California extended-reach project approved

In a precedent-setting action, Santa Barbara County and California state officials have approved Molino Energy Co.'s extended-reach gas drilling project.

The project, which involves the company drilling extended-reach wells from an onshore site to tap gas reserves in the Santa Barbara Channel, was flashed a green light after sponsors hammered out an accord with environmental lobbyists. The pact enables Molino to implement a project that results in zero net air emissions, due to offsets. Molino is a joint venture of local firms Gaviota Energy Group and Santa Barbara Facilities Inc.

It will also be the first energy project that allows a share, 20%, of state royalties to be earmarked for counties where such facilities are located, thanks to Senate Bill 1187 signed by Gov. Pete Wilson Sept. 20.

The revenue-sharing agreement makes energy projects more attractive to local governments that have complained for years that they receive the brunt of negative environmental effects and risks from such projects without adequate financial compensation.

A precedent

The county's Sept. 3 approval "was the last major hurdle for the first major energy project in state waters in a long time," said Molino Pres. John V. Stahl.

It is also the first major project using current-technology extended-reach drilling from an onshore site into California's state tidelands, a technique hailed by state officials as a way to allow offshore development without new platforms that carry a higher risk of offshore spills (OGJ, July 5, 1993, p. 20).

Thus, the Molino project will be watched closely and can be considered a litmus test, Stahl said, "because recent advances in technologies (extended-reach drilling) allow you to reach most reserves within the state's three-mile limit." There are at least two other sites near Molino's project that also could be tapped in the future, Stahl said, among a few others along the southern California coast.

As proof, Stahl pointed to the State Coastal Commission's Sept. 11 vote allowing extended-reach drilling from onshore locations to offshore reserves. Passing on a 10-2 vote, the state action approved land use definitions allowing the technique, going beyond a specific project that would need only the county's blessing.

The environmental coalition agreed not to appeal the project to the commission after the company offered concessions on zero emissions and protection of sensitive flora.

GOO breaks ranks

However, on Sept. 30, Get Oil Out! (GOO) broke ranks with the coalition and appealed the approval to the Coastal Commission because of "the long-term ramifications that the slant drilling technology will have."

GOO is a citizens' group formed after the 1969 Union Oil Co. of California platform blowout in the Santa Barbara Channel, and it fears "a proliferation of slant drilling projects," claiming that ramifications of extended-reach drilling "have not been adequately addressed."

GOO's appeal has caused a rift within Santa Barbara's normally solid environmental coalition, but it apparently will not affect the pact with Molino.

Stahl said Molino could break the agreement, "but we're proposing to stick by it." He believes the commission will probably refuse to hear the appeal on grounds there are no "substantial issues" as defined by the commission's bylaws and because of its Sept. 11 majority support of extended reach drilling.

Although Molino's project may spark other extended-reach drilling projects into state waters, Stahl noted "there have actually been more (oil and gas) industrial sites removed along the coast," such as four old oil and gas facilities in Santa Barbara County alone, along with the recent dismantling of four Chevron Corp. platforms in state waters (OGJ, Sept. 2, p. 40).

Molino's revised project purposely avoids Measure A, an initiative passed by Santa Barbara County voters early this year (OGJ, Apr. 1, Newsletter) requiring a public vote on any energy project unless located within two consolidated sites-Chevron's Gaviota or Exxon Corp.'s Las Flores Canyon processing plants, 25-30 miles up the coast from the city of Santa Barbara. Stahl said Molino agreed not to challenge the measure in court as part of the deal with the environmental coalition.

Project details

In relocating to Chevron's Gaviota site, Molino hopes to reach three offshore fields-Caliente, Gaviota, and Molino (state tideland leases 2920, 2199, and 2894).

Molino estimates potential combined reserves for these three fields at 200-300 bcf of sweet gas and as much as 100 million bbl of oil, located as far as

21/2 miles offshore and as deep as 20,000 ft in the Matilija formation, requiring well angles building to 60-75°.

Another potential reserve, the Manatee prospect, is within one of the same state leases, and Stahl said Molino hopes to develop it as a future project-assuming commercial hydrocarbons are found. Stahl contends 3D seismic data have indicated a structure capable of holding 80-100 million bbl of oil and 100 bcf of gas.

Stahl said the company is now looking for an operator-partner to develop and test the gas reserves first, expand if successful, and later go after oil. Gas will go into Southern California Gas Co.'s system via an existing transmission pipeline across the property.

Processing facility

Santa Barbara's Environmental Defense Center, which appealed an earlier planning commission approval to the Board of Supervisors, said there is "good reason to celebrate today (by) driving Molino to relocate its project to an existing industrial site...an unprecedented settlement that mitigates air quality impacts to zero...and increased protection of the Gaviota tarplant," a rare species.

Molino proposes a small gas production facility with capacity of as much as 15 MMscfd to ttest the reserves and then perhaps increase it to 75 Mmscfd if reserves potential support that.

Plans call for a 3,000 ft pipeline to Chevron's Gaviota plant for processing natural gas liquids, and Molino is negotiating with Chevron for tariffs for both sour gas and crude oil processing.

The Gaviota and Caliente leases produced some gas from subsea wells in the 1970s and 1980s, but the deeper Matilija formation has yet to be explored, as Molino proposes.

Shell Western Exploration & Production Inc. found sweet gas in Molino's Matilija formation and proposed development as part of the Hercules project, but in 1988 decided against going ahead with the project.