There’s enough oil in the fields along South Murphy Road to help the City of Brazil with some local projects but it’s not steady income.
Brazil Mayor Brian Wyndham said crude oil prices play a role in the amount of money made off a group of oil wells southeast of the city. Two oil wells are located on the same property as the Brazil Wastewater Treatment Plant on 6538 N. Murphy Road, with four others on property owned by Joseph C. Thomas Enterprises. An agreement between the two entities allows for the city to receive one-eighth of the royalties from the oil pumped from the wells when they are in operation.
“The original funds from the oil wells was actually part of the sewer/utility budget before 2012,” said Wyndham, who explained it was one of the first things his administration wanted to correct.
“You don’t want to budget with money you don’t have no idea what is going to come in every year. The city gets a little less than others involved with the oil wells because there is less acreage being utilized on our portion of land involved.”
The oil wells were discovered by accident in 2008. The city leased some mineral rights for approximately 40 acres to a company looking for possible locations to tap into natural gas. During the seismic tests, oil was discovered instead and production started shortly afterwards.
Wyndham explained that oil wells don’t really have to be on a person’s property to receive a portion of royalties from a drilling operation.
Often oil/gas production facilities are made up of multiple tracts of land with mineral rights leased to oil companies by various landowners. This makes it difficult to know what oil is being pumped from under which tract of land. However, oil companies use mathematical formulas to calculate each owner’s share of the royalty payment based on acreage from the sales.
In 2008, there was steady production of the more than 100 barrels a day of oil being removed from the field, which was graded at about a 41 gravity. That means there is not a lot of impurities in the product. According to the American Petroleum Institute, oils with this grade level are considered a “sweet light crude,” and require no deduction adjustments in the price per barrel.
“It created a little buffer for unforeseen incidents,” Wyndham said. “The funds have been used where necessary and to help areas where additional funds were needed.”
Starting in 2013, funds were kept in a separate account that could be monitored by the city council. The mayor said the council could use the funds at their discretion to support various projects and departments instead of just the utility department.
The account started with $44,551.90 in 2013, but over the years royalties have decreased and not been able to recoup expenditures like the purchase of lawnmowers for the golf course at Forest Park, trucks for water distribution and a dump truck for the street department.
In 2017, the account started with $5,225.55, and has grown to $14,801.64 after receiving recent royalty payment.
“There’s not been any expenses taken out of it so far this year,” Wyndham said. “It actually was a little cash cow for the city there for a while, and it was definitely better having it than not. But, as for right now, they’re just not producing very much money at this point.”