Venoco Restructuring Highlights Unusual Oil Well

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As oil and gas explorer Venoco seeks to move forward with its debt restructuring, it must confront the fate of an unusual oil well: one on the grounds of Beverly Hills High School.

For decades, an oil tower has overlooked the California campus known for educating a number of stars, from Betty White to Angelina Jolie, as well as being known for appearing in “It’s a Wonderful Life.” Venoco took over operations there in 1995 under a lease that court papers show is currently set to expire at the end of the year.

Ahead of Monday’s hearing on its bid to put its restructuring plan to a creditor vote, Venoco received an objection to its plan outline from the Beverly Hills school district. The district complained that the plan outline left too many key details unknown, including whether Venoco plans to renew the lease to drill at the high school or to terminate it as part of its restructuring.

“Which oil and gas leases are retained as assets will be essential to any reasonable investor in determining the value of the business going forward,” the school district said in the filing.

The school district also wants to know Denver-based Venoco’s plan to deal with its “significant” financial obligation” to restore the property once the lease terminates as well as what “prospective environmental hazards” may arise.

“Alternatively, if the debtors hold the belief that their bankruptcy case will enable them to skirt their obligations under environmental regulations, then they should so state directly, rather than approach the matter stealthily, and they should provide some explanation of the basis for that belief,” the school district added.

Venoco Chief Financial Officer and Chief Restructuring Officer Scott Pinsonnault told Bankruptcy Beat, through a spokeswoman, that the company plans to keep the Beverly Hills lease as part of its the restructuring, though the company declined to comment on what would happen once the lease expires.

Mr. Pinsonnault also said the company “has met and will continue to meet all of our environmental and safety obligations under our lease with the Beverly Hills [school district] through and after the restructuring process. This includes not only full payment of royalties, but also our stringent operating procedures with an emphasis on the environment and safety.”

In court papers filed Monday, Venoco said it resolved the school district’s objection to its plan outline. The company sought chapter 11 protection in March after reaching a deal with key creditors, including Apollo Global Management, on the broad terms of a restructuring that would slash nearly $1 billion in debt off its books.

Having oil and gas drilling go on at a high school hasn’t been without controversy. More than a decade ago, former students alleged that the drilling activities were hazardous to their health, causing some to fall ill to cancer, Hodgkin’s disease and other illnesses. The lawsuits, led by Erin Brockovich’s law firm, were later dismissed.

Write to Jacqueline Palank at [email protected] . Follow her on Twitter at @PalankJ