Loading...
HomeMy WebLinkAboutAGENDA REPORT 1986 0519 CC REG ITEM 07AJAMES D. WEAK Mayor THOMAS C. FERGUSON Mayor Pro Tern ALBERT PRIETO Councilmember DANNY A. WOOLARD Councilmember LETA YANCY- SUTTON Councilmember DORIS D. BANKUS City Clerk THOMAS P. GENOVESE City Treasurer TO: FROM: SUBJECT: MOORPARK ITEM Zf� May 14, 1986 STEVEN KUENY City Manager CHERYL J. KANE City Attorney RICHARD MORTON Director of Community Development R. DENNIS DELZEIT City Engineer JOHN V. GILLESPIE Chief of Police The Honorable City Council (City Council Meeting of 5/19/86) Michael Brandman Associates INTRODUCTION SUN OIL EXPLORATORY OIL WELL CUP -4502 On February 18, 1986, the City Council met and discussed the request by Sun Oil to drill a proposed exploratory oil well. During the public hearing, several comments and questions were raised concerning possible revenue fees that the City may levy on oil operators, how the City may spend the revenue generated by the oil activity, how the City may monitor and inspect onsite oil activities and the type of public (financial) costs the City might incur from the operation of oil wells within the City limits. The purpose of this memorandum is to provide the information requested by the City Council regarding the above concerns. The information was gathered through a tele- phone survey of several Southern California communities that have had experience with oil production activity within their city limits. (Please see Attachment A for sample survey.) The following 22 cities were contacted by Michael Brandman Associates between March 5 and March 10 concerning oil- production activities within their city limits. The majority of the cities contacted have had oil- producing wells since the early 1900s. Only the City of Beverly Hills has had oil- producing wells for less than 20 years, and the City of San Clemente and Oxnard were the only cities contacted without current oil - production activities. Cities Contacted Anaheim Bakersfield Beverly Hills Carson Culver City E1 Segundo Fullerton Huntington Beach Inglewood Long Beach Montebello Oxnard Placentia Redondo Beach San Clemente Santa Fe Springs Seal Beach Signal Hill Torrance Whittier Wilmington Yorba Linda 799 Moorpark Avenue Moorpark, California 93021 (805) 529 -6864 The Honorable City Council p. 2 - May 14, 1986 SUBJECT: SUN OIL EXPLORATORY OIL WELL CUP -4502 In addition to surveying cities with oil - production activities, the Ventura County Air Quality Pollution Control District (VCAQPCD) and the Southern California Air Quality Management District (SCAQMD) were surveyed for concerns regarding air quality, revnues generated by oil activities and inspection procedures. (Please see Attachment B and C for sample survey.) An overview of the cities, states and air quality agencies responses to the issues discussed during the telephone survey is presented in the following section. The specific actions recommended by Moorpark City staff and Michael Brandman Associates to the City Council is presented in the conclusion of this memorandum. SURVEY RESULTS The following information describes fees collected by cities related to both explor- atory wells and oil producing wells. All the cities contacted receive some form of revenue and the fees charged by the cities for each of these revenue generators are summarized in the following table. Each local revenue generator is represented with a fee range and an average fee charged by the 22 cities. The fees noted below are exclusive of taxes collected by the state and rebated to cities. TABLE 1 Fee Range Applicable To Local Revenue Average Exploratory Producing Generator High Low Fee Wells Wells Drilling Permit $3,314 /well $30 /well $600 /well yes yes Annual Business $443 /well $20 /well $200 /well no yes License Barrel Tax $0.14/barrel $0.02 /barrel $0.07 /barrel no yes Bond Fee $6,000 /well $2,000 /well $5,000 /well no yes $509000/ $10,000 /operator operator $30,000 /operator Application Fee $3,314 /well $758 /well $2,500 /well yes yes Annual Operating $250 /well $7 /well $150 /well no yes Fee The Honorable City Council p. 3 - May 14, 1986 SUBJECT: SUN OIL EXPLORATORY OIL WELL CUP -4502 The revenue generators presented in Table 1 are the basic fees charged by the cities contacted. The conditions under which these fees are implemented are highly variable and usually occur within a mixture of other fees charged by the individual cities. These fee charges are most commonly stated within a city's oil or municipal code. Most cities levy more than one type of fee. Typically, cities levy fees for drilling permit(s) and annual business license and barrel tax and annual operating fee. In fact, many of the cities surveyed levy at least three fee - generators. The bond fees charged by the cities are not direct revenue generator. In case an operator does not properly abandon his oil well, the bond can cover the cost of refurbishing the drill site. However, once an operator properly abandons his site, he recovers his entire bond. Exploratory Oil Wells Most of the cities surveyed do not implement special fees for exploratory oil wells, since unlike Moorpark, they have existing producing wells which generate revenues to the city. Transportation and Storage of Oil Approximately one -third of the cities surveyed receive revenue from the transportation and /or storage of oil within their city limits. A few of the cities implement flat annual storage fees: Bakersfield charges $1.00 for each square foot of storage space occupied; Carson charges $200.00 for the storage, distribution, as processing of oil resources; Placentia charges an annual fee to $220.00 per storage tank; and Yorba Linda charges $2.50 per storage tank per year. The most common form of revenue generated by the transportation of oil resources is through the pipeline franchise tax. The cities that levy this type of tax have a complex formula. A sample pipeline - franchise tax formula used by the cities of Torrance, Long Beach, and Carson is the Long Beach - Carson Formula. The franchise tax for these cities is equal to one -half the value of land per square foot x diameter of pipe (in inches) x 12.5 capitalzation rate. Redrilling Wells The majority of the cities that were surveyed receive some type of revenue from operators who redrill wells. An annual tax, such as a business license and /or drilling permit, is the most common type of revenue. However, there are a few cities that do not receive revenue from the redrilling of wells because they assess a one -time drilling permit fee that covers redrilling of wells. Use of Oil Well Revenues The majority of the cities that were contacted place the revenue they receive from oil wells into their general fund. Once this revenue is placed in the general fund, it may be allocated to any branch of government, such as police, fire and public services. There was only one city that did not place all of the revenues that they received from oil wells into their general fund; Redondo Geach required revenues received from the harbor area to be placed into the harbor fund whereas oil well The Honorable City Council p. 4 - May 14, 1986 SUBJECT: SUN OIL EXPLORATORY OIL WELL CUP -4502 revenues from other areas within the city are placed into the general fund. Public Financial Costs Many of the cities that were interviewed were unaware of the specific public financial costs incurred by the cities from oil well operators. Some of these cities indicated that costs such as road improvement were covered by other taxes and fees. An add- itional cost that these cities incur is from inspecting oil wells; however, many of these cities charge an inspection fee or an annual fee to cover the cost to inspect each well within the city. Monitoring Oil Wells The majority of the cities that were surveyed inspect oil wells within their city limits. Some of these cities indicated that county officials monitor wells within their city, whereas others leave this responsibility to the State Department of Oil and Gas (DOG), which annually inspects all oil producing wells within the state. However, some of the cities have indicated that the DOG inspects wells less than once a year. When wells are monitored, many cities inspect the wells for conformance with building, fire and safety codes. Some of the cities have adopted an oil code that includes a variety of standards, such as landscaping, painting, noise, safety, fire and build- ing. When the DOG inspects the oil wells annually, they inspect the surface and subsurface of the oil site. However, they have limited jurisdiction over the surface of the oil well sites. Air Quality impact Monitorin Two air quality control districts, the Ventura County Air Quality Pollution Control District ( CAQPCD) and Southern California Air Quality Management District ( SCAQMD), were contacted concerning their inspection and monitoring procedures of oil activities. Issues that were discussed during a telephone survey are presented below. Regular Oil Well Inspection Schedule The VCAQPCD randomly inspect oil wells within Ventura County approximately onece a year, whereas the SCAQMD does not inspect oil wells; however, they do annually inspect oil facilities that treat the oil. Procedures in Inspecting and Monitoring Oil Wells Within Ventura County, operators and the VCAQPD inspect wells for emissions escaping into the atmosphere. The operators are required to monitor their wells on a regular basis while the VCAQPCD inspects the wells annually. The VCAQPCD has indicated that the well operators may use a variety of techniques to check for emmissions; however, the cheapest and most common technique is the use of soap bubbles. The Honorable City Council p. 5 - May 14, 1986 SUBJECT: SUN OIL EXPLORATORY OIL WELL CUP -4502 When the VCAQPCD inspects the wells annually they use two types of techniques: an organic vapor analysis or a threshold vapor analysis. If a large amount of emissions to standard levels within 5 days. As previously discussed, the SCAQMD does not inspect or monitor oil wells; however, when they inspect the facilities that treat oil, they acquire samples through a "grabbag" technique or a mobile station taps into the facility to measure the emisions. During the inspection, the SCAQMD checks for consistency with tank rules, checks valves, settings and tubing. In addition, the SCAQMD may require an operator to prepare a report on their emissions. Financial Cost to Monitor Oil Wells In Ventura County, operators are required to monitor their wells on a regular basis, therefore, monitoring costs to inspect their wells depends on the type of technique each operator uses. The cheapest and most common technique used is the soap bubble technique, which requires mostly labor costs. In Southern California, the SCAQMD incurs the cost of inspecting facilities that treat the oil; however, operators are required to pay an annual operating fee that is partially used for inspecting wells. The costs to inspect treatment facilities vary and depend on the type of monitoring technique used and the size of the treat- ment facility. Finally, the State Department of Oil and Gas (DOG) was contracted concerning the different types of revenues a city may receive from oil activities and DOG inspection procedures. According to the DOG, the Department does not regulate the limit of oil and gas taxes within a jurisdiction. The cities and counties are able to set their own oil and gas tax limits. In addition, each city and county sets their own types of taxes, such as an annual fee permit, annual drilling permit, barrel tax, storage fee, inspection fee, and transportation of oil fee. According to the DOG, the transportation of oil fee is currently being challenged in court. Cities are charging a rental fee for oil lines traversing city property. Operators are claiming an interference of interstate commerce. Furthermore, the DOG inspects the surface and subsurface of producing wells approx- imately once a year. In case an operator has a maintenance problem, the operator contracts the DOG. The department is on 24 -hour call, 7 days a week. Sun Oil has estimated that the probability of actually developing production wells to be less than 20 %. However, Sun Oil cannot estimate the anticipated cost to develop an exploratory oil well, although recent exploratory wells have cost the company from $500,000 to $2,000,000, with an average of less than $1,500,000. If oil producing wells are developed, Sun Oil has indicated that less than twenty truck trips per day would be required to service the wells. The Honorable City Council p. 6 - May 14, 1986 SUBJECT: SUN OIL EXPLORATORY OIL WELL CUP -4502 Estimate of City Revenue The City of Moorpark could receive substantial revenue from any future oil- producing wells. The amount depending upon the extent of the field and the fees established by the City. Also, the City receives 29 of the County's ad valoren tax, such tax based on the valuation of the producing field. CONCLUSIONS 1. As stated previously the situation in Moorpark is unique compared to the other cities in that the other cities have current revenues from existing wells. The monitoring and inspections by other agencies ie sporadic and in some cases only annual, and monitoring by the user is not considerea satisfactory. In order to monitor and inspect the exploratory well on a continuing basis, and to make any studies regarding problems with traffic, dust, or noise that arise as a result of the exploratory well, the City should require a fee to cover the expense of the above. The exact amount of such expense will depend upon the actual situation but could be in the neighborhood of $100,000. With such amount the City should be able to control the operation so that the environmental concerns of the neighborhood can be fully met. 2. If the exploratory well is approved, the City should initiate consideration of an action to establish production or extraction fees. Recommendation Approval of CUP -4502 with the following conditions: 1. All conditions of approval recommended by the staff to Council on February 18, 1986 (see Attachment D). 2. The deposit of $100,000 with the City for use by the City as described above. /crl ATTACHMENT A CITY SURVEY Date: City Contacted: Individuals Contacted: Department: Phone Number: 1. Do you have oil- producing wells within your city limits? 2. How long have you had oil- producing wells (approximately)? 3. Does the City receive revenue from the oil- producing wells? If so, how and what are the fees for each of the revenue generators? 4. Does the City receive revenue from exploratory oil wells? If so, how? 5. Does the City receive revenue from the transportation and storage of oil? If so, how? 6. Does the City receive revenue from nonproducing wells? If so, how? 7. Does the City receive revenue from the redrilling of wells? If so, how? 8. When the city receives the revenues from oil wells, how may the city use the revenues? (Only oil- related activities of in any branch of goverment.) 9. What type of public financial costs does the City incur from operating an oil well? 10. What procedures does the City use to monitor oil wells (operations and equipment safety)? ATTACHMENT B AIR QUALITY AGENCY SURVEY Date: Agency Contacted: Individuals Contacted: Department: Phone Number: 1. Do you have a regular inspection schedule for monitoring wells? How often do inspections occur? 2. What are the procedures in inspecting and monitoring oil wells? 3. What is the financial cost to monitor and inspect oil wells? 4. Who is currently required to pay for the monitoring and inspecting of oil wells? 5. Has anyone else incurred these costs (producer /property owner)? ATTACHMENT C STATE DEPARTMENT OF OIL & GAS SURVEY Date: Agency Contacted: Individuals Contacted: Department: Phone Number: 1. What are the different types of revenue a city may receive from an oil - producing well, storage, or reserves (i.e., permits, barrel tax, or other forms of taxes)? 'MEMO MENE Michael Brandman Associates January 27, 1986 MEMORANDUM TO: City Council ATTACMENT D Environmental Research ■ Planning and Processing ■ Resource Management FROM: Richard Morton, Interim Community Development Director SUBJECT: CUP 4502, Sun Exploration and Production Company Introduction The Sun Exploration and Production Company ( "Sun Oil ") requests city approval of a conditional use permit to drill one (1) exploratory oil well on a 3/4 -acre site located approximately 6,000 feet southwest of the intersection of Los Angeles Avenue and College View Avenue. Teti on Assessor's Parcel Number: 513 -0- 050 -085 Size of Permit Area: 227.723 acres Number of Drill Pads: one Size of Drill Pad: 3/4 -acre General Plan Designation: Open Space 10 to 40 du /acre Existing Land Use: Cattle grazing Sun Exploration and Production Company is requesting approval of conditional use permit (CUP) 4502 to drill one (1) exploratory oil well (A. A. Vail #1). The 3/4 -acre site is located within the City of Moorpark (see Exhibit 1). The location of the drill site will be on an east facing slope, as illustrated in Exhibit 2. The site will be developed with an 18 -inch berm to capture any hazardous substances (hydrocarbons) that might spill. _ A drainage pipe (6 to 8 inches) with a valve will be placed at the low point of the site. If any hydrocarbons spill, a vacuum truck will drain the spilled material, then deposit it at an approved waste disposal site. 3140 Red Hill Avenue, Suite 200, Costa Mesa, CA 92626, (714) 641 -8042 Mr. Richard Morton January 27, 1986 Page 2 Access to the site will be provided along Tierra Rejada Road to the existing Apache Road, then along a dirt access road to be constructed. Before drilling operations commence, grading of both a drilling pad and the access road from Apache Road to the site will be necessary. The drilling pad will be 3/4 of an acre. The access road will be approximately 3,000 feet long. Approximately 5,000 cubic yards of earth will be removed to install the drilling pad, and 6,640 cubic yards of earth will be removed to provide access to the drill site. An excess -fill dump site located on approximately 1/4 -acre within the permit area will accommodate the earth removed for the drill site while earth removed for the access road will be bermed alongside the road. Drilling operations will require one drilling rig that is approximately 140 feet in height. Once the rig is in place, the drilling phase will take 30 days and activity will occur 24 hours a day. The depth of the well will not exceed 6,000 feet. During night time hours, the drill site will be lighted. After the 30-day drilling period, the applicant will require 45 days to test and complete the well, remove the rig and restore the drill site. During the drilling phase, an estimated 12 vehicles per day (24 round trips) will transport men and materials to and from the site. If oil is found on the drill site, the applicant will conduct tests to determine the quality of the discovered oil or gas. Gas flaring could occur. Additional exploration or any production activities would not be permitted by this Conditional Use Permit• such activities, if etermine by the applicant to be feasible, would require an additional conditional use permit and additional environmental analysis prior to any permit approvals. Statement of Environmental Findings An initial study was conducted by the firm of Michael Brandman Associates, Inc. (MBA), under contract to the City of Moorpark. The initial study was conducted to evaluate the potential effects of the project on the environment. Based on the findings contained in the attached initial study, it has been determined that this project could have a significant effect on the environment. These potentially significant impacts can be satisfactorily mitigated through adoption of the following identified measures as conditions of approval. Adoption of these measures would ensure that the project would not impair the use of any adjacent properties and would not be detrimental to the public interest, health, safety, convenience and welfare. 1. The site shall be returned to its original land form if economically extractable hydrocarbons are not found. This would be accomplished, in part, by returning excess fill from the fill dump area (located on the project site) to the drill pad site. 2. The site shall be bermed with an 18 -inch berm to capture any hydrocarbons that might spill. Any spilled hydrocarbons shall be removed with a vacuum truck and disposed of at an approved waste disposal site. Mr. Richard Morton January 27, 1986 Page 3 3. No construction of access roads or the drill site shall take place within the dripline of any oak trees. 4. Lighting for nighttime operations shall be conducted with internally silvered globes, external opaque reflectors, or low- intensity lights, with all lighting directed away from offsite areas. 5. Flaring of natural gas shall be permitted for testing purposes only. 6. All operations shall comply with the standard conditions of the California Division of Oil and Gas regulations, the Ventura County Fire Department regulations and the Ventura County Air Pollution Control District regulations. 7. The site shall be open for inspection, at any time, by officials of the city of Moorpark, county of Ventura or other appropriate officials. These conditions apply to the exploratory drilling operations for one (1) well. Any production operations, or the drilling of additional wells, shall be required to satisfy additional environmental requirements. Response to Planning Commission Concerns At the public hearing of January 7, 1986, the City of Moorpark Planning Commission voted 5 -0 to deny requested CUP 4502. Following is a summary of planning commission concerns that resulted in CUP denial, with responses to these concerns. 1. Approval of this CUP could set a precedent for approval of other exploratory wells by the city. Response: Any precedent that would be set by approval of this CUP would be only a precedent insofar as this would be the first exploratory oil well approved by the city. If, unlike requested CUP 4502, any other proposed exploratory wells have significant environmental impacts that are not satisfactorily mitigable, they could be denied on that ground. All future proposals would still need to be considered by the city, and would need to be approved or denied on their own merits. Therefore, even if CUP 4502 is approved, it would not necessitate that all other projects of this nature receive similar approval. Further, any future exploratory wells and /or production wells must be permitted by the site's zoning. Therefore, oil - related activities could not occur throughout the city. 2. There is uncertainty as to the number of future wells and the associated impacts if oil is found during exploratory activities. Response: Proposed CUP 4502 is for the drilling of one {1) exploratory well only. If produceable oil or gas is found, the applicant would be required to apply for the approvals necessary to construct any additional wells. At that time, the environmental impacts would be reevaluated and Mr. Richard Morton -January 27, 1986 Page 4 the city would consider the new proposal. At this time, it is speculative to consider future impacts, as it is unknown if any produceable oil or gas will be discovered. However, the applicant, Sun Oil, has indicated willingness to have the subject CUP 4502 impose conditions of approval for any future activity that may be subject to any future permit. 3. The proposed exploratory well is not consistent with the open -space land use designation for the site identified in the Moorpark General Plan and Zoning Ordinance. Response: The drilling of oil wells is a permitted use within the open - space zoning and land use designation, subject to a conditional use permit (CUP). CUP 4502 has been prepared for this project to satisfy this requirem ent. 4. Air quality impacts and odors would impact nearby residences. Response: The drill site is approximately 3,500 feet southeast of the closest residences — Virginia Colony —and is screened from these residences by a ridgeline. Any odors from drilling could occur only if oil or gas is found, and such odors would be noticeable only in the immediate vicinity of and downwind from the site. The Virginia Colony mobile home area would not notice odors from the site. Prevailing winds tend to blow east - west across the site (and not toward Virginia Colony); even if winds blew across the site towards Virginia Colony, the distance between the site and Virginia Colony would disperse any odors (or other air pollutants) to a level that would not be noticeable at Virginia Colony. In fact, it is uncommon for odors and air pollutants from single oil rigs to be noticeable more than a few hundred feet from the source. (Note: For additional information, please refer to the attached air quality impact analysis submitted on behalf of the applicant.) Recommendations Following the close of the public hearing on the requested conditional use permit, the City Council can take one of the following actions: 1. Find that the proposed project will not have a significant effect on the environment if the statement of environmental findings are adopted, and certify that the attached Negative Declaration has been completed in compliance with CEQA and State EIR Guidelines issued thereunder and that this body has reviewed and considered the information contained in the Negative Declaration, and; 2. Adopt the following findings (a through d) and approve Conditional Use Permit No. CUP 4502 subject to the recommended conditions. Specifi- cally, based on the information and findings set forth above, it is determined that this application, with the attached conditions, meets the requirements of Moorpark in that: Mr. Richard Morton .January 27, 1986 Page 5 a. The proposed use would be compatible with existing and future land uses within the zone and the general area in which the proposed use is to be located; b. The proposed use would not be obnoxious or harmful to adjacent properties; c. The proposed use would not impair the integrity and character of the zone in which it is to be located; and, d. The proposed use would not be detrimental to the public interest, health, safety, convenience or welfare. 3. Deny requested CUP 4502; or 4. Return the proposal to city staff and consultant for additional analysis. Attachments: A. Initial Study B. Mitigated Negative Declaration C. Air Quality Impact Analysis D. Fiscal Impact Assessment FBW /GJ /mw JN 226 -0004