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October 29, 2013

Oil and gas, and housing?

Lease of downtown block subject to multiple contingencies

TERRE HAUTE — The city has signed another oil and gas lease with Pioneer Oil Co., this time for property at 500 Wabash Ave., a former bus transfer station that is now a city-owned parking lot.

In September, the Board of Public Works and Safety approved a lease with Pioneer that set up royalty payments for any oil produced and sold from under city-owned property, such as downtown streets and sidewalks.

On Monday, the board approved a similar lease for the city’s 33-space parking lot at 500 Wabash Ave.

In this case, however, the lease is a little different.

That’s because the city has already agreed to sell 500 Wabash to Thompson Thrift, a Terre Haute contractor. But, to further complicate things, that sale is contingent on a larger deal – the sale of adjacent land to Thompson Thrift to build new downtown housing for Indiana State University students.

The State Budget Committee has been reviewing the ISU/Thompson Thrift project for several months and has asked for changes. Until the committee gives its approval, the housing project is on hold, leaving the city’s sale of 500 Wabash also on hold.

The oil and gas lease agreed to Monday sets up royalty payments for the city equal to 15 percent of the gross sales proceeds actually received by Pioneer for the first 75,000 barrels of oil sold. It will be 19 percent for the next 50,000 barrels, and 22 percent for all additional barrels.

Those royalties would become the property of Thompson Thrift if the sale of 500 Wabash goes through.

Also at Monday’s meeting, the board again extended the purchase agreement on 500 Wabash Ave. with Thompson Thrift. The new extension, which keeps the sale pending until Jan. 7, includes language granting oil and gas lease rights to Thompson Thrift “at closing.”

This is the third extension of the purchase agreement and allows the deal to remain alive while state lawmakers consider the downtown housing project, which calls for Thompson Thrift to build a multi-story student housing building in the 500 block of Wabash Avenue.

When originally proposed to the state, ISU was seeking to rent student housing space in the building for about $1.05 million per year for 30 years. State officials said they wanted to see changes in that arrangement.

Reporter Arthur Foulkes can be reached at 812-231-4232 or arthur.foulkes@tribstar.com.

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