Lawmakers urge industry to drill deeper

04 16, 2012 by Houma Courier

Legislation that would allow energy companies to drill at depths of 22,000 feet won approval from the House Natural Resources Committee this past week.

“That’s four miles,” said Chris John, president of the Louisiana Mid-Continent Oil and Gas Association. “That blows me away. It’s incredible to think the technology we have to be able to go four miles deep.”

The idea of ultra-deep drilling rigs is a “new horizon” for the oil-and-gas industry in Louisiana, said House Natural Resources Chairman Gordon Dove, sponsor of House Bill 504. The bill allows for leased lands to be consolidated and for operational costs to be shared under a process known as “unitization.”

One of the chief reasons energy companies use the unitization model is operational costs. Ultra-deep drilling rigs come with price tags eclipsing $100 million each.

Louisiana Oil and Gas Association President Don Briggs said it’s more financial risk than most companies want to shoulder, even the largest of energy companies. Still, it will probably be the major players who benefit most from Dove’s bill, since they would likely be alone in pursuing these mega-projects.

“And that’s my concern, that we are going to lose some of the small people in the shuffle,” said Rep. Jack Montoucet, D-Crowley, who voted in favor of the bill.

Proponents argued that any increase in economic activity would trickle down and help other sectors. John said the “economic ripple” would send waves of prosperity along the coastline, where rig counts have been sluggish in recent years.

“This could be an of $9 billion infusion into oil-and-gas activity in south Louisiana, the exact part of the state where we need that activity,” he said.

Energy observers, such as Natural Resources Secretary Scott Angelle, point to prospects like Davy Jones, south of Marsh Island, which require bigger units and platforms. The prospect is expected to have massive production potential, to the tune of 2 trillion cubic feet of natural gas or more.

Dove’s legislation would allow an oil company or landowner to petition the state Department of Natural Resources to create units of up to 9,000 acres. The bill originally called for 9,500 acres, but Dove amended his legislation following negotiations with landowner groups.

If the petition is approved, following public hearings and a waiting period, the petitioner would be allowed to approach other leaseholders about paying a proportional share of the drilling operations.

Many of the rules and regulations would be drafted by the secretary of the Department of Natural Resources. But leaseholders may be able to give “non-consent,” meaning they would opt out of paying.

Under this scenario, lease holders would retain mineral rights — just like they would if they participated — but would be saddled with a penalty if a payout results. The petitioner would be allowed to recoup his investment, and maybe more, before being forced to pay interest and royalties to any “non-consent” leaseholder.

Dove said several points are still being discussed with landowner groups and other special interests. Dove said compromises could result.

During last week’s committee hearing, he added amendments requiring development plans include the number of anticipated wells, the drilling time table and the target depth for each well.

While Dove will be directing the legislation on the House side, Senate Natural Resources Chairman Blade Morrish, R-Jennings, has a duplicate version in Senate Bill 469.