Company Drilling Well Inside Nuclear Blast Site Buffer Zone, page 1

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Topic started on 4-6-2005 @ 06:36 AM by Hellmutt

A Texas company is going to drill for gas inside a state-imposed buffer zone near a 1969 underground nuclear blast site in Colorado. They don´t know until late 2007 if this is a safe thing to do, but they are determined to carry on anyway. Radioactive gas or other material spreading underground might be a hazard.

SignOnSanDiego.com: Company remains determined to drill gas well in Colorado nuclear blast site

June 3, 2005

A Texas company said Friday it still planned to drill for natural gas near the site of a 1969 underground nuclear blast in western Colorado, despite opposition from local residents and concern from Energy Department officials studying potential hazards.

Presco Inc., based in the Houston area, had the endorsement of Garfield County commissioners to drill one well inside a state-imposed buffer zone around the Project Rulison site about eight miles northwest of Parachute.

County Commissioner Tresi Haupt said she doesn't want any drilling inside the zone until the Department of Energy determines it is safe. "I don't understand why they feel the need to drill in this location until everyone has cleared it," said Haupt, the only commissioner who opposed allowing one well.

The DOE's office in Las Vegas expects to complete a study, which includes computer modeling, by the fall of 2007 to determine if radioactive gas or other material is spreading underground. Pete Sanders, the agency's manager of the site, said the DOE could provide the technical data, but the state has jurisdiction over drilling permits.

"We would be more comfortable if drilling didn't take place until we're done with our study," Sanders said.

This sounds like a crazy idea to me. They must be really desperate, huh?

reply posted on 4-6-2005 @ 07:19 AM by Valhall

County Commissioner Tresi Haupt said she doesn't want any drilling inside the zone until the Department of Energy determines it is safe. "I don't understand why they feel the need to drill in this location until everyone has cleared it," said Haupt, the only commissioner who opposed allowing one well.

Because once a company buys drilling rights they have a limited number years (I do believe that is 7) in which they have to find oil or give it up. She probably needs to read up on that part of U.S. law.

Not knowing when the drilling rights were procured, the case may be that their time is running out and they can't wait for the agency. I'm not saying this is a good idea. I'm just trying to share what the motivation may be to get on with it.

[edit on 6-4-2005 by Valhall]

reply posted on 4-6-2005 @ 03:46 PM by pao

Originally posted by Valhall

County Commissioner Tresi Haupt said she doesn't want any drilling inside the zone until the Department of Energy determines it is safe. "I don't understand why they feel the need to drill in this location until everyone has cleared it," said Haupt, the only commissioner who opposed allowing one well.

Because once a company buys drilling rights they have a limited number years (I do believe that is 7) in which they have to find oil or give it up. She probably needs to read up on that part of U.S. law.

Not knowing when the drilling rights were procured, the case may be that their time is running out and they can't wait for the agency. I'm not saying this is a good idea. I'm just trying to share what the motivation may be to get on with it.

[edit on 6-4-2005 by Valhall]

do you know exactly how much oil they have to find to get the OK to continue?

reply posted on 7-6-2005 @ 11:43 AM by DCFusion

I would imagine that the company is going to do some sort of research on their own. If they did drill and released radioactive gas, it would probably not be very good for the companies image, not to mention that if any workers were exposed, multi-million dollar law suits.

reply posted on 13-6-2005 @ 10:50 AM by Valhall

Sorry for the delay in responding to your question. I had to look it up. Land-lease contractual stuff is fairly complicated.

The length of time an operating company has to produce on a given lease varies according to the contract. This time limit is called the "primary term". The majority of primary terms are 3 years, but can vary from 1 year to 10 years. The is the portion of the agreement between the mineral rights owner and the operating company as to how long their lease will last if they don't drill and produce. The operator has to be producing at "paying quantities" (courts consider this to mean "sufficiently profitable to warrant continued production") within the primary term.

The lease is written to where it expires at exactly one year from the date it is signed if the operator does not drill and produce by the end of that year. The operator can opt to pay a "delay rental" every year up until the end of the primary term which is an amount of money that buys him a delay in drilling/producing.

So let's say they sign a three year agreement. The operator either has to drill and produce before the end of the first year or pay his delay rental. He can do that again in the second year. But in the third year he must drill and produce <== at a level that is profitable to maintain continued productions at that rate (so this would vary according to the economic environment).

Also, there can be a "dry hole clause" which allows the operating company to keep the lease for another year if the first hole is dry, but the same conditions apply. In other words, if they poke the first hole and it's dry they either have to turn around and drill a second well or pay delay rental for that year.

Reference

Fundamentals of Petroleum, 4th Edition, Van Dyke, Kate, Petroleum Extension Service, Continuing & Extended Education, The University of Texas, Austin, Texas, pp 60-65.

reply posted on 13-6-2005 @ 11:46 AM by Valhall

Oh - check this out.

The "force majeure clause" allows the operating company to continue the lease beyond the "primary term" without meeting the drilling/production requirements if:

"the lessee is prevented from meeting the conditions of the lease during delays caused by 'acts of God' or other events beyond the control of the operator...This clause...usually excuses delays caused by government interference that cannot be blamed on the lessee."

So the operator may be intentionally forcing the hand of the government to see if they will come back with a mandate to cease drilling activity on this until some environmental hazard analysis can be completed. In which case, it would free the operator to not do any activity and still maintain his lease.