Collier Resources Company

FAQ

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HISTORY OF OIL IN SOUTH FLORIDA

Q: What is the history of oil operations in Southwest Florida?

A: The first oil discovery in Florida was made in Collier County by the Humble Oil and Refining Company (a predecessor to ExxonMobil Corporation) in 1943 on Collier minerals at Sunniland Field, located just south of Immokalee. Since that time, eight Southwest Florida commercial oil fields have produced more than 118 million barrels of oil from the Sunniland Oil Trend at some of the highest on-shore per-well flow rates in the country. In 1977, the Trends peak year, more than 14,000 barrels per day were being produced.

For many years, Humble Oil/Exxon was the predominant operator in the Sunniland Trend. In addition to Sunniland Field, it discovered and produced oil under leases from CRC in the Big Cypress National Preserve at Bear Island beginning in the mid-1970s and at Raccoon Point beginning in the early 1980s. Exxon later sold its interest to Calumet Florida, LLC in 1993. Today, BreitBurn Florida, LLC, the successor to Calumet, continues to produce oil from the Bear Island and Raccoon Point fields within the Preserve, as well as three other fields located north of the Preserve, all within the Sunniland Oil Trend.

Southwest Florida oil has traditionally been transported by pipeline and by truck to Port Everglades and loaded onto ocean-transport barges for delivery to Gulf Coast refining facilities.

Q: What is the Sunniland Oil Trend?

A: The Sunniland Trend is a well defined, onshore hydrocarbon-bearing geological layer that stretches from Fort Myers to Miami. Its located on the northeast flank of the South Florida Basin, the largest unexplored geological basin in the lower U.S.

Sunniland Trend wells produce from limestone hills at an average depth of more than 2 miles and its fields contain very low amounts of gas, making them low pressure and requiring pumps to bring the oil to the surface. Oil from the Trend is of the heavy-sour variety with a consistency of liquid tar. Its refined products include automobile and aviation fuels, various grades of diesel fuel, lube oils and asphalt.

Oil and gas production has been continuous from Southwest Florida oil fields since the Trends first discovery at Sunniland Field in 1943. Over the past 69 years, 14 named discoveries have been made in the Trend and in excess of 118 million barrels of crude oil have been produced from eight commercial oil fields.

Q: What is the safety record of drilling and production in Southwest Florida?

A: Over the past 30 years, State Commissions, including the Big Cypress Swamp Advisory Committee (BSCAC), have twice concluded that oil production operations have been carried out safely in Southwest Florida and with minimal impacts to the surrounding ecosystem. Congress reached the same conclusion in 1974 when the Big Cypress National Preserve was created and again in 1988 when authorizing the BCNP Addition area. In both the 1974 and 1988 legislation, Congress directed the Department of the Interior to allow continued oil and gas exploration and production subject to rules and regulations that would protect the environment.

The Big Cypress Swamp Advisory Committee (BCSAC) was created in 1971 by resolution of the Governor of Florida and the Department of Natural Resources to advise and make recommendations on oil and gas permit applications in or affecting Big Cypress. The committee is comprised of a geologist, botanist, hydrologist and representatives from the environmental community and the oil and gas industry. For nearly 40 years, the BCSAC has independently reviewed and recommended approval of over one hundred exploratory and development well permit applications in Big Cypress.

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BACKGROUND ON CRC AND COLLIER MINERAL RIGHTS

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Q: Who is Collier Resources Company (CRC) and what is its business?

A: Collier Resources Company (CRC) is composed of the corporate entities of Collier Countys founding family, the Barron Collier Companies and Collier Enterprises. CRC is the largest private mineral company in South Florida managing more than 800,000 mineral acres in Collier, Lee and Hendry Counties.

Q: Did the Collier family make land available to create Big Cypress National Preserve?

A: In 1974, Collier family members and entities conveyed 76,800 surface acres to the federal government representing the initial tract establishing the Big Cypress National Preserve. Fourteen years later, in 1996, the Colliers completed an exchange of 83,000 surface acres with the Department of the Interior, adding to the Big Cypress National Preserve and creating the Florida Panther National Wildlife Refuge and the Ten Thousand Islands National Wildlife Refuge.

Q: Why didnt the sale and exchange creating the BCNP include the mineral rights?

A: Congress elected not to acquire the private mineral interests during the 1974 acquisition and the 1988 authorized expansion. At both junctures, they concluded that the value of unexplored mineral acreage was difficult to determine and could be very expensive. Additionally, Congress concluded that oil and gas operations had a long history of activity with minimal adverse impacts to the environment, and agreed that oil and gas activities could continue subject to regulations to protect the environment.

Q: Why did the federal government decline buying CRC mineral rights after making an announcement in 2002?

A: Discussions with the federal government to acquire Colliers minerals under federal lands began in the mid-1990s, and an agreement was reached in 2002. However, Congress chose not to provide funding for the acquisition during the years that followed and the agreement expired. As a result, CRC resumed work on the exploration and production of its minerals.

Q: Didnt a report issued by the Inspector General of the Department of the Interior claim that CRC overvalued the potential oil reserve?

A: The value of the Collier federal mineral interest has been debated over the years and it is no surprise that a wide range of values have been estimated. The valuation of largely unexplored mineral interests is a difficult and subjective exercise. CRC believes that this question is best answered with the private capital it is prepared to deploy along with its new industry partner, Lake Ronel Oil Company, to continue to safely identify and produce new oil reserves in the Big Cypress National Preserve using new, state-of-the-art technologies.

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EXPLORATION

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Q: How does the 3-Dimensional seismic survey work?

A: A 3-D seismic survey uses sound waves to locate oil formations at great depths, much like an MRI produces a map of the human body, significantly reducing the environmental impacts of oil exploration. The process begins by creating a carefully designed grid of small seismic charges and listening devices called geophones on the surface. A specially designed sonic drill is used to sink a small diameter casing 50 to 110 feet into the earth. The sonic drill uses high-frequency vibrations to buzz through underground layers without bringing soil to the surface. A small seismic charge is placed through the casing. The casing is then withdrawn, sealing off the charge from the surface and allowing the soil to fall back into place. Once the seismic charges have been placed, geophones are positioned on the surface and turned on. The charges are then individually discharged. The resulting sound waves travel downward and reflect off layers of the earth providing a highly accurate three-dimensional map of all underground structures within the survey area. This map reveals the presence or absence of geological formations similar to those that have historically produced oil. The accuracy of the 3D seismic survey reduces the need to drill multiple exploratory wells and allows more strategic placement of development wells. Click here to see how the process works.

Q: How does the survey determine the possibility of oil?

A: The survey shows whether geological formations or hills equivalent to those already producing oil are present and, if so, the shape, orientation and exact location of those formations, which indicates the optimal location for a new development well.

Q: What is the environmental impact of a 3-D seismic survey?

A: When exploring with a 3-D seismic survey within the Big Cypress National Preserve, Collier Resources and its partners work with the National Park Service (NPS) to develop the most minimally invasive survey plan possible. We also follow a comprehensive list of operational rules and conditions set by the NPS and the Preserves Minerals Management Plan, Floridas Department of Environmental Protection and the industrys Best Management Practices, including helicopter delivery of survey equipment, use of existing roads and trails when possible, on-foot surveying and placement/retrieval of geophone listening devices and use of third-party observers to ensure rule compliance.

To further minimize effects on the environment, CRC and its partners also invest in the most advanced technology available for conducting the seismic survey including a specially designed mini sonic drill. This drill, which has less surface impact than that of a human footprint, uses vibration instead of the older auger drilling technology to place seismic charges quickly and to prevent permanently displacing the soil.

Q: Isnt the use of seismic charges harmful to wildlife?

A: Seismic charges are generally small, about 1.5 to 2.0 kilograms in size. From several hundred feet away, charge detonation sounds and feels like a very low frequency thump with very little vibration. The sound magnitude is no greater than a muted thunder clap immediately adjacent to the charge location. No soil is displaced into the air from the detonation because the seismic charge placement process completely isolates it from the surface. Wildlife has been shown to avoid areas for the very short time temporary survey equipment and human activities are present.

Q: What about endangered species and archaeological sites?

A: Ongoing Florida Panther tracking information and Red Cockaded Woodpecker information are gathered and incorporated into the 3-D seismic survey for species avoidance. The 3-D seismic program has sufficient design flexibility to minimize impacts to these Preserve resources. In addition, a field survey is conducted and an avoidance model for archaeological, historical and ethnographic resources maps known important cultural resources and predicts presence of possible new sites; crews and equipment circumvent these sites. An archaeologist is on call to address any new sites found when the work is underway.

Q: What permits are required before seismic surveying can be conducted?

A: In addition to the National Park Service permit, required regulatory approvals include USCOE 404, , Florida Surface Use, State Geophysical and Wetland permits and Collier County site permit for support staging areas. As part of the state and federal approval process, other agencies, including the South Florida Water Management District, are asked to comment on each permit application.

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Q: Will current oil production in the Big Cypress National Preserve continue?

A: Yes, production from Raccoon Point and Bear Island Fields will continue until they are no longer economically productive. At that point, their surface lands will be reclaimed and restored to original conditions.

Q: If a 3-D seismic survey locates oil, what happens next?

A: If exploration with a 3-D seismic survey reveals a potential underground oil formation, CRC then requests a permit to drill during the following dry season. The permitting process can take a year or more to complete and includes a rigorous review of our plans by several federal and state government agencies including the Florida Department of Environmental Protection, US Fish and Wildlife Service, the National Park Service and the Environmental Protection Agency. CRC then begins a comprehensive preparation process that incorporates a variety of measures to protect the environment and our natural resources. Once complete, and following development permit approvals, drilling and production commences using the latest and most advanced technologies to minimize environmental impacts.

Q: What would the impacts be of new oil production?

A: Todays exploration and production technologies significantly reduce surface impacts over those of the past. The 3-D seismic survey produces an accurate picture of potential underground oil formations minimizing the need for multiple exploratory wells. Advanced drilling techniques reduce the number of wells and the size of pads needed to access large amounts of oil. High-capacity down-hole electric submersible pumps reduce field life and surface occupancy. As a result, todays oil and gas development methods temporarily utilize only a very small fraction of the area surveyed by 3-D seismic. When production activities have concluded in 12 to 15 years, the temporary impacts will be reversed and the area will be left essentially as it was found.

Q: What is the probability of an oil spill?

A: A 3-D seismic survey carries no risk of a spill, as no oil is brought to the surface. In terms of production, because oil fields in the Sunniland Trend contain very low amounts of gas, pumps placed inside the well are required to lift oil to the surface. This absence of a natural flow makes a spill improbable; if the well head on an established well were to be knocked over, the oil would likely drop several thousand feet below the surface.

In 67 years of producing oil in Southwest Florida, no major spills have occurred in producing oil fields. When small spills have occurred, most or all of the oil has been recovered with cleanup efforts. Statistics indicate that many incidents occur around well heads and tank batteries and are contained on limestone pads precluding environmental impact. Incidents occurring off limestone pads and into standing water, if present, are subject to a spill response plan, an operating requirement that is practiced every year and incorporates state and federal agency cleanup and vegetative restoration supervision. Southwest Florida oil fields also include production monitoring systems to alert field personnel and minimize spills. New oil fields will also employ the newest versions of this technology.

Overall, there has been minimal impact to the environment from oil and gas activities in SWFL including the BCNP, demonstrating that federal and state regulations together with the industrys best operational practices have provided excellent environmental protection.