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HomeMy WebLinkAboutMinutes Oil And Gas Advisory Committee - 03/28/2008 MINUTES OIL AND GAS ADVISORY COMMITTEE March 28,2008 PRESENT: Lois Huff Chairman,Public Representative AUG 2008 Glenn Cooper,Industry Representative John Cantu,Industry Representative Gretchen Arnold,Public Representative Tom Fisher,Alternate Public Representative Chet Freeman,Alternate Industry Representative OTHERS PRESENT: Ricardo Guzman, Petroleum Superintendent Elizabeth Hundley, Assistant City Attorney;Max Jameson, Ken Schubert and J. D.Hall, Sabco Operating Company. Chairman Huff called the meeting to order and asked for nominations for Chairman and Vice Chairman. Ms. Huff nominated Mr. Cantu for Chairman, seconded by Mr. Fisher and Mr. Fisher nominated Ms. Arnold for Vice Chairman, seconded by Mr. Cooper. All were in favor of the nominations and they were unanimously elected. After everyone introduced themselves, Ms. Huff asked if the committee had reviewed the minutes for December 19, 2007 meeting and asked for a motion to approve. On a motion by Mr.Fisher, seconded by Mr. Cantu,the minutes were unanimously approved. Two applications from Sabco Operating Company for drill sites at exceptional locations in Corpus Christi Bay Marine Recreation Area being State Tract 55 Well No. 8 and State Tract 65 Well No. 1 were discussed. Mr. Guzman stated applications have been submitted on behalf of Sabco Operating Company for permits to drill these wells. The locations of the proposed wells are outside the established cluster areas and the applicant has requested the exceptions based on an affirmative showing that the exception is necessary to prevent confiscation of property. Mr. Guzman stated the Committee would make a recommendation to City Council to approve or deny the permit applications and stated staff recommended approval of the permits as requested. Mr. Guzman provided background information on previously granted exceptions and maps depicting the requested surface locations in the report provided to the Committee. Ms. Huff asked how long it would take to complete both wells and when they would begin drilling. Mr. Jameson answered they would begin drilling in about a month and it will take about two (2) months to drill the three wells(including State Tract 55 Well No. 7 previously permitted). Ms. Arnold asked how confiscation of property is being applied by the cluster requirement. Mr. Jameson answered by denying access to these reserves. Mr. Schubert stated as interpreted by Legal at a previous Council meeting the city would in fact be confiscating the property because they would be prohibiting Sabco from exploring this prospect. Ms. Hundley agreed and Mr. John Cantu asked if she could elaborate. Ms. Hundley stated, "Should the city find themselves in the position, which it can, to deny Sabco their permits the result is that the reserves won't be developed. The reserves are owned by the permanent school land fund of the State of Texas and so by the city as a governmental entity denying the lessee of the state access, it can in fact be claimed to be or would be claimed by the state to be a confiscation of property as a denial of the ability to develop the reserves. It's a regulatory condemnation type of action." Mr. Cantu asked if there are any criteria involved or any triggers for the city to actually deny access. Ms. Hundley stated, "Should this body, the Oil and Gas Advisory Committee, not recommend approval,which it can do,and the City Council in turn hypothetically denies the permit,then the challenge would be by either Sabco joined by the state or the state acting on its own to challenge the city in court against a regulatory condemnation. The city has regulatory authority,that's why we are here. It's our jurisdiction but the state of course has overlapping authority and it would be up to the court. It's an unanswered question." SCANNED 1100 Oil and Gas Advisory Committee Minutes March 28, 2008 Page 2. Ms. Hundley stated, "We recognize one that we also get ad valorem revenue which has been researched for the Council to determine even these exceptional well sites, we are getting revenue from them. So the city has an interest, but the city also has a regulatory interest, so this committee through the recommendation balances those actions and should you deny it,which of course you can, Sabco then has the ability to go to Council and seek to overturn your recommendation or challenge your recommendation." Mr. Fisher added that he has looked into this issue, not for the City of Corpus Christi, there are some cases out of Houston where, whatever the agency is up there, has an artificial lake and the owners of the minerals under the lake want to develop them. The lake authorities said well you can't drill because your going to pollute the water,etc. It then came down to an issue whether they had a reasonable alternative, for instance directionally drilling of a well. So then it becomes a fact issue, do they have a reasonable alternative, these are Texas Supreme Court cases. So if Sabco had a reasonable alternative, lets say if they could reasonably drill from the regular location, then if a court would so find they wouldn't have a case against the city but if the only way that they could reasonably develop these reservoirs were the way they are proposing and if the city denies it then they are confiscating their property. Ms. Hundley agreed and said with the exceptional location, as you all know it is outside the cluster. The city has it set up and the city has interest to support the fact that we want drillers in our jurisdiction to comply with those cluster requirements. So its an instance here where an operator for whatever reason, and those are the reasons of this oil and gas committee, investigates and determines that those reasons are supportable as an exceptional location for just the reasons stated. Ms. Handley continued and stated the city has a regulatory obligation and the Committee can deny the permit and challenge the recommendation but Sabco's reasons are supportable for granting the permits. Ms. Arnold asked for copies of the City Council meeting minutes when it was last discussed. Mr. Freeman asked for a map showing the location of the proposed wells with the proximity to the ship channel. The committee noted the close distance to an existing cluster for the State Tract 55 Well No. 8 location and Mr. Jameson and Mr. Schubert explained the angle they would have to drill the well would make it impossible to reach the targeted zone. On a motion by Mr. Cantu, seconded by Mr. Cooper, the committee unanimously agreed that the application for State Tract 55 Well No. 8 and State Tract 65 Well No. 1 be recommended for approval by the City Council as applied for. Mr. Fisher asked Mr. Guzman to provide a map showing the surrounding areas with the next application. Mr. Cantu asked if staff could provide a detailed outline of the responsibilities of the Committee and Mr. Freeman asked that a map be provided showing the clusters as required by the city with the applications being discussed. Mr. Guzman stated that a map is being completed as they requested and he will be meeting with them soon to discuss any other questions. On a motion by Mr.Fisher,seconded by Mr.Freeman,the meeting adjourned at 11:10 a.m.