LIBERTY — The Amite County school board voted 4-0 Thursday to reject three oil and gas bids based on a recommendation of the Mississippi Secretary of State’s office, which said the proposed oil royalties should be 25 percent instead of 20.
The Secretary of State manages oil leases and approval of all 16th Section land issues to ensure school districts receive fair market value for rental agreements, and that lease terms are in compliance with the law.
It’s the first time the board has been advised to turn down oil lease offers.
“As long as I’ve been here, I’ve never seen the board decline a bid,” business manager Tommy Felter said. “That’s the Secretary of State’s call. Maybe they are beginning to see a greater level of profit as the oil activity increases.”
In general, an oil company will pay the district a certain amount per acre to lease school-owned land for oil exploration, then send a monthly royalty check for revenue generated. Royalty on 16th Section land has typically been 20 percent, Felter said.
The Secretary of State’s office in February set the recommended royalty for oil and lease bids at 20 percent. But with increased oil activity and a rise in the fair market value, state officials have since raised their recommendation to 25 percent.
Otherwise, nothing in the bids seemed out of line with previous bids, Felter said.
The board will re-advertise for bids on Sections 16-1-6, 16-2-5 and 16-2-6.
After the board voted to decline the bids, board attorney Nate Armistad noted dismay on trustees’ faces.
“I understand. It’s hard to watch that many checks walk out the door, but it’s business,” he said. “You’ve got to know when to hold ’em.”
Sanchez Oil & Gas Corp. and KEW Drilling of Dallas were two of the three companies that submitted bids. School officials had no other information on the proposals, noting that bids for 16th Section leases are submitted directly to the Secretary of State’s Office.
The companies can rebid each section, but they will have to go through the whole process again, and that is likely to take three more months.
With additional oil revenue coming in, Felter proposed the board consider hiring an adviser to invest money from the district’s 16th Section fund. The board can only spend interest that is accrued from the fund.
Alan Leach, a sales manager with the investment firm Smith Shellnut Wilson, told trustees Thursday that his company could earn anywhere from 11⁄2 to 21⁄4 percent interest on the fund. Currently, the money in the fund accrues less than 1 percent interest.
“We are the premiere school district provider in the state,” Leach said. “We have investments with a dozen districts already, and others are being established. This region is blessed to have a valuable commodity already in place, and you are in a position to benefit from it.”
The district’s total cash balance was $26,133,000 as of Aug. 31. Felter reported $12.9 million in the 16th Section interest fund and $9.5 million in the principal fund, with $45,000 in oil and gas royalties.
In another matter, the district is moving a step closer to finalizing capital improvement projects at its elementary and high schools, and it is looking at referrals from two architects, JBHM Architects and Bailey Architecture. The board will consider bids in the near future, Felter said.
The district also received an update on accreditation status from the Mississippi Department of Education, but Superintendent Scotty Whittington reported letter grades for the school district under the state’s accountability model will not be released until October.
“We are still under embargo,” he said.
Enrollment increased by 16 students since the August board meeting, totalling 1,048 students at the elementary and high schools.
Whittington presented the board a bar graph illustrating the level of academic need for elementary school students, noting the most attention is needed at the fourth-, fifth- and six-grade levels. Whittington said the biggest step in raising grades is to concentrate on the lowest 25 percent of students, which Whittington labeled as in need of urgent academic intervention.
The board then went into executive session to handle a personnel matter but took no action.
