The claim is a precursor to a much broader lawsuit expected to be filed by Citadel Exploration. The company is hoping to extract millions of barrels of oil from south San Benito County fields, just west of Bitterwater, Calif., with their plan called Project Indian.
Citadel owners claim they could have extracted 20-40 million barrels of oil over the life of the project, a value they believe equals $1.2 billion.
"$1.2 billion. That's like asking for the moon. The county will file for bankruptcy and reorganize. He’s not going to get anything,” San Benito County Supervisor Jerry Muenzer said.
"We don’t have that kind of money ever, ever," supervisor Muenzer said. Such a judgement would leave the county broke.
November's election put the brakes on that because voters passed Measure J, which bans all fracking and other high-intensity oil extraction.
The company is arguing that Measure J constitutes "regulatory taking," meaning, government regulation limits on the use of private property.
"When you start taking people’s property rights you have to pay for them and in this case you talking about the mineral rights to natural gas and crude oil which have substantial value over long period of time," said Jeffrey Dintzer a land use lawyer not associated with the oil company.
Citadel owners claim they could have extracted 20-40 million barrels of oil over the life of the project, a value they believe equals $1.2 billion.
Prior to the election, county supervisors passed an ordinance that would allow Citadel Exploration to request an exemption to Measure J.
"Before anything would come to trial they would have to go through that process first, the hearing would be before the board of supervisors and we can grant them an exception," said Muenzer.
County attorneys refused to discuss the claim and several calls made to the oil company were not returned.
The county board of supervisors will take up the claim when they meet December. Muenzer said the claim will likely be rejected, which will allow Citadel Exploration to file their lawsuit.
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Citadel Exploration's description of Project Indian:
Project Indian is located in the Bitterwater sub-basin of the Salinas Basin, north of the giant San Ardo Field. It is a shallow anticline defined by surface geology and well control that may have over 100 million barrels of heavy (11-14 gravity API) oil in place. A well that was drilled and cored extensively by Chevron in 1976 showed the oil is trapped in highly porous and permeable basal Pliocene sands at 300-600 feet deep with 300’ of clay stone cap rock.
Citadel will develop Project Indian as a thermal recovery operation. The initial phase of evaluation began in January 2014 with the Indian 1-15 well with cyclic steam injection starting in May. Ultimately this phase is expected to entail the drilling of up to 5 vertical wells in 2014, and installing temporary steaming facilities. The company will conduct extensive coring and side wall sampling of these initial wells. This will better assist the company’s independent reservoir engineers in estimating total oil in place and proper engineering for full field development.
The company will employ cyclic steam injection to produce oil. This technique consists of injecting steam down the well where it interacts with the heavy oil, then allowing the steam/oil mixture to sit for several days pumping the now-viscous mix out of the ground, then repeating the cycle by re-steaming the well.
At Project Indian, operational efficiencies should be achieved as both electrical lines and natural gas pipelines are in close proximity to the lease. This should assist the company in lowering its operating costs and increasing its operating margin. Oil produced from the lease will be trucked out to local refinery within 100 miles of the field.
The San Ardo oil field, which sits 30 miles to the south of Project Indian has produced over 500 million barrels of oil since its discovery in 1940, suggesting that it has recovered more than 50% of the original oil in place (OOIP). Ultimately, establishing this commercial threshold will be a key catalyst for creating value for Citadel’s shareholders.
By Felix Cortez
http://www.ksbw.com/news/central-california/hollister-gilroy/oil-company-files-12-billion-claim-against-san-benito-county/29829374