Hillsboro council asked to lease city land for oil search

The Hillsboro City Council, at its Oct. 4 meeting, tabled a request to lease city-owned property for the purpose of oil exploration.

Chas Docking, representing Wichita-based J. Fred Ham?bright & Associates, said the request is part of a much larger effort in the area in recent months to secure leases that would enable an oil-drilling company to use new technology, including horizontal underground drilling, to search for oil deposits.

The property in question is where the city has its sewer lagoons, plus the adjacent acreage the city leases to Cooper???ative Grain & Supply as a field-test plot.

Docking said the three-year lease would pay the city $15 per acre plus one-eighth royalty based on the cost per gallon of oil pumped?the same offer made to other landowners in the area of interest.

The drilling company was not identified except as being ?large and reputable.? Docking said horizontal drilling enables the company to draw potential oil finds from four clustered mile sections through one centrally located rig.

He said each rig would bore a hole a mile or more deep, then manipulate the shaft to drill horizontally for up to one mile. Each bore hole would cost around $1.2 million.

For most landowners, Docking added, that would mean no surface disturbance except at the one drilling site. The owner of that acreage would receive additional compensation from the company.

Docking said he could ?almost guarantee? the CG&S acreage, which is used as a field test plot, would not experience surface disturbance, a question the council raised during the discussion.

Docking suggested that a ?no surface disturbance? clause be added as an addendum to the lease, if that would alleviate the council?s concern.

The drilling procedure opens up the ?fracking? technique for the company?s oil recovery process, City Administrator Larry Paine noted.

Fracking, short for hydraulic fracturing, is using pressurized fluid to create a fracture in a rock layer in order to release petroleum for extraction.

The practice has come under international scrutiny because of concerns about environmental and health safety, but Docking assured the council that, given the geological makeup in the designated area, the process would pose no environmental threat here.

Councilor Marlene Fast questioned the financial compensation of the lease, noting that in western Kansas the per-acre and royalty rates were significantly higher.

Docking responded that rates vary regionally, based on the potential for success and other factors.

Because of the competitive nature of the oil business, Docking said he approached the city last among area landowners because of the open nature of public meetings.

The council did not indicate when it would next discuss the request.

Property sale

Having two purchase requests to consider, the council approved the sale of 104 feet of city-owned property at 310 N. Lincoln to a person who plans to build a duplex there.

The city earlier had received an offer from a business owner that wanted to purchase 125 feet of the property, which is adjacent to his home, to build an accessory building for his heating and air conditioning business.

Clint Seibel, the city?s economic development director, presented both offers to the council. He said the builder of the duplex intends to live in one half of it and rent out the other half.

The council opted for the duplex project primarily for two reasons: the residential buyer offered $8,000 for the property compared to the business-owner?s offer of $6,000; the property in question currently is zoned for residential use.

The council raised concerns about the impact of having a commercial structure situated in the neighborhood?assuming a conditional-use permit would be approved for the new owner?especially since the city would still own the remaining property there.

?We?d have a better chance of selling the other lot (if the adjoining property was residential),? Fast said.

Even though the second offer came in the day of the meeting, Seibel said he informed both parties that the council?s decision would be based on the merits of the offer, not on the order in which they were received.

Seibel said he would be working with the business owner to find an alternate, higher-profile location that is zoned highway commercial.

Other business

In other business, the council:

? authorized the mayor to sign a contract for $19,500 with Ranson Financial to act as Community Development Block Grant administrator if funds are approved for the city?s proposed street-reconstruction projects.

Because the U.S. Department of Housing and Urban Develop?ment oversees the CDBG grant program funds distributed to the state of Kansas, there are a large number of ?assurances? that have to be documented, Paine said.

? gave permission to Police Chief Dan Kinning to solicit bids for the purchase of a new police car. The new vehicle would replace the department?s 1999 Explorer, and its 2003 Crown Victoria would be used as a backup vehicle.

Since Ford has taken the Crown Victoria out of production, Kinning said the new vehicle would be either a Dodge or a Chevrolet Impala.

Because only one of those vehicles would be available through a local dealership, the council authorized Kinning to include out-of-town providers to assure competitive pricing.

Mayor Delores Dalke reminded the council that the city?s purchase policy is to buy locally if the local bid is within 10 percent of the lowest bid.

? approved the mayor?s appointment of Amy Simmons for a four-year term to the Hillsboro Housing Authority, which oversees the operation of Grand Oaks Apartments.

? approved the mayor?s appointment of Brenda Kim?berly to the Hillsboro Public Library Board.

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