1. History

2. Strategy and operations
    Asphalt refinery  Onshore oil production  Offshore production: Rincon Island 

3. Environmental compliance issues
    Events of 2011 

4. Public relations

5. Notes

In addition to its United States operations, Grewal runs further Greka operations in China, including Green Dragon Gas, which is a publicly traded company (GDG on the London Stock Exchange), and of which Grewal owns a controlling interest. Green Dragon Gas was incorporated in 2006 in Hong Kong, and mainly extracts coal bed methane in China. It is a part of Greka Energy International, B.V., a Netherlands Company headquartered in the Cayman Islands.^[4] While Grewal owns both a controlling interest in Green Dragon, and all of Greka Energy in California, and the two companies use the same logo, as of 2009 the two companies are separate legal entities.^[5][6] When Greka was still a publicly traded company, in 2002 and early 2003, the China operations were part of the firm; Grewal separated them out later.

History

The oldest component firm making up Greka, Saba Enterprises, was founded in 1981.^[7] Greka itself was originally named Kiwi III, Ltd, and was created as a Colorado corporation in 1988. This firm, renamed to Petro Union, Inc., filed for bankruptcy in 1996.^[6] In 1999, Randeep Grewal, the current owner of the Greka companies, acquired the assets of Saba Petroleum, changing the company's name to Greka; and previously in 1998, with his newly purchased Horizontal Ventures, which was then a private entity, he acquired the assets of Petro Union, which was just then emerging from its 1996 bankruptcy filing in Indiana. Grewal formed Greka Energy by combining these various entities in 1999.^[8][9]

In an October 2000 interview with Wall Street Transcript, Randeep Grewal stated that the company's motto was "Working for Profits": "...[these] are the three words that define what keeps me excited and that's primarily what each of my employees and I focus on. Being profitable drives every decision we make, hence our company's slogan 'Working for Profits.'"^[9] While a publicly traded firm, Greka continued to grow, acquiring Windsor Energy US Corporation and Rincon Island Limited Partnership in 2002,^[10] thereby adding Rincon Island in Ventura County to their portfolio; and in that same year they acquired the properties of Vintage Petroleum in northern Santa Barbara County, which included about 110 producing wells on portions of five oil fields, principally in the Santa Maria Valley and the surrounding hills.^[11][6]

During the time that Greka was a public company, it had holdings worldwide, including in Canada, Colombia, Indonesia, and China, in addition to its United States operations, which at the time of its creation in 1999 included oil fields and other facilities in California, Texas, New Mexico and Louisiana.^[12]

Randeep Grewal took the firm private in 2003. Until that year, Greka was traded on the NASDAQ as GRKA. Grewal bought all outstanding shares for $6.25 per share, which was a 69% premium over the $3.70 per share closing price, for a total of about $32 million.^[8] Grewal split out several entities prior to filing Saba for bankruptcy in 2005. Three parts of Greka, including Greka, Petro Union, and Horizontal Ventures, were included in that filing, in which the firm in its petition estimated assets of $0–$50,000 and estimated debts of $10–$50 million. Neither the producing operations – which include several leases in Santa Barbara County, Rincon Island, Orange County, and Kern County – nor the asphalt plant were included in this liquidation filing.^[13][14]

Greka appointed former Greka CFO,^[15] Andrew deVegvar as president in January 2008. Shortly after beginning his new job DeVegvar began a new "Greka Green" campaign to counter the perception that the company was environmentally careless. The company also hired corporate security consultant, Tom Parker, a former Sr. FBI agent and Deputy Chief of the Los Angeles Regional Office of the FBI, in order to investigate alleged sabotage at their facilities in late 2007 and early 2008 seemingly timed to coincide with the political meetings regarding Greka.^[16]

On August 20, 2008, Greka settled a lawsuit brought against them by the trustees of the owners of the mineral rights to several leases on the Cat Canyon Field. They paid $5 million to the trustees through Wells Fargo Bank and Union Bank. At issue was the transfer in 2002 of production from Vintage, the original operator hired in 1992, to Greka, which allegedly took place without the trustee's permission. According to Greka, the operations on the three leases on the field were only a small part of their local operations.^[17]

On January 21, 2009, Greka sued the County of Santa Barbara, alleging that it used its "repeat offenders" rule to shut down non-polluting facilities along with polluting ones, a situation Greka maintained was unconstitutional. The County agreed with Greka that the retroactive application of the rule would be unconstitutional.^[18] The remaining claims were dismissed by a U.S. District Court.^[19]

Citing declining oil prices and a deteriorating economic climate, Greka laid off 30 people in March 2009, representing about twenty percent of its staff in the Santa Maria area.^[20]

Strategy and operations

Prior to going private in 2003, CEO Randeep Grewal stated that the firm was positioned so as to make a profit whether the price of oil was low or high.^[21] The asphalt plant functioned as a hedge. When oil was high, the company was able to sell on the open market the heavy crude they produced from the Cat Canyon, Santa Maria Valley, and North Belridge fields; when the price of oil is low, they used it instead to make asphalt at their Santa Maria refinery, since asphalt keeps a relatively constant price. In 2002, Greka announced that they possessed approximately {{convert|800|Moilbbl|m3}} of heavy crude oil recoverable with current technologies.^[22] Greka was able to capture this resource since the heavy oil existed in a shallower, neglected reservoir, primarily the contained in the Sisquoc Formation. When the major oil companies – Union, Conoco, Shell, and others – extracted oil in the Santa Maria Valley from the 1920s to the 1980s, they mainly pumped from the deeper formations with lighter oil which was more valuable; when they pulled out of the county in the 1980s and 1990s, they left behind considerable reserves of difficult-to-extract heavy oil, which however made good feedstock for the asphalt refinery.^[6]

Greka operates wells at the North Belridge Oil Field in Kern County, the Casmalia, Cat Canyon, Zaca, and Santa Maria Valley Fields in Santa Barbara County, and through a subsidiary the Rincon Island in the Santa Barbara Channel south of Carpinteria, and the Richfield Oil Field in Orange County.^[23]

Asphalt refinery

Greka owns and operates an asphalt refinery northwest of Santa Maria. It sits on {{convert|30|acre|m2}} of land surrounded by an agricultural area, but within the still-operational portion of the Santa Maria Valley oil field. Greka's heavy oil operations in North Belridge and elsewhere provide feedstock to the refinery, especially when the price of oil is low. Currently the refinery is able to separate heavy oil into distillates and heavy fractions at approximately {{convert|125|oilbbl|m3}} per hour; they then ship the resulting product out by truck. Products of the refinery, in addition to asphalt, include naphtha, asphalt emulsion, and gas oil. Some of the distallates are used by regional oil fields as a diluent, aiding in oil recovery.^[24]

The refinery was constructed in 1935, prior to the creation of zoning laws in the county, which accounts for its unusual position as an isolated industrial parcel within a mostly agricultural area. Previous owners of the refinery included Conoco and Saba. Saba took over the refinery in 1994, closing it while they performed equipment upgrades, and reopening it in 1996.^[24] In 1999, Greka acquired the refinery along with Saba's other assets as part of their takeover of that firm. In the early 2000s the facility was subject to numerous safety audits and facility upgrades, completed in 2004. In 2005 Greka shut the plant down temporarily in a planned 10-year turnaround to upgrade the equipment further, and in November of that year received a permit to process wastewater, which is now used to irrigate surrounding cropland.^[24]

Onshore oil production

As of the beginning of 2009, Greka ran onshore oil production facilities in four California counties: Santa Barbara, Kern, Ventura, and Orange. In Santa Barbara county, they actively produced oil from the Santa Maria Valley, Casmalia, Zaca, and Cat Canyon fields. In Kern County, they produced from the large North Belridge field, and in Orange County they ran their largest single production operation on the Richfield field. Their only producing site in Ventura County was Rincon Island, which still used the Rincon Island Limited Partnership banner.^[25]

Offshore production: Rincon Island

Environmental compliance issues

When Greka moved into Santa Barbara County in 1999, most of the major oil companies had already pulled out, or were in the process of doing so. Opportunities were better elsewhere, including in inland California, such as Kern County, with its huge oil fields and somewhat more relaxed regulatory climate. Greka and other small companies purchased the aging infrastructure left behind by companies that had been operating since the early 20th century. In 2009, only Chevron was left of the major companies; Aera Energy LLC, a joint venture of Shell and Mobil, also retained some operations at the Cat Canyon Oil Field. Greka became, by 2009, the largest oil producer in the County, without drilling a single new well.

It was not long before Greka came to the attention of regulators in Santa Barbara County, where the majority of its operations are concentrated. Between 1999 and 2008, the Santa Barbara County Fire Department responded to over 400 waste leaks and spills at Greka. According to EPA Superfund Division employee Robert Wise, speaking to the Associated Press, "I've been in the hazardous materials business for 20 years and this is the worst oil company I've ever seen."

The EPA fined Greka $127,500 for improperly disposing of industrial wastewater by injecting it into disposal wells on their Union Sugar and Morganti Leases in the Santa Maria Field, not far from their refinery, in June 2006. While some water disposal is permitted in wells – indeed, wastewater is often used to recharge oil reservoirs to improve recovery – industrial wastewater is considered to be a greater danger to drinking water and must be treated differently, and can only be injected into wells meeting specific criteria. Injecting such water into Class II wells is a violation of the federal Safe Drinking Water Act of 1974.

On December 7, 2007, Greka spilled over {{convert|58,000|USgal|m3}} of oil at their Bell Lease in the Cat Canyon Field along Palmer Road southwest of Santa Maria. Greka's attorney, however, claimed that some of the recent spills were the work of an eco-terrorist at large. Pipes and wires were cut, valves were opened, and alarms disabled. Some of the wires had been cut with a crimping device. Attorney Robert O'Brien also emphasized that Greka is meticulous in its reporting of the exact amount spilled, unlike other operators in the county.

Also in early January 2008, Greka through Rincon Partnership voluntarily shut down the causeway leading to the Rincon Island facility so that it could repair damage to the pilings caused by the El Nino storms. Consequently, production from the Rincon Island was suspended (as no other method of moving oil to shore was available). Rincon Partnership has promised to repair the causeway.^[33]

On January 15, 2008, the Santa Barbara County Board of Supervisors held a hearing to discuss the company, their record, and their future. A large group of Greka employees attended the meeting, in which the supervisors, the California Department of Fish and Game, the Santa Barbara County Fire Department, and the U.S. EPA all reported on the situation. Greka had spilled approximately {{convert|500,000|USgal|m3}} of liquids in the county – both oil and produced water, a total of about {{convert|12000|oilbbl|m3}} – in the four years from 2003, when the company went private, to the end of 2007, while it also had the largest number of active wells. The second-largest spill total went to Sierra Resources, a small operator active in the Casmalia Oil Field, which spilled only {{convert|16,800|USgal|m3}} of liquids.^[34]

Shortly after this meeting, on January 29, 2008, Greka distributed a Media Briefing packet to provide the media with a source for its side of the story regarding environmental issues. Also, Greka launched a "Greka Green" initiative, intending to establish itself as an environmental leader in the Santa Barbara County petroleum industry. As part of this initiative, it would repair or remove much of the decaying infrastructure which had been responsible for many of the leaks, spills, and releases that had brought the company to the attention of regulators and the public. Andrew deVegvar, the recently appointed company president, stated: "I am making it my primary task to ensure that this Company is doing everything it can to be as environmentally aware as possible and as good a corporate citizen as possible; we are going to be a leader." In addition to repair and removal of old equipment, the initiative included berm reinforcement, creek protection, and other measures designed to exceed the environmental standards the company believes it had already met.^[35]

The United States Environmental Protection Agency (EPA) removed Greka's contractor from the cleanup effort in February 2008, stating that Greka and its contractors were inefficient and incompetent, and repeatedly "failed to meet federal standards."^[36] In particular, the EPA found that Greka employees were covering spilled oil in the creek with fresh soil, rather than removing it; therefore EPA removed them from the cleanup exercise. Greka dismissed their cleanup contractor in March, and the contractor they hired to replace them failed the EPA's Hazardous Waste Operations and Emergency Response Standards (HAZWOPER), so EPA dismissed them, and carried out the cleanup themselves.^[37] On the same day that the EPA dismissed Greka from its own cleanup, February 1, Congresswoman Lois Capps wrote in a letter to the EPA: "Given the apparent haphazard manner in which the Greka sites are managed and the devastating effects this mismanagement is having on the local environment, it is crucial that EPA continue working with appropriate federal, state, and local agencies to put an end to this intolerable situation."^[38] Greka countered with a statement through Sitrick and Company, their public relations consultant, claiming that EPA's action had effectively prevented them from finishing their own cleanup efficiently and on time.^[39]

In October 2008, EPA took over the cleanup of a Greka spill for the third time, this one at the Gato Lease in the Cat Canyon Oil Field. They stated that they would seek to have Greka reimburse their expenses, and could not delay due to the imminent start of the rainy season, which could push the contamination farther down the streambeds. In southern and central California, many streambeds are dry prior to the beginning of the rains in late autumn.^[40][41]

When the Board of Supervisors reconvened on the issue of Greka's violations in May 2008, however, they determined that there were further problems since January. In the County, there had been a total of 48 waste spills since the last meeting on January 15; of these, 41 had been at Greka facilities. The company claimed in a letter that most of the spills were benign in nature, and not a threat to public health; and the Board also suggested that perhaps not enough time had been allotted to Greka to correct the problems.^[42]

The California Regional Water Quality Control Board, meeting in Watsonville, California on July 10, 2009, recommended Greka be referred to the state Attorney General for prosecution due to its repeated waste spills.^[43] In 2008 alone, Greka had spilled more than {{convert|157,000|USgal|m3}} of waste (oil and produced water); Greka had spilled more than a {{convert|500,000|USgal|m3}} since going private in 2003, resulting in over 400 hazardous materials teams responses; the firm had been fined more than $2.6 million by the different regulatory agencies during this time.^[44][45] Rather than criticizing the Board's decision, Greka president Andrew DeVegvar said that he welcomed a review of his company by the State Attorney General, for the findings would likely be in Greka's favor. "99 percent [of Greka's spills] have been very minor and they’ve been on private property and have not done any environmental damage."^[46]

In 2008, Assembly Bill 1960 ^[47] was introduced in the state legislature, largely in response to spills at Greka.^[48]

Events of 2011

In March 2011 Santa Barbara County announced details of an agreement reached with Greka after approximately two years of contentious negotiations. Greka agreed to pay $2 million between 2011 and 2014 as compensation for the series of spills which occurred in late 2007 and early 2008, events which included more than 1700 violations of County regulations. Additionally, Greka promised to improve their infrastructure to make future spills less likely, including reinforcing containment structures. The agreement brought Greka into full compliance with the County's codes governing oil and gas.^[49][50]

Greka changed its name to HVI Cat Canyon, Inc. in May 2011, going back to a name it had used prior to 1999 for its operations on the East Cat Canyon Oil Field. The name "HVI Cat Canyon Inc." had been the name of a small subsidiary of Horizontal Ventures, Inc. prior to their 1998 merger with Saba Petroleum Corporation. The entity which resulted from this merger was named "Greka Energy", a name which it retained until 2011.^[51][52]

On June 17, 2011, the U.S. Department of Justice, California Department of Fish and Game, and California Regional Water Quality Control Board filed suit against Greka in Federal court in Los Angeles for having failed to comply with the requirements of the Clean Water Act, citing 21 oil and contaminated water spills between 2005 and 2010. The amount sought was in excess of $2.4 million.^[53]

Public relations

Greka created a website for their US operations in 2010. They have a website for their unrelated China operations – greendragongas.com, but it makes no mention of Greka Energy. In Santa Barbara County, they have occasionally hired retired County Supervisor Mike Stoker as a spokesman.^[27] In 2008 they hired Tony Knight from the public relations firm Sitrick and Company to assist in representing them.^[54] Greka created a news website in 2011 to keep the public informed in all operations related to their company.

Notes

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