Seismic Fee Fuss Heading to Court

Louisiana Activity Slows

Louisiana has a new statute on the legislative books, apparently aimed at making the state more user-friendly for 3-D seismic data acquisition.

Yet the new law brings to mind an old cliché: With friends like this, who needs enemies?

Act 8 of the Second Extraordinary Session of 2000 - which went into effect in August 2000 - created a comprehensive fee structure for obtaining exclusive and non-exclusive seismic permits over state lands and water bottoms, including wildlife management areas and refuges. In some instances, however, the base fees are a staggering 750 percent more than previously, according to Don Briggs, president of the Louisiana Independent Oil & Gas Association (LIOGA).

The oil and gas folks are understandably smarting, given that the legislation was prompted by LIOGA's still-pending February 2000 lawsuit against the self-funding Louisiana Department of Wildlife and Fisheries (DWLF). That suit contests the validity of what LIOGA considers an excessive $60 per acre "access fee" levied by DWLF to conduct seismic exploration in wildlife management areas and refuges.

In Louisiana, exclusive right-of-use seismic permits for large tracts on wildlife refuges 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.

Briggs said the fee, which escalated from $20 to $60 in 1996, made Louisiana non-competitive with other states and had essentially brought seismic activity to a screeching halt in the Bayou State. He noted that Texas charges an average of $5 per acre on state lands.

LIOGA's legal suit contains a three-pronged challenge to the fee levied by the state agency:

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Louisiana has a new statute on the legislative books, apparently aimed at making the state more user-friendly for 3-D seismic data acquisition.

Yet the new law brings to mind an old cliché: With friends like this, who needs enemies?

Act 8 of the Second Extraordinary Session of 2000 - which went into effect in August 2000 - created a comprehensive fee structure for obtaining exclusive and non-exclusive seismic permits over state lands and water bottoms, including wildlife management areas and refuges. In some instances, however, the base fees are a staggering 750 percent more than previously, according to Don Briggs, president of the Louisiana Independent Oil & Gas Association (LIOGA).

The oil and gas folks are understandably smarting, given that the legislation was prompted by LIOGA's still-pending February 2000 lawsuit against the self-funding Louisiana Department of Wildlife and Fisheries (DWLF). That suit contests the validity of what LIOGA considers an excessive $60 per acre "access fee" levied by DWLF to conduct seismic exploration in wildlife management areas and refuges.

In Louisiana, exclusive right-of-use seismic permits for large tracts on wildlife refuges 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.

Briggs said the fee, which escalated from $20 to $60 in 1996, made Louisiana non-competitive with other states and had essentially brought seismic activity to a screeching halt in the Bayou State. He noted that Texas charges an average of $5 per acre on state lands.

LIOGA's legal suit contains a three-pronged challenge to the fee levied by the state agency:

  • The DWLF lacks the authority to charge any fee at all in certain areas covered by wildlife management areas and refuges.
  • The fee was not enacted by the legislature prior to its initiation, as required by the Louisiana Constitution.
  • The DWLF didn't follow the proper rule-making procedure.
  • However, James Jenkins, DWLF secretary, claimed to be on solid legal ground, citing an opinion issued by the Attorney General Richard Ieyoub's office stating that the agency 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, DWLF has charged an access fee, or right-of-use fee, for these areas since the 1930s.

    Ieyoub's office noted also that the 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.

    Because LIOGA's lawsuit claims the DWLF fee violates the state constitution, Ieyoub is included as a defendant as well.

    And the Winner Is ...

    LIOGA came out the winner in round one of the legal skirmish when it persuaded the trial court to grant a preliminary injunction against the state agency, prohibiting it from charging access fees to oil and gas companies on wildlife and fisheries lands.

    After hearing arguments by both of the opponents in the trial court, Judge Michael Caldwell ruled that LIOGA made a prima facie case that the $60 per acre access fee is illegal and signed the judgement in June, subject to the posting of bond by the association.

    The court deferred ruling on LIOGA's challenge to the authority of DWLF to set the fee on state-owned lands and water bottoms until a trial on the merits. Instead, Caldwell's decision was based on the other counts of the association's claim.

    He determined that the fee had to be enacted by a vote of two-thirds of the legislature, according to the Louisiana Constitution. In addition, even if the relevant constitutional provision did not apply, the DWLF had to comply with the Louisiana Administrative Procedure Act's rule-making requirements.

    Within the framework of the newly enacted Act 8, the state Mineral Board has the exclusive authority to grant permits to conduct geophysical and geological surveys on all state-owned lands, including wildlife management areas and refuges.

    The fee set by the Mineral Board for non-exclusive permits will be based on the market value but cannot exceed $30 per acre or fall below $5 per acre. A fee for exclusive permits will be determined by public bid.

    The DWLF can continue to charge its regulatory fee of $135 per seismic agent but can no longer charge an added fee for any designated oyster seed ground or reservation that belongs to the state.

    ... Not So Fast

    To the dismay of the oil and gas community, the Mineral Board opted to launch Act 8 by raising the base seismic permit fee on state lands from $2 to $15 and setting a $30 base fee on DWLF land, according to Briggs.

    "Passing Act 8 didn't help the industry at all," Briggs said, "because it still makes the whole cost of shooting 3-D seismic non-competitive in the state. We gained nothing."

    There is a ray of hope, however.

    "The way Act 8 works is the Mineral Board can review the fee charged for non-exclusive permits at least every six months," Briggs said, "and they'll find out $15 is too high because we're not going to get any seismic activity.

    "If they keep the fee that way, I'm not sure just how we'll do it, but we'll work to make some changes."

    Some industry observers continue to blame the continuing low level of seismic activity in Louisiana on the backlog of existing non-exclusive seismic data that came available just as the last downturn in the industry occurred, but Briggs doesn't buy this.

    "There are several seismic projects out there that would be shot now if it weren't for the fees," he claimed.

    Meanwhile, Briggs noted LIOGA is still in court on the issue of authority cited in its case against DWLF. If the motion for summary judgement filed by the association prior to the passage of Act 8 proves unsuccessful, a trial on the merits is set for January 2001.

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