Oil money not flowing for city, yet
Published 12:09 am Friday, April 26, 2013
NATCHEZ — Despite touting the success of an oil well on Cemetery Road, the City of Natchez has not yet received any money generated from the well.
The reason the city has not received a check for its share of the revenue, Mayor Butch Brown said, is because a division order for the well has not been issued.
A division order tells an oil company how to pay the well’s royalty owners by listing each owner of an interest in production and that owner’s share of the production revenue.
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The oil well was drilled by DRAYCO Exploration and was approved by the city in November 2011. Ward 1 Alderwoman Joyce Arceneaux-Mathis, in whose ward the well was drilled, reported to the Natchez Board of Aldermen in October 2012 that the well had been successful and struck oil.
The city owns three-sixteenths of the well and has estimated that it will receive approximately $30,000 a month from the well.
Brown said he believes the division order has been held up because there is a possibility of a second well that may be drilled near the first well.
“I’m under the impression that the second well is going to fall into an irregular or newly shaped unit,” Brown said.
Oil and gas wells are drilled on 40-acre units, so creating a new unit would mean that more approval would be necessary.
“That’s not a problem, but it’s just a piece of the minutia you have to follow,” he said.
DRAYCO is working out whether or not a second well will be drilled on the existing unit or a new unit, Brown said, and is keeping the well revenue in an escrow account until a decision is made.
Mathis said she was unaware the city had not been receiving payments for its share of the well’s revenue.
Brown said he previously reported to the board that the revenue was not coming in, and Mathis said she could have missed that meeting.
Brown said he does not believe the hold up on getting the oil revenue has caused any cash flow problems for the city.
Plans for spending the revenue have not yet been outlined by the board of aldermen.
Mathis has said she would like to see part of the revenue go toward infrastructure improvements in the Marblestone area, which is near the oil well.
Brown said Thursday he would like to see the money used for improvements to recreational facilities at Duncan Park.