplands is not in a state trust?

Garner: No. And that money can go to the general fund and pay for police, fire, libraries . . .

LBBJ: Given these roles and responsibilities, how does the department serve the residents of Long Beach?

Garner: On the gas side, obviously, we are a full-service gas utility. So we have about 140,000 customers in the cities of Long Beach and Signal Hill. And then we touch seven surrounding cities. Just bits and pieces of those. Technically, our service area is our city.

LBBJ: We understand that residents who receive their gas service from the department pay some of the lowest bills in the state. Is that right?

Garner: Yes. Long Beach is unique in the sense that our city charter requires us to have market-based rates. So it's not cost-based, meaning that, on paper, we compete with Southern California Gas Company. We compare our rates with theirs. So when their rates go up, we may raise our rates. If they lower their rates, we lower our rates. We've had four or five rate decreases in the last 10 years. So our rates today are comparable to where they were back in the late 1980s. We go out and buy our gas supply, the gas commodity, on the open market. We compete with every other gas utility in the country for our gas supply. We're fortunate that we have our own local gas production, also. So we're able to get good rates, good deals for our customers. And we pass that directly to our customers. There is a glut of natural gas on the market right now.

LBBJ: And how does oil serve the residents of Long Beach?

Garner: It's hopefully invisible to most of them. In all my years as director I have not received one complaint from a customer about the oil islands themselves. So mostly it's invisible. And that's part of our role. Our primary role on the oil side, from the city's standpoint, is to make sure it's environmentally friendly so there are no oil spills, which we've never had in Long Beach. Protect the environment, and also protect against subsidence. The city experienced quite a bit of subsidence, the sinking. After withdrawing the oil from the ground the land started sinking, especially down at the port area. So we re-inject it with water and we monitor that with GPS technology all over the city.

LBBJ: We have heard that some residents receive royalties from the islands.

Garner: Not so much from the islands. They have mineral rights on their property. So there are property owners in Long Beach, I think about 3,000 or 4,000 residents, mostly downtown, who get a royalty check. Because we generate revenue for the city in many different ways on the oil side, it basically goes into two pockets. Tidelands pays for all the beach cleaning. It's a huge moneymaker for the city. And then on the uplands side, we're generating quite a bit of money because oil prices are high. And this helps offset the cost for police, fire, recreation programs, libraries.

LBBJ: And as far as SERRF goes . . .

Garner: Probably 99 percent of people have no idea what SERRF is. It's the largest operation of its kind west of the Mississippi. The city's leaders back in the 1980s had a big fear that the local landfills were filling up. The city has its own refuse collection. So they partnered with the L.A. County sanitation district – a joint power authority – and we built SERRF. So the city's refuse gets taken there. We also take refuse from private haulers. We charge them a tip fee for every ton of refuse brought there. And that's market-based. We take the trash and burn it to generate electricity. We have a power generation there. And the power is put onto the grid and sold to Southern California Edison for a profit. It generates, on a daily basis, enough electricity for about 35,000 homes. On top of that, as a business we generate profit that is split 50-50, and that money goes to the general fund.

LBBJ: What is your budget for fiscal year 2013?

Garner: The total budget is a little under $600 million. For fiscal year 2012, our department is transferring a little over $100 million in profits to the city.

LBBJ: How does that compare with recent years?

Garner: It's hard to compare it because so much of that is built on the price of oil and oil revenues and the price of gas. And so it doesn't necessarily correlate with profits. It could fluctuate up and down and the profit could stay roughly the same.

LBBJ: Does the city's oil revenue fluctuate a great deal based on the market price of a barrel of oil?

Garner: Yes and no. That's one of the fallacies. There's so much focus on the price of oil. When we do our price for the budget, there's this misnomer that this is our forecast for the price of oil. I stress over and over that we are not in the business of forecasting the price of oil. We started preparing the fiscal year 2013 budget back in February or March, so for me to forecast the price of oil, I'd be forecasting out 18 months. And we're not going to do that. We work with financial management to come up with a conservative price target that we fully expect oil to be above. The price target in the budget reflects that we feel comfortable with meeting that price and the city can count on that revenue for ongoing operations. Anything above that would go for one-time purposes.

LBBJ: How many employees work for the department?

Garner: We had reductions this year so we're down to 217.

LBBJ: Who are these employees? What are their jobs?

Garner: The bulk of the employees are gas employees. We have probably about 195 gas utility employees. There are only three city employees at the SERRF operation. On the oil side, we have a contractor, Occidental Petroleum Corporation (Oxy), who is the oil operator. And even on the gas side, the bulk of it is engineers, gas service people that go in and light pilot lights, meter installers and readers, and our pipeline construction crews. If we have a major pipeline project, we will hire a contractor to do that. We spend about $8 million on pipeline replacement a year. And we have in-house crews that deal with the day-to-day maintenance operations and minor leak repair.