Oil company close to finalizing 3,000 leases in Carlsbad

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CARLSBAD, N.M. (AP) – An Artesia-based oil company is close to finalizing numerous leases with mineral rights owners in Carlsbad as it moves ahead with plans to drill under the southeastern New Mexico city.

Santo Petroleum got approval from city councilors in 2017 to go door to door and offer residents five-year leases for their mineral rights.

The Carlsbad Current-Argus reports that the company has obtained about 3,000 leases in the last year, covering the majority of the planned leasing area.

"Santo is well down the path of its planned lease acquisition activity," Santo President Hanson Yates said. "We are nearing the end of the lease acquisition phase of the project."

Owners were offered a signing bonus up front and a percentage of the subsequent revenue, should the wells prove productive.

Yates said Santo hasn't published a specific timeline for drilling development due to the complexity of readying such a large number of leases and tracts to drill.

The two biggest leases were with the City of Carlsbad and Carlsbad Municipal Schools. The city leased about 175 acres (70 hectares) and was paid about $824,000. The school district received about $148,000 for 149 acres (60 hectares).

The company plans to drill wells up to 2 miles (3 kilometers) deep outside city limits and then drill horizontally up to 2 miles into Carlsbad to access potential crude oil.

Carlsbad City Administrator Mike Hernandez said the wells will be much deeper than the water table and that the project will have little effect on activities on the surface.

Carlsbad's ground water supply is about 300 to 500 feet (152 meters) deep, he said.

"We've had our experts prove to us that it is safe," he said.

The project is another sign that the Permian Basin is booming.

"It just fits in with everything that's going here," Hernandez said. "The royalties will be a huge benefit in the long term. They said it could pump millions into the city."

Superintendent Greg Rodriguez was not as confident that the school district will see a large return. The main reason he signed the lease was to get the upfront bonus. That money means more can be spent on school supplies and other student needs, he said.

Rodriguez was certain the project won't disturb district-owned structures on the surface. He said similar deals were enacted at rural school districts in West Texas to no detriment.


Information from: Carlsbad Current-Argus, http://www.currentargus.com/

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