GULFPORT -- The head of a family with significant mineral rights holdings in the state said a bill before the state Senate could make his family, and the state, a lot of money.
Bruce Monroe of Brandon-based Denkmann Associates, an oil royalty trading company, has been arguing with Denbury, a Texas-based energy company, over access to a carbon dioxide pipeline. Now, it wants to settle that dispute in the state's Public Service Commission.
Monroe, who flew into Gulfport as part of a press tour across the state Monday, said Denbury repeatedly used eminent domain to obtain property for the pipeline, claiming it would be for the benefit of the public. He said Denbury abandoned its plans to develop oil reserves in Mississippi and sold the carbon dioxide pipeline but retained 100 percent of its capacity through a 20 year lease. He said up to 70 percent of the state's C02 is being shipped to Texas. Greg Schnake, Denbury's executive vice president for governmental relations, disputes most of Monroe's claims.
The gas shipped to Texas is excess, he said.
"There are no fields (in Mississippi) that are currently requiring C02 that are not being served," he said. "That includes our fields ... and fields controlled by others."
Under the Senate bill, disputes over access to such pipelines would be settled by the PSC.
"Just as telephone companies and cable companies, for a fee, are allowed to use poles and lines 'built by' and 'at the expense of' power companies, by this same principle, it only seems reasonable that for a fee these pipelines that were secured by eminent domain, and have ample capacity available, should be open to public use for the good of the public," he wrote in talking points distributed after the news conference.
Denbury says the dispute has no place in the Legislature.
"Our view is this is special interest legislation that being brought by the proponents to avoid the mineral lease agreement they have with our company," Schnake said. "They've been offered on more than one occasion a commercially reasonable transportation agreement to access transportation for C02 they control in the Jackson Dome field. We've been attempting to try to discuss that with them but they have since turned to the Legislature for private relief."
He called the bill a "retroactive regulatory taking."
"And an illegal governmental interference with existing contracts," he said, "that in our opinion is unconstitutional.
"Frankly, they just don't like the price."
Carbon dioxide can be used in "enhanced oil recovery" techniques to squeeze more oil from fields that would yield no more using conventional drilling.
"What this bill is advocating is an open pipeline that has been dedicated to transporting from CO2 fields to these dry oil fields," Monroe said. "These pipelines currently are closed to access. They do not have access to outside users."
Monroe said the carbon dioxide could be used to get at an additional 250 million barrels of oil beneath Mississippi. He said there is enough carbon dioxide to produce an additional 30,000 barrels of oil per day for 30 years. That would give the state another $100 million per year in severance and royalty taxes, he said.
But, Monroe said, Denbury decided a few years ago to develop only very large fields and sold their 10 undeveloped fields in Mississippi and the pipeline.
"It's a very rare commodity," he said. "Instead of going to the east Mississippi fields it was intended for, those fields have been sold."
Schnake said Denbury has not pulled out of the state. He said the field the company sold were not economically viable.
"This year we will spend in Mississippi for capital budget, lease operating expenses and royalty payments ... a billion dollars," he said. "It's our largest operation of any of our entire seven-state region."
He also disputes the payoff for the state. He said with oil at $90 a barrel, it would take 100,000 barrels a day to bring in $100 million in taxes for the state.