Can't afford the taxes, can't afford to close down: family-owned crude producers lament Metro Rail tax.

Between a rock and a hard place is the complaint of 16 family-owned producers of crude oil from the old Los Angeles City Oilfield, which Edward L. Doheny discovered in the early 1890s when he dug a hole in his backyard.

Unlike the legendary oil titan and his heirs, though, "we do not have the money to go out of business," cried Bruce W. Manley, general manager of the family-owned Manley Oil Co. here. Yet Manley also lamented the lack of cash to pay a benefit assessment tax for the Metro Rail Red Line, and inability to pay the new tax could drive him and other crude producers out of business.

Manley said his company's bill for the benefit assessment tax by Southern California Rapid Transit District to help fund construction of the Red Line is about $20,000 a year and is scheduled to continue for 16 years. Yet Manley and 15 other family-owned producers pump an aggregate of only about 3,000 barrels of crude a month from 40-odd stripper wells, each producing one to two barrels of crude daily, in the venerable oilfield, he reported.

Because that production is so small, Manley said, major petroleum companies won't buy it from independent producers there. Thus, Manley has a gathering plant with six tanks on the company's one-acre property in the oilfield to gather oil from the producers and sell tanktruck lots to Unocal Corp., which trucks the crude to Unocal's Wilmington refinery.

Manley said he and other producers appealed the assessment before a process controlled by RTD, complaining that their modest oil operations couldn't support the tax bill. Moreover, he continued, the benefit district concept ignored the fact no benefit will be derived by the crude producing and gathering operations in the oil field, which extends from Alvarado Street and Beverly Boulevard to Chinatown.

Evocative of the board game Monopoly, though, Manley said he was told by RTD the tax was justified if he just would put a hotel on the one-acre property -- in effect, quit the oil business and get into real estate development.

However, at least two problems with that economic nostrum were cited by Manley and Dan Kramer of the California Independent Petroleum Association:

* The current depressed price for the modest amount of crude Manley and the other struggling producers in the field are pumping doesn't provide enough income to pay to cap the wells and other costs to abandon production. "We are exploring the options available to us and our operators regarding bankruptcy," Manley lamented.

* Results to date of a study being conducted by the California State Division of Oil & Gas indicate a major risk to public safety from subsidence with buildings slipping out of kilter if production of this shallow field ceases.

RTD created the benefit assessment district in 1985 after asking for and receiving authority from the California Legislature to help fund construction of the Metro Rail Red Line. After imposing the tax in 1987 on business properties within walking distance of the Red Line route, RTD was nudged by business community opposition to defer collection until start of the transit line's operations.

That gave the opposition time to appeal the tax in the courts; however, the California Supreme Court upheld the tax in a 5-2 decision handed down Jan. 30. "I almost had a heart attack when I read that," Manley related.

After getting that green light last month, RTD is expected to resume annual assessments in December 1993, about six months after the first 4.4-mile segment of the Red Line starts operations between downtown L.A. and MacArthur Park.

Manley and the other producers in the L.A. field have two last straws to grasp at, indicated Kramer of California Independent Petroleum Association:

* CIPA may propose to L.A. City Council an "independents exemption" to exempt independent oil and natural gas producers from the tax as long as their principal business conducted on-site remained oil and gas production.

* There is an unconfirmed report that Atchison, Topeka & Santa Fe Railway Co., which also is affected by the RTD tax assessment, is considering an appeal to the U.S. Supreme Court.