State Mineral and Energy Board

DNR Secretary Angelle calls on Mineral and Energy Board to consider new incentives to South Louisiana exploration

The Louisiana Mineral and Energy Board on Wednesday heard a presentation on proposed new incentives to encourage more traditional oil and natural gas exploration in South Louisiana as other states with unconventional sources of energy – such as shale natural gas – have become stronger competitors for investment in drilling.

Louisiana Department of Natural Resources Secretary Scott Angelle, who chairs the Board, suggested that the Board begin discussion of setting up a system of incentives to draw more investment in energy exploration in Louisiana’s coastal zone.

Angelle had made a presentation to the Board in March, noting that the surge of investment and exploration activity in northwest Louisiana – primarily due to the Haynesville Shale natural gas formation – has outpaced activity in South Louisiana.

“When it comes to exploration and production in our state – we have two Louisiana’s.  While the North Louisiana province is setting records—activity in South Louisiana has been less than robust,” Angelle said of the current status of activity in the state. “As shale plays across the nation become more in vogue, the drilling investment dollars are flowing disproportionately to these unconventional resources.”

That is a current trend, as states with natural gas shale plays – such as the Barnett in Texas and the Marcellus in Pennsylvania – have shown the strongest upswings in drilling activity in the past year.

As of the most recent rig count, 142 drilling rigs were running in North Louisiana – more than four times the 35 running in South Louisiana.

The proposed system would target wells drilled to 15,000 feet or below in the coastal zone, making such wells a more attractive option for exploration companies to spend their drilling dollars.

The draft proposal also includes a provision requiring companies taking the state up on the incentive options to compensate for impacts to coastal wetlands at rate of 125 percent of the habitat value of the wetlands, instead of the customary 100 percent.

Louisiana Oil and Gas Association President Don Briggs said that incentives such as those proposed would draw interest from exploration companies and could give Louisiana a competitive edge as oil and natural gas companies consider where to make investments in drilling.

“We have to be competitive with so many states and we are competing with so many resource plays,” Briggs said.

"Incentives of the kind Secretary Angelle has brought forward would certainly spur development in South Louisiana, where exploration and production have been on the decline. Renewing interest there would make economic sense for Louisiana," said Chris John, president of the Louisiana Mid-Continent Oil and Gas Association. "The return on that investment would benefit the people of Louisiana not only in revenue to the state but in the jobs it would create."

Michael Hecht, President and CEO of Greater New Orleans, Inc., said, "We appreciate Secretary Angelle's efforts to encourage exploration activity in South Louisiana. Providing the right incentives for deep drilling in Louisiana is one of the most positive policy changes we can make to create new revenues for the state and parishes and create jobs for our citizens."

Staffers with the Office of Mineral Resources will continue research into the issue, which will likely come up for further discussion and a possible vote in an upcoming Mineral and Energy Board meeting.

In other business, the Board collected more than $3.4 million in bonuses in its monthly lease sale, bringing the total collected for the financial year that began July 1 to more than $53.5 million. For the calendar year, the total collected is more than $18.6 million

In Wednesday’s Mineral and Energy Board April lease sale, 48 leases covering more than 2,600 acres were awarded.

The Board sold leases in nine parishes – Beauregard, Bossier, Caddo, Cameron, Concordia, St. Helena, St. James, Vermilion and Vernon.  Of the 48 leases sold, the majority were sold in north Louisiana, with 40 leases sold in all or part of northern parishes and 10 in all or part of south Louisiana parishes. Two leases split the line between north and south Louisiana.

Of the 40 north Louisiana leases sold, 15 were in the area of the Haynesville Shale natural gas formation – in Bossier and Caddo parishes. Lease sale prices remain strong in that area, with the 15 Haynesville Shale area leases averaging about $8,800 an acre.

CLASSIFICATION	NOMINATED TRACTS	NOMINATED ACREAGE	LEASES AWARDED	NO. OF ACRES	AMOUNT OF CASH PAYMENTS
Lease Sale April 14, 2010
State Offshore Leases	0	0.000	0	0.000	$0.00
State Onshore Leases	44	18,964.570	31	2,313.980	$1,310,936.84
State Dedicated Leases	0	0.000	0	0.000	$0.00
State Agency Leases	19	423.838	17	300.441	$2,160,923.63
Total Sale	63	19,388.408	48	2,614.421	$3,471,860.47
NOTE: The totals for this sale do not reflect any options that may be exercised or revisions to acreage and cash amounts that may take place after this sale date which may cause these totals to change.
2009-2010 Fiscal Year
State Offshore Leases	52	79,456.330	16	9,599.722	$4,326,066.22
State Onshore Leases	228	148,303.638	136	19,981.234	$16,096,987.90
State Dedicated Leases	13	22,321.900	8	3,193.660	$1,316,592.29
State Agency Leases	97	4,867.802	89	4,204.065	$31,783,892.96
Total Year to Date	390	254,949.670	249	33,978.681	$53,523,539.37
NOTE: The Fiscal Year totals include this sale totals and also options exercised and revisions to acreage and cash amounts that may have taken place from the date of the last sale to this state lease sale.