Lordy, it seems there's always something to squabble about in South Louisiana, particularly when you mix politics, money and oil.
The latest flap has some unhappy campers from the oil and gas sector gearing up for a day in court carrying the banner of the Louisiana Independent Oil and Gas Association (LIOGA).
A number of LIOGA members got so riled up about the $60-per-acre seismic fee being levied by the Department of Wildlife and Fisheries (DWF), the association filed a lawsuit against the self-funding state agency in mid-February. Because the suit claims the fee violates the state constitution, Attorney General Richard Ieyoub is included as a defendant as well.
LIOGA president Don Briggs says the fee, which escalated from $20 to $60 four years ago, makes Louisiana non-competitive with other states -- noting that Texas charges an average of $5 per acre on state lands. And certain LIOGA members say the pricey permits played a major role in the drop in seismic permit acres from 1.1 million acres two years ago to a paltry 1,088 currently.
"I recognize there are several economic factors that assisted the downturn, but that single move of raising the fee did more to turn the momentum in the oil and gas industry down in this state than any other economic factor," said Bryan Hanks, president of Alpha Land Services in Lafayette, La.
Not so, according to DWF secretary James Jenkins.
"It's a totally bogus argument that the fee is a factor in low seismic activity," Jenkins said. "There's 8.5 million acres of land in the coastal zone out to the three-mile limit, and our property that hasn't been shot only amounts to about 200,000 acres, or a little over two percent of the gross acreage. You can't tell me everybody is going to Texas because of that."
The Heart of the Matter
At the heart of the brouhaha is LIOGA's contention that Jenkins does not have the statute authority to charge such a high fee.
But Jenkins claims he's on solid legal ground.
"We and the House Natural Resources Committee asked for an opinion from the attorney general a year and a half ago," Jenkins said, "and he determined we did have authority, and our own in-house counsel agreed to that."
According to Ieyoub, the state mineral board has exclusive authority to grant permits to conduct geophysical and geological surveys on state-owned lands and water bottoms. It issues permits for seismic activities that occur in state waters or on state water bottoms in wildlife management areas and wildlife refuges -- but not on the land portion.
The DWF, however, has regulatory jurisdiction over all seismic activity in the state, both private and public property, including land and water bottoms. In addition to assessed fees associated with its regulatory authority, DWF has charged an access fee, or right-of-use fee, for these areas since as far back as the 1930s.
For large tracts on wildlife refuges, exclusive right-of-use permits are competitively bid. In other refuge and wildlife management areas, non-exclusive permits are issued in order of request by seismic companies. These are the permits that carry the $60 price tag.
Although it drastically exceeds the base fee of $2 per acre charged by the mineral board for a non-exclusive seismic license, DWF touts the added $60 fee as being fair market value, comparable to the price charged by owners of private property.
This in itself is a bone of contention with Briggs, who says it proves the monies are not being collected for regulatory purposes but only because of market value.
Ironically, according to Jenkins, the oil industry brought the onerous fee on itself.
"This all started because the seismic companies bid $53 a few years back at Rockefeller Refuge," he said, "and we assumed this was close to market price, so we decided the $60 market range was right. The first big job at $60 I recall was back when Ocean Energy's predecessor, Flores & Rucks, paid $60 an acre at Pass a Loutre.
"Since then," he added, "everyone that was granted a permit has paid this fee."
Some companies, however, have publicly withdrawn their permit applications rather than ante up the amount of money they consider detrimental to project economics.
In 1998, The Meridian Resources notified DWF via written correspondence it would redesign a Terrebonne Parish 3-D seismic survey to exclude 11,000 acres of state water bottoms. The $60 fee had escalated the project's permitting fee to $660,000 instead of the planned $220,000, which was based on the earlier fee of $20 per acre.
By excluding the acreage:
- Meridian lost the opportunity to image the subsurface there.
- The DWF lost a $220,000 permit fee.
- The office of mineral resources lost the chance to acquire a 3-D data set over those particular water bottoms.
It was asserted that the fallout was even more widespread.
"With the loss of employment for seismic acquisition and the potential for drilling, logistical support and production royalties, the citizens of Louisiana appear to be the real victims of this permit fee escalation," Meridian district landman, John Brown, noted in the letter to DWF.
In response to Brown's letter, the DWF replied:
"The Department understands this level of compensation may reduce the level of 3-D seismic activity on coastal wildlife management areas and refuges...
"Any reduction in seismic activity which occurs because of the amount of compensation being required will result in reduced environmental impacts."
While there is much angst among many of the seismic and E&P companies over the $60 fee, the desire not to rock the boat and to stay in the good graces of the political powers-that-be has most folks staying mum over the issue, perhaps hoping for others to go out on the proverbial limb for them.
As of press time, Briggs still was unsuccessful in acquiring the official blessing of the International Association of Geophysical Contractors (IAGC).
"Briggs gave a thorough briefing at our southeastern region meeting in New Orleans and said he would welcome IAGC support and any funding we might consider," said IAGC president Charles Darden. "But after he talked, I asked for input from the members present, and none came.
"Our position at the moment is to study this," he said, "and as it progresses, we will determine if IAGC will take part."
Darden noted that both Jenkins and Louisiana Gov. Mike Foster had been helpful to the association in the past on a number of issues important to its members. He said that as the current situation evolves, it would be appropriate to talk to them before deciding to be a party to anything.
Perhaps some blame for the lack of input by individuals and companies can be attributed to the current dearth of seismic data collection activity -- not just in Louisiana, but throughout the industry. Indeed, seismic appears to be at the bottom of the food chain when it comes to the ongoing, yet slow industry recovery.
"We're surprised no one has come to us about this $60," Darden said, "but the answer is no one is working over there."
His remarks echo Jenkins' sentiments in part: "Right now, no one is looking for oil and gas here, so there's no reason to consider changes -- and besides, thousands of acres have been shot that nobody's done anything with yet."
However, the E&P community appears to be in the initial stages of dusting off the unused seismic data that have languished on the shelf for the past couple of years. So at some point there no doubt will be demand for additional seismic data.
But, you ask, will lower permitting fees be in place at that time to lure the data gatherers back to the DFW stakes in the prolifically productive coastal environs?
It doesn't look promising.
"If you look at what the mineral board charges, it's a giveaway program," Jenkins said. "Our properties are difficult to manage, protect and inspect, and we're accommodating oil and gas if we let them look on our properties and retrieve oil and gas. If they think we're going to give it away, the alternative is to not do it at all."
Briggs predicts it will be several months before the issue is resolved.