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By Kathrine Schmidt

HOUMA — Local oilfield-service workers hurt by the federal government’s six-month ban on deepwater drilling may be eligible for compensation for lost income.

At first, only workers who were employed by the 33 deepwater rigs halted by the federal government in the wake of the Deepwater Horizon oil spill were eligible for $100 million donated by BP to help oilfield workers idled by the temporary ban.

Now the Baton Rouge-based nonprofit group charged with distributing the money has expanded the eligibility to more people. It is allowing any employees who worked for companies that as of May 6 provided services to those deepwater rigs to seek compensation.

That opens the door to boat captains, deckhands, offshore welders, cooks and a wide range of other occupations common in the Houma-Thibodaux area.

“Anybody who thinks they qualify should certainly apply,” said Mukul Verma, a spokesman for the Gulf Coast Restoration and Protection Foundation, which is supervising the grant. “We’re trying to … make sure people get as much help as possible.”

Starting March 15, workers can apply for $3,000 to $30,000 in lost income by visiting www.RigReliefGrants.org or by calling 866-577-8141. Until March 15, however, there will be a recorded message on the line. This round of applications is expected to help up to 9,000 people.

The first round of distribution from the fund only doled out $5.3 million of the $100 million, giving 373 recipients an average of $15,914, according to the foundation. Those affected directly by the oil spill, like fishermen, hotel operators or restaurants, are still making claims against a separate $20 billion pool of money set up by BP. But those who saw a drop in business when the government put the brakes on issuing drilling permits had no comparable process to make up for the lost income.

Area unemployment figures have not budged and sales-returns show customer spending has increased compared with 2010. But many of the economic damage may not be visible in those figures, since some workers still have a job but are working fewer hours.

Members of the industry said they were pleased by the news.

“I just hope the people who deserve it get it,” said Don Briggs, president of the Louisiana Oil and Gas Association. “Hopefully that happens. It has been so difficult for so many.”

However, most would much rather see the federal government resume drilling so they can get back to work full-time, Briggs said.

The expanded fund won’t help everyone. Businesses of any type, unlike in the BP claims process, are not eligible. People who rely on the oil industry more indirectly, like real estate agents or restaurant owners who have seen less business, are also not included in the criteria.

Asked why it has taken almost a year to help people who saw work sputter shortly after the Deepwater Horizon explosion, Verma said the group wanted to help those most directly affected first, and be precise with how the second round of workers was classified.

“We waited to make sure we got it right,” he said.

To qualify for the money, you need to show you lost income in 2010 compared with 2009 because of the drilling ban. Supporting documents need to include your paystubs for both years, W-2 and 1099 tax forms and your tax returns for both years. You also need the documents showing any other income you or your spouse received, including unemployment benefits or insurance settlements, and an accounting of your average monthly expenses for at least three months between May and October 2010.

Checks are expected to be sent out by June 15.

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By Robert Zullo

THIBODAUX — Most of the oil leaked from a pipeline near East Timbalier Island Monday afternoon is expected to be mopped up today, though the cause of the spill that left a two-mile long sheen on Timbalier Bay remains under investigation, the Coast Guard said.

An estimated one to two barrels of crude oil, about 40 to 80 gallons, seeped from the underwater pipeline, which runs between tank batteries at the manned production site, said Mike Simon, a senior vice president for operations with Maritech Resources. Maritech, based in The Woodlands, Texas, has been identified as the responsible party.

Simon and Coast Guard Cmdr. Mark McManus said crews shut down the pipeline immediately after workers saw the oil seeping. The spill was reported by Maritech workers to the National Response Center just before 1 p.m. Monday.

“They worked on skimming all that crude that was in the boomed area today,” McManus said Tuesday night. “They were able to boom off a substantial portion that was in the immediate area of the rupture.”

During a helicopter flight Monday afternoon, Coast Guard crews spotted a sheen estimated to be two miles long and 15 to 30 yards wide, McManus said.

“They were trying to corral as much of that as they can, but they were not able to corral all of that,” he said.

Montegut crab fisherman Rob Neil, 33, said he drove his boat through the sheen as returned from checking his cages.

“It was pretty heavy. It was kind of stringy looking and it actually stuck to the boat a little bit,” Neil said, adding that he saw large amounts of feathers stuck in the oil.

McManus said it’s common for a relatively small amount of oil to create a large sheen.

A small amount of oil reached East Timbalier Island, and workers were sent to clean up the island, McManus said. Maritech will send divers to determine the leak’s source, he added.

“It’ll be an ongoing investigation,” he said, adding that the Coast Guard will continue to monitor the cleanup.

Original Article

By Kathrine Schmidt

HOUMA — Seahawk Drilling has filed for Chapter 11 bankruptcy protection and will sell its assets to competitor Hercules Offshore in a $105 million cash-and-stock deal, the companies said Friday.

Executives with Seahawk, which is based in Houston but has an office in Houma at 1198 Barrow St., said the merger would maximize value to shareholders but also that the decision was necessary because of slow permitting activity in the wake of the Gulf oil spill. The company expects to continue operating normally throughout the sale and expects to be able to pay off all its debt. The transaction is subject to clearance from regulators and expected to close by midyear.

“It is important to note that Seahawk was forced to seek out strategic alternatives only after an unprecedented decline in the issuance of offshore drilling permits following the Macondo blowout,” CEO Randy Stilley said in a news release. “The decision by regulators to arbitrarily construct unnecessary barriers to obtaining the permits they had traditionally authorized has had an adverse impact not only to Seahawk, but on the sector as a whole.”

Chief Operating Officer Kurt Hoffman said on Monday that the company was unable to comment on the deal, including how many workers are employed by Seahawk and in what way their jobs, benefits or facilities will be affected.

Seahawk was created in August 2009 as a “spin-off” company of Pride International, which formerly employed as many as 1,500 out of its office in Houma. In 2008, Pride sold off much of its equipment and a yard at 410 S. Van Ave. to Blake International. Pride kept the smaller office on Barrow Street, whose sign on the door changed to Seahawk. Pride, also based in Houston, last week announced its own merger with Ensco Plc., a London-based driller.

Hercules Offshore also has an office in Houma at 24 Concord Road.

After the BP-leased Deepwater Horizon rig exploded April 20, the number of drilling permits issued by the federal government nearly ground to a halt as the regulators revamped rules and regulations to address safety and environmental weaknesses. Companies that drill in waters less than 500 feet argued the slowdown in permitting was particularly unfair, given their technology had been around much longer than newer deepwater drilling practices. The flow of permits for the shallow-water sites has rebounded to some extent.

Oil-and-gas industry members were quick to diagnose the events as emblematic of a larger industry problem.

“With the lack of certainty, it’s going to be very difficult for a lot of companies,” said Don Briggs, president of the Louisiana Oil and Gas Association. “Not just Seahawk, anyone working out there.”

Sen. Mary Landrieu, D-La., released a statement on the news.

“I have said repeatedly that the administration’s excruciatingly slow release of oil-and-gas permits will cause job losses and undue economic hardship,” Landrieu said. “Sadly, the worst-case predictions are now true, and we are still living this economic nightmare.”

But Seahawk had other vulnerabilities beyond the market conditions. According to the bankruptcy filing and releases, the company had “legacy liabilities” stemming from the deal with Pride and at least $15 million in disputed debt. In addition, its 20 rigs were mainly older “jackup” models, a segment of the business that major companies have largely left behind for in favor of more lucrative deepwater contracts.

The jackup business “is not as profitable as it was,” said Judson Bailey, an analyst with Jefferies and Co., enabling Hercules to pick up the rigs on the cheap.

Bailey said the two companies have significant overlap in their capabilities, leading him to expect some reductions in staff or facilities.

According to the bankruptcy filing, Seahawk owes more than $2.1 million to creditors in Terrebonne and Lafourche.

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White House wants to reform process

By Jonathan Tilove

WASHINGTON — The Obama administration’s proposed fiscal 2012 budget would provide $500 million to restructure the regulatory and oversight regime for offshore drilling, strengthening enforcement in the wake of the Deepwater Horizon oil disaster and charging oil companies user fees for inspecting their operations and processing their drilling permits.

The new fees, recommended by the National Oil Spill Commission, would net the Bureau of Ocean Energy Management, Regulation and Enforcement about $65 million, an increase of $55 million over past levels, and would apply to offshore drilling rigs for the first time. Interior Secretary Ken Salazar said an inspection of a deepwater rig would cost an operator $16,700.

“The Deepwater Horizon explosion and resulting oil spill have led to the exposure of significant weaknesses in the way this agency has historically done business,” said Michael Bromwich, who, as director of Interior’s Bureau of Ocean Energy Management, Regulation and Enforcement, has led the administration’s post-spill reorganization of its regulations and regulatory structure.

“This bureau has not had sufficient resources to provide an appropriate level of regulatory oversight of offshore oil and gas development. These shortcomings have become more pronounced as operations have moved into deeper and deeper waters,” Bromwich said. “The president’s budget request would, if enacted, provide us with the resources — including personnel, technical expertise and equipment — needed to remedy that situation.”

Oil industry opposed

The call for inspection fees comes in a budget blueprint that renews the Obama administration’s call to end billions of dollars in oil and gas tax breaks and incentives. On all counts, the budget plan was panned by industry.

“Besides eliminating thousands of new potential jobs, the increases, over the long term, would actually lower revenue to the government by many billions of dollars as a result of forgone revenues from projects the tax hikes would prevent going forward,” said Jack Gerard, president and CEO of the American Petroleum Institute.

“Those tax incentives and tax credits don’t mean a thing to the major oil companies, but they mean everything to independent oil and gas producers,” said Don Briggs, president of the Louisiana Oil and Gas Association.

“New fees that would drive investment and jobs elsewhere at this time of tremendous uncertainty is simply bad public policy and would not produce the needed revenues for the federal treasury that simply getting folks back to work would,” said Randall Luthi, president of the National Ocean Industries Association.

The budget also calls for establishing a $4-an-acre fee for new, non-producing oil and gas leases “to encourage more timely production,” which Luthi said was an “ironic” initiative for an administration which “itself is not producing the necessary permits for the companies to actually drill.”

“The administration could generate much, if not all the requested revenue just by conducting offshore sales,” Luthi said. “We have gone from having at least two sales a year to possibly zero in 2011.”

Landrieu opposed

In what has become a bit of a chicken-or-egg debate, the administration has argued that Interior needs an infusion of resources to be able to build up its regulatory capacity, hire new inspectors and expedite the issuance of permits. No new permits for deepwater drilling have been issued in the 10 months since the blowout of the Macondo well.

Sen. Mary Landrieu, D-La., said last week that she supported a big increase in Interior’s budget to speed permit processing. But many oil state lawmakers are loath to give any more resources to a department they feel has stalled permitting with excessive new requirements on an industry that already pays plenty to the federal government and ought not be burdened with additional costs.

“I’m very concerned about the president’s attack on the oil and gas industry in the request he sent up today,” Landrieu said. “This part of the president’s budget doesn’t win many friends in the House and it doesn’t meet my approval.”

Luthi said that in 2010, the industry paid $4 billion in royalties, $245 million in rent and $979 million in lease bids, and that the “$500 million to restructure BOEMRE and to increase personnel could be more than covered by that existing revenue.”

But the National Oil Spill Commission had recommended that the energy producers could easily afford the additional coast of paying for the new regulations that would help reduce a risk of a repeat of last year’s immensely costly oil disaster, and that, at a time when federal dollars are especially hard to come by, having industry pay for more capable regulation makes perfect sense.

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By MICHELLE MILLHOLLON

Tax collections are showing signs of strengthening and employment is growing across Louisiana despite the five-month Gulf oil drilling moratorium and stricter rules that once were expected to cripple the state’s economy.

Gov. Bobby Jindal said Monday that federal policies still could be the job killer he predicted six months ago, if the Gulf drilling permitting process fails to accelerate by summer.

He said many companies are depleting savings to maintain their work forces.

Some are calling the slowness in new permits being issued a de facto moratorium.

“The unpredictability is what’s scaring folks,” the governor said during a telephone interview Monday.

LSU economics professor Jim Richardson said jobs would be lost if permits are not issued soon. He said companies are sticking it out while waiting for a green light.

“I think the moratorium or the lack of no permits eventually will be a job killer if indeed the government does not enhance the permitting process,” Richardson said Monday.

So far, though, evidence of the governor’s fears becoming reality appears to be largely anecdotal.

State Department of Natural Resources Secretary Scott Angelle said he sees evidence of the impact when he drives down U.S. 190 because of businesses  no longer there.

Those closures do not appear to be crippling the state’s economy. The state is facing a $1.6 billion shortfall in the upcoming budget year but that is largely due to a drop in federal revenue.

Greater New Orleans Inc., an economic development organization, noted in a recent study that “effects to date may not be as dire as many Louisianans feared.”

“You’re not seeing it yet in the numbers. But you’re going to start seeing it in the numbers,” said Don Briggs, president of the Louisiana Oil and Gas Association.

Members of the Revenue Estimating Conference, which decides how much money state government has to spend, received good news when they met last month to study the state’s finances.

Personal income tax collections appear to be strengthening, oil prices are on the rise and consumer spending is increasing.

Greg Albrecht, economist for the Legislative Fiscal Office, said there is employment growth even in oil and gas drilling.

Figures kept by the Louisiana Workforce Commission show employment in oil and gas extraction increased from November to December.

Albrecht said his perspective is statewide instead of just along the coast.

“My casual or anecdotal observation is that in the coastal portion of the state, the spill response (and) cleanup positive activity replaced moratorium negatives,” he said.

The BP Deepwater Horizon oil rig exploded in April, killing 11 men and resulting in 4.9 million barrels of oil discharging into the Gulf of Mexico. Since a five-month moratorium was lifted in November, few deepwater permits have been issued.

GNO Inc. predicted in June a loss of at least 12,500 jobs. The more recent study concludes, “We have not seen evidence of these projections.”

GNO pegged the statewide job loss at 25,000 since June. How many of those are tied to the lack of permits is unclear, according to the GNO study.

Louisiana’s unemployment rate dropped from 8.2 percent in November to 8 percent in December. The U.S. employment rate, which was 9.4 percent in December.

The Governor’s Office said the state Department of Economic Development is tracking the statistical impact of the permit decline.

Matt Braud, press secretary for DED, said the agency does not have up-to-date numbers on the impact.

Briggs said he talked to a company official the other day who only has eight of 30 offshore vessels working in the Gulf of Mexico.

He said the official did not want his company to be publicly identified.

Briggs is pessimistic about the outlook.

“I have zero confidence in any certainty being developed in the Gulf of Mexico that will allow investors to want to invest and drill … There is no certainty. You have to have that certainty for investment, and there’s not any,” Briggs said.

Jindal said unemployment should be lower than it is and economic activity should be better than it is.

“You are seeing an impact,” Jindal said. “The good news is we continue to diversify … The challenge is the economy would be even stronger” without the de facto moratorium.

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There has been discussion of late in regard to the Legislative Fiscal Office statements that the State of Louisiana has seen a decrease in mineral income due to untaxed natural gas production in the Haynesville Shale. This could not be further from the truth.

Louisiana’s Severance Tax Relief Program allows the suspension of severance taxes due on production from a qualifying well for a variable time period depending on the category. Under the current program, wells that qualify under the “Horizontal well” and “Deep well” categories are eligible for a two year severance tax exemption or until payout of qualified costs, whichever comes first.

A chief economist with the state’s Legislative Fiscal Office claims that about 85 percent of a Haynesville wells’ total production is generated in the first six months and that the state would receive little or nothing in revenue due to the horizontal drilling incentive. Unfortunately, these numbers do not sync up with actual data.

To begin, production rates do decline rapidly in the Haynesville, however they do not decline at the rates suggested by the state’s economist. Petrohawk Energy, one of the top drillers in the Haynesville, noted in a detailed report that a typical Haynesville well will produce one-third of its total volume in the first year. That means that after two years, over 50 percent of the well’s reserves will be subject to taxation by the State.

The amount of severance tax dollars the state receives is dependent on the price of natural gas. However, the severance tax rate is set for the current year, based on the prior years average price. As the U.S. experienced record-high natural gas prices in 2008, this lead to inflated projections for state collected taxes in 2009 and 2010. Because of declining natural gas prices, the state is now facing a severance tax rate that is half of previous years collection. In the end, future projections of revenue are just that — projections. No one could have predicted the natural gas market drop from $13/mcf in 2008 to less than $4/mcf in 2009.

At an average of $10 million dollars per well, Haynesville Shale developments depend heavily on the horizontal drilling incentive. Another fact to consider is that current low natural gas prices and high oil prices have shifted competition from pure natural gas shale plays like the Haynesville to shale plays that contain both natural gas and oil such as the Eagle Ford, Niobrara, Anadarko Basin, and Bakken formation.

As the state begins to tighten its belt to alleviate the $1.6 billion budget shortfall, it’s imperative that we avoid policies that stand to harm sectors that truly generate investment, job creation, and revenue within the state. Repealing the severance tax incentive is a shortsighted policy approach that would do more damage to the state than good. The long-term effects of a repeal would bring about a decline in Haynesville Shale growth, and more importantly would chase away significant future tax revenue from the state.

Don Briggs is president of the Louisiana Oil & Gas Association.

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MANSFIELD — The DeSoto Parish Police Jury will try a different tactic with its road construction work this year, hoping to get more bang for its buck while at the same time providing a smoother process for oil and gas operators charged with repairing damaged roads.

The Police Jury is advertising for a commercial road contractor. Prospects are asked to submit unit prices for various types of work such as asphalt overlay, soil cement, culverts and more. By month’s end, bids should be ready for review, with a contractor on board by late March.

“We will use the unit prices and issue work orders accordingly. “» This method will give us quality control,” Parish Administrator Steve Brown said. “We got this blessed by the attorney general and local contractors. It’s done this way in other parishes.”

The Police Jury’s practice has been to advertise individual road projects, which means working with an assortment of contractors. The parish also has ebbed and flowed in utilizing its own road crews on some road construction work.

The new arrangement won’t leave the Road Department idle, though. “We have over 800 miles of parish roads. They will do the small projects, but more importantly they will do pothole patching, signs, ditching, culverts — things that are general maintenance.”

The Police Jury has earmarked $7 million this year for road work, with special attention to through-roads that are taking a beating from the oil- and gas-related truck traffic. Last year, the Police Jury spent about $10 million on 32 miles of heavily traveled parish roads.

Having a single contractor at the Police Jury’s fingertip also will make it easier for those companies that are pounding the fragile parish roads in their Haynesville Shale drilling. A parish law enacted last year requires the companies to pay for assessed damages.

“But now they won’t have to get their own contractor. Instead, the Police Jury will issue a work order through its contractor to do the work,” Brown said. “The companies will still pay the Police Jury but this will give us better control.”

Jodee Bruyninckx, Louisiana Oil and Gas Association’s north Louisiana director, is pleased with the Police Jury’s proactive step.

“The decision of DeSoto Parish to employ a road contractor will provide the necessary flexibility for our operators to continue to be a part of the road repair and upgrade process within the parish. Our industry has worked with DeSoto Parish Police Jury to address the concerns with the road upkeep within the parish,” she said.

The list of roads on this year’s repair list hasn’t been finalized, Brown said, but he has been directed to provide cost estimates on some identified by police jurors as being in the greatest need.

Original Article