What will happen to Price Canyon when oil company sells its California properties?

A recent announcement by Freeport-McMoRan Inc. to sell its onshore California oil and gas properties has raised questions about what will happen to the company’s plans to expand production of the Price Canyon oil field in San Luis Obispo County.

In a news release, Freeport-McMoRan said it would sell the onshore state properties to Sentinel Peak Resources California LLC for a total of $742 million: $592 million in cash and another $50 million per year in 2018, 2019 and 2020 if the price of crude oil averages $70 per barrel or higher.

The onshore properties include the Price Canyon field and those in the Los Angeles Basin and San Joaquin Basin, according to Freeport-McMoRan’s website.

Spokesman Eric E. Kinneberg referred questions about the future plans for the Price Canyon property to Sentinel Peak Resources. Company officials there did not return a call for comment Wednesday.

The private, Denver-based energy company was formed in 2016 to focus on acquisition, development and exploration of oil and gas assets, primarily on heavy oil development in California, according to its website.

In the news release, the company said the Freeport-McMoRan properties are producing 28,000 barrels of oil per day, including 18,000 barrels a day in the San Joaquin Basin and 10,000 barrels per day in the Los Angeles Basin and coastal properties. Sentinel has identified a number of economic development projects across the properties “that are attractive in the current price environment,” the news release stated.

Sentinel also plans to hire from existing Freeport-McMoRan staff “and complementing them with other top operating, technical and commercial talent in their corporate office in Denver and new offices” in Bakersfield and Los Angeles.

San Luis Obispo County senior planner John McKenzie said the county has not yet been contacted by Sentinel in regard to the Price Canyon oil field.

“Every oil company is different, so depending upon whether they follow the same practices or approaches then they may keep the project intact as is, but we don’t know that with any certainty,” he said. “It’s speculative to say how they may proceed.”

The Price Canyon oil field, also called the Arroyo Grande oil field, is located halfway between San Luis Obispo and Pismo Beach on Price Canyon Road.

Late last year, the San Luis Obispo County Planning Commission gave Freeport-McMoRan another three years to drill the last 31 wells from a project approved in 2005. The environmental group Center for Biological Diversity appealed the decision.

A hearing date before the county Board of Supervisors has not been set, McKenzie said Wednesday.

Freeport-McMoRan has 165 oil wells and up to 40 injector wells in the field producing about 1,600 barrels a day, according to past Tribune reports and a staff report in September 2015. The oil is transported by a pipeline, which was completed in late spring, to the Phillips 66 refinery on the Nipomo Mesa.

Freeport-McMoRan has also applied for another significant expansion of the oil field to add 450 wells, including about 100 replacement wells. The overall size of the oil field would not increase; the injection area within the field would grow from 249 acres to 807 acres.

The oil company’s first step is to get approval from the federal Environmental Protection Agency to expand an area within the oil field into which wastewater containing brine and other liquid byproducts of the oil production process can be injected, according to past Tribune reports.

State energy regulators have applied to the EPA to expand the injection area; the Center for Biological Diversity has challenged the state Division of Oil, Gas and Geothermal Resources’ and the State Water Resources Control Board’s approval of the plan.

McKenzie said the county’s consultant was close to releasing the draft EIR when the oil company asked to put it on hold until the EPA makes a decision on the aquifer expansion. That agency has until February to make the ruling.

This story was originally published October 19, 2016 at 4:39 PM with the headline "What will happen to Price Canyon when oil company sells its California properties?."