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Louisiana Department of Natural Resources (DNR) Secretary Scott Angelle said today that McMoran Exploration’s recent announcement of a planned 30,000-foot onshore well project in South Louisiana could be the start of a wider trend in exploration for oil and natural gas at depths greater than 22,000 feet – which could bring the promise of new investments, new energy resources and new jobs.

McMoran has also announced that it will be testing the flow rate of its first well in the Davy Jones natural gas prospect, drilled to a depth of more than 30,000 feet in a water depth of about 20 feet in federal Outer Continental Shelf (OCS) waters about 10 miles south of Vermilion Parish, next week. The Davy Jones project has been ongoing for approximately three years – and been the subject of interest throughout the energy industry for the potential it may hold to provide energy from an area that had been considered to be mostly played out.

In regard to the South Louisiana onshore project, McMoran leadership recently stated that the company has acquired approximately 70,000 acres in mineral leases in area where the borders of Iberia, St. Martin and Iberville parishes meet for what the company terms the “Highlander” prospect, with drilling on the planned 30,000-foot well to commence by the end of 2012.

McMoran is also partnered with Chevron on an already ongoing Lineham Creek ultra-deep well in eastern Cameron Parish, that is currently drilling past 19,000 feet, with a target depth of 29,000 feet. Both projects would beat the previous record depth in the state by nearly a mile. McMoran has indicated that the company estimates that the Highlander, Lineham Creek and other ultra-deep potential prospects it has identified onshore in South Louisiana in an area from Cameron Parish to Lafourche Parish potentially hold the equivalent of 30 trillion cubic feet of natural gas.

“McMoran has established itself as one of the pioneers in the new frontier of energy exploration in South Louisiana in the past several years, finding oil and natural gas at depths that were not considered feasible for energy production until that company found a way to do it,” Angelle said. “Attempting projects such as this require not only a substantial investment by exploration companies, but substantial confidence that the regulatory framework they will be working within includes efficient permitting processes that preserve safety and the environment while encouraging development that attracts investment and brings job creation.”

Angelle said that the potential to draw new investment and activity in ultra-deep energy exploration, bringing with it new energy industry spending that can support job creation both in the industry and in the communities surrounding new activity, was a primary driver in DNR having recommended new law in the recent legislative session that specifically addressed the Office of Conservation’s regulation of ultra-deep oil and natural gas wells. The law, as passed by the Legislature, defines “ultra-deep” wells as those drilled to tap into reservoirs at 22,000 feet or deeper below surface and includes provisions outlining rules for how drilling units can be established at that depth and determining the size of those units. The process of establishing a drilling unit for a well can be critical in establishing the rights of operators to explore for oil and natural gas and the rights of landowners to share in the proceeds of oil and natural gas production.

“The industry expressed its faith in Louisiana’s energy potential and governmental leaders by investing in a handful of ultradeep prospects in recent years without those rules in place, to prove their science was sound,” Angelle said. “Companies are now seeing that faith being rewarded in both new energy prospects and the state’s action to ensure fair and effective regulation, and Louisiana’s businesses and workers could be reaping the benefits for years to come if McMoran and other companies continue to expand their activity and investment.”

Angelle said that a strong success in the planned test of the Davy Jones prospect in federal waters next week could also be a signal to energy companies and investors that the science driving McMoran’s ultradeep exploration in both South Louisiana and the shallow coastal waters is sound.

“Ultradeep prospects both directly within the state and in the federal waters just off our shores bring with them the potential to strengthen our economy, because exploration companies will be looking to Louisiana’s ports, supply companies, support industries and workers to develop and produce the energy resources they discover,” Angelle said. “That potential growth within the industry can mean new opportunities for other businesses to expand as they gain customers with new jobs or better paying jobs who have more money to spend on everything from homes and cars to movies and restaurants.”

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The second well to target the Tuscaloosa Marine Shale in Avoyelles received its permit today from the state of Louisiaina.

The Department of Natural Resources issed the permit July 26, for Gauthier No. 1, which is located on Mill Bayou at Bayou Des Glaises not far from Hamburg.

The permit calls for a length of 15,000 feet. A rig is being moved from the first well of the project in the Brouillette Community. Results from the Brouillette well should begin in a few weeks, after it enters its second phase of drilling with a horizontal leg.

Both the Brouillette and Hambur wells are being drilled by EOG, and are testing new technologies which were successful in the Eagle Ford oil fields of Texas in recent years.

The well ’s name comes from members of the Gauther family, residents and land owners of the area.

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Continuing the partisan divide over energy production policy, the Republican-led House on Wednesday replaced President Barack Obama’s five-year plan for offshore drilling with a far more ambitious proposal to expand exploration in the Atlantic and Pacific oceans. Rep. Charles Boustany, R-Lafayette, chided the president for offering a drilling plan he said cuts off a large majority of offshore sites to exploration, making a mockery, he said, of the president’s proclaimed “all of the above” energy strategy. “Not only will this bill generate a robust drilling plan, creating thousands of new jobs, helping to lower the price at the pump, improve American energy security, and strengthen our national and economic security, but it requires separate environmental reviews for each specific lease sale,” Boustany said. “This is good policy.”

View full sizeGerald Herbert, The Associated Press archiveRep. Charles Boustany, R-Lafayette, said President Barack Obama’s drilling plan would cut off a large majority of offshore sites from exploration. This oil rig and supply vessel were photographed in the Gulf of Mexico off the coast of Louisiana in April 2011.

The Obama plan, unveiled June 28, authorizes 12 lease sales in the Gulf of Mexico and three off the coast of Alaska between 2012 and 2017. The GOP drilling bill, which passed 253-170 with support from 25 Democrats, authorizes 29 lease sales, including areas off the Atlantic coast from Maine to Virginia, the southern coast of California, as well as areas off Alaska and the Gulf Coast.

The bill got the votes of all six Louisiana Republican House members. The delegation’s only Democratic member, Cedric Richmond, D-New Orleans, missed the vote to be with President Barack Obama during his visit to the city Wednesday.

Rep. Ed Markey, D-Mass., called the bill another giveaway to the oil and gas industry, authorizing oil and gas exploration off California and East Coast beaches where local citizens and businesses oppose drilling due to environmental concerns.

“Whatever ExxonMobil wants, whatever Shell wants, whatever BP wants, we’ll do it, even if we know millions of people will just be protesting right from the very beginning — and by the way, without passing one of the reforms from the BP spill commission to make sure that the drilling occurs in a safe fashion,” Markey said.

The White House issued a veto threat, saying the plan would force oil and gas development where it isn’t wanted or environmentally prudent. Senate Democratic leaders said the House bill will never make it through the Senate.

Rep. Steve Scalise, R-Jefferson, said the House bill will produce jobs and lead to less dependence on foreign oil.

“It’s time for President Obama to work with us to develop a long-term plan to promote safe domestic energy production so America can finally reduce our dependence on Middle Eastern oil and increase our energy security,” Scalise said.

Meanwhile, Sen. Mary Landrieu, D-La., joined Sen. Lisa Murkowski, R-Alaska, in offering a Senate bill to expand drilling on the Outer Continental Shelf beyond that called for in the Obama administration’s plan, though not into the most controversial locations included in the House bill.

The bill also would eliminate the $500 million cap on revenue sharing, slated to begin in 2017, for the four-oil producing states and would extend the 37.5 percent share of federal royalty payments to all states that accept energy production, including alternative fuels.

“This legislation would replace the administration’s shortsighted five-year plan for drilling in the OCS, and instead allow the U.S. to tap into the vast oil and gas potential off our coasts,” Landrieu said. “In addition to creating jobs and giving the U.S. economy a much-needed boost through increased energy production revenues, this bill includes revenue sharing for coastal states that produce essential energy resources for our country, something that is lacking in other drilling legislation.”

Sen. David Vitter, R-La., also has introduced legislation to allow for significantly more oil and gas development than authorized by the administration’s five-year plan.

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Today, the U.S. Senate Energy and Natural Resources Committee is having hearings in which they will discuss alternative transportation fuels with special attention given to natural gas-powered vehicles.

With the price of gasoline as high as it is, Compressed Natural Gas (CNG), is looking really good these days and increasing its usage in vehicles would be a boon to Louisiana. Currently, a gallon of CNG fuel costs about $1.79 as compared to a $3.47 per-gallon national average for regular gasoline.

Louisiana is the Saudi Arabia of natural gas, said Louisiana Oil and Gas Association Vice President Gifford Briggs, with the Haynes Shale being the largest known supply of shale gas in the world.

The industry is suffered from a supply glut and jobs are being lost in our state, however, due mostly to lack of refining and storage facilities that would make it cost effective as an export commodity. Federal environmental hurdles aren’t easy to get over, either, and add to costs associated with fracking. A few years back, high prices caused a rush, but supply is so high now that drilling isn’t really worth the investment. Back in 2008, prices were as high as $12 per-million British thermal units (MMBtu), but that’s dropped down to about $2.70 per-MMBtu.

“We are the Saudi Arabia of natural gas, but prices are going to have to come back up to about $3.50 to $4 to make things profitable,” Briggs said. “There are only about 25 rigs working now at Haynesville and that’s down from around 140 from just two years ago.”

While the federal government continues to throw billions down the crapper on green energy that doesn’t work, the one that does—natural gas—hasn’t gotten the support it needs to take off as a gasoline alternative:

There have been strides made in Louisiana to grow the CNG gas market—like in Lafayette where city busses have been converted to use CNG gas—but there are lots of obstacles to be overcome before the fuel becomes a viable alternative to gasoline and diesel.

The primary problem is infrastructure. While the number of CNG stations are growing—there are only 11 across the state—they’re nowhere close to enough to give people an incentive to convert their vehicles or spend the money on a new one that’s able to accept CNG gas. Much less, for gas stations to invest in CNG. Bills like the Nat Gas Act and Rep. Bill Cassidy’s H.R. 1712, include things like tax incentives for individuals and businesses and restructuring of the tax code to grow CNG gas assumption but haven’t gotten very far.

This is something that holds a lot of potential for growing jobs and state coffers here in Louisiana, so it’s worth keeping an eye on what—if anything—comes from these hearings.

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The Bureau of Ocean Energy Management (BOEM) has released details of the first offshore sale under the Administration’s new Outer Continental Shelf Oil and Gas Leasing Program for 2012-2017 (Five Year Program)

Proposed Western Gulf of Mexico Lease Sale 229, scheduled to take place in New Orleans on November 28, 2012, will include approximately 3,800 blocks, covering roughly 20.5 million acres, located from nine to 250 miles offshore, in water depths ranging from 16 to more than 10,975 feet (5 to 3,346 meters).

BOEM estimates the proposed lease sale could result in the production of 116 to 200 million barrels of oil and 538 to 938 billion cubic feet of natural gas.

“This lease sale will make available millions of acres in the Gulf of Mexico, where there are vast untapped oil and gas resources and industry is working hard to expand oil and gas exploration and development,” said BOEM Director Tommy P. Beaudreau. “This sale is part of the regionally tailored approach that we are taking under the Five Year Program, which is central to the balanced, all-of-the-above strategy we need to meet the nation’s energy needs.”

The decision to move forward with plans for this lease sale follows extensive environmental analysis, public comment, and consideration of the best scientific information available. Earlier this month, BOEM completed a Final Environmental Impact Statement with analysis to support decision-making for this and other Western and Central Gulf of Mexico lease sales scheduled as part of the next Five Year Program.

The proposed terms for the lease sale include a series of measures to protect the environment, including stipulations requiring that operators protect biologically sensitive features. The stipulations for marine mammals and sea turtles will require trained observers to ensure compliance and restrict operations when conditions warrant. The terms also include a range of incentives to encourage diligent development and ensure a fair return to taxpayers – including an increased minimum bid for deepwater tracts, escalating rental rates, and tiered durational terms with relatively short base periods followed by additional time under the same lease if the operator drills a well during the initial period.

The terms and conditions outlined for November’s Sale 229 in the Proposed Notice of Sale are not final. Different terms and conditions may be employed in the Final Notice of Sale which will be published at least 30 days before the sale. All terms and conditions for Western Sale 229 are detailed in the Proposed Notice of Sale information package, which is available at: http://www.boem.gov/Sale-229/. Copies can also be requested from the Gulf of Mexico Region’s Public Information Unit at 1201 Elmwood Park Boulevard, New Orleans, LA 70123, or at 800-200-GULF (4853).

The Notice of Availability of the Proposed Notice of Sale is available today for inspection in the Federal Register at: http://www.archives.gov/federal-register/public-inspection/index.html.

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The pace of things is a little slower in Mansfield these days.

The drive across town feels a little shorter, the line at the gas station takes a little less time and the parking lots are less crowded every day.

“It’s really been a tremendous change since February,” said Shelby Spurlock, co-owner of Café 171 in Mansfield in northwest Louisiana. “It’s gotten to the point where we wonder if we can keep the doors open or not.”

Café 171 opened in September 2010 when Spurlock and her business partner, Rebecca McDaniel, started serving country cooking aimed at the droves of oil and natural gas workers meeting the booming demand on the Haynesville Shale.

And for almost two years that eatery just inside the DeSoto Parish city’s limits had a house packed with roughnecks, surveyors, supervisors and anyone else working the nearby rigs.

“I just don’t know how long we can hold on,” Spurlock said. “The way things are falling, every day we get closer to nothing.”

The price of natural gas has fallen to dramatic lows over the past six months.

Since 2009, the words “glut” and “overproduction” have been floating around the oil and natural gas industry, said Ragan Dickens, north Louisiana director for the Louisiana Oil and Gas Association. When things really turned sour is a matter of whom you ask, he said.

In 2008, 82 percent of U.S. rigs were producing natural gas while prices ranged between $8 and $12 per million British thermal units (MMBtu), according to Louisiana Oil and Gas Association President Don Briggs. Now only 27 percent of rigs are producing natural gas and prices are near $2.70 per MMBtu. Those prices will need to return to at least $4.50 per MMBtu before serious activity is expected to return to the Haynesville Shale, Briggs said.

“Companies can’t drill for natural gas at these prices,” Briggs said. “But it’s important to understand the Haynesville Shale will continue to be a major supplier of natural gas for our country for at least another 10 to 15 years. It’s still the largest discovery in the United States.”

Meantime, Briggs said, oil and natural gas companies will be seeking more lucrative activity on liquid-rich plays, particularly the Eagleford Shale in Texas. And they’re taking their workers with them.

That’s the way things go, said Mansfield’s B-N-L Tire and Auto Service owner Greg Dyess. “I’ve been here 16 years, and I’m used to the ups and downs. That’s business, but we’re still going to be around.”

For about four years Dyess said his business saw a boost from outfitting trucks, trailers and other vehicles working the Haynesville Shale. He’s seen a significant drop in business recently but said local customers always have been his foundation.

“I figure it’ll be back up again eventually,” Dyess said. “Once the prices get up, it’ll be back again.”

In Bossier City, Key Energy district manager Buddy Terry said there’s hardly enough work hauling “fracking” water to go around. “The only thing that’s going to help anyone is the price of natural gas going back up,” he said. “We had to make a change. Our yard wasn’t making the kind of profit we need to stay in business.”

And while there were no layoffs, Terry said, several supervisors were offered positions as truck drivers while business is slow. They left for other companies, he said.

Other trucking and supply companies have packed up and moved on. The reduction in competition has helped, Terry said, but things still are slow.

And the impact goes beyond those directly employed in the oil and natural gas industry.

From a peak of 60, the number of residents at Davidson RV Park in Mansfield has fallen to 12, owner Robert Davidson said. About 90 percent of that loss pulled out over one week in March, he said.

Since opening in 1978, Davidson said, his park has never been so empty as without the oil and gas workers. “With what I’ve got, I’m not making much at all,” Davidson said. “I’m not griping, though, because the past few years have been so good. I didn’t blow all my money, put it that way.”

Chesapeake Energy Corp. employee Tim Farrington has watched as many of his co-workers and competition moved on from Mansfield to more active oil and natural gas plays.

“It’s kind of sad now,” Farrington said. “It’s slowed down quite a bit, and nobody saw that coming. You see it all over town from traffic to housing. Everything was coming here for a long while,” he added. “But we still have the basis for production, so it’ll be easy for it come back.”

Farrington has eaten at Café 171 at least twice a week for almost two years. At its peak, Spurlock said, the restaurant was feeding 160 to 250 people a day. Now a majority of the tables remain empty even through the lunch hour.

“I can’t say if we’ll have enough support just from the locals,” she said. “We’ll either have layoffs or we’ll close the doors. We’re just trying to hold out until (natural) gas prices go back up.”

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