Languishing in Louisiana

A Tale of Two Regions

Like it or not, sometimes you do gotta dance with them what brung ya.

For so long, the oil and gas operators in Louisiana have done the dance for the opportunity to tap into the state's plethora of hydrocarbon-rich reservoirs.

They have patiently (or impatiently) traversed the complex, time-consuming permitting maze, forked over sometimes-exorbitant fees to acquire 3-D seismic data and fought to surmount a host of other obstacles in order to conduct business in the Bayou State.

Frequent cries of outrage and threats to take their drilling business to other more operator-friendly petroleum-rich states have long fallen on deaf ears. Indeed, the lawmakers and regulators have continued to pile on ever-harsher requirements, regulations and fees, assuming the often-prolific drillbit targets are too alluring for the industry to shun.

Rig count comparisons released by LIOGA (Louisiana Independent Oil & Gas Association) tell a different story, indicating the oil finders weren't crying wolf after all.

Exploration growth numbers from the downturn of 1999 to July 2003 speak volumes:

  • Louisiana -- 18 percent.
  • Texas -- 147 percent.
  • Oklahoma -- 111 percent.
  • United States -- 97 percent.

Particularly bad for Louisiana was the period between August '02 and August '03 when the state, including offshore, had negative growth compared to positive numbers for the other states. (Excluding offshore, Louisiana's growth was 5 percent).

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Like it or not, sometimes you do gotta dance with them what brung ya.

For so long, the oil and gas operators in Louisiana have done the dance for the opportunity to tap into the state's plethora of hydrocarbon-rich reservoirs.

They have patiently (or impatiently) traversed the complex, time-consuming permitting maze, forked over sometimes-exorbitant fees to acquire 3-D seismic data and fought to surmount a host of other obstacles in order to conduct business in the Bayou State.

Frequent cries of outrage and threats to take their drilling business to other more operator-friendly petroleum-rich states have long fallen on deaf ears. Indeed, the lawmakers and regulators have continued to pile on ever-harsher requirements, regulations and fees, assuming the often-prolific drillbit targets are too alluring for the industry to shun.

Rig count comparisons released by LIOGA (Louisiana Independent Oil & Gas Association) tell a different story, indicating the oil finders weren't crying wolf after all.

Exploration growth numbers from the downturn of 1999 to July 2003 speak volumes:

  • Louisiana -- 18 percent.
  • Texas -- 147 percent.
  • Oklahoma -- 111 percent.
  • United States -- 97 percent.

Particularly bad for Louisiana was the period between August '02 and August '03 when the state, including offshore, had negative growth compared to positive numbers for the other states. (Excluding offshore, Louisiana's growth was 5 percent).

The only growth in exploration activity for the past years has been in north Louisiana, which is a world removed from the sensitive environs of the heavily-drilled coastal zone, where the rules and regs can be especially extreme.

There are five specific areas impeding oil and gas exploration in Louisiana, according to Don Briggs, president of LIOGA:

  • Cost of 3-D seismic on state and Wildlife & Fisheries land.
  • State taking of lands due to subsidence.
  • Frivolous lawsuits filed on legacy oil and gas sites.
  • Ad Valorem taxes due to rulings by the Louisiana Tax Commission.
  • Permitting process.

"I just walked out of the office of someone who's getting ready to drill some wells in Louisiana," Briggs said, "and their whole deal was 'you guys are killing us with this stuff.'

"One of the engineers said 'Texas is so much easier -- a well in Louisiana takes on a whole new life of its own.'"

It's unlikely anyone would argue that permitting is perhaps the thorniest issue of all to deal with.

Part of the problem, according to LIOGA chairman Mitch Ackal, stems from the unique coastal environment where wetlands predominate. Besides going through the onerous procedures set up by the state, operators also must acquire a stamp of approval from the Corps of Engineers, meaning the federal government is in the loop.

But the added steps and challenges to acquire the blessing of the Corps are only the tip of the iceberg.

"We have a permitting bureaucracy at the state, federal and sometimes parish level that's set up to manage conditions the way they were 30 or 40 years ago," said Steve Maley, operations manager at Badger Oil Corp. "Back then, operators were finding big structures with multiple development potential.

"Now operators may go in for a quick single well hit in an old field, and it's not uncommon for the producing zone to run its life cycle in five-15 months," Maley said. "If there are delays in the permitting process, it could be two years sometimes, both before and after you drill, to get it all taken care of to start production.

"The fact is, about anything you do in south Louisiana requires 60, 90 or maybe 120 days of permitting because of the coastal zone, the wetlands, regulatory issues."

Help may be on the way in the form of a new Select Committee on Oil and Gas Permits, appointed by Senate President John Hainkal. The committee's mission is to assist in communicating industry concerns to government and ultimately devise a solution to improve the permitting process.

Alas, for every one lawmaker who recognizes the need to work with the industry rather than against it, there seem to be myriad others waiting to wrest every dollar possible from the operators.

The Louisiana Tax Commission is making a move to increase oil and gas assessments from 30-70 percent, depending on the wells involved, in 2004. The ultimate intent, according to Briggs, is to give the tax assessors a 300 percent increase LIOGA has been fighting for a number of years.

"The tax commission is in its own damn world," Briggs said. "Governor (Mike) Foster put in the chairman who is an ex-tax assessor who thinks like all the other assessors.

"Their little pot of money is dwindling in a lot of the parishes," he said, "so their thing is to increase taxes on oil and gas, and that's where they'll get their windfall to make up for lost taxes.

"LIOGA has been in a lawsuit with the tax commission for two years and still has had no day in court," Briggs said.

He noted the legislature has no control over the assessors who can do whatever they want whenever they want.

"The tax commission oversees them," he said, "but if the commission blesses what the assessors want, it's passed.

"One of the things that drives me crazy is we've been fighting a governor for the last four years who made a speech one time saying we're dinosaurs," Briggs said. "He said the oil and gas industry is not where the state is going to make money."

In fact, oil and gas is a cash cow for Louisiana, generating an economic impact of $93 billion in 2001, according to a study commissioned by the Louisiana Mid-Continent Oil & Gas Association.

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