American Oil and Gas Reporter - February 2015 - 137

ConventionSection: Louisiana Oil & Gas Association

Challenging Days Exhibit
Industry's Endurance
By Danny Boyd
Special Correspondent
BATON ROUGE-Members of the
Louisiana Oil & Gas Association will
gather for their annual meeting March
11-13 at the L'Auberge du Lac Resort in
Lake Charles facing plenty of challenges.
"We are worried about the state budget,
we have bad oil prices, we have elections
coming, and we have all the lawsuits and
Louisiana's legal climate," muses LOGA
President Don Briggs.
The lengthy list of issues compounds
challenges oil and gas operators already
face daily, reflects association Chairman
Bryan Hanks. "We already were fighting
all those issues, now we have to strap on
additional federal regulations and the
like, and then we get zapped with lower
commodity prices," says Hanks, president
and chief executive officer of Lafayettebased BETA Land Services. "I have examined a lot of lists ranking the country's
most productive, economical areas. Unfortunately, not one Louisiana play is
near the top of any of those lists, which
does not help."
Smaller Target
The prospect of an oil price slump
seems especially disconcerting for lawmakers, given an estimated state budget
deficit of $1.4 billion. Legislators will
have to resolve the matter during a fiscal-focused session from April 14 through
June 11, but LOGA Vice President Gifford
Briggs says lower energy prices may
have shrunk the size of target the industry
typically wears on its back whenever
lawmakers aim to find sources of additional revenue.
"With concerns about job losses, I do
not think there will be an appetite to
further harm an industry on which the
state relies so much," he says. "It is a
much tougher situation in which to target
the industry than when oil was $100 a
barrel and gas was $5 an Mcf."
However, talk of raising production
taxes and removing the state's horizontal
drilling incentive may arise, D. Briggs
warns. LOGA members already face the

prospect of higher parish property taxes
and increased fees, contributes Lauren
Chauvin, in-house counsel and government
relations adviser.
Meanwhile, G. Briggs relates, the association does not plan to pursue additional
legislation on lawsuit issues this session
after successfully backing several bills
last session. "Now, Louisiana is in an
election year. With the tremendous budget
deficits and incredible pressure the legislature faces, our goal for this session is
not to come with any aggressive, controversial legislation, but to focus on protecting our incentives and playing defense,"
he explains.
One matter that has LOGA's attention,
G. Briggs says, is talk circulating about
the possibility of a state water code. "The
state does not really have a comprehensive
water policy or statute, so there has been
a lot of discussion about creating something along those lines," he says.
A cross unit well study also continues,
Chauvin says, as a committee reviews
the possibility of rules to allow a horizontal
well drilled on one unit to hold a second
unit under which the lateral traverses.
"From a pure conservation standpoint,
I think it would make sense in line with
the Mineral Code," says Hanks. "We are
trying to leave as small a footprint as
possible. Now, you can go 10,000 feet
with a lateral from one location. If this
proves to be truly more efficient for the
industry, it would be fine. The landowners
need to sit down with the industry and
work out a common-sense solution agreeable to both."
Financial Surety
In the meantime, LOGA is awaiting
word from the Louisiana Office of Conservation with regard to a proposed rule
on financial security for plugging inactive
wells, D. Briggs says. The proposal calls
for revising regulations to require all operators to provide some type of financial
assurance on newly permitted wells or
wells with amended permits, according
to a LOGA summary.
It also seeks to revise regulations to
increase financial security standards to

better reflect the costs of properly plugging
and remediating orphaned well sites,
LOGA says, and includes a provision to
periodically review and adjust required
amounts.
The proposal also calls for a specific
time frame that will limit how long an
inactive well can remain in future utility
status and remain unplugged, including
how often and under what circumstances
extensions will be granted, LOGA describes. The revisions also attempt to require additional financial security or add
a yearly fee for wells in future utility
status because of concerns that extended
periods of inactivity suggest a well is
more likely to be abandoned, LOGA's
summary explains.
"The state is looking at how to minimize the number of orphaned wells and
getting rid of some financial security exceptions through that rule making," Chauvin says. "There also is talk about legislation to increase the fee revenue going
into the orphaned well program. We support that with a cap, as long as oil is at a
certain minimum price. Obviously, we
don't want operators to get hurt by unnecessary obligations."
LOGA also wants operators to have
the option of paying a fee that extends
an inactive well's future utility status,
and does not want the extension fee to
be labeled as a penalty, she says. "That
might require legislation because it is
not a penalty, and we do not want an extension referred to as such," Chauvin
says. "There are a number of reasons to
keep an inactive well in future utility
status. This allows an operator to pay a
fee to keep a well from being plugged or
abandoned."
The state's Oilfield Site Restoration
Program, passed in 1993 and funded by
the industry, has plugged more than 2,500
orphaned wells, D. Briggs notes in comments that LOGA has submitted to the
Office of Conservation. Although the
state collects about $4.5 million annually,
plugging and remediation costs have
risen, he remarks. The oil and gas industry
is not only aware of the problem, LOGA
says, but operators generally are willing
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