Title
Agreement between Signal Hill Petroleum, Inc., and City of Long Beach for mineral interests. (District 5)
Discussion
Signal Hill Petroleum, Inc., (SHPI) is the operator of three waterflood oil recovery Units in the Long Beach Oil Field adjacent to the Long Beach Airport. SHPl desires to collect technically advanced geological information in the Long Beach Oil Field by conducting a three-dimensional (3D) seismic survey. The new geological information will be used to
improve both the waterflooding operations and the ultimate oil recovery from the field.
While the seismic equipment is onsite, SHPl is interested in expanding the survey area beyond the limit of the Long Beach Oil Field and into areas where the City owns the mineral fee interests in anticipation of finding additional oil reserves to develop.
SHPl is proposing to lease approximately 1 ,I 00 acres of City mineral-fee property adjoining the Long Beach Oil Field to conduct the survey. The lease rate offered to the City is 515 per acre per year for a minimum of five years with no right to surface entry. Should the survey result in commercial production of mineral resources in the leased acreage, the City
would receive a one-sixth royalty of gross revenues, which is the industry standard.
This item was reviewed by Deputy City Attorney Charles Parkin on August 9, 2004 and Budget Management Ofticer David Wodynski on August 18,2004.
Timing Considerations
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Fiscal Impact
The rental fee would generate approximately $1 5,000 per year to the Upland Oil Fund (SR 134) for the next five years. If mineral resources were commercially developed by SHPI, the Upland Oil Fund would realize unanticipated additional revenues through well permits, barrel tax, and royalties.
SUGGESTED ACTION
Authorize City Manager to enter into a five-year agreement.
Body
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Respectfully Submited,
[Respectfully Submited,]