By November 15, 2012 0 Comments Read More →

Cooperative Endeavor Agreements

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Lauren Estopinal

 

La. R.S. 9:1101 states the waters of Louisiana are not under the direct ownership of any person are declared to be the property of the state. There shall never be any charge assessed against any person for the use of the waters of the state for municipal, industrial, agricultural or domestic purposes. Surface water is for the public’s use and benefit. Under this law farmers, industry and citizens have operated, until the enactment of the Surface Water Management Act of 2010.

 

At the commencement of natural gas exploration of the Haynesville Shale formation operators relied primarily on local groundwater resources to supply water for drilling and fracturing.  This was because most of the gas fields in that formation are not on riparian land, i.e., land adjacent to surface water. Large volumes of water were withdrawn from three primary aquifers. Because of the significant fracturing operations, the Department of Natural Resources (DNR) Commissioner of Conservation issued a Water Use Advisory in 2008. Haynesville Shale operators were asked to utilize alternative water resources for hydraulic fracturing, such as the Toledo Bend Reservoir or the Red River. There was a significant industry response.  In 2008 — before the Advisory, 100% of water used by drillers fracturing operations came from groundwater; now, approximately 77% of water used for fracturing comes from non-potable resources (sources that cannot be used for drinking water).

 

As oil and gas exploration companies in the Haynesville Shale area began substituting their use of groundwater with surface water, Louisiana’s Attorney General got involved. In 2010, he issued a series of opinions that held that surface waters of the state are “public things” and therefore cannot be given away because the Louisiana constitution prohibits the donation of things of value.  But Attorney General opinions are just that, opinions, and have no binding legal affect. The industry has strongly disagreed with the Attorney General’s opinion on this issue from day one. Nevertheless, the Office of Conservation, fearing a lawsuit, pushed for the passage of Act 955 in the 2010 legislative session. The Act would create a voluntary process whereby users who want to withdraw surface water could choose to have their request evaluated by DNR. If the usage is approved, the state and the company then enter into a cooperative agreement that may or may not have recommended limitations on the withdrawal and use. The Act would allow the agreements to put a price on surface water withdrawn on a per gallon basis, but it would also allow for companies to use a non-conventional form of compensation to pay the state for the water, e.g., proof of an economic development benefit such as jobs and taxes.

Posted in: Legal Issues, water

About the Author:

The Louisiana Oil & Gas Association (known before 2006 as LIOGA) was organized in 1992 to represent the Independent and service sectors of the oil and gas industry in Louisiana; this representation includes exploration, production and oilfield services. Our primary goal is to provide our industry with a working environment that will enhance the industry. LOGA services its membership by creating incentives for Louisiana’s oil & gas industry, warding off tax increases, changing existing burdensome regulations, and educating the public and government of the importance of the oil and gas industry in the state of Louisiana.

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