Introduction

The Oilfield Site Restoration Section is responsible for the preparation of all bid packages for abandonment of orphan wells which are forwarded to approved contractors, review of bid proposals received form said contractors to insure compliance with applicable law, coordination with District Office personnel, Department of Natural Resources personnel, purchasing personnel, Office of Secretary personnel, etc. regarding all aspects of Act 404 of the 1993 Regular Legislative Session (Louisiana Oilfield Site Restoration Law)

Background

Act 404 of the 1993 Regular Session created the Oilfield Site Restoration Law, which was subsequently amended in regular session by Act 297 in 1995, Act 994 in 1997, Act 1097 in 1999, Act 15 in 2001, and Act 225, 768, and 412 in 2004. The purpose of the program is to properly close and restore orphaned oilfield sites.

An orphaned oilfield site is one in which: 1) no responsible party can be located, or such party has failed or is financially unable to undertake actions ordered by the Assistant Secretary for the Office of Conservation, 2) the oilfield site either a) was not closed or maintained in accordance with all statutory requirements and the regulations adopted thereunder, or b) constitutes or may constitute a danger or potential danger to the public health, environment, or an oil or gas strata. A formal procedure exists for orphaning a well. The Assistant Secretary shall seek to notify the last operator that the site is to be declared abandoned and shall publish a notice in the State Register that the site is to be declared orphaned.

The Fund

Revenue for the fund is generated from a fee on production, prorated by producing category. The fee consists of one and one-half cents / barrel of oil and condensate, and three-tenths of one cent / MCF of gas. The fee is suspended if the fund reaches $10 million. When the balance falls below $6 million, the fee is again collected.

Commission

The Oilfield Site Restoration Commission consists of ten members. The Secretary of the Department of Natural Resources serves as chairman of the Commission. The Assistant Secretary for the Office of Conservation shall serve as vice-chairman. The remaining eight members of the Commission are appointed by the Governor from a list of people submitted by various industry and environmental groups. The Commission meets once every two months in Baton Rouge.

The Commission evaluates and approves contractors for oilfield site restoration work. Applicants must prepare and submit an application with all required information in order to be considered. When a site is to be restored, a bid package is prepared and sent to all of the approved contractors. Bids are submitted under the rules of the State bid law. Bids received by the Department of Natural Resources are evaluated to insure they meet all of the administrative and technical requirements of the bid proposal. The bid is then awarded to the lowest qualified bidder.

Site Specific Trust Accounts

In accordance with the provisions of LA R.S. 30:88, when there is a transfer of ownership interest of an oilfield site, either party can file an application to establish a site specific trust account to cover restoration costs. The transferring parties shall also: 1) propose a funding schedule based on the site restoration assessment, which will fully fund the site restoration at the end of the economic life of the oilfield site, 2) pay some contribution to the account at the time of the transfer and make regularly scheduled payments throughout the economic life. The transferring party shall be exempt from restoration costs associated with this oilfield site once the account is fully funded.

Recovery of Restoration Costs

The Secretary shall seek to recover site restoration expenses from any party who has operated or held a working interest in an orphaned oilfield site which has been restored with Act 404 funds if the site restoration costs exceed $250,000. The costs will be recovered from parties in inverse chronological order from the date the site has been declared orphaned. If the cost does not exceed $250,000, the Secretary is authorized to collect restoration funds from the responsible party. The Office of Conservation defines the responsible party as the operator of record.

A party shall be exempt from liability for restoration of an orphaned oilfield site in which said party had an operating or working interest if the party complies with the following: 1) party makes full and timely contribution to the fund, 2) party creates a site specific trust account and is no longer the operator of record, 3) makes full disclosure in the transfer, 4) complies with any penalty assessment, 5) party is not determined to be an individual, partnership, corporation, or other entity which is an operator or working interest owner in an orphaned oilfield site, 6) party is not determined to be a partnership, corporation, or other entity for which a general partner, an owner of more than 25% ownership interest, or a trustee who has held a position of ownership or control in another partnership, corporation, or other entity which is an operator or working interest owner in an orphaned oilfield site, and 7) party complies with all reviews of site specific trust accounts.