HomeMy WebLinkAbout05/05/14From: 1buyer2u@gmail.com [mailto:1buyer2u@gmail.com] On Behalf Of Mr. Morley
Sent: Tuesday, April 29, 2014 11:42 PM
To: Tom Bakaly
Cc: Ann Yang
Subject: New data from City on Oil Volume from City Trial Expert
Hi Tom,
I apologize that I have been unable to provide this data sooner. At your convenience, of course, I
would like to discuss the new information with you before next Mondays CBA Study session.
I ask that we talk before we decide about providing this Draft to the Kosmont team because I
may need to modify it based on your insight.
After the last City Council Meeting the City released one more report per our Public Records
Request.
This report from the City's Trial Expert includes twelve (12) additional Oil Volume estimates for
Hermosa Beach.
I have worked for several days to create the attached Spreadsheet, Tables and Charts which
evaluates this new data from Mr. Wunderlich.
I am still reviewing the 450 pages of Depositions and Exhibits. So far as I have read, our
$125,500 City Expert determined in 2011 that the Oil projects potential recovery volume is
uncertain, was potentially non-commercial and there is not enough factual knowledge of the
oilfield to justify the assumption that Macpherson would have proceeded past the exploration
well(s).
He also noted that all of the estimates were based on Redondo Beach past performance. For All
the new data. See 1st Tab '2009 City Trial Economist Data' and see tab 4 for raw table of 'Trial
Prep Data'..
There are Two categories of the Volume Estimates;
See tab 2 and 3, Oil Volume Estimates with and without Schist Zone. (with Redondo Actual and
Average noted)
A. Estimates for the three Producing Zones actually proven to produce in Redondo Beach.
(Upper/Lower Main and Del Amo).
Overall average for all 11 estimates is 7.2 Million Barrels.
10 out of 11 of these estimates are close to Redondo Beach actual production volume.
Redondo Beach Actual was 5.5 Mil Barrels and the Average of these 10 estimates is 5.2 Mil
Barrels.
The single outlier in this group is the highest estimate and was produced by Macpherson Oil in
1998 with a volume of 19.3 Million barrels (350% of Redondo Beach Actual Volume).
B. Estimates which include the 'Unproven' Schist Zone.
The average of these 6 estimates is 19.4 Million barrels which is only 55% of E&B's 'Applicant'
estimate in the CBA of 35.6 Million barrels. 5 out of 6 of these estimates were produced by
Macpherson Oil and one was produced by a potential investor in Macpherson Oil.
Please see tab 'Detail Breakeven by Oil Volume' for my calculations. See tab 'Non Schist Zone
Revenue Totals' for a summary of the Revenue projections based on these newly available
estimates.
Last, I recreated the Breakeven analysis Chart to reflect this new data as compared to the
Applicant and CBA (low/med/high). I also reformatted the Table for the City known and
potential costs, losses and expenses. Please note the Barrels of Oil required to cover each value.
See tab 'Chart Breakeven Volume est. (17)'
See tab 'CBA City Cost Detail.
Upon your review, please let me know if a meeting with the City's finance department is
appropriate for me to discuss the potential for the City to actually lose money if the Oil Project
were to be approved.
Please feel free to call anytime,
Best Regards,
Tom Morley
858 699 2002
Note; three experts listed on attached City Declaration , I am still waiting for 2 more reports, per
Lael's March 2014 specific Public Records Request.
CC Ann, Lael
1
Supplemental submission to the 4/22/14 City Council agenda 6a – Attachment 1.
To: The City of Hermosa Beach
Honorable Mayor,
Mayor Pro tem and
Council Members.
From: Tom Morley
I have made a concerted effort to honestly evaluate the Draft Cost Benefit Analysis and
share my observations on page one. Please consider the action item suggestions on pg2-3.
1. In the spirit of transparency and full disclosure I am asking the City Council to assist
the citizen ‘decision makers’ to compare a presentation of historical facts to the current
Draft CBA projections which are based only on their experts evaluation of E&B provided
Oil Industry data.
On 4/3/2014 the City provided to Kosmont new information produced by the State Lands
Commission in a report commissioned by the City of Hermosa Beach.
( and to citizens per our 05/30/2013 Public Records Request )
This Hermosa Beach border data (Redondo Beach North Lease) is the most similar
example with which to compare our proposed 35 year, 30 well project. The CBA team
had not previously considered the complete dataset for production volume from Redondo
Beach’s 35 year, 31 well adjacent oil field.
It should be noted that every Oil Operator applies contemporary laws, market conditions
and technology to the benefit of stakeholders. It should be assumed that any future
operator will also attempt to maximize production as required by State Law and our Oil
Lease. It can not be assumed that Triton Oil withheld production from Redondo Beach.
The CBA used the Intera report (1996 -1997) to extrapolate the CBA Oil estimates. The
CBA report, page 24, clearly states that the Intera data was flawed and “cannot be agreed
with at this time” and, page 25 “Even with newer technology, it is considered very
optimistic to escalate the recovery factor to almost 2-1/2 times the base recovery factor as
shown in the 1997 Intera report”. Previously the CBA only had relied upon 6 month old
hand notes from a report viewing at Oil Company’s law office.
On 4/17/2014 the City provided, for the first time, the complete Intera report.
I reviewed the actual reports with the CBA oil expert last Friday and I came to the conclusion the
Intera report errors vastly increased the oil producing sand depths and acreage beyond that known
to be true from the Redondo Beach actual data. I suggest the CBA report should continue to use
their own experts Oil volume estimates and knowledge of modern technology but it should be
based on actual historical Redondo Beach production volume.
Thank You, Tom Morley
2
Potential action items for the 4/22/14 City Council Meeting pg 1/2
Action:
1.A. Action: I ask that the Council directs staff that Kosmont shall include the Redondo
Beach North Lease 35 year, 31 well, proven actual production volume data be added to
the CBA oil volume projections for reference.
For example;
Table 1: Original Oil in Place for Each Major Zone (In million stock tank barrels)
Table 2: Estimated Reservoir Production (In million stock tank barrels)
Table 3: Comparison of Production Estimates (barrels of oil)
1. B. Action: I ask that the Council directs staff that Kosmont shall include the
Redondo Beach North Lease 35 year, 31 well, proven actual production data be added to
the many existing projections of revenue in the CBA Tables and Figures.
For example;
Table 7:City Oil & Gas Revenue Projections (Project Lifetime / Over 34 years)
Table 8: Comparison of Scenario Revenue Projections
Table 14: Estimated Incremental Property Tax Revenues - -$ -$ -$ -$ -
Table 15:Gross School District Oil & Gas Revenue Projections (Project Lifetime)
Table 23 through Table 27 summary calculations of net City revenues
Table 28 Sample Annual City Cashflow - CBA expected, Advances Utilized
Table 39: Summary of Net Projected City
Table 39: Summary of Net Projected City
1. C. Action: I ask that the Council directs staff that Kosmont shall reconsider the draft
oil volume estimates and consider using the new Redondo Beach North Lease complete
dataset as the baseline instead of the Intera data.
1.D. Redondo Beach North Lease utilized 31 wells, directionally drilled, to produce 5.5
million barrels from under 300 acres. The Intera report projects 900+ acres for the
Hermosa Beach production area. The CBA indicated 850 acres. This begs the question of
how many wells would be required to drain three times the acreage.
Note: CBA Figure 14 indicates that 22% of the Oil will be produced from 184 Uplands
acres and from that datapoint I calculated that 666 acres would be needed for the other
78% in the Tidelands. See. Figure 14: Assumed Land Ownership Distribution
1. D. Action: I ask that the Council directs staff that Kosmont shall include an
explanation of the ability of 30 wells to extract each of the “Recoverable Oil” volumes
projected in the report. Or from another perspective, describe how many acres the
Hermosa Beach limit of 30 wells could efficiently produce and specify techniques which
must be used to attain the various projected volumes identified in the CBA.
3
Potential action items for the 4/22/14 City Council Meeting (continued) pg 2/2
2. Action: I ask that the Council directs Staff that each NOP and Draft comment should
have a response and must be part of the CBA report. Please pay particular attention to the
existing Tideland Trust expenditure limitations and avoid speculative future changes.
3. It would be beneficial to the citizen ‘decision makers’ to view the data formatted as a
“breakeven analysis” for each production CBA volume estimate and including Redondo
Beach North Lease historical data. This may accomplished with a style change to the
CBA Table 39 on page 101 but the CBA must include all expenses, costs and losses
considered as General Fund expenditures today. The chart could be supplemented later if
other sources of funds such as City fees are enacted at a later date or if cost reductions
are found.
3. Action: I ask that the Council directs staff that Kosmont shall provide a chart and
graphic which includes a list of all fixed and potential City expenses, costs and losses
(PV) and calculates the volume of Oil required to pay foe each listed expense. It should
be noted which items are being paid by the Tidelands Trust or from the General Fund.
4. The CBA does not analyze the residential resale price reduction to be expected during
the Construction and the 24 hour continuous drilling and re-drilling periods. All of the
comparable date in the CBA is after 2002 and not from a location with active drilling or
re-drilling. I contend that the days surrounding the most intense periods of the project
would depress resale prices for those who must sell due to typical ‘must sell’ emergency
situations (i.e. health, birth and death, divorce, estate division, employment changes and
others) My example is the Lease terms which allows 120x35=4200 days that are in a
bank of available 24/7 drilling days over 35 years. The EIR specifies 900 days initial
drilling in the first 5 years and then 6 additional years of 150 days a year for a total of
1800 re-drilling days (only 21% of available drilling days).
4. Action: I ask that the Council directs staff that Kosmont shall provide a separate
analysis of Property Value Impact during the intense activity periods and those the EIR
designated to present the most disturbance and danger.
In Closing, there is a real benefit to the public understanding of the range of potential
financial outcomes of the project based on real, actual and comparable data from the most
similar oilfield directly adjacent to the Hermosa Beach proposed project target oilfield.
New information has come to light this month and Kosmont should have the time and
opportunity to incorporate it in to the CBA report. The independent actual production
data from the Redondo Beach North Lease should be available to all citizens while
contemplating their vote and will allow a more informed ‘kitchen table’ and ‘across the
fence’ discussion as the ballot measure is considered.
Thank you for your consideration, Tom Morley
4
0
5,000,000
10,000,000
15,000,000
20,000,000
25,000,000
30,000,000
35,000,000
40,000,000
Est. Production
Est. Production
Est. Production 5,500,000 10,900,000 17,100,000 22,200,000 35,600,000 27,200,000 35,000,000
RB North Lease
Actual CBA Low CBA Expected CBA High Applicant Morris (1993)Hacker (1998)
Table 3: Comparison of Production Estimates (million barrels of oil)
Barrels Percentage of RB Increase
RB North Lease Actual 5.5 100% x 1.0
CBA Low 10.9 198% x 2.0
CBA Expected 17.1 311% x 3.0
CBA High 22.2 404% x 4.0
Applicant 35.6 647% x 6.5
Morris (1993) 27.2 495% x 5.0
Hacker (1998) 35.0 636% x 6.4
5
HB Oil Breakeven Analysis Cost vs. Revenue
$26,542,574
$49,658,743
$66,115,139
$83,971,053
$106,170,296
$144,777,677
$168,907,290
$0
$20,000,000
$40,000,000
$60,000,000
$80,000,000
$100,000,000
$120,000,000
$140,000,000
$160,000,000
$180,000,000
Total Direct City
Costs = RB 5.5
Mil BBLS 35
years 31 wells
Total Direct City
Costs $9.9 Mil+
Financed
remainder = 10.2
Mil bbls CBA
Low = 10.9 Mil
BBLS
Vol HB 13.7 Mil
……
Total Direct City
and Potential
Direct City Costs
= 17.4 Mil bbls
CBA Expected =
17 Mil Barrels
Vol CBA High 22
Mil Barrels
Total City
Costs+Potential
Costs $18 Mil +
Financed
remainder = 30
Mil Barrels
Vol E&B's
promise 35 Mil
Barrels
Various Oil VolumesGeneral Fund RevenueGeneral Fund Oil Contribution $27 mil Total Direct City Costs
$80 mil Total Direct City Cost + Potential Direct City Costs Total Direct City Costs $9.9 Mil + Financed remainder
Total City Costs+Potential Costs $18 Mil + Financed remainder
Direct City Costs (not eligible for Tidelands Trust expenditures)
Present
Value cost $
(in millions)
Barrels of Oil
(in millions) @
CBA $95
Total Direct City Costs 27.25 5.94
Finance Amount of Direct City Costs (remainder) 17.35
Extended Financed amount of Direct City Costs 37.30
Total Direct City Costs non-financed $9.9 Mil + Financed
remainder $47.20 10.29
15.43
Total Additional Potential Direct City Costs 47.33 10.31
Finance Amount of Potential Direct City Costs (remainder) 31.90
Extended Financed amount of Potential City Costs $54.40
Total Potential Costs non-financed $15.4 Mil plus Financed
remainder 95.41 20.79
Total Direct City Cost + Potential Direct City Costs 74.58 16.25
Total City Costs + Potential Costs non-financed $25.3 Mil +
Financed remainder $142.61 31.08
6
0
50000
100000
150000
200000
250000
300000
350000
400000
450000
500000
Oil Volume in Barrels1956-1992 35 year Redondo Beach Oil Volume 5.5 Mil Barrels from 31 Wells
56-76 cum oil 437,454,414,411,337,224,205,177,151,163,138,76,59,2375,570,283,992,394,6100,64,385,888,340,870,043,463,230,121,99,319,06 315
77-91 cum oil 61,341,738,11,9464,866,156,026,647,127,926,079,7139,69,266,952,239,025,415,248,920,317,261,818,142,115,834,416,923,99,777,75
Well #42 2 12 1 21 31 8 20 5 9 25 53 24 3 29 43 34 49 10 19 23 6 11 27 7 41 22 17 44 54 4
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31
Est. Production
5.5 Mil Barrels RB North
Lease Actual
35.6 Mil Barrels Applicant =
whole circle
5.5 Mil Barrels RB North Lease Actual 35.6 Mil Barrels Applicant = whole circle
NOTE: Every HB well would need to produce more than twice
the single highest RB well in order to meet the Applicants Oil Volume.
7
EXISTING LAW:
1. Creates DOGGR within the Department of Conservation.
2. Requires DOGGR to do all of the following:
a. Supervise the drilling, operation, maintenance, and abandonment of wells
and the operation, maintenance, and removal or abandonment of tanks and
facilities attendant to oil and gas production, including certain pipelines
that are within an oil and gas field, so as to prevent, as far as possible,
damage to life, health, property, and natural resources; damage to
underground oil and gas deposits from infiltrating water and other causes;
loss of oil, gas, or reservoir energy, and damage to underground and
surface waters suitable for irrigation or domestic purposes by the
infiltration of, or the addition of, detrimental substances.
b. Supervise the drilling, operation, maintenance, and abandonment of wells
so as to permit the owners or operators of the wells to utilize all
methods and practices known to the oil industry for the purpose of
increasing the ultimate recovery of underground hydrocarbons and
which, in the opinion of DOGGR, are suitable for this purpose in each
proposed case.
Declares as a policy of the state that to further the elimination of waste by
increasing the recovery of underground hydrocarbons, a lease or contract for the
exploration and extraction of hydrocarbons is deemed to allow, unless otherwise stated,
the lessee or contractor to do what a prudent operator using reasonable diligence
would do, having in mind the best interests of the lessor, lessee, and the state in
producing and removing hydrocarbons, including, but not limited to, the injection of
air, gas, water, or other fluids into the productive strata, the application of pressure heat
or other means for the reduction of viscosity of the hydrocarbons, the supplying of
additional motive force, or the creating of enlarged or new channels for the underground
movement of hydrocarbons into production wells, when these methods or processes
employed have been approved by DOGGR.
Data corrected to pay Macpherson
3.33% from General Fund not TL
Fund.
Corrected City Rev - Uplands ($2014) EIA Low $ EIA Base $ EIA High $ Fixed $
RB North Lease Actual 18,895,518 30,213,296 44,564,451 26,878,654
CBA Low 37,529,100 58,829,400 87,229,800 53,250,750
CBA Expected 59,336,550 97,372,800 143,016,300 83,679,750
CBA High 77,086,800 128,816,100 188,659,800 108,530,100
Applicant 121,716,000 192,209,850 283,496,850 173,952,450
Morris (1993) 91,794,150 139,973,400 207,931,500 132,873,300
Hacker (1998) 120,194,550 193,224,150 285,018,300 170,909,550
8
9
Intera 1996 end of submission 6a , 1
May 5, 2014
Honorable Mayor DiVirgilio & Members of the Hermosa Beach City Council:
This letter comes to you in support of Assemblyman Muratsuchi’s AB 2711.
Moira & I cannot attend this evening’s meeting due to a prior commitment involving one
of our charities, the Southern Poverty Law Center. We look forward to watching the
meeting as I will be setting the DVR to record it, but due to the very important nature of
the meeting, especially as you will be deciding on your support for AB 2711, we felt
compelled to go on record with this letter.
AB 2711 is an invaluable, additional tool for the City of Hermosa Beach to provide its
citizens as they make their choice for or against the proposed oil drilling project.
Solutions and choices are what you should be all about. This is a no brainer!
Thank you for your consideration of this matter.
Sincerely,
Dency & Moira Nelson
2415 Silverstrand Avenue
Hermosa Beach, CA 90254-2664
310-374-4543
DLN52@verizon.net
AMENDED IN ASSEMBLY APRIL 21, 2014
AMENDED IN ASSEMBLY MARCH 28, 2014
california legislature—2013–14 regular session
ASSEMBLY BILL No. 2711
Introduced by Assembly Member Muratsuchi
February 21, 2014
An act to add Section 25525.5 to the Public Resources Code, relating
to energy. An act relating to oil and gas, and making an appropriation
therefor.
legislative counsel’s digest
AB 2711, as amended, Muratsuchi. Energy: thermal powerplants:
certification: sea level rise. Oil and gas: loan to City of Hermosa Beach.
Existing law requires the State Lands Commission to deposit in the
General Fund all revenues, moneys, and remittances received by the
commission, with certain exceptions. Existing law requires that the
moneys be used for specified purposes, including refunds, commission
expenses, and specified payments to cities and counties.
This bill would appropriate $17,500,000 from the General Fund,
from certain oil and gas revenues deposited by the commission, to the
Controller for a loan to the City of Hermosa Beach, to be made if the
city is obligated to make payment pursuant to a specified settlement
agreement. The bill would require the State Board of Equalization, if
the city fails to make any payment on the loan when due and upon the
order of the Controller, to deduct the amount of the payment from the
sales and use taxes to be paid to the city. The bill would also require
the Controller to deposit moneys received in repayment of the loan into
the State Coastal Conservancy Fund to be used, upon appropriation,
97
by the State Coastal Conservancy for expenses related to the
conservancy’s Climate Ready Program.
Existing law vests the State Energy Resources Conservation and
Development Commission with the exclusive jurisdiction to certify
sites for thermal powerplants with a generation capacity of 50 or more
megawatts and related facilities. Existing law requires the commission
to make certain findings before issuing a certification for the site.
This bill would require the commission to consider, during the
certification process, the effects of sea level rise in the context of
protecting the proposed site and related facility from damage caused
by sea level rise.
Vote: majority 2⁄3. Appropriation: no yes. Fiscal committee: yes.
State-mandated local program: no.
The people of the State of California do enact as follows:
line 1 SECTION 1. (a) The sum of seventeen million five hundred
line 2 thousand dollars ($17,500,000) is hereby appropriated from the
line 3 General Fund, from the oil and dry gas revenues paid to the state
line 4 during the 2014–15 fiscal year and deposited in the General Fund
line 5 pursuant to Section 6217 of the Public Resources Code, to the
line 6 Controller for purposes of this act. The Controller shall, upon
line 7 agreement with the City of Hermosa Beach, loan that sum, or a
line 8 portion thereof, to the city if the city is obligated to make payment
line 9 pursuant to Section IV.4.6.c of “The Settlement Agreement and
line 10 Release” entered into on March 2, 2012, between Macpherson
line 11 Oil Company, Windward Associates, E&B Natural Resources
line 12 Management Corporation, and the City of Hermosa Beach.
line 13 (b) A loan to the City of Hermosa Beach pursuant to subdivision
line 14 (a) shall be subject to the following terms:
line 15 (1) The city shall annually pay to the Controller, prior to June
line 16 30 of each year, not less than five hundred thousand dollars
line 17 ($500,000) until the loan is paid in full.
line 18 (2) If the City of Hermosa Beach fails to make any payment
line 19 when due pursuant to paragraph (1) for any reason, the State
line 20 Board of Equalization, upon the order of the Controller, shall
line 21 deduct the amount of that payment from the sales and use taxes to
line 22 be paid to the city thereafter pursuant to Section 7204 of the
line 23 Revenue and Taxation Code and shall pay the amount so deducted
line 24 to the Controller.
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— 2 —AB 2711
line 1 (c) The Controller shall deposit all payments received pursuant
line 2 to subdivision (b) into the State Coastal Conservancy Fund to be
line 3 used, upon appropriation, by the State Coastal Conservancy for
line 4 expenses related to the conservancy’s Climate Ready Program,
line 5 authorized pursuant to Section 31113 of the Public Resources
line 6 Code.
line 7 SECTION 1. Section 25525.5 is added to the Public Resources
line 8 Code, to read:
line 9 25525.5. In the issuance of a certification pursuant to this
line 10 chapter, the commission shall consider the effects of sea level rise
line 11 in the context of protecting the proposed site and related facility
line 12 from potential damage caused by sea level rise, such as storm
line 13 surges and flooding. In assessing the sea level rise, the commission
line 14 may rely on floodplain maps published by the Department of Water
line 15 Resources.
O
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AB 2711— 3 —