http://www.firstcoastnews.com/news/florida/article/230989/4/Florida-Bill-Drill-in-Old-Wells
3:55 PM, Dec 13, 2011
Associated Press
FORT MYERS, Fla. — A bill sponsored by a Naples state representative would give a tax break to companies that go back to drill in abandoned oil wells or drill new wells in fields that are more than 30 years old.
Rep. Matt Hudson, R-Naples, said his bill seeks to boost production, revenue and jobs for the state. The bill targets oil fields in Southwest Florida and the Panhandle.
“What we do is create a new category of oil called mature oil, and in doing so we allow for rejuvenation of wells that were previously capped,” as well as new wells drilled in “mature” fields, Hudson said.
Instead of exploring elsewhere, companies can go to fields where they know oil exists, he said.
The remaining oil is harder to extract, so the tax break would save companies money by helping offset the drilling cost.
House Bill 87 would apply to oil fields that were discovered before 1981 and wells that would begin producing oil after July 1, 2012.
That would include fields in which all wells are abandoned or plugged; fields that have some active and abandoned or plugged wells; and fields where new wells are being drilled, as long as all the fields were discovered before 1981, Hudson said.
The bill cleared its first hurdle Tuesday with a 10-4 approval by the House Energy & Utilities Subcommittee.
The bill has been forwarded to the Finance and Tax Committee.
One of the bill’s dissenters, Rep. Jeff Clemens, D-Lake Worth, said he had questions about where the abandoned wells are and the potential environmental effects of tapping them.
Florida has long had oil production in parts of Southwest Florida and in the northwest Panhandle.
The first field was discovered about 12 miles south of Immokalee in 1943.
A House staff analysis said the Panhandle fields produced about 1 million barrels of oil in 2010, while the Southwest Florida fields produced about 775,000 barrels.
The scope of the bill means a field such as Raccoon Point in the Big Cypress National Preserve, with mineral rights owned by Collier Resources, would fall under its umbrella.
Raccoon Point has 13 wells, eight active. The field, which is in Collier County, was discovered in 1978. Five new wells have been drilled there since February.
The company, run by descendants of Naples founder Barron Collier, plans to expand drilling.
Collier Resources released this statement through a spokeswoman, Andrea McLendon: “While we have not been following state Rep. Matt Hudson’s proposal, HB 87, we do believe that additional onshore drilling in Florida can provide many benefits including new jobs.
Oil drilling in Southwest Florida, ongoing for over 60 years, has proven to be an economic advantage generating tax revenues and creating jobs all in an environmentally sensitive manner.”
The proposed bill would help future drilling become more profitable for companies such as Collier Resources by lowering severance taxes paid per barrel of oil, which is typically 8 percent.
The severance tax is essentially a tax for severing, or extracting, oil or other minerals from the ground, said David Mica, executive director of the Florida Petroleum Council.
The bill would offer varying severance tax rates for producing “mature” oil: * 1 percent on the value of oil that is $60 and below per barrel. * 7 percent on the value between $60 and $80 per barrel. * 9 percent on the value per barrel of $80 and above. If the bill encourages companies to go back into fields that are plugged and recover more oil through new technological methods like directional, or horizontal drilling, “the purpose of the bill is quite frankly laudable,” said Andrew McElwaine, president and CEO of the Southwest Florida Conservancy in Naples. But drilling, particularly in the Big Cypress, is expanding, he said.
If companies are going to pay less taxes for drilling in existing fields where they were planning to drill anyway, “that strikes me as less laudable,” McElwaine said. “We’re not going to allow people to have a windfall profit from this,” Hudson said. He pointed out that under the bill, companies would pay 9 percent on the value of oil $80 and above per barrel, instead of the typical 8 percent. The bill would benefit residents of the state, Mica said. “If you don’t do anything,” he said, “you won’t produce any additional jobs, any additional oil or any additional revenue.”
There are an estimated 370 million more barrels of undiscovered oil in South Florida, according to the most recent United States Geological Survey oil reserve estimate.
All of South Florida’s oil fields are in the Sunniland Trend, an oil reserve about 150 miles long and 20 miles wide, stretching from Fort Myers to Miami.
The trend has 14 oil fields. Six have all wells plugged or abandoned, according to state Bureau of Mining and Minerals Regulation 2010 statistics.
They are: Baxter Island, 40 Mile Bend, Pepper Hammock, Seminole, Sunoco-Felda and Townsend Canal.
All of those, except for Townsend Canal, are in the Big Cypress and were discovered pre-1981.
A 2008 federal Department of the Interior study gives this forecast for oil expansion in the state over the next 10 years: “It can be expected that there is a significant potential for new drilling and development in the state of Florida. It can further be expected that new drilling will be located near existing oil and gas fields.”
Associated Press
Special thanks to Richard Charter