Oil and Gas Drilling in Florida Balances Opportunity and Risks

While beaches and sunshine are the primary natural resources in Florida, oil and gas production offers a substantial upstream business opportunity in Florida for landowners, those who own mineral rights, and drillers who understand how Florida environmental and drilling regulations differ from those in the Southwest and West. Much of Florida remains undeveloped for oil and gas deposits, although there is significant drilling activity in South Florida and in Northwest Florida, where Santa Rosa County in the Panhandle accounts for half of the state’s oil production and almost 80% of gas production.

Drillers Face Regulatory Challenges in Florida

While Florida has a business-friendly climate, anyone considering coming into the state to drill should understand that the state Department of Environmental Protection heavily regulates these activities compared to a state such as Texas, always with a concern toward protecting the environment that has made Florida a destination for both residents and tourists. Permitting takes more time here – typically six to 18 months for an initial project. There often are conflicts between more restrictive local governments and more permissive state government regulators, and operators must find a way to navigate between them. Florida gives strong home-rule power to local governments, and it’s difficult to argue that local environmental restrictions are preempted by state law or regulations. However, many times these conflicts can be mitigated by education efforts that allay local concerns.

Local Land Use Laws Regulate Drilling

Florida treats drilling as a land use activity, which means that counties and local governments can regulate the surface activities related to the drilling process within their boundaries. Operators need both state and local government approvals. Since drilling was not anticipated as a land use in many counties, drillers sometimes have to ask a county to amend its land development code since unanticipated uses usually are prohibited. Counties vary in the reception they give drillers from outright opposition to welcoming the severance tax income.

The state also restricts any drilling that could damage improved beaches, wetlands or other environmentally sensitive areas. Off-shore drilling in state coastal waters is now forbidden due to a recent state constitutional ban and is unlikely ever to gain approval because of the fear that an oil spill will pollute our pristine beaches, which the tourism industry regards as our most important natural resource.

Although hydraulic fracturing (or “fracking”) is legal in Florida – and the state legislature consistently has rejected efforts to outlaw it – some local governments have banned it. This technique faces a high hurdle for permitting approval, and in practice, drillers will find that fracking is not welcome in Florida.

Permits Required at Every Phase of Process

Three state permits are required to explore for energy in Florida: A permit for geologic or seismic exploration, then a permit for exploratory drilling, and finally an operating permit for production. All are subject to challenge by third parties, which usually will be environmental groups who will argue that drilling endangers sensitive areas. Drillers also need state permission to abandon a well and must comply with requirements for plugging it and restoring the site.

Mineral rights in Florida are similar to those in other states where the surface landowner and mineral owner have different rights. Like most states, the mineral is the dominant estate in Florida if there is a split estate, and an energy producer is allowed reasonable use of surface property, regardless of the consent of the surface owner. We don’t usually see drillers run roughshod over surface landowners in Florida, and typically drillers work with surface landowners and agree not to damage property. Since drilling requires water, producers often will drill a well that is gifted to the landowner – a welcome benefit in rural areas.

Higher Energy Prices Will Make Florida More Attractive to Drillers

Whether Florida becomes more attractive to oil and gas exploration ultimately depends on energy prices. That’s a complex equation, but we can say that studies indicate there are large areas of untapped reserves in Florida. There is virgin land here waiting to be explored, and this may be one of the biggest energy opportunities east of the Mississippi River. Since there is less drilling competition here, mineral leases usually can be signed on favorable terms. The tradeoff is the higher risks that attach to an area which has a more arduous permitting process, powerful environmental interests and, while substantial, lower concentrations of reserves than in the West.

Timothy M. Riley has more than 13 years of experience practicing in government relations and administrative law, focusing on land use, environmental, and oil and gas law. He is an adjunct professor at Florida State University’s College of Law, where he teaches oil and gas law.