Oil industry eyes South Florida again

The Miami HeraldMay 19, 2013 

The oil industry is primed for resurgence in Southwest Florida.

Fueled by lofty oil prices, more efficient drilling techniques and the promise of untapped but also largely unproven reservoirs, at least a half-dozen companies plan to expand exploration across the region.

They've quietly spent between $10 million and $20 million over the last few years, by the estimate of one industry executive, to buy mineral rights covering massive swaths of Collier, Lee and Hendry counties.

Now, drilling is picking up, with companies reviving long-abandoned fields and low-producing wells in and bordering the Big Cypress National Preserve, the historic heart of oil operations that go back 70 years. They also aim to poke prospecting "wildcat" wells into new areas like a tomato farm in Immokalee and the subur

ban outskirts of Naples.

It's likely to amount to a drop in the barrel compared to black gold booms that the controversial practice of "fracking" has generated in once obscure sites in Texas, North Dakota and other states. But by the standards of South Florida's modest and mostly under-the-radar oil industry, it shapes up as the biggest -- and, for environmentalists, most concerning -- spike in interest and investment in decades.

"The price of oil has encouraged people to come back and take another look at Florida," said Tom Jones, executive vice president of Collier Resources Co., a major player as owner of gas and mineral rights for 800,000 acres across the region. "There was a lot of data on Florida. People are digging up that old data, re-analyzing it and looking at it from different angles."

Jones stressed that it could take several years of exploratory work to determine if new, deeper zones companies plan to probe prove profitable. But Murray Grigg, president of Houston-based Kerogen Exploration, which has acquired mineral rights to about 156,000 acres from other owners and hopes to drill at least four wells over the next two years, is optimistic.

"Anybody who is here obviously believes in it enough to invest their money," he said. "The oil business isn't a gamble. The oil business is a calculated risk. We're all anticipating that there will some new commercially viable wells."

Though the industry has sent mixed signals, most experts also insist drillers won't have to resort to fracking, short for hydraulic fracturing. It's been employed in many states to unlock dense shale oil deposits with a pressurized injection of water, sand and chemicals. The technique, which has sporadically produced damaging side-effects like contaminated aquifers and small earthquakes, has never been tested in porous, brittle South Florida limestone.

Ed Garrett, administrator of the Florida Department of Environmental Protection's oil and gas program, said no one currently drilling a well has inquired about fracking. He doesn't believe the step, which adds considerable expense, is needed in carbonate rock that is typically porous.

"They're naturally fracked," he said.

For the moment, environmental groups are waiting to see where wells will go in, how big operations will become and how they may impact groundwater and a wilderness prowled by endangered Florida panthers, black bears, wild turkeys and other wildlife. While they've had little to quibble about with long-standing drilling operations, mostly hidden in the swampy Big Cypress preserve, past proposals to dramatically expand the industry in the western Everglades have met strong public and political resistance.

The last big company, Shell Oil, dropped out in the early 1990s after an intense backlash. A decade later, Collier Resources also backed off a proposal for a massive expansion of seismic testing and exploratory drilling in the Big Cypress.

This time, little-known small and mid-sized companies are doing the groundwork, pursuing drilling permits outside wilderness areas like the preserve and the adjacent Florida Panther National Wildlife Refuge.

The Dan A. Hughes Company, which has partnered with Collier Resources, for instance, has drilled one well in an Immokalee tomato field and early this month applied for state permits for two wells a mile from southeastern Golden Gates Estates, a subdivision at the rural edge of Naples. Kerogen and other companies also are shopping for surface rights -- also necessary to site a drilling rig and sink a well -- in areas with few nearby residents such as rock quarries and ranches.

"Our idea was to develop areas that were not environmentally sensitive," said Henry Kremers, chief operating officer for Hughes, which is based in Beeville, Texas. "We're drilling in agricultural lands. Let's find out if there is anything there before we go further."

Still, environmentalists worry about the ripple effects of industrial development -- from the noise of small explosions and "thumper trucks" used in seismic exploration to the prospects of heavy traffic, messy spills and construction of unsightly wells, pumps and tank farms.

"We're concerned," said Eric Draper, executive director of Audubon Florida, which owns Corkscrew Swamp Sanctuary, a pristine 14,000-acre preserve near Hughes' Immokalee well. "We're going to pay careful attention to what Hughes and Collier Resources are doing."

Matthew Schwartz, executive director of the Florida Wildlands Associations, said the Golden Gates Estates well borders prime panther habitat and, at the least, would increase traffic, which has become one the biggest killers of rare cats. Six have been run down this year. Some area neighbors also have raised health, safety and traffic concerns.

"When you industrialize an area, there's a loss of habitat, a degradation of habitat," Schwartz said. "The panther and the western Everglades are already dying by a thousand cuts."

Oil drilling has a long history in Southwest Florida, starting with Humble Oil's 1943 discovery of the Sunniland Trend, a 20-mile-wide formation about 11,000 feet down that runs across much of the lower peninsula, from Fort Myers through the Big Cypress and narrowing as it crosses the Everglades toward Miami. Over the next four decades, companies would drill hundreds of wells in 14 fields, pumping out a peak of some 17,000 barrels a day by the 1970s.

But plunging prices and the fact that the thick crude is expensive to pump and process whittled the industry down. By 2005, a handful of operators were producing about a tenth of peak volume from fewer than two dozen active wells.

But in the last few years, the industry has begun to rebound. DEP's Garrett called it a "moderate uptick" that has corresponded with rising oil prices, currently hovering near $90 a barrel.

The state, which has issued 24 permits over the last three years, now counts 46 active wells in Southwest Florida, more than double the number a decade ago. Garrett expects another 10 or so drilling requests are likely in the pipeline.

BreitBurn Energy Partners, which acquired a lease on long-standing operations in the Big Cypress from Collier Resources in 2007, did some of the early work, sinking five new wells in 2010 and 2011.

The company used a directional drilling method that runs a shaft horizontally, greatly improving the chance of tapping pockets of oil and improving production, said Greg Brown, executive vice president of the BreitBurn, which is based in Los Angeles. It also reduces the footprint of a pad, allowing companies to explore a wide area through a single surface hole, drilling wells like spokes on a bike wheel.

Output at Raccoon Point, the region's largest field, remains modest, last year averaging 1,385 barrels a day, but Brown said the company intends to continue exploring with no plans to frack.

"Some of our wells have been very prolific and some have not and that's kind of the nature of the business," Brown said. "It's very high risk. There are a lot more places you can drill and not find oil than places where you can find it."

Newcomers are banking almost exclusively on deeper zones, starting with the lower Sunniland, about 500 feet deeper than most wells have been sunk. One well into the area has produced some 300,000 barrels over the last 40 years, Kerogen's Grigg said, but it has otherwise been lightly explored. Still, he believes the geological science is strong, built on more advanced seismic surveys and positive results from similar underground formations in other states.

Geologists point to even deeper pockets as well, ancient long-buried reefs and swamps another 1,500 to 3,000 feet down with colorful names like Pumpkin Bay and Wood River, which could be the "source rock" of oil that has percolated upwards over millions of years.

What is happening in Florida reflects a recent surge in domestic exploration, largely driven by fracking. The technique, combined with horizontal drilling, has turned trickles from shale formations into gushers of oil, money and jobs. Two of the most famous fields -- Bakken, North Dakota, and Eagle Ford, Texas -- together currently pump more than 1 million barrels daily. In four months, those two fields alone exceed all 70 years of oil production from Southwest Florida.

The industry acknowledges scattered problems with fracking but defends it as a generally safe practice that helps reduce dependence on imported oil

"American energy from Florida creates jobs," said Dave Mica, executive director of the Florida Petroleum Council. "It's a no brainer to the industry that we do it."

Mike Cheeseman, a veteran industry geologist who owns Trend Exploration in Bonita Springs, also believes fracking is the key to making drilling pay in deeper zones that may not be as porous.

"The only thing we know is the oil is there," said Cheeseman, who said he is working to acquire leases in the area. "The question is whether we can get it out in commercial quantities."

For now, most operators say they intend to stick with horizontal drilling -- in part because fracking adds considerable expense to wells.

Ed Pollister, who owns Pollister Drilling in Southwest Florida, told the Fort Myers New-Press last October that he asked state regulators about pursuing fracking. But after further research, he now says he won't rule it out but "I'm not sure anymore that it's going to be necessary."

Still, the mere mention of fracking raises alarms with environmental groups, who last month initially fought proposed state legislation requiring any company proposing to frack in Florida to disclose any chemicals they use in the process, fearing it would open the door to the technique. Florida doesn't currently have specific fracking policies, said DEP spokeswoman Dee Ann Miller, but the agency would review any request to assess environmental or public safety risks.

Franklin Adams, a board member of the Florida Wildlife Federation who lives near the proposed Golden Gates Estates well, praised government restrictions for helping minimize industry impacts but said fracking would increase water pollution risks and raise significant new concerns.

"The big question is what's going down that hole," he said. "Is there anything toxic?"

Despite the flurry of interest, it's unlikely drilling rigs will multiply overnight. Right now, there are only two rigs in Southwest Florida capable of horizontal drilling. And big oil companies haven't yet shown interest, Collier's Jones noted.

"What we have in South Florida may not be big enough for them," he said.

Grigg predicts companies might sink perhaps a dozen new wells a year -- enough, he believes, to revive what had been reduced to a cottage industry.

"It's never going to be a big business," he said, "but it most certainly could go from being an industry that has been in decline, in sunset, to an industry that's in sunrise."

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