Business

Saturday, Oct 12 2013 08:00 PM

Thieves tapping Kern's oil riches

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    By Casey Christie / The Californian

    Oilman Howard Caywood has posted a big reward for oil rustlers who drained a tank out in the South Belridge oilfield in northwest Kern County.

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    By Casey Christie / The Californian

    Howard Caywood

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BY JOHN COX Californian staff writer jcox@bakersfield.com

The more Howard Caywood thought about how thieves had stolen almost 100 barrels of crude from his South Belridge lease two months ago, the angrier he got.

He got so steamed he put up $50,000 -- seven times the oil's value -- as a reward for information that would put the culprits behind bars.

"We all work too damn hard," said Caywood, an independent oil producer and stone-faced owner of a Bakersfield well servicing company.

Oil rustlers are skimming untold profits from Kern County's petroleum industry -- and the people being hit hardest are the small producers least able to absorb the losses.

Law enforcement officials and oilfield veterans say thieves looking to pilfer a few thousand dollars worth of black gold drive vacuum trucks into remote parts of Kern County. There, they hook up to unguarded storage tanks and take oil that may not be missed for weeks, if ever.

TOUGH TO PULL OFF

The heists require a surprising degree of sophistication. One reason is that oil contains a molecular fingerprint that can be used to trace every drop to its original source.

Another challenge is the government-required paperwork that accompanies every step of oil's processing between well and refinery. Producers can't be caught selling more oil than they pump from the ground.

"If a producer suddenly begins shipping more oil than what has been typically produced at his lease, it would be a red flag," noted oil marketer Bob Devine.

Fencing stolen crude is no simpler, because refiners and middlemen only buy under contract.

"If you steal oil, it's not like you can go to a pawn shop. You have to have a place to sell it," said Burt Ellison, district deputy in Bakersfield for the state Division of Oil, Gas and Geothermal Resources.

The only buyers are crude oil producers and refineries. If they have existing sales contracts with the producer, Ellison said they're unlikely to look deeply into the oil's source. And once mixed with other oil, it can't be traced.

Whether oil theft has become more common is hard to say. Though not as big a problem here as in Texas -- and nowhere near the headache it has become in Nigeria where thieves tap directly into pipelines -- theft has long festered in the open expanses of Kern's oil industry. And it hasn't even been the headliner: Stolen valves, well casing and tools generally cost companies more than missing oil.

But the temptation to steal crude has risen along with historically high barrel prices in recent years, heightening calls for greater vigilance among private industry and law enforcement.

"As the price of oil goes up, you see unscrupulous producers seeing that they can make money on this," said Detective Casey Brunsell of the Kern County Sheriff's Office's Rural Crime Investigation Unit. He counted two or three local theft cases in the past year, though he suspects the crime goes underreported and, often, unnoticed.

"It goes on more than you think," said Les Clark, executive vice president of Bakersfield's Independent Oil Producers Agency. He has called for more helicopter flyovers by the sheriff's department to protect small companies that, unlike the big players, rarely spend on surveillance.

The sheriff's department tries to balance industry requests for more patrols and investigations against the need to fight other crimes, Brunsell said.

His advice for local producers is to pay close attention to their volume gauges, set up lights for nighttime visibility, and work with neighbors and vendors to monitor vehicular traffic.

"If they work together and work with us, it's kind of a multiple-pronged approach," he said.

Caywood called for a different kind of collaboration: private contributions to his reward offer.

"It's a problem I don't think our industry should sit down and tolerate," said the owner of West American Energy Corp. on Lencioni Avenue.

The South Belridge lease where Caywood's oil was stolen lies 40 barren miles west of Bakersfield, near a site operated by Aera Energy LLC, a much larger oil producer. Caywood had left his operation unlocked and unguarded.

Caywood thinks he knows when the thieves struck: between 9:35 a.m. Aug. 14 and 11:45 the next morning. With photos of the culprits' tire tracks and boot prints, he hopes to make an example of the perpetrators.

"I'm hoping to catch 'em. Expose 'em," he said.

BAD CASES

There have been worse cases than his. The IOPA's Clark recalled a particularly brazen heist perhaps a decade ago, when oil was less than half its current price.

Thieves drained a 1,000-barrel tank and refilled it with oil field waste so that no one noticed the crime for weeks, maybe months, until it was time for a pick-up.

"They show up, there's nothing in that tank but drilling mud," he said.

Kern County Superior Court records tell the story of three men who pleaded no contest to felony charges of stealing some 1,100 barrels over the course of at least five illicit oil transfers between June 4 and Sept. 3, 2012.

Two of the men -- Gary Ledbetter and Billy Willis, both 59 -- worked for Crimson Resource Management, a Denver-based company active in the Bakersfield area.

They arranged to steal oil from Crimson's Rosedale Ranch facility and sell it through a company Ledbetter was working for on the side, Beverly Hills-based SJM Oil LLC.

Bypassing Crimson's inventory controls by diverting oil into an emergency tank, they paid 33-year-old Jeffery Searcy to drive a vacuum truck -- smaller than a tanker truck and mostly used to remove waste -- $500 a trip to take the stolen oil to an SJM facility near Arvin.

The scheme fell apart in November when Bakersfield police acting on a tip set up a sting operation.

A subsequent investigation turned up inconsistencies between the production records SJM had sent to the state and the information it had provided to the third party with which it had a sales agreement.

Additionally, not only had SJM's lease been sold and idled, ruling out the possibility of any production at all, but the oil SJM had been selling didn't match the field it was supposedly coming from.

None of the three men had prior criminal records, and each took a plea deal that included an agreement to pay restitution of $90,000. Willis was sentenced to 120 days in jail and referred to work release, Searcy was given 33 days in jail and 640 hours of community service, and Ledbetter is serving a year in jail.

The Kern County District Attorney's office filed no charges against SJM's owner, Jordan Weinberg, who according to a BPD report had sent false records to state oil regulators, including data on supposed production at the Arvin-area lease when the site was not producing oil.

Prosecutor Gregory Pulskamp said none of the defendants ever implicated Weinberg, and there was insufficient evidence to prove Weinberg's knowing involvement.

Weinberg referred questions Friday to his Century City attorney, Steve Levine, who said he had not reviewed the court records and could not discuss the case.

TIME TO RETHINK?

The Crimson case and Caywood's reward have led some in the local oil industry to wonder whether more security is needed.

"We spend millions of dollars in the oil industry drilling holes in the ground," Bakersfield oil and gas industry lawyer Mel Ehrlich said. "And then we turn around and put a 25-cent padlock on the gate to protect our investment."

Taft oil veteran Bruce Holmes said traditional oil field security has long been a constant, if informal, affair.

"All us insiders, if we're out there, see lights and they got no business being there, we're in there like a dog on a bone," he said.

Now that Caywood has posted a $50,000 reward, though, Holmes said he plans to keep an even closer eye out.

"I guess we better pay a little more attention," he said.

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