The MMS Pacific OCS Region and MRM wish to recognize Mr. Tom Gladney of Arguello, Inc. His efforts in assisting both the OMM and MRM offices in managing the resources of our Nation in a safe, environmentally sound, and fiscally secure manner are exemplary. Mr. Gladney and his staff have served both professionally and timely in addressing our needs and the needs of the various agencies that share an interest in oil and gas operations and revenue on the Pacific OCS.

Since being designated the Operator of the Point Arguello Unit on November 1, 1999, Arguello, Inc., has worked diligently to improve the performance of the Unit’s operations. The most notable improvement of 2001 is the change in its offshore oil and gas recovery management. They now include sweet gas sales-to-shore (using excess gas previously reinjected into the reservoir) for use as fuel at the once idled co-generation units of the Gaviota Onshore Facility.

The decision for gas sales-to-shore was not only beneficial to offshore oil and gas recovery management but also timely. The result was that it supplied an additional 10 megawatts of power to California consumers during a time of serious energy shortfalls. Rather than take advantage of the peak market price for its electricity, Arguello, Inc., contracted at a lower price. This ensured a continuous flow of power 24 hours a day, 365 days a year supplying enough power to light up to 10,000 homes each day. In addition to supplying critically needed power to California, the gas sales-to-shore allowed Arguello, Inc., to discontinue the purchase of the 800 mcf/day of gas from a local utility needed to fuel the Gaviota facility. This freed the 800 mcf/day for use elsewhere around the state.

Arguello, Inc.’s change in offshore oil and gas recovery management allowed them to redirect the injection of excess produced gas and therefore resume full production at its previously curtailed high gas-oil ratio wells. Additional production from selective redrills, new artificial lift technologies, and improved facility uptime increased crude oil production by nearly 15 percent since becoming the Designated Operator and by over 40 percent from the Unit’s production low in June 2001.

With the resumption of gas sales-to-shore, Mr. Gladney also initiated discussions resulting in the successful completion of a new valuation methodology jointly developed by MRM, the State of California, and Arguello, Inc. This methodology allows the resolution of several issues resulting from the resumption of gas sales-to-shore from the Point Arguello leases and the non-arm’s-length sale of the gas. Principal among these was everyone’s concern over using a burdensome net-back method for calculating the costs associated with the manufacture of electricity. Probably equal to this has been the concern of costly and lengthy litigious actions. In addition, the Gaviota Gas processing facility was permanently shut down before Arguello, Inc., became the Designated Operator. Therefore, there was no method for processing the gas and without processing, the gas will not meet local air quality standards of the Santa Barbara Air Resources Board.

With the group's consensus on a valuation methodology that accounts for the special quality conditions of the gas, we have successfully resolved all issues. We have avoided costly litigation related to the valuation of electricity sales, and we have saved many, many hours of work by all parties through the implementation of a fair and easy to apply valuation formula.

For these reasons, Mr. Gladney is most deserving of the MMS Corporate Leadership Award.