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A Report on Oil and Gas Leasing Florida Offshore Waters rn INV tj) W -@i COAS A. J", 4X A CL V WESIr FL4 -WESt FL4. URRA,6 Over A Val SLOPE An E5C*jp n Y\ , VS Tor tb miss. ILOVIER FRN :@@;A 'N ell r T ef > ci J, ..... .... . ILI so D ape, 242.5 00D," 034 S44, 1984 -UniveikyofFlo a @,Florlda a',' Iversl #//,L:un1rersity of West F1 i ty University of Miami se I Schoo 3 6668 14108 9096 0 'V, 35'&N- 3001 O@ A 75 Z@ br 8 0 lop 9 WEST 14 8d' i ier Shelf YIA tERRAr S MEL r "@7 x N.W@ 2e she If V/ rj@gt Vol FL SLOPE PhIENT wi I S S VAN IWA 71 4 ;rw! le, :@ w., Ile, r ;4' ";y S EL A'@ N4 2 gN$ygym oF oc OGRAPHYL Petem.bmrg, RoOdaal 33 r "?Q U I of Florida Florida State University Florida A & M. University Uni rsity South Florida Florida Atlantic University UniTe'rsityof West Florida University of Central Florida University of North Flod lorl International University Florida Sea Grant College __ University of Miami, Rosenstlel School of Marine and Atmospheric Science F a art ent of Natural Resources, Bureau of Marine Research 61e, 0I N. US Department of Commerce NOAA Center Library 2234 South son Avenue Charleston, SC 29405-2413 Oil and Gas Leasing in Florida Offshore Waters Volume I A Description of Florida's Existing Program and Recommendations for Revised Procedures Prepared by: Florida Institute of Oceanography St. Petersburg, Florida Financial support was provided by The Coastal Zone Management Act of 1972 as amended, administered at the Federal level by the Office of Ocean and Coastal Resource Management, National Oceanic & Atmospheric Administration and administered at the State Level by the Florida Department of Community Affairs, Division of Resource Planning and Management, Coastal Energy Impact Program. October 15, 1984 TABLE OF CONTENTS VOLUME I Page Acknowledgements . . . . . . . . . . . . . . ... . . . Executive Summary . . . . . . . . . . . . . . . . . . . . . Glossary and Acronyms . . . . . . . . . . . . . . . . . . . viii List of Tables . . . . . . . . . . . . . . . . . . . o o . . xiv List of Figures . o . . . . . . . . . . . . . . . . . . . . xv Introduction and Background . . . . . . . . . . . . . . . . I Purpose of Project . . . . . . . . . . . . . . . . . . . . 4 Preparation and Format of Report . . . . . . . . . . . . . 5 IV. Recommendations . . . . . . . . . . . . . . . . . . . . . . 8 A. Introduction . . . . . . . . . . . . . . . . . . . . . 9 B. Policy Recommendations . . . . . . . . . . . . . . . . 13 1. Formation of a Policy Advisory Group . . . . . . . 14 2. Development of an Offshore Comprehensive . . . . . 17 Leasing Program 3. Development of a Pre-Leasing Environmental. o . 20 Study Program 4. Restrictions On Offshore Lease Sales . . . . . . . 22 5. Mineral Leasing . . . . . . . . . . . . . . . . . 22 C. Program Recommendations . . . . . . . . . . . . . . . . 24 1. Development of a Leasing Program Consistent . . . 25 With State Policy 2. Establishment of a Leasing Advisory Board With... 29 Supporting Committees a. Technical Committee b. Environmental/Scientific Committee TABLE OF COUTENTS VOLUME I (cont'd) Page 3. Recommended Charges to the Leasing Advisory . . . 31 Board a. Resource Planning . . . . . . . . . . . . . . 31 (1) Establishment of Grid Patterns for Offshore Waters (2) Development of Planning Regions b. State and Local Jurisdiction Over Offshore . 36 Waters (1) State Jurisdiction (2) Local Jurisdiction C. Environmental Study Program . . . . . . . . . 44 (1) Implementation of the Study Program (2) Funding of the Study Program d. Revenues from Oil and Gas Leasing Program. . 49 e. Operational Orders, Lease Stipulations, . 54 and Site Specific Environmental Impacts 4. Lease Procedures and Terms . . . . . . . . . . . . 56 V. Florida's Oil and Gas Leasing Program A. Statutory Authority . . . . . . . . . . . . . . . . . . FL- I B. Philosophy of State Towards Leasing in State Waters. . FL- 2 C. History of Leasing Program . . . . . . . . . . . . . . FL- 4 D. Delegation of Management Responsibilities for State. . FL-11 Leasing Program E. Geographic Description of State Territorial Waters . . FL-12 F. Local Jurisdictional Control Over State Waters . . . . FL-21 C. Oil and Gas Revenues Accruing to State . . . . . . . . FL-24 H. Environmental Controls and Regulations . . . . . . . . FL-27 I. Leasing Procedures . . . . . . . . . . . . . . . . . . FL-35 J. Relation of Leasing Program to Issuance of Permits FL-39 K. Mineral Leasing . . . . . . . . . . . . . . . . . . . . FL-39 TABLE OF CONTENTS VOLUME I (cont'd) Page- L. The Socioeconomic and Physical Impact of Oil and Gas . FL-39 Leasing in Florida's Waters References . . . . . . . . . . . . . . . . . . . . . . . . . . . FL-42 Appendices A. Oil and Gas Leasing in Florida's Territorial Waters: State Laws B. Florida Local Governments and Oil and Gas Leasing of State Territorial Waters C.- State of Florida Oil and Gas Lease Form D. Onshore Impacts of Oil and Gas Activities in Florida State-Owned Coastal Water E. Permit Requirements for Siting Onshore Facilities Related to Offshore Oil and Gas Activities: and Florida Legislation Affecting Offshore and Onshore Energy Development F. Project Advisory Board TABLF OF CONTENTS VOLUME II Page Acknowledgements . . . . . . . . . . . . . . . . . . . . . . . . i Executive Summary . . . . . . . . . . . . . . . . . . . . . . . iii Glossary and Acronyms . . . . . . . . . . . . . . . . . . . . viii I. Introduction and Background . . . . . . . . . . . . . . . . . . . 1 II. Purpose of Project . . . . . . . . . . . . . . . . . . . . . . . 4 III. Preparation and Format of Report . . . . . . . . . . . . . . . . 5 IV. Discussion and Summary . . . . . . . . . . . . . . . . . . . . . 8 V. State Leasing Program . . . . . . . . . . . . . . . . . . . .19 A. Alabama . . . . . . . . . . . . . . . . . . . . . . . AL 1-32 B. Alaska . . . . . . . . . . . . . . . . . . . . . . . AK 1-39 C. California . . . . . . . . . . . . . . . . . . . . . CA 1-41 1). Florida . . . . . . . . . . . . . . . . . . . . . . . FL 1-42 E. Louisiana . . . . . . . . . . . . . . . . . . . . . . LA 1-31 F. Mississippi . . . . . . . . . . . . . . . . . . . . . MS 1-29 G. North Carolina . . . . . . . . . . . . . . . . . . . NC 1-21 H. South Carolina . . . . . . . . . . . . . . . . . . . SC 1-22 I. Texas . . . . . . . . . . . . . . . . . . . . . . . . TX 1-36 Appendix A Annexation Procedures Used in Six Coastal States ACKNOWLEDGEMENTS The authors of this report are: James W. Miller, Ph.D. Associate Director Florida Institute of Oceanography St. Petersburg, Florida and Murice 0. Rinkel OCS Representative State of Florida The material on which the report is based was generously provided by many individuals and organizations. Guidance and advice was obtained from the Department of Community Affairs (DCA) Project Advisory Board (see Appendix F of Volume 1) during the planning stages and during the preparation of the recommendations. Special thanks go to Mr. James Quinn, Mr. Terry Jernigan and Mr. Jeffrey L. Kiss of the Division of Resource Planning and Management, DCA; and Mrs. Patricia White, Bureau of State Lands Management, and Mr. Steve R. Windham, Bureau of Geology, of the Department of Natural Resources for their help throughout the project. The reports on the oil and gas leasing programs of the other eight coastal states reviewed in Volume II were made possible only by the outstanding cooperation and assistance of the following individuals. Alabrama Alaska �Department.of Environmental Management Department of Natural Mr. Joe B. Broadwater (Director) Resources Mr. Robert Cooner (Biologist) Division of Oil and Gas Ms. Pam Rogers �Department of Conservation and Natural Leasing Manager State Lands Division Mr. Robert A. Macrory (Director) Department of Fish and Game Habitat Division � State Oil and Gas Board Mr. John A. Clark (Director) Dr. Ernest A. Mancini (Supervisor) i ACKNOTATLEDGEMENTS (cont'd) California Louisiana State Lands Commission Office of Mineral. Resources Ms. Claire R. Dedrick Mr. William E. Howe (Executive Officer) Chief Engineer Division of Research and Planning Mr. Dwight E. Sanders (Chief) Mr. Allen D. Willard Minerals Resources Engineer Ms. Susan R.-Livenick Assoc. Mineral Resources Engineer Mississippi North Carolina � Bureau of Geology Department of N&tural Mineral Lease Division Resources and Community Mr. John D. Kellis (Chief) Development Division of Earth Resources � Department of Wildlife Conservation Mr. Steve Conrad (Director) Bureau of Marine Resources Mr. James S. Franks State of North Carolina (Staff Scientist) Center for Urban and Region- al Studies Mr. Charles Wyman (Research Associate) South Carolina Texas Water Resources Commission General Land Office Mr. Camille Ransom, III (Director) Petroleum and Minerals Mr. Paul S. League, (Attorney) Division Ms. Gwen M. Euler Mr. Jack M. Howard (Ground Water Geologist) (Geologist) Coastal Division Land Management Mr. Michael H. McYann (Environmental Quality Specialist) Parks and Wildlife Depart- ment Mr. J. Rollin MacRae Wetlands Permits Coordinator EXECUTIVE SUMMARY Recognizing that the increasing interest of industry in exploring Florida's Outer Continental Shelf could spread into state waters, the Florida Department of Community Affairs (DCA), in 1982, proposed that a comprehensive study be undertaken for the management of the potential oil and gas operations in state waters. As the f irst step in this program, a Coastal Energy Impact Program grant was awarded by DCA to the Florida Institute of Oceanography in May 1983. The purpose of this grant was to review Florida's existing leasing procedures as well as those of eight other coastal states and to incorporate the information obtained into specific policy and program recommendations to aid Florida officials in making decisions if they choose to develop and implement a long range oil and gas program in Florida waters. The results of this study indicate that Florida's oil and gas leasing program is primarily oriented toward onshore operations. Statutory provisions, regulations, and policy for offshore leasing and operations are vague and sometimes contradictory. Even so, Florida law does provide a method for the leasing and development of state waters. Given the current level of oil industry interest in federal OCS areas adjoining state waters, an active effort could be undertaken by industry to pursue this possibility. Under current circumstances this situation could very likely. foster reactive decisions which could prove contrary to the protection of Florida's coastal and marine resources. Adequate pre-lease planning and lease program development are essential in providing the data necessary to make prudent decisions. In this regard, the first and foremost concern throughout the development of this report has iii been to provide specific recommendations in support of an envvironmental program which offers the maximum protection possible for Florida's resources if oil and gas are found and developed. It is not the purpose of this document nor the intent of the sponsor or authors to recommend whether oil and gas operations should be encouraged in Florida waters. That determination is the statutory responsibility of the Governor and Cabinet acting as the Board of Trustees of the Internal Trust Fund. The following program elements were analyzed for each of the nine states studied (including Florida): Philosophy of the state towards oil and gas development; the statutory authority for leasing; program management; the geographic description of territorial waters; the role of local government in offshore leasing; oil and gas revenues and their distribution; environmental controls and regulations; and leasing procedures. The basic Florida report was augmented by special reports on: existing oil and gas related statutes; the role of local government in offshore leasing, taxation, and annexation; and on the socioeconomic impact of oil and gas leasing. The project report is divided into three volumes: Volume I - Florida's leasing program, the special reports, and the recommendations; Volume II - reports on all nine coastal states reviewed; and Volume III the recommendations. Each report also contains the introductory and background material. The five policy and twenty program recommendations resulting from this study are summarized below. The basis for each recommendation is discussed in the main body of the recommendations section contained in Volumes I and III. iv Policy Recommendations 1. Formation of Policy Advisory Group a. That the Board of Trustees of the Internal Improvement Trust Fund establish a policy for initiating an oil and gas environmental protection program in state territorial waters. b. That an ad hoc advisory committee be established to provide broad-based input to the Trustees in developing such policy. 2. Development of an Offshore Comprehensive Leasing Program That a comprehensive oil and gas leasing program be developed specifically for offshore waters to provide for more effective resource management safeguards, environmental protection, and obtaining just revenues for the state. 3. Development of a Pre-leasing Environmental Study Program That a comprehensive long range pre-leasing study program supported with adequate funding and staff be initiated for the purpose of acquiring environmental data in state offshore waters showing potential for oil and gas development. 4. Restrictions on Offshore Lease Sales That no oil and gas leasing takes place in Florida's territorial waters until such time as the necessary environmental data are obtained. 5. Mineral Leasing That any minerals not defined as constituent products in the current oil and gas lease form in the State of Florida shall not be considered as part of an offshore oil and gas leasing program. v Program Recommendations 1. Development of Leasing Program Consistent with State Policy a. That a Memorandum of Understanding be established'between the Department of Natural Resources and the Department of Environmental Regulation pertaining to lease/permit programs for offshore oil and gas operations. b. That all program recommendations which follow or are developed in the future be examined for consistency with the offshore oil and gas policy to be established by the Board of Trustees/Governor and Cabinet. 2. Establishment of a Leasing Advisory Board with Supporting Committees. a. That a permanent offshore oil and gas Leasing Advisory Board be formed for the purpose of providing guidance to the Board of Trustees of the Internal Improvement Trust Fund with respect to the development and management of oil and gas operations in offshore state waters. b. That an environmental/scientific committee and a technical committee be formed to serve as staff to the Leasing Advisory Board recommended in 2a. 3. Recommended Charges to the Leasing Advisory Board 3a.(1) That a grid pattern by laid out in Florida's territorial waters with initial leasing planning regions to be selected based on current OCS oil and gas activities. 3a.(2) That the state be divided into offshore planning areas for the purpose of determining excluded areas, avoidance areas, and leasing areas, within their respective grid patterns. 3b.(I) That Chaptcr 253 F.S. be amended to more specifically and thoroughly address oil and gas leasing in state offshore waters. Recommendations contained in this document should be given major emphasis in this process. 3b.(2) That the state clarify by statute the authority of coastal municipal governments to annex state offshore waters. 3c.(1)(a) That minimum environmental lease stipulations be established for each planning region identified (i.e. excluded, avoidance and leasing areas) based on. the results of the environmental study program.. 3c.(1)(b) That an offshore environmental resource management code system, similar to that now used in Texas, be examined for lease planning regions and for site specific stipulations in Florida. 3c.(2)(a) That an adequate funding source be developed to support the long term comprehensive environmental study programs required for exploration, development and production. 3c.(2)(b) That the necessary executive and legislative actions be taken to obtain the funds cited above from existing revenue. Vi Program Recommendations (cont'd) MM That the Rules of the Department of Natural Resources, section 15Q-15.08-(9)F.A.C., be amended to add the basis for calculating offshore royalty percentages. Instead of basing royalties on the distance from production, a flexible sliding scale method should be devised similar to that used in California and Alaska. 3d(2) That a revenue distribution program be initiated on a statutory basis designating approximately five percent (5%) and/or a maximum amount of the current uplands oil and gas severance tax for coastal and offshore environmental studies; for research on renewable energy sources; and to provide for revenue sharing with local governments likely to be affected by offshore oil and gas development. 3e(l) That a set of specific operating orders be referenced in each offshore oil and gas lease. 3e(2) That an offshore environmental enforcement and inspection program be established. 3e(3) That general environmental stipulations be developed for each planning region prior to each sale. 3e(4) That an agreement be established with the State of Alabama specifying the environmental stipulations to be used in common waters such as in Perdido Bay. Other potential interstate conflict issues also should be addressed. 4. Lease Procedures and Terms That the recommended Leasing Advisory Board review existing onshore lease terms and procedures for compatibility and adaptability to an offshore oil and gas leasing program. vii GLOSSARY AND ACRONYMS Glossary Applicant - Any person requesting the State to either issue a call for nominations for leasing or offer for lease minerals owned by the State. Aquatic preserves - Submerged or tidal areas identified and designated by the Florida Legislature which have exceptional biological, aesthetic, educational, and/or scientific value, with the intent of setting them aside forever as preserves or sanctuaries for the benefit of future generations pursuant to Chapter 258, F.S. Barrier islands - Thin, elongated, naturally formed islands, usually parallel to the shoreline, formed of unconsolidated sediments (mostly sand), separated from the mainland by natural bodies of water, including estuaries and wetlands. Beach - Gently sloping areas of loose material @e.g. sand, gravel, and cobbles) that extend landward from the low-water line to a point where there is a def inite change in the material type or land form, or to the line of vegetation. Bid - The offer to pay a valuable consideration to obtain a mineral lease. Bidder Any person submitting a bid. Block A geographical area, as portrayed on an official BLM protraction diagram or leasing map, that contains approximately nine square miles (2,304 hectares or 5,760 acres). Board of Trustees - Board of Trustees of the Internal Improvement Trust Fund (Florida, Governor and Cabinet). Bonus - A sum of money offered or paid b17 a lessee to the State as J consideration for the execution of a lease. Coastal waters - Those waters surrounding the continent which exert a measurable influence on users of the land. Coastal zone - Coastal waters and adjacent lands which exert a ineasurable inf luence on the uses of the sea. The zone extends onshore to the upper reaches of.the tidal zone and adjacent shore areas. Continental margin A zone separating the emergent continents from the deep sea bottom. Continental shelf A broad, gently sloping, shallow feature extending from the shore to the continental slope. viii Glossary (cont'd) Delay rental - A payment offered or made by a lessee to the State, on a per mineral acre basis, annually during each year of the primary term of a mineral lease after the first year thereof, to delay commencement of drilling operations. Designated environmental preservation areas - Gulf of Mexico shorefront areas which have been established for the quality and significance of their natural environments. They have been legislatively, administratively, or privately protected from the developmental influences of man and are managed solely for the preservation, understanding, and appreciation of their natural attributes. Included are National Parks and Preserves, National and State Wilderness Areas, National Marine and Estuarine Sanctuaries, National Natural Landmarks, Wildlife Sanctuaries, Florida Aquatic Preserves, and Environmentally Endangered Lands. Development - Activities that take place following exploration for, discovery of, and delineation of minerals in commercially attractive quantities, including but not limited to geophysical activity, drilling, platform construction, and operation of all directly related onshore support facilities; and that are for the purpose of ultimately producing the minerals discovered. Development of Regional Impact (DRI) - Any development which, because of its character, magnitude, or location, would have a substantial effect upon the health, safety, or welfare of citizens of more than one county pursuant to Chapter 380, F.S. Ecosystem - The living and non-living components of the environment which interact or function together, including plant and animal organisms, the physical environment, and the energy systems in which they exist. Environmental impact statement - A statement required by the National Environmental Policy Act of 1969 (N E P A) in relation to any action significantly affecting the environment; a NEPA document. Estuary - A natural body of water semi-enclosed by land, connected with the open ocean, and within which sea water is measurably diluted by fresh water derived from the land. The estuary includes: a) estuarine water; b) tidelands; c) tidal marshes; and d) submerged lands. Estuaries extend upstream as far as the waters contain a measurable quantity or percentage of sea water. Exploration The process of searching for minerals. Exploration activities include: a) geophysical surveys where magnetic, gravity, seismic, or other systems are used to detect or infer the geologic conditions conducive to the accumulation of such minerals and (b) any drilling, except development drilling, whether on or off known geological structures. Exploration also includes the drilling of a well in which a discovery of oil or natural gas in paying quantities is made and the drilling, after such a discovery, of any additional well that is needed to delineate a reservoir and to enable the lessee to determine whether to proceed with development and production. ix Glossary (cont'd) Gas - All natural gas, including casinghead gas, and all other hydrocarbons not defined as oil. Gas well A well capable of producing gas from a gas pool or gas pools. Habitat A specific type of place that is occupied by an organism, a population, or a community. Joint bid - A proposal whereby two or more bidders combine in submitting a bid for a mineral lease. Field - An area within which hydrocarbons have been concentrated and trapped in economically producible quantities in. one or more structural or stratigraphically related reservoirs. Hydrocarbon - Any of a large class of organic compounds containing primarily carbon and hydrogen, comprising paraffins, olefins, members of the acetylene series, alicyclic hydrocarbons, and aromatic hydrocarbons, and occurring in many cases in petroleum, natural gas, coal, and bitumens. Lease - A contract authorizing exploration for and development and production of minerals; the land covered by such a contract. Lease royalty - A share of the production, or the proceeds thereof, specified in a lease as a fraction, percentage or fixed sum, payable to the State by the lessee. Lease sale - The public opening of sealed bids made after competitive auction for leases granting companies or individuals the right to explore for and develop certain minerals within a defined period of time. Local government - Any county or municipality or any special district or local. government entity established pursuant to law which exercises regulatory authority over and grants development permits for land development pursuant to Chapter 163, F.S. Marshes - Persistent emergent non-forested wetlands characterized by vegetation consisting predominantly of cordgrasses, rushes, and cattails. Marine league - 3.45 statute miles. Mean high water - The average height of the high tides over a 19-year period. For shorter periods of observation, "mean high water" means the average height of the water after corrections are applied to eliminate known variations and to reduce the result to the equivalent of a mean 19-year value. Mean high water line - The intersection of the local elevation of mean high water with the shore. x Glossary (cont'd) Mineral - Oil, gas, and other minerals, both hydrocarbon and non hydrocarbon, unless otherwise specifically included, sand, clay, gravel, limestone, and coal. Mineral acre - The equivalent of the full mineral interest in one acre of land. lion-renewable resource: Those natural resources that, once used or exhausted, cannot be replaced. Commonly used with commodity type resources such as coal, petroleum, natural gas, etc. Oil - Crude petroleum oil and other hydrocarbons, regardless of gravity, which are produced at the well in liquid form by ordinary production methods and which are not the result of condensation of gas after it leaves the pool. Oil well - A well capable of producing oil from an oil pool or oil pools. Outer Continental Shelf (OCS - All submerged lands that comprise the continental margin adjacent to the U.S. and seaward of state offshore lands. The OCS has been subject to Federal jurisdiction and control since enactment of the Submerged Lands Act (43 U.S.C. 1301 and 1302). Current national policy is provided in the Outer Continental Shelf Lands Act Amendments of 1978. Petroleum - An oil, flammable bituminous liquid that occurs in many places in the upper strata of the earth, either in seepages or in reservoirs; essentially a complex mixture of hydrocarbons of different types with small amounts of other substances; any of various substances (as natural gas or shale oil) similar in composition to petroleum. Pool - An underground reservoir containing a common accumulation of oil or gas or both. Primary term - The initial period of oil and gas leases, can range from 2 to 20 years in coastal states. Renewable resource - Those resources which, if managed, used, and harvested properly, can replenish themselves at a rate equal to the rate of consumption. They are usually biological or living resources. Reserve estimate - An assessment of the portion of the identified oil or gas resource that can be economically extracted. Reservoir - An accumulation of hydrocarbons that is separated from any other such accumulation. Right-of-way - A legal right of passage over another person's land; the strip of land for which permission has been granted to build a pipeline and for normal maintenance thereafter. xi Glossarv (cont'd) Seismic - Pertaining to, characteristic of, or produced by earthquakes or earth vibration; having to do with elastic waves in the earth. Severance tax - A tax levied by the State upon a person or persons engaging or continuing to engage within a State in the business of producing or severing oil and gas from the soil-or the waters, or from beneath the soil or the waters of the State for sale, transport, storage, profit, or for use. Shut-in royalty - An amount specified in the lease to be paid for a time period also specif ied in the lease to hold the lease in f orce af ter a gas well has been completed capable of production in paying quantities, but which has been shut-in under provisions specified in the lease. Shut-in well - A well that is capable of producing oil and/or gas but must remain shut-in until connected to a gathering system, pipeline or cleansing facility; or for some other reason. Spoil islands - Artificial islands created with dredged materi4l resulting from disposal of material created, resulting from, or as waste products of creating, maintaining, or deepening channels, harbors, ports, or other such projects. Territorial sea - In Florida, for jurisdictional purposes, the ocean and seafloor area from mean low water seaward three nautical miles on the Atlantic Coast, and extending seaward three marine leagues on the Culf Coast. Wetlands - Areas periodically inundated or saturated by surface or ground- water and supporting predominantly vegetation typically adapted for life in saturated soil conditions. Acronyms ADNR Alaska Department of Natural Resources CEIP Coastal Energy Impact Program CZMA Coastal Zone Management Act of 1972, as amended. DCA Department of Community Affairs (Florida) DER Department of Environmental Regulation (Florida) DNR Department of Natural Resources DRI Development of Regional Impact EPA Environmental Protection Agency FAC Florida Administrative Code xii Glossary (cont'd) FDNR Florida Department of Natural.Resources FIO Florida Institute of Oceanography F.S. Florida Statutes LGCPA Local Government Comprehensive Planning Act (Florida) MHW Mean high water MMS Minerals Management Service (Department of the Interior) OCS Outer Continental Shelf OFCP Office of Federal Coastal Programs (Florida) OHW Ordinary high water SUS State University System xiii LIST OF TABLES Page Table 1 Coastal States Included in Review 5 of Leasing Procedures Table 2 Topical Outline for State Reports 7 Table 3 Distribution of State Oil and Gas Revenues 10 Table 4 Historical Summary of State Leasing Programs 18 Table 5 Florida Leaseholdings of Coastal Petroleum 19 Company Table 6 State Environmental Responsibilities 26 and Policies Table 7 Delegation of Management Responsibilities 27 for State Leasing Program Table 8 Geographical Description of State 32 Territorial Waters Table 9 Statutory and Vested Authority for 37 State Oil and Gas Leasing Programs Table 10 Authority of Local Governments to Annex 40 State Territorial Waters Table 11 State Revenues from Offshore Oil and 50 Gas Operations Table 12 State Leasing Procedures 57 Table 13 Summary of State Lease Terms 58 Xiv LIST OF FIGURES Page Figure 1 Eastern Gulf of Mexico OCS Activity 2 Active Leases Figure 2 Organization of Leasing Advisory Board 30 Figure 3 State OCS Offshore Planning Regions 34 xv I Introductlon '%@ I. Introduction and Background In recent years the oil and gas industry has expressed interest in exploring for oil and gas in Florida offshore waters.. Their interest has been primarily in the federal waters of the Outer Continental Shelf (OCS). Blocks leased in past OCS Lease Sales along the coast of Florida indicate that formations offshore northwest and southwest Florida and along the continental slope may have hydrocarbon potential. Interestingly, these leased OCS blocks are parallel to onshore areas which represent the najor producing oil and gas fields in the State (Figure 1). In the January 1984 OCS Lease Sale, blocks were leased offshore northwest Florida which are within 3 miles of state territorial waters. Several companies already have applied to the Department of the Interior Minerals Management Service (MMS) for permits to drill exploration wells on blocks 14 to 40 miles from the coastline. Should there be a major discovery on these OCS blocks, it is likely that exploration interest could extend into state waters. Historically, because the state's oil and gas operations have been primarily on shore, leasing procedures, permitting, and environmental concerns have been directed toward onshore operations. The environmental circumstances and conditions for offshore operations, however, differ substantially from those onshore. This fact has long been recognized by the Federal Government, and the coastal states examined in this study which have separate and distinct management procedures for onshore and offshore areas. Given the increasing industry interest in OCS areas offshore Florida, and the probability that state waters may be targeted for exploration, the Office of Federal Coastal Programs (OFCP) within the Florida Department 1 FIGURE 1 ae IS EASTERN GULF OF MEXICO AMA OCS AC.T.IVITY ALAS GEORGIA ACTIVE LE A SES 'Pensacola 4 Lease Sales 66 El 67- anams (1981-82)1 Iwo UMNK Lft ity PENSACOLAO January,1984 Lease Sale + ru Wells Drifted DEST&OUS APALAC@WOLA ESvILL 0 FLORID,% SAIDDLE GROUND TAF%pON SPRINGS DESOTO cj@@Ib *Tampa -I,- Port Manatee 2 SAINT PETEFtoURG 19 THE ELBOW LLOYD z e,. El VERNON cHARLOTTE HARBOR HENDERSON HOWELL HOOK PULLEY RIDGE MLAMI 03 95@@ (3 0 Gulf of Mexico ony IORTUGAS KEY WEST SOURCE: U.S. Department of the Interior, Minerals Management Service 2 of Community Affairs (DCA) proposed a comprehensive study of oil and gas management procedures in state waters. The primary purpose of the proposed study was to develop measures for maximum protection of valuable coastal and marine resources in consideration of the potential for oil and gas development. The secondary purpose was to provide recommendations to ensure that the state receives adequate compensation for public resources if and when they are developed. As the first step in pursuing this proposal, the OFCP, in cooperation with the Florida Department of Environmental Regulation and the Florida Department of Natural Resources (FDNR), prepared an outline to provide the framework for a comprehensive approach towards adapting existing onshore leasing/permitting procedures for use in state offshore waters. The project was designed to provide an analysis of leasing and permitting procedures, leading from the initial mapping of state waters to potential revenue distribution, and was to be accomplished in four phases: Phase I Mapping Lease Tracts Phase II Leasing Procedures Phase III Permit Procedures Phase IV Allocation of Revenue Recognizing that these categories are not mutually exclusive, the DCA elected, as the first step in this program, to address leasing procedures (Phase II). In May 1983, a Coastal Energy Impact Program (CEIP) grant was awarded to the Florida Institute of Oceanography (FIO) to undertake the Phase II tasks of: defining existing rules, regulations, statutes, and procedures affecting leasing in state offshore waters; summarizing oil and gas leasing programs of selected coastal states; describing the interface of geographical boundaries between state and Federal offshore waters; 3 reviewing county and local government statutes, rules, and regulations; reviewing Federal and state policies in regard to oil, gas, and mineral leasing; and drafting recommendations for a revised leasing program for state offshore waters to serve as a planning document for future policy decisions. II. Purpose of Project The purpose of the project and this report is to provide a working document, incorporating background information and specific recommendations, on which policy/management decisions can be based with respect to future oil and gas leasing in Florida's offshore waters. Conversely, it is not the purpose of this document nor the intent of the FIO to recommend whether oil or gas operations in Florida offshore waters should be permitted. The determination of whether oil and gas operations in Florida offshore waters should be approved is the responsibility of the Governor and Cabinet acting as the Board of Trustees of the Internal Improvement Trust Fund. If oil and gas resources are discovered in commercial quantities in Florida's offshore waters, any program developed must be compatible with the protection of the coastal environment and the exploration and production of offshore oil and gas. With increasing activity in the Federal waters of the eastern Gulf of Mexico, now is the time to rationally and systematically develop a state offshore leasing program that will. ensure adequate- environmental protection as well as the potential financial benefits accruing to the state from offshore oil and gas revenues. If it is decided at a future date to award additional leases in Florida offshore waters, the material in this report should provide useful guidance in the preparation of revised leasing procedures. To provide such guidance is the overall goal of the project and this report. 4 III. Preparation and Format of Report The data in this report were obtained from interviews and meetings with Florida State officials, the DCA project advisory board (Appendix F), representatives from the other states selected for reviews shown in Table 1, Federal officials, and from a wealth of documents provided by all of the above. The format shown in Table 2 was used for the report of each of the nine states reviewed in Volume II to facilitate the compariso-n and critique of their respective oil and gas leasing programs. TABLE I Coastal States Included in Review of Leasing Procedures Alabama Louisiana Alaska Mississippi California North Carolina Florida South Carolina Texas Three consultants contributed to the Florida report. Their contributions consisted of a review of state laws, the role of local governments in leasing, and the socioeconomic impact of offshore oil and gas activities. The complete reports of these consultants are included as Appendices A, B, and D, respectively, in this report (Volume 1). 5 The draft of each state report reflecting its program was sent to selected state officials for review and comment. The f inal reports of the eight other states reviewed and the draf t of the Flor@da report, together with Appendices, were sent to the members of the DCA project advisory board (Appendix F) prior to general distribution. Following @nsertion of comments received, the, final draft of this report was distributed widely to state agencies and private organizations. 6 TABLE 2 TOPICAL OUTLINE FOR STATE REPORTS A. Statutorv Authority G. Oil and Gas Revenues Accruing to State (cont.) 1. Vested Authority 3. Rental per acre 2. Members of Governing Body 4. Delay rental payment 5. Shut-in royalties B. Philosophy of State Towards Leasing in State Waters 6. Offset wells 7. Pooled acreage C. History of Leasing Program 8. Bonus consideration I . Establishment of offshore leasing program 9. Severance tax 2. Frequency distribution of leases by year 10. State agency receiving royalties 3. Average geographic size of lease and related bidding data 11. Distribution of Revenue within State 4. Example of prior lease sale schedule 5. Revenues accruing to state H. Environmental Controls and Regulations 1. Responsible agencies D. Delegation of Management Responsibilities for State Leasing Program 2. Relation to leasing agency 1. Name of managing agency or department 3. Environmental review process prior to issuing lease/permit 2. Agency responsibilities 4. Environmental stipulations 3. Organization chart of state agencies 5. Baseline environmental research 6. Role of Corps of Engineers E. Geographic Description of State Territorial Waters I . General description of state offshore boundaries 1. Leasing Procedures 2. Mapping and charting procedures used to define lease areas 1. Leasing Schedule 2. Call or nominations for lease F. Local Jurisdictional Control Over State Waters 3. Fees 1. The role of counties and municipalities 4. Publication of calls for nominations and advertisements for leasing 2. The role of port authorities 5. Bidding 3. Proprietary interests of local governments in submerged lands 6. Terms of lease 4. Home rule rights and the authority for local governments to annex 7. Handling of proprietary information offshore lands 5. Effects of local government regulations on offshore operations subsequent to issuance of leases J. Relation of Leasing Program to Issuance of Permits 6. Ability of local governments to tax oil and gas facilities, properties or production through taxes on leasehold interests, K. Mineral Leasing equipment or by levying a severance tax C. Oil and Gas Revenues Accruing to State 11. The Socioeconomic and Physical Impact of Oil & Gas Leasing in Florida's Waters (Florida Report Only) 1. Minimum royalties allowed by law 2. Royalties prescribed for oil and gas leases Recommendations A. Introduction The attitude towards offshore oil and gas activities in coastal states ranges from the strong pro-leasing states such as Louisiana, Texas, Alabama, and Alaska to the neutral position of South Carolina, to a conservative approach such as found in California. For example, the long term favorable offshore leasing attitude in Louisiana derives from the fact that almost one-third (approximately one billion dollars) of the state's annual revenue comes from oil and gas activities. A decrease of one dollar per barrel in the price of oil costs Louisiana $31 million in annual revenue. Tn Alabama, a single lease sale in 1981 produced a bonus revenue alone to the state of $449 million. Their most recent lease sale on August 14, 1984 resulted in bonus bids of $347.5 million for 18 leases. In Texas, the public school fund receives $300 million annually which represents the interest accruing from invested oil and gas revenue. In Alaska, 90% of the state's revenue comes from oil and gas. These funds are being used to develop new state revenue sources and to support existing programs. The distribution of Alaska's oil and gas revenues are shown in Table 3 along with those of the other eight coastal states reviewed. . By contrast, without any offshore oil or gas production, Florida is justifiably concerned with the socioeconomic and environmental impact of future offshore oil and gas activities because of its reliance on tourism, retirement communities, and coastal recreational-based revenue. Florida's economy is based largely on its unique environment. Because the development 9 TABLE 3 DISTRIBUTION OF STATE OIL AND GAS REVENUES ROYALTIES, RENTALS, AND BONUSES SEVERANCE TAX AGENCY (100%) (100%) COLLECTING STATE LEVE LOCAL LEVEL TOWARD REVENUES AGENCY % AGENCY % ADMINISTRATION AGENCY % FLORIDA Department of Internal 100% None 0% Granted from Depart- 100% Natural Improve- Internal ment of Resources ment Trust Improvement Revenue Fund rust Fund Oil and To State/ Gas Tax County of Trust Production Fund ALABAMA State Land Divi- State 90% None 4 Dept. 100% sion, Department General of of Conservation Fund Revenue and Natural DCNR 10% General Resources Fund ALASKA Department of Various 100% None 0% None None Natural State Resources Funds CALIFORNIA State Lands State 100% None5 0% None None Commission Treasury LOUISIANA Office of Mineral Bond Secu- 90%2County 10%2 $15,000 to N.S. Resources,Depart- rity Re- of Prod. cover adver- ment of Natural demption 3 tising costs Resources Fund 100 None 0% Tnhanced Balance None 0% Mineral Income Trust MISSIS- Mineral Lease Min.Lease 0.5% None 0% .5% of Royal- N.S. SIPPI Division, Depart- Uu_lf -and 2% ties, Rentals ment of Natural Wildlife and bonuses Resources Protection to Mineral Fund Lease Divi- Ttate Gen-- 97.5% sion eral Fund NORTH Department of State 100% None 0% Granted Funds N.S. CAROLINA Natural Resources Treasury from Royal- ties, Rentals and bonuses SOUTH Water Resources State 100% None 0% Granted from N.S. CAROLINA Commission Treasury Exploration Special Permit Monies TEXAS General Land Permanent 100% None 0% .5% of Sever- Available 25% office Public ance Taxes School School Fund Fund General 75% Fund 1 N.S.: Not separate from royalties, ALASKA rentals and bonuses. ROYALTIFS@ RENTAL A 2 Directly from royalty funds to a DISTRIBUTION maximum of $12.5 million. GENERAL (15.00%) CAPITAL (25.00%) FUND 3 OUTLAY Directly from leases and bonuses FUND RENEWABLE MOM to a maximum of $2.5 million. RESOURCES FUND 6 ENERGY FACILITIES FUND 4 PUBLIC (5.00%) Dependent on legislative SCHOOL Ft'ND appropriation. 5 State Controller apportions 1% to local city or county. Data provided and reviewed by ALASKA (50.00%) respective state officials. PERKANENT FUND 10 of the state has been concentrated at or near its seaward boundaries, any program that affects this environment should be preceded by a cost risk analysis to assure that the overall benefits of short term economic gains from sources such as oil and gas exceed potential deleterious long term economic or environmental effects. These ef f ects can take the f orm of damaging a flourishing tourist industry, damaging the physical environment, over-stimulation of the economy, or a rapid depletion of non-renewable resources. California and Alaska continue to face similar problems. Alaska particularly had a high dependence on the tourist industry until oil and gas was discovered and became a major source of revenue. In California, as a result of the Santa Barbara oil spill in 1969, with the accompanying environmental impact, offshore oil and gas leasing was halted until a new state policy, operational methods, and offshore procedures were developed. In response to such challenges, Alaska and California are developing offshore oil and gas leasing policies and comprehensive offshore environmental programs that allow the determination of the cost risk involved with oil and gas activities. A detailed discussion of Alaska's and California's program is contained in Volume II. Based on these reports it is apparent that policy decisions have been made by these two states that with proptr care, funding of environmental studies, and improved leasing procedures, -oil and gas resources can be developed while simultaneously protecting their environmental resources. The recommendations contained in this section of the report are divided into two major categories. The first category addresses policy 11 recommendations which attempt to lay out a strategy for developing and clarifying the state's position with regard to offshore oil and gas leasing. The second category, program recommendations, describes recommended steps for implementing the policy recommendations. The program recommendations to be described are based on the assumption that the State of Florida will initiate a separate offshore oil and gas leasing program. The format to be followed in this section provides a general title, comment /background information for each respective recommendation, and a concise recommendation. 32 as B. POLICY RECOMMENDATIONS ft 0 13 Introduction The five policy recommendations which follow address the basic mechanisr. and planning procedures necessary prior to implementation of any future oil and gas leasing program in Florida's offshore waters. They call f or the initial policy decisions by the state, the development of comprehensive leasing and environmental program plans, and for restrictions on offshore activities until such plans are in place. 1. Formation of Policy Advisory Group Comment Prior to developing a comprehensive plan specifically for offshore oil and gas exploration, Florida needs to re-examine its present leasing policy. The review of Florida's existing statutes and planning documents undertaken for this report indicates confusion as to whether the state does or does not wish to support the development of oil and gas in state waters. At the present time there is no clear, definitive state policy regarding leasing of offshore waters for oil and gas operations. Chapter 253.45-253.61 F.S., generally, describes the power and duties of the state with regard to state land management. Further, Chapter 253.47 F.S. and 253.51 F.S., specifically empower the Board of Trustees to sell or lease state submerged lands. Both Chapter 253 F.S. and F.A.C. 16Q-21, "Sovereignty Submerged Lands Management Rule", prescribe general procedures for the application and issuance of submerged land leases. General policy guidance is found in the State Lands Management Plan "to ensure maximum benefit and use" Chapter 253.07(7) F.S. of state-ovmed lands. Within this plan oil and 14 gas is addressed consistently within the context of minerals in general. Little treatment is given to a specific policy regarding offshore oil and gas leasing on submerged lands. Further reference to energy resources can be found in Chapter 377.06 F.S. which establishes public policy for the conservation of oil and gas resources within the state with particular attention to rights of property owners, encouraging development of oil and gas sources, and safeguarding the health, property and public welfare of state citizens. Under this statute, the Florida Department of Natural Resources (FDNR) is empowered to adopt rules and regulations as may be necessary for the administration of this legislation, including the offshore waters of the State (Chapter 377.22 F.S.) In general, the regulation of oil and gas in submerged lands is vested in two separate statutes, Chapters 253 and 377 F.S. with policy established by the State Lands Management Plan and the "Sovereignty Submerged Lands Management Rule". Each of these instruments provides a form of general guidance for submerged lands leasing. Under Chapter 253.45 F.S., ultimate authority is given to the Board of Trustees with primary administrative support provided by the Division of State Lands. For Chapter 377 F.S., the primary administrative support is provided by the Division of Resource Mana@gement of the FDNR. Although there is a statutory basis that allows leasing of offshore waters and development of new offshore resources, the rules, regulations, and state policy are sufficiently complicated that the implementation of this policy is extremely difficult. The end result is that it isn't clear as to whether the State of Florida is supportive of offshore oil and gas 09 development or not. 15 Based on the review of offshore oil and ga.s programs of other states, it has become clear that it is possible to have a leasing program in an environ- mentally sensitive region with proper protection for that environment. The situation in Florida is no exception. That is to say it should be entirely possible to develop an offshore oil and gas leasing program compatible with protection of the environment. The development policy of Florida has not been concentrated on heavy industrial complexes such as has occurred in California and other gulf coastal states. Florida's policies have led to a heavy dependence on light industry, tourism, and retired communities. Even though it is possible to have an offshore program that protects the environment, the political climate of the state may not support it. Therefore, the question of whether an offshore leasing program should be developed is primarily a political decision. Such a policy decision must, however, look at the entire spectrum of oil and gas activities and not just the leasing portion of those operations. Without this policy decision, the implementation of the recommendations which follow cannot occur. A decision on an offshore policy must be formulated. To determine a policy on offshore leasing, the Board of Trustees should have a broad-based advisory group to provide guidance with respect to making a final policy decision. Based on the state's OCS experience, this group should have representation from the environmental community, industry, state and local governments, OCS representative, and a member at large. An Interagency Management Committee was formed in 1980 for the purpose of reviewing state policies and advising the Governor and Cabinet. if this Committee is sanctioned eventually by the Florida legislature, it might represent a vehicle for fulfilling this role. 16 Recommendation Ia. That the Board of Trustees of the Internal Improvement Trust Fund establish a policy for initiating an oil and gas environmental protection program in state territorial waters. 1b. That an ad hoc advisory committee be established to provide broad-based input to the Trustees in developing such policy and that this committee be supported with adequate funding and staff. 2. Development of an Offshore Comprehensive Leasing Program Comment Historically, interest in oil and gas exploration in Florida's offshore waters dates back to the early 1940's, as summarized in Table 4. This early historical interest resulted in large lease blocks as reflected in Table 5. These leases were modified in 1976 and will remain in effect until the year 2016. An effective offshore oil and gas leasing program will require the development of a comprehensive plan. Accordingly, a five to ten year overall plan addressing potential oil and gas activities in Florida's territorial waters should be developed and continually updated, consistent with: The state policy. The already approved Conceptual State Lands Management Plan. Balanced public utilization. OCS oil and gas planned sales and exploration efforts. The state's position with regard to OCS leasing. Regional planning council goals. Revenue structure of the state. Flexibility to permit routine updating of the program. The importance of having management plans for the use of state owned lands was emphasized by the Florida Senate Natural Resources and Conservation 17 TABLE 4 Historical Summary of State Leasing Programs* Leases Wells Production Lease Sales Schedule First Number Average First Number Initial Current (Frequency of Sales) Offshore Issued Size (Acres) Drilled Drilled Production Status To Date To Date Date Florida Early 19 ? to 1945 29 Non- Non- N.E. 1940's 2.3 million Producing Producing Alabama 1950's 182 4,150t 3 1951- <20 Non- None produced N.E. 1952 Producing to date. First production will be 1987 Alaska 1958 3,377 5,760 1898 No Data 1902 In Production January, May & September each year California 1929 59 2,668 1896 43,8383 1932 In Production N.E. Louisiana 1920 900 total 1,000+ 1901 18,5064 1928 In Production Monthly 742 since 1960 Mississippi 1982 2 2,880 None 0 Non- Non- N.E. Producing Producing North 1944 5 5 1946 4 drilled Non- Non- N.E. Carolina offshore Producing Producing South None 0 2,500 6 None 0 Non- Non- Carolina Producing Producing N.E Texas 1922 422 640/1,440 1938 8167 1940 In Production April and October each year 1. None established. 2. Currently leased. 3. based on 1982 figures. 4. As of 1980. 5. Average @ 1976 sale several thousand acres. 6. Maximum acreage allowable. 7. Wells in currently leased fields. Data provided and reviewed by respective state officials. TABLE 5 FLORIDA LEASEHOLDINGS OF THE COASTAL PETROLEUM COMPANY** RESIDUAL ROYALTY INTEREST ROYALTY INTEREST WORKING INTEREST ACREAGE PRODUCTION (COASTAL PETROLEUM) OF STATE LEASE LOCATION (Million Acres) STATUS OIL & GAS MINERAL OIL & GAS MINERAL OIL & GAS MINERAL 248 Lake Okeechobee 0.45 N.P.1 0 0 1/8 1/10 100% 100% _-9t. -John's River 0.20 N.P. 6.25% 5% 0 0 0 0 and inland lakes 224A, B Appalachicola Bay to Naples Inner Area: 2.30 N.P. 6.25% 5% 0 0 0 0 0-4.36 miles from shore Outer Area: 0.80 N.P. 0 0 1/8 1/10 100% 100% Total Lease Area = Approximately 3.7 Million Acres Annual Lease Rental = $59,247.00 Lease Term = 40 Years Pursuant to Agreement dated January 6, 1976 Lease Expiration Date = January 6, 2016 Source: Florida Department of Natural Resources 1N.P. = Non-Producing Committee in a December 1979 management study on state owned lands. The study found that the Division of State Lands (FDNR) was very possive in terms of land management of state owned lands. The report. stated that "without detailed plans and continuing supervision, the land is often subject to conversion, trespass, abuse, or underutilization as a state owned resource." A survey conducted by the Senate Committee revealed that only 5 of 11 agencies, who manage lands which have titles vested in the Board of Trustees, submitted evidence of a general plan or policy regarding real property management. Of the 185 parcels sampled, only 25 site specific detailed plans were furnished. The Committee report further stated that: "Through the issuance of leases or even management agreements, the board has simply delegated its authority to the using agency. The lack of an adequate inventory of state owned lands has created a potential setting of mismanagement based on neglect. . . . without some form of planning or policy making, land management can degenerate into ad hoc, directionless decision making which may not serve the public interest optimally." (Office of the Governor, Office of Planning and Budgeting, March 1982, "An Evaluation of the Department of Natural Resources State Lands Management Programs", p.38.) Recommendation: That a comprehensive oil and gas leasing program be developed specifically for offshore waters to provide for more effective resource management safe- guards, environmental protection, and obtaining just revenues for the state. 3.. Development of a Pre-leasIng Environmental Study Program comment Before activating an offshore oil and gas leasing program in state offshore waters, it will be necessary to acquire essential environmental data describing potential. lease areas. There are many ongoing state and federally funded programs related to the impacts of oil and gas activities. There is, however, no long term comprehensive plan which ensures that data generated by 20 these studies will be interpreted and used within the context of a state offshore oil and gas program. Accordingly, the state should undertake a structured marine environmental studies program in support of F.A.C. 16Q-21.04(2)(K). Such a program could be implemented through the FD1qR and the State University System (SUS). Although there have been numerous literature surveys and compilations of environmental data by EMS and the state, additional data are available and should be entered into existing data banks. This updated data base could form the basis for developing a comprehensive long term plan for a mission- oriented environmental study program to generate data for offshore management decisions. The data, once organized, also would provide a preliminary basis for evaluating geographical areas which may be considered for oil and gas leasing. The state's analysis of OCS activities indicates that existing state environmental programs underway cannot generate the management information necessary for leasing in offshore waters. The importance of obtaining relevant environmental data prior to issuing offshore leases cannot be over-emphasized. In order to achieve this goal it will be necessary to begin collecting these data at least four to five years ahead of initiating any additional leases in offshore waters. Data currently available suggest that oil and gas leasing interest in stat-e-owned waters will most likely be focused in areas not presently leased in the offshore area of the West Florida Panhandle and off the Keys for the next decade. Scheduling of leasing in state waters should be keyed to geologic interpretations from upcoming drilling in the OCS and from yet-to- be-conducted industrial seismic investigations in state waters. Exploratory well completions in the OCS will be nearly in phase with the start of consideration for leasing in state waters and will coincide with the recommended 4-5 year environmental study program. 21 Recommendation: That a comprehensive long range pre-leasing study program supported with adequate funding and staff be initiated for the purpose of acquiring environmental data in state offshore waters showing potential for oil and gas development. 4. Restrictions on Offshore Lease Sales Comment Examination of the oil and gas activities in other states indicates that without the proper environmental data to make leasing management decisions, environmental problems might be caused by oil and gas activities. It is the State of Florida's OCS policy that leasing should not occur in federal waters without adequate environmental data prior to the implementation of a leasing schedule. Similarly, in the territorial waters of the State of Florida, leasing should not occur prior to the acquisition of adequate environmental data. This reconmendation is consistent with recommendat ions contained in the Coastal Energy Facilities Siting Study published in December, 1982 by the Tampa Bay Regional Planning Council. Recommendation: That no oil and gas leasing takes place in Florida's territorial waters until such time as the necessarX environmental data are obtained. 5. - Mineral Leasing Comment As stated in Chapter 253.45, F.S., "The Trustees may sell or lease any phosphate, earth, or clay, sand gravel, shell, mineral, metal, timber, or water, or any other substance similar to these resources, in, on, or under any land the title to which is vested in the State. The proceeds of such sales or leases are credited to the Board, department, or agency which has title or control of the land involved." 22 The leasing of the State's mineral interest has mostly been exclusive to oil and gas exploration and drilling. Very few mining leases have been granted mainly because the leasing of the State's exploitable resources has historically been triggered by private persons or groups who desire the right to the resources on specific parcels of state owned land. Another f actor which has hindered leasing of the mineral interest is the lack of a compre- hensive inventory and assessment of mineral interest leases. The inventory of mineral interests is nearly complete. Rather than leasing mineral interests, applications have been received for re-leasing or selling mineral interests primarily for phosphate mining operations. Applications have been scarce since the State has a real interest in these lands and desires to collect royalties on the mining operations (Office of the Governor, Office of Planning and Budgeting, March 1982, "An Evaluation of the Department of Natural Resources State Lands Management Program", p.33) 46 None of the states examined during the course of this study combined oil and gas leasing with mineral rights. The f ederal government also separates leasing of oil and gas f rom non-energy resources. At the present time in Florida, mineral leases are handled separately by the FDNR including the use of a separate lease form. Considering the state's concern for its environment, it must be recog- nized that the environmental problems associated with the development of offshore non-energy mineral resources far exceed those potential ones associ- ated with oil and gas. Recommendation: That any minerals not defined as constituent products in the current oil and gas lease form in the State of Florida shall not be considered as part of an offshore oil and_gas leasing program. 23 Introduction The foregoing pages contain policy recommendations essential for initiating an offshore oil and gas leasing program for Florida's territorial waters. On the assumption that a policy decision will.be made to initiate a separate comprehensive leasing program for offshore waters, the following recommendations address major program elements and issues necessary for the implementation of that policy decision. They draw upon existing Florida law, the lessons learned from examining the oil and gas programs of other coastal states, and the unique requirements of the State of Florida. 1. Development of Leasing Program Consistent with State Policy Comment As shown in Tables 6 and 7, the management responsibilities for state environmental programs are distributed among two or more agencies in most states. Florida is no exception. It is accepted generally that the statutory authority and management structure necessary for environmental control of oil and gas operations in Florida currently is in place. A detailed discussion of Florida's existing environmental regulatory procedures is contained in the Florida report (Volume I). Interviews with agency officials reveal that while the statutory responsibilities for leasing and permitting are well defined, there appears to be a need for closer cooperation between the FDNR and the Department of Environmental Regulation (DER) with respect to the implementation of environmental lease/permit procedures. This could be achieved, at least in part, by establishing a formal Memorandum of Understanding for offshore 25 TABLE 6 State Environmental Res ponsibilities and Policies* A B Relationship Between Baseline Environmental Role of Corps Policy Concerns Respons ible Leasing Agencies Programs of Engineers Agencv Agency N.S.P.1 Florida Dept. of Dept. Formal agreement Independent research, Environmental Wide range of Adverse effects on Environmental of Natural joint application regional, and site permitting attitudes tourism, environment, Regulation Resources process specific data collect- phase toward and community ing for permitting development Alabama Department of Dept.of Formal "Remorandum N.S.P. No direct role Strong support Although few state Environmental Conser- of Agreement" but State geological in leasing pro- for exploration environmental re- lanagement vation & no clear under- survey conducts in- cess; does in- and development strictions, there is Natural standing house studies; most fluence the per- of oil and gas is a qualified zero Resources stipulations based on mitting process resources (esp- discharge policy available data ecially with 1979 discovery of gas in Mobile Bay) Alaska Dept. of Dept. of DEC is lead entity Dept. of Fish and Primarily con- Wide range of Arctic area production Environmental Natural for dept. review of Game conducts baseline cerned with attitudes to- effects on whale mi- Conservation Resources other state agency and applied research dredge and fill ward develop- gration route and programs as they re: oil and gas activ- permits ment Eskimo-whale inter- impact environment- ities action al quality California Shared 2 State Memorandum's of SLC and State Water Re- Primarily con- Very cautious Strong environmental, Lands Understanding sources Board carry out cerned with development especially with state Commission baseline studies prior to structures, policy history of oil spills (SLC) development of an area dredge and fill permits Louisiana Office of Con- Dept. of No direct N.S.P. Issues permits Strong economic No environmental review servation Natural relationship with respect and social sup- prior to leasing, no Resources to 404 clean port of cont- shoreline buffer zone water program inued oil and (drilling can occur any- gas development where Mississippi Dept. of Dept. of Formal "Memo- D.W.C. supports issues dredge Preservationist Buffer zones around_ Wildlife Natural randum of Agree- research for data permits with policy tempered environmentally sen Conservation Resources ment" which facil- base, integrates other respect to 404 by need to dev- sitive areas itates cooperation data and develops guide- clean water elop resources lines program North Dept. of Council D.N.R.C.D. pro- Coastal energy impact Issues permits No official No general environ- Carolina Natural of State vides recommend- programs to chart with respect to policy on oil mental stipulations Resources ations on oil & gas estuarine resources 404 clean water & gas leasing addressing offshore & Community leasing program in state waters, oil and gas leasing Development statutes allow (no current leases leasing if in or drilling in state best state waters) interest South Water State Exclusive Conducted through Not Clear Current attitude Drilling platforms must Carolina Resources Budget agent State wildlife and is neutral, no be greater than I mile Commission & Control outside agency grants. current plans from beach No overall plans of fund- for offshore ing offshore environ- drilling mental research Texas Parks and General Informal cooperation N.S.P. Not directly Strong support Has developed series of Wildlife Land through Governor's Environmental leasing involved in for continued environmental recommend- Service Office Office codes derived from leasing process, oil and gas ation codes for lease previous experience, serves as en- development tracts prior research pro- vironmental with concern grams, and scientific permitting for environ- literature enforcement mental pro- I arm of state Itection I 1. No specific program for oil and gas leasing 2. Dept. of Resources, Dept. of Fish and Game, Minerals Management Service, National Marine Fisheries Service 3. Department of Health and Environmental Control *Data provided and reviewed by respective state officials. 26 0 TABLE 7 Delegation of Management Responsibilities for State Leasing Programs l Lease Lease Sale Lease Permit Environmental Recommendation Management Administration Authority Regulation 0 V4 U 9: 41 to 14 @4 0 9; r. 1: W CMU 0 r. (d >1M-r4 -1 4) bo 0 0 0W 0 0 0 -H 0 r -H W 41 41 .0 0 P 41 W W (U 0 4j 0 EzW aW >1 41 0 .00To 0 0 U -H C: W @4 Cj 4j 4j 0 W4j 4j 0 4j 0 41U 41 PWP W 41 0 > 0 0 r-I :3 Q $4 0) 0q" 14 -H -H r-4 0 Managing Agency 0) W U rq UW r. 00. 0.0 -W -H .0 14 I-q 10 0 00 0) 44 r-4 -H0 Cd0 W 41 to cc Cd r-A UM" "0 a 0 -W --1 0. 11 0 0.U Cd r. -H V. 41 P.,V or Department ra 0 P > W0) q00 -H" o W U -H X 14 W W0 W 0 $3600 0 0 V Florida Department of Natural H E- W P C4 @-4H:ic (nZ 9L. -.40 W CZ P4 04 PI 04 UWZ @Ic A4 04 -4, Resources - X X X X XX X X X X X X X Dept. of Environmental Regulation X X X X Alabama Department of Conservation and Natural Resources X X X X X, X X X State Oil and Gas Board XIX I X X- Department of Environmental X Management X X X Alaska Department of Natural Resources X X X X X X X X X XX X California State Lands Commission X X X X X X X I X X X1 XX X 8,9 X Department of Conservation X. X X X X XX Coastal Commission I X X Louisiana State Mineral Board X X- X XX1 X X X- 2 1 3 X 3 X Mississippi Department of Natural Resources X X X X X X X X X Department of Wildlife Conservation XX X X X X X State Oil and Gas Board X X X1 X 4 North Department of Natural Carolina Resources and Community Development X X X X X X. X X X X XI XIX X X Department of Admiiiistration South Water Resources Commission @-X Carolina X X X X X X X X I xl-x.-XT-XTX-I-X. Texas General Land Office X X X X X X X X I X-1 5 151 Ix - FXLE 6 1. Department of Environmental Management 2. Office of Con;ervation. 3. Department of Natural Resources 4. Bureau of Pollution Control 5. Director State Railroad Commission 6. Corps of Engineers 7. Department of Health and Environmental Control 8. Air Quality - Local Air Pollution Control District 9. Water Quality - Regional Water Quality Control Board *Data provided and reviewed by respective state officials. oil and gas operations. A major objective of such an agreement would be to identify the necessary environmental stipulations and controls prior to the award of offshore leases. Such an arrangement has been initiated successfully in other coastal states. It also would be consistent with the recommendation made by the Governor's Office of Planning and Budgeting in March 1982 in a report entitled "An Evaluation of the Department of Natural Resources State Lands Management Program" that "The DER and DNR should develop a formal Interagency Memorandum of Agreement which specifies how the state lands management program and the dredge and fill permitting program will be coordinated". It has been recommended previously that Florida establish a comprehensive state policy for offshore oil and gas leasing. When the state does develop such a policy together with the recon ended management plans, the program recommendations which follow should be reviewed for compliance with these newly developed policies and plans. Recommendations: la That a Memorandum of Understanding be established between the Department of Natural Resources and the Department of Environmental Regulation pertaining to lease/permit programs for offshore oil and gas operations. lb *That all program recommendations which follow or are developed in the future be examined for consistency with the offshore oil and gas policy to be established by the Board of Trustees/Governor and Cabinet. 28 322. Establishment of a Leasing Advisory Board with Supporting Committees Comment The decision-making body for offshore oil and gas operations is the Board of Trustees of the Internal Improvement Trust Fund. In support of the Board of Trustees, an offshore oil and gas Leasing Advisory Board should be established with two subcommittees for the purpose of guiding the development and implementation of Florida's offshore oil and gas program. Specifically, an environmental/ scient if ic committee should be established to advise on environmental studies and their management, and a technical committee should be formed to provide planning input on proposed lease areas, lease sales, and acceptance of bids. The Leasing Advisory Board should consist of representatives from organizations such as: the legislature, the environmental community, industry, local governments, regional planning councils, OCS representative, 40 fishing industry, and a delegate at large. The environmental/ sc ientif ic committee should include representatives from the DNR, the DER, the SUS, the State Department of Fish and Wildlife, the OCS, and a member at large. The technical committee should include representatives from organizations such as: the FDNR, the DER, Department of Commerce (DOC), the Department of Community Affairs (DCA), the Office of the Attorney General, the@oil and gas industry, and a member at large. The chairmen of each of the two subcommittees should serve-a's ex-officio members of the Leasing Advisory Board. Figure 2 depicts the organization of the Leasing Advisory Board and the two subcommittees. 29 FIGUPE 2 ORGANIZATION OF LEASING ADVISORY BOARD BOARD OF TRUSTEES OF THE INTERNAL IMPROVEMENT TRUST FUND LEASING.:. ADVISORY BOARD ENVIRONMENTAL/ TECHNICAL SCIENTIFIC COMMITTEE COMMITTEE Recommendations: 2a That a permanent offshore oil and gas Leasing Advisory Board be formed for the purpose of providing guidance to the Board of Trustees of the Internal Improvement Trust Fund with resp ct to the development and management of oil and gas operations in offshore state waters. 2b That an environmental/ scientific committee and a technical committee be formed to serve as staff to the Leasing Advisory Board recommended in 2a. 3. Recommended Charges to the Leasing Advisory Board The Leasing Advisory Board must consider a number of factors to ensure adequate environmental protection for Florida's waters in the event that oil and gas leasing takes place in the future. The following are charges that should be considered at the outset. Comment a. Resource Planning (1) Establishment of Grid Patterns for Offshore Waters Comment: A detailed geographical description of Florida's territorial waters is contained in the Florida report (Volume I). Second only to Alaska in length of coastal shoreline, Florida has the most diverse characteristics of the Gulf coastal states as seen in Table 8. It also is seen in Table 8 that Florida is the only coastal state reviewed, other than South Carolina, that has not laid out offshore lease blocks. 31 TABLE 8 GEOGRAPHICAL DESCRIPTION OF STATE TERRITORIAL WATERS COASTLINE NUMBER COASTAL DESCRIPTION LENGTH OF SEAWARD DEFINED (M LES) FRONTING BOUNDARY TERRITORIAL LEASE BARRIER ESTU- INEAR TIDAL COUNTIES DISPUTES BOUNDARY AREAS ISLAND REEFS ARIES MARSH BEACH FLORIDA 1,350 8,426 33 None 3 nautical No X X X X X although miles in OCS-state Atlantic boundar- 3 marine ies have leagues not been (10.35 legally statute identi- miles) in fied in Gulf Atlantic ALABAMA 52 607 2 Legal 3 nautical Yes X X X X Boundary miles W/Missis- sippi not firmly es- itablished ALASKA 69640 33,904 24 State and 3 nautical Yes X X X X Federal miles Jurisdic- tion in Dispute CALIFORNIA 840 3,427 18 inc. None 3 nautical No X X X X X San miles Fran Bayl LOUISIANA 397 7,721 11 Missis- 3 nautical Yes X X sippi miles Boundary In Dispute MISSISSIPPI 44 359 3 Alabama & 3 nautical Yes X X X X Louisiana miles Bounda- ries in Dispute NORTH 301 13,375 8 None 3 nautical Yes X X X X CAROLINA I miles SOUTH 187 2,876 8 Georgia 3 nautical No X X X X CAROLINA Boundary miles In Dispute TEXAS 367 3,359 12 State & 3 marine Yes X X X X Federal leagues Jurisdic- (10.35 n:uti- tion in cal mile Dispute I Data provided and reviewed by respective state officials. 1from: Information Please Almanac, 1983 A & W Publishers, Inc., N.Y. 32 To facilitate long range planning, the development of an environmental studies program, and the protection of marine resources, it is important that steps be taken to establish an offshore grid system in Florida's waters.. As described in the Florida report (Volume I), the Governor and Cabinet have approved an extension of the Federal OCS grid lines into state waters with a superimposed 1000 meter block size. These blocks should be numbered sequentially to avoid a piecemeal block numbering lease-by-lease approach as has occurred in the past. This would serve both to delineate areas in which leases might be awarded and to identify those areas excluded from leasing considerations. Mapping should begin as soon as possible for west Florida offshore areas because of current OCS leasing activities. (2) Development of Planning Regions Florida's offshore territorial waters should be divided into lease planning regions. In selecting these planning regions a number of factors should be taken into consideration such as: environmentally similar areas in which general environmental stipulations can be applied during lease sales; onshore site facilities which have been identified by the regional planning councils; and political considerations. The state has identified in its OCS deliberations environmentally similar areas as shown in Figure 3. It will be noted that these regional planning areas do not agree exactly with the existing Regional Planning Council Areas for 33 Figure 3 State OCS Offshore Planning Regions and Regional Planning'Council Areas of Florida West Fla. RPC Apalachee N.E. Fla. RPC North Central Fla. RPC RPC Withla- cooch RPC Edst Central Fla. RPC Tampa y C Trea e Coas RPC South- west Flz RPC South Fla. RPC 34 the State of Florida. Within these planning regions, blocks or parts of blocks could be excluded based on the following: Exclusion Area (drilling prohibited by law) I mile of shoreline; aquatic preserves; 1 mile of local, state, or federal park or wildlife preserve; freshwater lakes, rivers or streams; bays or estuaries; areas requiring local government consent. Avoidance Area - (area of known but perhaps undocumented or suspected environmental, historic, resource, or economic value.) coral reefs; live bottoms; nursery areas, especially for endangered species; seagrass beds; shipwreck sites; rookeries; turtle nesting areas; marine breeding grounds; military use areas; navigation safety areas; Avoidance areas should be considered for leasing only after a thorough data analysis resulting from the environmental study program has been completed. These 35 analyses may result in recommendations for Exclusion Area, or require stringent environmental safeguards as part of the lease stipulations. 46 Leasing Areas - remaining areas within a lease planning area not identified as Exclusion or Avoidance in which nominations for lease may be made. Recommendations: 3a(l) That a grid pattern be laid out in Florida's territorial waters with initial leasing planning regions to be selected based on current OCS oil and gas activities. Recommendation: 3a(2) That the state be divided into offshore planning areas for the purpose of determining excluded areas, avoidance areas, and leasing areas, within their respective grid patterns. b. State and Local Jurisdiction Over Offshore Waters (1) State Jurisdiction Comment: As can be seen in Table 9, in coastal states the, statutory authority for leasing and managing submerged lands may be vested in bodies of elected or appointed officials, or in a single appointed official. Of the nine coastal states reviewed, Florida, with its seven-member elected Board of Trustees of the Internal Improvement Trust Fund and constitutionally-based public interest standard, appears to 36 TABLE 9 STATUTORY AND VESTED AUTHORITY FOR STATE OIL AND GAS LEASING PROGRAMS GOVERNING BODY STATUTE APPOINTED (A) NUMBER OF STATE NUMBER NAME ELECTED (E) MEMBERS FLORIDA Chapter 253, Board of Trustees of the E 7 253.03 (1) Internal Improvement 1982 Supplement Trust Fund ALABAMA Alabama Code None - Leasing A - �9-17-60 to Authority held by �9-17-62 Commissioner of Conser- vation and Natural Resources ALASKA Alaska Statute None - Leasing A 38.05 Authority held by Commissioner of Natural Resources CALIFORNIA Public Resources State Lands Commission A,E1 3 Code, Div. 6, Part 1, Chpt. 4, Article 1, 6301 LOUISIANA Louisiana Code, State Mineral Board A 92 Title 30, Section 124 MISSISSIPPI Mississippi Code Commission on Natural A 7 Ann. ��29-7-1 Resources et seq. (1972 and supp. 1982) NORTH CAROLINA General Statutes Depart. of Admin., Dept. E 10 �146-8 at. Res. & Community Devel., the Governor and Council of State SOUTH CAROLINA South Carolina State Budget and E4 5 Code �48-43-390 Control Board TEXAS Texas Code Chptr. School Land Board A,E3 3 52, subchptr. A, 1�52.04 1 The Commission consists of the State Controller and the Lieutenant Governor 2 (elected) and the State Director of Finance (appointed). Additionally, the Governor and the Secretary of the Department of Natural 3 Resources serve as ex-officio members. The Board consists of the elected Commissioner of the General Land Office 4 and 2 appointed citizens, one by the Governor and one by the Commissioner. The Board consists of 5 ex-officio members: Governor, Treasurer, Comp- troller General, Chairman of Senate Finance Committee, Chairman of House Ways and Means Committee. Data provided and reviewed by respective state officials. 37 of f er good protection in the use of state submerged lands. The Board of Trustee's authority to control Florida's sovereignty tidal ,lands, however, is tempered with the requirement that all sovereignty land's management decisions conf orm. to the public interest standard contained in Article X, Section II, of Florida's Constitution. With respect to oil and gas leases, the Board of Trustees has adopted an even more stringent standard, requiring that leases be approved only when certain specified environmental constraints are satisfied. A detailed discussion of the above responsibilities of the Board of Trustees and of Florida's public interest standard is included in Appendix A, of the Florida report (Volume I). Chapter 253.47 F.S. empowers the Trustees to lease offshore lands under conditions similar to onshore leasing. Given the fact that Florida's current oil and gas leasing legislation/policy has been oriented primarily towards onshore activities, consideration should be given to offshore lands as a spearate entity. The difference in the offshore and onshore areas is clearly acknow- ledged at the federal level based on the environmental, management, and legal aspects appropriate to each area. The state should follow this example by developing distinct offshore lands legisla-_ tion for oil and gas operations. 38 Recommendation: 3b(l) That Chapter 253 F.S. be amended to more specifically and thoroughly address oil and gas leasing in state offshore waters. Recommendations contained in this document should be given major emphasis in this process. (2) Local Jurisdiction Comment: Local governments can exert control over activities in state waters in several ways including annexation, taxation, regulation. (police power), and through statutes and local ordinances affecting leasing. Each of these controls is discussed in detail in Appendix B of the Florida report (Volume 1). While the manner in which taxes are levied and police Go power applied is established clearly by statute and by precedence, the authority of municipalities to extend their boundaries into state waters is not clear. Table 10 summarizes the annexation authority of seven coastal states. It is seen that annexation is handled quite differently among these states, ranging from clear cut rules in Texas and California to the absence of rules at all in Alabama and Mississippi and, for the most part, Florida. Because of the complexities involved in the annexation of state waters, it is an issue that Florida should address well in advance of anticipated offshore oil and gas lea-sing. 39 TABLE 10 Authority of Local Governments to Annex State Territorial Waters* County Municipality Florida Jurisdiction includes state only by legislative enactment waters; no statutory annex- consistent with "Municipal ation authority Annexation or Contraction Act." No case history exists. Alabama Jurisdiction includes state Not addressed in constitution waters - although not defined by statute Alaska Jurisdiction includes state Controlled by state appointed waters within burrough bound- "Local Boundary Commission" aries established by statute California Jurisdiction includes state Established statutes permit waters - defined by statute cities to annex state waters with approval of State Lands Commission Louisiana Jurisdiction of parishes in- Statutes do not address - can be cludes state waters done by petition and election or by petition and ordinance Mississippi Constitution still claims Not addressed in constitution that state and county juris- contained in city charters No diction extends 6 leagues case history gulfward North Jurisdiction includes all Not addressed. Carolina estuarine waters within county boundaries, waters seaward of barrier islands are not included. South Tidelands are presumed owned See explanation under county. Carolina by the state although cities may assert some proprietary interests and annex or tax submerged lands if oil or gas is developed. Texas Jurisdiction includes state General law, cities can extend waters 1 mile, home rule cities 3.5 miles gulfward Data provided and reviewed by respective state officials. % 40 As discussed in Appendix B of the Florida Report (Volume I), three possibilities exist for uniformly managing municipal annexation of coastal waters. First, the legislature may do nothing and allow annexations of territorial waters to proceed under the existing Florida Statute Chapter 171. Such annexations would meet many problems and could be litigated for years to come. Second, the legislature could unilaterally establish municipal boundaries by fixing the water boundary for each coastal city. Any attempts further to annex state territorial waters could be prohibited. This method would require city-by-city implementation, since the current jurisdiction of each coastal city differs. Finally, the legislature could enact a new statute designed to accommodate annexations of territorial waters. This alternative involves weighing many policy considerations, primarily whether it is wise to allow such annexations at all. Criteria for annexing lands would have to be selected carefully. However, with growth within the state accepted as inevitable, and with industrial developments taking place at an ever increasing rate within Florida's territorial waters, the state should determine whether coastal cities should be allowed to grow both inward and outward to accommodate new technologies and needs of the citizens. Coastal local governments in Florida also have broad powers to control whether the state can issue oil and gas 41 leases in specified areas. Chapter 253.61 F.S., enacted in 1945, gives local municipalities and counties a veto power if the proposed lease lies within certain geographic and political boundaries. The statute does not, however, clearly define the areas over which such power can be exercised. Some parts of the statute are ambiguous; other parts are almost incomprehensible. There have been no reported court decisions to aid interpretation. The only authority interpreting the statute is a 1958 opinion by the Attorney General of Florida, which analyzes a tangential point and is thus of little assistance. In summary, if Florida is to meet the combined needs of coastal management and resource development, it must clearly identify the interactive rules of state and local governments with respect to oil and gas activities in offshore waters. For additional discussion of these issues see Appendix B of the Florida report (Volume I). Although not defined within the study objectives of this project, annexation and revenue issues are bound inextricably to the leasing process. Not only do they impact on specific terms of the oil and gas lease form itself, but they must be resolved to allow the state to develop a more cohesive offshore leasing policy and to provide industry with hard data -on which to base future decisions on undertaking oil and gas operations in Florida waters. Further, a clearly identified role of local governments should ensure a more cooperative approach and enhance the quality of the tough decisions 42 related to environmental issues that will be f aced in the coming years. This could be accomplished either through provisions in the previously proposed submerged land legislation, through Chapter 171 F.S. "Municipal Annexation or Contraction Act". through revisions in Florida Statutes Chapters 125 - "County Government" or 166 - "Municipalities", or through the creation of a new statute. A convenient way of handling issues associated with annexation of state waters has been devised by the State of Alaska. The Alaskan Constitution provides for the establishment of a Local Boundary Commission in the executive branch of the state government. It consists of five members appointed by the Governor for overlapping five year terms. The Commission is empowered to consider proposed changes to local government boundaries. This section of the constitution establishes two methods of local boundary alteration: 1) through direct action of the Local Boundary Commission subject to legislative disapproval; and, 2) through establishment, by the Commission, of procedures for the adjustment of boundaries by local action. The Local Boundary Commission is a unique feature of Alaskan Law. The framers of Alaska's Constitution intended to provide an objective administrative body to make state-level decisions regarding local boundary changes in order to avoid the chance that a small, self-interest group might prevent boundary changes otherwise in the public interest. A detailed discussion of Alaska's Local Boundary Commission is contained in Appendix B (Volume 11). 43 Recommendations: 3b(2) That the state clarify by statute the authority of coastal municipal governm ents to annex state offshore waters. C. Environmental Study Program (1) Implementation of the Study Program The need for initiating an offshore oil and gas environmental study program was discussed previously. The implementation of the results of such a program to protect the Florida's marine resources will play an important part in the development of the leasing program. For example, it could form the basis for the identification and mapping of exclusion areas, avoidance areas and leasing areas as described previously. Further, it could form the basis for lease stipulations which can be applied to specific sales within planning regions. The results of the study program also will form the basis for informing industry, during the pre-leasing phase, of requirements which they should consider in preparing their response to the leasing schedule. Texas has an excellent system of providing information on environmental restrictions to potential lessees. Lease sales are announced through a Notice for Bids booklet, which contains a description of the land tracts offered for lease and a request f or bids. Since 1972, the booklet also has contained environmental codes pertaining to submerged blocks located in bays, estuaries, and the Gulf of Mexico. These 44 codes inform potential lessees of the concerns of certain state and federal agencies that might constrain oil and natural gas operations. Each submerged block nominated for lease sale is assigned one or more two-letter environmental codes. The codes are suggested guidelines for the conduct of activities within the tracts and are designed primarily to encourage the protection of biologically sensitive areas. Codes include restrictions and precautionary measures to minimize adverse impacts from drilling, dredging, spoiling, and associated activities. The coding process accomplishes three goals. First, the codes suggest operating procedures that encourage the protection of sensitive natural resources. Second, the codes assist potential bidders and lessees in developing plans that are likely to receive more expeditious approval from state and federal agencies. Third, the codes provide greater predictability in the leasing process by somewhat reducing the uncertainties associated with the development of state-owned submerged land. This system is described in detail in the Texas report contained in Volume II. Alaska also has a plan specifying environmental stipulations to provide safeguards for protection of the marine environment. This plan, which is managed by the Alaska Department of Natural Resources (ADNR), requires that maps and explanations of the sequence and scheduling of operations be prepared, that the projected use requirements associated with 45 proposed operations be identified, that a document be prepared describing how the operating procedures have been designed to minimize adverse effects on, other resources as well as historical and archaeological sites, and finally, plans be made for rehabilitating the lease area following the production phase. Although Florida does not have sufficient offshore environmental data to establish specific block environmental codes, the establishment of a code system for the recommended lease planning regions at this time will provide a framework into which data obtained f rom the recommended environmental studies could be placed. The environmental stipulations and codes should be developed f or lease planning regions by recognized experts in the relevant scientific disciplines over the next 4 to 5 years based on existing data and the results of the recommended environmental study program. A set of specific minimum criteria similar to the state's policy on OCS leasing should be established as environmental stipulations for the leasing program. These stipulations would be considered as minimum criteria in each lease planning region and would not preclude additional stipulations as, determined necessary by site-specific characteristics. Such stipulations should be circulated by the State Planning and Development Clearinghouse (Office of the Governor) and/or a select committee of technical experts. In this regard, the federal system of interagency review, environmental stipulations, and operating orders should be considered. 46 Recommendations: 3c(l)(a) That minimum environmental lease stipulations be established for each planning region identified in recommendation 3a(l) and based on the results of the environmental study program. 3c(l)(b) That an offshore environmental resource management code system, similar to that now used in Texas, be examined for lease planning regions and for site specific stipulations in Florida. c(2) Funding of the Study Program In environmentally sensitive states such as Alaska and California, the need for pre-leasing environmental studies has been recognized. Although Alaska does not have an environmental research program devoted solely to gathering data related to offshore oil and gas development, it has a comprehensive plan designed to generate such data. For example., approximately $150,000 a year is provided to the Alaska Department of Fish and Came by the ADNR for conducting literature searches and preparing environmental analyses of proposed state oil and gas lease sales. The Minerals Management Service (MMS), the National Marine Fisheries Service (NMFS), and the North Pacific Fisheries Management Council have funded, through the state, environmental studies in offshore waters, the results of which have been used for making management decisions. These data also have been applied to the decision processes for Alaskan oil and gas sales. 47 California, while not having an environmental research program dedicated to its offshore oil and gas operations, has stipulations in the lease based on available data on the lease area. For example, "Notwithstanding any other provision of law to the contrary, no leases shall be let for the extraction of oil and gas from coastal tidelands or submerged lands in state waters within the Santa Barbara Channel unless the commission determines that such a lease will not result in the see page or spillage of oil (either by finding that safety and containment devices to be used are sufficient to prevent such seepage or spillage or that no seepage or spillage would result in any event) or in the destruction of scenic or aesthetic values" (Public Resources Code, Div. 6, Part 2, Ch. 3, Art. 4, 6870). Further details of California's program are contained in Volume II. Since Florida does not have an ongoing offshore leasing program generating revenue, which could be applied to an offshore environmental study program, the recommendations made in the policy section will. require some form of front-end financing. Examples of sources from which such financing could be obtained include direct funding from the legislature similar to that in the Alaska DNR, a percentage of the severance taxes derived frow the present onshore oil and gas production, or from the state's oil spill contingency fund. The latter two would require a change in the existing statutes. The Leasing Advisory Board should be charged with examining these three sources as well as other appropriate sources of funds. 4F Once an off shore leasing program is in existence and generating revenue through bonuses, royalties, and rentals, 0 the funding of the environmental study program could be obtained from these sources. It should.be realized, however, that a continuous source of funding must be available without regard to the fluctuations in the revenues produced from sales if a viable environmental study program is to be maintained. Reconmendation: 3c(2)(a) That an adequate funding source be developed to support the long term comprehensive environmental study programs required for exploration, development and production. 3c(2)(b) That the necessary executive and legislative actions be taken to obtain the funds cited in recommendation 3c(2)(a) from existing revenue. d. Revenues from Oil and Gas Leasing Program Comment: Table 11 summarizes revenues received from oil and gas operations in the nine states reviewed. In general, Florida's oil and gas revenue structure with regard to royalties, bonuses, rentals, and severance taxes is consistent with those of other states. There are, however, some areas in which Florida's oil and gas revenue system might be productively modified. Florida's current method of determining royalties is designed for onshore oil and gas production. Rather than using the distance from production as a basis for establishing 49 TABLE 11. State Revenues From Offshore Oil and Gas Operations Royalties Rentals Bonus (Cash) Severance Tax Consideration Finimum Typical Shut-in Rate (per acre) Delay (per acre) Gas Oil I Florida 1/8 1/8-1/4 twice annual $3.50 per acre N.E. determined by 5%2 8% 2,3 Getty 1968 rental rate first 2 yrs in- competitive lease 1/8 ($1,200) minimum crease @ .50/yr. bidding after 2nd year Alabama 4 set at each 1/6-1/4 twice annual $5 twice annual Determined for ea. 8%5 8%5 lease sale rental rate rental rate lease sale $100/ $200/acre min. 1982 avg. bonus $2406 per acre Alaska 4 12.5%7 20% N.E. Ist yr-$l rate in effect determined for greater of 10% 12.25% 8 2nd yr-$1.50 during year each lease sale gross value or 3rd yr-$2 of abandonment $.064 per 1000 4th yr-$2.50 is maintained ft3 5th yr-$3 fixed 0 California 16 2/3% 20% Average of usually Rarely used determined by None None 3-year produc- $1.00/acre/yr competitive tion bidding Louisiana 1/8 25-30% $25/acre/6mo. none if in 1/2 bonus determined by 7c MCF 12.5% 9 ($500 minimum) production competitive bidding Mississippi 3/16 20% twice delay N.E. $5 specified each 6% 6% rental ($2 minimum) sale North N.E. 1/6 $1/acre/yr(Ist3yr) N.E. N.E. N.E. $.0006/ $.005/ Carolina $2 (4th,5th) 1000ft 3 barrel $3 (after) South 1/6 N.E N.E N.E N.E N.E. N.E. N.E. Carolina I Texas 1/8 1/4 twice annual None if individually fixed separately 7.5% greater of rental rate productive determined with each tract 10 4.6% or ($1200 min) $10.001G.O.M. 4.6c/barrel $ 5.00/other land 1. None established 2. Tax @ wellhead. Due to high sulphur content, severance tax is determined by subtracting interim processing costs between wellhead and final sale from final sale value. 3. Tax @ wellhead. For small wells (Jess than 100 barrels per day) tax for oil is 5% @ the wellhead. 4. 1981 amounts 5. Except @ wells producing 25 barrels or less of oil or 200,000 ft (see *3) or less of gas per day (levied at 4%) or offshore pro- duction @ depths greater thon 18,000 ft below mean sea level (levied @ 6%) 6. Leasing method may vary with each sale. 7. In special circumstances, be reduced to 5%. 8. Escalates to 15% after 5 yrs. 9. Lower for less capable wells. (6.25 and 3.125%) 10. Does not include a $100 nomination fee. *Data provided and reviewed by respective state officials. royalties, a more flexible method would be a sliding scale or options such as those used in California or Alaska (see Volume For example, in Alaska the Commissioner of Natural Resources (ADNR) determines the leasing method to be used for each sale. The leasing method selected addresses factors such as whether royalties are f ixed, bonuses are f ixed, prof it sharing is used, volume of production, etc. Examples of combinations of these factors are as follows: a cash bonus bid with a f ixed royalty share reserved to the state of not less than 12.5 percent in amount or value of the production removed or sold from the lease; a cash bonus bid with a f ixed royalty share reserved to the state of not less than 12.5 percent in amount or value of the production removed or sold from the lease or a fixed share of the net profit derived from the lease of not less than 30 percent reserved to the state; a fixed cash bonus with a royalty share reserved to the state as the bid variable but no less than 12.5 percent in amount or value of the production removed or sold from the lease; a fixed cash bonus with the share of the net prof it derived from the lease reserved to the state as the bid variable; a fixed cash bonus with a fixed royalty share reserved to the state of not less than 12.5 percent in amount or value of the production removed or sold from the lease with the share of the net profit derived from the lease reserved to the state as the bid variable; a cash bonus with a fixed royalty share reserved to the state based on a sliding scale according to the volume of production or other factor but in no event less than 12.5 percent in amount or value of the production removed or sold from the lease; and a fixed cash bonus with a royalty share reserved to the state based on a sliding scale according to the volume of production or other f actor as the bid variable but not less than 12.5 percent in amount or value of the production removed or sold from the lease." 51 The commissioner of the ADNR also can choose to select a sliding scale royalty if more advantageous to the state. The distribution of revenue is another area in which improvement may be possible. Because of the sensitive nature of Florida's coast, there will be active involvement in the development of any future offshore and onshore oil and gas operations by local governments and private organizations. In addition to participating in the decision-making process involving environmental issues, local constituencies should expect to share in the proceeds resulting from offshore oil and gas operations. At the present time, although counties receive a portion of oil and gas severance taxes, municipalities do not. This issue is discussed in detail in Appendix B of the Florida report (Volumes I and II). Revenue sharing, including that generated by leasing, rentals, royalties, as well as severance taxes, could take the form of grants provided to local governments affected by offshore operations use of such funds in specific environmental and educational programs including studies on renewable energy sources, and/or through land purchase programs within the Internal Improvement Trust Fund. Revenue. sharing with municipalities would be consistent with the state's position with respect to OCS revenue sharing with the states. Table 3 summarized the distribution of oil and gas revenues in the nine states reviewed. As shown, Alaska divides its revenues into five areas including a Resources and Energy Facilities Fund. 52 In California, with the exception of revenues derived from state school lands, and other special sources, all oil and gas revenues are deposited into the State Treasury. It should be pointed out that California has no oil and gas severance tax. The distribution of these funds throughout the state is in accordance with priorities prescribed in the Public Resources Code (a process referred to as subvention). In addition, the State Controller annually apportions one percent of the revenues paid to the state under krticle 4 of the Public Resources Code to each city or county having within its boundaries ungranted tide and submerged lands or such other tide and submerged lands granted to it by @he state in which the state has reserved the rights to the mineral deposits contained therein. The total amount apportioned to each city or county in each year may not exceed $75,000 per mile, or fraction of a mile, of ocean frontage within and owned or operated as a park by a city or county and leased by the State Lands Commission for the production of oil, gas and other hydrocarbons, and only in those cases where such ocean frontage is available to the public free of charge for recreational purposes. Any city which is fronted, in whole or in part, by a state and gas lease and which owns or operates a public recreational beach on the ocean is qualified to receive an apportionment. A revised revenue sharing program in Florida not only would allow the implementation of the much needed offshore 53 environmental studies, but could stimulate local participation in continual long-term planning for future oil and gas operations in state waters by establishing at the outset that municipalities will have a role in development and will benefit directly from offshore operations. Recommendations: 3d(l) That the Rules of the Department of Natural Resources, section 15Q-15.08-(9)F.A.C., be amended to add the basis for calculating offshore royalty percentag2s. Instead of basing royalties on the distance from production, a flexible sliding scale method should be devised similar to that used in California and Alaska. 3d(2) That a revenue distribution program be initiated on a statutory basis designating approximately five percent (5%) and/or a maximum amount of the current uplands oil and gas severance tax for coastal and offshore environmental studies; for research on renewable energy sources; and to provide for revenue sharing with local governments likely to be affected-�x offshore oil and gas development. 3e. Operational Orders, Lease Stipulations, and Site Specific Environmental Impacts Comments: Operational orders for exploration and drilling should be specified clearly in the notice to lessees as is done in the OCS sales. The proposed technical committee of the Leasing Advisory Board should establish such offshore operational orders. It is suggested that OCS 54 operational orders be reviewed which have been developed for safety and protection of the environment and f or adaptability to the of f shore waters of the State of Florida. No environmental regulatory system is complete without an effective enf orcement program. Problems with the lack of an inspection system have been experienced in Alabama where operational orders have been specified but not followed by the operators. Enf orcement and on-site inspection could be accomplished through: 1) stationing a full-time state inspector on each exploration/development drilling unit or 2) training at least 1 officer from each Marine Patrol region as an oil and gas safety inspector. Although the full-time inspector probably would,be the more effective method, Marine Patrol resources already are in place and would require the least adjustment and new costso Unscheduled spot checks could be conducted as part of an officer's normal patrol. Inspections would focus on safety and pollution control and could be supplemented by other technical experts as necessary. In general, the key to an effective lease/permit program is to establish the rules up front so that the state can clearly identify the necessary environmental stipulations and a method for enforcing them. At the same time, industry will beccme fully cognizant of the statets requirements in each planning region and can plan their exploration and development accordingly. The scientific and technical committees of the Leasing.Advisory Board should develop general environmental stipulations for the lease planning regions for each sale, Where there are common waters, such as the Florida/Alabama border in Perdido Bay, and State/OCS boundaries, compatible environmental 55 stipulations meeting the requirements and procedures of each state will have to be established in concert with Alabama and Federal representatives. Although beyond the scope of this study, it should be made clear in the notice to lessees in each sale that additional site specific environmental stipulations or operational orders may be applied to a lease block during the permitting process. Every effort should be made, however, to minimize the number of additional stipulations so as to reduce costs, lease/permit time, and litigation. Recommendations: 3e(l) That a set of specific operating orders be referenced in each offshore oil and gas lease. -')e(2) That an offshore environmental enforcement and inspection program be established. 3e(3) That general environmental stipulations be developed for each planning region prior to each sale. 3e(4) -That an agreementbe established with the State of Alabama specifying, the-environmental stipulations to be used in common waters such as in Perdido Bay. Other-potential interstate conflict issues also should be addressed. 4. Lease Procedures and Terms Tables 12 and 13 summarize the lease terms and relevant procedures for the nine coastal states reviewed. it is seen here that, for the 56 TABLE 12 STATE LEASING PROCEDURES LEASE SCHEDULE ADVERTISEMENT BIDS RESPONSIBLE LEASE BETWEEN BETWEEN SALE NOTICE PRIOR AWARD AGENCY INITIATOR SALES AND AWARD TO SALE MEDIA FEES BASIS FLORIDA Department of Potential 1 2 Leon County news- $200 non- On high Natural Resources lessee N.E. 5 weeks papers and news- refundable bonus paper in county processing of lease fee ALABAMA Department of Private person, 3 The Montgomery Parties Most ad- Conservation and Commissioner, 1 Yr. 5 days 2 months Advertiser, and requesting vantageous Natural Resources head of leasing newspaper in lease ad- to state agency, or county of lease vertisement Governor. must pay for same ALASKA Department of Department of Varies with Statewide news- Bid deposit May vary Natural Resources Natural Resources 4 months timing of 2 months paper; public of 20% of with bonus and service announce- cash bonus bidding rental pay- ments on elec- method ments tronic media; used posting in area; & other available methods CALIFORNIA State Lands State Lands N.E. N.E. 2 months Statewide news- May vary Commission Commission or paper and news- Various 4 with industry paper of county fees bidding of production required method used LOUISIANA Department of Qualified indiv- Official journal $300 Most ad- Natural Resources iduals (including I month 60 days of the state and deposit 5 vantageous representatives parish where with lease to state of foreign lands are located application coun@ries) MISSISSIPPI Department of Private person, One sale Southeastern Oil Prepaid fee Rost ad- Natural Resources firm, or state held to 60 days Review, a news- per tract; vantageous commission date paper in county bids to to state (7/8/82)' of lease, and a cover pub- Jackson newspaper lication expenses NORTH 6 Department of Private person, N.E. N.E. N.E. CAROLINA Natural Resources firm, or corpor- and Community ation Development SOUTH Water Resources Private person, At least 25 Statewide news- On high CAROLINA Commission industry, or N.E. 20 days days prior paper and news- N.E. bonus Commissioner to bid sub- paper of county mission of production TEXAS State General Industry or Generally At least 30 State distributes $100 nomi- High Land Office private person 6 months on sale days printed lists of nation fee bonus/ nominates tracts date tracts - 25-30 High state newspapers royalty advertise sale 2 No schedule established 3 15 weeks between nomination request and award 4 May vary greatly - current figure given $25 filing fee plus processing fee, guarantee deposit, insurance, a native declaration fee, environmental impact 5 report and consultation fee 6 Refundable with lease bid All leasing procedures currently under revision Data provided and reviewed by respective state officials. 57 TABLE 13 SUMMARY OF STATE LEASE TERMS Title Length Transfer Work Cessation Handling of Proprietary Cuarantee Initial Extensions Stop Production Information Florida No guarantee 5 years Lease in force as Written consent 60 days to resume Excise tax, production processes, of clear title long as operations of lessor production or and geophysical data held con- are carried out or make rental fidential, drilling data held production continues payments for 90 days on operator requests All else public record. Alabama No guarantee Established in I year with rental Written approval 90 days to drill Well data kept confidential for of clear title invitation to payments of Commissioner or produce oil & 6 years upon written request of bid, usual is of conservation gas operator 5 years and natural resources needed Alaska No guarantee 5-10 years Lease in force 2 Permission of 6 months to pro- Confidentiality upon request, of clear title as long as drilling, Commissioner duce, drill, or no time limit producing, reworking needed rework within 60 days California Lessee has exclus- 20 years None allowed Permission of 6 months to con- Permittee and lessee written ive rights to drill, Commission duct operations consent needed to inspect pro- prospect or produce needed to restore duction. Data kept confidential by hydrocarbons. Others production state. can conduct geological/ Ln geophysical surveys. 00 Louisiana No guarantee 5 years State approval 90 days to pro- Required data and information of clear title needed duce, drill or supplied by lessee held in con- make rental fidence payments Mississippi No guarantee 5 years in Lease in force Prior written 90 days to re- Mineral exploration data kept of clear title Gulf, 3 years as long as pro- notice to state sume work or confidential for 10 years. Dis- elsewhere duction, drilling needed make rental closure is a misdeameanor. or reworking payment continues North Lessee holds exclus- 2 year 3 2 year 4.5 Permission Dept N.E.6 Geo-physical and well log Carolina ive rights for $1, (10 year limit) Administration, log records kept confidential title to minerals Dept. of Nat. for I - 2 years. remains with state Resources and until excavation Community Dev- elopment needed South No leasing to 5 year Yr. to yr. with Not addressed in N.E. Required well logs, samples, Carolina date, no pro- drilling or pro- state code surveys, and reports confident- vision in duction ial for I year statutes Texas No guarantee 5 years in 1 yr period for Lessee may sell, 60 days7 Reserve estimates, sale, pro- of clear title Gulf, 3 years 5 yr. if shut-in relinquish or if lessee cessing data held in confidence elsewhere royalty paid give a lien reworks or until lessee releases to qualified commences person I drilling I 1. Board of Trustees may authorize to 10 years. 2. Upon extension, lease rental may increase up to 150% of previous rental. 3. 1976 lease. 4. If test wells are drilled where footage not less than 20,000 feet within 2 years. 5. 90 day grace period if less than 20,000 feet drilled in any 2 years, but work is underway at end of period. 6. Procedures not established. 7. With a dryhole, a delay rental payment within 60 days 0 ecessary to keep lease. * Data provided and reviewed by respective 0 officials. it most part, the procedures currently in use for the onshore Florida oil and gas leasing program are consistent with those used in the other states. If an offshore oil and gas program for Florida is developed, the existing lease terms should be reviewed to assure their applicability to the offshore program. Specific issues that should be addressed include the length of the primary term, drilling instructions, rental fees, the state's power to inspect records and facilities, royalties, the determination of reserve estimates, pooling and unitization, pollution, site security, and the manner in which proprietary information is handled. Each of these lease terms will be affected by the overall policy of the state, the comprehensive leasing program plan to be developed, the extent of oil and gas to be discovered in state offshore waters, and the demand for oil and gas. The Leasing Advisory Board should charge the technical committee with reviewing lease terms of the existing onshore leasing program and to recommend changes in these terms necessary to ensure that Florida's offshore oil and gas resources are explored, developed, and produced in a manner most beneficial to the state while at the same time providing an incentive to private industry to develop the resources in a manner consistent with state policy. Recommendation: 4.That the recommended Leasing Advisory Board review existing onshore lease terms and procedures for compatibility and adaptability to an offshore oil and gas leasing program. 59 . Florida Leasing 0 STATE OF FLORIDA OIL AND GAS LEASING PROGRAM 0 1984 go TABLE OF CONTENTS Description Page A. Statutory Authority . . . . . . . . . . . . . . . . . . . . . . . . 1 B. Philosophy of State Towards Leasing in State Waters . . . . . . . . 2 C. History of Leasing Program . . . . . . . . . . . . . . . . . 4 D. Delegation of Management Responsibilities for State . . . . . . . . 11 Leasing Program E. Geographic Description of State Territorial.Waters . . . . . . . . 12 F. Local Jurisdictional Control Over State Waters . . . . . . . . . . 21 G. Oil and Gas Revenues Accruing to State . . . . . . . . . . . . . . 24 H. Environmental Controls and Regulations . . . . . . . . . . . . . . 27 I. Leasing Procedures . . . . . . . . . . . . . . . . . . . . . . . . 35 J. Relation of Leasing Program to Issuance of Permits . . . . . o . .39 K. Mineral Leasing. . . . o . . . . . . . . . . . o o . . . . 39 L. The Socioeconomic and Physical Impact of Oil and Gas Leasing in Florida's Waters . . . . . . . . . . . . . o . . . . . .39 References . . . . . . . . . . . . . . . . o o . . . . . . . o .42 Appendices A. Oil and Gas Leasing in Florida's Territorial Waters: State Laws . . . o . o . . . . . . . . . . . . . . . . . . . . B. Florida Local Governments and Oil and Gas Leasing of State Territorial Waters . . . . . . . . . o . . . . . . . . . C. State of Florida Oil and Gas Lease Form and Steps for Lease Processing. . . . . . . . . . . . . . . o. . . . . . D. Onshore Impacts of Oil and Gas Activities in Florida State-Owned Coastal Water . . . . . . . . . o . . . . . . . . E. Permit Requirements for Siting Onshore Facilities Related to Offshore Oil and Gas Activities: and Florida Legislation Affecting Offshore and Onshore Energy Development . . . . . . LIST OF TABLES AND FIGURES Description Page Table I Wells Located in Submerged Water Bottoms and Offshore State of Florida . . . . . . . . . . . . . . .. . . . . . . . . 6 Table 2 Oil and Gas Leases Issued for Exploration in Florida Territorial Waters . . . . . . . . . . . . . . . . . . o . . . 10 Figure I Florida Offshore Leaseholdings of Coastal Petroleum Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 Figure 2 Florida State Agencies Involved with Oil and Gas Lease/Permit Program . . . . . . . . . . . . . . . . . . . . o13 Figure 3 Supplemental Official OCS 8-G Block Diagram . . . . . . . o . .20 Figure 4 Florida State and Federal Coastal Jurisdictions . . . . . . . . 31 Figure 5 Oil and Gas Lease Administrative Flow Chart . . . . . . . . . . 40 A. Statutory Authority 1. Vested Authority The basic authority for leasing lands owned by the State of Florida is vested in the Board of Trustees of the Internal Improvement Trust Fund (hereinafter the Trustees). This authority is contained in Chapter 253, �253.03(l), F.S., 1982 Supplement. "The Board of Trustees of the Internal Improvement Trust Fund of the state is vested and charged with the acquisition, administration, management, control, supervision, conservation, protection, and disposition of all lands owned by, or which may hereafter inure to, the state or any of its agencies, departments, boards, or commissions,--- "---Lands vested in the Board of Trustees of the Internal Improvement Trust Fund shall be deemed to be: a) All swamp and overflowed lands held by the state, or which may hereafter inure to said state; b) All lands owned by the state by right of its sovereignty; c) All internal improvement lands proper; d) All tidal lands; e) All lands covered by shallow water of the ocean, gulf, or bays or lagoons thereof, and all lands owned by the state covered by fresh water; f) All parks, reservations, or lands or bottoms set aside in the name of the state, excluding lands held for road and canal rights-of-way; g) All lands which have accrued, or which may hereafter accrue, to the state from any source whatsoever, excluding lands held for road and canal rights-of-way or spoil areas or borrow pits or any land, title to which is vested or may become vested in any port authority; flood control district, water management district, or navigation district or agency created by any general or special act." The authority of the Trustees to administer state lands is delineated further in Chapter 253.03(7), F.S. "The Board of Trustees is hereby authorized and directed to administer all state-owned lands and shall be FL-1 responsible for the creation of an overall and comprehensive plan of development concerning the acquisition, management and disposition of state-owned lands so as to ensure maximum benefit and use. The Board of trustees of the Internal Improvement Trust Fund shall adopt rules and regulations necessary to carry out the purposes of this act as herein set forth." The procedures and policies involved in implei@enting these responsibilities are discussed in-detail in Appendix A (Volume I). 2. Members of Governing Body The Board of Trustees of the Internal Improvement Trust Fund (also known as the Governor and Cabinet) is a body of seven elected officials: the Governor, the Commissioners of Education, Agriculture, Insurance, the Secretary of State, the Comptroller, and the Attorney General. Appendix A (Volume I) contains detailed descriptions of the responsibilities, policies, and administrative procedures of the Trustees with respect to oil and gas leasing in state waters. B. Philosophy of State Towards Leasing in State Waters .Florida, because of both the extent and nature of it's coastal geography, has reason to be concerned with precipitous development of its shoreline and offshore regions more than other coastal states. These facts, viewed within the context of the state's dependence upon tourism and coastal recreational activity, has understandably resulted in 'a cautious and conservative attitude with respect to oil, gas and mineral development in offshore waters. This concern, however, is long standing and has a constitutional basis expressed as a public interest standard. FL-2 All sovereignty lands management decisions must conform to the public interest standard in Article X, Section 11 of Florida's constitution: "The title to lands under navigable water ... is held by the state, by virtue of its sovereignty, in trust for all the people. Sale of such lands may be authorized by law, but only when in the public interest." (emphasis added) The Trustees have adopted an even more stringent standard for oil and gas leases. Section 16Q-21.04(2) (k), F.A.C. provides that; "Oil and gas leases on state-owned submerged lands shall be approved only ... upon adequate demonstration that the proposed activity is in the public interest, that the impact upon aquatic resources has been thoroughly considered, and that every effort has been made to minimize potential adverse impacts upon sport and commercial fishing, navigation, and national security." (emphasis added) This emphasis on serving the public interest is consistent with the legislative goals of conserving Florida's oil and gas resources described in Chapter 377.06 F.S. as follows: "It is hereby declared to be the public policy of the state to conserve and control the natural resources of oil and gas in said state, and the products made therefrom; to prevent waste of said natural resources; to ,.provide for the protection and adjustment of the correlative rights of the owners of the land wherein said natural resources lie and the owners and producers of oil and gas resources and the products made therefrom, and of others interested therein; to encourage and cause the development in said state of said natural resources of oil and gas and the products made therefrom, to encourage the continuous and economic supply of the demand therefore; to safeguard the health, property and public welfare of the citizens of said state and other interested persons and for all FL-3 purposes indicated by the provisions herein ... it (Florida Coastal Management Program, Final Environmental Impact Statement, Department of Environmental Regulation). The overall philosophy of Florida, with respect to land and resource development, has been expressed as the maximum benefit and use or as a balanced public utilization of land. resources, which can be summed up as follows: a. Encourage detailed inventories and evaluation of state-owned mineral resources. b. Control management activities on state-owned land that would preclude or seriously impair the ability to extract significant mineral resources. C. Allow extraction of state-owned mineral resources in environmentally sensitive areas only upon demonstration that the extraction is of overriding public importance, that all reasonable steps will be taken to minimize adverse environmental impacts, and that there are no reasonable alternatives. d. Discourage all future releases of state-owned mineral reservations, excepting right-of-entry and exploration. e. Require that all state-owned lands subjected to mining be reclaimed or restored and left in such condition so as to maximize future public uses and values. (Board of Trustees of the Internal Improvement Trust Fund 1981) A detailed description and analysis of the Public Interest Standard, and its basis, and a review of the State Lands Management Plan is contained in Appendix A (Volume I). C. History of Leasing Program 1. Establishment of Offshore Leasing Program Hydrocarbons never have been produced commercially from Florida's territorial waters although there have been a number of exploratory efforts along the Gulf coast. Table I lists 29 wildcat exploratory wells drilled FL-4 since 1945. It should be noted that this number includes several wells that were drilled on leases acquired under Federal OCS Lease Sale 5, in 1959, the area that the Supreme Court subsequently has ruled belongs to Florida. The last exploration well was drilled, plugged, and abandoned in 1968 with the exception of the Getty well in Santa Rosa County. Although this latter lease was issued to Young, Anderson, and Beall in 1968 and assigned to Getty in 1970 (see Table 1), the final environmental permit was not issued by the Corps of Engineers until March 1983. The well was spudded in June 1983 and subsequently plugged and abandoned later that same year. An interesting situation exists with respect to existing offshore leases in Florida waters. Coastal Petroleum Company (a subsidiary of Coastal Caribbean Oils and Minerals Ltd, a Bermuda. Corporation) owns three leases encompassing approximately 3.7 million acres of submerged lands along Florida's Gulf Coast and under certain lakes and rivers (Coastal Caribbean Oils and Minerals Ltd. 1984) These lease holdings are shown in Figure 1. The two Gulf Coast leases, 224-A and 224-B, follow the coastline from Apalachicola Bay to a point six miles south of Naples, a distance of 425 statute miles. These leases are divided into two separate areas, as described below. The Inner Area, shown on Figure 1, includes tidal estuaries and bays, and extends 4.36 miles from the shoreline to cover approximately 2.3 million acres. Within this area, Coastal has a 6.25 percent residual royalty interest on the wellhead value of any oil or gas found--payable in cash or in kind, at Coastal's option--as well as a 5 percent royalty interest on the production or market value of any minerals. The Offshore Area, also shown on Figure 1, is a three-mile-wide belt that extends from 7.36 to 10.36 miles from the shoreline, covering more than 800,000 acres and bordering federal offshore acreage. FL-5 Table I WELLS LOCATED IN SUBMERGED WATER BOTTOMS AND OFFSHORE STATE OF FLORIDA County Operator Well Name Date *Bay Magnolia Petr. I St. Blk 4-B 4-45 *Charlotte Mobil Oil I St. Lse 224-B 3-67 +Citrus Mobil Oil 1 St. Lse 224-A 11-67 +Collier La. Land & Exp. I St. Of Fla. 16-2 11-72 *Franklin Calf. Co/Coastal 1 St. Lse 224-A ? +Franklin Calf. Co/Coastal 2 St. Lse 224-A 11-60 +Franklin Coastal Carr. Oil A-1 St. Lse 244 10-59 +Franklin Magnolia Petr. 1 St. Blk #5-B 5-47 *Franklin Magnolia Petr. A-1 St. Blk #5-B 6-47 Franklin Mobil Oil 1 St. Lse 224-A 4-68 Lee Calf. Co./Coastal 1 St. Lse 224-B 9-60 Lee Calf. Co./Coastal 2 St. Lse 224-B 8-61 Levy Mobil Oil B-1 St. Lse 224-A 11-67 *Monroe California Co. 1 St. Lse 10-11 9-59 Monroe California Co. 2 St. Lse 10-11 1-61 (Marq. Area) Monroe California Co. 3 St. Lse 1011 11-61 Monroe Calf. Co./Gulf I OCS Lse 0672,Blk 44 11-60 FL-6 Table 1 (cont) County Operator Well Name Date Monroe Comnonwealth 1 St. Lse 362 4-55 *Monroe Gulf I St. Lse 373 11-45 *Monroe Gulf I St. Lse 374 10-46 Monroe Gulf/Calf. Co. 1 Marq. OCS BLK 28 1-60 Monroe Gulf/Calf. Co. I Marq. OCS BLK 46 7-61 +Monroe Gulf 1 St. of Fla. 826-G 4-55 Monroe Gulf 1 St. of Fla. 826-Y 2-59 +Monroe O.D. Robinson/ 1 St. (Barnes Sound) 2-45 Republic Oil 2-46 Pinellas Calf. Co./Coastal 3 St. 224-B 2-63 Santa Rosa Humble I St. Lse 833 9-56 *Offshore California Co. 1 OCS-Lse 0674 12-60 Santa Rosa Getty I St. of Fla.2338 3-70 (Originally issued to young, Anderson and Beall on 7/9/68) TOTAL WELLS DRILLED 29 * May be onshore + Does not appear on state map (Source: Bureau of Geology Department of Natural Resources) FL-7 Figure 1 Florida Offshore Leaseholdings of Coastal Petroleum Company Georgia TALLAHASSEE 0 JACKSONVILLE FLORIDA Allantic Ocean Bay AYTONA It BEACH OCALA a -29. Guff of Mexico 'UI Show'. Well CAPE Lease 224-A RLANDO CANAVERAL .................... ........ um TAMPA 2W ST. PETERSBURG Land Pebble Phosphate District SARASOTA 2r Lake. Lease 248 chadw VVEST PALM halb@ BEACH E Sunniland Irend Odfields NAPLES OFFSHORE t MIAMI AREA INNER AREA FebnAry 1984 0 15 Scale in Miles or (Source: 1983 Annual Report JACKSOVILLE ON Coastal Caribbean Oils and Minerals, Ltd.) FL-8 The third lease, 248, covers the 450,000-acre tract beneath Lake Okeechobee. Although Coastal has a working interest in the Okeechobee acreage (100 percent as to minerals), it has agreed not to conduct any exploration, drilling, or mining operations in this area without the prior approval of the State of Florida. Lease 248 also covers an additional 200,000 acres beneath certain other inland lakes and the St. John's River. On this acreage, Coastal has the same royalty interests as within the aforementioned inshore area. The three leases--which were granted to Coastal's predecessors company by the State of Florida in the early 1940's--require the payment of annual rentals totaling $59,247. The current lease, renegotiated in 1976, expires on January 6, 2016. However, if any oil, gas, or minerals are being produced in economically sustainable quantities at the expiration of the lease term, such production will be allowed to continue until it becomes uneconomic. At present, all three of the leases are nonproducing. (Coastal Caribbean Oils and Minerals, Ltd 1984). Additional details of these early offshore Florida leases are contained in Appendix D (Volume 1). 2. Frequency Distribution of Leases by Year .A total of 19 oil and gas leases have been issued for exploration in Florida's territorial waters. These leases, which were granted between the early 1940's and 1972, are summarized in Table 2. 3. Average Geographic Size of Lease and Related Bidding Data The size of lease ranged from a few thousand acres to the enormous 2.3 million acre lease held by Coastal Petroleum Company discussed previously. The Getty lease originally issued in 1968 was 47,932 acres. FL-9 Table 2 OIL AND GAS LEASES ISSUED FOR EXPLORATION IN FLORIDA TERRITORIAL WATERS Year Operator No. Leases Lease No. Early 1940's Coastal Petroleum 3 224-A 224-B 248 1945 Magnolia Petroleum 1 4-B Gulf Oil 1 373 1945 O.D. Robinson/ 1 Barnes Sound Republic Oil 1946 O.D. Robinson/ 1 Barnes Sound Republic Oil 1946 Gulf Oil 1 374 1947 Magnolia Petroleum 1 5-B 40 1955 Commonwealth 1 362 Gulf Oil 1 8126-G 1956 Humble Oil 1 833 1959 Gulf Oil I 826-Y Calif. Co. 1 10-11 Coastal Petroleum 1 244 1960 Calif. Co./Coastal Pet. I 224-B Calif. Co./Coastal Pet. 1 224-A 1968 Young, Anderson, Beall 1 2338 1970 #2338 Transferred to Getty Oil 1972 La. Land and Exp. 1 1 16-2 TOTAL 19 FL-10 4. Example of Prior Lease Sale Schedule Lease sale schedules have not been established in Florida. 5. Revenues Accruing to State Because oil or gas has not been produced commercially in Florida's territorial waters, no revenues have accrued to the state except bonus and rental f ees. The only active offshore oil and gas leases a:re those - of Coastal Petroleum and Getty Oil Company, resulting in total annual rentals of $70,271.36. D. Delegation of Management Responsibilities for State Leasing Program 1. Name of Managing Agency or Department The implementation of the trust and fiduciary responsibilities with respect to the administration, management, and disposition of Florida sovereignty lands has been assigned by the Board of Trustees of the Internal Improvement Trust Fund to the Florida Department of Natural Resources (FDNR). 2. -Agency Responsibilities The general responsibilities of the FDNR as defined in Chapter 16Q-21.01 (March 27, 1982) Chapter Rules of the Department of Natural Resources include: 1) Aid in fulfilling the trust and fiduciary responsibilities of the Board of Trustees of the Internal Improvement Trust Fund for the administration, management, and disposition of sovereignty lands; 2) Insure maximum benefit and use of sovereignty lands for all the citizens of Florida; FL-11 3) Manage, protect, and enhance sovereignty lands so that the public may continue to enjoy traditional uses including, but not limited to, navigation, fishing and swimming; 4) Manage and provide maximum protection for all.sovereignty lands especially those important to public drinking.water supply, shellfish harvesting, public recreation, and fish and wildlife propagation and management; 5) Insure that all public and private activities on sovereignty lands which generate revenues or exclude traditional public uses provide Just compensation for such privileges; and, 6) Aid in the implementation of the State Lands Management Plan 3. Organization Chart of State Agencies The state agencies involved directly or indirectly with oil and gas leasing in Florida are shown in Figure 2. The interaction of the DNR and the Department of Environmental Regulation is discussed in detail in a report prepared by the Office of the Governor in 1982 (see references). E. Geographic Description of State Territorial Waters 1. General Description of State Offshore Boundaries Florida has the longest coastline in the continental United States, Its 33 coastal counties stretching 1350 miles from the Alabama border to the Georgia coast. The following discussion of Florida's boundaries was taker. from Section II of the Florida Coastal Management Program Plan (NOAA OCZM 1981). "Section 305(b)(1) of the federal Coastal Zone Management Act (CZMA) of 1972 requires that a state management program identify the boundary of the coastal zone which is subject to the management program. There are f our elements to a state's coastal boundary: the inland boundary, excluded areas, the seaward boundary, and interstate boundaries. Based upon the geography of Florida and the legal basis for the state program, the entire state is proposed to be included within the coastal zone, (except for lands owned, FL-12 Figure 2 Florida State Agencies Involved With Oil and Gas Lease/Permit Program Office Board of Trustees of of the the Internal Improvement Governor Trust Fund -T Department Department of Department of Department of of State Natural Community Environmental E Resources Affairs Regulation Division of Archives Division of Regional Water History and State Lands Management Research Management Districts Division of Recreation and Parks --- I - - - -- --- Division of E@larine Resources Division of Resource Managereni leased, held in trust or whose use is otherwise by law subject solely to the discretion of the federal government, its officers or agents). Also excluded are.lands of the Seminole Indian Tribe." "Geographically, Florida has low land elevation, a generally high water table, and an extensive coastline with many rivers emptying into coastal waters. Few places in Florida are more than seventy miles from either the Atlantic Ocean or the Gulf of Mexico. The result is an interrelationship between the land and coastal waters which makes it difficult, if not impossible, to establish a scientifically supportable boundary which would exclude inland areas having no significant effect on coastal waters. The Florida Legislature has directed that the Coastal Managel4ent Program be based upon existing laws and regulations; Chapter 380.21(2), F.S. No new regulatory scheme is being proposed or created by the state coastal management program. The laws and regulations upon which the state's program is based, are laws of statewide applicability. Consequently, the establishment of a coastal boundary line including less than the entire state would give the erroneous appearance that a new regulatory scheme had been created for a portion of the state and would lead to needless public confusion. However, for the purposes of administration of funding to local governments pursuant to Section 307 of the CZMA, the boundary of the program. is limited to coastal counties. The following is a description of the seaward and interstate boundaries. The United States Supreme Court has recognized that Florida has jurisdiction over submerged land to a distance of three marine leagues, or approximately 10.35 statute miles in the Gulf (U.S. vs. States of Louisiana, Texas, Mississippi, Alabama, and Florida, 364 U.S. 502, 81 S. Ct. 258, 5 L. Ed. 2nd. 247, 1960). However, the Federal Coastal Zone Management Act FL-14 defines the seaward extent of the coastal zone as the outer limit of the U.S. territorial sea, currently three nautical miles. Thus, for the purposes of the Florida Coastal Management Program only, the seaward limit of three nautical miles represents the area within which the statets management program may be authorized and financed through CZMA Section 306 funds. This seaward boundary does not in any way alter the state's claim to ownership of all land and waters to a distance of 10.35 statute miles. The seaward boundary in the Atlantic is the same as the U.S. territorial sea definition, i.e. three nautical miles. These limits are irrespective of any other claims Florida may have by virtue of the Submerged Lando Act or any changes that may occur as a result of the operation of the Fisheries Conservation and Management Act of 1976. The western lateral boundary of Floridats Coastal Management Program is defined by the adjudicated boundary between Florida and Alabama. The coastal zone boundary in Alabama is the 10' MSL contour in Mobile and Baldwin Counties. The northern lateral boundary of the statets coastal program is the adjudicated boundary between Florida and Alabama as well as Florida and Georgia. The coastal zone boundary in Georgia is an area averaging about 20 miles inland within portions of six coastal counties. Each state, with the development of its own coastal management program, has consulted with one another to ensure compatibility between each state's respective boundary designations." (NOAA Office of Coastal Zone Management, 1981, pp. II-10 to II-11.) "The mean high water line means the intersection of the local elevation of mean high water with the shore. The mean high water line along the shore of land immediately bordering on navigable waters is recognized and declared to be the boundary between the foreshore owned by the State of Florida in its FL-15 sovereign capacity and the uplands subject to private ownership." (FDNR Rules 16-21.03(22), 1982.) "Mean high water means the average height of the high tides over a 1.9-year period. For shorter periods of observation, "mean high water" means the average height of the water after corrections are applied to eliminate known variations and to reduce the result to the equivalent of a mean 19-year value." (FDNR Rules 16-21.03(21), 1982). Within these boundaries lie Florida's sovereignty lands which are defined in the Rules of FDNR, Chapter 16-21 as:"those lands including but not limited to, tidal lands, islands, sand bars, shallow banks, and lands waterward of the ordinary or mean high water line, under navigable fresh and salt waters, to which the State of Florida acquired title on March 3, 1845, by virtue of statehood, and which have not been heretofore conveyed or alienated."A detailed discussion of Florida's sovereignty lands management policies is contained in Appendix A (Volume I). With respect to the leasing of state-owned submerged lands, oil, gas, and other petroleum leases can be issued only when the proposed lease area is at least one mile seaward of the outer coastline of Florida as defined in United States v. Florida, 425 U.S. 791, 48L, Ed. , 2nd 388, 96 S. Ct. 1840, upon adequate demonstration that the proposed activity is in the public, interest, that the impact upon aquatic resources has been considered thoroughly, and that every effort has been made to minimize potential adverse impacts upon sport and commercial fishing, navigation and national security. (DNR Rules Chapter 16Q-21, �21.04, 2, (k), 1982.) Thus, on Florida's Atlantic Coast, a potential two-mile leasing zone extends from one to three nautical miles offshore while on the Gulf coast the leasing zone is a nine mile strip extending from one to 10.35 statute miles offshore. FL-16 In addition to its length, Florida's coastal region of f ers a wider variety of environmental characteristics than any other state. The East Florida section is a young marine plain. of very low relief characterized by sandhills, swamps, sinks, and lakes. Few streams drain in this lowland area. The underlying sedimentary strata recently have been raised above sea level and the coastline is a typical shoreline of emergence, characterized by an extensive series of nearly continuous barrier islands extending from Daytona Beach to Biscayne Bay. Barrier islands also are a common landform along the Gulf Coast. These islands consist of sand and other loose sediments that have been and continue to be transported by wind and water action. Florida has 80 barrier islands covering a total of 467,710 acres. Brackish, relatively quiet bays and estuaries lie between the barrier islands and the mainland. The waters in these bays and estuaries, a blend of the terrestrial-freshwater systems of the mainland and the saltwater system of the ocean, are among the richest ecosystems known. One of the characteristic features of barrier islands is their instability. Because the islands are composed of unconsolidated and shifting sands, they migrate along the coast in response to littoral currents as well as a gradually rising sea level. As such, they do not readily support construction of permanent structures or pipelines. The movement of sand under and around a pipeline can cause the line to sag, bend, and perhaps rupture. A line that was buried may in time, become exposed. 2. Mapping and Charting Procedures Used to Define Lease Areas The state boundaries are defined in the Florida Constitution, Article II, Section 1(a). FL-17 "(a) The state boundaries are: Begin at the mouth of the Perdido River, which for the purposes of this description is defined as the point where latitude 30*16'53" north and longitude 87*31'06" west intersect; thence to the point where latitude 30017102" north and longitude 87031'06" west intersect; thence to the point where latitude 30*18'00" north and longitude 87*27'08" west intersect; thence to the point where the center line of the Intracoastal Canal (as the same existed on June 12, 1953) and longitude 87*27'00" west intersect; the same being in the middle of the Perdido River; thence up the middle of the Perdido River to the point where it intersects the south boundary of the State of Alabama, being also the point of intersection of the middle of the Perdido River with latitude 31*00'00" north; thence east, along the south boundary line of the State of Alabama, the same being latitude 31*00'00" north to the middle of the Chattahoochee River, thence down the middle of said river to its confluence with the Flint River, thence in a straight line to the head of the St. Marys River; thence down the middle of said river to the Atlantic Ocean; thence due east to the edge of the Gulf Stream or a distance of three geographic miles whichever is the greater distance; thence in a southerly direction along the edge of the Gulf Stream or along a line three geographic miles from the Atlantic coastline and three leagues distant from the Gulf of Mexico coastline, whichever is greater, to and through the Straits of Florida and westerly, including the Florida reefs, to a point due south of and three leagues from the southernmost point of the Marquesas Keys; thence westerly along a straight line to a point due south of and three leagues from Loggerhead Key, the westernmost of the Dry Tortugas Islands; thence westerly, northerly and easterly along the arc of a curve three leagues distant from Loggerhead Key to a point due north of Loggerhead Key; thence northeast along a straight FL-18 line to a point three leagues from the coastline of Florida; thence northerly and westerly three leagues distant from the coastline to a point west of the mouth of the Perdido River three leagues from the coastline as measured on a line bearing south 0*01'00" west from the point o f beginning; thence northerly along said line to the point of beginning. The State of Florida shall also include any additional territory within the United States adjacent to the Peninsula of Florida lying south of the St. Marys River, east of the Perdido River, and south of the States of Alabama and Georgia. (b) The coastal boundaries may be extended by statute to the limits permitted by the laws of the United States or international law." The plane coordinate system used in Florida is based on two conformal projections. The northern part of the State uses a Lambert conic projection with two standard parallels and the southern part has a transverse Mercator projection with two zones, using a reduced scale for the central meridian of each zone (U.S. Department of Commerce 1951). Lease blocks have not been laid out in Florida's territorial waters. A method for laying out the blocks, however, was submitted by the Florida Department of Natural Resources and approved by the Governor and Cabinet in 1981. The Universal Transverse Mercator projection system was used with a 1,000 meter grid size. The resulting block network will in effect be a continuation of the lease block system used by the Federal government on the Outer Continental Shelf. Where state lease blocks meet Federal lands, the boundaries have been delineated for Florida's West Coast using satellite based date. and drawn on OCS block diagrams prepared by the Department of Interior, Minerals Management Service. Figure 3 is an example of an OCS block diagram. The federally prepared block diagrams as shown in Figure 3 were approved by the State of Florida in late 1983. Comparable boundaries have not been agreed upon for Florida's Atlantic Coast. FL-19 SALE No. 79 S U P P L 1@@N TA L OFFICIAL OPD NAME rFD.-STATE SENWARD BDY. OCS G-G BLOCK DIAGRAM OPD NO. 1111 16-5 HADIUS j L- 6 54. BLOCK NO. 8143 3-G BOUNDARY OCS LEASE NO. _ _ Il,%DIuS- STATE LEASE NO. Y= 10 945 10V 4 C, co co 2 3 X Y= 10 929 6ool INTERSECTIONS ARC CENTERS x y x 1 1 488 9@@o.nol 10 236 730. !1';' *1-2 11175 )11: 6. 31' lo Qsc 0. 1 4w) P37. I 2 10 Q36 Q75.68 2 -3 1Oc' Q,27. lo opo 1 3 1 hl' , , 5 lo 937 ol 5. 4 It *3-4 11,70, ')-7 . -., 6 30 nc),) It 1 1195 3@2. 1@' 10 4-5 1); 8 @ -@147.2'@' 1 f; 15 1 -7,' 10 93) 7 0,6 - 31 *5-6 !jF)I. 8i;,(. le (?gi 6 1 5 0 --' 73j-%, 10 @S9 -'@83-00' *6-7 1 L3?, --@.17' 10 ooo v, 7 1 5oi 5r@-e-651 10 1131.0"'1 7 ,-8 1ll()@' 779.10' 10 90,@ `9 8 @L 5 o il.@- lo P39 7?,B. 66 *8_9 a401 7-1 Q. 1 10 09'@ 1 5 C, -3 0 T- 9 lo ()); ooc)2.161 S::G" FEDERAL AREA STATE AREAP,70.,90 E;G AREA 3132-20 ICDISPUTED AREA COMPUTAT IONS Dyi@@- DAI E irL JL 93 FOR IHE DIRECTOR FOR TtIE STATE 4 2 DU AF T I D TIY --gL.-- DAT F. -3--. L2-- F L DAT E 3J -- f)ATE It L C K E 0 U Y 1) A T r 3'3 FL-20 UNITED STATES DEPARTMFNT OF INTERIOR MINERALS MANAGEMENV SERVICE F. Local Jurisdictional Control Over State Waters A special report containing a detailed analysis. of the role of local governments in the leasing of state of f shore waters f or oil and gas operations has been prepared by the Center for Governmental Responsibility, University of Florida, College of Law, and is contained in Appendix B (Volume I). It is recommended that readers wishing to understand the legal status of issues involving annexation actions by local governments and the impact of such actions on offshore activities carefully review this document. Basically, Chapter 171, F.S., entitled "Municipal Annexation or Contraction Act", does not address the annexation of territorial waters. While there are conditions under which territorial waters conceivably could be annexed, there are no Florida cases examining the scope of a municipality's power to annex such areas. The U.S. Constitution$ the Florida Constitution, and the Florida Statutes, as well as a large body of case law govern municipal annexations in Florida. The Florida Constitution, Article VIII, Section 2(a), (c), contemplates municipal annexation of unincorporated territory as provided by general or special law. Annexation law is built on the premise that the power to change municipal boundaries, establish municipalities outright, or expressly prohibit municipal expansion is solely a legislative power. The legislature may exercise the power directly or may delegate the power to municipalities. The legislature's power, however, is not unlimited. The legislature must observe constitutional limitations or courts will intervene. The principle limitation is that municipal boundaries may not be extended solely to increase tax revenues. Annexation for that purpose is a flagrant abuse of FL-21 authority amounting to a taking without just compensation. In essence, the legal ramifications of annexation, taxation, and/or control of state waters by local governments is unclear. While annexation laws exist, they may have to be reinterpreted or modified in preparation for offshore activities in state waters. Appendix B also analyzes the annexation laws of other coastal states with respect to offshore territorial waters. A review of this material will provide the reader with further insight into the problems and the benefits to be gained by such laws. Local governments can greatly influence offshore oil and gas activites regardless of annexation laws. As pointed out in Section IV of Appendix B (Volume 1), the Local Government Comprehensive Planning Act (LGCPA), Chapter 163, F.S. requires counties and municipalities to prepare, adopt, and amend comprehensive plans to guide local development. An excellent summary of the potential impact of this Act is presented in the South Florida Regional Planning Council 1983 report OCS Facility Siting Study. Once adopted by the local governing body (163.190(2)), the Act requires that "all development undertaken by, and all actions taken in regard to development orders by, governmental agencies in regard to land covered by such plan or element shall be consistent with the adopted comprehensive plan or element or portion thereof," F.S. (163.3194(l). That is, once adopted, no. deve7lopment order may be issued, no capital expenditure made, no governmental action related to land use taken, that is Inconsistent with the comprehensive plan. Adoption of the comprehensive plan thus obligates local governments to: � Bring existing zoning ordinances into conformity with the future land use plan element. � Revise or initiate land development regulations to conform with the plan. FL-22 Disapprove development applications that are inconsistent with the comprehensive plan. The consistency requirement of the LGCPA, 163.3194(l), F.S., gives the comprehensive plan a unique legal status, subordinating zoning regulations to the comprehensive plan. The few legal signals so far indicate strong acceptance of the plan's primacy. Although the South Florida report is aimed primarily at OCS activities, the same concerns and actions pertain to oil and gas development in state territorial waters. The report states further: "Tools that allow local governments to encourage, discourage, and regulate onshore OCS-related facilities include the following: (Remembering that coastal zone controls must be reasonable and national needs must be considered). 1. Counties and municipalities have what is in effect a veto power over State leasing of adjacent or nearby submerged lands. This is particularly relevant to pipeline landfalls and water-dependent facilities. There are significant exceptions and conditions based on Chapter 253, F.S. 2. The local Comprehensive Plan can be amended to reflect and incorporate local policies regarding OCS-related activities. Only Broward County directly and clearly addresses the Impacts of offshore energy development (part 1-3) of the Coastal Zone Protection Element). However, the policy guidelines hinge on imprecise words such as "guide" and "encourage." 3. Local land development regulations can be written to specifically regulate or discourage onshore OCS-related development by limiting certain uses in specific districts, not zoning any land for OCS-type industry, or imposing strict regulations a specific use even if permitted and zoned. Such regulations include height, size, setback, aesthetic, and safety requirements as well as air and noise performance standards. Subdivision regulations and platting requirements can also exert local control as can building, plumbing, electrical, gas, fire, safety, and sanitary codes, if written to deal with specific characteristics of particular OCS-related facilities. 4. The Development of Regional impact process can be used to evaluate petroleum storage facilities located within 1000 feet of any navigable water with a storage capacity of more than 50,000 barrels, or any industrial manufacturing or processing plant that is determined to be a Development of Regional Impact (DRI). The conditions imposed in the local government's DRI development order control facility siting. FL-23 5. Through taxation and spending measures, local governments may encourage and direct the facility siting. 6. Local governments may enact local air, noise, odor, and water pollution controls that either limit or encourage siting of certain facilities. The controls must be as strict or more strict than State or Federal regulations in order to be valid and avoid conflict with State or Federal regulations. 7. Port authorities, whether established as separate entities or operated by or in conjunction with local governments, can have a significant effect on marine-dependent OCS-related facilities through port regulations or tariffs, safety regulations, liability insurance requirements, and fire regulations. 8. Local governments may establish historic preservation districts which could discourage development in these areas." G. Oil and Gas Revenues Accruing to State 1. Minimum Royalties Allowed by Law Minimum royalties for oil and gas in Florida are 1/8 of gross production. During any year beginning with the anniversary date of a lease, if the lease is maintained by production, the royalties paid to Lessor in no event can be less than an amount equal to the total annual rental, otherwise, an amount must be paid equal to the total annual rental, less the amount of royalties paid during the preceding year (State of Florida 1982a). 2. Royalties Prescribed for Oil and Gas Leases Because oil or gas has not been produced in Florida's territorial waters, royalties have not been generated from this source. Royalty payments from upland oil and gas fields are described beginning on page 13 of Appendix A (Volume I). FL-24 3. Rental per Acre Rental payments are established prior to advertising for a lease sale and are specified in the lease agreement. No rental. is due if lands are developed for oil or gas or if a well has been commenced in good f aith to secure production in paying quantities. The details of the manner in which rental rates are set is described on pages 14-15 of Appendix A (Volume I). 4. Delay Rental Payment Florida oil and gas leases establish an annual rental fee but do not have a delay rental clause. 5. Shut-in Royalties As stated in Florida's Oil and Gas lease "If, at the expiration of the primary term or at any time thereafter, there is located on the leased premises a well or wells capable of producing oil or gas in paying quantities and such oil or gas is not otherwise produced due to pending development of a satisfactory market outlet or lack of suitable production facilities and this lease is not otherwise being maintained in force and effect, Lessee shall pay as royalty a sum of money equal to double the annual rental provided for in this lease but in no event to be less than $1,200.00 per annum for each well capable of producing oil or gas in paying quantities;---." Further details regarding the handling of shut-in royalties are contained on page 8 of Appendix C and on pages 15 and 16 of Appendix A (Volume I). 6. Offset Wells As stated in Florida's Oil and Gas Lease "in the event production in paying quantities should be brought in on adjacent land draining the leasee FL-25 premises, Lessee agrees to drill such offset wells as a reasonable prudent operator would drill under the same or similar circumstances at such locations required by spacing regulations adopted by the State of Florida, Department of Natural Resources." 7. Pooled Acreage The statutory basis for authorizing pooling or unitization of leased premises is discussed on page 16 of Appendix A (Volume I). The Florida Oil and Gas Lease addresses royalty aspects in greater detail. Operations for drilling, reworking or production on any part of a unitized unit composed in whole or in part of the land covered hereby shall be considered as operations for drilling, reworking or production on land covered by this lease and the entire acreage constituting such unit or units shall be treated for all purposes as if the same were included in this lease, except that in lieu of the royalties elsewhere herein specified, Lessor shall receive on production from each of such units the proportion of the royalties herein stipulated that the amount of Lessor's ownership in the mineral interest in the acreage placed in the particular unit involved bears to the entirety of the mineral interest in such unit." 8. -Bonus Consideration In Florida, the amount of the bonus required for a lease sale is not set by the state. In effect, because both the rental and royalty levels are established by state statute, the lease award is made to the bidder offering the highest cash bonus. Details of.the statutory requirements relating to the bonus consideration are contained on pages 4 and 5 of Appendix A (Volume 1). FL-26 9. Severance Tax Severance in Florida for ordinary oil production is 8% of value at the wellhead. For small wells (less than 100 barrels per day) the tax for oil is 5% at the wellhead. Severance tax f or gas at the wellhead also is 5%. Because oil and gas produced in Florida is so sour (high sulfur content) that it is actually lethal, no one will buy it at the wellhead. The amount of severance tax due therefore is determined by starting with the final sale value and subtracting the interim processing costs between wellhead and final sale (Parramore 1984). 10. State Agency Receiving Royalties Royalties are paid to the Department of Natural Resources. 11. Distribution of Revenue Within State The distribution of oil and gas revenues within the state is established by statute and is described on pages 6-8 in Appendix A (Volume I). H. Environmental Controls and Regulations 1. -Responsible Agencies The Florida Department of Natural Resources (FDNR) is solely responsible for leasing of all state lands as the administrative arm of the Board of Trustees of the Internal Improvement Trust Fund. While other state agencies are not involved directly in the leasing process some play a critical role in the permitting following the award of a lease. This role is addressed in the FDNR 1982 (Section 16Q-21.04(2c)): FL-27 "The Department of Environmental Regulation biological assessments and reports by other agencies with related statutory, management, or regulatory -authority may be considered in evaluating specific requests to use sovereignty lands. Any such reports sent to the department in a timely manner shall be considered." Environmental parameters and the agencies responsible for their management are as follows: Air Quality Florida's air quality program is administered by the Department of Environmental Regulation (DER) pursuant to Chapter 403, F.S. (the Florida Air and Water Pollution Control Act) and the 1977 Federal Clean Air Act. The Environmental Protection Agency (EPA) administers the Clean Air Act at the federal level, while DER is the implementing agency at the state level. These two ac ts provide the authority for DER to establish ambient air quality standards and emission standards to protection or upgrade air quality. DER has established State Ambient Air Quality Standards for six major pollutants: nitrogen dioxide, carbon monoxide, ozone, sulfur dioxide, lead, and total suspended particulate. All sources of air pollution, whether existing, modified, or new must comply with Chapter 17-2, F.A.C., which sets standards for allowable emissions. -To achieve and maintain national (and State) ambient air quality standards, DER developed an air implemention plan in 1972. This plan has been quite successful in helping Florida to attain the six ambient standards; Florida does not have a persistent, serious problem with any of these major pollutants. Several of Florida's urban areas have exceeded the standards at one time or another, but in general pollutant levels have been well below the State or national standards. Some of Florida's ambient air quality standards are stricter than those of the Federal Government. FL-28 DER is responsible for issuing permits for the construction or operation of all air pollution sources. Power plants, phosphate plants, pulp and paper mills are examples of industrial facilities that require emission permits (State of Florida 1983). Water Quality The Department of Environmental Regulation also is responsible for maintaining water quality on state lands and in state waters. "These waters of the state are rivers, streams and their tributaries, bayous, sounds, estuaries and bays and their natural tributaries, most natural lakes and the Atlantic Ocean and Gulf of Mexico to the seaward limit of the state's territorial boundaries. Waters owned entirely by one person other than the state are included only with regard to possible discharge on other property or water. If there is a connection, then a permit may be required---." "DER controls the permitting of dredge and fill activities under Chapters 253 and 403, F.S. Chapter 253 F.S. is limited to areas below the Mean High Water (MRW) saltwater and Ordinary High Water (OHW) freshwater line. This statute ensures wildlife consideration by authorizing permits only when it "will not interfere with the conservation of fish, marine and wildlife or other natural resources to such an extent as to be contrary to the-public interest." Chapter 403 F.S., on the other hand, applies to areas above and below the MHW and OHW lines. Its coverage includes most lakes in Florida and a large percentage of freshwater wetlands. Heretofore, interpretations of Chapter 403 F.S.have precluded the direct consideration of fish and wildlife as a parameter for water quality permitting---" (State of Florida 1982b). FL-29 2. Relation to Leasing Agency Recent attempts have been made within the state to streamline activities related to oil and gas leasing and the subsequent permitting procedures. While formal memorandums of understanding have not been drawn up, a joint application process was established in 1982 to expedite selected activities in Florida waters (State of Florida 1982b). This improved permitting procedure involved the cooperation of the DER, the DNR and the Corps of Engineers. 3. Environmental Review Process Prior to Issuing Lease/Permit A formal environmental review process prior to issuing pil and gas leases in Florida's offshore waters has not been established. Rather, the environmental review occurs during the permitting phase. The administrative and application procedures for obtaining environmental permits is described in the Joint Application Pamphlet (State of Florida 1982b). Appendix E 1.2,a.(2) of that pamphlet states "Unless specifically exempted, all dredging and filling activities which are to be conducted in or connected directly to waters of the state or which are connected via an excavated water body or series of excavated water bodies to certain waters of the state require permits (see Figure 4). - The purpose of the Joint Application Pamphlet is to furnish information on permit programs and instructions for submitting an application to the U.S. Department of Army, Corps of Engineers (Corps), the State of Florida Department of Environmental Regulation (DER), and the State of Florida Department of Natural Resources (FDNR) for work in the waters of the state. Federal and state laws prohibit certain activities unless authorized by permit. These laws include the River and Harbor Act of 1899; the Federal FL-30 FIGURE 4 Florida State and Federal Coastal Jurisdictions Tertiary Tributary Lake 10 Acres Secondary or Greater Tributary Primary Freshwater Vegetation, Tributary Marshes, Mudflats S@amps, and Shallow Areas Subject to Periodic Inundation Inland Navigable Waterway Coastal Vegetation- Periodic Inundation or Brackish Water Manmade Canals i ater:.1 STATE JURISDICTION oastal lvv@aters, DEPARTMENT OF ENVIRONMENTAL REGULATION AW _91i in All Waters of Flor;da Except as Noted in Appendix 'C ch@-?k hite. Un@4 ea DEPARTMENT OF NATURAL RESOURCES *Coastal Areas of Florida, Coastal Protective Structures, or Beach Restoration Vz @Yz 4, FEDERAL JURISDICTION All Activities Fill Activities and Activities that Affect Water Quality Downstream Fill, Excavation, and Major Structures (State of Florida Joint Application for Permit, Dredge Fill Structures) FL-31 Water Pollution Control Act Amendments of 1972, as amended by Clean Water Act of 1977; the Marine Protection, Research and Sanctuaries Act of 1972; and Chapters 161, 253, 258, and 403, F.S. In addition, other laws are directly related to the procedures for processing permit applications. These include the Fish and Wildlife Coordination Act of 1958, the National Environmental Policy Act of 1969, and Chapter 120, F.S. Rules and regulations governing the Department of the Army permit programs are listed in Title 33, Section 209.120 of the Code of Federal Regulations. Those governing the Department of Environmental Regulation are listed in Florida Administrative Code Rule 17, while those governing the Department of Natural Resources, Bureau of Beaches and Shores and Bureau of State Lands are listed in Florida Administrative Code Rule 16 (Appendix E). Appendix A of the Joint Application Pamphlet addresses the information requirements of the Board of Trustees of the Internal Improvement Trust Fund. The purpose of this appendix is to list the information required by the Board to obtain a letter of consent, submerged land lease, easement, or other form of consent sought pursuant to Chapter 253.77, F.S. Copies of Florida Administrative Code Rules 16Q-21 (Sovereignty Submerged Lands Management Rule), 16Q-20 (Florida Aquatic Preserve Rule) and 16Q-18 (Biscayne Bay Aquatic Preserve Rule) of the Department of Natural Resources, showing the more- detailed requirements, and criteria for approval are available upon request. A. copy of an application submitted to the Department of Environmental Regulation satisfies many of the information items required by the above rules and will be forwarded to DNR. The Bureau of State Lands Management will review the application for compliance with the administrative rules of the Department of Natural Resources. Additional information will be requested if needed. Exemption from Department of Environmental Regulation FL-32 permitting requirements does not relieve anyone using state-owned lands from soliciting consent or other authorization from Department of Natural Resources unless specifically exempt under Florida Administrative Code Rule 16Q-21. 4. Environmental Stipulations The Florida Oil and Gas Lease addresses environmental stipulations in a general way in Section 14(A), "Pollution and'Site Security." "The Lessee shall be liable for land @or water pollution resulting from the drilling for or production of products pursuant to this lease. The Lessee shall be liable for any damage to aquatic or marine life, wildlife, birds, and any public or private property, both real and personal due to Lessee's operations pursuant to this lease. The Lessee shall not allow any extraneous matter to enter or damage any mineral or freshwater bearing formation. Provided, however, this covenant of absolute liability shall not apply if the Lessee establishes that the prohibited discharge or other polluting condition was the result of any of the following: (1) an act of war; or (2) an act of government, either federal, state or local; or (3) an act of God, which shall be construed to mean an unforeseeable act exclusively occasioned by the violence of nature without the intervention of any human agency; or of nature without the intervention of any human agency; or (4) acts of disinterested third parties who are neither employed by or agents of the Lessee." The environmental responsibilities of the lessee are addressed further in the lease. in Section 18(E) with regard to the requirement for a surety bond. "Prior to the time that the Lessee mines, drills or extracts in any manner, petroleum, petroleum products, gas, sulphur or any other mineral from FL-33 the land covered hereby, Lessee shall deposit with the Lessor a surety bond in the amount of $50,000 from a surety company authorized to do business in the State of Florida. The bond shall serve as security and is to be forfeited to the Lessor to pay for any damage caused by mining or drilling operations of the Lessee. Damages as used this section shall include, but not be limited to, air and water pollution, destruction of wildlife or marine productivity and any other damage which impairs the health and general welfare of the citizens of the State of Florida." While environmental issues are cited in a general way in the Oil and Gas Lease, there are more specific environmentally related stipulations contained in Florida statutes. These .stipulations along with relevant adu@inistrative requirements are discussed in Appendix A (Volume 1) pages 18-24. Further stipulations are found in the State Lands Management Plan adopted by the Board of Trustees of the Internal Improvement Trust Fund in March 1981 (Appendix A, Volume I, pages 33-49). The impact of these permitting requirements and stipulations, and their interpretation by State officials, was reflected in the numerous stringent clauses in the only permit for oil and gas drilling in Florida's waters since 1968. This permit, issued to Getty Oil Company (for exploration in East Bay, Santa Rosa County) in November 1982 followed by the Corps of Engineer's permit in March 1983 was in effect a zero-discharge policy. This policy required a major effort on Getty's part to comply as indicated in the following statement. "Getty Oil Company has committed 16 persons per shift to the task of protecting East Bay. Three boats were purchased for use by crews: to monitor the environment of East Bay land surrounding areas during drilling operations; to maintain the sp e c ially- required equipment such as the Oil FL-34 Fence, and to perform routine housekeeping chores inside the 12-acre area. In addition, consultants have been hired to audit the environmental monitoring and environmental compliance of the East Bay. Project." (Getty Oil. Company 1983). 5. Baseline Environmental Research There is a considerable amount of research in the Gulf of Mexico conducted by scientists from academic, state, and private organizations. Funding is derived from private sources, federal grants for basic and/or applied research, or from state agency budgets to permit the fulfillment of statutory responsibilities. As with most other coastal states, Florida does not have a funded program dedicated to obtaining baseline data in support of future offshore oil and gas activities. Regional and site specific environmental data are collected, however, as required to support the application for permits for offshore development, As these data are made available, a body of knowledge is accumulating which will have a direct impact on our ability to make intelligent management decisions about future oil and gas development in Florida's waters. 6. Role of Corps of Engineers See Section H-3 of this report. I. Leasing Procedures 1. Leasing Schedule Florida has no schedule for offshore oil and gas lease sales. FL-35 2. Call or Nominations for Lease Oil and gas leases usually are offered in response to a nomination (proposal) for a lease from a potential lessee. See Appendix A, Volume I, pages 2-3 for details. 3. Fees A $200 non-refundable processing fee must accompany a nomination. 4. Publication of Calls for Nominations and Adverisements for Leasing See Appendix A, Volume I, pages 3-4. 5. Bidding All oil and gas leases in Florida are by sealed bids and competitive bidding. See Appendix A, Volume 1, pages 4-5 for details. 6. Terms of Lease -Title The lease grants exclusive rights to: investigate, explore, prospect and drill for discovery and production of "oil, gas, sulphur, carbon black, carbon dioxide, other liquid hydrocarbons, salt and/or brines and any other. miscellaneous constituent products produced. See Appendix A, Volume I, pages 20-24 for details. -Length of Lease The current Florida oil and gas lease establishes a primary term of five years although Section 253.55, F.S. authorizes the Board of Trustees to issue leases for primary terms up to 10 years. See Appendix A, Volume 1, pages 24-26 for details. FL-36 -Extension of Lease Leases can be extended under a variety of conditions as specified in Appendix A, Volume I, pages 24-28. -Transfer of Lease Leases can be assigned in whole or in part with the written permission of the Lessor. Liability rests with the owner of the lease and in the event of segregated ownership, liability is apportioned accordingly. -Compliance With Rules and Regulations The Lessee is required to comply with all current and future statutes, rules and regulations of the U.S. Government and the State of Florida. See Appendix A, pages 27-29 for a discussion of the resolution of conflicting laws affecting compliance. -Cessation of Work See Appendix A "Terms of Lease" pages 24-28 and Appendix C, Volume I, for a detailed discussion. 7. Handling of Proprietary Information In general, Florida's Public Records Law provides that all public records may be examined "by any person --- at reasonable times, under reasonable conditions---" unless an exemption is provided by law, (Section 119.07, F.S.). A detailed discussion of the management of proprietary data is included in Appendix A, Volume I, pages 82-83. The 15.steps required for processing an oil and gas lease in Florida can be summarized as follows: 1. Request to Nominate. Applications for nominations for the lease of sovereignty lands in which the State of Florida holds an interest in the petroleum or petroleum products shall include the following: FL-37 a. Name and address of the applicant or nominee; b. Legal description of the parcel sought including the surface acreage; this description may utilize the submerged land blocks approved by the Board of Trustees on March 17, 1981; C. Identification of the state agency vested with the ownership of the petroleum products; d. Percentage of the petroleum interests held by the State; e. Identification of any municipal corporation in which all or part of the parcel sought is located or within 10 miles thereof; f. Identification of any improved beach outside a municipal corporation or lands.in the tidal waters of the State of Florida abutting on or immediately adjacent to any improved beach in which all or part of the parcel sought is located or is within 3 riles thereof, and g. A $200.00 non-refundable processing fee. 2. Letter of acknowledgement sent to applicant by DNR, Bureau of State Lands Management. 3. Title requested from the Title Section of Bureau of State Lands Management by Uplands Leasing office. 4. Request sent to State Departments of Transportation or Agriculture for permission. Agency may specify stipulations to be put in lease. 5. Application sent to Bureau of Geology for review. They make recommendations on geological structure based on available data. Special site visits are not made. The Bureau of Geology report serves as the basis for establishment of royalties by DNR based on proximity to dry holes, producing wells, etc. Formal approval by the Bureau of Geology is not required. 6. Forwarded to uplands office of Bureau of State Lands Management for. review of land restrictions, local government regulations and related statutory and legal aspects. 7. List of owners within 500 feet of lease site is obtained from applicant if not already submitted with application. List is based on county tax records. 8. Application agendaed for permission to advertise by delegation of authority by Board of Trustees to the Executive Director of the DNR. 9. Approved lease form is designated prior to advertising. Standard form is used. 10. Advertisements are executed as specified in Chapters 253.115 and 253.52, F.S. FL-38 11. Lease date is set by Bureau of State Lands Management. 12. Bidders are notified of lease sale date. 13. Bids submitted by applicant must be sealed and accompanied by certified check. 14. Public lease sale is held on specified date in the manner prescribed in Chapters 253.53, 253.54 and 253.55, F.S. 15. Selected bidder is notified by Bureau of State Lands Management. A flow chart summarizing the above lease process is shown in Figure 5. J. Relation of Leasing Program to Issuance of Permits Issues involving the interrelationships of leasing and permitting are discussed in detail in Section H. and in Appendix E, Volume I. K. Mineral Leasing Non oil and gas mineral leasing in Florida also is handled by the Bureau of State Lands Management of DNR. At the present time, there are rock mining and sand and gravel leases. A different lease form is used for such leases than for oil and gas and lease sales are held separately. L. The Socioeconomic and Physical Impact of Oil and Gas Leasing in Florida's Waters Numerous studies have been performed over the years to assess the impact of offshore oil and gas activities on the coastal regions of the United States. In anticipation of such activities in the eastern Gulf of Mexico, FL-39 FIGURE 5 OIL AND GAS LEASE ADMINISTRATIVE FLOW CHART Request to Nominate Received I WEEK Acknowledge I Request tol Back 2 WEEKS __T@t@e to 4 to Veri y U Is d Y] 0 7 Bureau of Geology 1 WEEK Recommendations I Back to If Uplands Request Request 2 WEEKS List of Owners Permission] Within 500' to Advertic Own;;9, I Notify Within & k Advertise A Mailing List z 5 4EEKS Notify Petroleum Applican Information, oil and Gas Report Agenda for Consideration I WEEK of Bids upon Acceptance Petroleum Notify Information, Oil Cowpan oil and Gas Report -E-ea-.e.to I;:e 4 WEEKS F ga ga 'v for pprc val 1 To Oil Company Back to Uplands Agency/Executive for Signatu e Director Signatur @ryal. I Back to Uplands Back to UplaniL@-- - I @ c l 1C. IyBack to Uplands FOil Company FL-40 Ifor Recordin TOTAL 16 14EEKS the Florida Department of Community Affairs recently has supported studies by seven Florida Regional Planning Councils to determine local and regional effects of oil and gas operations on Florida's coastal zone. Although the impetus for conducting these studies was the potential development in nearby Federal waters, the results will apply equally well in the event that oil and gas exploration and production occurs in state offshore waters. Because of the voluminous nature of these reports, it is not possible to discuss each in detail. Rather, a special report prepared by T.A. Herbert and Associates, addressing the main issues, is contained in Appendix D, Volume I. Examples of areas covered are local employment, shore side space requirements, dollar impact, transportation, required services, and historical data affecting each of these parameters. Also contained in Appendix D are the summaries, conclusions, and recommendations of the four Regional Planning Councils facing on or near the Gulf of Mexico. It is recommended that the reader review these summaries for a better understanding of the socioeconomic issues as viewed by local governments. FL-41 REFERENCES Board of Trustees of the Internal Improvement Tr ust Fund (1981) Conceptual State Lands Management Plan. Prepared by the Bureau of State Lands Management, Department of Natural Resources, Tallahassee, Florida. Coastal Caribbean Oils and Minerals, Ltd. (1984) 1983 Annual Report. Hamilton Bermuda. Florida Department of Natural Resources (1982) Rules - Chapter 16Q-21, Sovereignty Submerged Lands Management, Tallahassee, Florida. Getty Oil Company (1983) East Bay Project Tour Guide. Southern Exploration and Production Division. NOAA, Office of Coastal Zone Management (OCZM) (1981) The Florida Coastal Management Program Draft Environmental Impact Statement. Prepared jointly with Florida Office of Coastal Zone Management and the Florida Department of Environmental Regulation, Tallahassee, Florida. Office of the Governor (1982) An Evaluation of the Department of @atural Resources State Lands Management Program. Office of Planningland Budgeting, Tallahassee, Florida. Parramore, J. (1984) Personal Communication. Florida Department of Revenue, Tallahassee, Florida. South Florida Regional Planning Council (1983) OCS Facility Siting Study. Hollywood, Florida. State of Florida (1982a) Oil and Gas Lease. Florida Department of Natural Resources, Tallahassee, Florida. State of Florida (1982b) Joint Application for Permit, Drill, Fill Structures. U.S. Army Corps of Engineers, Florida Department of Environmental Regulation, Florida Department of Natural Resources. Tallahassee, Florida. State of Florida (1983) Natural Resources/Recreation Policy Guides Workshop Draft. Office of Planning and Budgeting, Executive Office of the Governor, Tallahassee, Florida. Tampa Bay Regional Planning Council (1982) Coastal Energy Facilities Siting Study. St. Petersburg, Florida. U. S. Department of Commerce (1951) Plane Coordinate Projection Tables. Florida Coast and Geodetic Survey, Special Publication No. 255, Washington, D.C. West Florida Regional Planning Council (1983) Regional Outer Continental Shelf Onshore Facilities Siting Study for West Florida. Pensacola, Florida. 40 FL-42 j Appendices I APPENDIX A Oil and Gas Leasing in Florida's Territorial Waters: State Laws Prepared by Debra A. Swim Attorney Office of the Governor Tallahassee, Florida 1984 TABLE OF CONTENTS Page introduction ................................................... 1 I. Procedures ..................................................... 2 A. Iease Offering ......................... ! ..................2 B. Lease Form ................................................ 3 C. Advertisement for Bids .................................... 3 D. Consideration of Bids ..................................... 4 E. Reports Required .......................................... 6 F. Disposition of Proceeds fran Oil and Gas Leasing Activities ................................................ 6 II. Standards ...................................................... 8 A. The Public Interest Standard .............................. 9 B. Sovereignty Lands Managen-ent Policies .................... 13 1. oil and Gas Leasing Policies ........................ 13 a. Royalties ...................................... 13 b. Rentals ........................................ 14 C. Payment in Lieu of Royalties ................... 15 d. Cash Consideration ............................. 16 e. Pooling and Unitization ........................ 16 f. Bonds/Responsibility of Bidder ................. 17 g. Liability ...................................... 17 h. Areas Excluded from Leasing .................... 18 i. Operations ..................................... 20 Term of Lease .................................. 24 k. Force Majeure .................................. 27 1. Conflicting Laws ............................... 27 2. General State Lands Management Policy ............... 28 a. The Sovereignty Lands Management Rule .......... 29 b. The State Lands Management Plan ................ 33 Conclusion for Section II .......................................... 49 Footnotes for Sections I and II ...................................... 51 III. Developnent of Oil and Gas Resources: State Laws ...................................................... 63 Introduction ................................................... 63 Chapter 161, Florida Statutes .................................. 64 Chapter 163, Florida Statutes .................................. 64 Chapter 253, Florida Statutes .................................. 65 Chapter 258, Florida Statutes .................................. 66 Chapter 267, Florida Statutes .................................. 67 Chapter 370, Florida Statutes ...................... ............ 68 Chapter 373, Florida Statutes .................................. 69 Chapter 376, Florida Statutes .................................. 69 Chapter 377, Florida Statutes .................................. 71 Chapter 380, Florida Statutes .................................. 72 Chapter 403, Florida Statutes .................................. 75 Footnotes for Section III ........................................... 77 IV. The Consistency Provisions of the Coastal Zone Manageirent Act ............................................ 79 V. State Policy Regarding Oil and Gas Leasing in State Waters and Federal Consistency ........................ 81 Vi. Public Access to Proprietary Oil and Gas Resource Data Held by the State ................................ 82 Footnotes for Sections IV, V, and vi ................................. 84 INTRODUCTION When Florida became a state in 1845, title to navigable ocean waters,l the land beneath them, and the foreshores (that had not been conveyed by previous sovereigns) was vested in the State.2 These areas are known as sovereignty tidal lands. Title to sovereignty tidal lands is vested in the Trustees of the Internal Improvement Trust Fund3 (hereinafter the Trustees). The Trustees (also known as the Governor and Cabinet) are a body of seven elected officials: the Governor, the Commissioners of Education, Agriculture, Insurance, the Secretary of State, the Comptroller,,and the Attorney General. Disposal of any interest in sovereignty lands, whether by sale, lease, or otherwise must be by vote of at least five of the seven Trustees.4 Staff responsibility for sovereignty lands management rests with the Department of Natural Resources (DNR). Within the DNR the land management program is admin- istered by the Bureau of State Lands within the Division of State Lands.5 All sovereignty lands management decisions must conform to the-public interest standard established by Florida's constitution, statutes and rules. In addition, standards for oil and gas leasing have been adopted. Both the public interest standard and the oil and gas leasing standards are discussed in Section II. The following section explains the procedural mandates for oil and gas leasing on sovereignty tidal lands as established by statute or rule. Section III will briefly discuss laws which influence post-lease activities. Section IV describes the federal consistency requirements of the Coastal Zone Management Act. Lastly, the impact of Florida's "Sunshine Laws" upon the release of proprietary information in the oil and gas leasing process is discussed in Section V. I. PROCEDURES The following discusses six procedural mandates regarding oil and gas leasing established by Chapter 253, F.S., or by rules or policies adopted by the Trustees. More substantive directives are discussed in Section II. 1. The Trustees shall offer oil and gas leases in such parcels as it may designate, whenever, in their opinion, there is demand for such leases.6 The Trustees have delegated authority to determine when to offer leases to the Executive Director of the Department of Natural Resources. Department practice is to offer oil and ga.s leases after application or nomination7 has been filed. An application or nomination must contain the following:8 1) name and address of applicant or nominee, 2) legal description of the parcel sought, including surface acreage; this description 2 may use the submerged land blocks approved by the.Trustees March 17, 1981;q 3) identification of the state agency vested with ownership of the petroleum products; 4) percentage of petroleum interest held by the state; 5) identification of any municipality in which all or part of parcel souiht is located or within three (or ten 0) miles thereof; 6) identification of any improved beachll outside a municipal corporation or lands in the tidal waters of the state abutting on or immediately adjacent to any improved beach in which all or part of the parcel sought is located or within three miles thereof, and 7) a $200 non-refundable processing fee.12 2. The lease form must be prescribed prior to adver- tising for bids.13 Lease terms are discussed in Section III. Certain lease terms are required by statute. Other lease terms are within the Trustee's discretion (guided by applicable provisions of Florida's constitution, statutes, regulations, and policies). A lease form has been approved by the Trustees. Some terms in this lease form are more appropriate for uplands rather than submerged land leases.14 3. Oil and gas leases shall be executed only after notification by-publication, and, in some instances, a public hearing.15 Notice must be published in a newspaper of general circulation in Leon County or in the vicinity of lands to 3 be offered16 no less than once a week for four consecutive weeks. The last publication must be no sooner than five days in advance of sale. Notification must include: the date, time, and place at which bids will be opened and considered;17 description of the area offered for lease; and a statement indicating the availability of the lease form. Copies of such.notice must also be sent by certified or registered mail to each owner of land lying within 500 feet of the land proposed for lease. An example of such notifi- cation is included as Attachment A. If the area proposed for lease is: 1) within three miles of an incorporated municipality, or 2) within three miles of an improved beach, 18 a public hearing must be held. At least one week prior to such hearing notice must be published in a newspaper in the vicinity of the lands to be offered. Copies of such notice must be sent by certified or registered mail to each owner of land lying within 500 feet of the land proposed for lease. The Trustees may withdraw all or part of land offered if, after public hearing or comments, they consider leasing such lands to be contrary to the public welfare. 4. All leases shall be by sealed bids and competitive bidding.19 Applicants shall submit sealed bids by the date and 4 time specified in the notification.20 All bids shall include a certified statement as to the bidder's state lease holdings2l and be accompanied by a cashier's check or certified check. Chapter 25322 requires the check to be for the amount of cash consideration23 and be payable to the state agency Which holds title to or controls the land offered for lease. Pursuant to Sections 16Q-15.08(2) and 16Q-21.08(3)(b), F.A.C., such check must include the rental payment for the first year's lease, in addition to the cash consideration and be made payable to the Depart- ment of Natural Resources. Checks are returned to unsuc- cessful bidders upon rejection. The statutory section entitled "Competitive Bidding" provides: On the date and at the hour specified in the advertisement of sale the Trustees shallat a public meeting, open and consider any and all bids previously submitted-and, in the discretion of the Trustees, award the lease to the highest and best bidder...pro- vided, that if, in the judgment of the Trustees, the bids submitted do not represent the fair value of such lease, or leases, or the execution of same is contrary to the public welfare, or the responsibility of the bidder 4has not been established to its satisfaction, 2 or for any other reason, it may ... reject said bids, give notice and call for new or other bids, or with- draw said land from the market. If several distinct... parcels...can be separately considered, then... the board may so consider them, but, if they cannot be so considered, then the rejection for any cause of the highest and best bid shall result in the rejection of all bids.25 (emphasis added) No bids have been separately considered to date.26 5 5. Lessees shall submit an annual notarized report.27 The Trustees must require an annual status report from all lessees. The report must include the number of holes drilled, the dates, depths and results of drilling operations and a financial report of moneys paid over to the state, if any. The Trustees may require reasonable additional information, as may be necessary, for a better understanding of the operation under lease. However information as to work product, trade secrets, or methods of operation not commonly shared with a leasing agency need not be divulged. Failure to submit the report within ninety days following the anniversary date of the lease may be grounds for revoking the lease. The lease form approved by the Trustees provides: 1) the State may "examine, for term of lease, including any extensions, plus 3 years,28 the records pertaining to computation of royalties and to the production, trans- portation, processing, disposition, sale and marketing of ... products produced";29 and 2) a log of each well drilled must be filed upon completion or abandonment.30 6. Proceeds from leasing are deposited in The internal improvement Trust Fund. Proceeds from oil and gas severance tax are credited to the Conservation and Recreation Lands Fund and the General Revenue Fund. Proceeds from the excise tax on terminal facility operators are credited to the Coastal Protection Trust Fund. 6 Proceeds from leasing (royalties, rentals, cash consideration, etc.) are deposited in the Internal Improvement Trust Fund. moneys from this fund are used for acquisition, management, administration, protection, and conservation of state-owned lands.31 Fifty percent of the proceeds-from the excise tax on the severance of oil and gas (pursuant to Sections 211.02(l)(a) and (c), F.S.) are credited to the Conser- vation and Recreation Lands Trust Fund. If the funds credited exceed $20 million for the fiscal year, the excess is transferred to the General Revenue Fund. The major portion of this fund is used to acquire lands for conservation or recreation purposes. Smaller allocations may be made to develop and maintain a natural areas inven- tory and for management of lands acquired by trust funds.32 All proceeds from excise taxes, registration fees, penalties, judgments, and other fees and charges related to Chapter 376, F.S., Pollutant Spill.Prevention and Control, are credited to the Coastal Petroleum Trust Fund. Moneys from this fund are used for a variety of purposes, including: 1) abatement of oil spill pollution hazards; 2) cleanup of.natural resources damage by discharge of oil spill pollutants (excluding liquified petroleum gases); 3) acquisition of spoil disposal sites; and 4) funding for the Water Quality Assurance Trust Fund (for hazardous 7 waste management).33 II. STANDARDS All sovereignty lands management policy, whether enacted by the legislature, adopted by the Trustees in a DNR rule, or expressed as a lease term, must conform to the public interest standard set forth in Florida's constitution, statutes, rules, and court decisions. Florida Statutes and rules also establish a variety of policies which influence oil and leasing of sovereignty lands. Section A will discuss the public interest stan- dard. Section B describes specific and general standards regarding oil and gas leasing of sovereignty lands as established by statute, rule or policy. A. The Public Interest Standard. All sovereignty lands management decisions must con- form to the public interest standard in Article X, Section 11 of Florida's constitution: The title to lands under navigable water ... is held by the state, by virtue of its sovereignty, in trust for all the people. Sale of such lands may be authorized by law, but only when in the public interest. Private use of portions of such lands may be authorized by law, but only when not contrary to the public interest. (emphasis added) - 8 The constitution's public interest standard is also found in Chapter 253. The Chapter vests sovereignty lands title in the Trustees34 and provides: All sovereignty lands ... shall continue to be held in trust for the use and benefit of the people of the State pursuant to Section 7, Article 11,35 and Section ill Article X of the State Constitution.36 As the above provisions indicate, leases of sover- eignty lands must be "not contrary to the public interest." However the Trustees have adopted a more stringent standard, for oil and gas leases. Section 16Q-21.04(2)(k), F.A.C. provides that: oil and gas leases on state-owned sub- merged lands shall be approved only ... upon adequate demonstration that the proposed activity is in the public interest,37 that the impact upon aquatic resources has been thoroughly considered, and that every effort has been made to minimize potential adverse impacts upon sport and commercial fishing, navigation, and national security. '(emphasis added) The rules define the public interest as: Demonstrable environmental, social, and economic benefits which would accrue to the public at large as a result of a proposed action, and which would clearly exceed all demonstrable environmental, social, and economic costs of the proposed action. In determining the public interest in a request for use, sale, lease, or transfer of interest in sovereignty lands or sever- ance of materials from sovereignty lands, the board shall consider the ultimate pro- ject and purpose to be served by said use, sale, 1 ase, or transfer of lands or mate- rials.39 9 The public interest standard stems from the Public Trust Doctrine.39 The Doctrine is a legal principle, rooted in Roman law and developed by years-of court decisions. The principle provides that "Sovereignty lands are held by the sovereign in trust for the use and benefit of the public." The public trust principle arose because of the history of sovereignty lands owner- ship. Under Roman law the ocean and the shores were regarded as res communes, common property, incapable of private ownership. Title to such common lands was vested in the sovereign for the use and benefit of the public. As in every trust relationship the trustee owed a high fiduciary responsibility to'the beneficiaries of the trust. The sovereign must manage trust properties so as to protect the public interest in such lands. The pattern of ownership and fiduciary relationship established by the Public Trust Doctrine continue today. Because sovereignty lands were acquired as incident to sovereignty, not by purchase or other means, their management must conform to the public interest standard. The public interest standard is more than an affirmation of the general principle that public lands must be managed to effectuate public purposes. The public purpose stan- dard merely requires the presence of one purpose which - 10 - -0 could be characterized as public.40 The public interest standard involves the higher fiduciary responsibility, established by the Public Trust Doctrine, to protect the public's interest in sovereignty lands. As described by Florida's First District Court of Appeal: (The) Trustees are charged with the responsibility of preserving the navi- gable waters of this state ... for the benefit of...all the people of Florida. Theirs is the duty of taking a broad and objective view of all matters under their jurisdiction which might adversely affect the public interest and of reaching their decisions in a manner consistent with the grWest good for the greatest number. To comply with the public trust standard the trustees must consider and balance a variety of public purposes in accordance with current public needs. . The public interest in sovereignty lands has changed over the years. In the late 19th and early 20th centuries Florida encouraged the filling of sovereignty lands. Sub- merged lands were given away to encourage immigration and agriculture.42 Since 1957, as a result of increasing ,environmental awareness, a permit is required to dredge or fill on sovereignty lands. Environmental impacts are eval- uated and satisfactorily mitigated or the permit is denied.43 Because public needs do change with time the public interest standard is a flexible concept. Historically the courts have emphasized protection of such traditional public uses of sovereignty lands as navigation, commerce, and recre- ation.44 Modern court decisions also protect the public interest in the environmental, social, and economic values of sovereignty lands.45 In order to accommodate the changing nature of the public interest determinations, the Trustees are accorded broad discretion in sovereignty lands manage- ment decisions. Such decisions are entitled to a "presumption of correctness" by the courts. As stated by the Florida Supreme Court: The Trustees of the Internal Improvement Trust Fund are ... constitutional officers of the executive branch of government. if we are ever to apply the rule that public officials will be presumed to do their duty, it would... be most appropriate in this instance.46 Even if a court thought a management policy unwise, the Trustees' decisions would not be overturned unless it could be termed "arbitrary and capricious" or "a clear abuse of discretion."47 Research reveals no instance in which a sovereignty lands management policy was re- versed for violation of the public interest standard. However, two Supreme Court cases noted in dicta48 that legislative grants of exclusive rights to propagate and harvest sponges or oysters "without reservation, compen- sation, or consideration, is not contemplated by the public nature and purposes of the title of the state - 12 to such lands which was conveyed as a sovereign right upon the admission of Florida into the Union."49 B. Sovereignty Lands Management Policies Pursuant to the responsibility to protect the public interest in sovereignty tidal lands a variety of direc- tives relevent to oil and gas leasing have been adopted by rule or statute. The following section discusses directives specifically applicable to oil and gas leas- ing. Section 2 sets forth general sovereignty lands management policies which may influence oil and gas leasing decisions. 1. Oil and Gas Leasing Standards The following standards are established by statute or rule. Additional lease terms or policy may be adopted so long as not inconsistent with the public interest standards. Royalties Chapter 253, F.S.,mandates that royalties never be less than one-eighth of gross production.50 The DNR rules5l adopted by the Trustees establish royalties per proximity to production. Royalties are 1/4 in sections less than one mile from production. If there is an intervening dry hole52 royalties drop to 1/5. Royalties are also 1/5 in - 13 sections between one and threemiles from production unless there is an intervening dry hole in which case they drop to 1/4. For sections more than three miles from production royalties are 1/6. If there is doubt as to the location of production because of multiple wells, the higher royalty will apply. A chart Attach- ment B has been adopted to aid in determination of royalties. The lease approved by the Trustees grants the State the option to receive either 1/6 of the gross production each month or the value of the State's part of gross production (set by the greater of one of four calculations).53 Chapter 253, F.S., provides that royalties may be in-kind or in value.54 The lease provides that the State may opt to have all royalties be made in-kind.55 Both Chapter 253, F.S., and the lease require de- duction of oil and gas reasonably used for production prior to calculating royalties.56 The lease also provides that all royalties are "without deduction for taxes or the cost of ... making the products produced hereunder ready for sale or use..."57 Purusant- to Section V of the lease, royalties cannot be less than annual rental. Rentals Pursuant to Chapter 253, F.S., a definite rental rate must be set prior to advertising for lease.58 The rental rate must increase annually after the first two 14 years. No rental is due if lands are "developed for oil and gas" or if a "well has been commenced in good faith to secure production in paying quantities".59' The lease establishes an annual rental fee of $3. 50 per net mineral acre, increasing $. 50 per net mineral acre annually after the second year.60 No rent is owed for a section: 1) with a drilled well or 2) upon which production in paying quantities has been obtained or 3) upon which drilling or reworking operations have been conducted in good faith within thirty days preceeding the rental due date.61 Payment In Lieu Of Royalties Chapter 253, F.S., authorizes the Trustees to estab- lish payments in lieu of royalties for "shut-in" wells,62 so long as the shut-in period is no longer than 48 months from date of completion.63 The lease provides that a payment equal to double the annual rental but in no event less than $1,200.00 per annum for each "shut-in" well will extend the lease for one year. Such extensions may be obtained under similar circumstances and 3 one year periods. If, how- ever: 'l) oil or gas is sold and delivered in paying quantities from a well within 6,500 feet of the "shut- in" premises and completed in the same producing reservoir, or 2) drainage is occurring, then the right to further extend 15 - the lease by payment in lieu of royalty ceases. In such instance the lease will remain effective until the end of any one-year period for which the "shut-in" roy- alty has been paid and may be extended by payment of a compensatory royalty. Such extension shall not exceed four years from expiration of the primary term.64 Cash Consideration Chapter 253, F.S., provides that a cash consideration, in addition to rental and royalty, must be required, said consideration being the bid.65 The lease provides that the cash consideration received from the bid is the lease consideration, and shall not be'allocated as a rental for the period.66 Pooling and Unitization Chapter 253, F.S.,. authorizes the Trustees to provide for pooling or unitizing the leased premises.67 The lease gives the lessee the right to pool or combine the acreage covered by the lease or any parts thereof, whether State, Federal, or privately owned land, when reasonably necessary to conform with drilling units established by the Department of Natural Resources or to conform to any unitization or integration order issued by the Department.68 16 - 0 Bonds/Responsibility of Bidder. Chapter 253, F.S., directs the Trustees to establish, to their satisfaction, the responsibility of the bidder.69 Both Chapter 253, F.S., and the lease require a surety or property bond prior to conducting any drilling. The surety bond must be from a company authorized to do bus- iness in Florida.70 The lease requires a surety bond from a Florida company but does not mention a property bond.71 In setting the bond the Trustees must consider the extent of possible damages,72 with special attention to operations in waters of the State. Liability Section 14 of the lease provides that the lessee is liable for land or water pollution and damage to wild- life or property resulting from operations. Absolute liability does not apply if pollution or damage is a result of an act of war, government, God,73 or a dis- interested third party. 74 The lease also provides that the lessee will "inves- tigate ... and hold and save harmless ... the State-from any and all claims, actions, law suits and demands of any kind or nature arising out of this lease."75 17 - Areas Excluded From Leasing The following areas may not be leased unless stated conditions, if any, are met: * Section 253.61, F.S., prohibits the issuance of oil and gas leases, without a resolution of consent from the appropriate municipality, in the following areas: 1) within the limits of an incorporated municipality; 2) on areas within the tidal waters of the state which are: - abutting or immediately adjacent to the corporate limits of a municipality; - abutting or immediately adjacent to any improved beach;76 or - within 3 miles (extending from Mean High Tide Line) of a municipality, or an improved beach.77 3) on an improved beach outside an incorporated municipality.78 0 Section 253.47, F.S., prohibits conveyance of the right to "drill ... or ... place permanent or stationary ob- struction ... within 1/4 of one mile of the lands of any up-land owner, without first having the written consent of such up-land owner." *. The sovereignty lands management rule adopted by the Trustees prohibits oil and gas leasing in areas less than "one mile seaward of the outer coastline as 18 defined in United States v. Florida, 425 U.S. 791 (1840) 79 ... unless the lease stipulates that any drilling will be conducted from outside said area." 80 9 No'lease may be issued without approval of state agency holding title. 81 e No "mineral" 82 lease may be issued "on hard- surfaced beaches that are used for bathing or driving and areas contiguous thereto out to a mean low-water depth of 3 feet..."83 It is important to note that, pursuant to post- lease permitting or regulatory requirements84 lessee activities may be further prohibited or conditioned. Specific drilling restrictions include: e No drilling of oil or gas wells is allowed within areas designated as Aquatic Preserves. Leases which permit drilling from outside the preserve may be executed.85 * No oil and gas drilling structure may be constructed within one mile of the seaward boundary of any state, local, or federal park, or aquatic or wild- life preserve.86 9 No drilling structure may be constructed on the surface of a freshwater lake, river or stream, or a bay or estuary.87 19 Operations Section 253.45(2) F.S., requires leases for "phos- phate, earth or clay, sand, gravel, shell,'mineral,88 metal, timber or water, or any other substance similar the foregoing..." to "specify... in clear and precise terms, the particular minerals for which the lessee is permitted to drill or mine and the'manner in which same may be extracted." The lease grants exclusive rights to: investigate, explore, prospect and drill for dis- covery and production of "oil, gas, sulphur, carbon black, carbon dioxide, other liquid hydrocarbons, salt and/or brines and any other miscellaneous constituent products produced."89 The following statutory and lease provisions relate to drilling operations: All drilling must be conducted!' inan efficient, dilligent, and workmanlike manner, and in accordance with the best practice, to a depth of six thousand" feet before the abandonment thereof, unless oil or gas has been found in paying quantities at a lesser depth."91 0 Test well operations92 must be conducted "in good faith ... to discover and... develop ... land for the production of oil and gas, until such well is completed or abandoned."93 20 e Seismic shot holes must be drilled sufficiently deep to prevent undue surface cratering and consequent damage to surrounding vegetation and wildlife. 94 9 If production in paying quantities is brought in on adjacent land draining the leased premises, the lessee must drill such offset wells as a reasonable pru- dent operator would drill under the same or similar circumstances at such locations required by the spacing, regulations adopted by DNR..95 0 A log of each well drilled shall be filed with the Oil and Gas Administrator within 30 days of completion or abandonment.96 e A plan for site security of each producing well must be filed for DNR's approval within 10 days of pro- duction. 97 Lessee must report to the DNR any breaches of site security within 48 hours of its discovery.98 * The lessee must report all spills or leakage of petroleum products, or other waste material -to the DNR. Any such spill leakage which cannot be immediately controlled must be reported immediately to appropriate state and federal agencies.99 The lessee must provide seals and locks for all oil access points on the leased premises.100 9 The lessee must provide, to all product trans- 21 porters, a run ticket and/or bill of lading which shows quantities, the shipper and the cosignee.101 Other operational lease or statutory provisions include: e The lessee shall not allow any extraneous matter to enter or damage any mineral or freshwater bearing formation.102 * The lease must convey rights of ingress and egress to, from, and over the leased area.103 However the right to enter upon private property without the ownerls previous consent may not be conveyed.104 * Chapter 253 requires the lease to convey "the right to construct and maintain on and over (the leased property) in such manner as not to obstruct transpor- tation, any structures, tanks, docks, stations and other equipment, as may be required for the proper development of such leases and the purposes for which same are made."105 The lease authorizes the lessee to lay pipelines, build roads, tanks, power lines and power stations, comiuni- cations equipment and other structures and equipment necessary to produce, save, take care of, treat, trans- port and own the lease products.106 * If the lease is for more than 640 acres, the lessee may house "employees engaged in operations for 22 drilling and/or production and handling" on the premises. 107 Geophysical exploration is authorized after notice to the DNR and mitigation of impacts on endan- gered species of vegetation or wildlife. The lessee must take all reasonable precautions to prevent the starting of fires in areas of geophysical operations.108 9 The lessee must, "in a timely manner" file "a schematic of approved pipe layouts, including all oil access points, from the actual well-head to the field plant and/or tank," with the DNR.109 The State may re- quire the lessee to "bury all pipelines four feet below the surface.110 The lessee must file a notarized status report in accordance with Section 253.511, F.S .111 9 The State is authorized to examine records per- taining to the computation of royalties and to the pro- duction, transportation, disposition, sale and marketing of lease products for the lease term including extensions plus 3 years.112 The lessee must maintain such records for this same period and, upon the State's request for royalty purposes, for 2 additional years. 9 The State is authorized to check meter, gauges, and measuring devices used by lessee and to require certificates of calibration accuracy.113 23 The lessee has the right to remove equipment within a reasonable time after expiration of the lease.114 o The lessee must restore the property to its former condition as far as practicable upon the conclusion of drilling or other operations.115 Term of Lease Section 253.55, F.S., and the State Lands Management Plan provide that the primary lease term is not to exceed 10 years. The lease establishes a primary term of 5 years-116 The lease remains in effect for the primary term and as long thereafter as: 1) operations are being carried on in good faith, in a workmanlike and diligent manner, with no cessation of more than 30 consecutive days or, 2) lease products are being produced in paying quantities.117 If production is obtained and then ceases within the primary term, the lease will remain in force if: 1) rentals are paid, or 2) operations for drilling or reworking are commenced on or before the rental payment date next en- suing sixty days after cessation of production.118 if productions ceases after the primary term, the lease re- mains in force if: 1) operations for drilling or re- working are commenced on or before sixty days after ces- sation of production, and 2) such operations are con- - 24 - 0 ducted with no cessation of more than thirty consecutive days, and 3) production is achieved within a reasonable time. In such instance the lease remains in effect so long as there is production in paying quantities.119 If production is not obtained the lease will remain in force after the primary term if: 1) drilling operations are underway but production has not been obtained, and 2) lessee files a written application for extension, accom- panied by a payment of $5 per acre before expiration of the primary term. In such instance the lease will be ex- tended for a thirty day period and so long thereafter as production in paying quantities continues. If such pro- duction does not occur the lease may (if the above con- ditions are met) be extended for additional thirty day periods up to a total of 390 days.120 The lease or portions thereof, is void if test wells de- scribed below are not drilled. Operations for drilling must be commenced and completed so that: 1) at least one test well is drilled within the first 2 1/2 years of the primary term, and 2) at least one additional test well is drilled in each succeeding year period of the term until the total number of wells drilled is equal to half the number of sections embraced in the lease. The lessee must file a 25 - written declaration at time of drilling describing the two sections of land to which such well shall apply- 121 The lease is subject to forfeiture if the lessee: fails or refuses to pay rental or royalty due; knowingly makes a false report concerning pro- ductions, royalty or drilling; fails or refuses to drill any offset well as required by law; 9 knowingly violates any material provision of the lease ... such provisions would include, but are not limited to the following: - the lesses must, at all times122 be either: 1) conducting drilling or reworking operations without cessation of more than 30 days or, 2) producing lease 3roducts in paying quantities;12 - the status report required by Section 253.511, F.S., and Section 18(D) of.the lease must be filed annually.; - the requirements of State, federal, and local must be met,124 and - the lessee must correct site security deficiency after written notice thereof;125 refuses the proper authority access to records pertaining to operations under the lease; or fails or refuses to furnish the log of any well as provided herein; and lessee fails to take reasonable action to remedy any such default within 30 days after written notice from lessor.126 - 26 Force Majeure If, despite good faith effort, lessee.cannot comply with any lease term, due to "war, rebellion, riots, strikes, act of God including but not limited to storms, floods, washouts, landslides, and lightening or any laws, acts, orders, rules regulations or demands of governmental author- ity", then: 1) lessee's obligation to comply with such covenant is suspended; 2) lessee will not be liable for damages for failure to comply with such covenant, and; 3) the lease will be extended for as long as the lessee cannot, despite reasonable diligence, conduct drilling, reworking, or production operations. Rental payments for the primary or extended term are not suspended. 127 Conflicting Laws Section 253.60, F.S., provides that: The development of the lands leased by the Trustees for the production of gas there- from shall be in accord with the laws of Florida relating to conservation and con- trol and, if herein is found any conflict with those laws, such laws relating to conservation and control shall prevail. The lease provides that: o Should there by any conflict in any of the pro- visions of -this lease with the law governing the issuance and operation of leases on the area here- in described... the provision of such law shall be written into this lease and shall control,128 27 - � all (lease) terms... expressed or implied... shall be subject to all Federal and State laws, exec- tive orders, rules, or regulations, in force at this time or which may be promulgated, en- acted and enforced in the future,112 � the lessee shall comply with all current and future statutes, rules and regulations of the United States Government, its agencies and the State of Florida, its agencies and political subdivisions.130 The lease grants the exclusive right to apply for per- mits to conduct exploration, development, or production activites, but cannot assure that such permits will be granted. Permitting may be difficult if such activities impact areas or resources designated for special protection under state or federal laws.131 Any revisions to the state laws regu- lating leasing of sovereignty tidal lands should ensure that restrictions on post-lease activities are, to the maxi- mum extent practicable, established prior to lease execution. 2. General State Lands Management Policies Pursuant to statutory authority132 and their respon- sibility to protect the public's interest in sovereignty lands, the Trustees have established sovereignty lands management policies. These policies are contained in the Sovereignty Lands Management Rule133 and the State 1,ands Management Plan,134 The following lists policies from these documents which relate to oil and gas leasing - 28 activities on sovereignty tidal lands. These pol.icies should form the basis for decisions as to which areas to offer for lease, or what stipulations to include in the lease. Some policies on the list may be more appro- priate for post-lease permitting decisions. 2. The Sovereignty Submerged Lands Management Rule.135 The Sovereignty Lands Management Rule was first adopted by the Trustees in March, 1982. The purposes and the Management Policies, Standards and Criteria established by the rule are stated as follows. The intent and purpose of the Sovereignty Lands Manage- ment Rule is: 1) to aid in fulfilling the trust and fiduciary responsibilities of the... Trustees ... for the administration, management, and disposition of sover- eignty lands; .2) to insure maximum benefit and use of sovereignty lands for all Florida citizens; 3) to manage, protect and enhance sover- eignty lands so that the public may continue to enjoy traditional uses, including but not limited to navi- gation, swimming, and fishing; 4) to manage and provide maximum pro- tection for all sovereignty lands, especially those important to public drinking water supply, shellfish harvesting, public recreation, fish and wildlife propagation & management; 29 - 5) to ensure that all public and pri- vate activities on sovereignty lands which generate revenues or exclude traditional public uses provide just compensation for such privileges;- and 6) to aid in the implementationl?g the State Lands Management Plan. The rule establishes two catagories of management policies, standards, and criteria which are to be used to determine "whether to approve, approve with conditions or modifications, or denyall requests for activities on sovereignty lands."137 These catagories are "general pro- prietary" and "resource management". General proprietary standards138 are stated as follows: o "For approval, all activities on sovereignty lands must be not contrary to the public interest, except for sales which must be in the public interest. o All leases, easements, deeds or other forms of approval for sovereignty land activities shall contain such terms, conditions, or restrictions as deemed necessary to protect and manage sovereignty lands. o Equitable compensation shall be required for leases and easements which generate revenues, monies or profits for the user or that limit or preempt general public use. Public utilities and state or other governmental agencies exempted by law shall be excepted from this requirement. - 30 e Activities on sovereignty lands shall be limited to water dependent activities139 only unless the board determines that it is in the public intere st to allow an exception as determined by a case by case evaluation. o Stilt houses, boathouses with living quarters, or other such residential structures shall be prohibited on sovereignty lands. The State Lands Management Plan shall be considered and utilized in developing recommendations for all activities on sovereignty lands." Resource Management Policiesl40 are stated as follows: o "All sovereignty lands shall be considered single use lands and shall be managed primarily for the main- tenance of essentially natural conditions, propagation of fish and wildlife, and traditional recreational uses such as fishing, boating, and swimming.141 Compatible sec- ondary purposes and uses which will not detract from or interfere with the primary purpose may be allowed. 9 Activities which would result in significant ad- .verse impacts to sovereignty lands and associated resources shall not be approved unless there is no reasonable alter- native and adequate mitigation is proposed. * The Department of Environmental Regulation bio- logical assessments and reports by other agencies with related statutory, management, or regulatory authority 31 - may be considered in evaluating specific requests to use sovereignty lands. Any such reports sent to the depart- ment in a timely manner shall be considered. * Activities shall be designed to minimize or eliminate any cutting, removal, or destruction of wetland vegetation (as listed in Section 17-4.02(17), Florida Ad- ministrative Code) on sovereignty lands. * Severance of materials from sovereignty lands shall be approved only if the proposed dredging is the minimum amount necessary to accomplish the stated purpose and is designed to minimize the need for maintenance dredging. a Severance of materials for the primary purpose of providing upland fill shall not be approved unless no other reasonable source of materials is available or the activity is determined to be in the public interest. Activities on sovereignty lands shall be designed to minimize or eliminate adverse impact on fish and wild- .life habitat. Special attention and consideration shall be given to endangered and threatened species habitat. oil and gas drilling leases on state-owned sub- merged lands shall be approved only when the proposed lease area is at least one mile seaward of the outer coast- 32 line of Florida as defined in United States v. Florida, 425 U.S. 791 (1840), upon adequate demonstration that the proposed activity is in the public interest, that the impact upon aquatic resources has been thoroughly considered, and that every effort has been made to minimize potential adverse impacts upon sport and com- mercial fishing, navigation, and national security. Drilling leases may be issued in the prohibited area if said lease stipulates that any drilling shall be con- ducted from outside said area." The State Lands Management Plan. Section 253.03(7), F.S., directs the Trustees to create "an overall and comprehensive plan of develop- ment concerning the acquisition, management and disposition of state-owned lands so as to insure maximum benefit and use." The Trustees adopted the State Lands Management Plan, pursuant to this statutory mandate, in March, 1981. The Plan establishes a comprehensive set of goals, objec- tives and policies which govern all lands owned by the State. A selected listing of those Plan segments rel,evc(nt to development.of a program for oil and gas leasing follows. Goals and objectives established by the plan include: 0 "Achieve full proprietary responsibility for the management of lands vested in the ... Trustees." 33 In order to assure "maximum benefit and use" state lands "should be managed with recognition that land is a resource, not a commodity (and) treated with equal or greater proprietary respect than that usually afforded to privately owned lands."142 9 "Achieve internal program consistency in the man- agement of state lands."143 a "Develop a state lands management program that provides a parcel-specific determination of "maximum benefit and use."144 Maximum benefit and use is interpreted to mean "balanced public uti lization". The ter m "bal- anced public utilization implies that parcel- specific management decisions are predicted upon a broad array of factors, including environmental constraints, economics, recreation, sociological and aesthetics."145 "Use a planning process that allows for input from affected state agencies, local government, and the general 1 1 11146 pub ic. The Plan also establishes "Resource Element" and "Program Element" policies. These policies are intended to "form the framework into which will be inserted more detailed parcel specific policies."147 Resource Element 34 policies include the following: Archaeological and Historical Resources � "Coordinate all proposals for changes in ... the use of state lands, with the Division of Archives, History and Records Management, in order to mitigate potential damage or disturbance of, or to preserve, archaeological and historical sites and properties. � Encourage the systematic location and evaluation of all significant archaeological and historical sites on state lands. � Prohibit the disturbance of archaeological and historical sites on state lands, unless prior authorization has been obtained from the Division of Archives, History and Re- cords Management."148 Water Resources (Quality and Quantity) "Coordinate state lands ... planning and management with water management programs to insure the long-range maintenance and improvement of water quality and quan- tity. e Manage state lands in a manner that provides maximum protection for the waters of the State, especially those used for public drinking water supply, shellfish 35 harvesting, public recreation, and fish and wildlife propagation and management. Require, at a minimum, that management activities on state lands comply with State water quality standards and classifications and their intent."149 Fish and Wildlife Resources � "Where significant fish and wildlife habitat exists, encourage those management activities which maintain a natural diversity of habitats and a balanced fish and wildlife population. � Coordinate proposed management activities potentially affecting significant tracts of fish and wildlife habitat with the Game and Fresh Water Fish Commission. Encourage the public use, either consumptive or non- consumptive, of the fish and wildlife resources on state lands where compatible with management goals." Endangered Species o "Provide for the continued protection of threatened and endangered species habitat on state lands. Encourage the location, identification, and protec- tion of presently unknown areas of threatened and endangered species habitat located on state lands. To minimize adverse effects, coordinate proposed - 36 - 0 management activities involving endangered plants and animals with the Division of Forestry and Plant Industry, Florida Department of Agriculture and Con- sumer Services and the Game and Fresh Water Fish Commission. 9 Encourage the re-establishment and restoration of endangered species and habitat."150 Beaches and Dunes � "Encourage management activities that will ensure continued protection of the physical and environ- mental integrity of state owned beaches and dunes. � Encourage the non-structural use of state owned beaches and dunes for purposes of public recreation."151 Natural Hazard Areas "Examples of natural hazard areas include river flood plains, the 100 year hurricane flood zone, barrier islands, and areas with active sinkhole potential." Policies include: � "Control the use and construction of public buildings and other structures within state-owned natural hazard areas to insure both structural integrity, resource protection, and public safety. � Encourage the utilization of natural hazard areas for non-structural purposes (e.g. timber production, 37 - recreation).,,152 Submerged Grass Beds � "Encourage the location and evaluation of submerged grass beds in state ownership. � Control the use of submerged lands to maintain essentially natural conditions and protect the values and functions of submerged grass beds. � Prohibit development activities that adversely im- pact significant beds of submerged grasses, unless determined to be of overriding public importance with no reasonable alternatives, and adequate mitigation measures are included.,,153 Swamps Marshes and Other Wetlands e "Require management activities on state-owned lands to protect wetlands and to maintain essentially natural conditions. o Encourage the re-establishment of previously modified wetlands in state ownership, where practical. o Prohibit the draining of wetlands on state-owned lands for agricultural, forestry, and other purposes. 0 Discourage the removal of natural shoreline vegetation.11154 38 Mineral Resources, Including oil and Gas � "Encourage detailed inventories and evaluation of state- owned mineral resources. � Control management activities on state-owned land that would preclude or seriously impair the ability to ex- tract significant mineral resources. � Allow extraction of state-owned mineral resources in environmentally sensitive areas only upon demonstration that the extraction is of overriding public importance, that all reasonable steps will be taken to minimize adverse environmental impacts, and that there are no reasonable alternatives. Discourage all future releases of state-owned mineral reservations, excepting right-of-entry and exploration. e Require that all state-owned lands subjected to mining be reclaimed or restored and left in such condition so as to maximize future public uses and values."155 Unique Natural Features "This is a generalized resource category designed to accommodate certain natural areas and features. The pri- mary public significance of these features is that they are uncommon in Florida. Unique natural features include such things as coral reefs, scenic vistas, exceptional 39 - vegetation and habitat areas, scenic natural rivers, coquina outcrops and bird rookeries." Policies include: e Encourage the location and evaluation of unique natural features on state-owned lands. 9 Require management activities on state-owned lands to avoid adverse impacts on unique natural features. Encourage public utilization of unique natural areas consistent with the protection of the natural values and functions. e Protect, maintain and, where necessary, restore unique natural features on state-owned lands."156 Outstanding Native Florida Landscapes "Outstanding native Florida landscapes contain rel- atively unaltered flora, faunaj and geologic conditions, and preservation from the adverse influences of human activity will permit the biophysical systems to function and interact naturally. During the management evaluation process, state lands would be analyzed to identify those areas which 1) contain outstanding, or the only remain- ing, examples of Florida landscapes and 2) are of a size and configuration that allow natural processes to be the dominant management tools. Ideally, it should be possible to buffer them from intensive land use areas." Specific 40 policies are to: * "Preserve examples of natural ecosystems on state-owned land. e Preserve the full range of genetic diversity in native plant and animal populations. e Encourage collection of baseline data on natural eco- systems which will aid in detecting environmental changes that result from human activity. e Provide research and educational opportunities for sci- entists and advanced students within the framework of a planned research program on applicable state-owned land. Recognizing that little of Florida can be considered pristine, outstanding native Florida landscapes must be areas where natural systems predominate or where restoration of the native systems is economically and ecologically feasible."157. Program Element policies relevent to oil and gas leasing include: Sale or Release of Reserved Title Interest (Minerals) � "Encourage public recognition of the fact that reserved title interests in real property represent commodities of value. � Discourage future releases or subordination of re- served title interests held by the Trustees, unless de- 41 - termined to be not contrary to the public interest and in exchange for just compensation. e Encourage the inclusion of reserved title interests (i.e. reserved mineral interests) in the state lands management program, and subject these reserved interests to the same management criteria applicable to state- owned lands, consistent with the degree of state title control.11158 Management Agreements and Leases ,Prohibit the issuance of 99-year or other long-term leases on state-owned lands, unless a specific need can be demonstrated for such duration. Limit the duration of leases, agreements or other instruments authorizing the use of state-owned lands to a period that is not greater than is necessary to provide for the reasonable use of the land for the existing or planned life cycle or ammortization of the improvements. 0 Require thorough management evaluations of all state- owned lands that are subject to lease requests, prior to issuance of leases or other similar instruments. Encourage the use of management agreements in lieu of leases, whenever practical. e Require the inclusion of specific management require- ments and responsibilities in each management agree- - 42 - ment, lease or similar instrument issued by the Trustees. � Actively pursue the termination of all outstanding leases that do not conform to the original management objectives contained in these leases. � Prohibit the lessee of state-owned lands from issuing subleases, easements, assignments, and other instru- ments affecting condition of title, without prior approval of the Trustees. Ensure that all financial, structural and other lia- bilities accruing to a parcel of state-owned land during the lease period become the sole responsibility of the lessee, unless it is determined that said lia- bilities are unrelated to the actions of the lessee. e Encourage the identification and marking of boundaries of all upland parcels of state-owned lands to allow orderly and effective management."159 Submerged Land Leases e "All submerged lands shall be considered single-use lands and shall be managed primarily for the main- tenance of essentially natural conditions, the prop- agation of fish and wildlife and public recreation, including hunting and fishing where deemed appropriate by the managing agency. 43 � Require that all proposed private or public uses of state-owned submerged land for profit be subject to Trustee actio4 and that just compensation be paid in return for this exclusionary privilege, using economic principles such as percentages of the assessed unim- proved upland property value. � Require management consistency evaluations prior to Board action on any state-owned submerged land lease. Discourage, to the extent practicable, all private, exclusionary uses of state-onwed submerged lands. � Issue oil, gas, and other petroleum drilling leases on state-owned submerged lands only when the proposed lease area is at least one mile seaward of the outer coastline of Florida asdefined in United States v. Florida, 425 U.S. 791, 48 L. Ed. 2d. 388, 96 S. Ct. (1840), upon adequate demonstration that the proposed activity is in the public interest, that the impact upon aquatic resources has been thoroughly considered, and that every effort has been made to minimize potential adverse impacts upon sport and commercial fishing, navigation and national security. � Maintain an inventory of all state-owned submerged land title encumbrances. - 44 o Require that the use of state-owned submerged lands be restricted to water-dependent activities, unless the Board specifically determines that a greater public purpose would be served by allowing expections to the contrary, as determined by a case-by-case evaluation. Require that specific management consideration be given to the use of state-owned submerged lands within aquatic preserves, as defined by Chapter 258, Florida Statutes. � Ensure that all activities on state-owned submerged lands avoid adverse impacts upon other authorized uses of submerged lands. � Develop a uniform system of subdividing the state- owned submerged lands into easily described parcels to allow the development of an inventory and provide for the management of such activities as offshore oil and gas leasing. 160 Leasing of the State's Mineral interest � "Encourage the timely development of accurate mineral resource inventories and evaluations for all state- owned lands. � Encourage the establishment of an exploration lease program, covering all minerals, that will assist the 45 - Board in assessing future management directions and needs. Consider the active exploitation of mineral resources on state-owned lands when determined to be consistent with market economics, projected mineral reserve require- ments, present and projected public land use needs, environmental acceptability, and other public interest factors. a Encourage public recogn ition that state-owned mineral interests and resources are commodities of value, and should be managed accordingly. Discourage extensive, permanent structural development on state-owned lands possessing known commercial mineral potential so as not to unnecessarily preempt recovery and utilization of the mineral resource."161 Aquatic Preserves � "No sale, lease or transfer of state-owned submerged lands within aquatic preserves shall be approved un- less it is in the public interest. � There shall be no drilling of gas or oil wells within any aquatic preserve. � There shall be no dredging of state-owned lands within aquatic preserves for the purpose of providing upland fill. - 46 There shall be no dredging or filling of submerged lands within aquatic preserves except minimum dredging and spoiling as may be necessary for the following activ- ities: i) public navigation projects; ii) maintenance of existing navigation channels; iii) creation and maintenance of marinas, piers, docks and their attendant navigation channels; iv) public utility installation or expansion; v) installation and maintenance of fuel transporta- tion facilities, and vi) alterations necessary to enhance the quality or utility of the preserve or the public health generally. No structures shall be erected within a preserve except: a) private docks for reasonable ingress and egress of riparian owners; b) commercial docking facilities shown to be not contrary to the use or management criteria of the preserve, and c) shore protection structures, approved naviga- tional aides, or public utility crossings for which dredging and filling is authorized. No wastes or effluents which substantially inhibit the 47 - accomplishment of the purposes of the Aquatic Preserve Acts shall be discharged into an aquatic preserve. 9 Management of human activities within aquatic preserves will not unreasonably interfere with traditional public uses such as fishing, boating and swimming. Management of aquatic preserves shall not infringe upon the traditional rights of riparian land owners within or adjacent to an aquatic preserve. other uses of an aquatic preserve may only be approved subsequent to a formal finding of compatability with the purpose of the Aquatic Preserve Acts and rules, and of the type designation of the preserve in question.'L162 Compensation for the Use of State-Owned Lands "The Board shall require equitable compensation when the use of state-owned lands by private or public entities, except for state agencies exempted by law, generates revenue or profits for the user, or general public use is limited or preempted. To the extent practical, the Board should use principles of private enterprise in establishing fee schedules or other methods for ensuring just compensation. 9 The Board shall require a reasonable return for any pri- - 48 vate use authorized by lease, easement or other use agreement. The structure for the formula for assuring a reasonable return may vary depending on circumstances and may include a flat fee per time unit, per area of quantity unit, a percentage of the assessed upland pro- perty value, a royalty fee or some other form of com- pensation or combination thereof. The Board shall require the periodic reassessment of the terms and conditions of all leases, easements and use agreements that exceed one year to insure a continued equitable rate of compensation."163 CONCLUSION Title to navigable ocean waters, the land beneath them, and the foreshores, is held in trust by the Trustees of the Internal Improvement Trust Fund for the benefit of the public. These areas are known as sovereignty tidal lands. Decisions such as which offshore areas to offer for lease, and which terms or stipulations to include in the lease must be "not contrary to the public interest".164 Ihe public interest standard is more than an affirmation of the general principle that public lands must be used for a public purpose. The public interest standard involves - 49 - the higher fiduciary responsibility, established by the Public Trust Doctrine, to pr otect the public's interest in sovereignty lands. To meet the public interest stan- dard, the Trustees must consider and balance a variety of environmental, economic, and social factors in accordance with changing public needs. So long as the Trustees have considered and balanced relevant factors, their public interest determination is accorded broad discretion by the courts. In accordance with the public interest standardl procedures and standards for leasing sovereignty lands have been established by the Legislature or the Trust ees. six procedural mandates are listed in Section I. More sub- stantive directives are discussed in Section II. Those substantive directives specifically applicable to oil and gas leasing are discussed in Subsection B. General sover- eignty lands management directives relevant to offshore oil and gas leasing activities are listed in Subsection C. These policies should form the basis for a program for oil and gas leasing in Florida's territorial waters. 50 FOOTNOTES FOR SECTIONS I AND II Florida has a seaward boundary of three marine leagues, or approximately 10.35 statute miles in the Gulf and three nautical miles in the Atlantic, United States v. Louisiana, Texas, Mississippi, Alabama, and Florida, 364 U.S. 502 (1960). 2 Martin v. Busch, 112 So 274 (Fla. 1927). 3 Sections 253.001 and 253.1-12, F.S. 4 Section 253.02(2), F.S. 5 Section 253.002, F.S. 6 Section 253.52, F.S. A nomination is "a proposal for an oil and gas lease," Section 16Q-21.03(23), F.A.C. Sections 16Q-15.08 and 16Q-21.08, F.A.C. 9 The reference to submerged land blocks is contained in Section 16Q-21.08, F.A.C. but not in Section 15Q-15.08, F.A.C. 10 Section 16Q-15.08, F.A.C. states three miles, Section 16Q-21.08, F.A.C. states ten miles. 11 An "improved beach outside a municipal corporation" is "any beach adjacent to or abutting tidal waters of the state having not less than 10 hotels, apartment buildings, residences, or other structures for residential purposes on or to any given miles of beach, " Sections 253. 61 (2) and 377. 24 (8) , F. S. 12 A fee is required by Section 21.08(3), F.A.C., but not by Section 15.08, F.A.C. 51 13 Section 253.52, F.S. 14 Interview with Tom Herbert, consultant for G-etty Oil, Inc., December 1, 1983. 15 Sections 253.115 and 253-52, F.S. 16 Current practice is to publish notice in the Tallahassee Democrat. Interview with Pat White, Operations Section, Bureau of State Lands Management, Division of State Lands, Department of Natur;a:l Resources, December 2, 1983. 17 Current practice is to schedule consideration of bids at a meeting of the Governor and Cabinet. 18 An improved beach is "any beach... having not less than 10 hotels, apartment buildings, residences, or other structures 4-or residential purposes on or to any given miles of beach," Sections 253.61(2) , and 377.24(8) , F.S. 19 Sections 253. 45, 253. 53, and 253. 54, F. S. ; Sections 16Q-15. 0 8 and 16Q-21.08, F.A.C. 20 No bid submitted subsequent to specified time will be con- sidered, Section 253.53, F.S. 21 Section 253.512, F.S. and Sections 16Q-15.08 and 16Q-21.08, F.A.C. 22 Section 253.53, F.S. 23 Cash con sideration is the amount offered in addition to fixed charges (i.e., royalties, rentals) established in the lease form. 24 The Trustees shall establish the responsibility of the bidder to their satisfaction prior to accepting any bid or assignment, Section 253.56, F.S. 52 25 Section, 253.54, F.S. 26 Interview with Pat Whiter Operations Section, Bureau of State Lands Man*agement, Division of State Lands, Department of Natural Resources, December 2, 1983. 27 Section 253.511, F.S.; Lease, Section 18(D). 28 Section 7(C) of the lease provides that lessees obligation to keep such records is extended for two years (after the additional three year extension) upon lessor's request for examination of records for royalty purposes. 29 A partial listing of specific records which the Trustees are authorized to examine is included in Section 7(A) of the lease. 30 Lease, Section 12. 31 Section 253.001, F.S. But see Section 253.45, F.S. which provides that proceeds from mineral leasing on state lands are to be credited to the agency which has title or control of the land involved. See also, footnote 88. 32 Section 253.023, F.S. 33 Sections 376.11, 376.32, and 376.60, F.S. 34 Sections 253.001 and 253.112, F.S. 35 Article II, Section 7 of Florida's Constitution Provides that: "It shall be the policy of the state -to conserve and protect its natural resources and scenic beauty. Adequate provision shall be made by law for the abatement of air and water pol- lution and of excessive and unnecessary noise." 36 Section 253.001, F.S.; See also, Section 16Q-21.04(l)(a), F.A.C. 53 37 Leases in Aquatic Preserves must also be "in the public interest", Section 258.42(l), F.S. 38 Section 16Q-21.03(26), F.A.C. 39 As stated by the Supreme Court of Florida: "When the (public interest standard) was adopted as part of the 1968 constitution, it gave constitutional dimensions to the common law doctrine applicable in the state that the bed of navigable waters are held in trust for the people," Weller v. Askew, 363 So.2d 1091, at 1094 (Fla. 1978) citing Broward v. Maybry, 58 Fla. 398 (1909). 40 The public purpose standard may be at issue when government grants urban development bonds to a private entity. 41 Yonge v. Askew, 293 So.2d 395, at 400 (1st DCA 1974). 42 The Riparian Act of 1856, The Butler Act of 1921. 43 Section 253.123, F.S. See also, Yonge v._Askew,. 293 So.2d 395 (1st DCA 1974), and Farrigia-v. Frederick, 344 So.2d 921 (1st DCA 1977). 44 See e.g., Martin v. Waddel, 41 U.S. 367 (1842); Illinois Central Railroad v. Illinois, 146 U.S. 389 (1892); @@hively v-. Bovley, 152 U.S. (1-894), State v. Black River Phosphate Co., 13 So.2d 640 Fla.(1893). 45 See, e.g. Perky Properties v. Felton, 151 So.892 (Fla. 1934); Yonge v. Askew, 293 So.2d 395 (Ist DCA 1974); Farrugia v. Frederick, 344 So. 2d 921 (1st DCA 1977); Weller v. Askew, 363 So. '2d 1091 (Fla. 1978). 46 Hayes v. Bowman, 91 So. 2d 795, at 802 (Fla. 1957); quoted in Yonge v. Askew, supral at 401. Accord, Farrugia v. Frederick, supra, at 923. 54 47 Hayes v. Bowman, supra, at 802; Yonge v. Askew, supra, at 401. 48 Dicta are expressions in court opinions which are not necessary to support the decision and thus do not represent binding precedent. 49 Perky Properties, Inc. v. Felton, 151 So. 892, at 895 (Fla.* 1934); Bryant v. Lovett, 201 2d 720, at 724 (Fla. 1967). 50 Section 253.53, F.S. 51 Section 15Q-15.08(4)-(.9). 52 An intervening dry hole exists when a site has been drilled 11at least to the depth of production or stratigraphic equivalent of the well proposed for the lease area," Section 15Q-15.08(7), F.A.C. 53 Lease, Sections 5(A)-(D). 54 Section 253.53, F.S. 55 Lease, Section 5M. 56 Section 253.57, F.S.; Lease, Section 5(D). 57 Lease, Section 5(E). 58 Section 253.53, F.S. 59 Section 253.53, F.S. 60 The force majeure clause may prevent such rent increase, Lease, Section 16. 55 61 Lease, Section 3. 62 Shut-in wells are those which are capable of production in paying quantities but are, due to market conditions lack of production facilities, or closed temporarily. 63 Section 253.53, F.S. 64 Lease, Section 9. 65 Section 253.53, F.S. 66 Lease, Section 3(E). 67 Section 253.53, F.S. 68 Lease,Section 13 69 Section 253.56, F.S. 70 Section 253.571-, F.S.; Lease, Section 18(E). 71 Lease, Section 18(E). 72 Damages are defined as air and water pollution, destruction of wildlife or marine productivity,or any impairment of the health and general welfare of state citizens, Section 253.571, F.S.; Lease, Section 18(E). 73 An act of God is "an unforeseeable act exclusively occasioned by the violence of nature without the intervention of any human agency, Lease, Section 14. 74 A disinterested third party is any party who is neither employed by nor agent of the lessee, Lease, Section 14. 56 75L'ease, Section 18(F). 76 An improved beach is defined as 11any beach ... having not less than ten hotels, apartment buildings, residences or other structures, used for residential purposes on or to any given miles of such beach." Sections 253.61(2) and 377.24(8), F.S. 77 Ibid. 78 An improved beach "outside an incorporated municipality" is "any beach adjacent to or abutting upon the -tidal waters of the state and having not less than ten hotels, apartment buildings, residences or other structures, used for residential purposes, on or to any given miles of such beach," Sections 253.61(2), 377.24(8), F.S. 79 The United States Supreme Court defined coastline, for purposes of establishing Federal/State ocean boundaries, as: "the line of ordinary low water along that portion of the coast which is in direct contact with the open sea." Note also, footnote 1. 80 Sect@on 16Q-21.04(2)(k); Lease, Section l(E); See, also Section 377.242, F.S. 81 Section 253.45, F.S. 82 Chapter 253.45, F.S., See footnote 88. 83 Chpater 253.45, F.S. 84 certain statutes, such as Chapters 253, 258, 267, 288, 370, 372, 376, 380, and 403, F.S. require permits or establish standards which may restrict post lease activities on sover- eignty lands. 85 Section 258.42(3)(c), F.S. 86 Section 377.242, F.S. 87 Section 377.242, F.S. 57 88 Oil and gas appear to meet the definition of mineral. How- ever, for the purposes of Chapter 211, F.S. severance tax, the Trustees determined that peat was not a mineral. 89 Lease, p. 1. 90 Deeper drilling may be authorized on a case by case basis pursuant to Section 2 of the lease. 91 Section 253.53, F.S.; Lease, Section 2. 92 Those test'wells required by Section 253.55, F.S. and Lease, Section (1)(C). 93 Sections 253.53 and 253.55, F.S.; Lease, Sections (1) and (2). 94 Lease, Section 18(1). 95 Lease, Section 11. 96 Lease, Section 12. 97 Lease, Section 14(C). 98 Lease, Section 14(D). 99 Lease, Section 14(B). 100 Lease, Section 14(C)(2). 101 Lease, Section 14(C)(3). 102 Lease, Section 14(A). 103 Section 253.47, F.S. 58 104 Section 253.47, F.S. 105 Section 253.47, F.S.; Lease p. 1. 106 Lease, "Therefore clause," p.1 107 Lease, "Therefore clause," p.1 108 Lease, Section 18(G)(H) and (J); See, also Section 377.2408, F.S. 109 Lease, Section 14(C)(1). 110 Lease, Section 10. ill Lease, Section 18(D); See text accompanying footnote 27. 112 Lease, Section 7(A). 113 Lease, Section 7(B). 114 Lease, Section 10. 115 Lease, Section 10. 116 Lease, Section 1. 117 Section 253.55, F.S.; Lease, Section 1. 118 Section 253.55, F.S.; Lease, Section (1)(B). 119 Section 253.55, F.S.; Lease, S-ection (1)(C). 120 Lease, Section 4. 59 121 Section 253.55, F.S.; Lease, Section (2)(A). 122 The force majeure clause may excuse this requirement. 123 Section 253.55, F.S.; Lease, Section 2(B). 124 Lease, Section 18(K). 125 Lease, Section 14(C). 126 Lease, Section 17. 127 Lease, Section 16. 128 Lease, Section 18(A). 129 Lease, Se ction 18(C). 130 Lease, Section 18(K). 131 For example, state laws establish special protection for areas or resources designated as: 1) Outstanding Florida Waters or Class Two waters pursuant to Chapter 403, F.S.; 2) Aquatic Preserves pursuant to Chapter 258, F.S.; 3) An "Area of Critical State Concern" pursuant to Chapter 380, F.S.; 4) En- dangered or threatened species protected pursuant to Chapters 370 and 372, F.S.; or 5) Historical or archeological resources protected pursuant to Chapter 267, F.S. Other state laws that may influence post-lease activities include: Chapter 376, F.S., Pollutant Spill Prevention and Control; Chapter 377, F.S., Regulation of Oil and Gas Resources; and Chapter 380, F.S., Developments of Regional Impact. 132 Sections 253.03, 253.51, and 258.41, F.S. 133 Section 16Q-21, F.A.C. 134 The State Lands Management Plan was adopted by the Trustees, pursuant to Section 253.03(7), F.S. in March 1981. 60 135 Section 16Q-21, F.A.C. 136 Section 16Q-21.01, F.S. 137 Section 16Q-21.04, F.A.C. 138 A water dependent activity is one which can "only be conducted on, in, over, or adjacent to water areas because the activity requires direct access to the water body or sovereignty lands for transportation, recreation, energy production or trans- mission, or source of water, and where the use of the water or sovereignty lands is an integral part of the activity," Section 16Q-21.03(37), F.A.C. 139 Section 16Q-21.04(l), F.A.C. 140 This standard stems from Section 253.034(l)(a), F.S. Section 253.034(6) provides that the "section shall not be construed so as to affect: (a) other provisions of this Chapter re- lating to oil, gas, or mineral resources (or); (b) the ex- clusive use of state-owned land subject to a lease ... executed by the... Trustees ... leasing state-owned land for private uses and purposes." 141 Section 16Q-21.04(2)(a)-(d), (g)-(i) and (k). 142 State Lands Management Plan, Goals, p.5 143 State Lands Management Plan, Goals, Section B. 144 State Lands Management Plan, Goals, Section C. 145 Ibid. 146 State Lands Management Plan, Objectives, Section F. 147 State Lands Management Plan, p. 13. 61 148 State Lands Management Plan, Section C, Policies 1-3. 149 State Lands Management Plan, Section D, Policies 1, 6, and 9. 150 State Lands Management Plan, Section F, Policies 1-4. 151 State Lands Management Plan, Section G, Policies 1-2. 152 State Lands Management Plan, Section H, Policie s 1-2. 153 State Lands Management Plan, Section I, Policies 1-3. 154 State Lands Management Plan, Section J, Policies 1-4. 155 State Lands Management Plan, Section K, Policies 1-5. 156 State Lands Management Plan, Section L, Policies 1-4. 157 State Lands Management Plan, Section M, Policies 1-5. 158 State Lands Management Plan, Section C, Policies 1-3. 159 State Lands Management Plan, Section E, Policies 1-10. 160 State Lands Management Plan, Section F, Policies 1-7; 10-12. 161 ' State Lands Management Plan, Section H, Policies 1-4, 6. 162 State Lands Management Plan, Section L, Policies 1, 3-10. 163 State Lands Management Plan, Section 0, Policies 1-5. 164 Section 16Q-21.04(l) (a), F.A.C. Note that the Constitution and Section 253.001, F.S., require leasing of sovereignty lands to be "not contrary to the public interest." 62 III. Development of Oil and Gas Resources: State Laws INTRODUCTION An offshore oil and gas lease grants exclusive rights to apply for permits necessary to develop oil and gas resources of the leased area. Such a lease does not, however, guarantee the issuance of permits necessary to develop said resources either on or off the leased area. Post-lease oil and gas development activities may occur offshore, such as exploratory drilling or onshore such as a refinery. The following briefly describes state laws which may influence the post-lease development of oil and gas resources. 63 CHAPTER 161 BEACH AND SHORE PRESERVATION Administering Agency The Florida Department of Natural Resources, Division of Beaches and Shores (DNR). Purpose/Policy To protect the beach-dVne system and adjacent pro- perties. Chapter 161 requires a permit for: 1) excavation or construction seaward of the established Coastal Con- struction Control Line;l and 2) shore protection activities other than deposition or removal of beach material.2 CHAPTER 163 LOCAL GOVERNMENT COMPREHENSIVE PLANNING Administering _Agency The Florida Department of Community Affairs (DCA) and Local Governments. Purpose/Policy To encourage the most appropriate use of land, water and resources through comprehensive plan ning by local govern- ments.3 64 Sections 163.3161 through 163.3211, Florida Statutes require local governments to prepare, adopt, and implement comprehensive plans to guide future development. The plan must contain elements set forth in Section 1'63.3177, Florida Statutes. Each plan element must be consistent with other elements.4 After plan or element adoption, all development must be consistent with the plan or element.5 CHAPTER 253 STATE LANDS Administering Agency The Florida Departments of Natural Reso urces and Environmental Regulation (DNR and DER). Purpose/Policy To manage state lands so as to assure maximum benefit and use. State Lands include all sovereignty lands and, with certain-exceptions,all state owned lands. Sovereignty lands include tidal lands, islands, sand bars and lands under navi- gable waters, whether fresh or salt, which Florida gained title to upon Statehood. State owned lands include state parks, environmentally endangered lands, reservations, inter- nal improvement lands, certain swamp and overflowed lands, 65 and other lands that have accrued to the state from various sources. Dredging and filling of State lands require a permit from the DER.6 All other uses of State lands (including pipelines, leases, and easements) must be approved by the DNR and the Governor and Cabinet. CHAPTER 258 AQUATIC PRESERVES Administering Agency The Florida Department of Natural Resources, Division Of Recreation and Parks (DNR). Purpose/Policy . To maintain natural or existing conditions of Aquatic Preserves. The Florida Aquatic Preserves Act, Sections 258.35 through 258.45 Florida Statutes,establishes certain areas of state- owned or sovereignty submerged land and associated waters, having exceptional biological, aesthetic and scientific values, as aquatic preserves to be maintained essentially in their natural or existing condition. Rules for managing aquatic 66 preserves are established in Chapter 16Q, F.A.C. and by preserve specific management plans. In that aquatic preserves involve State lands, aquatic preserve statutes, rules and management plans are considered complementary to State lands management pursuant to Chapter 253, Florida Statutes. Sale, lease, or transfer of preserve lands must be "in the public interest!'@ In addition, the Florida Aquatic Preserves Act limits or conditions certain activities within aquatic preserves.9 Included among these is a prohibition on drilling gas or oil wells within Aquatic Preserves. Drilling from outside the preserve to explore for oil and gas within the preserve may be permitted if other conditions are met. CHAPTER 267 FLORIDA ARCHIVES & HISTORY ACT Administering Agency The Department of State, Division of Archives, History, and Records Management (DOS). Purpose/Policy To preserve and protect sites of historical, architectural, or archaeological significance. Chapter 267 establishes penalties for destruction or alteration ofarchaeological and historic resources on State 67 lands.10 In addition, the Division provides technical assistance to State permitting agencies regarding his- torical preservation. CHAPTER 370 SALTWATER LIVING RESOURCES Administering Agency The Florida Department of Natural Resources, Division of Marine Resources (DNR). Policy/Purpose To manage marine resources in the interest of all people of the State and to produce maximum sustainable yield consistent with the preservation and protection of the breed- ing stock.11 Chapter 370 regulates the taking and selling of a variety of marine fisheries. Section 370.12 prohibits the taking or molestation of marine turtles, nests and eggs, manatees', porpoises. Section 370.114 prohibits the taking or destruction of certain marine corals and seafans. The Chapter also provides penalties for violations. 68 CHAPTER 373 WATER RESOURCES Administering Agencies The Florida Department of Environmental Regulation (DER) and Regional Water Management Districts (WMD). Purpose/Policy To manage water resources so as to ensure the most beneficial use. Chapter 373 regulates drilling and use of water wells and, in certain instances, the management and storage of surface waters. A permit from the appropriate regional water management district is required to construct, repair, or abandon a water well. Further permit requirements may vary in each of the five Water Management Districts. CHAPTER 376 POLLUTANT DISCHARGE PREVENTION AND CONTROL Administering Agencies The Florida Departments of Natural Resources and En- vironmental Regulation (DNR and DER). 69 Purpose/Policy To protect the recreational use of Florida's seacoast and the quality of inland waters from petroleum product pollutants.12 Chapter 376 regulates: 1) the transportation, and clean up of pollutants (Pollutants are defined as "oil of any kind, gasoline, pesticides, amonia, chlorine and their derivatives, excluding liquified petroleum gas.)13; 2) terminal facilities and associated vessels14 (A termi- nal facility is any waterfrontor offshore facility, @ncluding directly associated pipelines and other appurtenances, that in the normal course of business has the capability to drill for, pump, store, handle, transfer, process or refine pol- lutants either over or under coastal waters, estuaries, tidal flats, beaches, and lands adjoining the seacoast.)15, and 3) under or above ground facilities.16 (Facility means any non-residential location containing certain stationary tank or tanks, with more than 550 gallon storage capacity, which contain pollutants.)17 The Chapter prohibits: 1) pollution of coastal waters, estuaries, tidal flats, beaches, and lands adjoining the seacoast.18 (Pollution is defined as "the presence in the outdoor atmosphere or waters of the State of any one or more substances or pollutants in quantities which are or may be potentially harmful or injurious to human health or welfare, animal or plant life, or property or which may unreasonably interfere with the enjoyment of life or property, including outdoor recreation)19; and 2) discharge of refined petroleum 70 products on any waters or lands of the State.20 A non-lapsing revolving fund,21 to cover the costs of cleaning a pollutant discharge, is created through exise taxes paid by operators. Violators are liable to the fund for certain abatement and cleanup costs. CHAPTER 377 OIL AND GAS RESOURCES Administering Agency The Florida Department of Natural Resources, Division of Resource Management, Bureau of Geology (DNR). Purpose/Policy To conserve the State's oil and gas resources while con- trolling their development. Chapter 377 authorizes the DNR to regulate all phases of discovery and development of petroleum products, both 22 on and offshore. Program coverage includes spacing, drilling, abandonment, control and management of wells, geoloqical explorations, production facilities, pipelines and transporters, pollution and waste disposal, reports of operations, and notification of fire and blow-outs.23 Drilling is conditioned or prohibited in certain instances.24 "Waste" and "pollution" are prohibited.25 71 CHAPTER 380 ENVIRONMENTAL LAND AND WATER MANAGEMENT Administering Agency The Florida Department of Community Affairs (DCA). Purpose/Policy To protect Florida's natural resources, insure a water management system that will reverse deterioration of water quality and to adequately plan for and guide growth,and development by establishing State land and water management policies to guide and coordinate local decisions. Chapter 380 encompasses two major programmatic areas, Developments of Regional Impact (DRI) and Areas of Critical State Concern (ACSC) . The DRI program establishes procedural and substantive requirements to assure that land development decisions consider regional impacts. The ACSC program regulates development in areas where unsuitable development would en- danger resources of regional or statewide significance. A DRI is "any development which, because of its character, magnitude, or location, would have a substantial effect upon the health, safety, or welfare of citizens of more than one county."26 Certain types of development, including petroleum storage facilities, industrial plants, and port facilities, are presumed to be DRI's if they meet threshold criteria specified in Florida Administrative Code Chapter 27F-2. 72 The rule, however, only creates a presumption. Projects not listed or which do not meet threshold criteria may, nevertheless, be DRI's when facts support a finding that the project meets the statutory definition. If there is doubt as to whether a proposed activity is a DRI or has vested rights, a binding letter may be requested by submitting appropriate forms to the DCA. If a proposed activity is a DRI, has no vested rights, and impacts an area which has zoning or subdivision regulations, it must be processed in accordance with procedures set forth in Chapter 380 and implementing rules. Essential features of the DRI review process include: 1) a preapplication conference is conducted, 2) an Application for Development Approval (ADA) is submitted to the appropriate regional planning council, local government and the Bureau of Land and Water Management, 3) the regional council submits a report and re- commendations to the appropriate local government, a public hearing on the application is held, and 4) the local qovernment issues an order approving, approving with conditions, or denying the de- velopment. In evaluating DRI's, the following will be considered: 1) impact upon the environment and natural resources of the region, 2) impact on the economy of the region, 73 3) efficient use or undue burden on water, sewer, solid waste disposal, or other necessary public facilities, 4) efficient use or undue burden on public trans- portation facilities, 5) effect on ability of people to find adequate housing reasonably accessible to their places of employment, 6) criteria for determining regional impact adopted by the appropriate regional planning council, 7) interference or compatibility with objectives of adopted state land development plan applicable to the area, and 8) consistency with local land development regulations. An Area of Critical State Concern (ACSC) may be designated by the Governor and Cabinet, upon the recommendation of the DCA. Designation may be made for areas with significant en- vironmental resources, historical resources or sites, or areas affected by an existing or proposed major public facility. When the Governor and Cabinet designate an ACSC they also adopt by rule principles for guiding development in that area. The local government of the ACSC must adopt land development rules in compliance with those principles, which the DCA then approves by rule. Areas which have been designated as ACSC's are the Big Cypress Swamp, the Green Swamp and the Florida Keys.27 Prior to recommending an area as an ACSC a resource planning and management committee for the area under study 74 by the DCA is appointed by the Governor. The committee's objective is to organize a voluntary resource planning and management program for the area. The committee must report to the DCA within 6 months but may remain in existence longer than that period. Resource planning and management committees have been established for Charlotte Harbor, Hutchinson Island, Suwannee River,28 Northwest Florida Coast, and East Everglades/ Everglades National Park.29 CHAPTER 403 ENVIRONMENTAL CONTROL Administering Agency The Florida Department of Environmental Regulation (DER). Purpose/Policy To prevent, abate, and control air and water pollution. Chapter 403 establishes a variety of programs regulating air pollution, water pollution and industrial, domestic, hazardous, and solid waste. A permit is required to construct, operate, maintain, expand or modify an installation which may reasonably be expected to be a source of pollution.30 Pollution is defined as "the presence in the outdoor atmosphere or waters of the State of any substances, contaminants, noise, or man-made or man-induced alteration of chemical, physical, biological or 75 radiological integrity of air or water in quantities or at levels which are or may be potentially harmful or injurious to human health or welfare, or animal or plant life, or pro- perty, or unreasonably interfere with the enjoyment of life or property, including outdoor recreation".31 An installation is defined as "any structure, equipment, facility, or appur- tenances thereto, or operation which may emit air or water contaminants in quantities prohibited by Department rules". This may include ditches, canals, buildings, discharge pipes, and fill deposits, amonq other thinas.32 Permits are issued if the applicant "affirmatively provides the department with reasonable assurance ... that the ... installation will not... cause pollution in contravention of department standards or rules."33 An activity need not, however, be stationary, or an installation to be subject to DER jurisdiction. Section 403.161, Florida Statutes prohibits pollution, as defined above, except in accordance with a DER permit. In addition to the general prohibition of pollution, Section 403.088, Florida Statutes prohibits"discharge of wastes to state waters which, by themselves or in combination with other wastes, reduce the quality of those receiving waters below the classification established for them." 76 FOOTNOTES FOR SECTION III Sections 161.052-161.053, Florida Statutes. 2 Sections 161.041-161.042, Florida Statutes. 3 Section 163.3161, Florida Statutes. 4 Section 163.3177, Florida Statutes. 5 Section 163.3194, Florida Statutes. 6 Sections 253.123 and 253.124, Florida Statutes. 7 Section 253.1245, Florida Statutes. 8 Section 258.42, Florida Statutes. Section 258.42, Florida Statutes. 10 Section 267.13, Florida Statutes. 11 Section 370.02(2), Florida Statutes. 12 Sections 376.021 and 376.30, Florida Statutes. 13 Sections 376.021(2) and 376.301(10), Florida Statutes. 14 Section 376.06, Florida Statutes. 15 Section 376.02(15), Florida Statutes. 16 Sections 376.30-376.315, Florida Statutes. 17 Section 376.301(4), Florida Statutes. 18 Section 376.041, Florida Statutes. 77 Footnotes con't. 19 Section 376.031(13), Florida Statutes. 20 Section 376.302, Florida Statutes. 21 The Florida Coastal Protection Trust Fund, and The Water Quality Assurance Trust FundSections 376.11 and 376.307, Florida Statutes. 22 Statutory provisions are often weighted toward onshore activities. See, e.g. Section 377.22, Florida Statutes. 23 Sections 377.24, 377.241-377.243, 377.25-377.28, 377.40, Florida Statutes. 24 See my previous report, Footnotes 86-87 and associated text. 25 Waste is defined in Section 377.20, Florida Statutes. Pollution is defined in Section 377.371, Florida Statutes. 26 Section 380.06, Florida Statutes. 27 Sections 380.055, 380.0551, 380.0552, Florida Statutes. 28 Resource Management Plans have been adopted for these three areas. 29 Resource Management Plans are being developed for these two areas. 30 Section 403.087, Florida Statutes. 31 Section 403.031(2), Florida Statutes. 32 Section 403.031(8), Florida Statutes. 33 Section 17-4.03, F.A.C. 78 IV. The Consistency Provisions of the Coastal Zone Management Act The consistency provisions of the Coastal Zone Management Act (CZMA) identify the point or points at which coastal states may influence the federal OCS oil and gas leasing process through their Coastal Management Program. Until a recent U.S. Supreme Court decision, the Department of Interior's pre-leasing and post-leasing decisions were both evaluated for consistency with state Coastal Management Programs (CMP). Pre-leasing consistency review was conducted pursuant to Section 307(c)(1) of the CZMA. Post-lease consistency review continues to be conducted pursuant to Section 307(c)(3). Section 307(c)(1) of the Coastal Zone Management Act (CAMA), 16 U.S.C. 1456(c)(1) provides: Each federal agency conducting or supporting activities directly affecting the coastal zone shall conduct or support those activities in a manner which1is, to the maximum extent practicable, consistent with approved state management programs. Neither the CZMA nor the implementing federal regulations define the phrase "directly affecting the coastal zone". However in Interior v. California, U.S. 104 S. Ct. 656 (1984), the U.S. Supreme Court held that the Department of Interior's decision to offer OCS oil and gas leases did not directly affect California's coastal zone and thus was not subject to the CZMA's consistency requirement. In 79 response to the Supreme Court decision, Congress is considering legislation that would require Interior's leasing decisions to be consistent with state coastal manaaement plans. While Interior's leasing decision is not currently subject to the CZMA consistency provisions, Interior's post-lease permitting decisions are to be reviewed for consistency. Section 307 (c) (3)- (B) of the CZMA, 16 U.-S.C. 1456(c)(3)(B) provides: After the management program of any coastal state has been approved... any person who submits to the Secretary of the Interior any plan for the ex- ploration or development of, or pro- duction from, any area which has been leased under the Outer Continental Shelf Lands Act.... Shall, with respect to any exploration, development, or production described in such plan and affecting any land use or water use in the coastal zone of such state, attach to such plan a certification that each activity which is described in detail in such plan complies with such state's approved management program and will be carried out in a manner consistent with such program. Unless the state concurs with the above described consistency certification, or the Secretary of Interior finds that the activity is "consistent with the objectives of the CZMA or otherwise necessary in the interests of national security", no federal permit may be granted "for any activity described in detail in such plan" 16 U.S.C. 1456 (c)(3)(B). There have been no court decisions regarding this statutory provision to date. 0 80 V. State Policy Regarding Oil and Gas Leasing in State Waters and Federal Consistency The CZMA thus requires plans for exploration.,development and production of OCS areas leased by Interior to be consistent with Florida's federally approved Coastal Management Proqram(CMP). In addition, should bills currently under consideration by Con- gress become law, the CZMA would require Interior's leasing decision to be consistent to the maximum extent practicable with Florida's CMP. Florida's CMP is made up of 20 state statutes. At least ten of these statutes establish policy for oil and gas leasing and post lease permitting in state waters.2 Because it is these laws with which consistency ..riay be required any amendments to them will establish state policies for leasing and development of OCS resources adjacent to state waters as well as for resources in state waters. For this reason any program for oil and gas leasing and development in state waters should contain specific OCS management policies, especially where OCS activities warrant special treatment. Lastly, in order for the CZMA consistency provisions to apply, amendments to CMP statutes must be submitted to the National Oceanic and Atmospheric Administration for approval as amendments to Florida's CMP. 81 VI. Public Access to Proprietary Oil and Gas Resource Data Held by the State Florida's Public Records Law provides that all public records may be examined "by any person ... at reasonable times, under reasonable condition'..." unless an exemption is provided by law, Section 119.07, F.S. Public records include: ... all documents, papers, letters, maps, books, tapes, photographs, films, sound recordings, or other material, regard- less of physical form or characteristics, made or received pursuant to law or ordinance or in connection with the transaction of official business by any agency, Section 119.011(l), F.S. Agency is defined as: any state, county, district, authority, or municipal officer, department, division, board, bureau, commission, or other separate unit of government created ... by law and any other public or private agency... acting on behalf of any public agency, Section 119.011(2),F.S. The courts have generally avoided restrictive intrepre- tations of Chapter 119,F.S. Thus, as a general principle, every document which: 1) meets the foregoing definition of public records; 2) is intended to perpetrate, communicate, or formalize knowledge of some type;3 is open to public inspection unless a specific statutory provision exempts those records from disclosure.4 Oil and gas resource data acquired by the state pursuant to the leasing and development process would, in most instances, be considered a public record. Four statutory exemptions to 82 disclosure exist. Section 377.22.(2)(h) F.S., provides that required drilling operation reports may be held confidential at the request of the operator for 90 days after completion of a well and, at the option of the Division of Resource Management, for a longer period. Section 377.2408(3) F.S., provides that information in applications to conduct geophysical operations as to "location and other anticompetitive matter shall be kept confidential ... and shall not be released to the public without the consent" of the applicant. Third, Department of Revenue Records regarding excise taxes on Chapter 376, F.S. terminal facility operators is not accessible to the general public, Sections 376.11(4)(e) F.S. and 376.307 (5)(e) F.S. Lastly, as regards Chapter 403, F.S. permits, "any information, other than effluent data, relating to secret processes, methods of manufacture or production which may be required ... or discovered by inspection or investigation... shall be kept confidential" by the Department of Environmental Regulation.5 Unless one of the foregoing statutory exemptions apply, oil and gas resource data in state files which meets Chapter 119's, F.S. definition of public records must be disclosed. 83 FOOTNOTES FOR SECTIONS IV, V AND VI The implementing federal regulations provide-that: The term 'consistent to the maximum extent practicable' describes the requirement for federal activities including development projects directly affecting the coastal zone of states with approved management programs to be fully consistent with such programs unless compliance is prohibited based upon requirements of existing law applicable to the Federal agency's operations. 15 C.F.R. 930.32 2 Chapters 161, 253, 258, 267, 370, 373, 376, 377, 380, 403, F.S. 3 Shevin v. Bryron, Harless, Schaffer, Reid and Associates, 379 So.2d 633 (Fla.1980) 4 Wait v. Florida Power & Light Co., 372 So.2d 420 (Fla.1979) 5 Section 403.111, F.S. Note that the confidentiality does not prevent use of such records in judicial proceedings. 84 Attachment A TALLAHASSEE FLORIDA )PECRUATION COPY INVITATION To BID FOR A STATE OIL AND GAS DRILLING LEASE NOTICE is hereby given that the Board of Trustees of the Internal Improvement Trust Fund of the State of Florida will, pursuant to sections 253.47 through 253.61, inclusive, Florida Statutes, offer for sale and receive competitive sealed bids for a State Drilling Lease covering the petroleum interest of the State of Florida in the following described land -located in Santa Rosa and Okaloosa Counties, Florida, to wit: LEASE NO: 3317-F Blackwater River State Forest Section 30, Township 6 North, Range 25 West, Okaloosa County; portions of Sections 1, 2 and 3, Township 5 North, Range 26 West, and portions of sections 25, 26, 27, 28, 33, 34, 35 and 36, Township 6 North, Range 26 West, Santa Rosa County. 5,606.55 surface acres, 1,401.6375 net mineral acres. The Board of Trustees of the Internal Improvement Trust Fund has determined that the lease shall require royalty payment of one sixth in kind or in value for oil and gas produced from said lands an annual rental of $3.50 per net mineral acre annually for the first two years, increasing' by 500 a year thereafter for the area described above. Lease will require at least one test well be drilled every two and one-half years of the lease; eac.h test well to be drilled to a depth of 6,000 feet, or deep enough to test the Smackover/Norphelt formation, whichever is deeper. The primary term of the lease will be five (5) years. A surety bond of $50,000 will be required prior to drilling operations. The bidding will be on the basis of cash consideration for the lease, the amount of which cash consideration shall include the offer of rental for the first year at the rate stated above. Copy of the lease form is available for inspection in the Bureau of state Land Mangementr Department of Natural Resources, 3900 Commonwealth Boulevard, Tallahassee, FlQrida 32303. The successful bidder will be required to pay all cost of legal advertisement in connection with this lease sale. All bids must be in a sealed envelope marked SEALED BID - STATE OIL AND GAS LEASE - SANTA ROSA AND OKALOOSA COUNTIES, showing lease number and date of sale, and accom- panied by certified or cashier's check made payable to the Department of Natural Resources, Bureau of State Lands Management, for the full amount of the cash consideration offered as the bid. Each bidder shall include as part of the bid a certified statemen@ as to any lease holdings regarding oil, gas, or minerals the bidder has which were granted by the State or any agency of the State. Such statement shall also include number and indentification of such leases issued and the State agency ,.,ihich issued the lease or leases. This notice is also published in compliance with Section 253.115, Florida Statutes. Written objections concerning the proposed lease shall be filed with Mr. Ted Forsgren, Department of Natural Resources, 3900 Commonwealth Boulevard, Tallaha3see, Flcrida 32303, within thirty (30) days after the date of the first publication of this notice. Sealed bids shall be filed in the Bureau of State Lands Management, Department of Natural Resources, 3900 Commonwealth Boulevard, Tallahissee, Florida 32303, in advance of the sale date hereinafter- stated. The sealed bids will be opened and read at the Dublic meeting of the Board of Trustees of the Internal Improvement Trust Fund on December 13, 1983, at 9:00 a.m., E.s.T., in Tallahass@e, Florida. The Board reserves the right to reject any bid. BY ORDER of the Board of Trustees of the Internal Improvement Trust Fund. Bob Graham, Governor ATTEST: Elton J. Gissendanner, E@,,. --!@!tive Director ATTACHMENT B Method of Defining Royalty Payments 16Q-15.08 1983 ANNUAL SUPPLEMENT 114 16Q-15.08 Oil and Gas Leases. ROYALTY AREAS DEFINED EXHIBrr A @ ME r7l@ L, A 77 41 71, L @7 /-V, Z2- Y 1-64 Ed;torial Note: This (hart, whi(h oa@ iyiadvevclrl@ ("'Imed knm the 1-ind olanic, is so outahove. APPENDIX B Florida Local Governments and Oil and Gas Leasing of State Territorial Waters Prepared by Principal Investigator Richard Hamann and Research Assistant George Gramling The Center for Governmental Responsibility University of Florida College of Law Gainesville, Florida 1984 Table of Contents Page Part I. Local Government Boundaries and Annexation of Florida's Territorial 1 A. County Boundaries 2 B. Municipal Boundaries and Annexations 3 1. Introduction 3 2. Municipal Boundaries 4 3. Annexation 5 a. Sources of Law Governing Annexation in Florida 5 b. Florida's Annexation Statute 6 c. Voluntary Annexation 7 d. Non-Voluntary Annexation 8 e. Character of Land Annexed 10 f. Problems with the Florida Annexation Statute as Applied to Terrirorial Waters 12 g. Potential Annexation Reform 19 Footnotes 19 Part II. Annexation Procedures Used In Coastal States Other Than Florida 27 Introduction 28 I. Alaska 28 A. ' Ty-es of Municipalities 28 1. Boroughs 28 2. City Boundaries 29 0 Table of Contents Page B. Alaska's Annexation Statute 30 1. State Initiated Annexations 31 2. Local Annexations 32 3. Step Annexation 34 4. Tidelands Acquisition 35 Footnotes 36 II. California 40 A. Boundaries 40 1. State 40 2. Counties 40 3. Cities 40 B. California's Annexation Statute 40 1. Annexation of Submerged Lands 41 Footnotes 42 III. Texas 44 Introduction 44 A. Boundaries and Annexation 44 1. State 44 2. Counties 44 3. Muni ci pal ities 45 Footnotes 46 IV. Louisiana 47 A. Boundaries 47 1. State 47 2. Counties 47 3. Municipalities 48 Table of Contents Page B. Louisiana's Annexation Statutes 48 1. Annexation by Petition and Election 48 2. Annexation by Petition and Ordinance 49 Footnotes 49 V. Mississippi 52 A. Boundaries 52 1. Counties 52 2. Municipal Boundaries 53 3. Port Authorities 53 B. Mississippi's Annexation Statute 53 Footnotes 56 VI. Alabama 60 A. Boundaries 60 1. State Boundaries 60 2. County Boundaries 60 3. Municipalities 61 B. Alabama's Annexation Statute 61 1. Annexation Generally 61 2. Annexations of Territory By Cities of 2,000 Inhabitants or More 62 3. Annexation of Territory Containing 25,000 Inhabitants or More 63 C. Conclusion 63 Footnotes 63 Table of Contents page Part III. Local Government Taxation 65 Introduction 66 A. Severance Tax on Oil and Gas 66 B. Ad Valorem Property Taxes 67 1. County 67 2. Municipalities 71 C. Taxation of Leasehold Interests 72 Footnotes 72 Part IV. Local Regulation of Oil and Gas P-ro-Zulction Activities 77 A. Introduction: The Police Power 78 B. Delegation to Local Governments of State Home Rule Authority to Exercise the Police Power 78 1. Municipal Home Rule Authority 79 2. Charter County Home Rule Authority 80 3. Non-Charter County Home Rule Authority 81 C. Specific Grants of Authority 83 1. Comprehensive Land Use Planning and Regulation 83 2. Local Pollution Control Programs 86 .3. State Preemption of Local Regulation 87 Footnotes 88 iv I Table of Contents 0 Page Part V. Local Control of State Leasing 92 Footnotes 100 Diagrams 102 0 0 v 0 Part I - Local Government Boundaries and Annexation Of Florida's Territorial Waters 0 0 1 A. County Boundaries The Florida Constitution.requires that the entire state be divided into counties.1 This provision implies that the boundaries of coastal counties would extend offshore to the limits of state juris- diction. In addition, a legal description for each county is set forth in Chapter 7 of the Florida Statutes. The twelve Atlantic coastal counties include: Dade, Broward, Palm Beach, Martin, St. Lucie, Indian River, Brevard, Volusia, Flagler, St. Johns, Duval and Nassau. These counties' legal descriptions typically define the coun- ties' jurisdiction to include the "waters of the Atlantic Ocean within the jurisdiction of the State of Florida."2 The 21 Gulf coastal coun- ties include: Escambia, Okaloosa, Walton, Bay, Gulf, Franklin, Wakulla, Jefferson, Taylor, Dixie, Levy, Citrus, Hernando, Pasco, Pinellas, Hillsborough, Manatee, Sarasota, Charlotte, Lee and Collier. The legal descriptions for each of these counties typically include "the waters of the Gulf of Mexico within the jurisdiction of the State of Florida". There are some immaterial differences in language. For example, Monroe County, which fronts on both the Atlantic and the Gulf of Mexico, is defined by omission to include "so much of the State of Florida as is situated south of the County of Collier and west or south of the County of Dade".13 Although boundaries between counties are usually defined by reference to the Universal Transverse Mercator grid,4 some boundaries are defined by reference to physical landforms subject to shifting by natural forces. For example, "the northernmost shore of Mullet Key" defines the boundary between Pinellas and Hillsborough Counties.5 The "thread of the Suwannee River" divides Levy and Dixie Counties.6 2 Ordinarily, the territorial limits of a state extend three miles offshore.7 This jurisdictional rule applies along the Atlantic coast of Florida. Florida's seaward boundary on the Gulf of Mexico, however, is not three miles from the shoreline, but three marine leagues (10.5 miles).8 The Florida Constitution of 1885 fixed the state's western boundary at three marine leagues. Later, the U.S. Supreme Court affirmed Florida's three marine league limit in United States v. Florida.9 The court noted that Congress' approval of the 1885 Florida Constitution, in effect, granted these lands to the state. Because the entire state is divided into counties, there are no statutory provisions relating to county annexation of territory. The Florida Legislature, though, can change county boundaries-10 B. Municipal Boundaries and Annexations 1. Introduction There are no Florida cases examining the scope of a municipali- ty's power to annex territorial coastal waters of the state. The reason for this seems to be that in the past there was insufficient urban and industrial activity in these waters to make annexation worthwhile, or even thinkable. Now, however, the territorial waters, once void of development save the extremely mobile fishing industry, are host to an ever-increasing number of oil and gas facilities, offshore power plants, shipping and deepwater ports, and people to operate each of these.11 The onshore impact of offshore development to both the local and state economy as well as to the extremely delicate coastal environment 3 is great.12 Although coastal counties and municipalities currently play some role in influencing the extent of offshore development, coastal municipalities may in the future seek to expand their influence. Annexation presents a mechanism by which a coastal city's power to control offshore development may be enlarged to more closely parallel the developer's power to use the municipality's resources and to affect its citizenry. Annexation of territorial water could increase the municipal tax base and thereby increase local revenues.13 Annexation would also extend municipal regulatory power offshore. This discussion explores the possibility of municipal annexation of territorial waters and examines problems with the existing law for regulating annexations. Proposals are given for regulating possible attempts by municipalities to annex territorial waters. 2. Municipal Boundaries Municipalities derive their power from the state.14 The juris- diction of each municipality, which is established either in its charter or by special legislative act, may extend to submerged lands owned by the state.15 A multitude of special acts and municipal char- ters control municipal authority. Thus., it is difficult to generalize about the scope of municipal authority over territorial waters beyond the line of mean high water.16 Coastal boundaries for each municipa- lity are different. For example, although Daytona Beach's jurisdic- tion extends two miles into the Atlantic,17 Key West's police powers extend only three hundred feet into the tidal waters adjacent to its corporate limits.18 The legal description of each coastal municipali- ty's boundary must, therefore, be individually researched.19 4 No comprehensive source exists containing all coastal cities' boundaries. A current description of a city's boundary lines can be ferreted out from a number of sources. The best method for deter- mining where boundaries lie is to consult the city Or town clerk's office for any city involved. The city clerk should have the most current and accurate records of the city's boundaries. Although every Florida city is required by law to record each annexation or contraction with the Department of State,20 the annexations are sometimes not filed.21 Thus, the Department of State's records may not include complete information. Also, since the Department of State's Bureau of Laws merely files the recorded annexations, this department cannot supply integrated maps or legal descriptions of a municipality's total corporate limits. An alternative source to consult for current legal descriptions of a municipality's limits is the county tax assessor for the county in which the city is located.22 A comprehensive investigation of a municipality's limits should include both the clerk's records and the records of the tax assessor. 3. Annexation a. Sources of Law Governing Annexation in Florida23 The U.S. constitution,24 the Florida Constitution25 and the Florida Statutes26 as well as a large body of case law govern munici- pal annexations in Florida. The Florida Constitution, Article VIII, Section 2(a), (c), contemplates municipal annexation of unincorporated territory as provided by general or special law.27 Annexation law is 5 built on the premise that the power to change municipal boundaries, establish municipalities outright, or expressly prohibit municipal expansion is solely a legislative power.28 The legislature may exer- cise the power directly or may delegate the power to-municipalities. The legislature's power, however, is not unlimited. The legisla- ture must observe constitutional limitations or courts will intervene.29 The principle limitation is that municipal boundaries may not be extended solely to increase tax revenues. Annexation for that purpose is a flagrant abuse of authority amounting to a taking without just compensation.30 b. Florida's Annexation Statute A municipal corporation has no power to extend its boundaries in a manner other than that provided by legislative enactment. Chapter 171, Florida Statutes is called the "Municipal Annexation or Contraction Act," and contains the general law regarding all annexa- tions in Florida. The act declares that the provisions of any special act or municipal charter relating to the adjusting of municipal boun- daries in effect on October 1., 1974 are repealed.33 Not repealed, however, are any provisions of special law which prohibit annexation of territory that is separated from the annexing municipality by a body of water or watercourse.34 The purposes of chapter 171 are to set forth procedures for adjusting the boundaries of municipalities through annexations or contractions of corporate limits and to set forth criteria for deter- mining when annexations or contractions may take place.35 The act 6 seeks to provide sound urban development and accomodation to growth;36 establish standards throughout the state for the adjustment of munic- pal boundaries;37 insure the efficient provision of urban services to areas that become urban in character;38 and insure that areas are not annexed unless municipal services can be provided to those areas.39 In order for an annexation proceeding to be valid under this act, the annexation must take place within the boundaries of a single county.40 Chapter 171 authorizes two methods of annexation: voluntary and invo- luntary annexation. C. Voluntary Annexation Under the procedure established for voluntary annexation, the owner of real property in an unincorporated area of the county which is contiguous4l to a municipality and reasonably compact,42 can peti- tion for annexation.43 The petition must bear the signatures of 100% of the area's landowners.44 The city is required to publish a pro- posed annexation ordinance once weekly in a local newspaper, for four .consecutive weeks prior to adoption of the ordinance.45 This proce- dure may not be used in Dade County46 nor may it be used in any other county whose charter provides an exclusive method of annexation.47 No enclaves may result from use of the voluntary annexation procedure.48 The term "enclave" is not defined anywhere in chapter 171. Enclave, as defined by the Florida Attorney General means "islands of municipal territory in the unincorporated territory of a county rather than unincorporated pockets nestled within a city.49 The prohibition against the creation of enclaves does not appear to be a serious limitation on voluntary annexations.50 7 An exception to the requirement of a referendum exists where the annexation is voluntary. The owner or owners of the property to be annexed may petition the municipality for annexation. This method of annexation was obviously intended to allow private-land owners to petition for inclusion within the municipality. It might apply, though, to allow annexation of submerged lands owned by the state. The Board, as trustee of the submerged property, could voluntarily petition a municipality to annex a parcel of territorial water. An issue that might arise is whether such a request is consistent with the Board's trust responsibilities. Chapter 253, Florida Statutes vests sovereignty lands title in the Board and provides: "All sovereignty lands... shall continue to be held in trust for the use and benefit of the people of the state pursuant to Section 7, Article II, and Secti?n II, Article X of the State Constitution."5 Arguably, the Board might be assisted in protecting public trust interests through incorporation of offshore lands and subsequent extension of municipal services and regulatory authority. In any event, the courts have given the Board broad discretion in the exer- cise of public trust responsibilities. Board decisions are, for example, entitled to a "presumption of correctness" by the courts-52 d. kon-Voluntary Annexation Non-voluntary annexation under chapter 171 may be used to over- come the objection of land owners to being annexed.53 Under this method, the city first prepares a plan outline the services to be bestowed on the annexed area.54 The plan must contain: 8 1) A map of the municipality and adjacent terri- tory showing present and proposed boundaries-5 2) Present major trunk water mains and sewer interceptors and outfalls;56 3) A statement certifying that the area to be annexed meets the criteria in Section 171.043 (urban use);57 4) A statement setting forth plans of the muni- cipality for extending to the area to be annexed each major municipal service per- formed within the municipality at the time of annexation-58 Such plans shall: 1) Provide for extending urban services except as otherwise provided herein to the area to be annexed on the date of annexation on substantially the same basis and in the same manner as such services are provided within the rest of the municipality prior to .59 annexation, 2) Provide for the extension of existing munici- pal water and sewer services into the area to be annexed so that, when such services are provided, property owners in the area to be annexed will be able to secure public water and sewer service according to the policies in effect in such municipality for extending water and sewer lines to individual lots or subdivisions;60 3) Set forth the method under which the munici- pality plans to finance extension of services into the area to be annexed.61 The Department of Veteran and Community Affairs must lend its technica 1 assistance to any municipality preparing for annexation.62 A copy of the plan must be filed with the board of county com- missioners.63 Following preparation of the plan, the city adopts a nonemergency annexation order which is contingent upon passage by separate 9 referenda both in the municipality and in the area to be annexed.64 The city then arranges for a referendum to take place no sooner than 30 days after final adoption of the ordinance.65 Once weekly during the four weeks prior to the referendum, the city must publish notice of the referendum and a general description of the area proposed for annexation in a newspaper of general circulation.66 If separate majorities of those voting in each area approve the proposed annexa- tion, it takes effect according to the specified schedule in the ordinance.67 e. Character of Land Annexed Three major restrictions exist on the use of the non-voluntary annexation procedure.68 First, the area to be annexed may not contain land located within another county's boundaries.69 Second, the area must meet certain general criteria: it must be contiguous to the municipality's boundaries at the time annexation is begun, and it must be reasonably compact.70 Third, the area must also meet the criteria of either of the following two subsections.71 1. Part or all of the area to be annexed must be developed for urban purposes.72. Urban purposes means: (a) it has a total 'resident population equal to at least two persons per acre of land include within its boundaries;73 OR (b) it has a total resident population equal to at least one person per acre and is subdivided into lots so that at least 60% of the total number of lots are one acre or less in size;74 OR 10 (c) it is so developed that at least 60% of the total number of lots and tracts in the area at the time of annexation are used for urban purposes, and it is sub- divided into lots and tracts so that at least 60% of the total acreage, not counting the acreage used at the time of annexation for non-residential urban purposes, consists of lots and tracts 5 acres or less in size;75 2. In addition to the area developed for urban purposes, a municipality may include in the area to be annexed any area which does not meet the requirements above if such either: (a) lies between the municipal boundary and an area deve- loped for urban purposes, so that the area developed for urban purposes is either not adjacent to the muni- cipal boundary or cannot be served by the municipality without extending services or water or sewer lines through such sparsely developed area;76 OR (b) is adjacent, on at least 60% of its external boundary, to any combination of the municipal boundary and the boundary of an area or areas developed for urban pur- poses as defined in subsection (2) of the Act.77 The purpose of this last section is to permit municipal governing bodies to extend the corporate limits to include all nearby areas developed for urban purposes. Where necessary, this section allows annexation to include areas which, at the time of annexation are not yet developed for urban purposes but whose future probable use is urban and which constitute a necessary land connection between the municipality and areas developed for urban purposes., or between two or more areas developed for urban purposes.78 f. Problems with the Florida Annexation Statute As ApplieT -to lerritorial waters Florida's "Municipal Annexation or Contraction" statute was not intended to apply to annexations of coastal waters. Hence, attempting to conform the statute's procedural and substantive requirements to an annexation of state territorial waters meets with many difficulties. Although the Act's purposes of insuring "sound urban development and accomodation to growth',79 arguably justify giving the municipality power to annex offshore areas of development, the Act requires much more of a municipality seeking to incorporate sparsely settled lands. As a prerequisite to any annexation, the governing body must pre- pare a report setting forth plans to provide "urban services" to the area. The report is to include maps of major trunk water mains and sewer interceptors, and a statement setting forth the plans of the. municipality for extending to the area each major municipal service performed within the municipality at the time of annexation. Obviously, these requirements are not aimed at offshore oil rigs. Oil rigs can be dependent upon-adjacent coastal lands for many basic necessities.80 In the normal course of construction and operation ait ol'l'.slhore oil rig demands land, water, and electrical power. These services may be supplied from an adjacent municipality. Supplies and services may also come from other municipalities, coun- ties, unincorporated areas or states. In return, the oil rig may contribute air and water pollution, aesthetic unpleasantness and noise 12 pollution to the coastal city. Oil and gas are often pumped onshore for processing. Overall., though, very few traditional urban services can be extended to an offshore oil rig. An argument can be made that Chapter 171 authorizes annexations of territorial waters under certain circumstances. The statute requires that the area to be annexed meet specified general standards and either of a set of two additional alternative requirements. First, the total area to be annexed must be contiguous to the city's boundaries and contained within a single county. Territorial waters could meet the contiguity requirement. The first alternative addi- tional requirement is that part or all of the area to be annexed must be developed for urban purposes. The urban purpose requirement can be met by a showing of either the area's population or potential use. Since there is no population at sea presently, this requirement could not be a basis for annexation. The potential use method of showing urban purposes requires that, at the time of annexation, at least 60% of the total area be used for urban purposes,81 defined in Section 171.031(10) to include industrial and commercial purposes. Not only must 60% of the area already be in use, but the area to be annexed must consist of tracts and lots five acres or less in size. Since most of the state's territorial waters cover submerged lands which have never been subdivided into lots or tracts, it is unlikely that a municipality could prove that the area to be annexed met any of the above requirements. However, under the second additional alternative requirement a municipality may include in the area to be annexed an area which, for 13 either of two reasons., does not meet the above first alternative requirement. First, if the area lies between the municipal boundary and an area already developed for urban purposes, so that without extending services (water, sewer,, etc.) through the'sparsely developed area., the urban purpose could not be served., this sparsely developed area may be annexed. This requirement might conceivably allow annexa- tion of waters between an offshore oil rig and the coastal city's boundary. Meeting the requirement appears to depend, though, on an intent to extend municipal utility services to offshore facilities. Also under the second additional alternative requirement, a muni- cipality may annex an area which is adjacent, on at least 60% of its external boundary, to any combination of the municipal boundary and the boundary of the area already developed for urban purposes. This requirement could arguably be met by a municipality seeking to annex territorial waters. The stated purpose of this second alternative is to permit muni- cipal governments to extend corporate limits to include all nearby areas developed for urban purposes, and, where necessary, to include areas which at the time of annexation are not yet developed for urban purposes, whose future probable use is urban and which constitute necessary land connections between the municipality and areas deve- loped for urban purposes. Allowing annexations where the future use will probably be urban in nature anticipates inevitable municipal growth and predicts technological advancements which might make pre- sently uninhabitable lands habitable. The provision supports a good argument for the application of the statute to annexations of terri- 14 torial waters leased, or likely to be leased., for natural resources development. However., the municipality is also subject to the general rule that to annex large areas of land there must be a pr esent showing of population, industrialization, or similar need to justify the annexation.82 Factors that tend to support the inclusion are: 1) the furnishing of utilities to the residents in the area to be annexed; 2) the trend toward urban development; 3) the platting into lots and streets of the area; and 4) most importantly, the city's need for the area.83 The city's growth and expansion needs are paramount con- siderations when determining the validity of an annexation. In Bower v. City of Tampa, the city annexed unimproved, uninhabited tidal shore property which was mostly under water.84 The property was located between the fringe boundaries of the city of Tampa and the bulkhead line of upper old Tampa Bay.85 The court said that although the pro- perty was within the territorial limits of the city, it was not within the corporate limits., the property being separate from the city land area by 2.,000 feet of water and a state road.86 The Second District Court of Appeal specifically rejected the landowner's argument that the annexation was improper because the land did not receive municipal benefits.87 According to the court, municipal services such as sewer, water, sidewalks, streets and fire protection are not the only ser- vices to be considered.88 The court reasoned that because the area was patrolled by police boats and helicopters, subject to the city's power to enjoin discharges into local waters, and subject to the 15 city's power to veto dredging or filling permits, the requirement that the area to be annexed be supplied with municipal services was met.89 The court's reasoning arguably justifies annexation of terri- torial waters containing oil leased lands. The Bower court specifi- cally approved the annexation on the theory that the probability of future development was enough to satisfy the requirement that the area be amenable to municipal benefits-90 A distinction should be drawn, however., between wetlands and shallow, submerged lands easily made habitable through dredging and filling, and areas located far offshore. The Bower court's approval of an annexation of swamp land relied on the fact that technology was available to make the land habitable. Annexations of offshore lands, however, may not be as readily approved by the courts, since these areas seem unlikely to support urban concentrations of people or industry in the foreseeable future. Perhaps the central issue of this discussion is whether any court would approve an annexation of uninhabited, relatively undeveloped territorial waters. In addition to the Bower court's reasoning, which arguably supports such annexations, the Florida Supreme Court in a similar case indicated that the predictability of future municipal growth and development justify annexation of rural or unserviced lands. In Gillette v. City of Tampa, the land involved was rural, swampy and undeveloped-91 However, the court took judicial notice of the growth and increase in population of the city of Tampa. "We are not persuaded that the fact that some of the area is swampy makes it unfit for urban use. In this machine age, and with the modern and highly specialized meth'ods of filling and dredging., there are few areas which cannot be adapted to residential or industrial use where there is a community demand for expansion.92 16 While it appears to have adopted a rule that future municipal needs and land uses may justify annexation., the Supreme Court has not expressly receded from the general rule in State ex. rel. Ervin v. City of Oakland Park.93 Lands may not be annexed for the sole purpose of taxing them. In Oakland Park., the court found that potential growth and development of an urban area was not sufficient to support annexation that occurred for revenue purposes only.94 According to the District Court of Appeal in Bower,, though., the reasoning and policy considerations supporting the decision in Oakland Park are no longer applicable in light of more modern cases.95 For example, in City of Fort Lauderdale v. Town of Hacienda Village,96 the Supreme Court specifically stated that the Legislature is empowered to fix boundaries to accommodate future growth of a municipality, reasoning as follows: "The urbanization of the state is evidenced by the extensive development of metropolitan areas in the environs of large cities. This condition not only justifies but, in many instances, actually requires a long range legislative perspective in planning the orderly development of these metropolitan areas.1197 Long range legislative planning for orderly development may also justify annexations of undeveloped territorial waters in contemplation of future offshore development or municipal growth. Sin.'rp titlp to the submerged lands lying beneath the state's navigable waters is vested in the state, various problems arise regarding the statute's referendum requirements. Although the 17 legislature may authorize annexation without the landowners consent, in typical annexations under the Act involving land owned by indivi- duals, a referendum is required. Following final adoption of the pro- posed annexation by the municipal government, the proposal is submitted to a separate vote of the registered electors of the munici- pality and of the area proposed to be annexed. If there is a separate majority vote in favor of annexation in both the city and in the area to be annexed, the annexation becomes effective on the date specified. If the annexation is defeated, the area proposed to be annexed cannot be subjected to an annexation ordinance by that municipality for a two year period from the date of referendum. The problem with the referendum requirement is that the area to be annexed (state territorial waters) is mostly owned by the state itself. Hence., there are no residents present to vote either in favor of,, or against,, a hypothetical annexation. Under Chapter 253.03M., Florida Statutes., the Board of Trustees of the Internal Improvement Trust Fund (seven members) is vested with the "acquisition, admi- - nistration., management, control,, supervision, conservation, protection and disposition of all lands owned by, or which may hereafter inure to., the state or any of its agencies, departments, boards or commissions."98 Although a referendum could not occur among private landowners of territorial submerged lands (since there are none), a referendum might arguably be conducted among the seven member Board of Trustees of the Internal Improvement Trust Fund (hereinafter the Board). Since the members of the Board are not registered electors of the area to be annexed, however, this argument appears to have little merit. 18 g. Potential Annexation Reform Three possibilities exist for uniformly managing municipal annexation of coastal waters. First., the legislature may do nothing and allow annexations of territorial waters to proceed under the existing Florida statute, Chapter 171. Such an annexation would meet the many problems described above and could be litigated for many years. Second, the legislature could unilaterally establish municipal boundaries by fixing the water boundary for each coastal city. Any attempts to further annex state territorial waters could be prohi- bited. This method would require city by city implementation, since the current jurisdiction of each coastal city differs. Finally, the legislature could enact a new statute designed to accommodate annexations of territorial waters. This alternative involves weighing many policy considerations, primarily whether it is wise to allow such annexations at all. Criteria for annexing lands would have to be carefully selected. However,, with growth within the state accepted as inevitable, and with industrial developments taking place at an ever increasing rate within Florida's territorial waters, it seems logical that the coastal city should be allowed to grow both inward and outward to accommodate new technologies and needs of the citizens. Footnotes 1. FLA. CONST. art. VIII, section 1(a) (1969). See, Lipscomb v. Gialourakis, 101 Fla. 1130; 133 So. 104 (19317.- 0 19 2. See e.g., FLA. STAT. ch. 7.58 (1983). 3. See, FLA. STAT. ch. 7.44 (1983). 4. See e.g., FLA. STAT. ch. 7.11 (establishes the northern boundary line of Collier County as westerly extension of the north line of township forty-eight south to the western boundary of the State of Florida). 5. FLA. STAT. ch. 7.29 (1983). 6.. Id. ch. 7.38. 7. United States v. Florida, 363 U.S. 121; 80 S.Ct- 1026 (1960). 8. Id. See also, Lipscomb v. Gialourakis, 101 Fla. 1130; 133 '!;-0 . 170T 9. 363 U.S. 121; 80 S.Ct. 1026 (1960). 10. FLA. CONST. art. VIII., section 1(a) (1964) (provides that counties may be changed by law); See also, Re Executive Communication, 14 Fla. 320 (1873)--Firi-t-erpreting art. VIII Section 2 of former 1868 Constitution which provided all counties remain as organized unless changed by a two-thirds vote of both houses of the legislature). 11. Woodson, Corbett and Tannen, Onshore Impact of Offshore Energy Development, 31 U.FLA.L.REV. 284 (1979). 12. Id. 13. However., Florida cases clearly establish that a municipality may not annex large, uninhabited areas of land solely for the purpose of raising tax revenues. Davis v. Stewart, 120 So.2d 335 (Fla. 1929). 14. FLA. CONST. art. VIII, section 2(b). See also FLA. STAT. �166.021 (1983). 15. FLA. CONST. art. VIII, section 2; Fla. Stat. ch. 171 (1983). 16. Woodson, supra note 11, at 286. 17. See, e.g., DAYTONA BEACH, FLA., CHARTER pt. A, �2 (1971). 18. Woodson, supra note 11, at 296. See also, Id. at n. 18. citing, KT7_WF7ST, FLA., CHARTER cF_.r,-art.-T-, �9 (1975). 19. Telephone interview with Mr. Brian Scott, Geography Division., U.S. Census Bureau, Washington, D.C. 20333. Although the census bureau prepares maps outlining each municipality's boundary, the maps are based on unverified 20 census information contributed by each local authority. Presently., the U.S. Government Survey is working on digi- tizing these maps. That is, the present boundaries of each municipality with 5.,000 or more population, are being com- puterized. Florida will be the first state to become digi- tized. This does not mean, however, that the maps of the U.S. Census Bureau will be in any way more'accurate than maps presently available. The only method of insuring the exact location of any municipality's boundaries is to indi- vidually research the legal boundaries for each city. 20. FLA. STAT. ch. 171.091 (1983). "Any change in the municipal boundaries through annexation or contraction shall revise the charter boundary article and shall be filed as a revi- sion of the charter with the Department of State within 30 days. Id. 21. The Florida Bureau of Laws files all annexations which are submitted by municipalities. The Bureau, however, does not enforce the reporting requirement contained in the Act. See supra, note 20. Thus,, the obligation to file annexations is Te-ft-to the discretion of local officials, with no sub- sequent check up done by any state authority. 22. Advise of Dr. J. Armstrong, University of Florida Map Library. The county tax assessors keep current legal descriptions for all municipalities within their jurisdic- tion. The corporate limits are recorded using the tradi- tional range and township descriptions. 23. For an excellent discussion of this subject see, FLORIDA ADVISORY COUNCIL ON INTERGOVERNMENTAL AFFAIRT-,-ANNEXATION IN FLORIDA: ISSUES AND OPTIONS; (August, 1983), (hereinafter FAC Report). 24. The Federal constitutional cases dealing with annexations have primarily focused on protecting the right to vote. See,, The Right to Vote in Municipal Annexations, 88 HARV. U_.REV. 1579 (1975). 25. Regarding annexations, Article VIII, section 2(c) of the Florida Constitution states: "municipal annexation of unin- corporated territory, merger of municipalities, and exercise of extraterritorial powers by municipalities shall be as provided by general or special law." Id. 26. FLA. STAT. ch. 171. (1983). 27. See supra, note 15. 28. See, e.g., MacGuyer v. Tampa., 89 Fla. 138, 103 So. 418 TT725T--,-Wuberndale v. Adams Packing Asso., 171 So.2d 161 (Fla. 1965); Bower v. Tampa, 316 So.2d 570 (Fla. 2d DCA, 21 1975). 29. See., e.g., Davis v. Stewart, 97 Fla. 69; 120 So. 335 (Fla. T�78)-n-e-gislature may not extend municipal boundaries solely to increase tax revenues). 30. Id. See also, Gillete v. Tampa, 57 So.2d 27 (Fla. 1952). 31. Davis v. Stewart, 120 So. 335 (Fla. 1928). 32. Johnson v. Sarasota, 109 So. 473 (Fla. 1926); Davis v. Clearwater, 139 So. 377, aff'd 146 So. 836 (Fla. 1932). 33. FLA. STAT. ch. 171.022(2) (1983). "The provisions of any special act or municipal charter relating to the adjusting of municipal boundaries in effect on October 1, 1974, are repealed except as otherwise provided herein." Id. 34. Id. ch. 171.0413(4) (1983). 35. FLA. STAT. ch. 171.021 (1983). 36. Id. ch. 171 .021M. 37. Id. ch. 171 .021(2). 38. Id. ch. 171 .021(3). 39. Id. ch. 171 .021M. 40. Id. ch. 171.045. 41. Defined in FLA. STAT. ch. �171.031(11). (11) "Contiguous" means that a subst- antial part of a boundary of the territory sought to be annexed by a municipality is' coterminous with a part of the boundary of the municipality. The separation of the territory sought to be annexed from the annexing municipality by a right-of-way for a highway, road, railroad, canal, or utility or by a body of water, a water- course, or other minor geographical divi- sion of a similar nature, running parallel with and between the territory sought to be annexed and the annexing municipality, shall not prevent annexation under this act, provided the presence of such a divi- sion does not, as a practical matter, pre- vent the territory sought to be annexed and the annexing municipality from becoming a unified whole with respect to municipal services or prevent their inha- 22 bita'nts from fully associating and trading with each other., socially and economi- cally. However., nothing herein shall be construed to allow local rights-of-way, utility easements, railroad rights-of-way, or like entities to be annexed in a corri- dor fashion to gain contiguity; and when any provision or provisions of special law or laws prohibit the annexation of terri- tory that is separated from the annexing municipality by a body of water or water- course, then that law shall prevent annexation under this act. 42. Id. (12) "Compactness" means concentration of a piece of property in a single area and precludes any action which would create enclaves, pockets., or finger areas in ser- pentine patterns. Any annexation pro- ceeding in any country in the state shall be designed in such a manner as to ensure that the area shall be reasonably compact. 43. Id. ch. 171.044(l) (1983). 44. Id. ch. 171 .044(2). 45. Id. 46. FAC REPORT., supra note 23, at 101. Special act annexations are constituTI-on-a-lly prohibited in Dade county as are local bills of all types. Id. Two reasons exist for this, both of which result from TW_e inclusion of the Dade charter in the state constitution. Id. First, the charter and the constitution both contairi--aprohibition against acts affecting only Dade county. Id. citing Article VIII, sec- tion 11(5)., (6)., Florida ConsTIiTut-16_n__oT 1885 (incorporated by reference in Article VIII, section 6(c) of the present constitution). Second, the Dade county charter contains a provision that governs municipal annexations in the county. FAC REPORT, supra at n. 15. Courts have held that the rthp Pxclus5e means by which annexations may be accomplished in Dade county. Id. at no. 16, citing, City of Sweetwater v. Dade County, 343 75.2d 953 (1977-7FUCA). Therefore, absent a change in the state constitution, any changes made by the legislature in the statute pertaining to annexation (FLA. STAT. ch. 171) will not affect Dade County. Id. 47. FLA. STAT. ch. 171.044(4) (1983). To date, no counties. other than Dade are affected by this provision. 23 48. Id. �171 .044(5). 49. See ATTY. GEN. OP. 080-84, Sept. 30, 1980. 50. FAC REPORT, supra note 23, at 106. 51. Id. 52. The Florida Supreme Court stated: "The Trustees of the Internal Improvement Trust Fund are ... constitutional offices of the executive branch of government. If we are ever to apply the rule that public officials will be presumed to do their duty, it would... be most appropriate in this instance." Hayes v. Bowman, 91 So.2d at 802 (Fla. 1957); quoted in Yonge v. Askew, 293 So.2d 395 (1st DCA 1974). Accord, Farrugia v. Frederick, 344 So.2d 921 (1st DCA 19771-. Never has a Board's decision concerning sovereignty lands management been reversed by a court for violation of the public interest standard. See Swim, OIL AND GAS LEASING IN FLORIDA'S TERRITORIAL WATERT-.- STATE LAWS (report to the Center for Governmental Responsibility., Gainesville, Florida), at 12. 53. Id. 54. FLA. STAT. ch. 171.042(l) (1983). 55. Id. �171 .042(l)(a). 56. Id. 57. Id. �171 .042(l)(b). 58. Id. �171 .042(l)(c). 59. Id. �171 .042(l)(01. 60. Id. �171 .0420)(02. 61. Id. �171 .042(i)(c)4. 62. Id. �171 .042(2). 63. Id. �171 .042(3). 64. FLA. STAT. ch. 171.0413(l) (1983). 65. Id. �171 .0413(2)(a). 66. Id. �171 .0413(2)(b). 24 (4) "Newspaper of general circulation" means a newspaper printed in the language most commonly spoken in the area within which it circulates,, which is readily available for purchase by all inhabitants in its area of circulation, but, does not include a newspaper intended primarily for members of a particular professional or occupational group., a newspaper whose pri- mary function is to carry legal notices, or a newspaper that is given away pri- marily to distribute advertising. Id- 67. Id. �171 .0413(2)(c). 68. See., FAC REPORT,, supra note 23., at 107. 69. FLA. STAT. ch. 171.043(l) (1983). 70. Id. 71. Id. �171 .043. 72. Id. �171 .043(2). 73. Id. �171 .043(2)(a). 74. Id. �171 .043(2)(b). 75. Id. �171 .043(2)(c). 76. Id. �171 .043(3)(a). 77. Id. �171 .043(3)(b). 78. Id. 79. Id. �171 .021(l), .021(2). 80. See Woodson, supra note 11, at 287-297. 81. Urban purposes in this context means that land is used intensively for residential., commercial, industrial, insti- tutional. and governmental purposes, including any parcels of land retained in their natural state or kept free of development as dedicated greenbelt areas. 82. See., Gillette v. Tampa, 57 So.2d 27 (Fla. 1957). 83. Id. 84. Bower v. Tampa., 316 So.2d at 571; (Fla. 2d DCA 1975). 85. Id. 25 86. Id. 87. Id. at 572. 88. Id. at 571. 89. Id. 90. Id. at 573. 91. 57 So.2d at 28; (Fla. 1952). 92. Id. at 29. 93. Ervin v. City of Oakland Park., 42 So.2d 270 (Fla. 1949). 94. Id.- at 272. 95. Bower v. Tampa, 316 So.2d at 573. 96. 172 So.2d at 452; (Fla. 1965). 97. Id. 98. FLA. STAT. ch. 253.03(l) (1983). 26 0 Part II. Annexation Procedures Used in Coastal States I* Other Than Florida 0 27 Introduction This section will analyze the annexation methods used by other coastal states which lease offshore waters for mineral development. The annexation laws of Alabama, Mississippi, Louisiana, Texas, California., and Alaska are surveyed. For reasons such as differing population densities, rates of growth, and amounts of offshore acti- vity, some states' annexation laws are more sophisticated than the laws of other states. I. Alaska A. Types of Municipalities 1. Boroughs Alaska differs from every other state by the way in which it is divided into political subdivisions. Alaska has never had any coun- ties, such as are found in most other states. Somewhat similar to counties, however, are the state's largest political subdivisions, boroughs.1 A borough may contain one or more cities as well as unin- corporated territory. Alaska is presently divided into ten boroughs.2 @ew boroughs may also be formed. In order to incorporate as a borough, however, an area must meet certain requirements regarding population, natural geography, economy, and transportation.3 A borough may be categorized as first, second, or third class and the powers of a borough depend on its classification.4 Boroughs are governed by either home rule or general law.5 Only first class boroughs which have adopted home rule charters are governed by home rule.6 28 The Alaska Constitution, Article X, Section 3, requires that the entire state be divided into boroughs, organized or unorganized.7 Article XII, Section 1., of the Constitution extends the State@s boun- daries over "all the territory, together with the territorial waters appurtenant thereto, included in the Territory of Alaska upon the date of ratification of the constitution by the people of Alaska."8 Nothing in either the Alaska Constitution nor the Alaska statutes spe- cifically delineates the geographical jurisdiction of a borough. However., since the entire state is required to be divided into boroughs, it follows that the borough's jurisdiction extends over territorial waters within its boundaries. Another type of local government in Alaska is the city. Article X, Section 7 of the Alaska Constitution provides for incorporation of cities as prescribed by law.9 Alaska statutes, Title 29 contains the law pertaining to municipal government, including annexation. Like boroughs,, cities are either governed by home rule or general law.10 Cities may be either first class or second class, but only first class cities may adopt home rule.11 A first class city must have 400 or more permanent residents.12 2. City Boundaries The creation of municipalities and the establishment of their boundaries is a legislative function.13 The power of the legislature to adopt methods for changing or establishing these boundaries derives from Article X, Section 12, of the Alaska Constitution. The Constitution also provides for the establishment of a local boundary commission in the executive branch of the state government.14 29 The commission may consider proposed changes to local government boundaries.15 This section of the constitution establishes two methods of local boundary alteration: 1) by direct action of the local boundary commission subject to legislative disapproval, and 2) by establishment by the commission of procedures for the adjustment of boundaries by local action.16 The local Boundary Commission is a unique feature of Alaskan Law. The framers of Alaska's Constitution intended to provide an objective administrative body to make state level decisions regarding local boundary changes, in order to avoid the chance that a small, self-interested group might prevent boundary changes otherwise in the public interest.17 B. Alaska's Annexation Statutes Currently two statutes govern municipal expansion18 and an addi- tional statute governs conveyances of tidelands to municipalities.19 The statute governing municipal expansion by local action is Chapter 29.68.010. Expansion by state action is governed by Chapter 44.47.583. The Alaskan Constitution provides for legislative veto over any of the Local Boundary Commission's proposals.20 Neither the statutes nor constitution specifically address annexations of terri- torial waters. The Alaska statute which comes nearest to allowing municipal control over adjacent state waters is Chapter 38.05.320. This statute is not an annexation statute but is instead intended to allow conveyances of tidelands to municipalities., apparently for dredge and fill developments. 30 1. State Initiated Annexations The Local Boundary Commission consists of five members appointed by the Governor for overlapping five year terms.21 The Commission must: 1) make studies of local government boundary problems;22 2) develop proposed standards and procedures for changing local boundary lines;23 3) consider a local government boundary change requested of it by the legislature, the Commissioner of Community and Regional Affairs., or a political subdivision of the state;24 and 4) develop standards and procedures for the extension of ser- vices and ordinances of incorporated cities into contiguous areas for limited purposes upon majority approval of the voters of the contiguous area to be annexed, and prepare transition schedules and prorated tax mill levies as well as standards for participation by voters of these contiguous areas in the affairs of the incorporated cities furnishing services.25 The local boundary commission may: 1) conduct meetings and hearings to consider local government boundary changes and other matters related to local govern- ment boundary changes, including extensions of services by incorporated cities into contiguous areas and matters related to extension of services;26 and 2) present to the legislature during the first 10 days of a regular session proposed local government boundary changes, 31 including gradual extension of services of incorporated cities into contiguous areas upon a majority approval of the voters of the contiguous area to be annexed and transition schedules providing for total assimilation,of the contiguous area and its full participation in the affairs of the incor- porated city within a period not to exceed five years.27 2. Local Annexations The method by which a local municipality, either city or borough, may change its boundaries is codified in Alaska Statutes, Section 29.68.010, and in the Alaska Administrative Code, Section 15.010. The statute provides that: 1) The Local Boundary Commission may consider any proposed local government boundary change. It may present proposed changes to the legislature during the first 10 days of any regular session. The change shall become effective 45 days after presentation or at the end of the session, whichever is earlier-, unless disapproved by a resolution concurred in by a majority of the members of each house-28 2) In addition to the regulations governing annexation by local action adopted under Section 44.19.260, [renumbered as (44.47.565.)]., the Local Boundary Commission shall, within 90 days of September 1.0., 1972, establish procedures for annexa- tion and exclusion of territory by cities and boroughs by local action. The procedures established under this subsec- tion shall include:29 32 (a) a provision requiring that a proposed annexation and exclusion must be approved by a majority of the voters voting on the question residing within the area proposed to be annexed or excluded;30 (b) provisions that municipally-owned property adjoining the municipality may be annexed by ordinance without voter approval;31 and (c) provisions that an area adjoining the municipality may be annexed by ordinance without an election if all pro- perty owners and voters within the area petition the assembly or council.32 3) A boundary change effected under (a) of this section pre- vails over a boundary change initiated by local action, without regard to priority in time.33 The development of standards to guide municipal annexations is a precondition to the commission's exercise of its discretion under sub- section (b) of the statute.34 Three purposes underlie the statutory requirement of annexation standards.35 First, such standards expose the basic decision-making processes of the commission to public view and thus subject commission action to broad corrective legislation.36 Second., the standards guide local governments in preparing proposals and making annexation decisions.37 Third, annexation standards objec- tify the criteria of decision making and delineate the battleground for a public hearing.38 In Port Valdez Co. v. City of Valdez,39 the Alaska Supreme Court addressed the Local Boundary Commission's failure to promulgate stan- 33 dards for annexation required by the statute.40 The City of Valdez annexed the entire port area including land owned by the Port Valdez Company.41 The annexation was challenged on the ground that the Boundary Commission had not developed any standards 'to regulate or restrict the city's annexation.42 The Alaska Supreme Court noted that failure to promulgate standards made any annexation voidable and prima facie illegal.43 The court had reached the same conclusion three years earlier in a similar instance of the Boundary Commission's failure to promulgate standards and procedures.44 Thus, until the Commission develops standards, which research reveals it has yet to do, any annexation might be voidable on this ground. 3. Step Annexation Step annexation is a term which describes the gradual assimila- tion of adjacent territory by a municipality.45 It is an alternative to immediate annexation in situations where such annexation would be premature.46 This method of annexation may be most suited to attempted annexations of large, uninhabited areas of water. Florida law contains no parallel. Ordinarily, a step annexation is commenced by a municipality's petition specifically requesting the step annexa- tion alternative.47 - However, the Local Boundary Commission could require a municipality to use the step method.48 Presumably, a muni- cipality's attempt to directly annex large tracts of vacant ocean, simply for the purpose of taxing oil leases, could be regulated by requiring the municipality to annex only small, developed tracts one at a time. 34 4. Tidelands Acquisition The Alaska Annexation statutes does not address municipal annexa- tion of offshore oil fields or territorial waters. However, Under the Alaska Land Act,49 enacted in accordance with the Alaska Constitution, Article VIII, Section 10, home rule cities and first class cities incorporated on or before April 1, 1964, may apply for conveyance of all lands extending seaward from the mean high tide line, to either the pierhead line or harbor line.50 If there is no pierhead or harbor line established, the city may petition for submerged land up to any line, subject to approval by the Director and Commissioner of the Division of Lands-51 The tidelands are conveyed to the municipality subject to the rights of occupants existing on the land at the time the petition is made to purchase the land.52 Where no occupant has a preference right to the submerged lands, the municipality may lease or sell the land which is conveyed to it and may impose terms or con- ditions upon It.53 Apparently this act was created for the purpose of allowing the municipality to dredge and fill the immediate adjacent waters.54 However, the Act does not define tidelands, which arguably include all waters seaward of the line of mean high water. The statute by its terms does, however, restrict conveyances to "tidelands and submerged lands suitable for occupation and development without unreasonable interference with navigation.,,55 It is therefore questionable whether the statute would allow conveyance to a municipality of vacant, uninhabited submerged lands. 35 Footnotes 1. See, Walters v. Cease, 388 P.2d 263 (Alaska, 1964). 2. The ten boroughs are: Ketchikan Gateway Borough, Kodiak Island Borough, Matanuska-Sustina Borough, North Slope Borough, Sitka Borough, Bristol Bay Borough, Fairbanks North Star Borough, Haines Borough, Juneau Borough, and Kenai Peninsula Borough. 3. See, Mobil Oil Corp. v. Local Boundary Comm'n, 518 P.2d 92 Maska 1974). See also, ALASKA STAT. �29.18.030 (1983). 4. ALASKA CONST. art. X, section 11, (1959) provides: "A home rule borough or city may exercize all legislative powers not prohibited by law or by charter." 5. See., ALASKA STAT. 529.08.020 (1983)., which states:, "A general law municipality is a municipal corporation and political subdivision and is an unchartered borough or ci ty. 11 6. ALASKA STAT. �29.08.01 (1983). 7. Unorganized boroughs are discussed in article X, section 6, of the ALASKA CONSTITUTION which provides: "The legislature shall provide for the performance of ser- vices It deems necessary or advisable in unorganized boroughs, allowing for maximum local participation and responsibility."... 8. ALASKA CONST. art. X, section 1, (1959). 9. See, ALASKA CONST. art. X, section 7, (1959). Cities shall be incorporated in a manner prescribed by law and shall be a part of the borough in which they are located. Cities shall have the powers and functions conferred by law or charter. They may be merged, con- solidated., classified, reclassified, or dissolved in the manner provided by law. Id. 10. ALASKA STAT. �29.08.01 (1983). 11. ALASKA STAT. �29.18.010 (1983). 12. Id. 36 13. See., Town of Fairbanks v. Barrock, 282 F. 417 (9th Cir. M2); In re Annexation to City of Anchorage, 146 F. Supp. 98 (D. Alas. 1956). 14. ALASKA CONST. art X, section 12, (1959). 15. ALASKA STAT. �44.47.567(b)(1) (1983); Id.129.68.010. 16. Port Valdez Co. v. City of Valdez, 522 P.2d 1147 (Alaska 1974). 17. Id. See, City of Douglas v. City and Borough of U-unea7u-,484 P.2d 1040 (Alaska 1971). Of course, this philo- sophy is opposite that of many other states, such as Florida. Florida's annexation statute does not provide for central decision making by a board or state agency. Instead., Florida allows each municipality to decide for itself, by referenda, whether to enlarge or contract. See, FLA. STAT. ch. 171 (1983). 18. ALASKA STAT. �29.68.010 (1983); Id. �44.47.583 (1983). 19. Id. �38.05.320 (1983). 20. ALASKA CONST., art X, section 12., (1959); See, United States Smelting, Ref. & Mining Co. v. Local Bouncra-ry Comm'n, 489 P.2d 140 (Alaska 1971). 21. ALASKA STAT. �44.47.565 (1983). 22. Id. at 44.47.567(l). 23. Id. at .567(2). 24. Id. at .567(3). 25. Id. at .567(4). 26. Id. at .567(b)(1). 27. Id. at .567(b)(2). 28. ALASKA STAT. �29.68.010(a) (1983). 29. Id. at UIU(b). 30. Id. at .010(b)(1). 31. Id. at .010(b)(2). 32. Id. at .010(b)(3). 33. 1d. at .010(c). 37 34. See, United States Smelting, Ref. & Mining Co. v. Local S-o-undary Commission, 489 P.2d 140 (Alaska 1971); Mukluk Freight Lines v. Nabors Alas. Drilling, Inc., 516 P-2d 408 (Alaska 1973). 35. See, Port Valdez Co. v. City of Valdez., 522 P-2d 1147 Tff74). 36. Id. 37. Id. 38. Id. 39. Id. 40. Id. at 1148. 41. Id. 42. Id. at 1150. 43. Id. 44. See supra note 20. 45. Supra note 35, at 1151. 46. Id. 47. Id. 48. Id. 49. ALASKA STAT. �38.05.320 (1983). 50. Id. at .320(b). 51. Id. 52. Id. 53. Id. at .320(7). 54. Alaska's tidelands regulation has a long legislative history. The steps in the legislative history are the 1957 Act passed by the Territorial Legislature (ch. 184, SLA 1957); the 1957 federal Tidelands Act passed by Congress (Pub. L. 85-303, 71 Stat. 623, 48 U.S.C. S�455-455c); the 1959 Act passed by the Alaska State Legislature (ch. 169, SLA 1959); a 1960 formal Attorney General's opinion (1960 OP. ATTY. GEN. No. 13); the 1964 amendments to the 1959 Act (ch. 81, SLA 1964). 38 ALASKA STAT. �38.05.320 (1983). But see., State Dept. of Nat. Resources v. City of Haines, T77-T-2d 1047 (Alaska 1981) (this Act to be liberally construed in favor of con- veying waters to municipality). 39 II. California A. Boundaries 1. State The State of California., in its sovereign capacity, possesses legal title to: 1) tidelands, i.e., the area situated between the ocean's low and high water marks on the shoreline; 2) submerged lands up to three geographical miles from the coastline, and 3) the beds of navigable streams and lakes.1 2. Counties The Fifteen California counties which border on the Pacific Ocean are: San Diego., Orange, Los Angeles, Ventura., Santa Barbara, San Luis Obispo, Monterey, San Francisco, Santa Cruz, San Mateo, Marin, Sonoma, Mendocino, Humbolt, and Del Norte. The state is required to be divided into counties by statute.2 The boundaries for each California county are individually defined in the California Government Code.3 Like the State's oceanward boundary, each coastal county's boundary lies three miles off its coastline, as defined by statutes.4 3. Cities City boundaries may extend into the Pacific Ocean, subject to the annexation restrictions over submerged lands, discussed infra. B. California's Annexation Statute With over 50 cities along its coast, California,, like Florida, has a substantial interest in long-range management of submerged 4o lands. Unlike Florida, however, California has enacted laws specifi- cally aimed at offshore municipal annexation. Cal ifornia has affima- tively banned annexations or incorporations of State owned tidelands or submerged lands, without the approval of the State Lands Commission. 1. Annexation of Submerged Lands California has enacted at least two statutes which restrict muni- cipal annexations or incorporations of submerged or tide lands. The earliest statute, enacted in 1963 and still applicable., geographically restricted the area which could be annexed to lands within the seaward extensions of the city's existing land boundaries.5 The sta- tute also precluded any annexation without approval by the State Lands Commission.6 The more recent tidelands annexation statute, enacted in 1977, does not create additional substantive requirements.7 Rather, the newer statute merely re-words the former statute, without repealing it.8 No court has yet considered California's tidelands annexation statutes. The statutory requirements for annexation of submerged land are as follows: 1. No tidelands or submerged lands owned by the state or by its grantees in trust may be annexed to, or incorporated into, a city without the approval of the State Lands Commission.9 2. The city must file a map with the Commission showing pro- posed new boundaries.10 3. The State Lands Commission may approve or disapprove any or 41 all portions of the boundary proposal.11 The Commission must require., where feasible, the city's extension of its boundaries to be at right angles to the shoreline.12 The Commission may, however., allow irregular boundaries if necessary.13 4. The Commission has 45 days to decide whether to approve the annexation-14 5. The Commission's decision is final and conclusive.15 Failure of the Commission to report their conclusion within 45 days is deemed approval of the annexation.16 Footnotes 1. REPORT ON THE USE., DEVELOPMENT, AND ADMINISTRATION OF GRANTED TIDELANDS AND SUBMERGED LANDS, State Lands Commission of California I (January, 1976). "By-enactment of the Submerged Lan--ds-Tct of 1953 (43 USC �1301) the United States relinquished to the coastal states all of its rights in all lands beneath navigable waters within a three mile limit and., in excess of that limit, within state boundaries as they existed at the time a state became a member of the Union., or as theretofore approved by Congress. The limit of the grant was three leagues." United States v. Louisiana, 363 U.S. 1 (1960). See, CALIF. CONST. art. XXI, section 1 (1849). ("...thenc6-running west along said boundary line to the Pacific Ocean., and extending therein three English miles...") Id. See, CAL. GOV. CODE �170 (West 1980 & Supp. 1984) which _@_rovi_de_s: "the boundary ... runs and has in the past run three English nautical miles oceanward...and adja- cent to the mainland." 2. CAL. GOV. CODE 523001 (West 1980). 3. See, CAL. GOV. CODE �23108 (Del Norte); �23112 (Humboldt); M119 (Los Angeles); �23121 (Marin); 523123 (Mendocino); �23127 (Monterey); �23130 (Orange); �23137 (San Diego); �23138 (San Francisco city and county); �23140 (San Luis Obispo); �23141 (San Mateo); �23142 (Santa Barbara); �23144 (Santa Cruz); �23149 (Sonoma); �23156 (Ventura) (West 1980 & Supp. 1984). 42 4. See e.g.., CAL. GOV. CODE �23108 (Del Norte County) (West MOT providing: "The boundaries of Del Norte County are as follows: ...beginning at a point in the Pacific Ocean ... three miles from shore." Id. 5. CAL. GOV. CODE �35014 (West 1980). 6. Id. 7. CAL. GOV. CODE �35009 (Supp. 1984). 8. Id. 9. Id. �35009. 10. Id. 11. Id. 12. Id. 13. Id. 14. Id. 15. Id. 16. Id. 43 III. Texas Introduction The annexation law of Texas has evolved further than any other state discussed in this article. Not only has Texas updated the sta- tutory law to reflect Supreme Court decisions regarding its boun- daries, it has also enacted comprehensive legislation to regulate municipal annexation of submerged lands. A. Boundaries and Annexation 1. State The gulfward boundary of Texas was determined by the United States Supreme Court in Texas v. Louisiana in 1976.1 The State of Texas has full sovereignty over the water, beds and shores, and arms of the Gulf of Mexico up the three marine leagues from its coastline-2 This sovereignty is subject only to the United Statesl power to regu- late foreign and interstate commerce under Article 1,.Section 8 of the United States Constitution, and the United States' power over maritime and admiralty jurisdiction under Article III, Section 2 of the United States Constitution.3 2. Counties The twelve coastal counties in Texas are: Cameron, Willacy, Kenedy,, Kleberg, Nueces., Aransas, Calhoun, Matagorda, Brazoria, Galveston, Chambers, and Jefferson. The gulfward boundary of each coastal county is three marine leagues.4 The area in the extended boundaries of the counties is part of the public free school land and 44 is subject to constitutional and statutory provisions pertaining to use, sale., lease and distribution.5 3. Municipalities Texas has enacted statutes directly limiting the gulfward extent of municipalities., and prohibiting annexations of submerged lands beyond a certain limit.6 Texas has two types of cities: general law cities and home rule cities. Recent statutory changes and court decisions have made the present status of Texas law difficult to ascertain. The background of Texas annexation law explains how the present gulfward annexation limits evolved. Prior to June 19, 1983, the gulf- ward boundaries of general law cities were limited to one mile from the coastline.7 Home rule cities., however, were permitted to extend their boundaries 10.45 miles gulfward.8 Fearing that home rule taxa- tion and annexation of submerged land oil leases would encourage oil companies to relocate outside the state's boundaries in federal waters., the Texas legislature enacted what is now th e law regarding submerged land annexations.9 Presently, the boundaries of general law cities are limited to one mile gulfward from the coastline.10 Home rule cities may extend their boundaries no more than one marine league (3.48 miles) into the Gulf.11 Although at least one home rule city, Port Arthur, had, prior to enactment of the new annexation limits, extended is boundaries 10.5 miles gulfward., the statute voided the boundary beyond one marine league from the coastline.12 45 The new Texas law continues to allow coastal municipalities to tax oil leases within their Gulf boundaries, but only up to one mile in the case of general law cities or one league for home rule cities.13 Footnotes 1. 426 U.S. 465 (1976). See., U.S. v. Louisiana, 363 U.S. at 84 (1960); TEX. NAT. RES. CODE ANN. �11.1012 (Vernon 1983). 2. Id. 3. Id. 4. See., TEX. NAT. RES. CODE ANN. �11.013 (Vernon Supp. 1982). 5. Id. The revenues derived from submerged lands leases within sTa-te waters are used to support public schools in Texas. 6. The general annexation statute in use in Texas is not rele- vant for purposes of this discussion. See, TEX. REV. CIV. STAT. ANN. art. 970a (Vernon 1963 & Suo-p-.1983). 7. See TEX. NAT. RES. CODE ANN. �11.013(c) (Vernon Supp. M2). "The gulfward boundaries of any city, town or village created and operating under the general laws of the State of Texas shall not be established or extended by incorporation or annexation more than 5,280 feet gulfward beyond the coastline..." Id. 8. Cf. TEX. NAT. RES. CODE ANN. �11.0131 (Vernon 1981) T-emergency moratorium on home rule annexations more than one mile from coastline; expired October 1, 1983). 9. Senate Bill 551, enacted June 19, 1983, amending TEX. NAT. RES. CODE ANN. �11.0131(b)., (c)., and (d) (Vernon 1963 & Supp. 1982). 10'. See supra note 7. 11. See supra note 9. 12. Id. 13. Id. 46 IV. Louisiana A. Boundaries 1. State The state's gulfward boundary was established in United States v. Louisiana.,1 by the United States Supreme Court. Although Louisiana, like Mississippi and Alabama, had previously claimed a boundary three marine leagues into the Gulf,2 the Court rejected this argument and held that Louisiana's boundary extended only three geographic miles from its coastline.3 Louisiana's constitutional and statutory provi- sions,4 claiming a three marine league limit, are therefore super- ceded. 2. Counties Louisiana's counties are called parishes. The eleven parishes which border on the Gulf of Mexico are: Cameron, Vermillion, Iberia, St. Mary., Terrebonne, Lafourche, Jefferson, Plaquemines, Bernard, Orleans., and St. Tammany. Louisiana statutes provide that the gulfward boundary of coastal parishes "extend coextensively with the gulfward boundary of the State of Louisiana."5 Since the state's gulfward boundary lies three geoqraphical miles from the coastline, the Gulf parishes' boundaries also extend to this limit. 47 3. Municipalities There is no method for determining the gulfward extent of coastal cities' boundaries other than to investigate each city's charter and laws-6 B. Louisiana's Annexa tion StatuteS7 Two methods of annexation are available to a municipality in Louisiana. First,.a municipality may extend its corporate limits by means of petition and election.8 A second method is by means of petition and ordinance.9 Additionally, if the territory to be annexed is owned by a public body, such as the state, a municipality may annex the area upon petition to the public body, without complying with otherwise required procedures of advertisement., petition by resi- dents or public hearing.10 Louisiana's annexation law, like the laws of Florida., Alabama, Alaska, and Mississippi do not specifically address annexations of coastal waters. However, the statute on its face would not prevent municipal annexation of offshore lands. 1. Annexation by Petition and Electionil This method is employed by owners of an adjacent area seeking to become part of the city.12 One-third of the land owners in the area lying contiguous to the city (excepting New Orleans) may request the city to annex the area.13 The petition must contain a map or plat outlining the area to be annexed.14 The plat is permanently recorded in the official records of the town.15 After the petition has been filed, the city officials may order an election to be held by the qualified electors residing in the area 48 proposed for annexation.16 If the majority of voters vote in favor of annexation, the city officials may then order a second election to be held by the qualified electors residing in the city itself-17 If a majority of the city's voters vote in favor of the proposed annexa- tion., the area is annexed to the city by proclamation.18 2. Annexation by Petition and Ordinance19 This method allows a municipality (excepting New Orleans) to annex territory through passage of local ordinances-20 The ordinance is valid., however., only when a petition has previously been filed requesting annexation., signed by a certain percentage of the residents in the area to be annexed.21 If there are no registered voters residing in the area proposed for annexation,, then the requirement for a majority of the registered voters on the petition does not apply.22 Subject to the requirement that the annexation be reasonable, Louisiana statutes do not prohibit annexations of unoccupied, rural lands. One of the major considerations in determining the reasonable- ness of an annexation proposal is whether the city needs the area for future growth.23 Assuming a municipality could demonstrate a reaso- nable need for offshore waters, the Louisiana statute on its face would allow such an annexation. Footnotes 1. 363 U.S. 1 (1960). 2. 363 U.S. at 79. 3. Id. For an interesting discussion of Louisiana's boundaries @_ee., Stockwell., The Boundaries of the State of Louisiana, 42 IT.- L. REV. 1048 (1982). 49 4. See e.g.., LA. REV. STAT. ANN. �49:1 (1954 & Supp. 1983) 'TFe-Ti'istoric gulfward boundary of the state of Louisiana extends a distance of 3 marine leagues from coast." Id. 5. LA. REV. STAT. ANN. S49:6 (1954 & Supp. 1983). 6. See., LA. REV. STAT. ANN. �33:178 (Supp. 1984) (must file Yo-undary changes with clerk of the district court of parish in which city is located). 7. LA. REV. STAT. ANN. 533:141-180 (1950 & Supp. 1984). 8. Id. �33:151. 9. Id. �33:171. 10. Id. �33:180. 11. Id. �33:151. 12. Id. 13. Id. (requires one third "in number and in value of the bona Me owners of any lots or land, lying contiguous and adja- cent to the territorial corporate limits of any city or town, the city of New Orleans excepted.") 14. Id. 15. Id. S33:152, 153. 16. Id. �33:153. 17. Id. S33.157. 18. Id. �33.160. 19. See,, LA. REV. STAT. ANN. �33:171 (1950 & Supp. 1984). 20. Id._ 21. Id. 533:172 provides: No ordinance enlarging the boundaries of a municipality shall be valid unless prior to the adoption thereof a petition has been pre- sented to the governing body of the municipa- lity containing the written assent of twenty-five percent in number of the resident property owners as well as twenty-five per- cent in value of the property within the area proposed to be included in the corporate limits according to the certificate of the parish assessor. Id. 91 50 22. Id. S33:172 (Supp. 1984). 23. See e.g.,, Barbe v. City of Lake Charles., 45 So.2d 62 (La. MOT:,-Yansas City So. Ry. v. City of Shreveport, 354 So.2d 1362., at 1369 (La. 1978). Reasonableness of municipal enlargement is determined by, among other factors, popula- tion, need for homes, industrial or merchantile establish- ments, and a need for additional land area to accommodate the present or reasonably anticipated future growth of the municipality. Id. 51 V. Mississippi A. Boundaries 1. Counties Mississippi has three coastal counties:1 Hancock County.2 Harrison County3 and Jackson County.4 Mississippi Statutes, Chapter 19., sets forth each county's legal boundary description.5 Each coun- ty's description states that the boundary extends into the Gulf including "all the islands within six leagues of the shore of the Gulf of Mexico."6 This description could lead to the conclusion that the three coastal counties boundaries lie six leagues offshore. The Mississippi Constitution, Article 11, Section 3, similarly establishes the state's Gulf boundary to include "all islands within six leagues of the shore."7 Finally, Mississippi Statutes, section 3-3-5 gives coastal counties jurisdiction to the southern boundary of the state,8 which presumably was six leagues from shore. In 1960, however, the United States Supreme Court fixed the Gulf boundary of Mississippi at three miles from its coast.9 The court specifically addressed the language used in Mississippi's constitution refering to all islands within six leagues of the shore.10 ihe court stated that this language did not establish a boundary line six leagues from shore including all waters and submerged lands as well as all islands. Instead, the court concluded that the provision gave Mississippi title to islands, not waters where there were no islands.11 The court declined to express any opinion on the specific location of Mississippi's coastline.12 To date, the Mississippi 52 Constitution and statutes which define coastal county and state boun- daries to extend six leagues into the Gulf, have not been amended. 2. Municipal Boundaries The Mississippi statutes do not set forth the boundary descrip- tions for coastal cities; nor does the Mississippi Constitution men- tion the limits a municipality may extend into coastal waters. Mississippi's law regulating tidelands and submerged lands13 does not explicitly address municipal ownership of submerged., adjacent lands. It also fails to provide for a method of conveyance of these lands to the city by the state. The most likely source to contain an accurate description of a coastal city's territorial limits is the individual municipal charter. 3. Port Authorities Coastal county port authorities are given broad powers over sub- merged lands within their jurisdiction. The Ports, Harbors, Landings and Watercraft Act,14 can be interpreted as conferring complete control to the port authority over waters below the mean high tide line within their geographical boundaries. The port authority, there- fore, has the potential power to lease, sell or restrict the use of submerged lands.15 B. Mississippi's Annexation Statute Mississippi's annexation procedures are primitive by comparison to other states' laws., such as Florida's statute. Mississippi has one 53 statute which governs all extensions or contractions of corporate boundaries.16 However-, the statute does not address itself to exten- sions of corporate boundaries into tidal waters. Several steps are required of a municipality seeking to annex or exclude territory. The process begins by the municipality passing an ordinance defining the territory proposed to be annexed and also defining the entire boundary as changed-17 One aspect of the Mississippi statute which stands in sharp contrast to Florida annexa- tion requirements concerns proposed improvements to be conferred on the annexed territory. The Mississippi statute requires only that the annexation ordinance describe in general terms the proposed impro- vements., the extent of the improvements, and the time within which the improvements will be made.18 Florida requires a much more specific showing of the nature of improvements to be conferred on the annexed area; i.e.-, trunk water mains, sewage lines, etc.19 The Mississippi statutes also requires., as does the Florida statute, a statement of the public services which the city intends to render in the annexed territory.20 After the municipality has passed the annexation ordinance, the municipal authorities must file a petition in the chancery court of the county in which the city is located.21 If the annexed territory spans two adjoining counties., the petition must be filed in the chan- cery court of the county in which the territory is located.22 Florida forbids annexations of territory located in a county other than the county where the municipality is located.23 The chancery court either affirms or rejects the petition for annexation.24 The petition must 54 contain a map or plat of the municipal boundaries as they will exist if the annexation takes place.25 Upon filing the petition., the chancellor of the court must set a fixed time within which a hearing will be held.26 All interested parties have a right to appear at the hearing and object to the annexation.27 Additionally, if the area to be annexed is located within three miles of another municipality, then the other municipa- lity is automatically made a party defendant to the petition and served with notice at least 30 days prior to the hearing.28 At the hearing., the chancellor determines whether the annexation is 1) reasonable-, 2) required by public convenience and necessity, and 3) that reasonable public and municipal services will be rendered in the annexed area.29 If the chancellor determines that the above requirements will be met., he ratifies the proposed annexation.30 The chancellor may also modify the proposed annexation by decreasing the territory.31 If the chancellor determines that the above require- ments are not met he must deny the proposal.32 The chancellor's deci- sion is effective after 10 days from the date he renders it, or within 10 days from the final determination of an appeal taken to his decision.33 At all times the burden is upon the municipality to show the annexation is reasonable.34 After 10 days from the date the chan- cellor renders his decision, he files a copy of his decree with the Secretary of State.35 No court has had occasion to review a proposed annexation of Mississippi's territorial waters. However, a few decisions have ela- borated on the scope of the Mississippi statute. In Lowe v. 55 Jackson.,36 the Mississippi Supreme Court upheld an annexation of swampland under the rationale that the area was likely to become deve- loped within a reasonable period of time.37 Arguably, this rationale taken to its logical extreme would support a proposed annexation of uninhabited waters where the municipality could show imminent future development and industrialization of the waters. However, in Extension of Boundaries of Horn Lake v. Renfro,38 the Mississippi Supreme Court upheld the denial of a proposed annexation of territory separated from the city by a flood plain.39 This decision, however, also turned on the fact that the area proposed for annexation already had adequate public services.40 Although the Mississippi annexation statute does not articulate standards to guide annexations, the Mississippi courts have created criteria which could potentially regulate annexations of territorial waters of the state. In Bridges v. Biloxi,41 a lower court set forth the general criteria for determining whether an annexation ordinance is reasonable under the statute. The criteria are 1) the city's need for expansion; 2) whether the area sought to be annexed is reasonably within the path of such expansion; 3) the potential health hazard from sewage and waste disposal in the annexed area; and 4) the city's financial ability to make the improvements and furnish municipal ser- vices as promised.42- These criteria closely resemble the criteria listed in several Florida court decisions.43 Footnotes 1. MISS. CODE ANN. 53-3-5 (1972 & Supp. 1983). Counties on the Mississippi River and Gulf of Mexico extend. ...and the counties bordering 56 on the Gulf of Mexico, to wit Jackson., Harrison and Handwick., shall., respectively, have and possess jurisdiction and extend to the southern boundary of the state within the space embraced by extending their boundary lines wfiich strike the Gulf of Mexico, or inlets thereto., on a contiguous direct course to the southern boundary of the state, including all islands that may lie within the limits thus defined. Id. 2. Id. 519-1-45 (1972 & Supp. 1983). 3. Id. �19-1-47. 4. Id. �19-1-59. 5. Id. See notes 2, 3., 4., supra. 6. Id. 7. MISS. CONST. art II, section 3 (1890). 8. See supra note 1. 9. See., United States v. Louisianna, 363 U.S. 1, at 80 (1960). TRTs case decided the claims of Louisiana, Texas, Mississippi and Alabama, to exclusive possession over sub- merged lands beyond three geographic miles from each state's coast. Florida's claim is discussed in a separate opinion, 363 U.S. 121 (1960). 10. Id. 11. Id. at 81. "We have already held with respect to 1-ouisiana's claim to a three league maritime boundary that an Act of Admission which refers to all islands within a certain distance of the shore does not appear on its face to mean to establish a boundary line that distance from the shore, including all waters and submerged lands as well as all islands." Id. 12. Id. at 82. 13. MISS. CODE ANN. �29-1-101, 107 (1972 & Supp. 1983). 14. MISS. CODE ANN. 559-1-17 (1972 & Supp. 1983), provides in part: The several port commissions in the State of Mississippi are each hearby vested with full jurisdiction and control of any and all lands 0 lying within., or adjacent to, any river., bay or natural lake which are now, or heretofore 57 were., below the mean high tide mark., and which lands lie within or adjacent to any port or harbor within the jurisdiction of such port commission. Id.; MISS CODE ANN. �59-1-19 (1972 & Supp. 1983), provides in part: In the event any part of lands as are described in section 59-1-17 are not used for port purposes., and navigation and commerce will not be impeded thereby, such port com- mission may sell, lease, or otherwise dispose of same to individuals, firms or cor- porations., public or private, for individual use, on such terms and conditions and with such safeguard as will best promote and pro- tect the public interest. Id. 15. Id. 16. MISS. CODE ANN. 521-1-27., 21-1-43 (1972 & Supp. 1983). 17. Id. �21-1-27. 18. Id. 19. See,, FLA. STAT. ch. 171.042 (1983). 20. MISS. CODE ANN. 521-1-27 (1972 & Supp. 1983). Cf. FLA. STAT. ch. 171. (1983). 21. MISS. CODE ANN. �21-1-29 (1972 & Supp. 1983). 22. Id. 23. See., FLA. STAT. ch. 171.042 (1983). 24. MISS. CODE ANN. �21-1-29 (1972 & Supp. 1983). 25. Id. 26. Id. �21-1-31. 27. Id. 28. Id. 29. Id. �21-1-33. 30. Id. 31. Id. 58 32. Id. 33. Id. 34. Id. 35. Id. �29-1-39. 36. 336 So.2d 490., cert. den. 429 U.S. 980, 50 L.Ed. 2d 589, 97 S.Ct. 493. 37. Id. 38. 361 So.2d 1372 (Miss. 1978). 39. Id. 40. Id. 41. 178 So.2d 683 app. dismd. 383 U.S. 574; 16 L.Ed. 2d 106, 86 S.Ct. 1077. 42. 178 So.2d at 685. 43. See e.g., Bower v. City of Tampa., 316 So.2d 570 (Fla. 2d DCA T9T51-- 59 VI. Alabama A. Boundaries 1. State Boundaries The Alabama Constitution, Article II, Section 37, defines the state's boundaries. The constitution provides that the state's gulf- ward boundary extends "due south, to the Gulf of Mexico; thence, east- wardly, including all islands within six leagues of the shore, to the Perdido River-1 The Alabama Code, Chapter 41-2-1, defines the state's Gulf boundary in identical language-2 In 1960, however, the United States Supreme Court restricted Alabama's Gulf boundary to three geographical miles from its coast.3 The Court declined to specify where the coastline ended.4 2. County Boundaries Only two Alabama counties border on the Gulf of Mexico: Baldwin County and Mobile County. The legal descriptions for Alabama counties are not contained in either the state's constitution or the state's statutes. Nor does Alabama law define the Gulf extent of Mobile or Baldwin County's boundaries. Article 11, Section 38,, of the Alabama Constitution states that "[t3he boundaries of the several counties of this state., as they now exist., are hearby ratified and confirmed."5 The Alabama Code., Chapter 11-1-1, further provides that the state is divided into 67 counties and lists all counties by name.6 Presumably, since the entire state is divided into counties by statute, Mobile and Baldwin County's boundaries must extend three geographical miles into the Gulf of Mexico. 6o 3. Municipalities Article XII., Section 220., of the Alabama Constitution discusses municipal corporations., but is silent on the question of whether coastal cities may annex Gulf waters. The Constitution is also silent as to annexation in general. Chapter 11-40-1 of the Alabama Code governs municipal corporations in general. Like the state's constitu- tion, the Code does not mention the Gulfward extent of municipal boun- daries. Information about a coastal city's municipal limits in the Gulf of Mexico., may be found in the individual city's charter or incorporation documents. B. Alabama's Annexation Statutes Alabama has an extensive annexation statute found in Chapter 42 of the Alabama Code-7 The statute does not specifically address annexations of territorial waters. The Alabama statute separates annexation procedures into three categories: 1) annexations generally;8 2) annexations by cities of 2.,000 inhabitants or more, and9 3) annexations by cities of 25.,000 or more.10 1. Annexation Generally The provisions of this section set forth proceedures for annexa- tions but do not preclude annexations by other legally authorized means.11 The annexation begins with the city council's passage of a resolution stating that the annexation will be in the public interest.12 The mayor then certifies a copy of the resolution to the probate judge of the county where the land proposed for annexation is 61 located.13 A map must be attached to the resolution-14 The judge has 15 days to enter an order directing an election among the qualified voters residing within the territory to be annexed.15 Each voter has 3 months within which to vote either for or against the annexation.16 If a majority votes in favor., the annexation proceeds.17 The map or plat filed with the initial annexation resolution must accurately show 1) the territory proposed to be annexed, including subdivisions and streets., if any, and 2) that the territory is con- tiguous to the boundary of the city.18 The city may not annex any territory already part of another municipality.19 No territory may be annexed unless at least two qualified electors reside on each quarter of each quarter section according to a government survey.20 Additionally, these residents along with owners of 60% of the acreage to be annexed, must consent in writing to the annexation-21 After an election has been held in any area, no other subsequent election may occur for the same area or any part within 12 months.22 2. Annexations of Territory By Cities of 2,000 Inhabitants Or More23 All of the owners of property within the area to be annexed must sign and file a written petition requesting annexation-24 The munici- pality of' 2,000 or more inhabitants must also adopt the petition and thereby consent to the annexation-25 The petition must contain an accurate description of the property,26 which must be contiguous to the municipality.27 This method is available only for uncontested annexations.28 62 3. Annexation of Territory Containing 25,000 Inhabitants Or MoreZ9 This annexation procedure is similar to the general annexation procedure., requiring a resolution by the city council, decree by the probate judge, map or plat of the territory, and election. C. Conclusion Alabama's annexation law, although extensive., does not embrace annexations of offshore waters by coastal cities. Like Florida's annexation law, Alabama's law was clearly not intended to cover such situations. Perhaps under a very strained construction of the statute a coastal city may be able to annex submerged lands off its coast. However., it appears that Alabama is no more advanced than Florida in developing laws to control attempts by municipalities to annex waters offshore. Footnotes 1. ALA. CONST. art. III, section 37 (1901). 2. ALA. CODE �42-2-1 (1975 & Supp. 1983). 3. See., United States v. Louisiana, 363 U.S. at 82. The T-ourt held that: as to the states of Louisiana, Mississippi, and Alabama ... the United States is entitled, as against these States, to all the lands, minerals, and other natural resources underlying the Gulf of Mexico more than three geographical miles from the coast of each such state, that is., from the line of ordinary low-watermark and outer limit of inland waters, and extending seaward to the edge of the continental shelf. Id. at 83. 4. Id. 63 5. ALA. CONST. art. II, Section 38 (1901). 6. ALA. CODE �11-1-1 (1975 & Supp. 1983). 7. See., ALA. CODE �11-42-1., to 11-42-88 (1975 & Supp. 1983). 8. Id. �11-42-1., 11-42-4. 9. Id. �11-42-20, 11-42-23. 10. Id. 511-42-40, 11-42-88. 11. Id. 511-42-1. 12. Id. �11-42-2. 13. Id. �11-42-2(l). 14. Id. 15. Id. �11-42-2(2). 16. Id. �11-42-2(4). 17. Id. �11-42-2(7). 18. Id. �11-42-2(10). 19. Id. 20. Id. 21. Id. 22. Id. �11-42-4. 23. Id. �11-42-20 (1975). 24. Id. �11-42-21. 25. Id. 26. Id. 27. See., City of Leeds v. Town of Moody, 319 So.2d 242 (Ala. M5). 28. See, City of Birmingham v. Tarrant City, 315 So.2d 583 (Ala. M5). 29. See., ALA. CODE �11-42-40 (1975). 64 0 Part III. Local Government Taxation 0 0 65 Introduction This section discusses the possible types of taxes which a Florida county or city might impose.on offshore oil producers. The three types of taxes examined are: 1) oil and gas severance taxes, 2) ad valorem taxes on real and personal property., and 3) taxes on the oil leasehold. A. Severance Tax on Oil and Gas Chapter 211, Florida Statutes., governs severance taxes on the production of oil and gas.1 The tax is imposed by the state on every, person engaged in the business of producing or severing oil or gas from the soil or water of the state for sale., transport, storage, pro- fit, or commercial use.2 The Department of Revenue is vested with administration of this statute.3 The Department is responsible for collection and enforcement of the tax on oil and gas production., and also prescribes rules for that purpose-4 No other taxing district in the state, including the state., counties., municipalities., drainage* districts., road districts and school districts, may impose any addi- tional excise or license tax on producers of oil or gas.5 The Department of Revenue places all proceeds from the severance tax in a fund known as the Oil and Gas Tax Trust Fund.6 Each month distributions are made from this fund to the state and to counties in which oil or gas is produced.7 Municipalities in which oil or gas is produced apparently do not share in the distribution from the Oil and Gas Tax Trust Fund. The severance tax on oil and gas producers is divided into four separate taxes. These taxes are called the first oil tax,8 the second 66 oil tax,9 the first ga s tax,10 and the second gas tax-11 The first oil and the first gas tax are distributed for the benefit of the state.12 The second oil., and the second gas tax are distributed for the benefit of the counties in which the oil or gas*is produced.13 The total amount of the severance tax is measured by the value of the oil and amount saved, and by the value of the gas produced and sold at the following rates: for oil., 8% of the gross value at the point of production; for gas., 5% of the gross value at the point of production.14 The Florida legislature has clearly expressed its intention15 to impose th e second oil and gas tax as a county excise tax to compensate the county in which oil and gas is produced for the loss of ad valorem taxes by reason of the provision of Section 211.13., Florida Statutes.16 The legislature's intention to compensate counties, however., may no longer be entirely justified.17 The leoislature also intends the revenues which the counties receive to make it possible for the boards of county commissioners of those coun- ties to provide the additional public services that are required in a county where oil and gas are produced.18 The legislature expressed no intention in the statute regarding municipalities. B. Ad Valorem Property Taxes 1. County The Florida Constitution provides that counties and municipali- ties shall be authorized by law to levy ad valorem taxes and may be authorized by general law to levy other taxes for their respective purposes-19 Counties and cities may not levy ad valorem taxes on intangible personal property, or levy taxes prohibited by the 67 Constitution.20 The Constitution also provides that property situated within 'municipalities may not be taxed for services rendered by the county exclusively for the benefit of the property or residents in unincorporated areas.21 Chapter 125., Florida Statutes., governs county ad valorem taxation. This statute provides that the legislature and governing body of a county has the power to levy and collect taxes, both for county pur- poses and for providing municipal services within any municipal ser- vice taxing unit.22 The statute also authorizes county governments to make special assessments subject to limitations which may be provided by general law.23 No referendum is required for the levy of county ad valorem taxes either for county purposes or for the providing of muni- cipal services within any municipal service taxing unit.24 The county government has the authority to create municipal ser- vice taxing units for any part or all of the unincorporated area of the county.25 Within this taxing unit, the county may provide fire protection, law enforcement, beach erosion control, recreation service and facilities., water., streets, sidewalks, street lighting, garbage collection, sewage disposal, drainage or other essential municipal services.26 The funds which pay for these municipal services are derived from taxes, special assessments, or service charges taken exclusively from within the taxing unit.27 Chapter 211., Florida Statutes, in addition to giving the counties a percentage of the state's excise tax on oil production, also governs assessments of land value for ad valorem tax purposes.28 Section 211-13 prohibits state and city tax appraisers., when assessing the 68 value of any land for ad valorem taxes, from increasing the value of the land simply because there may be oil or gas under its surface.29 As compensation to the counties for tax losses suffered from the pro- hibition against taking subsurface mineral values into account when assessing lands for ad valorem tax purposes., the second oil and gas severance taxes were created.30 Section 211.13 also prohibits increasing the value of land for tax purposes simply because oil or gas producing machinery may be located thereon.31 However., there is no impediment to assessing an ad valorem personal property tax on the oil and gas producing equipment itself.32 This tax may be levied in addition to the state severance tax.33 Whenever the mineral rights and other subsurface rights in real property are sold or otherwise transferred by the owner, the subsur- face rights are treated as an interest in real property subject to taxation separate from the remaining fee interest.34 The aggregate tax amount due on both the subsurface interest and the fee interest is equal to the total taxes due on the entire parcel were the interests combined.35 Section 193.481, Florida Statutes, requires the separate ad valorem assessment and taxation of separately-owned subsurface rights.36 An apparent conflict exists between Section 211.13 and Section 193.481 of the Florida Statutes. Section 211.13 forbids any increased assessment of land because "there may be oil or gas under the surface" and declares that appraisal of oil and gas left in place is "impossible under known valuation methods.,'37 Chapter 193.481, however., requires that "separated" subsurface oil and gas interests - 69 those carved out of the fee--be separately assessed and taxed by the county.38 For purposes of Chapter 193.481., the county assessor must take into consideration the value of subsurface oil and gas. In Sun Oil Co. v. Fisher.,39 the First District Court of Appeal held that the legislature, by enacting Section 193.481, which subjects subsurface leasehold interests to ad valorem real property taxation, effectively repealed the inconsistent provisions of section 211.13 that appraisers may not increase the value of land because there may be oil or gas under the surface., and the repeated inconsistent statement that it is "impossible" to accurately determine the true value of oil and gas while still in place-40 The subsurface tax is levied in addition to the state excise tax.41 In conclusion, the county may levy ad valorem personal property taxes on oil producing machinery. The county may levy ad valorem taxes on separated subsurface leasehold interests in addition to the state's severance tax. Such subsurface mineral rights, where severed from the fee interest3 must be appraised separately as to their value for ad valorem tax purposes. The county may levy ad valorem taxes on the fee simple interest where subsurface rights are not severed., which assessment may be increased simply because there may be oil underground. The question whether the land may be assessed at a higher value because oil producing machinery is present has not been answered by the courts, although Section 211.13 explicitly provides that it may not. 70 2. Municipalities The Florida constitution provides that municipalities must be authorized by law to levy ad valorem taxes, and may be authorized by general law to levy other taxes., except ad valorem taxes on intangible personal property and taxes prohibited by the Constitution.42 Chapter 166, Florida Statutes, governs municipal ad valorem taxation-43 A municipality may levy ad valorem taxes on real property and tangible personal property within the municipality in an amount not exceeding 10 mills, exclusive of taxes levied for bond payment, and taxes levied for periods of not longer than 2 years and approved by a vote of the electors.44 The municipality may also require reasonable business, professional and occupational regulatory fees.45 The municipality may, at its discretion, tax the purchase of electricity, metered or bottled petroleum, water service., telephone and telegraph service.46 This tax may be levied only upon purchases within the municipality and cannot exceed 10% of the payments received by the seller of the taxable item from the purchaser for the purchase of such service.47 The Florida statutes specifically prohibit the municipality from levying a severance tax on the production of oil.48 The Florida Constitution, Article VII, Section 3(c) allows any county or municipality to exempt community and economic developments from ad valorem taxation. The exemption may be extended to new busi- nesses or expansions of existing businesses. Such an exemption may be granted only by ordinance of the county or municipality, and only after the electors of the county or city authorize the exemption by referendum. The exemption applies to tangible personal property 71 related to the expansion of a business, as well as to improvements to real property. The exemption expires after ten years but may be renewed.49 C. Taxation of Leasehold Interests Article VII, Section 10(c) of the Florida Constitution provides that where any project financed by revenue bonds is occupied or operated by any private corporation pursuant to lease., the property interest created by the lease shall be subject to taxation to the same extent as other privately owned property.50 Section 196.001, Florida Statutes (1983) parallels this constitutional provision by ma@ing all leasehold interests in property of the state., or any political sub- division., municipality, agency, authority or other public body of the state., subject to taxation unless otherwise exempted.51 Other statutory provisions52 exempt privately held leaseholds of governmental property from ad valorem taxation only when the lessee performs a governmental or public purpose.53 Property which is owned by a municipality or other state organization which is leased to a nongovernmental lessee shall be subject to ad valorem taxation unless the lessee uses the property exclusively for literary, scientific, religous or charitable purposes.54 Thus, unless an oil producer meets the public purpose definition, its leasehold interest in state or municipally owned lands may be taxed at the county and city level.55 Footnotes 1. See., FLA. STAT. �211.01-.20 (1983); FLA. ADMIN. CODE M-7.01-10 (1,983). 2. FLA STAT. �211.02 (1983). 72 3. Id. �211.07. 4. See., FLA. ADMIN. CODE 12B-7.01 et. seq. (1983). 5. FLA. STAT. �211.13 (1983) provides in part: No other excise or license tax in addition to the tax provided herein shall be imposed by the state, counties,, municipalities, drainage districts, road, school and other taxing districts within this state upon any person who produces in any manner any oil or gas by taking it from the earth or water of this state. 6. Id. �211.06(l). 7. Id. 8. FLA. STAT. �211.02(l)(a): "First oil tax: 37.5 percent of the total tax for the state for the use of the General Revenue Fund and 50 percent of the total tax for the state for the use of the Conservation and Recreation Lands Trust Fund." Id. 9. Id. at (b). "Second oil tax: 12.5 percent of the total tax T-or the county in which the oil is produced for the use of the general revenue fund of the board of county com- missioners; however, the proceeds of the second oil tax shall be subject to the service charge imposed pursuant to chapter 215." Id. 10. Id. at (c). "First gas tax: 30 percent of the total tax T-or the state for the use of the General Revenue Fund and 50 percent of the total tax for the state for the use of the Conservation and Recreation Lands Trust Fund." Id. 11. Id. at (d). "Second gas tax: 20 percent of the total tax T-or the county in which the gas is produced for the use of the general revenue fund of the board of county com- missioners; however., the proceeds of the second gas tax shall be subject to the service charge imposed pursuant to chapter 215." Id. 12. FLA. STAT. �211.02(l) (1983). 13. Id. 14. Id. 15. Id. at (2) provides: It is the intention of the Legislature to impose the first oil and gas tax as a state excise tax and to impose the second oil and 73 gas tax as a county excise tax to compensate the county in which oil and gas is produced for the loss of ad valorem taxes by reason of the provision of this chapter, and to make it possible for the board of county commissioners of such county to provide the additonal public services that will be required in a county where oil and gas are produced. 16. Sun Oil Co. v. Fisher, 370 So.2d at 415 (Fla. 1st DCA 1979). "Section 211.02(2) recites that the excise tax was enacted 'to compensate the county... for loss of ad valorem taxes by reason of Section 211.13." Id. FLA. STAT. �211.13 (1983) provides in part: The several property appraisers of this state and tax assessors of the cities therein., when assessing the value of any land for ad valorem taxes, shall not increase the value thereof by reason of the fact that there may be oil or gas under the surface of such land, inasmuch as it is impossible under known valuation methods to accurately ascertain the true value of oil and gas in place and taxation thereof is more certainly accomplished after its cap- ture or severance from the earth or water. 17. See., Louisiana Land & Exploration Co. v. Gibbs, 354 So.2d at 79'9-(Fla. 1st DCA 1978). "Since the provision of the chapter removing ad valorem taxes on oil producing machinery has been repealed., the sentiment expressed in Section 211.02(2) is to that extent no longer effective." Id. Former Section 211.02(2) prohibited any ad valorem Tax on oil producing equipment or machinery. Id. 18. FLA. STAT. �211.02(2) (1983). 19. FLA. CONST. art. VII, Section 9(a) (1968). 20. Id. 21. Id.,art. VIII, Section 1(h). 22. FLA. STAT. �125.016 (1983), set forth in full provides: Annually an ad valorem tax of not exceeding 1112 mills may be levied upon all property in the county., which shall be levied and collected as other county taxes are levied and collected. The taxes shall be charged to the general fund., but such revenue may be 74 apportioned by the county for the cost of constructing,, operating, maintaining, expanding, enlarging., improving, or deve- loping any project or projects herein spe- cified,,or for the payment of the costs of removing and relocating any structures., installations., or facilities which in the opinion of the board of county commissioners may be required for the safe and efficient operation of any such projects. Said tax may be levied, collected., and expended for any of the purposes herein specified not- withstanding the cost and expense thereof which may have been incurred in a previous year, and when so collected and used the tax shall be considered to be levied, collected and used for a county purpose. Id. 23. Id.., �125.01. 24. Id.., �125.01(l)(c). 25. Id., �125.01(q). 26. Id. 27. Id. 28. See supra., note 16. 29. Id. 30. See supra., note 15. 31. FLA. STAT. �211.013 (1983). "The value of land for ad valorem tax purposes shall not be increased by reason at the location thereon of any producing oil or gas equipment or machinery used in and around any oil or gas well and actually used in the operation itself." Id. 32. Louisiana Land & Exploration Company v. Gibbs, 354 So-2d at 395 (Fla. 1st DCA 1978). See supra, note 17. 33.@ Id. 34. FLA. STAT. �193.481(l) (1983). 35. Id.., �193.481(3). 36. Id. See also, Department of Revenue v. Ford., 438 So.2d 798 TTTa.7f978TT-which upheld the constitutionality of section 193.481, even though the Department of Revenue has not required all Florida property appraisers to assess subsur- face interests in land. Id. at 803. 75 37. FLA. STAT. 5211-13 (1983). 38. FLA. STAT. �193.481(2) (1983). 39. See., Sun Oil Co. v. Fisher, 370 So.2d 413 (Fla. 1st DCA 40. Id. at 415., 416. 41. Id. at 415. 42. FLA. CONST. art VII, Section 9(a) (1968); FLA. STAT. �166.201 (1983). 43. FLA. STAT. �166.201-.261 (1983). 44. Id. �166.211M. 45. Id. �166.221. 46. Id. 5166.231(l)(a). 47. Id. 48. See, FLA. STAT. �211.13 (1983) supra., at note 5. 49. See also., FLA. STAT. �196.1995 (1983) (statutory implemen- tat'@-nof constitutional provision). 50. FLA. CONST. art VII., section 10(c) (1968). 51. FLA. STAT. �196.001 (1983). See, Volusia County v. Daytona Beach Racing, 341 S=od 498 (Fla. 1977). 52. FLA. STAT. �196.199(2)(a) (1983). 53. "Public purpose" is defined in FLA. STAT. S196.012(5) (1983). Generally a corporation existing to make profits for its stockholders which uses the leasehold to further that purpose., will not meet the public purpose exemption. See e.g., Volusia County v. Daytona Beach Racing, 341 So.2d aT-5ZT-T'F 1 a . 19 7 7 ) . 54. FLA. STAT. �196.199(4) (1983). 55. See supra, note 53. 76 0 I Part IV. Local Regulation of Oil and Gas Production Activities 0 0 77 A. Introduction: The Police Power Local governments in Florida have extensive powers to regulate activities associated with oil and gas exploration, extraction, storage and transport. The source of this authority is the police power, an inherent, plenary power reserved to the states by the Tenth Amendment to the United States Constitution. The police power is defined generally as the power of the states: To prescribe regulations to promote the health, peace, morals, education and good order of the poeple, and to legislate so as to increase the industries of the state, develop its res?urces, and to add to its wealth and prosperity. The Florida Supreme Court has defined this essential ingredient of state sovereignty as "that power by which the Government may destroy or regulate the use of property in order to 'promote the health, morals and safety of the community.'"2 The police power is generally accepted as the authority to adopt land use regulat ions.3 Regulation of noise, glare, fumes, traffic, pollution, safety, aesthe- tics and other effects that may be associated with oil and gas produc- tion is also based on the police power. B. Delegation to Local Governments of State Home Rule Authority to Ex-erci-s-e- the Police Power The power to regulate oil and gas activities exists only at the state level unless it has been delegated to local governments by sta- tutory or state constitutional law-4 Thus, delegation of the necessary authority must have occurred before a local government may enact an ordinance. 78 The police power authority has been delegated to local govern- ments in Florida through various provisions for home rule power.5 The genesis of the home rule power is found in Article VIII of the Florida Constitution.6 Various sections of Article VIII specify the home rule powers of municipalities,7 charter counties8 and non-charter counties.9 The Constitution specifies that differing degrees of home rule power are delegated to the three basic types of local governments in Florida, and subsequent legislation has directly addressed and treated separately the issue of home rule power delegation to the various local government types. Therefore, each type of local govern- ment will be discussed individually in assessing its delegated authority. 1. Municipal Home Rule Authority The Constitution grants to municipalities a broad base of home rule powers. It authorizes municipalites to "exercise any power for municipal purposes except as otherwise provided by law."10 Notwithstanding the clear indication that the intent of the Constitution was to grant broad municipal home rule powers, and that the provision was self-executing and subject only to legislative supremacy by way of general or special law, the Florida Supreme Court in 1972 took a somewhat narrower view.11 The court held the consti- tutional provision did not alter the rule that the paramount law of the municipality is in its charter, which gives it all the powers it possesses, unless other statutes are applicable.12 In response to this decision, the Legislature enacted the Municipal Home Rule Powers 79 Act in 1973, reaffirming the broad grant of home rule powers to municipalities.13 The Florida Supreme Court has expressly upheld the validity of the later delegation of powers to municipalities.14 In assessing the effect of the Act on the power to regulate land use, the Florida Supreme Court, in Hillsborough Association for' Retarded Citizens, Inc. v. City of Temple Terrace,15 indicated the power of municipalities' to zone comes directly from the Constitution.16 The court reasoned the Constitution does not expressly prohibit zoning legislation by municipalities and neither the Constitution nor general law expressly preempts zoning power to state or county government. This rationale appears equally applicable to permit municipalities to use their home rule powers to adopt other land use restrictions, since neither the Constitution nor general law has expressly preempted such power to state or county governments.17 Thus, the end result of the constitutional reform aspects of the 1968 Florida Constitution coupled with the Municipal Home Rule Powers Act is to give Florida municipalities a direct source of land use control power in the Florida Constitution by virtue of municipal home rule powers.18 2. Charter County Home Rule Authority Charter counties19 and consolidated forms of government are granted essentially the same broad base of home rule powers as that granted to municipalities under the Florida Constitution. The Constitution states charter counties "shall have all powers of local self-government not inconsistent with general law, or with special law approved by vote of the electors.20 8D This broad grant of home rule powers is further supported by Chapter 125, Florida Statutes, which grants numerous and extensive powers to county governments and specifically states "the provisions of this section shall be liberally construed in order to... secure for the counties the broad exercise of home rule powers authorized by the State Constitution."21 This statute has been held sufficient to per- mit counties to execute the home rule provisions of the Constitution.22 By combining the home rule provisions of the 1968 Florida Constitution with Chapter 125, as interpreted by the Florida Supreme Court, charter counties should find sufficient delegated authority to adopt ordinances regulating oil and gas activities since the Legislature does not appear to have preempted this authority to the state or municipalities by general law.23 3. Non-Charter County Home Rule Authority Non-charter counties are granted limited home rule powers under the Constitution and must look to enabling legislation to define the limits of their home rule authority. The Constitution states non- charter counties "shall have such power of self-government as is pro- vided by general or special law..." and "may enact, in a manner prescribed by general law, county ordinances not inconsistent with general or special law."24 Chapter 125, Florida Statutes, would appear to be the necessary enabling legislation to permit non-charter counties to adopt land use ordinances through their zoning authority.25 However, the decision in Townley v. Marion County26 suggests that, absent authority delegated in a special act, a non- 81 charter county has no alternative other than to proceed in compliance with the CMPFDA in adopting zoning codes.27 The court reasoned that language in the CMPFDA to the effect that powers granted in the act were "supplemental and in addition to such other authority as might exist in county government in the area of zoning"28 related only to specific zoning powers granted by special act or to charter counties and that in the absence of a special act, non-charter counties were bound by the minimum requirements contained in the CMPFDA.29 The court opined that the broad powers of zoning granted by Section 125.01(l)(h) do not establish any objective guidelines and standards under which the zoning authority may be exercised and therefore must be read in pari materia with the provisions of the CMPFDA, which ser- ves as a limitation on the scope of Section 125.01.30 This narrow view of home rule powers of non-charter counties was weakened, if not overruled, by the decision of the Florida Supreme Court in Speer v. Olson.31 Although the taxing power and not the land use control power of a non-charter county was in question, the Florida Supreme Court expressed a very liberal view of the governmental powers possessed by non-charter counties. The court held that Chapter 125., Florida Statutes, implements the provisions of Article VIII, Section 1(f), Florida Constitution (1968), which gives non-charter counties such powers of self-government as are authorized by general or special law and also authorizes enactment of ordinances in a manner prescribed by Chapter 125, Florida Statutes, which are not inconsistent with general law.32 The court noted the intent of the legislature in enacting the recent amendments to Chapter 125, Florida Statutes, was E2 to enlarge the power of the counties through home rule to govern themselves.33 Therefore, Chapter 125 should be read as a complete grant to non-charter counties of all powers of local self-government not preempted by general or special law-34 Next, addressing the point in Townley that even if it does pro- vide a broad grant of home rule power to non-charter counties, Chapter 125 must be read in pari materia with the CMPFDA as it relates to non- charter counties, the court stated: This Court has not only stated that an act, when it recites that it is an additional and supple- mental grant of power, may be used in addition to other laws on the same subject, but may be rejected by a public entity ind another appli- cable law used in its place. 5 Speer establishes, then, that non-charter counties may find authority to adopt land use regulations or other regulatory measures, in a variety of sources. C. Specific Grants of Authority 1. Comprehensive Land Use Planning and Regulation The Florida Legislature has enacted two statutes, each of which provides an additional, independent source of land use control power to those land governments which comply with the provisions of the sta- tutes. The first of these, the County and Municipal Planning for Future Development Act (CMPFDA),36 confers certain land use control powers on local governments which undertake optional comprehensive planning.37 The second statute, the Local Government Comprehensive Planning Act of 1975 (LGCPA),38 mandates that all local government 93 units undertake a comprehensive planning program39 and grants addi- tional specific authority to local governments to adopt land use restrictions when those restrictions conform to the local government's comprehensive plan.40 Since the LGCPA mandates comprehensive planning, sets a deadline for the adoption of a comprehensive plan and also provides greater flexibility in adopting land development regula- tions, the CMPFDA is rapidly losing significance. Although the LGCPA mandates the adoption of a comprehensive plan by each local government and requires that all land development regulations be consistent with the comprehensive plan,41 there is nothing in the Act to suggest that the Act has preempted to the state the authority to adopt land,use restrictions, so as to limit home rule powers in the area of land use regul a ti on. 42 The Local Government Comprehensive Planning Act43 mandates adop- tion of a comprehensive plan containing specified elements. Although the content of the plan is not otherwise specified, the required ele.- ments identify subjects that must be addressed.44 All of these ele- ments could, at least indirectly, affect oil and gas production activities within a local government's jurisdiction.45 Required ele.- ments for all local governments address future land use; traffic cir.- culation; sanitary sewer, solid waste, drainage and potable water; conservation of natural resources; recreation and open space; housing electriud'i utilities; and intergovernmental coordination. Local governments touching the Atlantic or Gulf of Mexico are required to adopt a coastal zone protection element, setting out policies for: 1. Maintenance, restoration, and enhancement of the overall quality of the coastal zone environ- ment, including, but not limited to, its ameni- ties and aesthetic values. 84 2. Continued existence of optimum populations of all species of wildlife. 3. The orderly and balanced utilization and pre- servation, consistent with sound conservation principles, of all living and nonliving coastal zone resources. 4. Avoidance of irreversible and irretrievable commitments of coastal zone resources. 5. Ecological planning principles and assump- tions to be used in the determination of suitabi- lity and extent of permitted development. 6. Proposed management and regulatory techniques.46 In addition, there are a number of optional elements (which are reguired for local governments having populations of 50,000 or greater). One particularly relevant element must address plans for port and related facilities.47 Other elements must plan for mass transit; nonautomotive traffic; offstreet parking; public services and facilities; public buildings; recommended community design; area rede- velopment; safety; historical and scenic preservation; and commercial and industrial development. Implementation of the comprehensive plan through appropriate land use regulations is specifically authorized by the LGCPA.48 In addi- tion, the adopted plan has a powerful, independent legal status.49 All local land development regulations and all "development orders" must be consistent with the plan. Any local government action having the effect of permitting the development of land is affected.50 Development is defined,51 by reference to Section 380.04, Florida Statutes, to include "the carrying out of any building activity or 85 mining operation."52 Activities specifically included within the definition of "development" are "commencement of drilling, except to obtain soil samples;"53 the deposit of fill;54 "a change in the inten- sity of use of land;"55 " alteration of a shore or ba'nk;"56 and of coastal construction."57 Virtually any local authorization of oil and gas exploration, extraction or support activities would thus have to be consistent with the adopted local comprehensive plan. 2. Local Pollution Control Programs Section 403.182, Florida Statutes authorizes the counties and municipalities of the state to establish and administer local pollu- tion control programs. Local pollution control programs, however, must be administered in compliance with the Florida Air and Water Pollution Control Act58 and must be approved by the Florida Department of Environmental Regulation (DER).59 Approval is based on a finding that local regulations are "compatible with, or stricter or more extensive" than those of the state.60 The local program must also have the local resources necessary to effectively carry out its program.61 An approved local program may use the enforcement authorities of the state legislation.62 In addition, the DER may enforce the local regulations, even where they are more stringent than state requirements-63 The chart on the next page, supplied by DER, lists all known local programs, together with the statutory authority for the program, whether the program is approved by DER and the date of the latest agreement between DER and the local program. 85 3. State Preemption of Local Regulation Local governments in Florida may exercise the police power only to the extent delegated by home rule or specific statutory provisions.64 Just as the Legislature may grant 'authority, it can limit or preempt local regulation. An express preemption specifically prohibits local regulation. For example, the Legislature has prohibi- teds local governments from regulating-the consumptive use of water65 or prohibiting siting of hazardous waste facilities.66 The Legislature may also condition the exercise of local regulatory power, as it has in the LGCPA. In that case, local action has to conform to requirements mandated in the statute.67 A conflict between state and local regulation can also result in preemption. Although it is beyond the scope of this study to identify instances where the state has preempted local regulation of oil and gas activities, a few general principles are set forth to guide future efforts. Local regulations must fail to the extent they conflict with state law.68 Local and state regulations conflict if they are O'contradictory in the sense of legislative provisions which cannot co-exist.,,69 Thus, a local government cannot authorize something which is prohibited by the state.70 The more difficult case is where a local government prohibits something that the state would allow. A local government cannot take away a right which the state has granted.71 However, local governments can impose additional restric- tions in areas regulated by the Legislature.72 The distinction between these two latter situations may be dif- ficult to determine. For example, a local government may deny per- 87 mission under local regulations to conduct drilling operations which the state has permitted. Is the local body taking away a right granted by the state or merely imposing additional restrictions? The courts have given little definitive guidance for making such deter- minations. Footnotes 1. Barber v. Connaly, 113 U.S. 27, 31 (1885). 2. Adams v. Housing Authority of Daytona Beach, 60 So.2d 663, 666 (Fla. 1952). 3. See J.C. JUERGENSMEYER AND J. WADLEY, FLORIDA LAND USE RESTRICTIONS, �3.01 (1980), (hereinafter cited as FLORIDA LAND USE RESTRICTIONS). 4. Id. at �3.01. 5. For an excellent discussion of the development of home rule in Florida see The History and Status of Local Government Powers in Florida, Committee on Community Affairs, Florida House of Me-presentatives (July 31, 1972). 6. FLA. CONST. art. VIII, Sec. 1 and 2 (1968). 7. FLA. CONST. art. VIII, Sec. 2 (1968). 8. FLA. CONST. art. VIII, Sec. 1(g) (1968). 9. FLA. CONST. art. VIII, Sec. 1(f) (1968). 10. FLA. CONST. art. VIII, Sec. 2(b) (1968). 11. See City of Miami Beach v. Fleetwood Hotel, Inc., 261 So.2d 801 (Fla. 1972). 12. Id. at 803. The court invalidated a municipal rent control ordinance because the municipal charter did not specify that the municipality had the authority to pass such an ordi- nance. 13. FLA. STAT. �166.021(l) (1983) states "as provided in Sec. 2(b), Art. VIII of the State Constitution, municipalities ... may exercise any power for municipal pur- poses, excepts expressly prohibited by law." 88 14. City of Miami Beach v. Forte Towers, Inc., 305 So.2d 764 (Fla. 1975). The rent control ordinance was again invali- dated, however, on another basis. 15. 332 So.2d 610 (Fla. 1976), affirming 322 So.2d 571 (Fla. 2d DCA 1975). 16. Id. at 612-13. 17. FLORIDA LAND USE RESTRICTIONS, Sec. 3.02 (1980). 18. Id. 19. FLA. CONST. art VIII Sec. 1(c) (1968) establishes the proce- dures by which a charter county government is established. 20. FLA. CONST. art. VIII Sec. 1(g) (1968). 21. FLA. STAT. �125.01(3)(b) (1983). 22. See Speer v. Olson, 367 So.2d 207 (Fla. 1978). "The intent of the Legislature in enacting the recent amendments to Chapter 125, Florida Statutes, was to enlarge the powers of counties through home rule to govern themselves." 367 So. 2d at 210. 23. Art. VIII, Sec. 1(g) grants to charter counties all powers of local self-government not inconsistent with general law. 24. FLA. CONST. art VIII, Sec. 1(f) (1968). 25. FLA. STAT. �125.01(h) (1983) grants counties the authority to establish, coordinate and enforce such zoning and busi- ness regulations as are necessary for the protection of the public. 26. 343 So.2d 1312 (Fla. 1st DCA 1977). 27. Id. at 1314. 28. See Fla. Op. Atty. Gen. 75-63 (1975). 29. 343 So.2d at 1313-14. 30. Id. at 1313. For a thorough discussion of alternatives to the court's approach and an excellent analysis of the problems inherent in requiring Chapter 125 to be read in pari materia with the CMPFDA, see FLORIDA LAND USE RESTRICTI �3.03. 31. 367 So.2d 207 (Fla. 1978). 32'. Id. at 210. 89 33. Id. 34. 367 So.2d at 211. 35. 367 So.2d at 213. 36. FLA. STAT. S�163.160-163.315 (1983). 37. Section 163.165(l) states "it is the intent of this act to enable the several counties and incorporated municipalities to plan for future development and to prepare, adopt and amend comprehensive plans to guide future development. To implement comprehensive plans, the several counties may adopt and enforce zoning regulations, adopt and enforce Sub- division regulations, adopt and enforce building, p lumbing, electrical, gas, fire, safety and sanitary codes." Section 163.205(l)(g) specifically authorizes local governments, after the comprehensive plan has been adopted as prpvided in the act, to adopt and enforce zoning districts to regulate uses and types and sizes of structures in those areas sub- ject to seasonal or periodic flooding, so that danger to life and property in such areas will be minimized."! Although the CMPFDA appears to have been antiquated by the LGCPA (See Florida Land Use Restrictions Sec. 3.02 (1980), it may still have relevance for non-charter countie$. 38. FLA. STAT. �163.3161-.3211 (1983). 39. ID. �163.3167(2). 40. Id., �163.3167(l)(c), .3201. 41. Id., �163.3194(l). 42. FLORIDA LAND USE RESTRICTIONS, Sec. 3.02 (1980). 43. FLA. STAT. S�163.3161-.3211 (1983). 44. Id., �163.3177. 45. Generally, a municipality is charged with responsibility to develop the comprehensive plan for its incorporated area and the county adopts a comprehensive plan for the unincor- Dorated areas. Joint planning may occur by agreement or a local charter may give the county specific authority over land use within municipalities. Id., �163.3171. 46. Id., �163.3177(6)(g). 47. Id., �163.3177(7)(b). 48. Id., �163.3167(l)(c). 49. Id., �163.3194. 90 50. Id., �163.3164(5),(6). 51. Id., �163.3164(4). 52. Id., �380.04(l). 53. Id., �380.04(2)(d). 54. Id., �380.04(2)(g). 55. Id., �380.04(2)(b). 56. Id., �380.04(2)(c). 57. Id. The term 11 coastal construction" is used as defined in Section 161.021, Florida Statutes. 58. Ch. 67.436, Fla. Laws, codified at FLA. STAT. ��403.011-.182 (1983). 59. FLA. STAT. �403.182(l)(a) (1983). 60. Id., �403.182(l)(b). 61. Id., �403.182(l)(d). 62. Id., �403.182(8). 63. Id., �403.182(6). 64. Supra notes 4-10. 65. FLA. STAT. �373.217 (1983). 66. Id., �403.723, .7225(15). 67. See e.g., City of Miami Beach v. Frankel, 363 So.2d 555 (Fla. 1978). 68. Lifschitz v. City of Miami Beach, 339 So.2d 232 (Fla. 1976). 69. Scavella v. Fernandez, 371 So.2d 535 (Fla. 3d DCA 1979). 70., Td, 71. See e.g., City of Miami Beach v. Rocio Corp., 404 So.2d 1066 TFTa-.-3-6 DCA 1981). 72. See e.g., City of Jacksonville v. Reynolds, Smith and Hill, T-nc.-,-474 So.2d 63 (Fla. 1st DCA 1982). 91 Coastal local governments in Florida have broad power to control whether the state can issue oil and gas leases in specified areas. Section 253.61, Florida Statutes, enacted in 1945, gives local munici- palities and counties a veto power if the proposed lease lies within certain geographic and political boundaries. The statute does not, however, clearly define the areas over which such power can be exer- cised. Some parts of the statute are ambiguous; other parts are almost incomprehensible. There have been no reported court decisions construing the statute to aid interpretation. The only authority interpreting the statute is a 1958 opinion by the Attorney General of Florida, which analyzes a tangential point and is thus of little assistance.1 This section interprets Section 253.61 in light of the many possibilities presented by the drafters of the statute. Legal issues that might arise in defending a local government's use of the veto power are also briefly discussed. Section 253.61, entitled "Lands not subject to lease," states: (1) Regardless of anything to the contrary con- tained in this law in any previous section or part thereof, no board or agency mentioned therein or the state shall have the power or authority to sell, execute or enter into any lease of the type covered by this law relating to any of the following lands, submerged or unsub- merged, except under the circumstances and con- ditions as hereinafter set out in this section, to wit: (a) No lease of the type covered by this law shall be granted, sold or executed covering such lands within the corporate limits of any munici- pality unless the governing authority of the municipality shall have first duly consented to the granting or sale of such lease by resolution. (b) No lease of the type covered by this law shall be granted, sold or executed covering any such lands in the tidal waters of the state, abutting on or immediately adjacent to the cor- 93 porate limits of a municipality or within 3 miles of such corporate limits extending from the line of mean high tide into such waters, unless the governing authority of the municipality shall have first duly consented to the granting or sale of such lease by resolution. (c) No lease of the type covered by this law shall be granted, sold or executed covering such lands on any improved beach, located outside of an incorporated town or municipality, or covering such lands in the tidal waters of the state abutting on or immediately adjacent to any improved beach, or within 3 miles of an improved beach extending from the line of mean high tide into such tidal waters, unless the county com- missioners of the county in which such beach is located shall have first duly consented to the granting or sale of such lease by resolution. (2) For the purposes of this section and law an improved beach, situated outside of the corporate limits of any municipality or town, shall be an is hereby defined to be any beach adjacent to or abutting upon the tidal waters of the state and having not less than ten hotels, apartment buildings, residences or other structures, used for residential purposes, on or to any given miles of such beach. Subsection (1)(a) is straightforward: a lease may not be granted within the corporate limits of a municipality without the express con- sent of the municipal governing body. Subsection (1)(b) is ambiguous. It prohibits the lease of state lands without the municipality's consent in the tidal waters of the state "abutting on or immediately adjacent to the corporate limits of a municipality." Whether lands "abut" or are "adjacent" is uncertain. The terms are undefined. Black's Law Dictionary defines the term of abut" as "to reach, to touch" and indicates abutting lands usually, actually adjoin and touch each other. The term "adjacent" is defined as "lying near or close to; sometimes, continguous; neighboring." The 94 term "adjacent" is distinguished from "adjoining" in that the latter term implies the objects actually found. "Adjacent" implies th at they are not far apart. The determination of whether leased lands are close enough to municipal boundaries to fall within the statutory review, of course, would be highly subjective, even without reference to the term "immediately." Although an argument could be made that the legislature meant to include only lands that touch municipal boun- daries, it seems weak. The term "adjoin" could have been used to indicate such intent. Section 1(b) also requires municipal consent for leases or grants of lands "within 3 miles of the city's limits extending from the line of mean high tide into such waters."11 The language of this provision offers at least 3 plausible interpretations. First, it could be contrued to require city consent over leases of lands within a three mile radius of any point located on the mean high tide line. This interpretation assumes that the city's ocean boundary is coterminous with the line of mean high water. (See diagram 1). It could also mean that offshore leases within three miles of the city limits require municipal approval. Under either interpretation, a lease might fall within the radii of more than one city. A second construction is also possible. The line from which 3 miles is measured could be interpreted as the extension of the munici- pal boundaries. Upon reaching the high water line, the boundary line would be extended into the water at right angles with the shore lind and municipal consent would be required for lands leased anywhere within three miles of that extended line. (See diagram 2). Again, more than one city could veto a particular lease. 95 The third possible construction of this provision is the one most likely intended by the legislature. The statute could be construed as requiring consent only over lands lying within the municipal boundary extensions perpendicular to the mean high tide line,* up to a maximum of 3 miles into the ocean. (See Diagram 3). Counties also have a statutory role, which is similarly unclear. Subsection 1(c) of the statute requires county commission consent for, leases encumbering improved beaches located outside of an incorporated area. Subsection 1(c) also requires county commission consent for leases of state lands "in the tidal waters of the state a4utting on or immediately adjacent to any improved beach." This lang4 age is similar to the municipal authorization and is equally troubling. The word "adjacent" may mean the lease area's boundary must touch,the improved beach, or it may mean only that the lease area must be near the improved beach.15 How near is unspecified. Subsection 1(c) also requires the state to obtain county com- missions consent for lease of state lands "within 3 miles of an improved beach extending from the line of mean high tide into such tidal waters." The legislature did not specify how the lines are to be extended into the tidal waters. At least two possibilities, exist. First, this language could mean that without county commission, con- sent, no lease may be granted for state lands located within a three mile radius of any point located on the improved beach's mean high tide line. (See Diagram 4). Second, the language could mean that county consent is required only if the lease area lies within the 3 mile extension of the beach boundaries drawn perpendicular to the shoreline. (See Diagram 5). 95 Subsection (2) of the statute, defining an improved beach, is also ambiguous. An improved beach is defined as one with ten or more residential structures (not units) "on or to any given miles of such beach." Perhaps use of the plural in "miles" was unintentional, but it destroys the sentence's meaning. Other legal issues in addition to locational criteria are likely to arise in implementation. An argument can be made that Section 253.61 impermissibly delegates legislative authority to local govern- ments without providing sufficient standards to guide the'exercise of local government discretion. Arguably, the failure to include guide- lines allows local governments unbridaled discretion in vetoing leases of state lands and is therefore an unconstitutional delegation of the legislative power in violation of Article II Section 3 of the. Florida Constitution.4 Under the doctrine of nondelegation of legislative power, the legislature may not delegate to an administrative body its lawmaking power.5 Primary policy decisions must be made by the legislature.6 The administration of legislative programs may be delegated to another governmental body so long as minimal standards and guidelines are pro- vided.7 An argument can be made that the legislature's failure to provide any standards for guiding municipal and county decisions regarding the approval of oil and gas leases under Section 253.61 violates tnis aoctrine. The Florida Supreme Court has struck down several statutory dele- gations of legislative power under the nondelegation doctrine. For example, in City of Miami Beach v. Fleetwood Hotel, Inc.,8 the Court 97 found that certain provisions of a rent control ordinance amounted to an unlawful delegation of legislative power by the Miami Beach city council, without appropriate guidelines or fixed outer limits of discretion involved.9 A legislative delegation of power analogous to the veto power conferred on local governments by Section 253.61 was discussed by the Florida Supreme Court in Askew v. Cross Key Waterways-10 The statute in Askew delegated power to the Administration Commission to designate Areas of Critical State Concern.11 Although the statute provided cri- teria for making these determinations, it did not delineate priorities among competing areas and resources requiring state protection.12 Similarly, Section 253.61 fails to include any standard by which the municipality might weight the value of oil leases covering different geographical areas. To this extent it is arguably unconstitutional under the Askew rationale. There are several arguments that might defeat application of the nondelegation doctrine. In Smith v. Portante,13 the Court stated: No matter how laudable a piece of legislation may be in the minds of its sponsors, objective guide- lines and standards should appear expressly in the act or be within the realm of reasonable inference from the language of theact where a delegation of power is involved... Although Section 253.61 plainly contains no explicit guidelines or standards, objective standards or guidelines may be reasonably inferred. The Florida Supreme Court recognizes that in some areas of regulation it is impractical for the Legislature to enact specific standards to guide the exercise of administrative standards.15 The 9B degree of required specificity thus depends upon the subject of regu- 1 ati on. In this instance, the subject is the exercise of public trust responsibilites. It might reasonably be inferred that local govern- ments are bound in the exercise of their discretion under the statute to the same standard that guides the trustees in determining'whether to issue the lease, the public interest standard. Although such a standard appears broad, it embodies a long tradition and may not be susceptible to being made more specific without endangering protection of the trust. A broad public interest standard was upheld in Albrecht v. DER16 against claims that it was overbroad. Albrecht involved a challenge to DER's authority to evaluate dredge and fall permit applications regarding whether the activity would be "not contrary to the public interest.,,17 Another source from which standards and guidelines might be reasonably inferred is the local comprehensive plan. The Local Government Comprehensive Planning Act requires development orders to be consistent with the plan.18 Local government approval of a lease appears to meet the definition of a development order. The local comprehensive plan, therefore, would contain a logical set of stan- dards for review of the administrative action, thus negating a delega- tion claim. Finally, the delegation might be viewed by a court, not as a delegation of legislative powers to an administrative agency, which violates the principle of separation of powers, but as a delegation of legislative powers to a subordinate legislative body. The home rule 99 provisions of the Florida Constitution specifically authorize the delegation of authority to legislate to local governments. If the lease approval process is considered legislative, rather than admi- nistrative, then the nondelegation doctrine may sim.ply be inapplicable because it is exercised by a legislative body. Footnotes 1. OP. ATTY. GEN. 058-322 (December 4, 1958). The opinion answers two questions: 1) "What effect, if any, does the sale and conveyance of submerged sovereignty lands and the filling in and improvement of the same, for residential and business purposes, have upon oil and gas leases previously made by the state or its agency?"; 2) "What effect, if any, does the extension of muni- cipal corporate limits have upon oil and gas leases previously made by the state or its agency?" Id. 2. FLA. STAT. �253.61 (1983). 3. See, Lipscomb v. Gialourakis, 133 So. 104 (Fla. 1931). 4. FLA. CONST., art. II, section 3 (1968), provides: "The powers of the state government shall be divided into legislative, executive and judicial branches. No person belonging to one branch shall exercise any powers apper- taining to either of the other branches unless expressly provided herein." 5. Askew v. Cross Key Waterways, 372 So.2d 913, 924, 925 (Fla. 1979). 6. Id. 7. Id. 8. 261 So.2d 801 (Fla. 1972). See also, City of Miami Beach v. Forte Towers, Inc., 305 So.2_d76_47FFla. 1975). 9. 261 So.2d at 805. 10. 372 So.2d 913 (Fla. 1979). 100 11. Id. at 914. See FLA. STAT. �380.05(2) (1975). 12. 372 So.2d at 919. 13. 212 So.2d 298 (Fla. 1968). 14. Id. at 299. 15. See e.g., Demko's Gold Coast Trailer Park v. Palm Beach ro_u_rffiy-,218 So.2d 7459 747 (Fla. 1969) (upholding statute allowing Zoning Commission authority to adopt building, electrical and plumbing codes when deemed proper for public welfare.); North Broward Hospital Dist. v. Mizell, 148 So.2d 1, 2 (Fla. 1962) (upholding statute authorizing hospital board to grant to revoke physicians' licenses to practice at hospital so that welfare and health of patients and hospi- tal's best interests at all times may be served.). 16. 353 So.2d 883 (Fla. 1st DCA 1978). 17. Id. at 885. 18. See discussion supra Part IV, notes 36-57. 101 JAAGRAMS 100, 3 milt$ 3 o0ts @,Ae@ line- 3 Mite 12ADiu5 mIL-F- RAoIv5 .00. CIT'-( BOw4OARY CIT Y in2 36 STA-re L-'MiT c ITY goo 3 -3 xmrikc,\iE;D BEACH 3 cAk\f- 103 'rMPFCVV---D SBACk4 104 0 APPENDIX C State of Florida Oil and Gas Lease 0 Lease Form Florida Department of Natural Resources Tallahassee, Florida 1984 0 Approved by Governor and Cabinet July 20, 1982 STATE OF FLORIDA -OIL AND GAS LEASE INFOT?MATION Copy NO. THIS INDENTURE OF LEASE, made pursuant to the provisions of Chapter 253, Florida Statutes, by and between the Board of Trustees of the Internal Improvement Trust Fund of the State of Florida hereinafter referred to as "Lessor and Supervising Agency" and hereinafter referred to as "Lessee": WITNESSETH: WHEREAS, all acts have been performed and all consents have been obtained that are required by law as conditions precedent to execution of this lease, and whereas sealed bids submitted for this lease were duly opened by Lessor at a meeting for that purpose, held in the City of Tallahassee, Florida, on the day of A.D., 19 and it was thereupon found and determined that has submitted the highest and best bid for the lease on said pre- mises as described in Exhibit A, which bid is by the said Lessor accepted and approved; NOW, THEREFORE, the Lessor on this the day of A.D., 19 , by authority of said law and in con- sideration of the payment by Lessee, of the sum of $ consideration, receipt whereof is hereby acknowledged and of the royalties, covenants, stipulations and conditions contained herein and hereby agreed to be paid, observed and performed by Lesseer does hereby demise, grant, lease and let exclusively unto the said Lessee the said land described in Exhibit A, which is made a part hereof, for the purpose of investigating, exploring, prospecting, drilling of bore-holes for the discovery and production of oil, gas, sulphur, carbon black, carbon dioxide, salt and/or other brines and other miscellaneOLIS constituent products from the leased premises and for the laying of pipelines, building of roads, tanks, power lines and power stations, communications equipment and other struc- tures and equipment needed to produce, save, take care of, treat, transport and own said products and, if the lands covered by this lease exceed 640 acres, to house its employees engaged in operations for drilling and/or production and handling. For the purpose of calculating rental payments her9Linder, the land covered by this lease is estimated to comprise net mineral, acres, whether it actually comprises more or less, and each truct described in Exhibit A is estimated to cc-mprise the number of acres stipulated in said Exhibit A, whecher it actuallv comprises more or less. The terri "products" as used hereinafter shall, in the absence of other meaning by immediate context, include oil, gas, sulphur, carbon black, carbon dioxide, other liquid hydrocarbons, salt and/or brines and any other miscellaneous constituent products produced. 1. TLERM. (A) Subject to the other provisions hereir, contained, this lease shall be for a term of vears from the date hereof (called the primary term) and as long thareafter as operations are being carried on in good faith and in a workmanlike and diligent manner, with no cessation bf more than thirty con- secutive days, or products covered hereby are being produced from the lands of this,lease or acreage pooled therewith in paying quan- tities. For purposes of this lease paying quantities shall mean, the total gross amount of products produced from the lands cf this lease. As defined herein Daying quantities shall not include oil or gas used as fuel for lease operations. INFORMATM, COPY (B) When production (which has been obtained) ceases within the primary term, this lease may be maintained by either commencing or resuming the payment of rentals, or commencing operations for drilling, or reworking the lands of this lease, or acreage pooled therewith in good faith and in a workmanlike and diligent manner, on or before the rental payment date next ensuing after the expiration of sixty days. Within 48 hours after any production of any paying quantities of products have been obtained, the Lessee shall notify by telegram or telegraphic communication the oil and Gas Administrator and the Director of the Division of State Lands. (C) If this lease is being maintained by production which ceases after the expiration of the primary term, the lease may be main- tained in force and effect by commencing and continUing opera- tions for drilling or reworking the lands of this lease or acreage pooled therewith for the development and production of products covered hereby on or before sixty days after such cessation of production, and prosecuting the same with diligence and in a workmanlike manner with no cessation for more than thirty con- secutive davs, and if such operation within a reasonable time thereafter result in the production of products covered hereby from the lands of this lease or acreage pooled therewith in paying quan- tities this lease shall remain in force and effect thereafter as long as products covered by this lease are produced therefrom in paying quantities. (D) This lease shall terminate in the absence of drilling or reworking operations or production in paying quantities of products from the lands covered hereby or lands pooled therewith, within the time and in the manner as herein set forth. (E) No drilling operations shall be conducted within any public: road right-of-way. No structures for drilling operations shall be constructed on any state-owned submerged lands !eased herein unless the proposed structure for such drilling operations is constructed at least one mile seaward of the coastline of the state. The granting of this lease shall not interfere with any right of the Lessor to make conveyances of submerged lands pursuant to statutory authority; nor any right of the Lessor to authorize the dredging and/or filling of submerged lands in compliance with statutes appli- cable Uiereto; and all such parcels so conveyed shall automatically be inade subject to the terms and conditions of this lease. 2. DRILLING INSTRUCTIONS. (A) The Lessee shall commence and complete operatiojis for drilling of at least one test well on the lands covered hereby within the first two and one-half year period of the tarm hereof, and Lessee shall commence and complete operations for drilling of at least one additional well in each succeeding two and one-half year period of "he term of this lease until the total number of wells drilled shall equal one-half the number of sections of land embraced in this lease, and, after coru-nencing such operations shall. prosecute same in good faith and with raasonable diligence and in a workmanlike manner to discover and to develop said land for pro- duction until such well be completed or abandoned. The Lessee at the Lime the drilling of each well is commenced shall file with the Lessor a written declaration describing the two sections of land to which such well shall apply. if no well shall be commenced and con- tinued to completion, with reasonable diligence-and in a work- manlike manne@ to disco;er and develop said land for production until such well is completed or abandoned within the first two and one-half year period of the -term of the lease, the entire lease shall be void. If no additional well shall be conmienced and continued to completion, with reasonable diligence and in a workmanlike manner to discover and develop said land for produc- tion 6ntil such well is completed or abandoned, then this lease, at Lhe end of such applicable two and one-half year period of the term of the lease, shall become forfeited and void as to all of the land covered hereby, except that upon which wells have been drilled in accordance with the provisions of said Chapter 253, 2 Florida Statutes, that is to say, this lease shall, in such event, become forfeited and void as to all lands covered hereby, except those included in the sections designated by the Lessee, as hereinabove pro- vided, as the sections to which a well, commenced and *completed in accordance with the provisions of this Paragraph 2, shall apply. it is further understood and agreed that the only penalty for failure to drill such well or wells is the cancellation or forfeiture of this lease or a portion thereof, as hereinabove provided. (B) All wells required to be drilled under the provisions of this Paragraph 2 shall be drilled in anefficient, diligent and workmanlike manner and in accordance with the best practice to.a depth of 6,000 feet or before abandonment thereof, unless production in paying quantities has been accomplished at a lesser depth. 3. RENTAL. (A) This lease shall terminate as to both parties on any anniversary date hereof as to all land covered hereby on which rentals are payable hereunder on such anniversary date as hereinafter provided, unless Lessee shall on or before such anni- versary date pay in advance to Lessor an annual rental of $ per net mineral acre, which shall be increased or decreased as hereinafter provided, for the number of acres included in such land on which rentals are so payable. (B) After the second year of the term of this lease, the rental above provided for shall increase by $.50 per net mineral acre annually thereafter, except when the provisions of Paragraph 16 are in effect. (C) Rental shall be payable under this lease on or before the anniversary date on all lands then covered by this lease, except land in a section applicable to a drilled well or upon which sec- tion producLion in paying quantities has been obtained or upon which section drilling or reworking operations have been con- ducted in good faith and in a workmanlike manner within thirty days next preceding the anniversary date. (D) The rentals hereinabove provided for rand the shut-in royalties provided for in Paragraph 9 may be paid by check or draft of Lessee, with exchange, payable to Lessor and mailed or delivered to Lessor at its office, 3900 Commonwealth Boulevard, Tallahassee, Florida, on or before the anniversary date for which such rent is payable. If any interest in the rental payable hereunder mav become owned by another or others than the Lessor, the entire r;ntal may be paid to Lessor as herein provided, and it shall make appropriate distribution thereof. 1E) The cash consideration received from the bid is the con- sideration for this lease, according to its terms, and shall not be allocated as a mere rental for a period. (F) Lessee may relinquish the rights granted hereunder, either as to the.entire area covered hereby or any portion ther@@Of, at any time by filing a release for record in the county where the land released is situated and by notifying the Lessor within 24 hours by telegram or telegraphic communication and by filing a duplicate original, certitied copy, or photostatic copy, of the release with Lessor within thirty days from the date it i,-; filed for record, and thereafter no rental shall be payable hereunder as to the acreage so released and Lessee shall be released from further obligations as to such released acreage. Such relinquishmen@t will not have the effect of releasing Lessee of any liability theretofore accrued to the. Lessor. (G) It is agreed that if Lessor or the Stat,@ of Florida owns the title to or an interest-- in the oil and gas under the land covered by this lease iess than the entire mineral interest, then the royalties and.renta!3 herein provided for shall be reduced proportionately. 4. EXTENSTONS: If, at the expiration of the primary term of this 3 INFGR'i'i'ATICI'@ COPY lease, production of oil or gas has not been obtained on the leased premises but drilling operations are being conducted thereon or on land pooled therewith in good faith and in a good and workmanlike manner, Lessee may on or before the expiration of the primary term, file a written application with the Lessor for a thirty 00) day extension of this lease, accompanied by payment of five (5.00) Dollars per acre. The Lessor shall, in writing, extend this lease for a thirty (30) day period from and after the expiration of the primary term and so long thereafter as oil or gas is produced in paying quantities; provided further, that Lessee may, so long as such drilling operations are being conducted make like application and payment during any thirty (30) day extended period for an additional extension of thirty (30) days and, upon receipt of such application and payment, the Lessor shall, in writing, again extend this lease so that same shall remain in force for such additional thirty (30) day period and so long thereafter as oil or gas is produced in paying quantities; provided, however, that this lease shall not be extended for more than a total of three hundred ninety (390) days from and after the expiration of the primary term unless production in paying quantities has been obtained. 5. PRODUCTION ROYALTIES: When production of oil and or gas is secured, the Lessee agrees to pay or cause to be paid to the Lessor for the use and benefit of the State of Florida during the term hereof: (A) OIL: As a royalty on oil, which is defined as including all hydrocarbons produced in a liquid form at the mouth of the well and also all condensate, distillate, and other liquid hydro- carbons recovered from oil or gas run through a separator or other equipment, as hereinafter provided_____ _ _ part of the gross production each month, or at the option of the Lessor, the value of Lessor's part of the gross production which shall be determined, considering like type and gravity, by the greater of: (1) The weighted average of field posted per unit prices, plus premiums, for the month, used by the Lessee for oil, condensate, distillate, or other liquid hydrocarbons, where produced and when run; if any; (2) The weighted average per unit market price at the point of delivery which could have been obtained in an arm's-length transac- tion, for the month, where produced and when run; if any; (3) The weighted average per unit price determined from the gross proceeds of actual sales of the product by the producer in arm's-length transactions.during the month; if any; (4) A per unit value equivalent to the highest p,;@r unit value on which a royalty is paid by the producer to any other royalty interest in the general area for the same month in which such product is produced. Lessee agrees that be@-ore any gas produced from the land hereby leased is sold, used or processed in a piant, it will be run free of cost t:.-) Lessor through an adequate oil and gas separa- tcr of conventional type or other equipment at least as efficient to the end that all liquid 1-iydrocarbons recoverable from the gas by such means will be recovered. Upon written consent of Lessor, the requirement that Such gas be run through such a sooarator or other equipment may be waived upon such terms and conditions as prescribed by Lessor. (B) NON-PROCESSED GAS: As a royalty on any gas (excluding flared gas), which is detineO as all hydrocarbons and gaseous substaRces not defined as oil in Paragraph 5(A) above, produced from any well on said land (except as provided herein with re5pect to gas processed in a plant for the extraction of gaso- line, liquid hydrocarbons or other products).__ 4 INFORNIATION COPY part of the gross production each month, or at the option of the Lessor, the value of such part of the gross production. The value of Lessor's part of the gross production shall be deter- mined by the greater of: (1) The weighted average per unit market price at the point of delivery which could have been obtained in an arm's-length transac- tion, for the month, where produced and when run; if any; (2) The weighted average per unit price determined from the gross proceeds of actual sales of the product by the producer in arm's-length transactions during the month; if any;- (3) A per unit value equivalent to the highest per unit value on which a royalty is paid by the producer to any other royalty interest in the general area for the same month in which such pro- duct is produced; provided that the maximum pressure base in measuring the gas under this lease contract shall not at any time exceed 14.65 pounds per square inch absolute, and the standard base tem- perature shall be sixty (60) degrees Fahrenheit, correction to be made for pressure according to test made by the Balance Method or by the most approved method of testing being used by the industry at the time of testing. (C) PROCESSED GAS: As a royalty on any gas processed in a gasoline plant or other plant for the recovery of gasoline or other liquid hydrocarbons, part of the gross production of residue gas and liquid hydrocar- bons extracted each month, or at the option of the Lessor, the value of such part of the gross production. The value of Lessor's part of the gross production shall be determined by the greater of: (1) The weighted average per unit market price at the point of delivery which could have been obtained in an arm's-length transac- tion, for the month, where produced and when run; if any; (2) The weighted average per unit price deter-mined from the gross proceeds of actual sales of the product by the producer, in arm's-length transactions during the month; if any; (3) A per unit value equivalent to the highest per unit value on residue gas and the highest per unit value on the respective grades of liquid hydrocarbons, on which a royalty is paid by the producer to any other royalty interest in the general area for the same month in which such product is produced. All royalties due herein shall be based on one hundred percent (100%) of the total plant production of residue gas attributable to gas produced from this lease, and on fifty p4rcent (50%) or that percent accruing to Lessee, whichever is the greater, of the total plant production of liquid hydrocarbons, attributable to the gas produced from this lease; provided that if liquid hydrocarbons are recovered from gas processed in a plant in which Lessee (or its parent, subsi'diary or affiliate) owns an interest, then the percen- tage applicable to liquid hydrocarbons shall be fifty percent (50%) or the highest percent accruing to a third pari'Y'Pro- cessing (gas through such plant under a processinq agreement negotiated at arms-length, or if there is no such third partv, the highest percent then being specified in processing agreei-nents or contracts in general area, whichever is the greater. In no event, however, shall the royalties payable under this paragraph be less then the royalties which would have been due had the gas not been processed. 5 INFORMATION COPY (D) OTHER PRODUCTS: As a royalty on carbon black, sulphur, salts and/or other brines, or any other products produced or manu- factured from gas (excepting liquid hydrocarbons) whether said gas be "casinghead", "wet" or any other gas, by fractionating, burning or any other processing part of the gross production of such products, or at the option of the Lessor, the value of such part of the gross production. The value of Lessor's part of the gross production shall be determined by the greater of: (1) The weighted average per unit market price at the point of delivery which could have been obtained in an ar-n's-length transaction, for the month, where produced and when run; if any; (2) The weighted average per unit price determined from the gross proceeds of actual sales of the product by the producer in arm's-length transactions during the month; if any; (3) A per unit value equivalent to the highest per unit value on which a royalty is paid by the producer to any other royalty interest in the general area for the same month in which such product is produced. The royalties herein provided for shall be computed after deducting any oil or gas reasonably used for the production thereof. Lessee shall have the right to use any water that may be on the premises for operation hereunder and the right to use so much of the surface of the land covered hereby as may be reasonably necessary for developing and operating on this lease for production and for storing, marketing and transporting the products therefrom, such use to be conducted under conditions of least injury to the surface of the land. (E) NO DEDUCTIONS: Lessee agrees that all royalties accruing to Lessor under this lease shall be without deduction for taxes or the cost of producing, gathering, storing, separating, treating, dehydrating, compressing, processing, transporting, and otherwise making the products produced hereunder ready for sale or use; provided that any tax imposed in the future by the United States on account of production shall be deductible by the Lessee to the extent Lessee is required to pay such tax on Lessor's share of production under this lease. Lessee shall not be responsible for any state of local wellhead .or production taxes on Lessorl's royalty interest in production under this lease. (F) ROYALTY IN KIND: Notwithstanding anything contained -herein to the contrary, Lessor may annually, at its option, upon not less than 60 days notice prior to the anniversary date of the lease, notify Lessee, that payment of ali or any royalties accruing to Lessor under the lease for the ensuing year be made in kind withcut any deduction as specified 1)y Paragraph 5 (E) above. if Lessor decidef@ to take royalty in kind, Lessee shall provide storage free of charge to Lessor for 48 hours. Lesoor acknowledges that the products produced hereunder may be subject to the jurisdict!.on of federal regulatory authorities whose prior approval may be required in or-der to pay in kind all or any royalties accruing to Lessor under this -Iea:3e. Upon receipt of notice that Lessor will require that payment of- royalties be made in kind, Lessee agrees to apply for such, appro- vals as may hv in its sole judgment necessarv. Lessee agrees to diligently seek all necessary and appropriate approvals to enable the Lessor to exercise its option to take royalties in kind. Lessee shall not be liable to Lessor for consequences of a delay caused by factors beyond Lessee's control, or for thk-, failure of any regulatory authority to give the requested approvals. (G) PLANT FUEL AND RECYCLED GAS: No royalty shall be payable on any gas as may represent Ehe Lessor's proportionate share of any fuel used to process gas produced hereunder in any pro- 6 CON cessing plant. Notwithstanding anything contained herein to the contrary, and subject to the consent in writing of the Lessor, Lessee may recycle gas for gas lift purposes on the leased premises or for injection into any oil or gas producing formation underlying the leased premises after the liquid hydrocarbons contained in the gas have been removed and no royalties shall be payable on the gas so recycled until such time as the same may thereafter be produced and sold or used by Lessee in such manner as to entitle Lessor to a royalty thereon under the royalty provisions of this lease. Lessee shall provide Lessor with a monthly report of all gas and oil recycled or used for fuel. (H) MINIMUM ROYALTY: During any year beginning with the anni- versary date of this lease, if this lease is maintained by production, the royalties paid to Lessor in no event shall be less than an amount equal to the total annual rental herein provided; otherwise, there shall be due and payable on or before the last day of the month suc- ceeding the anniversary date of this lease a sum equal to the total annual rental less the amount of royalties paid during the preceding year. 6. ROYALTY AND OTHER PAYMENTS AND REPORTS: The Lessee shall bear all responsibility for paying or causing royalties to be paid as prescribed by the due date provided herein. (A) Estimated royalty payments on products produced are due and payable on or before the 25th day of the first month suc- ceeding the month of production. on or before the 25th day of the second month succeeding the month of production, the Lessee shall file a final report of products produced, and shall pay any unpaid royalties shown to be due by the report. If such final report shows an overpayment of royalties such overpayment, at the option of the Lessee, shall be refunded or credited to the esti- mated royalty payment due for the month succeeding the month covered by the final report. Such final report shall !-,how how the weighted average per unit price was deter-mined for each product under Paragraph 5 and summary of production on a form or forms prescribed by the Lessor. (B) No payment is necessary under this paragraph if the Lessor has exercised its option under Paragraph 5(F). However, the suirunary report required in Paragraph 6(A) above ,3hall be pro- vided to the Lessor. (C) Any royalty payment not postmarked by the 25th day of the first nionth succeeding the month of production shall have added to the amount of royalty due five percent (5%) of such sum each month or fractional portion thereof, not to exceed twenty-five percent (25%) during each 12 month period. This additional royalty payment-- shall not apply in cases of title dispute as to the Lessor's portion of the royalty. The additionai rovalty prescribed by this section may be waived upon showing of caus@ beyond the control of the Lessee. (D) In addition and notwithstarding the provisions of Paragraph 6(C), 'the Lessee shall pay a mandatnry additional royalty at the rate of one percont (IA) per month from the date due until the date paid on the royalty payment provided for in Paragraph 6(A) is delinquent. (E) All royalty payments not taken in kind shall be made to the Department of Natural Resources, State of Florida, at its office in Tallahassee, Florida, or to its duly authorized agent. 7. RECORDS REOUIRED TO BE KEPT; POWER TO !NSPECT, LIABILITY: (A) For purpo@@es of this lease, the Department of Revenue arid/or a-iy other duly authorized agent of the Lessor is hereby specifi- cally authorized and empowered to examine, for the term of this lease including any extensions thereto plus three (3) additional years, at nil reasonable hours, the books, records, contracts, and other documents confirming and pertaining to the computation of royalties under Paragraph 5 and to the production, transportation, 7 copy I I C, N processing, disposition, sale and marketing of oil, gas, sulphur, carbon black, salt and/or other brines and any other products pro- duced. Such documents shall include copies of all contracts under which gas is sold or processed and all subsequent agreements and amendments to such contracts, receipts and discharges of all wells, tanks, pools, meters, and pipelines, gas meter readings, gas line receipts, and other checks or memoranda of amounts produced and put into pipelines, tanks, trucks, or pools and gas lines or gas storage, and any other reports or records which the Department of Revenue and/or any other duly authorized agent of the Lessor may require. (B) it is agreed by the parties hereto that during all proper hours and at all times during the continuance of this lease, that the Lessor by its duly authorized agent or agents, shall be, and hereby is authorized to check meters, gauges, and any and all measuring devices used by Lessee and to require properly authen- ticated certificates of accuracy as to calibration of all meters and gauges aforesaid on a monthly basis, or as indicated. Such tests, when required, must be made by a properly qualified anq licensed testing laboratory in the State of Florida, and said duly authorized agent or agents shall have the right at all reasonable times and places to check readings on meters, gauges and measuring devices and meter reading records of employees of Lessee's anq copy and make copies of the same. (C) The Lessee, or his assigns, shall secure, maintain, and keep all records and accounts specified in Paragraphs 7(A) and 7(B) for the entire term of this lease, including any extensions thereto, plus three (3) additional years. This period shall be extended for an additional two (2) years upon request for exami- nation of all records and accounts for royalty purposes by the Lessor or its duly authorized agent. The liability of the Lessee, or his assigns, shall exist for the same period for which records are to be kept under this paragraph. (D) The State shall have a first lien upon the Lessor's pro- portionate share of all products produced from the area covered by this lease, to secure payment of all unpaid royalty.and other sums of money that may become due under this lease. (E) It is agreed by the parties hereto that during all proper hours and at all times during the continuance of this lease, that the Lessor or its duly authorized agent or agents, at its sole discretion, is hereby authorized to inspect the premises, to insure that the Lessee is complying with the terms of this lease. 8. RESERVE ESTIMATES: After production has been obtained, Lessee shall annually furnish the Florida Department of Revenue with a statement containing the estimate of the quantity of provea reserves of oil and gas underlying the lands covered by this lease. After the initial report, the statement also shall contF-in an explana- tion of any significant changes in the estimate which have occurred during the year. The quantity of proved reserves shall be estimated consistent with generally accepted methods in the petroleum engineering pro- fession. The statement filed with the Florida Department of Revenue shall conform to statements of Financial Accounting Standards, issued by the Financial Accounting Standards Board, which are in effect for disclosures about oil and gas producing activities. The information contained in this statement shall be governed by Section 213.053, Florida Statutes. 9. SHUT-IN ROYALTIES: If, at the expiration of the primary term or at any time thereatter, there is located on the leased premises a well or wells capable of producing oil or gas in paying quantities and such oil or gas is not otherwise produced due to 8 INFOR-PAATIOI',,I (Cf0py pending development of a satisfactory market outlet or lack of suitable production facilities and this lease is not otherwise being maintained in force and effect, Lessee shall pay as royalty a sum of money equal to double the annual rental provided for in this lease but in no event to be less than $1,200-00 per annum for each well capable of producing oil or gas in Daying quantities; such payment shall be made prior to t@e expiration of the primary term of this lease or if the primary term has expired within sixty (60) days after Lessee shuts in such well or ceases to produce oil or gas therefrom or within sixty (60) days after this lease ceases to be otherwise maintained in force and effect; and if such payment is made, this lease shall be considered to be a producing lease and such shut-in oil or gas well royalty payment shall extend the term of this lease for a period of one (1) year from the end of the primary term or, if after the pri- mary term, from the first day of the month next succeeding the month in which such well was shut in or production ceased or this lease ceased to be otherwise maintained in force and effect; and thereafter, if no satisfactory market outlet or suitable produc-. tion facilities for such oil or gas exists, Lessee may exiend this lease for three (3) additional and successive period; of one (1) year each by the payment of a like sum of money each year as above provided, on or before the expiration of the extended term. Provided, however, that if, while this lease is being maintained in force and effect by payment of such shut-in oil or gas well royalty, oil or gas should be sold and delivered in paying quan- tities from a well situated within 6,500 feet of the leased pre- mises and completed in the same producing reservoir,.or ;in any case where drainage is occurring, the right to further extend this lease by such shut-in oil or gas well royalty payments shall cease and this lease shall remain in force and effect for the remainder of the current one-year period for which the shut-in oil or gas well royalty has been paid and for an additional period not to exceed four (4) years from the expiration of the primary term by payment by Lessee of compensatory royalty at the royalty rate provided for herein, of the value at the well of production from the well completed in the same producing reser- voir from which oil or gas is being sold and delivered and which is situated within 6,500 feet of or draining the leased premises on which such shut-in oil or gas well is situated, such compen- satory royalty to be paid monthly to the Lessor beginning on or before the last day of the month next succeeding the month in which such oil or gas is sold and delivered from the well situated within 6,500 feet of or draining the leased premises and completed in the same producing reservoir, provided further that in the event such compensatory royalties paid in any twelve-month period are in an amount less then the annual shut-in oil or gas well royalties provided for herein, Lessee shall pay an addi- tional sum of money equal to the difference bctween such compen- satory royalties paid and such shut-in oil or gas well royalty within thirty (30) days from the end of such twelve-month period; provided further that nothing herein shall relieve Lessee of the obligation of reasonable development, nor of the obligation to drill off-set wells as required by law. 10. REMOVAL OF_EQUIPMENT. Lessee shall have the right at any time while this lease is in force and effect, or within a reasonable time after the expiration or termination of this lease, to re-11ove all property and fixtures placed by Lessee on the land covered hereby, including the right to draw and remove all casing, provided Lessee has complied with all obligations under this lease at the time of such removal. When required by Lessor, Lessee will bury all pipelines at least four feet below. the surface, and no well shall be drilled within two hundred feet of any residence or barn now on said land without Lessor's con- sent. Lessee shall restore the property to its former condition in so far as this is deemed practicable upon the conclusion of drilling or any other operations authorized by this lease agreement. (NFC1p11V,/',T10j@,1 C(@,Ipy 11. OFFSET WELLS. This lease contemplates the reasonable development of the production from the land described in Exhibit ]@,.including the drilling of as many wells as a reasonably pru- dent operator would drill under the same or similar ' circumstan- ces. In the event production in paying quantities should be brought in on adjacent land draining the leased premises, Lessee agrees to drill such offset wells as a reasonable prudent opera- tor would drill under the same or similar circumstances at such locations required by spacing regulations adopted by the State of Florida, Department of Natural Resources. 12. DRILLING LOG. A log of each well drilled on this lease shall be filed with tFe oil and Gas Administrator at his office in Tallahassee, Florida, within thirty days after such well shall have been completed or abandoned and the correctness of such log must be sworn to by Lessee, its agent or driller, and it must be accompanied by a plat showing the exact location of said well. 13. POOLING AND UNITIZATION. Lessee is hereby given the right to pool or combine the acreage covered by this lease or any parts thereof, whether State Land, Federal Land or privately owned land, when reasonably necessary to conform with drilling units established by the State of Florida, Department of Natural Resources or to conform with any unitization or integration order issued by such department. operations for drilling, reworking or production on any part of a unitized unit composed in whole or in part of the land covered hereby shall be considered as operations for drilling, reworking or production on land covered by this lease and the entire acreage constituting such unit or units shall be treated for all purposes as if the same were included in this lease, except that in lieu of the royalties elsewhere herein specified, Lessor shall receive on production from each of such units the proportion of the royalties herein stipulatd that the amount of Lessor's ownership in the mineral interest in the acreage placed in the particular unit involved bears to the entirety of the mineral interest in such unit. 14. POLLUTION AND SITE SECURITY. (A) The Lessee shall be liable for land or water pollution resulting from the drilling for or production of products pursuant to this lease. The Lessee shall be liable for any damage to aquatic or marine life, wild- lite, birds, and any public or private property, both real and personal due to Lessee's operations pursuant to this lease. The Lessee shall not allow any extraneous matter to enter or damage any mineral or freshwater bearing formation. Provided, however, this covenant of absolute liability shall not apply if the Lessee establishes that the prohibited discharge or other polluting con- dition was the result of any of the following: (1) an act of war; or (2) an act of government, either federal, state or local; or (3) an act of God, which shall be construed to mean an unforeseeable act exclusively occasioned by the violence of nature without the intervention of any human agency; or (4) acts of disinterested third parties who are neither employed by or agents of the Lessee. (B) The Lessee shall report to the supervising agency and to the Division of Resource Management, Department of Natural Resources, State of Florida, all spills or leakage of oil, gas, other petroleum products, or other waste material., and any such spill or- leakage which cannot be immediately controlled shall be reported immediately to the appropriate fed@-_,ral.agency and the Di,:ision of Resource Management, Department of Natural Resources, State of Florida. (C) Lessee shall prepare and file with the oil and Gas Administrator a plan for site security of each producing well 10 INVORMATION CQPY subject to this lease within 10 days after production has been obtained. The site security plan shall be subject to the appro- val of the Oil and Gas Administrator. When in the opinion of the Oil arid Gas Administrator or his duly authorized agent that con- ditions warrant the construction of a fence to better protect the general public and/or livestock, Lessee shall build and maintain fences around its slush, sump and drainage pits, tank batteries and wells. In addition, Lessee shall: (1) file in a timely manner with the Oil and Gas Administrator a schematic of approved pipe layouts, including all oil access points, from the actual. well-head to the field plant arid/or tank; (2) provide that all oil access points on the leased premi- ses have seals and locks. Lessee may select the type of seals and locks and methods of control by its employees; (3) provide all transporters of products with a run ticket and/or a bill of lading, which shall show in addition to quan- tities, the shipper and consignee; After written notice of a deficiency listed above to the Lessee, Lessor may cancel the lease for failure to correct the deficiency listed in the notice. The plans required above may be revised from time-to-time with the approval of the Oil and Gas Administrator. The requirements of this Paragraph are considered to be minimal site security requirements and Lessee shall take the necessary actions to protect the Lessor's interest. (D) The Lessee shall, in addition to notification of fire, breaks, leaks or blow-out, notify the Division of Resource Management, Department of Natural Resources, State of Florida and the supervising agency, of any breach of site security within forty-eight (48) hours of its discovery. (E) The Lessee shall provide the Department of Natural Resources, or its duly authorized agent access to each site for the purpose of determining: (1) the need for site security; ur (2) the terms of the site security plan are being met; or (3) to examine a site where a breach of site security has occurred. 15. ASSIGNMENT. (A) This lease shall not be assigned in whole or in part until and except the Lessor shall approve and consent in writing to such assignment. Such consent shall not be unreasonably withheld. Subject to the preceding sentences, the Convenarits, conditions, and agreements contained herein shall extend to ind be binding upon the successors or assigns of the parties hereto. (B) In the event of assignment hereof in whole or in partr in accordance with the provision hereof, liability for breach of any obligation hereunder shall rest exclusively upon the owner of this lease or a portion thereof, who commits such breach. If this lease is assigned in accordance with its terms as to a segregated portion of the land covered hereby, rentals payable hereunder shall be apportionable as between the several leasehold owners ratably on an acreage basis and default in rental payment by one shall not affect the rights of other leasehold owners hereunder. 16. 6ORCE MAJEURE: Should Lessee be prevented from 11 complying with any express or implied covenant of this lease, from conducting drilling operations or producing any products as herein defined from the leased premises, after effort made in good faith, by cause or reason of war, rebellion, riots, strikes, act of God inlcuding but not limited to storms, floods, washouts, landslides and lightning or any laws, acts, orders, rules, regula- tions or demands of governmental authority, then while so pre- vented, Lessee's obligation to comply with such covenant shall be suspended upon proper and satisfactory proof presented to Lessor in support of Lessee's contention and Lessee shall not be liable for damages for failure to comply therewith and this lease shall be extended while and so long as Lessee is prevented, by such cause, from drilling, reworking operations or producing products from the leased premises, provided, however, that nothing herein shall be construed to suspend the payments of rentals during the primary or extended term. Lessee shall be required at all times to use reasonable diligence to overcome such causes as described above as promptly as circumstances will permit and once such causes have terminated Lessee shall have 48 hours to notify the Lessor of such termination. 17. DEFAULT AND FORFEITURE. If the Lessee should fail or refuse to make payment of any sum due either as rental or shut-in oil or gas royalty on this lease or for royalty on the production within thirty (30) days after it shall become due, or if the Lessee or its authorized agent should knowingly make any false return or false report concerning productions, royalty or drilling, or if the Lessee should fail or refuse to drill any offset well or wells in good faith as required by law and the rules and regulations adopted by the State of Florida, or if the Lessee or its agent should refuse the proper authority access to the records pertaining to operations under this lease, or if such Lessee or its authorized agent should knowingly fail or refuse to furnish the log of any well, as provided herein, or if Lessee shall knowingly violate any of the material provisions of this lease and should Lessee fail, within thirty days after written notice to Lessee by Lessor setting out the matters as to which Lessor considers Lessee in default, to take reasonable action to remedy any such default, this lease shall be subject to forfeiture by the Lessor; and when forfeited, the area shall again be subject to lease to the highest bidder, at the option of Lessor, under the then current regulations controlling at the time of forfeiture by the Lessee. However, when a proper showing is satisfactorily made to Lessor, the rights of Lessee under this lease may be reinstated provided the rights of third parties have not intervened. 18. MTSCELLANEOUS (A) Notwithstanding any of the provisions, covenants or stipulations contained in this lease, should there be any conflict in any of the provisions of this lease with the law governing the issuance and operation of leases on the area herein described, in that event, the provision of suth law shall be written into this lease and shall control. (B) The Lessee joins in this lease for the purpose of indi- cating its assent to all the terms and provisions hereof, and agrees to be bound hereby. (C) All terms and express or implied covenants of this lease shall be subject to all Federal and State laws, executive orders, rules or regulations, in force at this time or which may be promulgated, enacted and enforced in the future. (D) Lessee shall, on or before ninety (90) days after each anni- versary date while this lease continues in force and effect, file with Lessor a notarized report as to the status of operations thereon in accordance with the provisions of, and subject to the sanctions authorized in Section 253.511 of the Florida Statutes. 12 NFORMATION COPY (E) Prior to the time that the Lessee mines, drills or extracts in any manner, petroleum, petroleum products, gas, sulphur or any other mineral from the land covered hereby, Lessee shall deposit with the Lessor a surety bond in the amount of $ from a surety company authorized to do business in the State of Florida. The bond shall serve as security and is to be forfeited to the Lessor to pay for any damage caused by mining or drilling operations of the Lessee. Damages as used in this section shall include, but not be limited to, air and water pollution, destruction of wildlife or marine productivity and any other damage which impairs the health and general welfare of the citizens of the State of Florida. Lessee shall pay the premiums for said bond as they become severally due and payable and furnish a receipted bill therefore to the Lessor. (F) That Lessee hereby covenants and agrees to investigate all claims of every nature at its own expense and to indemnify, protect, defend, hold and save harmless the State of Florida, Board of Trustees of the Internal Improvement Trust Fund and/or the State of Florida from any and all claims, actions, law suits and demands of any kind or nature arising out of this lease. (G) Lessee may conduct geophysical exploration on the lands covered by this lease. (H) Prior to proceeding with any geophysical exploration, the Lessee shall serve reasonable notice on the supervising agency. The route to be taken by the geophysical crew must first be submitted by the supervising agency. If areas of valuable or endangered species of vegetation or wildlife would be disturbed by the proposed route of geophysical operations, the supervising agency may require rerouting of the path or reclamation of the damaged area according to its specifications. (I) All seismic shot holes shall be drilled sufficiently deep to prevent undue surface cratering and consequent damage to the surrounding vegetation and wildlife. (J) The Lessee shall take all reasonable precautions designed to prevent the starting of fires in areas of geophysical operations. M Lessee shall comply with all current and future statu- tes, rules and regulations of the United States Government, its agencies and the State of Florida, its agencies and political sub- divisions. The willful violation of any statute, rule or regula- tion shall constitute cause for termination of the lease. W The location, preparation, construction, maintenance, and restoration of the access road on leased premises and drill site shall be accomplished to the satisfaction of the supervising agency in accordance with the following: (1) The location and construction plans of the access road shall be approved by the supervising agency prior to the commencement of construction. (2) No construction work shall be undertaken without approval of the supervising agency. (3) The drill site must be approved by the supervising agency before clearing of any access road or drilling site is done. Lessee must notify the super V4 sing agency of the tentative site location so that a-representative can inspect the drill site. Drilling in or within 200 yards of a river, stream, lakei pond (or the flood plain thereof) swanip, sink, ou drain, shall require special approval by the Lessor, if such drilling is not prohibited by law. (4) Lessee shall restore the drill site and access road in conformance with a plan submitted to and approved by the supervising agency at the time of approval of the site thereof. 13 @estoration shall meet with the approval of the oil and Gas Administrator, and the supervising agency shall be notified when restoration is complete. (5) The size of the drill site shall not exceed four (4) acres in area unless a large area is justified and approved in writing by the supervising agency. The supervising agency shall not unreasonably withhold approval of the items listed above. (6) The Lessee shall notify the supervising agency within 48 hours after the termination of drilling operations at the drill site. IN TESTIMONY WHEREOF, the Executive Director of the Department of Natural Resources as agent for and on behalf of the Board of Trustees of the Internal improvement Trust Fund has set his hand and has affixed hereto the Official Seal of the Board of Trustees of the Internal Improvement Trust Fund of the State of Florida, in the City of Tallahassee, Florida, on this day of A. D. 19 (SEAL) BOARD OF TRUSTEES OF THE INTERNAL Board of Trustees IMPROVEMENT TRUST FUND of the Internal Imorovement Trust Fund By EXECUTIVE D@AEICTOR DEPARTMENT OF @@,TSRAL RESOURCES J' (CORPORATE SEAL) LESSEE 14 APPENDIX D Onshore Impacts of Oil and Gas Activities In Florida State-Owned Coastal Water Prepared by Thomas A. Herbert, Ph.D. and Linda L. Lampl T.A. HERBERT & ASSOCIATES Tallahassee, Florida 1984 and Summary of Conclusions and Recommendations of Onshore Facilities Siting Studies of � Southwest Florida Regional Planning Council � South Florida Regional Planning Council . Tampa Bay Regional Planning Council r.7- - - - I - __ 1 -3 - - - __ - - - - I -I - __ __ - __ __ - - - I TABLE OF CONTENTS INTRODUCTION ....................................... 1 METHODOLOGY .................... so .... oo!* ....... so. 2 EXPLORATION IN FLORIDA'S STATE WATERS .............. 7 Atlantic Peninsular Coast ..................... 7 Gulf Peninsular Coast ............. 0.0.000000.9 8 West Florida Panhandle ........................ 10 FUTURE PROSPECTS ....................... ossoooo-9.* 13 Geologic Prospects: Comparative Methods ....... 13 Industry Interest ................ ..... 015 INDUSTRY ACTIVITIES: WORKERS, GOODS AND SERVICES ... 19 Seismic Exploration ................... o ....... 21 Exploratory/Delineation Drilling .............. 24 Development Drilling .................... 31 Permanent Shore Facilities .................... 32 Workover and Maintenance Operations ........... 33 THE SCENARIOS ...................................... 34 Exploration and Development Scenarios ......... 34 Timing and Level of Activities ................ 36 SUMMARY ... ......................................... 41 CONCLUSIONS AND RECOMMENDATIONS .................... 42 BIBLIOGRAPHY .......................... o ............ 44 40 LIST OF FIGURES Figure 1 Location map of the areas of interest .... 5 Figure 2 Location of OCS Planning Subarea E-1 ..... 6 Figure 3 Location Map of Florida State Drilling Leases 224-A and 224-B ............. 12 Figure 4 OCS lease activity in Planning Subarea E-1 through 1984 ....................... 17 Figure 5 Geologic prospect estimate for Federal OCS and Florida state waters <300 meters water depth ........................ 18 Figure 6 Timetable for state waters drilling (Scenario 1) ....................... . 38 Figure 7 Timetable for combined state/federal drilling (Scenario II) ............. 39 LIST OF TABLES TABLE 1 ESTIMATES FOR FLORIDA OFFSHORE DEVELOPMENT SCENARIOS .......................... 40 PREFACE This report was supplied to the Florida Institute of Oceanography free of charge. The geological portions of this study were prepared by Thomas A. Herbert, Ph.D., a professional geologist and associate with the firm of T. A. HERBERT & ASSOCIATES in Tallahassee, Florida. The discriptions of the oil and gas industry were prepared by Linda L. Lampl, an applied anthropologist and associate with the firm. The firm of T. A. HERBERT & ASSOCIATES routinely provides consulting services for the oil and gas industry in Florida. The findings and conclusions are those of the authors. iv ONSHORE IMPACTS OF OIL AND GAS ACTIVITIES IN FLORIDA STATE-OWNED COASTAL WATERS INTRODUCTION This report considers exploration, development and production of oil and/or natural gas reserves within the 3 Marine League (Gulf of Mexico) and 3 Geographic Mile (Atlantic Ocean) zones off the coasts of Florida. Two scenarios are presented. Scenario I addresses the onshore impacts that might result from exploration and production in Florida-owned waters only; Scepario II considers the impacts of oil and gas activities conducted concurrently in state and federally-owned waters. This report presents a general discussion of 1) the geologic potential and leasing history for three study areas; 2) geologic prospect estimates for West Florida offshore areas; 3) industry requirements during exploration and development in terms of labor and materials; 4) Scenarios I and II. Recommendations follow, suggesting a case study to determin,e the actual impacts that accompany OCS activities in the Florida Panhandle. METHODOLOGY The object of this study was to determine the geologic potential for state-owned offshore waters and to identify the level of activity that might impact Florida coastal communities in the event that oil and gas reserves are sought within the 3 Marine League or 3 Geographic Mile zones. The guidelines were: 1) All impacts and their magnitude will ultimately be linked to the geology of the area. If the interpretation of the petroleum geology of the area indicates a high probability that hydrocarbons exist, impacts may occur; if the interpretation indicates a low probability for the discovery of hydrocarbons, there will be no call for leases, no drilling, and hence no impacts. 2) Most onshore impacts will be linked to the timing and number of rigs and the number of people and goods and services required by operators to support their projects. These people-related impacts will be influenced by industry practice in regards to hiring and purchasing and by the local or regional availability of skilled labor and specialized services. With that in mind, the first step was to divide the state into three manageable study areas 1) the Atlantic Peninsular Coast 2) the Gulf Peninsular Coast 3) the West Florida Panhandle (Figure 1). Geology was 2 the first consideration; industry requirements and practice in terms of people and supplies, the second. A review of the literature and historic leasing patterns in marine and upland environments indicated that the third area, the West Florida Panhandle, held the greatest geological potential. Informal interviews conducted with industry representatives of several major companies confirmed this information. As it became apparent that much of the industry would likely restrict interest to the West Florida area for the next decade,1 two study areas, the Atlantic Peninsular Coast and the Gulf Peninsular Coast, were eliminated from consideration. Scenarios were developed for the remaining study area, the West Florida Panhandle. Geologic prospects were estimated for the 3 Marine League zone along the. Panhandle by extrapolating on an area-to-area basis from the Minerals Management Service (MMS) OCS Eastern Gulf of Mexico Planning Subarea E-1 that lies in federal waters directly south of state- owned inshore waters of the West Florida Panhandle Since not all exploration companies were polled, this statement should not be interpreted as industry- wide policy. 3 (Figure 2). MMS estimates of the hydrocarbon potential for Subarea E-1 prior to Lease Sale 79 in January', 1984, were confirmed in January, 1984.; sixty of the 156 blocks leased in the Eastern Gulf of Mexico off Florida in Lease Sale 79 were in Planning Subarea E-1. Data regarding the number of people associated with oil and gas exploration, development and production projects were compiled after a literature review and interviews with industry representatives. The same sources provided information regarding the timing of activities and the goods and services required to support drilling projects. An overview of industry hiring and purchasing traditions were determined by interview. The availability of skilled labor and specialized services within the West Florida Panhandle Area were determined from recent literature, personal knowledge and discussions with industry representatives. 4 A Atlan West Florida Panhandle 0 0 03 0 Eg 0 @-h (D 0 cn Gulf Peninsular Coast 0 rT m 00 C2 870 86' 8S' 840 83' 920 81 0 --7_______7_0_K A LO__0_SA___ E*CAMSIA SANTA I I ROSA BALDWIN WA&TON I, JE F FPM004 WAKULL^ TAYLOR + + + + + ++ + + ++ + + + ++ + + + + + + ++ + GULF MAN L IT + + + + DIXIE + + + + ++Enl+++++++i + . . . . . . . ...... f@ Lr:vY +++++++++++++++ + + E-2 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . CITRUS HERMAN PASCO E-5 ri ELLAIII HILLS1110ROUGH MANATEE 0 E-3 DESOTO SARASOTA CHARLOTTE LEE COLLI E-4 E-4X 87' 0 86' 85 840 830 820 Figure 2 Location of ocs Planning Subarea E- 1 0 6 EXPLORATION IN FLORIDA'S STATE WATERS The state-owned waters of Florida were divided into three study areas to review the geologic potential, exploration history and interest, and future prospects (Figure 1). Atlantic Peninsular Coast The Atlantic Peninsular Coast study area extends from the Florida-Georgia state line south through the Florida Keys. Exploration geologists have expressed little or no interest in this 3-Geographic-Mile wide (nautical mile) state waters zone along the Atlantic Coast from Jacksonville to the Florida Keys in recent years. The State of Florida has never leased offshore areas between Duval County and Monroe County (Florida Keys) along the Atlantic Coast. However, several leases were granted in the Florida Keys in the 1950's and early 1960's. With the exception of OCS tests approximately 60 miles off Jacksonville, there have been no wells drilled in the OCS or 3 Geographic Mile zone off the Atlantic Peninsular Coast of Florida. Exploratory wells drilled from land locations along the Atlantic Coast showed scant geologic potential for hydrocarbons. State leases in the waters off the Florida Keys were tested in the late 1950's and early 1960's when 7 several deep wells were drilled to Cretaceous and Jurassic age formations. These offshore wells, drilled on State Leases 826-G, 826-Y, and 1011, and OCS Blocks (Sale 5, 1959) in the Marquesas (now considered Florida state waters), showed no commercial oil or gas, and the leases were allowed to expire. In addition, a number of deep exploratory wells were drilled on state leases from land, (island) locations as early as 1946, in the Keys but abandoned as dry holes. Drilling logs report that small quantities of 11young oil" (hydrocarbon liquids not fully matured or converted to commercial grades of oil) were found in several of the Keys wells.1 Even with these in mind, no serious interest is anticipated for state-owned waters in this area at this time or in the foreseeable future. Gulf Peninsular Coast The 3-Marine League zone along the Florida Gulf Peninsular Coast from Key West to Apalachicola was of geologic interest in the 1960's. Two deep test wells were drilled into Lower Cretaceous and possibly Jurassic Age formations from over-water locations on State Lease 224-B approximately five miles off Lee County (Drilling Permits Nos. 289 and 297). Additional wells were drilled on State Lease 224-B in the water lAttilio, Donald E. and Bruce Blake, 1983, Petroleum Potential, Exploration Possibilities of South Florida Basin, Florida Keys:. Oil and Gas Journal, v. 81, no. 45 (November 7), p. 148-153. 8 off Charlotte County (Drilling Permit No. 375), off Pinellas County (Drilling Permit No. 304), off Citrus County (Drilling Permit No. 382) and o ff Levy County (Drilling Permit No. 383). Additional deep tests were drilled off Franklin County in the Big Bend area on State Lease 224-A (Drilling Permits 281, 293, and 387). The wells were declared dry holes but provided valuable stratigraphic information useful in the interpretation of the subsurface geology and hydrocarbon potential within the 3-League zone. Exploration in the OCS off South Florida is now concentrated in areas 40-50 miles offshore in what is known as the South Florida Basin. Because of the paucity of stratigraphic information related to this geologic basin, little or no interest is expected in state-owned waters for at least a decade. The leases granted in OCS Sale 79, south of latitude 26 degrees north, represent the beginning of exploration in the deeper basin areas now considered most promising in South Florida. Discoveries in federal waters could lead to interest in the 3-League zone in the future as the geological picture becomes clearer. Modified versions of State Leases 224-A and 224-B are extant for the outer three statute mile band of the 3 Marine League area from Apalachicola to Naples, 9 Figure 3. However, no exploration interest has been expressed to the state in recent years.1 Sohio, however, did obtain leases to four blocks in federal- OCS waters located 35-40 miles off the Big Bend area in Lease Sale No. 79. If discoveries are made on the Sohio blocks, interest may be revived in state-owned waters beneath Lease 224-A in the Big Bend. West Florida Panhandle The state-owned waters offshore from Apalachicola west to the Perdido River (Alabama-Florida boundary) were originally leased in 1944 (State Lease 223). The area was subsequently leased again as State Lease 833 which expired in 1961. These leases included West Florida bays, estuaries, and coastal waters out to the 3 Marine League line; however, no wells were drilled seaward of the coast. This area is now considered of high geological potential because onshore geologic trends in the deep, Jurassic Age Smackover and Norphlet Formations have been traced into offshore areas. The Smackover is the production formation at Jay and Blackjack Fields in Santa Rosa County, Florida. Jay Field, with an estimated size of 420 million barrels of oil, is considered the largest upland field discovered east of 1 Personal communication with the Pat White, Division of State Lands, Department of Natural Resources. 10 the Mississippi to date. The geologic trend that contains the Jay Field is believed to extend into OCS Subarea Area E-1 that includes the Destin Dome; Destin Dome was the site of heavy but disappointing exploration activity in the mid-1970's. Exploration geologists are also tracing a deep natural gas trend that was discovered in the 1970's in the Norphlet Formation (Jurassic Age) off Alabama. If this trend continues in an easterly direction, interest may increase for leasing Florida state-owned waters south of Pensacola. L k= sn 0.4 0 0 -7 7 A) STATF OF FLORIDA ]pwE Caa.@l maLm"Las Losses (3 tatmte miles wide) V- o cm:t&L eurremder. WA rel"N.. t. the StAtm (I retu" miles wide) mcas.@l @@-m:"tts.intereet (@.W... 1=. but asin Lee 4%1 , sid@l royalty Rn oil *1 2 lomq Za 9, 1 for sulph@j SO an aLb.. Per Coant:1 rs"L.. I-se Im ssooratio of emy kind ithmt prior appr-l of Tmstsma) 0 :sk A .. ........ ir 4 L 0 U L F F M E X I C 0 0 Figure 3 Location Map of Florida State Drilling Leases 224-A and 224-B. 12 FUTURE PROSPECTS An estimate of the potential number of geologic prospects in Florida waters was prepared to determine the likelihood of onshore impacts, since the number of potential prospects in an area is considered an indicator industry interest. Such interest may be expressed in leasing and drilling activities which may lead to onshore impacts. Geologic Prospects: Comparative Methods Geophysical information regarding the numbers and size of prospects anticipated in the target area by individual oil and gas companies was not available; the data are considered propriatary. The number of potential prospects was determined by comparison of OCS Subarea E-1 and the offshore West Florida Panhandle area, Figure 4. The method, "look-alike field densities," is commonly used method to estimate the number of structurally definable (by seismic survey) fields in frontier areasi. Field sizes are assumed to be capable of yielding >250 million barrels. The OCS prospects off the Florida Panhandle are thought to be in this size range. 1 Baker, R. A., H. M. Gehman, W. R. James, and D. A. White, 1984, Geologic Field Number and Size Assessments of Oil and Gas Plays: AAPG Bulletin, v.68, p. 426-432. 13 The assumptions made for the "look alike" analysis are: The geologic potential for petroleum hydrocarbons beneath OCS blocks off West Florida within the 301) meter isobath is similar to areas within the 3-- Marine League zone from Bay County to Escambia County. The 300 meter isobath was picked as an arbitrary seaward limit on the basis of drilling economics and the regional geology of the West Florida shelf area. The resource estimates for OCS activities off West Florida prepared by the Minerals Management Service are a reasonable prediction of future discoveries for the study area. Planning Subare a E-1 contains approximately 1,072 blocks in the Pensacola and Destin Dome leasing areas. Each OCS block is formed by a 3 mile by 3 mile grid that encloses 5,760 acres unless adjacent to a boundary where fractional blocks might occur.1 The southern extent of the Destin Dome area is off the continental shelf edge in water depths of 600-800 meters. Figure 5 depicts the area of 749 blocks of the outer continental shelf in water depths less than 300 meters that was used for comparison with 134 blocks of state water's acreage extending from Panama City to the Florida- Alabama border. 1 The OCS grid system was extended inshore to state- owned waters to allow comparison between areas. However, the Universal Transverse Mercator (UTM) (1,000 meter grid) coordinate system was adopted for use in state waters in 1981 by the Governor and Cabinet acting as the Trustees of state lands. The UTM system will be used for future state waters leasing. 14 For this analysis, it was assumed that one geologic prospect is present for every three blocks (17,280 acres)- leased, and, from previous industry practices, one exploratory well is usually drilled for each prospect. Approximately 36 total geologic prospects were estimated to be present in the area depicted in Figure 5, an area of 749 OCS blocks, including some prospects near the Destin Dome (Sale 32 leases) that were drilled and abandonded as dry holes the mid-1970's. (The "look alike" method of analysis used here includes the total of evaluated and unevaluated prospects for comparison purposes.) A minimum of six geologic prospects are predicted for the state waters area depicted on Figure 5. The state waters area is equal to 134 (OCS) blocks, if the same field density per unit area is used. Industry Interest Industry interest remains high in the frontier area in the Outer Continental Shelf area off West Florida despite failures in the Destin Dome blocks in the 1970's, e.g. 60 new leases were awarded in January, 1984, in the Pensacola and Destin Dome (Eastern Gulf of Mexico, Subarea E-1. Seven pre-1984 leases are still active while 40 leases were allowed to expire. Two of the leases expired from previous sales were re-leased 15 in the January, 1984, lease sale. After eliminating the leases drilled and abandoned, more that 20 new geologic prospects (structural traps) are shown by the leasing pattern for new leases in Subarea E-1, Figure 4. The 134- blocks in the state-owned area depicted in Figure 5 are likely to become of significant geologic interest after more wells are drilled in federal waters. If a discovery occurs in federal waters, interest may be directed toward exploration of prospects of the same geologic time periodin inshore waters. Even a series of dry holes in the OCS could focus interest on the leasing of state tracts, particularly if data indicate evidence of stratigraphic traps suitable for hydrocarbon reserves. 16 87 OKALOOSN W LTON WAS I Ogj 1@'@,ESCAM Aiv 4 R .7 - @r - t LA FA kNSA Beach "It- 7 BALDWIN 0 ISLA OSA (D SANTA 4@- EE 757 rt (Z) 79, 797 all :a, n T $55 B65 9to $341 1 1 PEP 943 )LA 353. 1 SAC 987 to 54 73 01*1 CO 90 126 89 r) 142 Ist 0.00 "1 AAA&A 010 0 0 170 M 77 23D 10.0 A& 214 1 2390 i 249 268 22t 274 W I I I - 293 1001 31! 3111010 137 3" 315 FAI 3a2 10000 3111 363 A AA 415 01" 425 4341317 F 1 450 0 459 0 @aa 4781441 ass 0 5,13 01 1 512 1 11214111 1 538 547 10*557 I AAF 5#6 521 sot 51D 573 1211 635 6451 114 all 6711 $79 ass -flat M4 773 733 767 0 742 los 00 717 786 48 Cr I I I I I I Bo2 all all 830 713 P3 I I I I I I 1`1 1 F ass B66 374 $37 (D I -FT ass P) Aso t @ I - [ 943 4 sis $81 L I U2 Active Pre-1984 Lease A Relinquished Lease 0 Active Lease From Sale 79 (1984) ESCAMBIA SANTA ROSA OKALOOSA WALTON L Qn (D :Z (D 0@ o 0 0 0 134 State Waters Blocks --- 6 Geologic Prospects Estimated 0 Cn rt Co (D " E5 749 OCS Blocks <300 meters --- 36 Geologic Prospects Estimated Co (D C) @t C) 0 El " op (D It rt (D (D 0@ " (D 00 CI) C 00@ 0 t-I Cn INDUSTRY ACTIVITIES: WORKERS, GOODS AND SERVICES The commercial production of hydrocarbons involves three industry-recognized phases: . exploration, development, and production. Each phase is marked by highly specialized activities that require varying numbers of people to perform, varying levels of worker expertise and different kinds of equipment and supplies. The job location also varies according to phase and task. For example, the exploration phase includes 1) seismic exploration 2) leasing 3) exploratory drilling. Seismic exploration activities in marine areas, similar to those under discussion in this report, are conducted from a relatively independent operating survey vessel that is outfitted with sophisticated data recording equipment and other research aides; leasing activities, however, are conducted from corporate offices with little personnel movement or involvement Ln the geographic vicinity of a proposed drilling operation. .Exploratory drilling is conducted from one of several types of mobile drilling rigs that are submerged on location for marine drilling operations. Exploration drilling rigs require a shorebase staging site near the prospect while development drilling requires a longer-term commitment to the area by the 19 oil companies. A recent study of one drilling operation in West Florida indicated-that the manpower needs for exploration are supplied for the most part by worker's who commute to the project from a wide geographic area of the Gulf Coast.1 Final stages of development evolve into production of hydrocarbons and higher levels of impacts to the local community; the later stage is known as "production." The explorat.ion and development process may take 6-10 years to complete during which time planning for onshore impacts can take place. An overview of industry requirements for the exploratory and development phases is presented below in terms of employment, supplies, materials anq other needs that might effect coastal communities. Production related impacts are discussed briefly; OCS facility siting studies prepared by six coastal area regional planning councils in Florida provide in-depth discussions regarding onshore facilities associated with all three phases. The Minerals Management Service provides a regular update of onshore impacts in their summary reports.2 I Herbert, T. A. and L. L. Lampl, 1983, Travel and Residency Patterns of Rig Workers: The Getty Oil Company Project, Santa Rosa County, Florida: Tallahassee, FL (unpublished). 2 U. S. Dept. of the Interior, Minerals Management Service, 1983, Gulf of Mexico Summary Report: Outer Continental Shelf Oil and Gas Activities in the Gulf of -Mexico and their Onshore Impact: Reston VA. 20 The term "Industry," as used in this paper, includes the myriad of independent companies and contractors that service oil and gas exploration and production operations. For example, these may include catering companies that handle housekeeping duties and cooking on rigs, mud logging companies that monitor and log the drill cuttings produced by exploratory drilling, roustabout (labor) contractors, and companies that provide specialized crews for specific tasks, i.e. 11casing crews" to set well casing. Seismic Exploration The seismic exploration process uses sound waves to locate subsurface geological structures capable of bearing hydrocarbons. Energy sources such as compressed air or dynamite are used to generate acoustic signals that are sent from a host survey vessel down through the water column and into the rock strata. Reflections returning from the subsurface are recorded by hydrophones that are attached to cables towed by the survey vessel. . Geologic structures are identified and evaluated according to historic seismic and regional stratigraphic data. If the structures look promising in terms of potential for hydrocarbons, they may become "prospects" for an exploration company, who will in turn attempt to lease the surrounding acreage. 21 Seismic 'exploration may occur before, during and after lease sales in marine areas, i.e. Florida state-- owned waters. Seismic exploration surveys are commonly used for field reconnaissance in frontier areas (new areas for exploration) where stratigraphic information is scant. Seismic surveys may be rerun in an area after exploration wells have been drilled; the additional data are used to delineate structures that were confirmed during drilling. Surveys may also be rerun to take advantage of improvements in technology. In other words, a single geologic prospect may be the subject of multiple cycles of seismic survey activity during the move from the status of prospect to producing field. Marine seismic surveys are relatively independent of shore needs, both in terms of labor and facilities. Survey vessels range from 150' to 250' in length; crews vary in size but may exceed 25 persons. If necessary, these vessels can operate offshore without returning to port for fuel or supplies for up to a month. Depending on the policies of the seismic company, crews may stay with the vessel for the duration of the work or may change out at shoreside locations on a six to eight day rotation schedule. Some oil companies own their own seismic exploration vessels and use company crews. Other exploration companies use one of the dozen or 22 more independent seismic contractors operating in marine environments off the southeastern United States. At the present time, most Gulf Coast seismic vessels are based in Louisiana or Texas ports and can operate in any area of the Gulf of Mexico. Crews and technicians who live and work onboard are believed to be drawn from a wide geographic area around the home port. On occasion, boat hands are hired locally as crew replacements when a survey vessel puts in for supplies or crew changes. Typically, supplies needed for a seismic survey would include fuel, water, and perishable foods. These essentials are usually available at port facilities that routinely supply the commercial fishing or marine- oriented industries along the Gulf Coast. Services required would include equipment and engine repairs, on an as -needed -basis. Docking or shore facilities are the same as those required for other vessels of comparable size, i.e. docks, navigation channel. SHORESIDE FACILITIES REQUIRED FOR SEISMIC OPERATIONS Local Services: Fuel, water, and food, engine repairs, as needed Local Personnel: None required, replacements are possible Local Facilities: Docks capable of handling 150'-250' vessels, 14' navigation channel 23 Exploratory/Delineation Drilling The object of exploratory drilling is to confirm the absence or presence of commercially recoverable amounts of hydrocarbons in the geologic prospect(s) identified during seismic exploration. A mobile drilling rig is positioned over the prospect; the well spudded (started) and drilled to the target formation(s). Drill cuttings are monitored as the well progresses; cores are taken, tested and evaluated to determine the sequence of beds and type of rocks encountered. This stratigraphic information is obtained in case other exploratory wells are drilled in the same area. If the prospect is thought to be' commercially viable, the well is "completed," the term used to indicate that additional casing and tubing are set down the hole; the well is then tested (flow is measured). Other exploratory wells may be drilled in the same area to delineate the "field." If the test shows a dry hole, meaning the hydrocarbons are absent or the quantity is not commercially significant, the well is plugged and abandoned. In such cases the prospect itself is usually abandoned and the leases allowed to revert or expire without further exploration. If the quantities of hydrocarbons discovered on a lease are considered commercially valuable, indicating 24 the potential for a field, an evaluation or delineation process will be triggered. At that time, additional wells are drilled to outline the geographic area and thickness of the pay zone(s) in the potential field. Exploratory drilling typically begins soon after leases have been granted and environmental and drilling permits are approved. Exploration drilling is an expensive and risky venture, particularly when conducted in water depths in excess of 100' and to target depths 16,000' to 22,000', below the earth's surface --- the conditions expected off Florida's coast. Deep offshore wells can take from three to nine months to reach total depth; well costs range from $15 to $25 million. The delineation process may take several years to complete with no guarantees that a commercial field ultimately will be found. The well costs influence the economic feasibility of a prospect. High well (and development) costs mean that significant reserves must be discovered to make a field a commercial venture. To warrant development, in the Florida OCS area or state waters, at least under 1984- market conditions, a field would require reserves of 60 to 100 million barrels of oil or the equivalent in gas and condensate. By comparison, the size of the Jay Field in Santa Rosa County, discussed earlier as the largest discovery east of the Mississippi River to date, is estimated at 420 million barrels; the reserves 25 at Blackjack Creek,, however, are estimated at 60 million barrels, meaning that it would be a marginally economic field if discovered today in a marine environment off Florida. Exploration companies, because of high drilling costs in frontier areas, may only risk one well for each geologic prospect, e. g. Getty Oil Company's 1983 test on State Drilling Lease 2338 in East Bay, Santa Rosa County.1 The test well is usually drilled at the optimum location over the geologic prospect based on geophysical data. Exploratory wells are most often drilled vertically; directional wells are sometimes used in exploration drilling in unusual situations, e.g. a navigation fairway may require an alternate surface position. Both exploratory and delineation drilling are conducted from mobile rigs that are usually under contract to the exploration company from an independent drilling company that owns and operates rigs. The rigs are either towed or moved to location under their own power. A 25-30 member drilling crew is usually permanently assigned to a rig. Each rig crew is supported by other live-aboard workers from service 1 Getty Oil Company spent 12 years in the permitting process for a single test on a 3,000 acre structure beneath East Bay; a dry hole led to the abandonment of the prospect in late 1983. 26 companies that provide caterers and housekeepers, crewboat and tugs, and pollution control specialists in some operational areas.1 Specialty service personnel appear on the rig from time to time, depending on the drilling phase. For instance, special crews are brought aboard when new casing is run, safety personnel maintain gas detection equipment, and other service crews arrive to log, test and complete the well. In the event of a dry hole, cementing crews may come aboard to plug the well. Crewmembers may catch a crewboat or heliocopter at a shorebase or other supporting facility. In frontier areas, drilling crews are sometimes assembled at a central location, Houma, Louisiana, for example, and bused or flown to the shore base. Usually, other service company crews are responsible for their own home-to-shorebase transportation. Drilling crews usually work seven or fourteen days on the job and an equal number off (7/7 or 14/14), depending in part on the rig's location from a shorebase. Schedules for service company crews vary from 5/5 to 21/7. Specialty service personnel may only spend a day or two onboard on an as needed basis; some 1 Offshore operations in state waters usually require additional rig personnel to handle more stringent pollution control operations; Alabama, for example, has a "no discharge" regulation. 27 specialists may only spend hours onboard. The total personnel onboard at any one time may vary from 40 to 70 workers, depending upon the drilling phase. Over the three to nine month period it takes to drill an exploratory or delineation well, a total of as many as 600 persons may live or work aboard the rig.1 The number of rigs operating in an area at any one time is governed by the schedules of the individual companies involved and the number of prospects. Rigs are queued from one well to another to minimize rig standby costs and to allow time for evaluation of the results of an exploratory well. Actual exploration drilling strategies vary from company to company. A drilling rig may be retained for a year or more and moved from one prospect to another if an exploration company holds leases on more than one prospect. Exploration partnerships will be formed to jointly explore high risk areas. Other oil companies often take a "wait-and-see" attitude on evaluating lease acreage, letting another company take the active role in exploration and even development. A dry hole on 1 A tally of rig personnel who worked on Getty Oil Company's East Bay test indicated 627 persons worked on the operation over a 9 month period. One third of the persons reported Florida residency. Exxon Company, U.S.A. kept similar records for operations in Mobile Bay in Alabama state-owned waters and recorded 450-500 workers over a 9 month period. ODECO reports a similar employee count for its operations off Louisiana. 28 a group of lease blocks usually means that the entire area will be abandonded. The exploration strategies vary from company to company and are governed by the economics of exploratory drilling at the time leases are evaluated. Specialized equipment and materials will be needed over the life of each project: as an example, drilling ,fluid components, casing and tubing, test equipment, and logging are all major expenditures. At this time (1984), oilfield service and equipment centers that supply Gulf Coast operations are located in Laurel, Mississippi, and New Orleans, Houma, Morgan City and Lafayette, Louisiana. A new center may be emerging at Mobile, Alabama, where discoveries from 1979-1984 pushed the offshore frontier to the East of Mobile Bay. In Florida, a nucleus of specialty services already exists; a well logging firm, environmental safety, roustabout contractor, and wire line and testing contractors, are already located at Jay in West Florida. .Unlike seismic survey vessels, exploratory drilling operations require shoreside support. The criteria for selection of a shorebase includes: proximity to the rig itself and road/highway access for trucks transporting heavy loads such as casing, tubing, cementing units to and from the shore site. A 29 shorebase capable of supporting an offshore explorator, drilling operation requires a 3-5 acre storage area, a loading dock with a minimum of 200' of bulkhead with access via a 14-18' channel, and quarters suitable for a temporary office. Several exploration company personnel (usually commuting from the nearest exploration office) and contract service personnel (usually hired locally), a total of 4-6 persons, manage the site and handle shorebase logistics and dispatching operations. Semi-skilled and skilled labor may be hired locally to run cranes and fork lifts, provide welding and repair services and general labor tasks. Pensacola and Panama City, Florida, are likely staging areas for northern Gulf OCS and state waters operations. The Uest Florida Regional Planning Council study on facilities needs discusses in detail the locational aspects and needs of shore facilities. REQUIREMENTS FOR A TYPICAL SHOREBASE � Local Services: Fuel, water, food, welding, minor fabricationandsupplies � Local Personnel: 8-10 skilled and semi-skilled workers � Local Facilities: Docks, storage areas and suppliers of non-specialty marine equipment 30 Development Drilling Development is a period when additional wells are drilled to "fill in" the spacing between the delineation wells to optimize hydrocarbon recovery. Once reservoir characteristics of a field are known, identified by delineation drilling, field development planning and development drilling begins. Development wells are frequently drilled directionally from one or more platforms at central locations throughout the field. These development wells can be drilled by a mobile drilling rig; often the rig used for exploratory and delineation drilling is put on long-term contract to begin development wells. A production platform or well jacket is then placed over the wells drilled by a mobile unit then the wells are connected to a pipeline collection system. Permanent drilling and production platforms are commonly used to complete multiple wells and house production facilities. These large structures are fabricated in shipyards (usually on the Gulf Coast) and are towed into position. Two wells can be drilled at a time from a fixed platform, and, as they are completed, the wells can be hooked to flow lines to begin production. Numerous combinations of rigs and platforms are possible for field development, depending upon the size and type (oil and/or gas) of the field. 31 Drilling crews who work aboard fixed platform operations are contract personnel assigned to duty tours of 7/7 or 14/14. Data regarding.these workers home bases are not available. Permanent Shore Facilities Planning and construction of storage and processing facilities on shore usually begins with the period between delineation and development drilling. Schedules are usually phased so that as wells are completed the hydrocarbons can be brought through a pipeline to a shore plant or terminal. If oi 1 is the hydrocarbon discovered, a storage terminal for transhipping to a refinery must be designed and built. If natural gas is discovered, a gas treatment plant must be designed and built and connected to a pipeline carrier for distribution. These planning and construction operations are carried out simultaneously with the early stages of development drilling so that shore facilities and pipelines are completed when the majority of the development well-s are ready to begin production. The entire operation from exploration to full scale production often takes a decade to complete. The shorebase support facilities for production drilling operations take on a more permanent character as long-term commitments to an area are recognized. An oil company may move from temporary, leased facilities 32 to a permanent docking area with ample storage and buildings. Service companies usually acquire adjacent land to handle their operations. Throughout development drilling, shorebase personnel requirements should remain nearly the same as for exploratory operations. Workover and Maintenance Operations Throughout the life of a field (15-25 years), the operating wells will require constant attention to keep them in proper working order. These "workover" operations generally require fewer personnel than for production drilling, but shore support will remain about the dame. Occasionally, over the life of a field, replacement wells will be drilled to maintain production levels. 33 THE SCENARIOS This section considers two scenarios for exploration and development in the.West Florida Panhandle area's offshore state-owned waters: Scenario I considers exploration on state waters alone, Scenario II considers concurrent operations in state and federal waters. The West Florida Panhandle area is adjacent to OCS Planning Subarea E-1. Figure 2 depicts the area under consideration for this analysis. Exploration and Development Scenarios The Minerals Management Service staff prepared exploration and development scenarios as background for Lease Sale 79 in January 1984 which are presented in Final Regional Environmental Impact Statement, Gulf of Mexico, Volume 1, January 1983. As defined by the Minerals Management Service (Final EIS, Volume 1, p. 249) a development scenario is: a hypothetical framework of assumptions and estimates on the amounts, timing, and general locations for OCS exploration, development, and production activities and facilities, both offshore and onshore. As such it is not a prediction of future oil and gas activities because all of these .activities are unpredictable prior to a lease sale and only become clear as offshore development proceeds from lease through production. The Minerals Management Service "most likely find scenario" was used to describe anticipated levels of activity in the OCS and as a guide to predicting state waters impacts. 34 Scenario I is the prediction of the number of wells and related activity on state waters tracts alone. Table 1 (1) presents the number of wells, platforms and pipelines that could be expected in the Panhandle for state waters exploration and development based on the evaluation of six geologic prospects with one field discovery. State waters activity is predicted to be 14 exploration and delineation wells, 15 development wells, one platform, and 20 miles of pipeline. These figures were extrapolated from MMS "most likely find" estimates for Sale 79 areas in Planning Subarea E-1. Scenario II is summarized in Table 1 (11); this depicts the level of activity anticipated for concurrent state/federal waters offshore explorations and development. This scenario would include a total of 50 exploration and delineation wells, 53 development wells, 3 platforms, and 125 miles of pipeline. The MMS predicted activity level in OCS waters alone shows 36 exploration and delineation wells, 38 development well-s, and 2 platforms; 105 miles of pipeline will be constructed to bring the product to shore. The MMS "most likely find" for OCS Planning Subarea E-1 off West Florida was used as the baseline for these estimates. 35 Timing and Level of Activities Preparation of a lease program for state-owned waters will probably require a minimum of one year. At the earliest, leasing in state-owned offshore waters would begin in mid-1985 or 1986 and drilling on West Florida state leases could not before late 1986. It is anticipated, however, that exploration drilling activities will begin on blocks leased in OCS Lease Sale 79 in OCS Subplanning Area E-1 in late 1984 or early 1985. Figures 6 and 7 present the estimated drilling and development timetables for state waters and for simultaneous state-federal activities, respectively. Figure 6 is the timetable for state waters activities; it was prepared under the assumption that exploratory drilling would begin in 1987 and that a field discovery would be made by 1989. If a discovery occurred by 1989, a platform could be set in 1990; development wells then could be drilled directionally from the platform. Figure 7 is the combined timetable for state and federal activities; it was prepared under the assumption that exploratory drilling would begin in the OCS area late in 1984 and that drilling in state waters would begin in 1987. Under this scenario, the peak 36 years for rig activity in the West Florida Panhandle area would be 1988 and 1989. This assumes a total of four rigs each year with each rig drilling three exploratory wells per year. By 1989 a platform could be set, and multiple wells could be drilled from the platform. The peak years for wells drilled would 1989- 92 with the majority of the wells drilled from the production platforms.1 The scenarios carry a caveat. The exploration programs of the companies that hold the 68 active leases in Planning Subarea E-1 may or may not be carried out over the lease term. Some companies will take a "wait and see" attitude; others will actively explore their leases. The phasing of the exploration activities will be governed by the success or failure of the first wells drilled, the internal corporate planning schedules of individual companies, and, to a large degree, the implementation of the stipulation governing drilling operations in military areas. 1 Operations now underway in the waters off the State of Alabama will provide an excellent case study to guide planning in Florida. A recent publication of the Alabama Geological Survey, "Oil and Gas Leasing and Drilling Alabama State Coastal Waters and Adjacent OCS Waters, 1951-1983" should be helpful to the reader. 37 DEVELOPMLiNF TIMETABLE DI)R DRILLING ON STATE LEASES (SCENARIO 1) Wells Drilled 20 + + + + + + + + + + + + + + 19 . . . . . . . . . . . . . . . 18 + + + + + + + + + + + + + 17 . . . . . . . . . . . . . . f 16 . . . . . . . . . . . . . + + 15 . . . . . . . . . . . . . . . 14 + + + + + + + + . . . . . . . 13 . . . . . . . . . . . . . . . 12 . . . . . . . . . . . . . . . 11 . . . . . . . . . . . . . . . 10 + + + + + + + + + + + + + +' + 9 + + + + + + + + + . . . . . . 8 + + + + + + + f + + + + + + 7 + + + + + + + + . . . . . . 6 + + + + + + + + + + + + + @ 0*0 5 + + + + + + + + + + + 4 + + + + + + . . . . . . 3 + + + + + + + + + @kv 2 + + + OX@ + + + + + + + + + + 184 1 F 99 '91 '92 )5 '96 '97 '98 DRILLING RIG ACTIVITY BY YEAR Exploration/Delineation Well Development Well Platform Installed OF ZY @Z@ 04- %,A APOA10 Figure 6 Timetable for state waters drilling (Scenario 1) 38 COMBINED DEVELOPMENT TIMEFABLE FOR DRILLING ON STATE A14D FEDERAL LEASES (SCENARIO 11) Wells Drilled 20 + + + ++ + + + + + + + 19 . . . . . . . + + + 18 . . . . . . . . . . . . 17 . . . . . + + + + + + + 16 + + + + + . . . . . . 15 . . . . . . . . . . . 14 + + + + + + + + + + 13 . . . . . + + + . 12 . . . . . . . . . . 11 10 + + + . . . . . . 9 . . . + -F + + + + 8 . . . . . . . . . 7 . . . + + + + + + 6 + + + + + + + + 5 + + + + +- 4-++ 4 + + . . . . . . 3 + oo@ + + + + + 2 + + + + -F+ 1 + + + + + + '84 '85 '86 '87 '88 '89 '90 '91 92 '93 '94 '95 '96 '97 '99- DRILLING RIG ACTIVITY BY YEAR Exploration/Delineation Well /0 Development Well @& 'N Platform Installed "'o Figure 7 Timetable for combined state/federal drilling (Scenario II) 39 TABLE 1 ESTIMATES FOR FLORIDA OFFSHORE DEVELOPMENT SCENARIOS SCENARIO I --- STATE WATERS ------------------------------------------------------ Geologic Prospects --------------------------- 6 Fields Discovered ---------------------------- I Exploration/Delineation Wells ---------------- 14 Platforms ------------------------------------ 1 Development Wells ---------------------------- 15 Pipeline Miles ------------------------------- 20 Years of Field Life -------------------------- 2Q SCENARIO II --- STATE/FEDERAL WATERS ------------------------------------------------------ Geologic Prospects --------------------------- 26 Fields Discovered ---------------------------- 3 Exploration/Delineation Wells ---------------- 50 Platforms ------------------------------------ 3 Development Wells ---------------------------- 53 Pipeline Miles ------------------------------- 125 Years of FieldLife -------------------------- 20 Source of Federal Waters Estimates: Most Likely Find Scenario, USDI, Minerals Management Service, Final EIS for Sale 79, p. 255. Source of State Waters Estimates: Look alike field comparisons between state and federal waters areas and extrapolations from MMS information. 40 SUMMARY The onshore impact associated with exploration for oil and gas reserves in state-owned waters off the West Florida Panhandle is expected to be minimal. Panama City and Pensacola would be suitable for temporary or permanent shorebase sites and would, therefore, be most likely to share any onshore impacts associated with support of the two to three rigs needed for exploration and delineation drilling. Two or three shorebase facilities could be located in these cities; the most probable combination is one in Pensacola and one or two in Panama City. Development wells from the mobile rigs and platforms would probably require the same number of shorebase facilities. Recent studies focused on exploration and development in the Outer Continental Shelf areas off Florida also suggest that onshore impact in the OCS only would be minimal through the exploration phase activities. However, some studies suggest that shorebase facilities for offshore Florida OCS operations in the northern Gulf of Mexico will be located in Mobile, Alabama, or in Venice, Louisiana. 41 CONCLUSIONS AND RECOMMENDATIONS The scenarios presented in this report are designed to provide the reader with a range of the kinds of activities and the level of activities that might be associated with exploration and development in state and federally-owned waters off the West Florida Panhandle coast. Conclusions 1) Oil and gas leasing interest probably in state- owned waters will most likely be focused in the offshore area of the West Florida Panhandle for the next decade. 2) Interest in state waters leases will be keyed to geologic interpretations from upcoming drilling in the OCS and from seismic investigations in state waters. 3) OCS exploratory activities will begin in late 1984 or early 1985 in the area beyond state-owned waters off the Panhandle and will probably continue through the end of the decade, even if no discoveries are made; drilling may begin on state leases by 1987. 4) If a discovery is made, development drilling, will begin and 15-25 year commitments will be made to the onshore areas to support these activities. 5) An analysis of OCS leasing patterns indicates at least 20 new geologic prospects have been identified in federal waters; at least six similar prospects are predicted for inshore state waters. 6) Four drilling rigs are predicted for combined state and federal waters operations; similar activities off Alabama can serve as a case study to guide planning in Florida. 42 7) The six regional planning reports on OCS facilities siting provide the basis for long-term planning for OCS and state waters operations. 8) The onset of OCS exploration activities in late 1984 provides a unique opportunity to begin studies to document impacts through an analysis of worker travel and in-migration patterns. Recommendations 1) It is recommended that a study of the travel and residency patterns for workers on OCS drilling operations off the Panhandle be considered and implemented before operations start. 2) It is recommended that the facilities siting study for West Florida be updated on a continuing basis to begin planning for longer-term onshore impacts. 43 BIBLIOGRAPHY Attilio., Donald E. and Bruce Blake, 1.983, Petroleum Potential, Exploration Possibilities of South Florida Basin, Florida Keys: Oil and Gas Journal, v. 81, no. 45 (November 7), p. 148-153. Baker, R. A., H. M. Gehman, W. R. James, and D. A. White, 1984, Geologic Field Number and Size Assessments of Oil and Gas Plays: AAPG Bulletin, v. 68-4, p. 426-- 432. Exxon Company, U.S.A., 1983, Offshore Alabama: (brochure). Herbert, T. A. and L. L. Lampl, 1983, Travel and Residency Patterns of Rig Workers: The Getty Oil Company Project, Santa Rosa County, Florida: Tallahassee, FL (unpublished). MacGregor, J. R., 1983, Direct Employment Associated with Gulf of Mexico OCS Oil & Gas Activities: unpublished paper prepared for ODECO. Mink, Robert M.I. 1984, Oil and Gas Leasing and Drilling in Alabama State Coastal Waters and Adjacent OCS Waters, 1951-1983: Alabama Geological Survey Oil and Gas Report 7B, 39 p. Northeast Florida Regional Planning Council, 1983, Coastal Energy Impact Study for Northeast Florida: Jacksonville, FL. South Florida Regional Planning Council, 1983, OCS Facility Siting Study, Volume I and II (Draft): North Miami, FL. Southwest Florida Regional Planning Council, 1983, Outer Continental Shelf Onshore Facilities Siting Study: Fort Myers, FL. Tampa Bay Regional Planning Council, 1982, Coastal Energy Facility Siting Study: Tampa, FL. U. S. Dept. of the Interior, Minerals Management Service, 1983, Gulf of Mexico Summary Report: Outer Continental Shelf Oil and Gas Activities in the Gulf of Mexico and their Onshore Impact: Reston VA. 44 U. S. Dept. of the Interior, Minerals Management Service, 1983, Regional Environmental Impact Statement, Gulf of Mexico, Volumes I and II: Metairie, LA. West Florida Regional Planning Council,,1983, Regional Outer Continental Shelf Onshore Facilities Siting Study for West Florida: Pensacola, FL. Withlacoochee Regional Planning Council, 1983, Outer Continental Shelf Onshore Facility Siting Study for the Withlacoochee Region, Volumes I and II: Ocala, FL. Zinn, Jeffery, 1978, Environmental Planning for Offshore Oil and Gas, Volume II: Effects on Coastal communities: The Conservation Foundation, Washington, D.C. 45 OUTER CONTINENTAL SHELF Onshore Facilities Siting Study 29 Z 96 C3 52M r7" cm REGIONAL COMPILIAERBSIVE PLAN URIES Southwest Florida Regional Planning Council 2121 West First Street, Fort Myers, Florida Published April, 1983 Preparation of this document was financed through a Coastal Energy Impact Program Subgrant (82-CE-66-09-00-21-010) from the Florida Depart-ment of Veteran and Community Affairs, Division of Local Resource Management, and the Office of Coastal Zone Management, National Oceanic and Atmospheric Administration, tinder the-Coastal Zone Management Act of 1972, as amended. 46 Part Ix - Conclusion 'A. Conclusions 1. Future Oil and Gas Activity Exploration activities for oil and gas can be expected to continue in the Eastern Gulf. This is part of a national effort to achieve full development of OCS re- sources. Over-dependence on unstable foreign sources and experiences such as the 1973 Arab oil embargo have stimulated this action. Factors such as increased fuel supplies and lower prides are unlikely to reduce this effort to develop the OCS because they are short term. Therefore, local governments should not reduce the attention paid to OCS activities. The Gulf of Mexico is an area of proven resource po- tential. -It has an existing industry base--at least for the Central and Western Gulf. Additionally, there are producing areas onshore. For these and similar reasons, the industry will likely continue to push for development of the Eastern Gulf. 2. Onshore Impacts One of the purposes of this project was to provide some perspective on the onshore impacts possible if the OCS were developed. That has been achieved. It has been difficult, however, because there is ihadequate his- torical information on which to develop a projection in a reasonable manner. It is possible that one hundred holes could be drilled and all be dry or at least below commercial production. Success could be achieved when the next hole is drilled. It is that type of uncertainty that makes the projection of specific onshore impacts almost impossible. Based on the experience and knowledge gained through this project, however, several conclusions can be made. 1), The chances of a commercial-level find in the South- west Florida OCS are very low. 2) If oil were found, it would be a low-level find. 3) The impacts of such a find would be minimal, perhaps even lower than noted above. 47 4) Onshore impacts are likely to be further reduced by industry use of facilities in other areas, such as Tampa Bay. These areas offer much fewer problems for onshore facilities in terms of public resistancef permitting difficulties, environmental problems, land use conflicts and other factors. 5) There will be significant resistance from a broad range of citizens and residents to the siting of onshore facilities in Southwest Florida. 6) Elected and appointed officials at local, regional and state levels will reflect this public sentiment, and, in order to ensure protection of Florida re- sources, will closely monitor and may oppose industrly actions to locate in this Region, without clear-cut plans preventing any adverse environmental. impacts. B. Recommendations 1. State The State is the level of government in Florida with the most direct and frequent contact with federal 4gencies in OCS matters. It is through the Governor or hid represen- -'Cative that the concerns'of Florida are communicated to the U.S. Department of the Interior. A letter or resolu- tion to a federal agency from the Governor and Cabinet carries more weight (political and legal) than one from a county commission. In order to make the optimal-use. of that fact, however, state government must have part-i-c-1- pa-'ion by regional planning councils and local governmen't-s in as many steps of the OCS development process as possible. From the perspective of the Regional Planning Council and local governments, it is very important that the relevant state agencies continue to provide information. As of now, the Office of the Governor and the Department of Community Affairs perform that function. Without. information, neither the Regional Planning council nor local governments can adequately assist the state in dealing with the federal government. This arrangement provides definite benefits for the State. The letters, resolutions, comments and other items from regional planning councils and local governments can serve a number of important functions. 48- 1. Provide more specific information about local conditions, 2. Indicate local preferences, 3. Give support to comments made by state agenciest 4. Bring up questions about problems perhaps over- looked or not considered important at the state level, and 5. Catch errors and omissions in the document being reviewed. Most importantly, this evidence of local awareness and concern is especially necessary for Florida in that it gives added weight to the comments and questions raised by state agencies. Some federal agencies or staff may think that comments from state agencies are not representative of a broad range of concerns among agencies and individuals throughout Florida. The broad participation discussed here can help to correct that. There should be participation by a broad range of state agencies. in this way, the variety of expertise available to the State can be more fully utilized. If@this is done, the result will be a more careful, thorough review of proposed federal and/or industry actions. The informa- tion developed in this study will provide state agencies with a firmer base from which to examine those actions. Additionally, it will assist in the review of state policies that address OCS activities now and in the future. This will ensure that the resources of Florida are developed in a manner that is advantageous to the people of this state while protecting its resources wisely. The review of the Draft Regional Environmental Impact Statement- Gulf 9f Mexico in 1982 was an excellent example of this type of effort. 2. Region For the Regional Planning Council, this project has re- sulted in adoption of policies as Council rules. This represents an important step in dealing with this issue. These policies will provide a basis for Council review of OCS projects and related activities with impacts on this Region. 49 This Council should continue to parti-ipate in reviews of OCS documents and reports. Especially important a-re review and comment of environmental impact statements for proposed OCS activities. Council also provides another important function for this Region as clearinghouse. Local governments - even if interested - cannot always review and comment on OCS documents and activities. Council, however, can assist local governments by distributing relevant materials, notifying local staff of meetings, events, documents, etc. Council can also present local and regional concerns to state and federal agencies by acting as a local ".advo- cate." State agencies and staff could be unaware of local and regional concerns or attribute less weight to a regional or local concern than desirable. In such a case, regional- and local review and comments can ensure an awareness at the state level of the existence of the 15roblem and of its importance. As noted above, it is essential that local concerns be transmitted clearly and quickly to the state and to the Governor. The regional planning council assists in this by forwarding.the written concerns and comments from local governments to the appropriate state agency and staff. Such comments are combined with regional comments to pre- sent the most complete picture of regional and local con- cerns possible. In requesting review and comment on a proposal, a very im- portant question is that of whom to contact. For state and local. government, this problem can cause unnecessary delays and even missed deadlines. If an environmental impact statement is sent to the wrong local staff person, this error may not be discovered until it is too late. The state will have lost the input to be gained from the local level and the local government will have lost -the opportunity to comment. The regional planning council can provide the effort to reduce the chance of this happening. Another way to foster awareness of OCS activities is to maintain relevant reports, documents and other material in the SWFRPC library. Council members and staff will. then have at hand the information needed to review OCS related proposals. This material can be used in a similar fashion by local governments. In addition, members of the media and the public in general can benefit by the presence of this material. 50 3. Local Specific discussions about individual local governments are found above in this report. General comments follow. Local governments, just as the Regional Planning Council, have no specific authority or control 'over activities in areas beyond their jurisdiction, such as the OCS. They can exercise considerable influence, however, by the review 'and comment that they provide on proposed activities in the OCS and on related activities in state waters and on land. They regulate land uses with- in their own jurisdictions via local codes and ordinances, It is imperative that local government participate as much -as possi@le. This may seem unnecessary. To wait until applications are received for construction and other per- mits for an onshore facility, however, is to wait too long. For local governments, it may not be realistic or possible to monitor federal actions and proposals. It is possible, however, to utilize state and regional efforts to monitor those actions. For SWFRPC to function effectivelv as an advocate of local concerns in this issue, local gov;rnments should respond as much and as specifically as possible. It is important that-the concerns of local government be stated as defini- tively as possible. An environmental impact statement, for example, prepared for an OCS lease sale addresses a relatively small area - from the 'federal perspective. From the regional and local perspective, however, that area - and the concerns that are created by the sale - can loom much larger. This factor is-even more important now that OCS lease sales are being conducted for much larger areas. The environmental impact statements prepared for these sales can co,@er millions of acres. Sale 79, for example, addresses 58 million acres and the entire Eastern Gulf. In contrast, the total acreage offered in the thirty-three general oil and gas lease sales from 1954 - 1982 was only 33.3 million acres.1 The average sale covered about one million acres. For the period of 1954 - 1979, only 822,601 acres were leased in the Mississippi-Alaba.-,na-Florida OCS (i.e., the Eastern Gulf).2 51 Of special importance in reviewing OCS-related proposals - and many other itents as well - is the need to note concerns as early as possible. E-xctensive review may not be pos- sible at that moment but it alerts all parties that this is a concern. Also, in reviewing several drafts of very large proposals, it is easy to forget something due to the large size of the document and the variety of issues. Additionally, even if an issue is noted later, the comment period may be closed by then. The list of various sites given above in this report may contain several sites that may one day be the scene of OCS activity. Probably more important, however, are the local policies, codes and Plans that could affect the siting process. Industrial activity would be restricted by the current policies of most local governments in the Region. Generally, even where allowed, the correctly zoned land lacks Gulf access or adequate area. If a local government is seriously interested in attracting OCS related industry, it must consider some alternatives such as the following: 1. Rezone existing land with Gulf access to industrial categories. 2. Increase the level of industrial activity allowed on potential sites with industrial zoning and Gulf access. Either of the alternatives will likelv generate opposition from citizens. The major opposition,@however, should --- 0 expected if and when an industry firm begins to seek the necessary permits for site alterati-on. The level of opposition probably will depend on the site, surrounding uses, environmental conditions, size and type of facility to be sited there and public awarene*ss. Since it appears that most local governments in the Region do not intend to encourage the siting of OCS facilities in the area, at best it is probable that only activities perceived as having very little impact will be allowed. It is also probable that there will be little or no seeking-out of any OCS-related activity. In.addition to restrictions and prohibitions contained within local codes and comprehensive plans, there is the Charlotte Harbor Management Plan. The qoals, objec- tives and implementing actions of the Plan.have *-,---en endorsed bv all local governments within the Region. The specific influence that this might have on any siting de- cisions by a local government is unknown. it is likely 52 that, however, this would result in decisions more pro- tective of the environment and more restrictive of" OCS onshore development. For the majority of local governments.that apparently do not want this type of development, the added restrictions present no problem. For any local government interested in such development, it will be necessary to ensure that any proposal for an onshore facility be carefully examined. This, of course, should be normal procedure. C. Site Profile In other portions of this report, a number of possible sites for onshore OCS facilities have been reviewed. Two have been iden- tified as most likely to satisfy industry needs. They are the San Carlos Island site and the Port Boca Grande site. As is often the case, neither site is ideal. Each site could be improved upon. Based on the site identification process noted above, a simple site profile for the most acceptable sites has been developed. Gulf access is without a doubt the most important characteristic of an ideal site. While other factors can be dealt with in less than ideal circumstances, there is no substitute for Gulf access. Land area is not as important as first thought. Based on infor- mation developed during the completion of this projectl it appears that onshore facilities could function quite well on relatively small sites. The format utilized in this project was based on twenty acres as the smallest acceptable site. Ten acres may be a more reasonable figure, at least by indus- try standards. Sites of five acres or less may also be suitable. Surroundina and adjacent land uses must be considered in any site selec@ion. As was discovered in the discussion of size, however, there is much more leeway than was first thought. This is influenced directly by the site area and facility activity. That is, the larger the site and the greater the- activity associated with the site, the more likely it is that conflicts may occur with adjacent land uses. For example, if. only one service boat per day used the San Carlos Island site, it would probably have little or no adverse impact on the tourism/recceation activities of that area. Tn fact, for some Dersons, the siqhts and sounds of such a craft might be regarded as a normal part of the scene. 53 A large site with relatively little activity, however, may have less apparent impact. If that same service boat were to operate out of a site of one hundred acres, the apparent im- pacts would be considerably reduced. Additionally, that larger site area would provide a greater degree of buffering and separation from nearby land uses. Even a fairly straightforward attempt to develop a site profile requires some caveats. To consider one of these characteristics alone would be foolish. Thus, while Gulf access is essential, other factors must be considered. A site with direct Gulf access - but located in a residential area - would be a poor selection because of the potential for conflict and negative impacts. Therefore, as in the siting of any facility, a broad range of factors must be considered. U.S., Department of the Interior, Minerals Management Service in cooperation with the U.S. Geological Survey, Gulf of Mexico Summary Report 3, by Kenneth J. Havran et al, U.S. Geological Survey Open-file Report 82-242, pp. 20 and 21. 2 U.S., Department of the Interior, Final Environmental Impact Statement Proposed OCS Oil and Gas Sales 67 and 69, 1981, p. 105. 54 Part X Council Action On April 21, 1983, the last of two hearings was held on this study by the Southwest Florida Regional Planning Council. (An earlier hearing had been held on March 17, 1983.) At the April hearing, Council unanimously accepted this s'tudy and authorized its distribution. As a final action, Council voted--without dissent--to recommend to interested agencies and other parties that Port Boca Grande not be considered as a site for onshore OCS facilities. 55 OCS FACILITY SITING STUDY SOUTH FLORIDA REGIONAL PLANNING COUNCIL 1983 CONCLUSION The South Florida Region contains many environmental and economic resources that are sensitive to OCS-related oil and gas activities. Preservation and enhancement of these resources is necessary to retain the quality of,life that residents and visitors now enjoy. The primary benefits that OCS-related activities can provide to the Region are 1) a possible slight reduction in oil and gas product prices, 2) Increased petroleum product availability, and 3) minor economic benefit associated with OCS-related facilities locating in the Region. In contrast, there are many risks to the Region associated with both onshore and offshore OCS-related activities. The primary risk is from ar oil spill contacting the shore, or Karming the offshore environment. Environmental resources Identified above may be Irreparably damaged or killed *@'th signficant economic consequences. The tourism industry could lose mMlons of dollars If a malor oil spill Impacts the Region. A major oil Spill would J In most cases require costly cleanup operations that may ultimately be borne by national, stal,e, and local taxpayers. Because many risks and potential costs to the Region are several hundred. miMon dollars greater than the value oil potential benefits, OCS-relall-ed activities that may adversely impact tha Ragion should be discouraged. 56 COASTAL ENERGY FACILITIES SITING STUDY Prepared by Tampa Bay Regional Planning Council 9455 Koger Boulevard St. Petersburg, Florida December 1982 The preparation of this report was funded in part by grant number 82-CE-(,5-- 08-00-21-008 provided by the Coastal Zone Management Act (-.)f 1972, as amended, administered at the federal level by the Office of Coastal Zone. Management, National oceanic and Atmospheric Administration and administered at the state level by the Florida Department of Community Affairs, Division of Local. Resource Management, C-oastal Energy Tmpact Program. 57 CHAPTER VII CONCLUSIONS AND RECOMMENDATIONS The Federal Department of Energy has outlined the need "or the nation to increase its own petroleum production. Toward that goal the OCS mineral resources will have a major impact on domestic production and reduce our dependence on imported oil. This recognized need has resulted in an increase in leasing and exploration for oil and natural gas in the eastern Gulf of Mexico. Concern over the impact this oil exploration and development will have on the local. economies and environment resulted in the establishment of the Coastal Energy Impact Program. The Tampa Bay Regional Planning Council has participated in this program with the objective of: Developing local and regional expertise in understanding and managing OCS facilities; Increasing local and regional understanding of the OCS process; and Promoting orderly OCS-related development by selecting preferred sites before any discoveries are made. The Coastal Energy Facilities Siting Study was developed to accomplish these objectives. The study addresses tile type. and character of onshore facilities which will be needed (luring each phase of OCS activities. A facility siting matrix was developed to assess each site in relationship to the economic potential and environmental hazards involved. Nine candidate sites were examined. The siting criteria, based on existing laws, and the site selection matrix were used to narrow this site selection list to four potential sites. The Coastal Energy Techinical Advisory Committee indicated that due to the time which would elapse between the planning process and the actual location of an OCS facility no single site should be chosen. Rather the matrix he used as a tool to determine the most suitable site at the time it is needed. The following recommendations were developed by the Coastal Energy Technical Advisory Committee to address facility siting, governmental actions, and facility operations. 58 RECOMMENDATIONS FACILITY SITING GUIDELINES The following recommended guidelines relate to tile potential opportunities and disadvantages of an OCS facility siting project tn the Tampa Bay area. These recommendations and criteria were developed by the Coastal Energy Technical Advisory Committee to assist in the process. 1. It The Site Assessment Matrix developed by the Tampa Bay Regional Planning Council (TBRPC) should be utilized in the siting of all Outer Continental Shelf (OCS) related onshore facilities in the Tampa Bay Region. 2. OCS drilling equipment should not operate within sight of land. Aiso, further studies should be conducted to analyze economic and environmental impacts of transporting oil and gas. 3. only Wdter-dependent OCS onshore facilities should be located at the water's edge (i.a., marine terminals, service bases, pipecoatinq yards). 4. Facility sites should be located in a remote area for OCS onshore farilities where safety is the primary concern. Also, strict buffering guidelines should be enforced. 5. Facility sites should not be located adjacent to environmentally sensitive areas or where environmental standards are nut being met- for those OCS onshore facilities where pollution is the primary concern. 6. Facility sites should be designed in a fashion that requires a minimum of maintenance dredging. Natural water scouring action should be utilized to prevent formation of silt traps. 7. It has been recorded that chronic/iritermittent oil spills can have a serious impact on animal and marine life and enviroiimontally sensitive areas. Therefore, oil transfer facilities should be located away from fresh wa@er, estuarine arld marine habitats and other environmentally sensitive areas. Where such an arrangement is not possible, the receiving vessel should be isolated utiLizing either a dead-end SlAp or pl.acing containment booms around the vessel during all oil handling operations. 8. Efforts should be made to use existing oil/kjas onshore facilities in other areas since most oil/gas facilities are capital and lar("i intensivP rather than labor intensive and are not. tile MdXJ.MI.IM use of waterfront properties. 9. Efforts should be made to ensure that supporting and complementary facilities ar(, in proximity to each other to @,,(-cnmplish a linkage between facilities arid services to tile maximum exterit fe'.1sibl-e. 59 10. Within the. coastal, zone, only those areas with suitable rates of tidal flushing are desirable locations for large thermal discharge facili- ties (10 to 100 million BTU/hour or qreater). For example, this would exclude the following areas: McKay Bay, Hillsborough Bay, Little Manatee River estuary, Cockroach Bay and Bishop Harbor, and Terra Ceia Bay. 11. The design, construction and siting of all OCS onshore facilities within the coastal zone should take into account the effects of a hurricane surge. GOVERNMENTAL ACTION PROPOSALS In the event of an OCS facility siting project being initiated in the Tampa bay area, governmental action on the part of the state and/or local government will be required. In light of this, the following recommended proposals are designed to provide insight into the process. 12. Chapter 27F-2 (Development of Regional Impact (DRI) criteria), Florida Administrative Code (F.A.C.) should be amended to include a category which specially addresses oil/gas onshore facilities. The facilities to be included are: marine terminals, pipelines (both off and onshore), refineries, gas processing plants, partial processing plants, and petrochemical plants. 13. Those jurisdictions lying within the coastal zone, as defined by the Florida Coastal Zone Management Program of 1981, should amend their respective comprehensive plans, developed pursuant to Section 163.3161, Florida Statutes (F.S.) to. address oil/gas onshore facilities. Specifically, Sections 163.3177(6)(a)land use, (d) conservation, and (g) coastal zone, should reflect the potential impacts of oil/gas activities. If warranted , an optional. plan element dealing specifically with OCS activities should be developed pursuant to fection 103-3177(7)(1). 14. Local ordianances and permits should be reviewed by local governments to ensure that they adequately reflect the types of impacts that are associated with OCS onshore facilities, as identified in the Council's Coastal Energy Facilities Siting Study, and contain appropriate mitigative measures as recommended in the study. 15. The Tampa Bay Study Committee should incorporate the findings and recommendations of the Coastal Eneregy Facilities Siting Study into its planning efforts. 16. The Gulf of Mexico Reqional Transportation Management Plan should be updated for the easterm Gulf of Mexico if commercial quantities of oil and/or gas are discovered. 17. If commercial quantities of oil and/or gas are discovered in the eastern Gulf of Mexico, technical seminars and workshops should be conducted for local government officials, planners, environmentalists and concerned citizens by the Tampa Bay Regional Planning Council, Department of Environmental Regulation, Department of Community 60 Affairs, Governor's Office, U.S. Department of Interior, and the Geological Survey. 18. Federal consistency requirements of the Coastal Zone Management Act must be enforced by the Office of Coastal Zone Management. This might include litigation to establish precedents ensuring the protection and predictability of approved coastal management programs in partici- pating states. 19. Provisions should be made in the National Oil and Hazardous Substance Pollution Contingency Plan (40 C.F.R. 6282), and in the Clean Water Act, for direct funding to the states with offshore exploration/development for development of containment or clean-up capabilities. 20. Environmental documents by the Environmental Protection Agency (EPA) are not required for OCS facilities (except for drilling in "environ- mentally sensitive" areas) because they are not considered new sources for National Pollution Discharge Elimination System perrmitting. Th i s situation should be reviewed by EPA and the Department of Interior, with input from state and local governments, and changes made, if warranted. 21. A geological investigation should be required for any hazardous waste treatment, storage and disposal facility in the State of Florida in view of the accessibiqlity of its aquifers and runoff problems. The revi S 4on of Appendix VI 40 C.F.R., Part 264, was made effective immediately on November 23, 1981 rather than the customary six months atter publication and requires only states west of the Rocky Mountains to conduct a geoglogical investigation for these type of facilities. This revision should be amended to include the entire State of Florida. 22. TBRPC should continue to work with local governments in their efforts to adequately prepare for OCS activities. FACILITY OPERATIONS GUIDELINES Once located in the region, an OCS facility should be designed and operated in a manner that will provide the maximum economic benefits and environmental consideration. The operation of the facility should adhere to the following recommended guidelines. 23. If the solid waste produced by an OCS facility is to be disposed of at an authorized landfill, the operator of said facility should notify the appropriate management agency of the characteristics of such waste (physical and chemical). Further, the landfill operator should contact the OCS facility operator as to its ability to receive and process such waste material. 24. It the solid waste is to be disposed of at an approved resource recovery facility/incinerator, the generator of such waste should notify the operator of said facility as to the type, composition (physical and chemical), and quantity of material to be disposed. 61 Special attention should be paid to potential toxicity and/or chemical transformation which could result from the disposal methods. 25. Training programs associated with OCS development should encourage the utilization of the existing regional labor force. 26. Resource recovery should be required in order to convert hazardous OCS wastes, such as oiled material, acids, and heavy metals, into less harmful products. 27. Preservation areas should be protected from any further oil/gas development. Preservation areas as identified in the Council's adopted growth policy, Future of the Region include: ClassI and II waters, marine qrassbeds, coastal marshes, mangrove forests, beaches and dunes and other important nursery areas, estuarine and man-made beaches, fresh water swamps and marshes, state wilderness areas, and historical and archaeological sites. 28. Because of their physical character or present use, conservation areas provide a buffer zone for preservation areas. Therefore, they should remain in non-urban or agricultural uses except where public interest would be measurably benefitted. Conservation areas as identified in the Council's adopted growth policy, Future of the Region include: Class III waters outside of port areas, aquatic preserves, and river flood plains, as identified by maps in Chapter 6. 29. Site alteration/preparation should be scheduled to avoid the most environmentally sensitive periods of the year (i.e., wet, mating, etc.). 30. The following items should he considered for use during any dredge and fill operation: * Locate channels parallel to the direction of tidal currents and watershed runoff to minimize sedimentation; * Use silt curtains to confine sediments where feasible and necessary; * Avoid economic loading of hopper dredges in cases involving fine grain material; * Avoid overboard or open-water disposal of polluted or fine-grained material; * Build and use diked upland spoil disposal areas except where spoil is highly polluted; * Route wastewater- return through marsh or other vegetated areas, subject to biological chemical analysis, rather than directly to open water; and * Resttrict dredging and spoil disposal to those months when aquatic organisms are least sensitive. 31. The following items or Best Available Techniques should be considered where shoreline alteration is required: Minimize erosion through use of offshore breakwaters or by re- routing navigation and establishing speed limits. 62 Bulkheads: - Select more gently sloping shoreline where possible; - Bulkhead only where necessary; - Place riprap in front of the bulkhead; and - Place bulkhead above mean high water line. Riprap: - Where possible, use plantings of suitable marsh vegetation in lieu of riprap; and - Place a polyethylene mat or other proper bedding beneath the riprap to protect it from slumping due to erosion of its base. Piers; - Space, pilings, to allow free flow of tidal currents and littoral drift; Elevate piers high enough above marsh crossings to avoid shad- ing; and Do not place non-water-dependent facilities on piers. 32. Concentrated industrial stormwater runoff should be prevented from entering adjacent water bodies. Best management practices shall be. used in industrial stormwater systems design to prevent impacts on receiving water bodies. 33. Stormwater retention/detention ponds or some other retention tech- niques should be used. If retention/detention ponds are not considered viable due to site specific characteristics, then the fol- lowing on-site controls should be considered: grassy swales; shallow depression retention; infiltration trenches; percolation swaqles; percolation sumps; grading control; or other best management prac- tice as appropriate. 34. Onshore wetlands located on the facility site should be preserved and incorporated into the stormwater retention system. 35. The following sediment control techniques should be used to minimize any adverse effects on surrounding water bodies: � Stripping of vegetation, grading or other soil disturbance shall be done in a manner which will minimize soil erosion; � Whenever fedsible, natural vegetation shall be retained and pro- tected; The extent of the disturbed areas and the duration of their expo- sure shall be kept to the minimum necessary to allow for the proposed construction; Either temporary seeding, mulching, sprigging, sodding, revegetation or other suitable stabilization measures shall be used to protect exposed critical areas during construction or other land disturbance activities; and Drainage provisions and retention provisions shall accommodate increased runoff resulting from modified soil and surface conditions during construction. Such provisions shall be in addition to all existinq requirements. 36. A resource-based water quality monitoring program should be estab- 63 lished for OCS onshore development prior to construction to establish existing conditions and to demonstrate that adequate controls for both point and nonpoint discharge are in place. 37. Federal legislation should ensure a comprehensive ongoing research program to develop the most effective strategies tor dealing with oil spills. 38. Align navigation and access channels to avoid shellfish beds, seaqrass, flats, or other productive areas. 39. Special protective efforts regarding the preservation of rare, en- dangered, or threatened species and habitats required support these species should be taken when impacted by OCS onshore development. 40. Piplines should follow an inland route, whenever possible. This route should follow existing highway or utility rights-of-way and avoid environmentally sensitive areas. 41. Pressure-activated shutoff valves should be installed in all pipelines. whenever they pass through or near an environmentally sensitive area. Further, this same type of equipment should be installed at all petro- leum transfer operations. 42. The least damaging landfall should be identified for location of a pipeline corridor and all hydrocarbon pipelines should be routed through this corridor. 43. Once installed, pipeline route locations, both offshore and on land, should be adequately identified to minimize the risks of interference with other activities. An offshore route should be published in "Notice to Mariners" and placed on appropriate navigational charts. At the landfall, the pipeline route shall be delineated with appropriate markers. 44. For landfall sites, the size of the area affected should minimized and the entire area restored physically (land/water interface) and ecologically, to a condition as closely approximating the original as possible. 45. Pipeline installation should be scheduled to avoid key ecological and tourist seasons. 46. The State of Florida should establish funding for research that assesses the impacts of oil and gas spills from OCS facilities outside the jurisdiction of the Federal Government. REGIONAL POLICY PROPOSALS The Council's adopted growth policy, Future of the Region, provide regional criteria for conducting the Council's various review responsibilities and clarifyig the the Council's adopted regional issues list. The following policy proposals are recommended for addition to the growth policy to reflect the. policy findings of the Coastal Energy Facilities Siting Study. 47. The use of local and state planning and review efforts and decision- making tools shall be promoted to ensure that Florida's unique economic and environmental resources are not jeopardized. 48. The Council will continue to encourage the federal government to integrate its efforts with those of local and state governments to facilitate the recovety of oil and gas from the nation's OCS in an environmentally sensitive manner. 49. It is recominended that specific environmental and socio-economic studies be conducted on the geophysical/geographical areas (basins) of the Gulf of Mexico as identified by past nomination trends and lease sales to industry.. 50. Provision of funding for local and state governments in order to) assist in preparation for OCS development shall be promoted. 65 WEST FLORIDA REGIONAL PLANNING COUNCIL COASTAL ENERGY 114PACT PROGRAM REGIONAL OUTER CONTINENTAL SHELF ONSHORE FACILITIES SITING STUDY FOR WEST FLORIDA EXECUTIVE SUMMARY AND RECOM14ENDATIONS AND CONCLUSIONS The preparation of this document was financed through a grant from the Office of Coastal Zone Management, National Oceanic and Atmospheric Administration in conjunction with the Florida Department of Community Affairs. Grant No. 82-CE-66-01-00-21-015 April 1983 66 CHAPTER 1 EXECUTIVE SUMMARY AND , RECOMMENDATIONS AND CONCLUSIONS Because the worldwide demand for energy is steadily increasing and because the United States is determined to decrease its energy dependence on non domestic resources, it is inevitable that Florida's offshore Outer Continental Shelf (OCS) will be explored and developed. The nation's need to stimulate domestic production has accelerated the federal OCS leasing process which could accelerate the oil industry's activity in Florida' offshore areas. Although the Minerals Management Service (MMS) received no bids for lease blocks in the OCS areas offshore from northwest Florida in the 8 March 1983 sale, the oil industry contends it does maintain its interest. Federal, state, regional and local concern over possible oil industry impacts in West Florida remain, and certain preparatory actions are needed before any oil or natural gas landfalls in Region 1. This OCS facilities siting study examined the potential impacts of five (5) likely types of OCS-related, onshore facilities and up to seven (7) alternative sites for each type of facility. Due to the proximity of the oil industry facilities in and around Mobile, Alabama, and in Mississippi, Louisiana, and Texas, there is a possibility that a resource discovery may not impact West Florida. This alternative was examined because oil industry technical representative input indicates its viability if a resource discovery is made in the southwest corner of the Pensacola Block or extreme western margin of the Destin Dome Block (see Figure A-1). The West Florida Regional Planning Council staff began the contracted work using the approach developed by the New England River Basins Commission but found that the scenario approach and format was not adequate for developing an assessment of the potential OCS onshore impacts for West Florida. The method used for completing this OCS Study is basic and relatively uncomplicated. The process followed eleven (11) basic steps/procedures. 1. Literature review/research. 2. Identification of typical oil industry facility needs. 3. Evaluation of regional constraints for OCS facilities siting. 4. Direct technical input from oil industry representatives and public participants. 5. Development of regional assumptions. 6. Selection of alternative facilities sites based on oil industry requirements and local suitability. 7. Formulation of socioeconomic evaluation matrix. 67 8. Formulation of environmental impact matrix. 9. Evaluation and assessment of the role of federal, state, regional and local regulatory and policy mechanisms. 10. Evaluation of alternative sites for development of specific West Florida recommendations. 11. Conclusions and final report preparation. RECOMAENDATIONS Due to a lack of any "real" information concerning the location, type or volume of a resource discovery, the West Florida Regional Planning Council staff and OCS Advisory Committee were not able to recommend actual sites for Ill industry needs. However, recommendations have been develope which will a 4 serve to assist any future siting decisions to be made when futther OCS exploratory activity yields more detailed data. This combinatioll of general and specific recommendations are presented in four (4) different'.categories. Some recommendations are pertinent to more than. one (1) category. The recommendation categories are: A. Environmental Resources B. Industry Activities C. Facilities Siting D. Public Policy Actions The following recommendations have been developed to provide a basis for decision makers to evaluate and permit OCS related facilities to locate in this region. A. Environmental Resources Recommendations Implementation of certain methods or measures are necessary to minimize.. any environmental degradation or loss from OCS onshore activities. The adoption and use of these recommendations is a function of the region's elected officials and the staffs that support local governmental processes. 1. Efforts should be made to employ an environmental quality (air, water, and groundwater) and safety monitoring program prior to and during the construction and operation of an OCS facility site. 2. Facility sites should not be located in areas that are environmentally sensitive, or where environmental quality is stressed prior to an OCS facility siting. 68 3. OCS facility sites should be located away from marine or estuarine meadows. 4. Efforts should be made to retain natural vegetation, where feasible, at an OCS facility site. 5. OCS facilities (service bases and pipelines) should be installed with blowout or pressure activated shutoff devices wherever located in or near environmentally sensitive areas or populated areas. 6. Efforts should be made to minimize any oil industry activity impacts in nearshore marine and estuarine areas. 7. Efforts should be made to mitigate for any habitat loss by reestablishment of a comparable habitat at an alternate location. 8. Facility sites should contain an onsite s tormwater /drainage retention/detention area. 9. Any approved discharge from a retention/detention system should be accomplished through natural vegetated areas and not directly into open estuarine or marine waters. 10. Efforts should be made to employ the best practicable technology to control dust or any other suspended particles in the air during construction and operation phases of any OCS onshore facility. 11. Efforts should be made by all OCS vessels to operate within defined navigation areas in a manner not to generate wakes or otherwise increase turbidity or to otherwise impact shellfish beds, marine grass beds or other sensitive estuarine areas. 12. Effort should be made to employ sediment control techniques and to avoid actions that might promote erosion. 13. All solid waste products, domestic and industrial, should be disposed of at approved, permitted solid waste disposal areas or resource recovery facilities. 14. Any hazardous waste (chemical or physical) should be disposed of at a authorized disposal site, and the facility operator should be notified in advance of the characteristics and composition of the waste and the time of its transport. 15. Efforts should be made to eliminate any thermal discherge to estuarine or other temperature sensitive habitats. 16. Facility sites that will generate high noise levels should be located, where feasible, in areas to minimize noise impacts. 69 17. Efforts should be made for facility related transportation to avoid all noise sensitive areas. 18. High noise level activities should be limited to daylight hours if surrounding.land use will be impacted. 19. Any pipeline landfall should be made by horizontal drilling so as to not disturb the beach dune system. B. Industry Activity Recommendations When an industry establishes a facility onshore in West Florida certain measures should be implemented to minimize any degrading impacts due to f acility operations. Necessary management measures described prior to development are more readilyincorporated by the industry and therefore less costly to implement. 1. OCS facility site construction should be staged to minimize the amount of area under construction at any one time. 2. OCS facility sites that are related or complementary phould be located in close proximity to each other. 3. Efforts should be made by industry representatives 'to conduct ongoing technical and public presentations to educate and inform about OCS activities and related onshore operations. 4. Efforts should be made by the OCS industry to provide local labor training programs and to employ from the existing labor force. 5. Efforts should be made to maintain natural vegetation, grass or other ground cover (e.g., mulching, sodding, etc.), on any unused areas of an OCS facility site. 6. Efforts should be made to preserve any wetland areas that may be a part of or adjoining an OCS facility site. These areas should be incorporated into the site's drainage system. 7. Efforts should be made to minimize dredging, bulkheading or other engineered disturbance activities. Procedures such as "Jack and bore" to cross roads and horizontal drilling to cross barrier islands and rivers should be emphasized to minimize dredging. 8. OCS facility site maintenance dredging should employ turbidity devices and be conducted at a time when impacts to the surrounding environment will be minimized (i.e., winter). 9. OCS facility site operation and maintenance procedures should be conducted at times to minimize any negative impacts to flora, fauna and environmental quality (i.e., cross rivers and streams during low flow). 70 10. OCS facility sites should maintain a drainage system for stormwater and for spillage that drains to an onshore retention area. 11. OCS facility sites should employ other best management practices where onsite retention/ detention is not viable (e.g. , grassed swales, grading, shallow depression retention, rooftop retention, etc.). 12. OCS facility sites for fuel servicing should include fuel spill containment equipment to be used whenever any fuel or product is spilled. 13. Efforts should be made to insure that spill containment devices are readily available at any product transfer site. 14. Any discharge or disposal from OCS facility sites or vessels into estuarine or other nearshore waters should be prohibited. 15. Efforts should be made to designate and use upland diked disposal sites f or any spoil generated during maintenance dredging needed for an OCS activity. 16. OCS facility sites should be as hurricane proof as possible. 17. Facility sites for OCS crew and supply boats should be designed to allow the vessels to use onshore power rather than onboard generators at dockside. 18. Efforts should be made to transport OCS products by pipeline, where feasible. 19. Efforts should be made to incorporate blow out or shutoff devices at product transfer points. 20. Onshore facilities should be constructed with fan-cooled equipment to minimize impacts on water resources. C. Facilities Siting Recommendations Onshore facilities are necessary for OCS operations. Specific methods and actions - should be employed prior to and during construction of any OCS facility to minimize any negative impacts. Decisions for siting industry facilities should incorporate issues of public concern regardless of an absence of existing regulatory provisions. These recommendations should be considered by all levels of government involved in facilities siting, as well as the oil industry. 1. OCS facility sites that are not water dependent should be located as far as feasible from the region's estuarine water areas. 71 2. OCS facility sites should be located in areas where needs can be accommodated by existing onshore facilities, where feasible (e.g., existing docking facilities). 3. OCS facility sites constructed in flood prone'areas should include provisions for.accommodating hurricane force wind and water surges. 4. OCS facility sites should be located in areas that will not impact rare, endangered or threatened species. 5. OCS pipelines should be located away from environmentally sensitive areas and be placed in previously disturbed (e.g., rights-of--way) areas, where feasible. 6. OCS right-of-way areas should be no wider than necessary to minimize impacts. D. Public Policy Action Recommendations Local elected officials federal agency personnel, state agency personnel and regional government.officials must be involved in any onshore activities to support OCS development by industry. Representatives of governments and goverment agencies are charged with making the decisions that will ultimately determine what industry activities take place and what the subsequent impacts will be. 1. Efforts should be made by federal, state, regional and local governments to promote the development of OCS resources in a coordinated, environmentally sensitive, and responsive manner. 2. Efforts should be made by federal and state governments to promote research and development of techniques that will further minimize the negative impacts of OCS related activities. 3. Efforts should be made by regional and local governments to stay aware and become involved in OCS related real issues affecting the regional and local environment and economy. 4. Efforts should be made by state and local governments to prepare for regulatory and fiscal needs prompted by OCS onshore activities. 5. Efforts should be made by local governments to incorporate policies and provisions for OCS related facilities and impacts into all comprehensive planning efforts. 6. OCS onshore facilities should be considered to have regional impact and should be reviewed an permitted by regional and local clearinghouse procedures. 7 Efforts should be made by gas utilities in Region I to guide development of OCS onshore facilities so that the region's residents obtain optimum benefit from regionally produced energy resources. 72 CONCLUSIONS This OCS facility siting study examines probable industry facility needs and the impacts that may be presented within the West Florida region and offers guidance for federal, state, regional and local decision makers to prepare for these impacts. During the preparation of this study certain conclusions were reached. Overall conclusions pertinent to this study are summarized as follows. Petroleum fuel (oil and natural gas) has been determined to be a resource of vital importance to the United States and is therefore subject to national control. Federal government policy has established that domestic petroleum fuel reserves will be explored and developed to the greatest possible extent. The Outer Continental Shelf of the United States has been viewed for extensive and systematic resource development and is the subject of the U.S. Department of the Interior's OCS Oil and Gas Leasing Program. Although the U.S. Department of the Interior Minerals Management Service and Geological Survey have been charged with estimating the oil and gas reserves in the OCS, including the Gulf of Mexico OCS; the reserves of natural gas and oil and not know. Some technical sources report that the world is depleting its rapidly declining supply of petroleum fuels, while other technical experts claim that development of vast new reserves is imminent. The same disagreement occurs between experts concerning the resource reserves in the Gulf of Mexico OCS. The State of Florida has maintained: "Florida supports OCS operations for leasing, exploration and production, Troviding that consideration is given to our unique coastal environment." The state has pledged close supervision of any OCS activities and has conscientiously fulfilled its pledge. Florida filed (14 September 1982) a petition for judicial review of Secretary of the Interior James Watt's approved Five-Year Outer Continental Shelf Oil and Gas Leasing Program. The petition was filed because the state was not satisfied that its "unique coastal environment" has been adequately provided for in the Department of the Interior leasing program. Although there is a need to determine and prepare for OCS related facilities in West Florida there is an uncertainty about exactly when any such facilities may be expected to occur. The U.S. Department of the Interior has streamlined the OCS federal lease sale process to promote and accelerate OCS exploration. However, at the same time the process was revised the worldwide supply of petroleum fuels was at a surplus level. The current surplus of petroleum fuels has precipitated a decrease in the price for the fuels. This surplus and reduced price combination has caused the oil industry to be less interested in OCS exploration. It is not cost effective for the oil industry to continue to spend funds for lease options and expensive exploration activities at a time when product volumes are at a surplus level and when domestic supplies cost the same or more than foreign supplies. Oil companies are interested in selling their product as soon as possible and maintain it is too costly to "sit on" a resource find while waiting for a more favorable market. 73 Another factor that makes it difficult to estimate when onshore facilities for OCS activities will be needed is the time periods involved in the lease sale process. Once a leasing schedule has been developed by MMS, it requires two and one-half years to three and one-half years to complete the leasing process. After the lease process is completed the lease holder has five to ten years to conduct exploration drilling within a lease block. Even if a lease block were sold today, local citizens and government representatives would have ample time to complete any necessary planning efforts and to implement any necessary regulations or management controls. "Remaining recoverable reserves of oil and gas in the Gulf of Mexico Outer Continental Shelf an Continental Slope have been estimated to be 2.90 billion bairels of oil and 39.8 trillion cubic feet of gas, as of December 31, 1981." HMS further estimates that the recoverable oil and gas resources of the eastern Gulf could be: 1. Most Likely Find: 123 Million Barrels of Oil 157 Billion Cubic Feet of Gas OR 2. Maximum Find: 980 Million Barrels of Oil 3 1.26 Trillion Cubic Feet of Gas MMS states that "over 90% of the gas resources are estimated to be discovered in subplanning are E-1" which provides an estimate of: 1. Most Likely Find: 31 Million Barrels of Oil 147 Billion Cubic Feet of Gas OR 2. Maximum Field 242 Million Barrels of Oil 920 Billion Cubic Feet of Gas These MMS estimates have not been disaggregated into subplanning areas which corresponded to the West Florida Regional Planning Council OCS facilities siting study boundary. Using input supplied by four (4) different oil industry representatives the study staff prepared an estimate of the minimum resource that would justify the cost of developing a production field in the OCS offshore from West Florida. This minimum volume is estimated as 100 million cubic feet of gas per day and 10 thousand barrels of oil per day.* It has been concluded, for this study, that two (2) areas of the OCS are more likely to yield a resource find that could impact Region I. The two (2) areas are: 1. Destin Anticline 2. Southwest corner of the Pensacola Block and western margin of the Destin Dome Block (see Figure A-1). *for a field life of seven (7) years. 74 The MMS has determined that the only "high resource potential" in the eastern Gulf of Mexico is an area south of Escambia and Santa Rosa Counties. Currently there are seven (7) active leases in this area. It is likely that any resource discovery made in this area will be transported to Alabama rather than to Florida. If a resource discovery is in the OCS offshore from West Florida it is very likely that the product will be transported to shore in a pipeline. The State of Florida has developed a stipulation that disallows any other transportation system (e.g., barge or tanker ship) unless a pipeline is not economically feasible. If a discovery is made that would yield less than 100 cubic feet of gas per day or 10 thousand barrels of oil per day, a pipeline would not be cost effective, therefore, another transportation system would be required. Oil produced at a rate of less than 10 thousand barrels per day may be tankered ashore, while gas produced less than 100 million cubic feet per day might not be produced. Based on input offered by three (3) oil company representatives it has been assumed that if a pipeline is to landfall in West Florida it will be sixteen (16) inches in diameter. Such a pipeline is designed to transport more than a minimum volume discovery. Most pipelines that landfall on the Gulf Coast are less than twenty (20) inches in diameter. While it is not possible to detail exact locations for all oil industry facility sites it is possible to offer seven (7) potential sites for an OCS pipeline landfall. Related industry facilities would be located in close proximity to a pipeline landfall. The seven (7) potential landfall sites are: 1. Al - Perdido Key (Escambia County) in the vicinity of Highway 292 and the Intracoastal Waterway Bridge (see Figure 5-3). 2. A2 - Santa Rosa Island/Gulf Breeze (Santa Rosa County) in the vicinity of the Santa Rosa County and Okaloosa County line (see Figure 5-3). 3. A6 - Panama City Beach (Bay County) in the vicinity of the intersection of Highway 79 and U.S. Highway 98 (see Figure 5-3). 4. A7 - Mexico Beach (Bay County) between Tyndall Air Force Base and Mexico Beach (see Figure 5-3). If two '(2) resource discoveries were made, one (1) close to Pensacola and one (1) close to Mexico Beach, it is possible that two (2) pipeline landfalls could occur, however, such an occurrence is not an assumption for this study. MMS and oil industry experts state natural gas has been concluded to be the most likely resource find the OCS offshore from West Florida. The resource finds in Jay, Florida and in Mobile Bay, Alabama have come from the geologic formation called "Smackover". This same formation is the likely source for any future find in the OCS offshore of Region I. The Smackover 75 Formation is producing "sour" natural gas or gas that contains hydrogen sulfide, therefore, a gas treatment facility will be necessary to remove the hazardous hydrogen sulfide. The most suitable sites for gas treatment facilities in West Florida are recommended as: 1. C1 Southwest Escambia County (see Figure 5-3) 2. C3 Holley/Navarre vicinity (Santa Rosa County) (see Figure 5-3). 3. C6 West Bay (Bay County) (see Figure 5-3). 4. C7 Mexico Beach vicinity, between Mexico Beach and Tyndall Air Force Base (Bay County) (see Figure 5-3). The onshore support or service base is the first onshore facility that would be located to accommodate OCS activity in West Florida. Factors that are considered when locating an onshore support base include: 1. land availability and surrounding land use; 2. waterfront access; 3. access to the Gulf of Mexico; 4. access to rail and road transportation; 5. availability of support services, e.g., potable water, fuel, and communication facilities; and, 6. potential for flooding and hurricane damage. The most suitable sites for onshore support bases are recommended as: 1. BI - Bayou Chico Industrial Park (Escambia County) (see Figure 5-3). 2. B7 - Southwest Forest Industries (Bay County) (see Figure 5-3). Although oil is not likely to be discovered, another onshore oil industry facility that has been considered for West Florida is an oil barge terminal. Such facilities already exist and may be expanded or modified to accommodate -hydrocarbons discovered in the OCS offshore from West Florida. An oil barge facility would be more likely to be needed if an oil find is made which would generate a large enough volume of oil to justify a pipeline. in such an event, oil would be directed into a pipeline at the production platforms and transported to an oil barge terminal for storage and transshipment. Oil could be piped ashore either separately or combined with natural gas, treated and stabilized, then piped to a barge terminal where it may be stored or transshipped to an oil refinery. 76 APPENDIX E Permit Requirements for Siting Onshore Facilities Related to Offshore Oil and Gas Activities and Florida Legislation Affecting Offshore and Onshore Energy Development Prepared by South Florida Regional Planning Council 1983 PERMITTING An array of permits are Involved In siting any onshore OCS-related facility. Effective planning requires knowledge of necessary permits and time periods required. Table V-2 shows the permits that may be required for each component of each OCS-related facility, the agency, and the normal expected time to obtain each permit. The time periods are general estimates; If an application Is particularly complex or subject to litigation, obviously a much longer time period Is required. A consolidated permitting scheme for OCS-related facilities should be developed so that coordinated State decisions can be made, taking Into account all the complex variables. A similar scheme for Industrial siting presently exists In the Florida Industrial Siting Act (FISA), Chapter 288.501. This Act Is designed to centralize, coordinate, and facilitate permitting procedures for new or expanded Industrial facilities, with the goal of encouraging Industrial development In Florida. The Act provides an optional procedure for developers who, If they fulfill three criteria, can make one application that results In one determination that the developer's proposed project does or does not comply with all State requirements. The three criteria are: I 1. the proposed facility will create at least fifty full-time jobs. 2. It Involves Industrial, commercial, wholesale, or retail business activities and 3. It needs permits or licenses from at least two State agencies. If a developer receives approval from the Governor and Cabinet, the ultimate arbiters of a decision under the Act, both construction and development of the facility are approved. Local government decisions, Including DRI orders, are specifically not covered by the Act, and an applicant must obtain local approval before filing a FISA application. Nevertheless, local decisions are affected by State decision on a FISA application In that the local government cannot, for two years from the date of a State decision, change ordinances, plans, or development orders that might effect the project, unless the developer agrees to such change or the local comprehensive plan Is amended. The goal of the Act was to streamline and condense the application and permitting process. E-1 Despite the Intent to streamline the application process, developers have apparently either determined that Act requirements are more burdensome than dealing with Individual State agencies, or that they do not wish to "put all their eggs In one basket." Were It redrafted, the statute might address OCS-related facility siting Issues, mandating consIderation of specific environmental concerns. However, why the statute has not been effective should be determined first. E-2 0 APPENDIX F PROJECT ADVISORY BOARD 0 it The Coastal Energy Impact Program (CEIP) Office established a Project Advisory Board to provide guidance and assistance during the course of the project. Several meetings were held beginning with a "kickoff meeting" just eleven days following the start date of the grant. This initial meeting was followed up by personal contacts with individual members of the Advisory Board and periodic meetings throughout the project. A formal mid-term project meeting was held at DCA in February 1984. The members of the Advisory Board were helpful in providing background information, documentation, and suggestions whenever asked. Of particular value was the guidance provided during the preparation of the final recommen- dations by those individuals mentioned in the Acknowledgements. The following individuals provided advice through the auspices of the Project Advisory Board. Department of Natural Resources Department of Environmental Regulation Mr. Ted Forsgren, Chief Mr. Fred Calder Bureau of State Lands Management Office of Coastal Management Mr. Kirby Green, Chief Ms. Suzanne P. Walker, Chief Bureau of Survey and Mapping Bureau of Permitting Ms. Patricia White Mr. David R. Worley Land Management Specialist Office of Coastal Management Bureau of State Lands Management Mr. Steve R. Windham, Chief Bureau of Geology Department of Community Affairs Other Board Members Mr. Terry Jernigan Mr. Chris L. Jensen Division of Local Resource Management Associate Director Coastal Energy Impact Program Florida Petroleum Council Mr. Jeffrey Kiss Ms. Shirley Taylor Division of Local Resource Management Citizens Advisory Committee on Coastal Coastal Energy Impact Program Zone Management; and Sierra Club Mr. James Murley, Director Division of Resource Planning and Management Mr. James Quinn, Chief Bureau of State Land Planning Division of Local Resource Management Oil and Gas Leasing in Florida Offshore Waters Volume II A Description of Florida's Existing Program and Recommendations for Revised Procedures Prepared by: Florida Institute of Oceanography St. Petersburg, Florida Financial support was provided by The Coastal Zone Management Act of 1972 as amended, administered at the Federal level by the Office of Ocean and Coastal Resource Management, National Oceanic & Atmospheric Administration and administered at the State Level by the Florida Department of.Community Affairs, Division of Resource Planning and Management, Coastal Energy Tmpact Program. October 15, 1984 TABLE OF CONTENTS VOLUME II Page Acknowledgements . . . . . . . . . . . . . . . . . . . . . . . . Executive Summary . . . . . . . . . . . . . . . . . . . . . . . iii Glossary and Acronyms . . . . . . . . . . . . . . . . . . . . viii List of Tables . . . . . . . . . . . . . . . . . . . . . . .. . xiv 1. Introduction and Background . . . . . . . . . . . . . . . . . . . 1 II. Purpose of Project . . . . . . . . . . . . . . . . . . . . . . . 4 III. Preparation and Format of Report . . . . . . . . . . . . . . . . 5 IV. Discussion and Summary . . . . . . . . . . . . . . . . . . . . . 8 V. State Leasing Program . . . . . . . . . . . . . . . . . . . . . 19 Ai Alabama . . . . . . . . . . . . . . . . . . . . . . . AL 1-32 B. Alaska . . . . . . . . . . . . . . . . . . . . . . . AK 1-39 C. California . . . . . . . . . . . . . . . . . . . . . CA 1-41 D. Florida . . . . . . . . . . . . . . . . . . . . . . . FL 1-42 E. Louisiana . . . . . . . . . . . . . . . . . . . . . . LA 1-31 F. Mississippi . . . . . . . . . . . . . . . . . . . . . MS 1-29 G. North Carolina . . . . . . . . . . . . . . . . . . . NC 1-21 H. South Carolina . . . . . . . . . . . . . . . . . . . SC 1-22 I. Texas . . . . . . . . . . . . . . . . . . . . . . . . TX 1-36 Appendix A Annexation Procedures Used in Six Coast al States 41 ACKNOWLEDGEMENTS The authors of this report are: James W. Miller, Ph.D. Associate Director Florida Institute of Oceanography St. Petersburg, Florida and Murice 0. Rinkel OCS Representative State of Florida The material on which the report is based was generously provided by many individuals and organizations. Guidance and advice was obtained from the Department of Community Affairs (DCA) Project Advisory Board (see Appendix F of Volume I).during the planning stages and during the preparation of the recommendations. Special thanks go to Mr. James Quinn, Mr. Terry Jernigan and Mr. Jeffrey L. Kiss of the Division of Resource Planning and Management, DCA; and Mrs. Patricia White, Bureau of State Lands Management, and Mr. Steve R. Windham, Bureau of Geology, of the Department of Natural Resources for their help throughout the project. The reports on the oil and gas leasing programs of the other eight coastal states reviewed in Volume 11 were made possible only by the outstanding cooperation and assistance of the following individuals. Alabama Alaska �Department of Environmental Management Department of Natural Mr. Joe B. Broadwater (Director) Resources Mr. Robert Cooner (Biologist) Division of Oil and Gas Ms. Pam Rogers �Department of Conservation and Natural Leasing Manager State Lands Division Mr. Robert A. Macrory (Director) Department of Fish and Game Habitat Division � State Oil and Gas Board Mr. John A. Clark (Director) Dr. Ernest A. Mancini (Supervisor) i ACKNOWLEDGEMENTS (cont'd) California Louisiana State Lands Commission Office of Mineral Resources Ms. Claire R. Dedrick Mr. William E. Howe (Executive Officer) Chief Engineer Division of Research and Planning Mr. Dwight E. Sanders (Chief) Mr. Allen D. Willard Minerals Resources Engineer Ms. Susan R. Livenick Assoc. Mineral Resources Engineer Mississippi North Carolina Bureau of Geology Department of Natural Mineral Lease Division Resources and Community Mr. John D. Kellis (Chief) Development Division of Earth Resources Department of Wildlife Conservation Mr. Steve Conrad (Director) Bureau of Marine Resources Mr. James S. Franks .'State of North Carolina (Staff Scientist) Center for Urban and Region- al Studies Mr. Charles Wyman (Research Associate) South Carolina Texas Water Resources Commission General Land Office Mr. Camille Ransom, III (Director) Petroleum and Minerals Mr. Paul S. League, (Attorney) Division Ms. Gwen M. Euler Mr. Jack M. Howard (Ground Water Geologist) (Geologist) Coastal Division Land Management Mr. Michael H. McKann (Environmental Quality Specialist) Parks and Wildlife Depart- ment Mr. J. Rollin MacRae Wetlands Permits Coordinator EXECUTTV17 SITMMAI@Y Recognizing that the increasing interest of industry in exploring Florida's Outer Continental Shelf could spread into state waters, the Florida Department of Community Affairs (DCA), in 1982, proposed that a comprehensive study be undertaken for the management of the potential oil and gas operations in state waters. As the first step in this program, a Coastal Energy Impact Program grant was awarded by DCA to the Florida Institute of Oc eanography in May 1983. The purpose of this grant was to review Florida's existing leasing procedures as well as those of eight other coastal states and to incorporate the information obtained into specific policy and program recommendations to aid Florida officials in making decisions if they choose to develop and implement a long range oil and gas program in Florida waters. The *results of this study indicate that Florida's oil and gas leasing propr;mi Is prhimilly oriented toward oiishore oper.11- foil.... SU.Mitory provisions, regulations, and policy for offshore leasing and operations are vague and sometimes contradictory. Even so, Florida law does provide a method for the leasing and development of state waters. Given the current level of oil industry interest in federal OCS areas adjoining state waters, an active effort could be undertaken by industry to pursue this possibility. Under current circumstances this situation could very likely foster reactive decisions which could prove contrary to the protection of Florida's coastal and marine resources. Adequate pre-lease planning and lease program development are essential in providing the data necessary to make prudent decisions. In this regard, the first and foremost concern throughout the development of this report has been to provide specific recommencintions In support of 111 CllVVJ yo,,,,jell ta I program which offers the maximum protection possible for Florida's resources if oil and gas are found and developed. It is not the purpose of this document nor the intent of the sponsor or authors to recommend whether oil and gas operations should be encouraged in Florida waters. That determination is the statutory responsibility of the Governor and Cabinet acting as the Board of Trustees of the Internal Trust Fund. The following program elements were analyzed for each of the nine states studied (including Florida): Philosophy of the state towards oil and gas development; the statutory authority for leasing; program management; the geographic description of territorial waters; the role of local government in offshore leasing; oil and gas revenues and their distribution; environmental controls and regulations; and leasing procedures. The basic Florida report wns mwmented by special report.-; on: existing oil and gns rel.1ted ..the role of local government in offshore leasing, taxa tion, and annexation; and on the socioeconomic impact of oil and gas leasing. The project report is divided into three volumes: Volume I - Florida's leasing program, the special reports, and the recommendations; Volume II - reports on all nine coastal states reviewed; and Volume III the recommendations. Each report also contains the introductory and background material. The five policy and twenty program recommendations resulting from this study are summarized below. The basis for each recommendation is discussed in the main body of the recommendations section contained in Volumes I and III. iv Policy Recommendations 1. Formation of Policy Advisory Group a. That the Board of Trustees of the Internal Improvement Trust Fund establish a policy for initiating an oil and gas environmental protection program in state territorial waters. b. That an ad hoc advisory committee be established to provide broad-based input to the Trustees in developing such policy. 2. Development of an Offshore Comprehensive Leasing Program That a comprehensive oil and gas leasing program be developed specifically for offshore waters to provide for more effective resource management safeguards, environmental protection, and obtaining just revenues for the state. 3. Development of a Pre-leasing Environmental Study Program That a comprehensive long range pre-leasing study program supported with adequate funding and staff be initiated for the purpose of acquiring environmental data in state offshore waters showing potential for oil and gas development. 4. Restrictions on Offshore Lease Sales That no oil and gas leasing takes place in Florida's territorial waters until such time as the necessary environmental data are obtained. 5. Mineral Leasing That any minerals not defined as constituent products in the current oil and gas lease form in the State of Florida shall not be considered as part of an offshore oil and gas leasing program. v Program Recommendations 1. Development of Leasing Program Consistent with State Policy a. That a Memorandum of Understanding be established between the Department of Natural Resources and the Department of Environmental Regulation pertaining to lease/permit programs for offshore oil and gas operations. b. That all program recommendations which follow or are developed in the future be examined for consistency with the offshore oil and gas policy to be established by the Board of Trustees/Governor and Cabinet. 2. Establishment of a Leasing Advisory Board with Supporting Committees. a. That a permanent offshore oil and gas Leasing Advisory.Board be formed for the purpose of providing guidance to the Board of Trustees of the Internal Improvement Trust Fund with respect to the development and management of oil and gas operations in offshore state waters. b. That an environmental/scientific committee and a technical committee be formed to serve as staff to the Leasing Advisory Board recommended in 2a. 3. Recommended Charges to the Leasing Advisory Board 3a.(l) That a grid pattern by laid out in Florida's territorial waters with initial leasing planning regions to be selected based on current OCS oil and gas activities. 3a.(2) That the state be divided into offshore planning areas for the purpose of determining excluded areas, avoidance areas, and leasing areas, within their respective grid patterns. 3b.0) That Chapter 253 F.S. be amended to more specifically and thoroughly address oil and gas leasing in state offshore waters. Recorrimendations contained in this document should be given major emphasis in this process. 3b.(2) That the state clarify by statute the authority of coastal municipal governments to annex state offshore waters. 3c.(1)(a) That minimum environmental lease stipul ations be established for each planning region identified (i.e. excluded, avoidance and leasing areas) based on the results of the environmental study program. 3c.(l)(b) That an offshore environmental resource management code system, similar to that now used in Texas, be examined for lease planning regions and for site specific stipulations in Florida. 3c.(2)(a) That an adequate funding source be developed to support the long term comprehensive cnvironmental study programs required for exploration, development and production. 3c.(2)(b) That the necessary executive and legislative actions be taken to obtain the funds cited above from existing revenue. vi Propj-,-iin Recominendations (Contl d) 3d(l) That the Rules of the Department of Natural Resources, section 15Q-15.08-(9)F.A.C., be amended to add the basis for calculating offshore royalty percentages. Instead of basing royalties on the distance from production, a flexible sliding scale method should be devised similar to that used in California and Alaska. 3d(2) That a revenue distribution program be initiated on a statutory basis designating approximately five percent (5%) and/or a maximum amount of the current uplands oil and gas severance tax for coastal and offshore environmental studies; for research on renewable energy sources; and to provide for revenue sharing with local governments likely to be affected by offshore oil and gas development. 3e(l) That a set of specific operating orders be referenced in each offshore oil and gas lease. 3e(2) That an offshore environmental enforcement and inspection program be established. 3e(3) That general environmental stipulations be developed for each planning region prior to each sale. I 3e(4) That an agreement be established with the State of Alabama specifying the environmental stipulations to be used in common waters such as in Perdido Bay. Other potential interstate conflict issues also should be nddressed. 4 .1,ea,-w mid Terins That the recommended Leasing Advisory Board review existing onshore lease terms and procedures for compatibility and adaptability to an offshore oil and gas leasing program. vii GLOSSARY AND ACRONYMS Glossary Applicant - Any person requesting the State to either issue a call for nominations for leasing or offer for lease minerals owned by the State. Aquatic preserves - Submerged or tidal areas identified and designated by the Florida Legislature which have exceptional biological, aesthetic, educational, and/or scientific value, with the intent of setting them aside forever as preserves or sanctuaries for the benefit of future generations pursuant to Chapter 258, F.S. Barrier islands - Thin, elongated, naturally formed islands, usually parallel to the shoreline, formed of unconsolidated sediments (mostly sand), separated from the mainland by natural bodies of water, including estuaries and wetlands. Beach - Gently sloping areas of loose material (e.g. sand, gravel, and cobbles) that extend landward from the low-water line to a point where there is a definite change in the material type or land form, or to the line of vegetation. Bid - The offer to pay a valuable consideration to obtain a mineral lease. Bidder Any person submitting a bid. Block A geographical area, as portrayed on an official BLM protraction dingrnm or lensing m.1p, thit contnins npproxinintely T1111V !,qitqrv Tnil(-.-: (2,104 hov t 111-0:; o 1- 700 ;1C res) Board of Trustees - Board of Trustees of the Internal Improvement Trust Fund (Florida, Governor and Cabinet). Bonus - A sum of money offered or paid by a lessee to the State as consideration for the execution of a.lease. Coastal waters - Those waters surrounding the continent which exert a measurable influence on users of the land. Coastal zone - Coastal waters and adjacent lands which exert a measurable inf luence on the uses of the sea. The zone extends onshore to the upper reaches of the tidal zone and adjacent shore areas. Continental margin A zone separating the emergent continents from the deep sea bottom. Continental shelf A broad, gently sloping, shallow feature extending from the shore to the continental slope. viii Clossary (cont'd) Delay rental - A payment offered or made by a lessee to the State, on a per mineral acre basis, annually during each year of the primary term of a mineral lease after the first year thereof, to delay commencement of drilling operations. Designated environmental preservation areas - Gulf of Mexico shorefront areas which have been established for the quality and significance of their natural environments. They have been legislatively, administratively, or privately protected from the developmental influences of man and are managed solely for the preservation, understanding, and appreciation of their natural. attributes. Included are National Parks and Preserves, National and State Wilderness Areas, National Marine and Estuarine Sanctuaries, National Natural Landmarks, Wildlife Sanctuaries, Florida Aquatic Preserves, and Environmentally Endangered Lands. Development - Activities that take place following exploration for, discovery of, and delineation of minerals in commercially attractive quantities, including but not limited to geophysical activity, drilling, platform construction, and operation of all directly related onshore support facilities; and that are for the purpose of ultimately producing the minerals discovered. Development of Regional Impact (DRI) - Any development which, because of its character, magnitude, or location, would have a substantial effect upon the health-, safety, or welfare of citizens of more than one county pursuant to Chnpter 380, F.S. - The 1.1vilig .111d 11oll- 1AV.11% ctmipoticitts of Che eiivironim.-IlL WhIC11 interact or function together, including plant and animal organisms, the physical environment, and the energy systems in whicb they exist. Environmental impact statement - A statement required by the National Environmental Policy Act of 1969 (NEPA) in relation to any action significantly affecting the environment; a NEPA document. Estuary - A natural body of water semi-enclosed by land, connected with the open ocean, and within which sea water is measurably diluted by fresh 'water derived from the land. The estuary includes: a) estuarine water; b) tidelands; c) tidal marshes; and d) submerged lands. Estuaries extend upstream as far as the waters contain a measurable quantity or percentage of sea water. Exploration - The process of searching for minerals. Exploration activities include: a) geophysical surveys where magnetic, gravity, seismic, or other systems are used to detect or infer the geologic conditions conducive to the accumulation of such minerals and (b) any drilling, except development drilling, whether on or off known geological structures. Exploration also includes the drilling of a well in which a discovery of oil or natural gas in paying quantities is made and the drilling, after such a discovery, of any additional well that is needed to delineate a reservoir and to enable the lessee to determine whether to proceed with development and production. ix Glossary (cont'd) Gas - All natural gas, including casinghead gas, and all other hydrocarbons not defined as oil. Gas well A well capable of producing gas from a gas pool or gas pools. Habitat A specific type of place that is occupied by an organism, a population, or a community. Joint bid - A proposal whereby two or more bidders combine in submitting a bid for a mineral lease. Field - An area within which hydrocarbons have been concentrated and trapped in economically producible quantities in one or more structural or stratigraphically related reservoirs. Hydrocarbon - Any of a large class of organic compounds containing primarily carbon and hydrogen, comprising paraffins, olefins, members of the acetylene series, alicyclic hydrocarbons, and aromatic hydrocarbons, and occurring in many cases In petroleum, natural gas, coal. and bitumens. Lease - A contract authorizing exploration for and development and production of minerals; the land covered by such a contract. Lease royalty - A share of the production, or the proceeds thereof, specified in n lease as a fraction, percentage or fixed gum, payable to the State by the lessee. Lease sale - The public opening of sealed bids made after competitive Puction for leases granting companies or individuals the right to explore for and develop certain minerals within a defined period of time. Local government - Any county or municipality or any special district or local. government entity established pursuant to law which exercises regulatory authority over and grants development permits for land development pursu--nt to Chapter 163, F.S. Marshes - Persistent emergent non-forested wetlands characterized by vegetation consisting predominantly of cordgrasses, rushes, and cattails. Marine league - 3.45 statute miles. Mean high water - The average height of the high tides over a 19-year period. For shorter periods of observation, I'mean high water" means the average height of the water after corrections are applied to eliminate known variations and to reduce the result to the equivalent of a mean 19-year value. Mean high water line - The intersection of the local elevation of mean high water with the shore. x Clossary (cont'd) Mineral - Oil, gas, and other minerals* both hydrocarbon and non hydrocarbon, unless otherwise specifically included, sand, clay, gravel., limestone, and coal. Mineral acre '- The equivalent of the full mineral interest in one acre of land. Non-renewable resource: Those natural resources that, once used or exhausted, cannot be replaced. Commonly used with commodity type resources such as coal, petroleum, natural gas, etc. Oil - Crude petroleum oil and other hydrocarbons, regardless of gravity, which are produced at the well in liquid form by ordinary production methods and which are not the result of condensation of gas after it leaves the pool. oil well - A well capable of producing oil from an oil pool or oil pools. Outer Continental Shelf (OCS - All submerged lands that comprise the continental margin adjacent to the U.S. and seaward of state offshore lands. The OCS has been subject to Federal jurisdiction and control since enactment of the Submerged Landi Act (43 U.S.C. 1301 and 1302). Current national policy is provided in the Outer Continental Shelf Lands Act Amendments of 1978. Petroleum - An oil, flammable bituminous liquid that occurs in many places in the upper strata of the earth, either in seepages or in reservoirs; essentially a complex mixture of hydrocarbons of different types with small amounts of other substances; any of various substances (as natural gas or shale oil) similar in composition to petroleum. Pool - An underground reservoir containing a common accumulation of oil or gas or both. Primary term - The initial period of oil and gas leases, can range from 2 to 20 years in coastal states. Renewable resource - Those resources which, if managed, used, and harvested properly, can replenish themselves at a rate equal to the rate of consumption. They are usually biological or living resources. Reserve estimate - An assessment of the portion of the identified oil or gas resource that can be economically extracted. Reservoir,- An accumulation of hydrocarbons that is separated from any other such accumulation. Right-of-way - A legal right of passage over another person's land; the strip of land for which permission has been granted to build a pipeline and for normal maintenance thereafter. Glossary (cont'd) Seismic - Pertaining to, characteristic of, or produced by earthquakes or earth vibration; having to do with elastic waves in the earth. Severance tax - A tax levied by the State upon a person or persons engaging or continuing to engage within a State in the business of producing or severing oil and gas from the soil or the waters, or from beneath the soil or the waters of the State for sale, transport, storage, profit, or for use. Shut-in royalty - An amount specified in the lease to be paid for a time period also specified in the lease to hold the lease in force after a gas well has been completed capable of production in paying quantities, but wh1ch has been shut-in under provisions specified in the lease. Shut-in well - A well that is capable of producing oil and/or gas but must remain shut-in until connected to a gathering system, pipeline or cleansing facility; or for some other reason. Spoil islands - Artificial islands created with dredged material resulting from disposal of material created, resulting from, or as waste products of creating, maintaining, pr deepening channels, harbors, ports, or other such projects. Territorial sea - In Florida, for jurisdictional purposes, the ocean and eafloor area from mean low water seaward three nautical miles on the Atlantic Coast, and extending seaward three marine leagues on the Gulf Coast. s Wetlands - Areas periodically inundated or saturated by surface or ground- water and supporting predominantly vegetation typically adapted for life in saturated soil conditions. Acronvms ADNR Alaska Department of Natural Resources CEIP Coastal Energy Impact Program CZMA Coastal Zone Management Act of 1972, as amended. DCA Department of Community Affairs (Florida) DER Department of Environmental Regulation (Florida) DNR Department of Natural Resources DRI Development of Regional Impact EPA Environmental Protection Agency FAC Florida Administrative Code xii Glossary.(cont'd) FDNR Florida Department of Natural Resources Flo Florida Institute of Oceanography F.S. Florida Statutes LGCPA Local Government Comprehensive Planning Act (Florida) MEW Mean high water, MMS Minerals Management Service (Department of the Interior) OCS Outer Continental Shelf OFCP Office of Federal Coastal Programs (Florida) OHW Ordinary high water SUS State University System xiii LIST OF TABLES Description Page 1. Coastal States Included in Review of . . . . . . . . . . . . 5 Leasing Procedures 2. Topical Outline for State Reports . . . . . . . . . . . . . 7 3. Historical Summary of State Leasing Programs . . . . . . . . 9 4. Statutory and Vested Authority for State Oil . . . . . . . 10 and Gas Leasing Programs 5. Geographical Description of State Territorial . . . . . . 11 Waters 6. Delegation of Management Responsibilities for . . . . . . 12 State Leasing Program 7. State Leasing Procedures . . . . . . . . . . . . . . . . . 13 8. Summary of State Lease Terms . . . . . . . . . . . . . . . 14 9. State Environmental Responsibilities . . . . . . . . . . . 15 and Policies 10. State Revenues from Offshore Oil and Gas . . . . . . . . . 16 11. Distribution of State Oil and Gas Revenues . . . . . . . . 17 12. Authority of Local Government to Annex State . . . . . . . 18 Territorial Waters xiv Introduction @@ I I I z 1. Tntroduction and Background In recent years the oil and gas industry has expressed interest in exploring for oil and gas in Florida offshore waters. Their interest has been primarily in the federal waters of the Outer Continental Shelf (OCS). Blocks leased in past OCS Lease Sales along the coast of Florida indicate that formations offshore northwest and southwest Florida and along the continental slope may have hydrocarbon potential. Interestingly, these leased OCS blocks are parallel to onshore areas which represent the major pr oducing oil and gas fields in the State (Figure 1). In the January 1984 OCS Lease Sale, blocks were leased offshore northwest Florida which are within 3 miles of state territorial waters. Several companies already have applied to the Department of the Interior Minerals Management Service (MMS) for permits to drill exploration wells on blocks-14 to 40 miles from the coastline. Should there be a major discovery on these OCS blocks, it Is 111cly that exploration interest could extend into state waters. Historically, because the, statets oil and gas operations have been primarily on shore, leasing procedures, permitting, and environmental concerns have been directed toward onshore operations. The environmental circumstances and conditions for offshore operations, however, differ substantially from those onshore. This fact has long been recognized by the Federal Government, and the coastal states examined in this study which have separate and distinct management procedures for onshore and offshore areas. Given the increasing industry interest in OCS areas offshore Florida, and the probability that state waters may be targeted for exploration, the Office of Federal Coastal Programs (OFCP) within the Florida Department FIGURr I EASTERN GULF OF MEXICO ALABAMA OCS AC IVITY FLORIDA GEORGIA ACTIVE LEASES Pensacola Lease Sales 66FA67. Panama U"A Lft ity PE SACPLAU + ionuary,1984 Lease Sale + Wells Drilled DESTffDOM& ApALACtWOLA ?OIESVILLe + DESOTO C FLORIDA %WDLE OAOUNO TAIIPO14 GpMG3 IT ampa Port Manatee SAWT PETERSURG LLOYD THE ELBOW z 4. CHARLOTTE HARBOR HENDERSON VERNON 4 HOWELL mOOK PULLEY RIDGE MIAMI (23 E3 E3 0 Gulf of Mexico Dny TORTUGAS I(Ey wFST E 'F S [@@@DPE SOURCE: U.S. Department of the Interior, Minerals Management Service 2 of Conunitnity Affairs (DCA) proposed a comprehensive study of 0-11 alld gas management procedures in state waters. The primary purpose of the proposed study was to develop measures for maximum protection of valuable coastal and marine resources in consideration of the potential for oil and gas development. The secondary purpose was to provide recommendations to ensure that the state receives adequate compensation for public resources if and when they are developed. As the first step in pursuing this proposal, the OFCP, in cooperation with the Florida Department of Environmental Regulation and the Florida Department of Natural Resources (FDNR), prepared an outline to provide the framework for a comprehensive approach towards adapting existing onshore leasing/permitting procedures for use in state offshore waters. The project was designed to provide an analysis of leasing and permitting procedures, leading from the initial mapping of state waters to potential revenue distribiiCi0ii, mid was to be occomplAsbed in fotir phases: Phase I Mapping Lease Tracts Phase II Leasing Procedures Phase III Permit Procedures Phase IV Allocation of Revenue Recognizing that these categories are not mutually exclusive, the DCA elected, as the first step in this program, to address leasing procedures (Phase II). In May 1983, a Coastal Energy Impact Program (CEIP) grant was awarded to the Florida Institute of Oceanography (FIO) to undertake the Phase II tasks of: defining existing rules, regulations, statutes, and procedures affecting leasing in state offshore waters; summarizing oil and gas leasing programs of selected coastal states; describing the interface of geographical boundaries between state and Federal offshore waters; 3 reviewing county and local'government statutes, rules, and regulations; reviewing Federal and state policies in regard to oil, gas, and mineral leasing; and drafting recommendations for a revised leasing program for state offshore waters to serve as a planning document for future policy decisions. II. Purpose of Project The purpose of the project and this report is to provide a working document, incorporating background information and specific recommendations, on which policy/management decisions can be based with respect to future oil and gas leasing in Florida's offshore waters. Conversely, it is not the purpose of this document nor the intent of the FIO to recommend whether oil or gas operations in Florida offshore waters should be permitted. The determination of whether oil and gas operations in Florida offshore waters should be approved is the responsibility of the Governor and Cabinet acting as the Board of Trustees of the Internal Improvement Trust Fund. Tf oll nnd pas resources nre discovered in commere-1.0 (pinntAtivs. In Florida's offshore waters, any program developed must @e compatible with the pr otection of the coastal environment and the exploration and production of offshore oil and gas. With increasing activity in the Federal waters of the eastern Gulf of Mexico, now is the time to rationa@lly and systematically develop a state offshore leasing program that will ensure adequate environmental protection as well as the potential financial benefits accruing to the state from offshore oil and gas revenues. If it is decided at a future date to award additional leases in Florida offshore waters, the material in this report should provide useful guidance in the preparation of revised leasing procedures. To provide such guidance is the overall goal of the project and this report. 4 III. Preparation and Format of Report The data in this report were obtained from interviews and meetings with Florida State officials, the DCA project advisory board (Appendix F), representatives from the other states selected for reviews shown in Table 1, Federal officials, and from a wealth of documents provided by all of the above. The format shown in Table 2 was used for the report of each of the nine states reviewed in Volume II to facilitate the comparison and critique of their respective oil and gas leasing programs. TABLE I Coastal States Included in Review of Leasing Procedures Alabama Louisiana Alaska Mississippi California North Carolina Florida South Carolina Texas Three consultants contributed to the Florida report. Their contributions consisted of a review of state laws, the role of local governments in leasing, and the socioeconomic impact of offshore oil and gas activities. The complete reports of these consultants are included as Appendices A, B, and D, respectively, in this report (Volume I). 5 The draft of each state report reflecting its program was, sent to selected state officials for review and comment. The final reports of the 40, eight other states reviewed and the draft of the Florida report, together with Appendices, were sent to the members of the DCA project advisory board (Appendix F) prior to general distribution. Following insertion of comments received, the final draft of this report was distributed widely to state agencies and private organizations. 6 TABLE 2 TOPICAL OUTLINE FOR STATE REPORTS A. Statutory Authority C. Oil and Gas Revenues Accruing to State (cont.) 1. Vested Authority 3. Rental per acre 2. Members of Governing Body 4. Delay rental payment 5. Shut-in royalties B. Philosophy of State Towards Leasing in State Waters 6. Offset wells 7. Pooled acreage C. History of Leasing Program 8. Bonus consideration 1. Establishment of offshore leasing program 9. Severance tax 2. Frequency distribution of leases by year 10. State agency receiving royalties 3. Average geographic size of lease and related bidding data 11. Distribution of Revenue within State 4. Example of prior lease sale schedule 5. Revenues accruing to state H. Environmental Controls and Regulations 1. Responsible agencies D. Delegation of Management Responsibilities for State Leasing Program 2. Relation to leasing agency 1. Name of managing agency or department 3. Environmental review process prior to issuing lease/permit 2. Agency responsibilities 4. Environmental stipulations 3. Organization chart of state agencies 5. Baseline environmental research 6. Role of Corps of Engineers E. Geographic Description of State Territorial Waters 1. General description of state offshore boundaries I. Leasing Procedures 2. Mapping and charting procedures used to define lease areas 1. Leasing Schedule 2. Call or nominations for lease F. Local Jurisdictional Control Over State Waters 3. Fees 1. The role of counties and municipalities 4. Publication of calls for nominations and advertisements for leasing 2. The role of port authorities 5. Bidding 3. Proprietary interests of local governments in submerged lands 6. Terms of lease 4. Home rule rights and the authority for local governments to annex 7. Handling of proprietary information offshore lands 5. Effects of local government regulations on offshore operations subsequent to issuance of leases J. Relation of Leasing Program to Issuance of Permits 6. Ability of local governments to tax oil and gas facilities, properties or production through taxes on leasehold interests, K. Mineral Leasing equipment or by levying a severance tax G. Oil and Gas Revenues Accruing to State 11. The Socioeconomic and Physical Impact of Oil & Gas Leasing in Florida's Waters (Florida Report Only) 1. Minimum royalties allowed by law 2. Royalties prescribed for oil and gas leases TABLE 3 Historical Summary of State Leasing Programs Leases Wells Production Lease Sales Schedule First Number Average First Number Initial Current (Frequency of Sales) Offshore Issued Size (Acres) Drilled Drilled Production Status To Date To Date Date Florida Early 19 ? to 1945 29 Non- Non- N.E. 1 1940's 11.3 million Producing Producing 2 3 Alabama 11950's 18 4,150� 1951- <20 Non- None produced N.E. 1952 Producing to date. First production will be 1987 Alaska 1958 3,377 5,760 1898 No Data 1902 In Production January, May & September each year California 11929 59 2,668 1896 43,838 3 1932 In Production N.E. Louisiana 1920 900 total 1,000+ 1901 18,506 4 1928 In Production Monthly 742 since 1960 Mississippi 1982 2 2,880 None 0 Non- Non- N.E. Producing Producing North 1944 5 5 1946 4 drilled Non- Non- N.E. Carolina offshore Producing Producing South None 0 2,500 6 None 0 Non- Non- Carolina Producing Producing N.E Texas 1922 422 640/1,440 1938 816 7 1940 In Production April and October each year 1. None established. 2. Currently leased. 3. based on 1982 figures. 4. As of 1980. 5. Average 1976 sale several thousand acres. 6. Maximum acreage allowable. 7. Wells in currently leased fields. Data provided and reviewed by respective state officials. TABLE .4 STATUTORY AND VESTED AUTHORITY FOR STATE OIL AND GAS LEASING PROGRAMS GOVERNING BODY STATUTE APPOINTED (A) 14UMBER OF STATE NUMBER NAME ELECTED (E) MEMBERS FLORIDA Chapter 253P Board of Trustees of the E 7 253.03 (1) Internal Improvement 1982 Supplement Trust Fund ABAMA Alabama Code None - Leasing A - �9-17-60 to Authority held by �9-17-62 Commissioner of Conser- vation and Natural Resources ALASKA Alaska Statute None - Leasing A 38.05 Authority held by Commissioner of Natural Resources CALIFORNIA Public Resources State Lands Commission A,E 1 3 Code, Div. 6, Part 1, Chpt. 4, Arti.cle 1, 6301 LOUIS1 ANA Louisiana Code, State Mineral Board A 92 Title 30, Section 124 MISSISSIPPI Mississippi Code Commission on Natural A 7 Ann. ��29-7-1 Resources et seq. (1972 and supp. 1982) ORTH CAROLINA General Statutes Depart. of Admin., Dept. E 10 �146-8 Nat. Res. & Community Devel., the Governor and Council of State SOUTH CAROLINA South Carolina State Budget and E4 5 Code �48-43-390 Control Board TEXAS Texas Code Chptr. School Land Board A,E 3 3 52, subchptr. A, �52.04 1 The Commission consists of the State Controller and the Lieutenant Governor 2 (elected) and the State Director of Finance (appointed). Additionally, the Governor and the Secretary of the Department of Natural 3 Resources serve as ex-officio members. The Board consists of the elected Commissioner of the General Land Office 4 and 2 appointed citizens, one by the Governor and one by the Commissioner. The Board consists of 5 ex-officio members: Governor, Treasurer, Comp- troller General, Chairman of Senate Finance Committee, Chairman of [louse Ways and Means Committee. Data provided and reviewed by respective state officials. 10 TABLE 5 GEOGRAPHICAL DESCRIPTION OF STATE TERRITORIAL WATERS COASTLINE i- NUMBER COASTAL DESCRIPTION LENGTH OF SEAWARD DEFINED (M LES) FRONTING BOUNDARY TERRITORIAL LEASE BARRIER ESTU- ROCKY LINEAR TIDAL COUNTIES _DISPUTES BOUNDARY AREAS ISLAND REEFS ARIES MARSH BEACH SHORE FLORIDA 1,350 8,426 33 None 3 nautical No X X X X X although miles in OCS-state Atlantic boundar- 3 marine ies have leagues not been (10.35 legally statute identi- miles) in fied in Gulf Atlantic ALABAMA 52 607 2 Legal 3 nautical Yes X X X X Boundary miles W/Missis- sippi not firmly es- itablished ALASKA @_,_640 33,904 24 State and 3 nautical Yes X X X X Federal miles Jurisdic- tion in Dispute CALIFORNIA 840 3,427 18 inc. None 3 nautical No X X X X X San miles lFran Bay LOUISIANA 397 7,721 11 Missis- 3 nautical Yes X x sippi miles Boundary In Dispute MISSISSIPPI 44 359 3 Alabama & 3 nautical Yes X X X X Louisiana miles Bounda- ries in jDispute NORTH 301 3,375 8 None 3 nautical Yes X X X X CAROLINA miles SOUTH 187 2,876 8 Georgia 3 nautical No X X X X CAROLINA Boundary miles In [Dispute TEXAS 367 3,359 12 State & 3 marine Yes X X X X Federal leagues Jurisdic- (10.35 nauti- tion in cal miles) Dispute Data provided and reviewed by respective state officials. 1from: Information Please Almanac, 1983 A & W Publishers, Inc., N.Y. TABLE 6 Delegation of Management Responsibilities for State Leasing Programs l Lease Lease Sale Lease Permit Environmental Recomnendation Management Administration Authority Regulation W r.a 0 :@. W 4j 4j U) to $4 @4 -.4 r: r. r. V. r. W Cd0 r. ca 0 @I -4W 0 0 W W 0 W 0 @q 0 "a 0< W 0 -H 0 -H AJC 00 -H -H 4j 00 -H 0 -H co :3 q 1-4 -4W " U 41< @4" " 100 r. 4j to W G z PCY 0 M 0 4) M 4-j W -0 U 0 0 0 U @4 g P @4 41 $4 0 P4j W 14 :3 U 41P 0 P Q) 4j0 ;> 0 0 -1 P I W0 -4 4jP -H -H r-4 :3 Managing Agency -4 U W r.0 a.W X 4j 4-0 -H 1-4 a0 0 0 tA 44 r-4 -@4 Q) :> co0 ca ca co -4 U (0 41" Co 0 0 4j -4 M 00. P. U M 0 -H g:" 0E :@,U or Department U) r. $4 > P W W 0 0 'r4 4J0@4 U 4 X 0 W 0 W 0 0.0co W Q) 0 U .,4H P W H (n P4 --,0 W Pd Pd 0 W z:3: - P-@ P44 Florida Department of Natural Resources X X X X X X1 X X XI I IX X X1 X Dept. of Environmental Regulation X X X X Alabama Department of Conservation and Natural Resources X X X X X X X 1 X State Oil and Gas Board X X X I X X X1 I Department of Environmental X Management X IX X X Alaska Department of Natural Resources X X X X XIX I X X X X X X California State Lands Commission X X X X X1 I X X X X X X X I IXI 8,9 X Department of Conservation X X X X X X X Coastal Commission X X Louisiana State Mineral Board X X X X X X X X 2 3 X 1 3 X Mississippi Department of Natural Resources X X X X X X X X X Department of Wild!-ife Conservation XIX X X X X X State Oil and Gas Board X X X X 4 1 North Department of Natural Carolina Resources and Community IDevelopment X Y, X X X X X X X X X X,X X X Department of Administration South Water Resources Commission Carolina X I X X X X X X X X X X, X X X 7 Texas General Land Office X X X X! X X X X- 5 5 X X 6 a n 2 a 1. Department of Environmental M nagement Office of Con bervatio 3. Depar tment of N tural Resources 4. Bureau of Pollution Control 5. Director State Railroad Commission 6. Corps of Engineers 7. Department of Health and Environmental Control 8. Air Quality - Local Air Pollution Control District 9. Water Quality - Regional Water Quality Control Board *Data provided and reviewed by respective state officials. TABLE 7 STATE LEASING PROCEDURES LEASE SCHEDULE ADVERTISEMENT BIDS RESPONSIBLE LEASE BETWEEN BETWEEN SALE NOTICE PRIOR AWARD AGENCY INITIATOR SALES AND AWARD TO SALE MEDIA FEES BASIS FLORIDA Department of Potential 1 2 Leon County news- $200 non- On high Natural Resources lessee N.E. 5 weeks papers and news- refundable bonus paper in county processing of lease fee ALADA14A Department of Private person, 3 The Montgomery Parties Most ad- Conservation and Commissioner, 1 Yr. 5 days 2 months Advertiser, and requesting vantageous Natural Resources head of leasing newspaper in lease ad- to state agency, or county of lease vertisement Governor. must pay for same ALASKA Department of Department of Varies with Statewide news- Bid deposit May vary Natural Resources Natural Resources 4 months timing of 2 months paper; public of 20% of with bonus and service announce- cash bonus bidding rental pay- ments on elec- method ments tronic media; used posting in area; other available methods CALIFORNIA State Lands State Lands N.E. N.E. 2 months Statewide news- May vary Commission Commission or paper and news- Various 4 with industry paper of county fees bidding of production required method used OUISIANA Department of Qualified indiv- Official journal $300 Most ad- Natural Resources iduals (including 1 month 60 days of the state and deposit 5 vantageous representatives parish where with lease to state of foreign lands are located application ---countries) MISSISSIPPI Department of Private person, One sale Southeastern Oil Prepaid fee Most ad- Natural Resources firm, or state held to 60 days Review, a news- per tract; vantageoufi commission date paper in county bids to to state (7/8/82)' of lease, and a cover pub- Jackson newspaper lication expenses NORTH Department of Private person, N.E. N.E. N.E. CAROLINA Natural Resources firm, or corpor- and Community ation Development SOUTH Water Resources Private person, At least 25 Statewide news- On high CAROLINA Commission industry, or N.E. 20 days days prior paper and news- N.E. bonus Commissioner to bid sub- paper of county mission_ of production TEXAS State General Industry or Generally At least 30 State distributes $100 nomi- High Land Office private person 6 months on sale days printed lists of nation fee bonus/ nominates tracts date tracts - 25-30 High state newspapers royalty advertise sale 2 No schedule established 3 15 weeks between nomination request and award 4 May vary greatly - current figure given $25 filing fee plus processing fee, guarantee deposit, insurance, a native declaration fee, environmental impact 5 report and consultation fee 6 Refundable with lease bid All leasing procedures currently under revision Data provided and reviewed by respective state officials. 13 TABLE 8 SUMMARY OF STATE LEASE TERMS Title Length Transfer Work Cessation Handling of Proprietary Guarantee Initial Extensions Stop Production Information Florida No guarantee 5 years Lease in force as Written consent 60 days to resume Excise tax, production processes, of clear title long as operations of lessor production or and geophysical data held con- are carried out or make rental fidential, drilling data held production continues payments for 90 days on operator requests All else public record. Alabama No guarantee Established in I year with rental Written approval 90 days to drill Well data kept confidential for of clear title invitation to payments of Commissioner or produce oil & 6 years upon written request of bid, usual is of conservation gas operator 5 years and natural resources needed Alaska No guarantee 5-10 years Lease in