Oil company seeks permits for oil and gas wells in Huasna Valley

clambert@thetribunenews.comMarch 22, 2014 

A Bakersfield-based company has applied to drill exploratory gas and oil wells on two pads built by Phillips Oil in the 1980s. The site is on Porter Ranch near Alamo Road, north of Highway 166 in Huasna Valley.

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Dero Parker slowly maneuvered his SUV up a winding, rock-strewn dirt road, past Monterey shale, chaparral and a few oaks.

Eventually, the Bakersfield businessman pulled around a corner, and a large, graded area came into view — one of two previously completed “pads” where Parker wants to conduct exploratory oil drilling.

Parker has filed an application to San Luis Obispo County’s planning department to drill and test up to four exploratory oil and gas wells on two existing pads on the Porter Ranch, a vast property off Alamo Creek Road, north of Highway 166 at the county’s southern end.

Pulling up to one of the leveled pads, Parker stopped the vehicle and climbed out. He said he’s been working with a geologist who believes there could be 15 million barrels of recoverable oil underground.

“I think there could be more,” Parker said. “But you don’t know until you go into the ground.”

As the crow flies, the property is located about six miles southeast of where oil exploration company Excelaron failed to get permission to drill as many as 12 oil wells in the remote Huasna Valley.

Huasna residents are paying close attention to Parker’s project. Some feel industrial oil development doesn’t fit with their rural way of life and worry that approval of one project could open the floodgates to other drilling ventures.

But some work has already been done on the Porter property under a county permit issued to Phillips Petroleum Co. in 1981 to drill and test for oil. Access roads and pads that were graded more than 30 years ago remain in fairly good shape today. Phillips later deemed the project uneconomical, according to the state Department of Conservation’s Division of Oil, Gas and Geothermal Resources.

On other parts of the Porter property, are vineyards, cattle grazing, and hay and grain production. The fact that an estimated several million dollars has already been spent on roads and pads makes the project more attractive to Parker.

“If these pads and these roads weren’t here, I wouldn’t touch this property,” Parker said, explaining that the investment would be too great for an uncertain outcome.

The oil driller

Parker, of PEOCO LLC, submitted his application to the county in January.

PEOCO is an operating shell for Parker’s producing properties; he’s also president of Bakersfield-based Production Specialties Co., which manages aspects of PEOCO’s properties as well as separate projects for out-of-state companies.

Parker, 57, said he’s worked in the oil industry since 1975. He founded his company in 1985 and started investing and drilling his own wells in 1992. Parker said he’s drilled more than 300 wells, many in California, with projects in Fresno and several Northern California counties.

His production wells are mainly located in Contra Costa, Glenn and Tehama counties.

County planning staff sent Parker a letter in February with 24 questions about the proposal, from daily truck travel to fire safety to how water used in the project will be disposed, county project manager John McKenzie said.

Parker is requesting a minor use permit, which does not require a public hearing unless someone requests a hearing before a county planning staff member (called a “hearing officer” in this situation). If the hearing officer’s decision is appealed, the proposal would go to the Board of Supervisors.

Property history

The drilling project area is 778 acres, but Parker has a five-year contract to lease mineral rights on the entire 4,068-acre property. Depending on seismic data, Parker said, “we would at least entertain” the option to expand the drilling area.

When he was brought into the project about six months ago, Parker said he told a group of investors and property owner Charles Porter that he would only get involved if he could have a vested interest.

Parker is now managing the project and has invested some of his own money. The other investors include Canadian-based United Hunter Oil and Gas Corp.; XState Resources, an Australian public company focused on oil and gas exploration and development; and Sacgasco LLC.

The latter investor group is a subsidiary of Australian Oil Co. Ltd., which formed Excelaron in 2007. Sacgasco LLC was incorporated on Dec. 20, 2010, to “exploit the company’s interest in the various projects in California,” according to an Australian Oil Co. director’s report last year.

Parker reiterated that he’s now handling the operation, and said his project representative, Christine Halley of TJ Cross Engineers in Bakersfield, is carefully working through the county’s list of questions.

“My attitude is I would rather get along and try to do this in a manner that’s acceptable to everyone,” Parker said. “If it works, we’re going to be connected at the hip for years to come. I would rather do it in a way that everybody’s happy with the outcome.”

Impact on area

The work would be temporary — sporadic drilling within a 12-month period — and would use about 98,000 gallons of water per completed well. (By comparison, the average American residence uses more than 100,000 gallons of water a year.) No fracking is proposed.

Parker said it would take about 10 days to drill a well using a hydraulically raised double-rig, then another three to four days to complete production testing. About 10 employees would work on the site.

If results from the first well don’t seem viable, Parker said, he would reassess whether he wants to spend another $600,000 per well to continue drilling any other exploratory wells. But if testing is successful and he wants to move toward production, Parker would have to apply for another permit from the county, which would likely include preparation of an environmental impact report.

Parker and Halley declined to speculate about what type of production facility they might design if commercially viable oil is found on the Porter property. “We explore first to get that information,” Halley said.

“Based on the exploration and testing of the wells you can forecast your field of development, the extent of facilities needed and the cost to put it into place.”

Project differences

The Porter proposal comes about a year and a half after county supervisors rejected Excelaron’s request to drill as many as 12 oil wells on the Mankins Ranch in the rustic valley 10 miles east of Arroyo Grande.

Geologists with Excelaron estimated that 100 million barrels of oil lie under the Huasna Valley, with about 6 million barrels recoverable using a hot water injection method.

The Excelaron project pitted residents of the Huasna Valley, who wanted to protect their quality of life, against mineral-rights owners, who said they should have the ability to exercise those rights. Opponents also said approval of the project could start a new wave of oil speculation in the county.

The Porter proposal differs in numerous ways from Excelaron’s project, including that Parker is, for now at least, only proposing exploratory drilling for a limited time period.

In addition, the pads are located several miles north of Alamo Creek Road and Highway 166, and aren’t visible from either roadway; they are farther from homes, which would cut down on any noise issues; and wouldn’t use roads that cross flood-hazard areas, said McKenzie, the county project manager.

Parker said he’s not interested in a hot water or steam-injection method, which involves re-injecting hot water deep into a reservoir to reduce the thickness of the crude oil so it can be pumped to the surface. That method is more expensive and uses more energy, Halley said.

For this project, he would use a temporary pump to bring oil to the surface. The pump would be run off a portable generator, according to Halley. Parker said he would reevaluate his options if oil found on the Porter property is too viscous to use a pumping unit.

Fears in Huasna

Members of a Huasna-based association, which vigorously opposed the Excelaron project, have not yet taken a stance on the Porter Ranch proposal.

They’re waiting for Parker’s response to the county, said Tracy Del Rio, interim president of the Huasna Foundation, a nonprofit formed when community members organized to fight the Exceleron plan.

About 30 residents attended a recent community meeting and expressed lingering concerns about long-term impacts to the Huasna Valley area should Parker want to start a permanent operation on the Porter property.

“It’s a long haul for a community to consistently battle or oppose projects like this when landowners have mineral rights too,” Del Rio said. “But is it going to turn into an oil-drilling valley, and where do the residents draw a line?”

She added: “People are worried about the cascading effect. When one gets their foot in the door, the possibility of Excelaron coming back to the Mankins Ranch becomes more real.”

Developers hopeful

Parker and Halley said they haven’t spent too much time dwelling on Excelaron’s lengthy, unsuccessful effort to get its project approved. Parker said he’d heard about it, but hadn’t followed it much.

But Halley sounded more familiar with Excelaron’s history in San Luis Obispo County, although she was guarded in her comments.

“I think any time a developer or anyone wants to do business in a certain area, you stay tuned in to the public perception,” she said. “I think San Luis Obispo County has proven to be a savvy, involved community and we welcome that kind of interaction.”

A few days later during the tour of the property, Halley stood on one of the pads and looked across the surrounding hills.

“This is a very positive setting,” she said. “We have access roads, we have pads. Looking around, have you seen anyone who would be impacted?”


How: Dero Parker plans to present his project to the South County Advisory Council

When: 6:30 p.m. Monday.

Where: 148 S. Wilson St. in Nipomo.

Details: View the application online here


Dero Parker’s company isn’t the first to apply for permits to drill oil in the Huasna Valley area.

Oil exploration company Excelaron submitted an application to San Luis Obispo County in July 2009 to drill up to 12 wells on the Mankins Ranch in Huasna Valley, east of Arroyo Grande.

In August 2012, the county Board of Supervisors unanimously denied the proposal, saying that an oil field was incompatible with the rural and isolated valley.

Excelaron then sued the county, claiming that the county’s actions rendered its mineral rights valueless. The company sought $6.24 billion in damages based on the value of the oil it said it could have recovered if the project had been approved.

Superior Court Judge Martin Tangeman dismissed the lawsuit in March 2013 on a technicality. He agreed with the county’s motion to have the case thrown out because Excelaron did not file and serve the lawsuit within 90 days of the supervisors’ final decision, as required by state law.

Excelaron appealed that ruling to the state’s 2nd District Court of Appeal. In its opening brief, Excelaron argued that the county misled the oil company into believing the filing deadline was governed by a county statute that requires that the lawsuit only be filed, but not served, within 90 days.

In its response, filed Monday, San Luis Obispo County argues that its statutes contain a provision noting that other, shorter statutes of limitation might apply to service deadlines.

Excelaron’s reply brief is due April 7.

Reach Cynthia Lambert at 781-7929. Stay updated by following @SouthCountyBeat on Twitter.

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