Seismic fees in Louisiana continue to be a thorny issue
that keeps the administration and oil and gas interests at odds
with one another on an ongoing basis.
When the Second Extraordinary Legislative Session
convened in 2000, legislators voted to enact a new law called Act
8, which gives the State Mineral Board the exclusive authority to
grant permits to conduct geophysical and geologic surveys on all
state-owned lands, including wildlife management areas and refuges.
Act 8 includes the proviso that the Board review
the permit fees every six months.
The mineral agency promptly voted to increase fees
on state lands for non-exclusive seismic data acquisition from $2/acre
to $15/acre -- a whopping 750 percent jump. Concurrently, the board
members opted to reduce the existing $60/acre fee on wildlife management
lands by 50 percent to $30. This fee was bumped up to $60 from $20
by the self-funding Louisiana Department of Wildlife and Fisheries
(DWLF) in 1996.
It was the catalyst for a lawsuit filed in February
2000 by the Louisiana Independent Oil and Gas Association (LIOGA)
against the DWLF. LIOGA charged the fee was illegal because the
state agency did not have the authority to levy it.
The trial court judge ruled in June 2000 that LIOGA
made a prima facie case that the $60 per acre access fee was illegal.
However, the judge deferred ruling on LIOGA's challenge to the authority
of DWLF to set the fee on state-owned lands and water bottoms.
Act 8 makes clear this is not DWLF's bailiwick, and
the lawsuit has been dropped, according to Don Briggs, LIOGA president.
The Problem
Under Act 8, the fees for exclusive, or proprietary,
seismic shoots will be determined by public bid. Non-exclusive permit
fees cannot exceed $30/acre or fall below $5. They are to be based
on market value.
Therein lies a bone of contention.
The administration insists market value is what private
landowners receive for a 3-D shoot over their land, according to
Briggs. His group and the International Association of Geophysical
Contractors (IAGC) take issue with the state's assertion that it
is the private landholder's equal where seismic fees are concerned.
Most all 3-D seismic data acquired over private lands
incurs a cost between $15 and $30/acre, Briggs said. However, the
economic benefits reaped on the privately-held property pale in
comparison to what the state rakes in.
Both parties receive fees for the shoot, lease rentals,
bonuses, royalties and such. But the similarities end there. The
state receives income tax from drilling jobs, sales taxes from wells
drilled, severance tax on hydrocarbons, copies of the seismic data
and more. Also, the parish where the wells are drilled comes in
for its share of the bounty.
Recently, the Mineral Board elected to give the industry
a break, albeit a small one, after hearing comments from DWLF and
the oil and gas folks in April to satisfy the required six-month
fee review. The board voted at its May meeting to leave the $30/acre
charge on wildlife management areas intact and to reduce the fees
on state lands from $15 to $10 -- which is still a 500 percent increase
over the original $2/acre charge.
And it's still way more than the seismic fees charged
by Louisiana's neighbors:
- The tab for Texas inlands and bays is $5, which drops to $1
for Texas outside of barrier islands.
- There is no fee on Mississippi state water bottoms or in the
OCS.
Killing the Goose?
Briggs noted seismic activity on state lands for
both exclusive and non-exclusive surveys has been practically non-existent
for the past year. Seismic permit acreage on these lands is 25,402
acres for the last eight months that have been tallied.
Although seismic data acquisition in general has
been at a dismally low level for the last couple of years, Briggs
is concerned the dearth of action in Louisiana is at least in part
because of the competition from his neighbors, where the lower fees
are more attractive to the data gatherers.
He may have a point.
"When we do a spec shoot, we look at those costs
and weigh if we're willing to pay that and whether we can get it
back when we license the data," said Jim White, vice president at
WesternGeco. "We have looked at and have canceled some surveys because
of the excess fees."
He noted the cost of acquiring data there means there's
not a lot left over for other areas and said the company has to
prioritize where it spends the money for surveys.
"If we feel we're spending that much in Louisiana
and it doesn't pay back as much as it would by spending it in, say,
eastern New Mexico or West Texas or Colorado, then we'll spend that
money elsewhere," he said.
"Those fees have a trickle-down effect when it comes
to decision making."
It's a scenario that brings to mind the cliche of
"cutting off your nose to spite your face."
"The problem with Louisiana is these people are still
trying to collect fees to run their budgets," said Marc Lawrence,
senior vice president at Fairfield Industries. "They don't understand
the economics of our business, and they don't look out for what
the market will bear.
"If they raise these fees too high -- seismic, drilling
or whatever -- they'll kill the goose that laid the golden egg."