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.
-- 147 percent.
-- 111 percent.
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.
taking of lands due to subsidence.
lawsuits filed on legacy oil and gas sites.
Valorem taxes due to rulings by the Louisiana Tax Commission.
"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
"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
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.