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New Times / Cover Story

The following article was posted on March 26th, 2014, in the New Times - Volume 28, Issue 35 [ Submit a Story ]
The following articles were printed from New Times [newtimesslo.com] - Volume 28, Issue 35

A new oil-drilling proposal in Huasna Valley is nothing like the last one and exactly the same

BY COLIN RIGLEY


WELL WITH A VIEW
If approved by SLO County officials, Dero Parker will drill as many as four exploratory wells on two drilling pads left over by Phillips Petroleum in the 1980s.
PHOTO BY HENRY BRUINGTON

Life has been good in the Huasna Valley.

For the past year, the day to day in this bucolic pocket of farms and ranches south of Arroyo Grande has returned to the regular pleasant doldrums of rural living. Residents have organized online to begin an adopt-a-road program. They notify each other when there’s a fire, or the Sheriff’s Department has put out an alert for rural crime. They ride horses. They raise cattle. They’ve used their newfound networking skills to arrange community potlucks during which about 20 people have crowded together on warm summer nights.

Originally founded as a tool to collectively finance and collaborate on drilling opposition efforts, the Huasna Foundation has grown and expanded into areas that have nothing to do with oil. And that new focus, as Huasna Foundation board member Doug Timewell describes it, has been just lovely.

“The nice thing is we get to go back to the lives that we bought into Huasna to enjoy,” Timewell said. “I farm land and make wine, and on [Huasna Foundation board member Dennis Allan’s] land they raise cattle and ride horses.”

“Yeah,” Huasna Foundation member Tracy Del Rio chimed in. “People have had a reprieve, really.”

What she means is a reprieve from poring over thousands of pages of documents related to proposed drilling operations. About two years ago, Timewell, Allan, and Del Rio joined dozens of Huasna Valley residents who pleaded for San Luis Obispo County supervisors to deny an application that could have resulted in as many as 12 wells dotting the Mankins Ranch off Huasna Townsite Road. In August 2012, the supervisors did just that, unanimously denying the application made by Excelaron and putting the lid on a project that had consumed the lives of many Huasna residents for the previous four years.

Excelaron ultimately sued the county, claiming the project was unfairly denied, barring the company from drawing as much as $100,000 per day in profits from oil extraction. That lawsuit was tossed when Superior Court Judge Martin Tangeman ruled Excelaron had missed a filing deadline. And now the case is working through an appellate court in Ventura. Both Excelaron and the county have filed briefs on the case, with one reply brief still on schedule for Excelaron before an appellate judge decides on the case.

In all, Huasna residents had a year in which to settle back into normal routines, with no oil projects to debate or scrutinize or research.

Then, on Jan. 16, Dero Parker filed a new application.

Parker is unassuming and casual in person. Based in Bakersfield, he’s started oil-drilling operations throughout the state and along the West Coast; he said he’s working on about a half-dozen projects at the moment. Dressed in slacks and a short-sleeved polo shirt, Parker steered a black Audi SUV up the gravel roads that snake behind the Porter Ranch into the surrounding hillsides. He simultaneously glanced in his rearview mirror and fielded questions about his application and his hopes for the oil potential of the Porter Ranch, as well as his history in the oil business.

“In ’75, I started in this business making $2.75 an hour in Taft, California,” he said.

Now Parker heads Parker Companies Inc., which holds two subsidiaries, including PEOCO, an LLC directly associated with the Porter Ranch project. He sees himself as the little guy, just a man with a simple dream of drilling a few exploratory wells to see if it’s worth applying for a more long-term operation.

And to hear Parker speak about his proposed project, which would include as many as four exploratory wells drilled on two existing well pads leftover from Phillips Petroleum in the 1980s, it’s easy to think it’s all just that simple—even if there’s little chance of simplicity when it comes to Huasna oil.

Parker pulled the SUV to a stop at pad No. 1, a plateau of gravel perched above a small winding valley that carves through the hills between Highway 166 to the south and the Huasna Valley to the north. Parker talked about the project as a simple in-and-out-type operation. He’s already got the infrastructure in place from when Phillips Petroleum graded the pads and carved out roads before abandoning its project in the ’80s. All it’s going to take, he said, is about 10 days to drill each well, then three to five days of testing to see if the crude meets his criteria.

Parker said he has no desire to access oil through fracking, nor does he intend to use steam injection to access the oil, if it’s there.

“Let’s face it,” he said. “We may drill this well and it may be an oil sand, but it may not be productive, and then we’re out.”

Standing by his side, Christine Halley of TJ Cross Engineers frequently reiterated their stance that the project is simple in scope, low in impacts, and unlike past proposals in the area.

“This is a very workable location,” Halley said.

“The impact on the environment is almost nil,” Parker added.

As the application moves through the various stages of review, one of the first goals for Parker and Halley will likely be to distinguish their project from Excelaron’s, which so infamously upset Huasna residents and is now the center of a lawsuit that, if the company wins on appeal, could undo the project’s denial and require the county to put up compensation. In fact, in a Feb. 24 email to county planners, Halley objected that a map on the county website displayed the Porter Ranch project in relation to Excelaron’s Mankins Ranch project.

“Understand that we seek every opportunity to distinguish this much smaller exploratory Minor Use Permit from the broader and more involved undertaking on Mankins Ranch,” Halley wrote.

Distinguishing the Porter project from Excelaron, however, will probably be their biggest challenge, because the same companies behind Excelaron’s project are bankrolling this one as well.

For Huasna residents, said Timewell of the Huasna Foundation, “That’s the shell game that we have to track.”

 

Familiar faces


BREAK'S OVER
After a one-year reprieve, Huasna residents and members of the Huasna foundation—such as Dennis Allan, left, and Tracy Del Rio, right—are gearing up to scrutinize the latest drilling proposal on Porter Ranch.
PHOTO BY HENRY BRUINGTON

On July 14, 2011, at a public meeting concerning the Mankins Project—when the project hadn’t yet gone before either the SLO County Board of Supervisors or the planning commission—former Huasna Foundation head Ron Skinner asked former United Hunter Oil and Gas CEO Art Halleran about thousands of acres of mineral lease rights the company had just scooped up under the Porter Ranch.

“Basically the two aren’t related,” Halleran responded.

This was a point reiterated throughout the project’s lifecycle: It was always too early to talk about other projects. Though Huasna residents could only speculate at the time, the Porter Ranch project had already been eyed by investors as the next prospect in the Huasna oil field. In fact, at the May 15, 2012, hearing before county supervisors, five members of the Porter family spoke in support of Excelaron’s Mankins Ranch project and, more broadly, in favor of mineral rights owners.

But in order to understand the connection between Excelaron’s Mankins Ranch project, and now Parker’s Porter Ranch project, you need to know the names Alamo Creek Oil, United Hunter Oil and Gas, Australian Oil Company—and then follow the bouncing ball.

In February 2011, Alamo Creek Oil finalized the paperwork to purchase more than 4,000 acres of oil and gas lease rights from Porter Enterprises, which is managed by Charles Porter of the Porter Ranch. Those leases included a number of parcels, most notably the two that have since reappeared on Parker’s application to drill four exploratory wells. In another lease agreement, Alamo Creek Oil secured an additional 2,800 acres in lease rights.

According to business filings from the California Secretary of State, Alamo Creek Oil is an LLC founded by Carol Florence of Oasis Associates in San Luis Obispo; Art Halleran, formerly of United Hunter Oil and Gas in Calgary, Alberta; and Andrew Childs of Australian Oil Company in Sydney. Those are the same three companies behind the Mankins Ranch project.

By the time the Mankins Ranch project reached county decision makers, it was jointly owned by Excelaron, which shares an address with Oasis Associates; United Hunter, which held a majority share of 65 percent in the project; and Australian Oil Company, which maintained a 35 percent share.

In other words, while the Porter Ranch project is separate and distinct from the project proposed on the Mankins Ranch about 5 miles to the north, it was conceived and financed by the same companies. Other investors in the Porter Ranch project include SACGASCO, a subsidiary of Australian Oil Company; and Xstate Resources, which recently signed an area of mutual interest agreement with Australian Oil Company.

For Huasna residents, the fear remains that the Mankins project was just a foot in the door: the first phase toward pursuing investors’ loftier aspirations of tapping into potentially tens of millions of barrels of oil in the Huasna Valley and surrounding areas.

“They have a lot of explaining to do,” Del Rio said as she ran her index finger across a list of questions county planners sent to Parker, the answers of which will ultimately determine the level of environmental review on the Porter Ranch project. “Just like Excelaron, it seems they do what they want, and then they come back to the community and say, ‘It’s not that bad,’ and the community, I think at this point, is just tired of being sold a story that hasn’t really panned out.”


SHELL GAME
A new project on the Porter Ranch shares many of the same investors with the previous Excelaron proposal. According to Doug Timewell of the Huasna Foundation, ‘That’s the shell game we have to track.’
PHOTO BY HENRY BRUINGTON

While the financial ties between the Mankins project and the Porter Ranch project will undoubtedly raise suspicions in the community, the various companies have made no attempt to hide involvement (as publicly traded companies, United Hunter and Australian Oil Company legally can’t hide any involvement) although the companies haven’t made a big show of advertising their affiliations.

“The county needs to think that through when they’re fighting an appeal and looking at the same players who have hired a driller and an engineer,” said the Huasna Foundation’s Timewell. (Assistant County Counsel Tim McNulty told New Times the county would likely have no legal basis to discriminate against the Porter Ranch project because of links to the Mankins Project and ongoing litigation.)

In public documents, both United Hunter and Australian Oil Company have listed the Porter Ranch project as an ongoing investment. In a November 2013 financial statement, United Hunter noted it had reduced its share in Alamo Creek Oil from 45 percent to 25 percent. United Hunter CEO Tim Turner couldn’t be reached for comment before press time as he was traveling in South America. Florence of Oasis Associates declined to comment.

And in January of this year, Australian Oil Company notified investors of its 9,000 acres leased for the Porter Ranch project, in which the company has a 45 percent interest. A few months earlier, the company listed Porter Ranch as one of two “world class prospects,” which are prospects that have the potential for more than 10 million barrels of oil. (Parker told New Times he believes the project could produce 15 to 20 million barrels.)

Speaking via Skype from his office in Perth, Australia, Australian Oil Company Managing Director Gary Jeffery said that with these types of projects, there are practical and legal reasons why corporations and subsidiaries appear and disappear, even if the underlying investors remain consistent.

“Sometimes, it’s for ease of selling the asset, but there are multiple, multiple reasons why these corporate structures exist,” Jeffery said.

He emphasized that the Porter Ranch project is just an exploratory operation for now, and no one will know what the potential is until a well is drilled. In the meantime, he declined to comment on the potential for long-term operations, and said he couldn’t comment on the future of the Mankins Ranch project.

Jeffery said Parker was selected to be the operator for the latest project because of his experience in California, adding that Australian Oil Company has no intention of taking over.

“He’s one of the best operators I’ve seen in 40 years,” Jeffery said of Parker. “I’d say he’s the best operator I’ve seen in 40 years in this business.”

For his part, Parker said he only agreed to take the project on the grounds that he would have complete control.

“To be honest with you, I’ll probably be out here to drill the first well myself,” Parker said as he drove up the road to well pad No. 2.

“I don’t think we can keep you away,” Halley chirped jokingly.

“Nope.”

When asked about the Mankins Ranch project and Excelaron, Parker said he knew little to nothing about it, and he’s quick to separate himself from Excelaron.

“I have nothing to do with Excelaron nor would I have anything to do with Excelaron,” he said defiantly.

And asked about the ties between investors for Excelaron’s project and his own, Parker responded, “My concern is to, No. 1, get a well drilled here safely and successfully and make Charlie Porter and myself some money. I don’t want to get involved in the politics of this—I just wanna get a well drilled for God’s sake.

“Our goal is to try to get this done in a manner that is mutually beneficial to everybody … and do it with as minimal negative impact as we can.”

But Huasna residents have heard similar sentiments before: The Excelaron proposal grew from four wells submitted under a mitigated negative declaration into as many as 12 wells that required an intensive environmental impact report. Throughout the process, residents and the Huasna Foundation hammered on company officials to disclose plans for drilling on the Mankins Ranch and beyond, though the answers rarely seemed to satisfy anyone or quell concerns.

“We’re letting it unfold, and that’s how we did it last time,” Huasna Foundation’s Del Rio said. “They underestimated the Huasna people, and all is fair in love and war.”

 

Next steps


NEWBIE
Though a veteran of the oil industry, Dero Parker of PEOCO said the process for his latest project on the Porter Ranch has already encountered more negative reactions than he’s used to.
PHOTO BY HENRY BRUINGTON

As of press time, Huasna community members had just begun to meet and discuss the Porter Ranch project. Following a March 18 get-together, held in a small barn just off Huasna Road, most of the attendees are still concerned about the potential to further drain the already stressed groundwater supply, the threat of a fire, and traffic impacts if flooding or some other blockage forces oil trucks to drive through residential areas rather than back out Highway 166.

“They aren’t opposed to oil,” said the Huasna Foundation’s Allan. “They’re just opposed to a project that doesn’t make sense.”

Those same words have rippled through past proceedings of oil projects in Huasna. Before she cast her vote to deny Excelaron’s proposal in 2012, former county Planning Commissioner Carlyn Christianson said, “Oil just doesn’t go with the Huasna Valley; it didn’t work out in the past, and it shouldn’t happen here in the future.”

That was the type of statement the current applicants, as well as investors like Jeffery, will be fighting vigorously in the coming months. Parker and Jeffery pointed out that there have been historical oil-drilling operations, and the Huasna Valley is a designated oilfield, according to the California Department of Conservation Division of Oil, Gas, and Geothermal Resources (DOGGR, pronounced “dogger”).

“To think that this might turn into sort of an El Dorado, or something like that, at the moment would be dreaming,” Jeffery said. “We’re just hoping we can find a reasonable accumulation of oil in that first well at the Porters’ in order to have a development that benefits the landowners and the community in royalties and taxes, and us as the shareholders.”

On March 24, the project underwent its first real public unveiling at the South County Advisory Council, during which Parker and Halley made a brief presentation. It didn’t take long for the meeting to break traditional formats as residents packing every seat and flowing out the doors flooded Parker and Halley with questions. Top worries included water, fire, traffic, and perhaps most prominently the potential impact of bigger projects coming down the pipeline.

Speaking before the hearing began, Parker appeared visibly ready for a tough night and said the level of negative reaction was already more than he’s used to in other areas with other projects.

“I can tell you right now, looking around the room, I’m the minority,” he told New Times.

Later in the night, one resident questioned Parker about the involvement of companies that are also involved in the Mankins Ranch project.

“But those are subsidiaries of Australian Oil Company,” she said.

“Yes they are,” Parker responded. “But what does that have to do with me?”

Ultimately, the advisory council postponed its recommendation on the project until it receives more information, though a majority of members appeared skeptical of the proposal as presented.

Though it’s still early in the process, residents are already clearly preparing for another fight. As Timewell of the Huasna Foundation told New Times: “We can easily be as strong or stronger than we were before.”

 

Contact Senior Staff Writer Colin Rigley at crigley@newtimesslo.com.