Citadel Exploration has filed a $1.2 billion claim against the county after passage of Measure J, the initiative set to ban enhanced oil extraction, including the use of cyclic steaming planned for the oil company’s field near Bitterwater.
Citadel submitted the claim through email to Barbara Thompson, an attorney in the county counsel’s office. The letter dated Nov. 6, last Thursday, contends the company could have recovered 20 million to 40 million barrels of oil over the project’s life. At $80 a barrel, where oil prices have been hovering lately, 20 million barrels would be worth $1.6 billion.
The public company’s market valuation – listed as COIL on the over-the-counter market – is at $6.18 million Tuesday. The stock’s share price has been volatile in recent months.
It is down significantly from its 52-week high of 79 cents. After Tuesday’s election, the share price dropped from 25 cents to its current value of 20 cents, giving it the $6.18 market capitalization. The company’s all-time high came in June 2011 when the share value was $3.90. At that price with nearly 31 million shares outstanding, the market cap would be just over $1.2 billion.
A legal claim is often a necessary precursor to a lawsuit against government entities.
According to the letter: “The County has attempted to avoid liability created by the aforementioned regulation by adopting an ordinance which addresses the taking issue. However, that ordinance does not provide the County with that coverage and it will in fact be a Court of law that determines the issue of a “regulatory taking” on a case by case basis.”
The claim goes on to “offer the county the opportunity to remedy the damage” by paying $1.2 billion.
In response to voters’ passage of Measure J last Tuesday, Citadel Exploration already had filed a document Wednesday with federal regulators indicating the oil exploration company intended to pursue legal options in an attempt to move ahead on plans for steaming extraction in the Bitterwater area.
Ojai-based Citadel Exploration is behind the massive Project Indian oil field project in Bitterwater that was a focus of the county’s Measure J debate. Citadel has plans for up to 1,000 wells in an area initiative supporters argued was six miles from Pinnacles National Park.
Cyclic steaming – the enhanced extraction practice planned for Project Indian – was among the methods banned in the measure, approved handily by San Benito County voters last week.
In the 8-K filing dated Nov. 5 with the Securities and Exchange Commission, Citadel points to the Nov. 4 election result and cites the county’s prior passage of rules for exemptions “from the application of the Measure when the application of the Measure would result in a taking.” The filing goes on to define a regulatory taking as a situation where a government regulation limits use of private property to a degree where it “effectively deprives the property owners of economically reasonable use or value of their property right to such an extent that it deprives them of utility or value of that property right, …”
The SEC filing then specifies potential action.
“Accordingly, Citadel Exploration Inc. will provide the County of San Benito the ability to compensate the company for the diminished value at the Indian Oil Field based on the reasonable Unrisked Resource Potential the property would ultimately yield, or allow Citadel to proceed with full field development and steam injection under the exemption ordinance.”
Citadel Exploration spokesman Robert Parry had referred the Free Lance to the SEC filing when asked what’s next for the company after Measure J’s passage. Parry declined to comment beyond the filing.
The prospect for legal action comes as little surprise following the victory for initiative supporters whose campaign focused on a ban against fracking while the measure also barred more common extraction techniques such as steaming. Measure supporters argued that steaming and other enhanced practices can contaminate water supplies and possibly cause earthquakes.
Andy Hsia-Coron, when reached earlier Friday afternoon, said measure supporters are confident the new law, taking effect Jan. 1, will stand.
“We’re certainly going to talk to the attorneys that helped us draft the initiative,” Hsia-Coron said, before word came down of the filing. “We wouldn’t put it past the industry to take a swat at our efforts. We’re pretty confident we’re on good legal standing.”
What is a Form 8-K?
In addition to filing annual reports on Form 10-K and quarterly reports on Form 10-Q, public companies must report certain material corporate events on a more current basis. Form 8-K is the “current report” companies must file with the SEC to announce major events that shareholders should know about.
Source: SEC
