State energy secretary outlines policy issues

06 15, 2012 by Houma Courier

New policy changes on oil and gas exploration and the management of water resources will help carry the Department of Natural Resources into a future that’s being shaped by technology and human need, the DNR secretary said.

With the help of the Legislature over the past three months, Scott Angelle said his department has been able to make “adjustments that will allow us to keep pace with new and emerging situations.”

Among many other measures, Angelle points to House Bill 504, which was signed into law Wednesday by Gov. Bobby Jindal. The legislation was sponsored by House Natural Resource Chairman Gordon Dove, R-Houma, and allows the commissioner of conservation to regulate ultra-deep oil and natural gas wells, which can be drilled to tap into reservoirs at 22,000 feet below surface or deeper.

The new law gives an investor or oil company the right to petition for the creation of a unit of up to 9,000 acres. It’s a process known as “unitization,” and it allows for the price tag of a costly ultra-deep operation to be shouldered by leaseholders around the drilling site.

If the petition is approved, following public hearings and a waiting period, the petitioner would be allowed to approach the other leaseholders inside the unit about paying for their proportional share of the drilling. Dove’s legislation details a payoff model based on what level leaseholders decide to participate, and the Senate inserted protections for landowners before the session adjourned last week.

“The new law dealing with ultra-deep drilling units will give oil and natural gas exploration companies confidence in their ability to get a return on their investments, and develop projects that support the creation of jobs both directly and indirectly, while protecting the mineral rights of landowners,” Angelle said.

Another new law passed during the recent session requires the disclosure to DNR of the composition of hydraulic fracturing fluids. These are drilling fluids used to recover oil and natural gas from shale formations, and there have been concerns raised in recent years about the hazardous materials they might contain.

Louisiana is among the first states to create administrative rules requiring operators to publicly disclose details of the contents of fluids used in hydraulic fracturing. Angelle said putting those requirements into law sends a strong message that Louisiana is a leader in ensuring responsible development of oil and natural gas resources.

“As the practice of using hydraulic fracturing to unlock the energy resources stored in shale and other tight formations continues to be more commonplace in the state and the nation, it is critical that we make clear our commitment to requiring exploration companies to operate in a safe and transparent manner,” Angelle said.

As for the session’s most significant reform in terms of oil and gas production, Angelle pointed to the compromise that was reached over so-called legacy lawsuits. These suits involve oilfields that have been contaminated, sometimes over generations, and require mitigation. In the past, they’ve produced record judgments, sometimes with no instructions in regard to cleanup.

The key provision in the new law was designed to protect leaseholders from having to pay remediation damages for previous pollution by other oil and gas companies. Angelle, designated by Jindal to be the administration’s point person on the issue, said working through the compromise legislation was a months-long effort involving many meetings at all hours of day and night. He said while it was sometimes “contentious,” all parties came to an agreement.

He added the end result balances the interests of landowners and the confidence the energy industry needs to continue investing in exploration in Louisiana.

“Going forward, we have provided transparency in the process and accelerated clean-up of environmental problems and protection for innocent parties from punitive damages,” Angelle said.

Finally, Angelle said the Legislature took the appropriate steps during the session to allow DNR, for the first time, to collectively begin addressing issues related to ground and surface water. Part of that restructuring will change the name of the Ground Water Resources Commission to the Water Resources Commission.

Angelle said that water supply is critical for basic human needs and economic growth. He noted that water demands are a growing issue for many parts of the nation, including neighboring states such as Texas, and even Louisiana’s relative wealth in ground and surface water supply can be strained in some areas.

“Now we have the opportunity to develop a comprehensive planning and management process with the changes made in the mission and membership of the Water Resources Commission,” he said.

The Legislature also extended a program created in the 2010 that allows DNR to enter into cooperative endeavor agreements for use of the state’s running waters, mostly for economic development purposes.