The Merced City Council approved a lease with Oklahoma-based Panther Energy Company, LLC Monday to drill for oil and gas in an area near the City's wastewater treatment facility.
The company approached the city last year, wanting to acquire oil, gas and mineral rights to approximately 640 acres surrounding the City of Merced Wastewater Treatment plant.
City Attorney Greg Diaz said the city had been in negotiations for at least a year and a half with the company.
Geological prospects led the company to Merced, according to Jim Stone, vice president of business development for Panther Energy, said.
Stone said they would begin drilling as soon as they were able to. He also said the potential outcome of the land would remain to be seen.
"Well it's just too hard to say because there is such a gigantic range of potential outcomes," Stone said. "But we look to get a good rate of return on our investment."
The oil and gas exploration company would look for oil, gas or minerals produced through wells on the site.
Any of the revenues or royalties from the land would benefit the wastewater enterprise funds, not the city's General Fund, Diaz stressed. The wastewater enterprise funds have holdings in the leased property, according to the report.
"What we cannot do is to take enterprise funds from the treatment plant and use that to fix the roads, put in a new traffic signal, or hire more police officers," he said.
The lease term would be three years during which the company would pay an annual rent of $32,000. If the company does hit pay dirt, one-fifth of the profits would also go to the fund.
Diaz said the company believes there may be a significant quantity of gas in that area. And there would be multiple wells on the site, too, he said.
He stressed that some of the land will be a part of city land, but not all of it.
Reporter Ameera Butt can be reached at (209) 385-2477 or email@example.com.