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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.

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U.S. Sen. David Vitter called on the Jindal administration Friday for stronger leadership in a dispute between landowners and the oil and gas industry over how cleanup of environmental damage from drilling years ago should be handled.

More than a dozen bills have been filed on the issue of “legacy lawsuits,” with the first measures set for a hearing next week.

The Louisiana Oil and Gas Association claims frivolous lawsuits over cleanup are stifling exploration in the state and killing potential job creation.

Gov. Bobby Jindal’s natural resources secretary, Scott Angelle, has said he’s trying to hammer out a compromise. Vitter said Angelle’s approach has been “pretty one-sided,” supporting trial lawyers who represent landowners and who stand to profit from ongoing litigation.

The Republican senator sent Angelle a letter Friday urging him to back several provisions in legislation sought by the oil and gas industry.

“I think it’s imperative that we solve this problem during this legislative session. Failure to do so will confirm many people’s impression that the current discussions are just a delaying tactic on the part of some to protect the legal status quo,” Vitter wrote in the letter.

“That status quo is nothing more than trial lawyer bonanza and an economic development disaster for our state,” he said.

Legacy lawsuits, often totaling millions of dollars, are filed by landowners who leased their property to energy companies and claim environmental damage for the drilling on their land, like contamination of ground water resources.

The issue puts Jindal uncomfortably in the midst of a dispute between multiple sets of powerful lobbying groups and campaign donors.

A key Louisiana industry is on one side and on the other side is the governor’s former top lawyer, Jimmy Faircloth, and Jindal’s big-money contributor Roy O. Martin, whose company is the largest private landowner in the state with thousands of acres and pending legacy lawsuits.

Vitter said he hoped his letter to Angelle – that’s also being forwarded to state lawmakers – would provoke more meaningful negotiations on the issue.

“I get the impression that Scott’s approach is pretty one-sided. I think Scott’s sided with the trial lawyers so far,” Vitter said in an interview.

Lawmakers, who had hoped a compromise brokered by the Jindal administration could be reached behind the scenes, are planning a public hearing Monday in the Senate Natural Resources Committee to hash out the issues.

Vitter suggested the hands-off approach, trying to get an agreement between two sides that are sharply divided on the issue wasn’t an appropriate route.

“This is a problem. I think it should be solved. On big issues, we rarely demand that everybody who has a strong opinion on it hold hands on a solution,” Vitter said.

Six years ago, lawmakers gave new power to the state Department of Natural Resources in devising cleanup plans and the costs associated with that.

Don Briggs, president of the Louisiana Oil and Gas Association, or LOGA, said that new authority hasn’t helped settle cleanup disputes.

He said more than 270 lawsuits are pending with over 1,500 defendants, and he accused trial lawyers of dragging out cases to force companies – particularly small and independent producers – to settle rather than pay for the legal costs of continuing litigation.

Landowners say they want to remediate property, but also want to preserve legal rights over damage claims. They disagree with LOGA’s push to center primary jurisdiction for these cases in Baton Rouge, rather than in local courts, arguing it was an attempt to manipulate the outcome of litigation.

Vitter said the cleanup should be overseen by the Department of Environmental Quality, rather than Angelle’s department, striking at complaints that DNR would have a conflict in trying to promote and police the oil and gas industry at the same time.

In his letter, Vitter also said legislation should encourage site operators to take responsibility for cleaning up contamination in a process in which DEQ would develop the cleanup plan. That plan would then be admissible in court if landowners pursue separate lawsuits for damage liability.

Landowners don’t want those cleanup reports submitted as evidence unless the state decides to intervene in a lawsuit.

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Sen. David Vitter criticized Gov. Bobby Jindal today for not leading to resolve the high-stakes legacy lawsuit issue, saying that his inaction aids landowners and trial lawyers at the expense of oil exploration.

“I don’t think the governor is that neutral,” Vitter told LaPolitics. “If the governor wanted to get everyone together to forge a compromise, it would get done.”

He said the lack of a legislative solution helps the landowner-lawyer side by maintaining the status quo of what he calls a “trial lawyer bonanza.”

The governor’s press office responded with a statement: “David Vitter is misinformed. Governor Jindal tasked Secretary (Scott) Angelle with negotiating an agreement between all the different stakeholders several months ago. They have been working diligently and are close to an agreement.”

Up to a dozen bills have been filed from both sides of the question but none have moved yet, as representatives of oil companies and landowners have tried to negotiate a legal process for clean-up of contamination caused by major oil companies that goes back decades, hence the “legacy” tag.

Vitter’s public comments give voice to frustration expressed in the Capitol by lobbyists for oil companies and the broader business community as well as some Republican legislators. “This is clearly an issue where a just and fair resolution would take that (the governor’s) leadership,” stated Vitter.

He added, “I don’t understand (why governor is not pressing for solution) because it is clearly hurting the economy and costing jobs. The recent LSU study outlines that.” A LSU Energy Studies report released last month estimates that but for the effect of numerous lawsuits on inland exploration, particularly in southwest Louisiana, 30,000 more jobs could have been filled in the energy sector. Environmental lawyers dismiss the study as flawed and slanted toward oil companies who support the LSU institute.

According to several sources, the oil industry is split over publicly pressing the governor on the issue. Vitter’s comments take care of that.

The senator met with about 30 GOP legislators on Tuesday morning in the Speaker’s Pentagon apartment, at which Vitter covered a wide range of issues but spoke the most about the lawsuit issue, according to some who attended.

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An expected clash over “legacy lawsuits” dealing with oilfield contamination was today put off until next week by Judiciary A Committee Chairman Ben Nevers, D-Bogalusa, who is viewed as the key vote on the industry-friendly Senate Bill 443.

Industry representatives had hoped to move the bill through the Judiciary Committee because they see it as a more receptive forum than the Natural Resources Committee, where similar bills have been heard in the past.

Next week will start with an informational meeting of the Joint Natural Resources Committee, which may be an effort to maintain those panels for the oilfield contamination suit legislation.

Expected to appear before the joint committee is attorney Jimmy Faircloth, who has drafted SB 528 for the chairman, Sen. Gerald Long, R-Natchitoches, on behalf of Faircloth’s client, major landowner Roy O. Martin III, a constituent of Long’s and supporter of Gov. Bobby Jindal. Faircloth and industry representatives have negotiated a compromise but have not been able to agree on how to allow companies to accept responsibility for cleanup without admitting liability for damages.

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The Senate Natural Resources Committee approved legislation that would require drilling companies in certain cases to notify landowners before the commence with operations.

Senate Bill 525 would require any operator looking to explore or test to notify any landowners who would be affected by the well at least 30 days before they begin drilling.

If the drilling company already has an oil or gas lease with the landowner, or a surface use agreement, the notice wouldn’t be necessary under the bill sponsored by Sen. Bret Allain, R-Franklin.

“Landowners have the right to know what’s going on before the oil company goes on and disturbs the property,” Allain said.

He said he came up with the idea for the bill from personal experiences. In addition to being a farmer, Allain is a landowner who receives income from energy production.

“A surveyor came on my property one morning and told me he was putting up stakes for a drilling rig,” Allain recalled. “In fact, he told me the bulldozers were going to be there the next day.”

The Louisiana Oil and Gas Association initially objected to the bill, but Allain made a few changes, like granting an exception for emergencies, to gain the group’s support.

The legislation is now pending debate before the fill Senate.

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Chesapeake Energy Corp (CHK.N) said on Monday it has struck three deals that will raise a total of $2.6 billion, a cash infusion needed by the U.S. oil and gas company as it faces a funding shortfall this year.

Chesapeake and other energy companies with big exposure to decade-low natural gas prices are putting more capital toward drilling for oil and pricier natural gas with a high liquids content.

“It’s pretty clear that Chesapeake needs to raise a significant amount of cash this year,” said Scott Hanold, an oil and gas analyst at RBC Capital Markets.

To help fund its drilling and close a financial gap that some analysts see as up to $6 billion, Chesapeake said it will close $10 billion to $12 billion in deals on its oil and gas assets.

Chesapeake struck a $745 million natural gas production deal with an affiliate of Morgan Stanley. In that deal, called a volumetric production payment (VPP), Chesapeake receives cash up front for future oil and gas production in a 10-year agreement linked to some of the company’s reserves and assets in the Granite Wash in Oklahoma.

In another transaction, Chesapeake sold $1.25 billion of preferred shares in a subsidiary called CHK Cleveland Tonkawa LLC. The purchasers were led by an affiliate of the Blackstone Group and included private equity firms TPG Capital and EIG Global Energy Partners.

The Oklahoma City, Oklahoma company will sell 58,4000 acres in Oklahoma to a subsidiary of Exxon Mobil Corp (XOM.N) for $590 million.

Chesapeake, which has a bloated share count and a heavy debt load, has relied on VPPs and preferred share deals to raise funds. However, some analysts see those types of transactions as debt because they involve future obligations.

Given the size of their cash flow, they clearly have to get creative,” Hanold added.

Chesapeake shares rose to $21.80 in post-close trading, up from a New York Stock Exchange close of $21.47.

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A joint statement has been released by a trio of energy and industry associations detailing their plans to push ahead with “legacy lawsuit” reform legislation despite opposition from landowners.

The statement was signed by the Louisiana Oil and Gas Association, Louisiana Association of Business and Industry and Louisiana Mid-Continent Oil and Gas Association and addressed to members of numerous house and senate committees who will be handling various proposals seeking to limit liability for energy companies who are being sued by owners of land where oil drilling once occurred.

A proposed agreement brokered by the Louisiana Department of Natural Resources Secretary Scott Angelle is cited in the statement as “not being the most important, vital and transparent resolution of the lawsuits.”

Industry officials are expected to increase lobbying efforts with the aim of passing through substantive reform despite opposition from landowners.

Prominent attorney Jimmy Faircloth, Governor Jindal’s former executive counsel, currently represents major landowner Roy O. Martin whose company is currently involved in legacy lawsuit litigation.

“I think this is a really difficult situation that is putting people in difficult positions, making difficult votes, because you have Jimmy Faircloth who is a good friend of the Governor’s, a good friend of the administration, and it certainly puts us, the industry, at a disadvantage,” stated Don Briggs, president of LOGA, before the statement was released.

“Whether they’ll prevail or we will is hard to say.”

The authors of the letter say it is their hope to remediate the polluted sites to the best of their ability, but that under existing law they are sometimes prevented from doing so.

The associations also expressed concern that energy industry investors have already backed out of the state because of the economic climate being inhibited by legacy lawsuits.

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