Drilling For Local Oil

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Oil companies come back to Southwest Florida

One of Collier Resources’ oil derricks at sunset. 
COLLIER RESOURCES / COURTESY PHOTO One of Collier Resources’ oil derricks at sunset. COLLIER RESOURCES / COURTESY PHOTO A COMPANY FROM LOS ANGELES HAS INVESTED millions of dollars in Southwest Florida mineral wells in the last six years, leading the way in reviving a local oil industry that dates back to the 1940s.

After years of steady production that peaked in 1978, production slid down along with oil prices. It came to almost a standstill in the mid 2000s.

As the cost of petroleum rose and new technology allowed for more accurate drilling, industry executives say, at least half a dozen oil companies have been issued permits in the region. Old wells are being tapped and new drilling has begun.

L.A.-based BreitBurn Energy Partners drilled four wells in 2012, investing $46 million in its Florida operations — a larger investment than in any of the other six states in which the company operates, aside from California. (There, it spent $47 million.)

A BreitBurn Energy Partners well in Collier County. 
COURTESY PHOTO A BreitBurn Energy Partners well in Collier County. COURTESY PHOTO The Florida Department of Environmental Protection, which regulates drilling, has issued 24 permits in South Florida since 2009.

“Most were issued for BreitBurn Energy and for drilling in established fields like Raccoon Point in southeast Collier County,” wrote Florida DEP spokesperson Mara Burger in an e-mail. “For a comparison, from 2006 through the end of 2008 there were four drilling permits issued in Florida. All four were for northwest Florida.”

There are currently 31 active wells in South Florida, she added. The majority are found about 30 miles inland in Lee, Collier and Hendry counties, from Lehigh Acres to the Big Cypress National Preserve. They also border the Florida National Panther Wildlife Refuge. Manager Kevin Godsea said the refuge has long monitored oil drilling, but there hasn’t been serious cause for environmental concern.

COLLIER RESOURCES / COURTESY IMAGE COLLIER RESOURCES / COURTESY IMAGE One new exploratory well proposed by Texas-based Dan A. Hughes Company would be only about 700 feet from the end of a subdivision near Naples, said Michael R. Ramsey, president of the Golden Gate Estates Area Civic Association.

Although some wells like this will be new ones, most of BreitBurn’s activity is from already existing ones. Many are in Sunniland Trend; the oil field stretches from Fort Myers to Miami. Humble Oil and Refining Company (now Exxon) discovered the state’s first productive well in the area in 1943.

Fields such as Sunniland are part of the larger South Florida Basin. That includes most of the southern part of the peninsula, as far north as Lake Okeechobee and as far south as the Keys, plus just off the western and southern shores. Exploratory oil wells were drilled in state waters just off Charlotte Harbor in the 1960s although no production came of it.

BreitBurn and Dan A. Hughes Company lease the land they drill on from Collier Resources Company, which manages and owns the mineral rights (oil and gas) on more than 800,000 acres in Southwest Florida. It’s the oil management wing of some of the area’s most venerable landowners, Barron Collier Companies and Collier Enterprises.

Golden Gate

Golden Gate residents were initially upset when they learned that an oil company wanted to drill just off their backyards — and that state permitting requires oil companies to have a “contingency plan” if a hydrogen sulfide gas leak causes an explosion.

“Some residents… expressed concern,” read Dan A. Hughes’ press release.

There has never been such an explosion, a major spill or any other serious mishap in the state, the DEP, oil producers and environmental conservation groups agreed.

“In roughly 70 years of oil production in Southwest Florida, there have been no major accidents,” said Ms. Burger of the DEP.

That may indicate a low risk, but stranger things have probably happened. Tom Jones, executive vice president of Collier Resources, suggests that’s doubtful.

“I think the realistic possibility of having an explosion in an exploratory well is nonexistent,” he said.

Golden Gate Association president Mr. Ramsey also noted that oil drilling companies in Florida have a clean safety record. But he adds that it’s so close to the end of 24th Avenue SE that even the freak possibility of an explosion is a concern, as is oil trucks and noise.

“I’m not convinced it’s as big a deal as some people think it is,” said Nancy Payton with Florida Wildlife Federation in Naples. “There may be community issues. The traffic I’m not sure about that; I’m not sure about noise. But we’re not uncomfortable with the concept of oil drilling.”

Barrel by barrel

BreitBurn, a publicly traded company, produced 1,924 barrels per day in Florida in 2012. That’s behind Texas (3,482 barrels) and Michigan (the top producer with 9,026 barrels).

“We hope to be able to continue that process, assuming the oil is there,” said Gregory C. Brown, the company’s executive vice president.

Even at Florida’s peak production of 48 million barrels in 1978, that’s only about an eighth of Texas’ production last year. Still, that ranked the state 8th nationally that year, the Florida Geological Survey says, showing the potential to produce a highly valuable yield.

BreitBurn first leased mineral rights in the region in May 2007 and completed drilling on their first new well in May 2010. The company was attracted here because of the long record of moderate production and “oil prices have remained constant,” Mr. Brown said. “They’re certainly not at their historical highs but they are in the range that made us willing to spend the significant capital that it takes. These wells are deep, they’re expensive, and it takes some doing to get a drilling rig there.”

But newer technology has also made it easier. So-called directional drilling allows a single, compact well to reach miles in different directions underground from one spot. And Mr. Jones of Collier Resources noted surveying equipment offers “real time data that can feed back to the surface so you can determine when you’re right where you want to be.”

Even so, it’s an inexact science, said BreitBurn’s Mr. Brown.

“Unfortunately, while there is technology that tries to see what’s down there, you never really know until you get there and even then you’re only seeing what you can see from a very small hole,” he said, adding that the first day of production from a well is “generally the best…

“You’re always fighting that decline and hoping to replace it and then some with new wells.”

The wells produce some natural gas in addition to oil, and although some companies have used it to run their equipment, it’s never been enough to sell commercially.

Frack, you say?

Most oil companies have said the technique called hydraulic fracturing (hydrofracking) isn’t a method they’re considering using in Florida.

It can release oil or natural gas held in underground rock formations by fracturing them with a high-pressure mix of water, sand and chemicals. It’s been highly successful in places like Texas where tight underground shale deposits exist, but has also drawn criticism from environmentalists for polluting water and air.

The relatively delicate, porous limestone rock below the Southwest Florida landscape does not lend itself to fracking, said Mike Cheeseman, a geologist and veteran Florida oilman based in Bonita Springs.

“You can’t frack this zone at all,” he said. “If you get too rough with it it’ll go to water.”

Even so, Florida legislators in the House last month passed a bill that would regulate fracking by requiring companies to disclose chemicals and amount of water used. The Senate considered a similar proposal without success. Mr. Cheeseman said he’s open to fracking if it can be done safely and profitably, and thinks it could be if companies drill more deeply, below the limestone aquifer.

“Me being an oilman, I don’t see any problem with it personally,” he said.

Just the idea that it could be used here excites oil companies, said Mr. Cheeseman, even if they haven’t found a way to frack here.

“That (fracking) has got everyone all riled up,” he said. “So yeah, people are looking at South Florida. If they’re successful, it’ll go wild. Oil men are like a bunch of sheep. They’ll follow whatever’s happening.”

Industry executives predict production will continue to climb with drilling methods, but downplay fracking as an unlikely possibility. Companies would have to be willing to spend money drilling more deeply below Florida’s surface than they have before, said Dave Mica, president of the Florida Petroleum Council. He disputes the idea that fracking is “controversial,” saying that the economic benefits of jobs and “oil independence” outweigh risks. With recent successes using hydraulic fracturing, he adds, companies are fine-tuning ways to use it.

“Technology does evolve. Sometimes it evolves pretty quickly,” he said. ¦

2013-06-06 / Business News

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