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The recent finds of huge natural gas fields like the Haynesville Shale in north Louisiana and the resulting dip in natural gas prices have not only been a godsend to state residents, but to a new wave of industrial expansion in Southwest Louisiana and around the state.

Last month, natural gas prices dipped to a 10-year low — around $2.30 per million British thermal unit — or about $2 less than where they were in 2010.

That lower price has not only resulted in noticeable lower electrical bills for residential customers, but substantially lower electrical bills for the petrochemical industry in Louisiana.

Department of Economic Development Secretary Stephen Moret said the lower natural gas prices raise optimism regarding industry expansion and job growth.

‘‘I’m really confident that Louisiana will benefit more from low, stable natural gas prices than any other part of the country because of the high concentration of the chemical industry, because of the infrastructure and because of the high level of natural gas in our electricity production base and reduction in our industrial electricity rates,’’ told this newspaper’s editorial board recently.

He said forecasts of stable gas prices will lead to millions of dollars of new investment in our area, along the Mississippi River corridor south of Baton Rouge and in southeast Louisiana.

Moret predicts that construction activity will increase in Southwest Louisiana from the second half of this year through 2014 and likely remain steady for five to seven years.

He said as opposed to the United States, most other parts of the world’s energy consumption is based on oil, not natural gas.

While natural gas prices have fallen nearly 100 percent in the last two years, the price of crude oil has risen 10 percent.

‘‘The economic advantages for industry in the U.S. and the chemical industry in particular has changed dramatically,’’ said Moret.

Last month, a Canadian company announced that it had purchased land in Geismar and was considering moving an idle methanol plant there from Chile.

And it’s possible in the not-to-distant future, the Cheniere and Sempra LNG plants in Cameron Parish and the Trunkline LNG facility south of Lake Charles could all be exporting liquefied natural gas.

‘‘Obviously, global conditions could change,’’ said Moret, ‘‘but this advantage that we have with low, stable natural gas is a very big deal and it’s not really counting on economic recovery. Even a flat national economy could still result in significant out-performance of this region and the state because of the economics of natural gas.’’

That’s promising news for our corner of the state.

original article

It doesn’t take long for Warren Perrin, a Vermillion Parish native

brimming with stories of his Acadian ancestors, to note that his

family roots run deeper than the oil and gas wells drilled on the

3,000 acres his family owns in Vermillion Parish.

Perrin, an attorney, is one of about 75 heirs of Aristide Broussard, a

Cajun cattle rancher who bought the stretch of land more than a

century ago. The Texas Co., now known as Texaco, found a large natural

gas deposit underneath the cattle pastures in 1942. The land has

played host to a gas plant and drilling rigs since.

Perrin, who was born in a small house near the plant, noted the oil

and gas employed and lined the pockets of many Broussards. But it also

came at a cost.

Grass won’t grow on patches of land where drilling activity took

place. Ditches on the property lead to Boston Bayou, where oil

containment boom has floated in the water for years.

Today, Perrin represents the Broussard family in 18 lawsuits seeking

to recover the costs of cleaning up the family land from the oil

companies that worked there, through so-called “legacy” lawsuits.

Vermillion Parish landowners have brought 41 legacy lawsuits to court

in the past six years, making it a hotbed for what the Louisiana oil

and gas industry says is a growing extortion scheme led by greedy

lawyers. This year industry lobbyists vow to introduce legislation to

fend off what they say is a wave of baseless environmental claims

bringing oil and gas companies to their knees.

Perrin sees the situation more cut and dry. Every oil and gas lease

spells out that damaged property must be restored. His family, like

any landlord, expects its land to be cleaned, he said.

“We’re not anti-oil, we’re anti-pollution. They’re not mutually

exclusive,” Perrin said.

Such landlord and tenant disputes are nothing new in south Louisiana,

where oil and gas firms have sold and traded leases since the early

20th century. But industry leaders say legacy suits have ballooned in

recent years.

They trace the spike back to 2003 when a group of landowners in

Calcasieu Parish sued Shell Oil Co. and others for cleanup costs

associated with an oil and gas terminal on a 320-acre tract of land.

The Louisiana Supreme Court upheld a $33 million jury award against

Shell. The leased property in question was worth $108,000.

The Louisiana Department of Natural Resources, which has overseen

cleanup efforts once suits are settled since 2006, counts more than

270 legacy suits in its records. The agency oversaw remediation plans

for 40 legacy suits originally filed in 2004, up from seven filed in

2003. DNR is also tracking 25 plans from cases filed in 2011.

Don Briggs, president of the Louisiana Oil and Gas Association, said

more than half of the state’s top oil and gas producers are tangled in

legacy lawsuit litigation — 1,500 defendants total.

Instead of cleaning land, Briggs said a handful of plaintiff lawyers

have formed a cottage industry in helping landowners win millions in

damage awards with over-the-top cleanup plans. Though state law

requires awards be used for cleanup, many in the energy industry

question if that’s the case.

The system hits small operators that buy properties from larger

companies the hardest and is driving investment away from Louisiana

oilfields, Briggs said.

“It’s not about the environment. It’s not about cleanup. It’s just

‘Throw me something mister,’” Briggs said.

The industry plans to throw its weight behind a measure that would

allow the Department of Natural Resources to study and establish an

amount companies are required to pay to clean contaminated land.

Companies that agree to pay for regulatory cleanup would not be

admitting responsibility for further private claims.

This attempt would be the third in nine years to control the legacy

lawsuit environment. In 2003, lawmakers approved a law that required

damage awards be used to clean public groundwater resources. In 2006,

it was further clarified that all awards should be used solely for

cleanup.

Scott Bickford, a New Orleans attorney representing Plaquemines Parish

government among other plaintiffs in legacy suits, said moving cleanup

disputes out of court opens the process further to industry lobbying

efforts. There’s also the question of whether the state has the

capacity to take on responsibility for cleanup hearings, he said.

“Do the regulatory agencies have the money and the staffing to

evaluate, to check, to patrol and to monitor (pollution)? I’d tell you

no. Is the legislature willing to fund that? I’d say no,” Bickford

said.

Stuart Smith, a New Orleans attorney who has represented south

Louisiana landowners for two decades, said claims that plaintiff

attorneys are flooding courts with unwarranted lawsuits are false.

Most suits cost more than $200,000 in environmental audits and expert

witness fees alone. If the pollution isn’t real, there’s no point

bringing the case to court, Smith said.

“The truth is (companies) don’t want to pay. They want to be able to

bury pollution on the landowner’s property. That wasn’t part of the

contract,” Smith said.

Scott Sinclair, president of Tensas Delta Exploration Co. in

Shreveport, has a hard time believing that. Tensas operates in

Louisiana and Mississippi.

In 2006, a landowner filed a $4 billion claim in Catahoula Parish for

environmental damage on a 30,000-acre tract where Tensas shared

ownership of mineral leases with Exxon Mobil Corp.

Sinclair said the final award, which he declined to disclose, was for

less money, but the suit rattled company and its investors. Tensas is

involved in two other lawsuits now.

Litigation and low natural gas prices have pushed the company out of

Louisiana, Sinclair said. Though Tensas owns leases in oil rich parts

of central Louisiana, he said the company is waiting to start drilling

there.

“What everybody is afraid of is, what if somebody stubs their toe or

if a hose breaks and something falls on the ground or an accident

happens? Then the lawyers are just going to swoop down on it and

gobble it up. You’re better off just staying away from it,” Sinclair

said.

In Vermillion Parish, Perrin is skeptical lawsuits will keep oil and

gas business away. The Broussard family has signed three drilling

leases so far this year on its land.

“An oil company will drill where there is oil. If it’s under your

house, they’re going to drill there. It makes no difference. … We’re

not running them off.”

original article

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New technology is a game changer for Louisiana’s energy future, but foreign rivalries and domestic legal issues are still stacking against the energy industry, according to Louisiana Oil and Gas Association President Don Briggs.

Addressing the association’s local members Tuesday, Briggs spoke of the challenges facing the industry.

“We are today truly in a new era for our industry,” Briggs said. “Technology is changing everything, and we’re going to be part of it in a big way, especially in northwest Louisiana.”

Those technologies have allowed drilling firms to reach unprecedented levels of production, which has driven a boom in investments across Louisiana, Briggs said. The Louisiana chemical industry has been a major benefactor, he said.

But even with natural gas prices falling rapidly, Briggs said concerns about the future of drilling on the Haynesville Shale will eventually fade. Only 42 percent of rigs in the United States are drilling primarily for natural gas, Briggs said, down from 82 percent in 2008.

“Natural gas prices are going in the tank. We had a good run, but that’s the nature of the beast,” Briggs said. “Even though the rigs are moving out, and they need to be, eventually that glut will be swallowed.”

But the challenge of natural gas prices is based on successful production and partly a mild winter. Briggs said the largest problems facing the industry are both foreign and domestic.

Increasing tension between the United States, Israel and Iran have raised the specter of skyrocketing oil prices, already trading around $100 per barrel. Briggs said military or political action could limit oil flow through the Strait of Hormuz, through which 35 percent of the world’s sea-born oil flows and which Iran has threatened to shut down.

“If that happens, we’ll see the price of oil go absolutely through the roof,” Briggs said.

But U.S. Environmental Protection Agency push-back against hydraulic fracturing — the process of breaking apart shale sediment with water, sand and chemicals to release natural gas — was the area Briggs said concerned him most.

The EPA has raised concern that fracking could contaminate groundwater and harm people and the environment. Briggs said those concerns are “scare tactics,” that 85 percent of wells today are fracked and there has never been proof it is harmful.

“I’m not sure we’re winning that battle,” Briggs said. “This administration doesn’t like the domestic oil and gas industry.”

Briggs also raised concerns about the effects of “legacy lawsuits” — claims against firms for environmental damage caused in years past — on the oil and gas industry.

“It’s a huge problem, and our industry has been on the back side of it,” Briggs said.

Briggs said 56 percent of the top 50 oil and gas producers have legacy suits filed against them. Good companies, he said, are being sued for environmental damage as much as 70 years old caused sometimes by drilling techniques legal at the time.

A founder of LOGA, Briggs also serves on governor-appointed committees such as the Ground Water Management Advisory Task Force, Governor’s Environmental Task Force and the Oilfield Site Restoration Committee.

“Don is always the guy leading the charge against bad legislation and challenges to our industry,” LOGA’s Chairman of the Board Raymond Lasseigne said.

original article

Oil and gas from shale fields now account for 10% of Anadarko Petroleum Corp.’s (APC) production, up from 1% just a few years ago, Chief Executive Jim Hackett said Tuesday.

The Woodlands, Texas-based independent has operations in major shale fields such as South Texas’s Eagleford shale, the Marcellus in the U.S. northeast, and the Haynesville shale in Louisiana. The company is in the midst of a production ramp-up led by increased offshore drilling activity and by recent exploration successes in Africa and the U.S. Gulf of Mexico, where the company’s exploration efforts will “return to pre-moratorium levels this year,” Hackett said.

The company plans to drill around six exploration wells, Hackett added in a conference call with investors. But the lead time necessary to complete the wells will be “meaningfully” longer due to stricter new regulations, Hackett added.

Several of the company’s projects are reaching fruition this year. Hackett said that Anadarko will see the first significant volumes from the El Merk project in Algeria by year-end 2012.

Also, first production is expected at the Caesar/Tonga development in the U.S. Gulf of Mexico by mid-2012, which will help offset declining output at existing Gulf properties by providing a “very nice bump” toward the middle of the year, an Anadarko executive said.

Other projects are also advancing: first production at Lucius, a recent major U.S. Gulf of Mexico discovery, is expected in 2014, Hackett said.

Amid a slump in natural gas prices, Anadarko is looking for opportunities to utilize some of its drilling rigs currently drilling for natural gas in the Marcellus shale in the neighboring, oil-rich Utica shale, but “the economics we still see in the Marcellus are good,” an executive said.

The company, which has put its Brazil assets on the block, has “just begun marketing our Indonesian assets” as well, and some gas-producing properties in South Texas, an Anadarko executive said.

original article

New figures show that Lafayette is one of the country’s “prospects of prosperity,” with household income increasing significantly during the economic recession.

From 2007 to 2010, Lafayette’s household income increased by 12.2 percent, to $47,200, according to a study by Sentier Research, based on an analysis of U.S. Census data. That is the most out of any metro area in the country, according to a USA Today report.

One of the key reasons for Lafayette’s prosperity is its position as an energy industry hub, but Bruce Conque, vice-president of the Greater Lafayette Chamber of Commerce, said the city’s diverse economic profile has also helped it withstand the downturn.

“We are a regional medical center, the major health care provider between New Orleans and Houston,” Conque said. “We have a university system that brings in 17,000 to 18,000 students and is one of our biggest employers. And we are truly the Hub City. We are a retail and entertainment center, not only for Lafayette, but for

our neighbors.”

When times got tough for oil and gas companies in the wake of the BP oil spill and subsequent Gulf of Mexico drilling moratorium, many of them didn’t lay off people to the level they did in the 1980s, Conque added.

“They kept their human capital, so that when things do return to normal, which we think will be quite soon, they are going to be in a position to respond to those needs,” he said.

Don Briggs, president of the Louisiana Oil and Gas Association, agreed, saying drilling rigs that remained in the Gulf of Mexico were staffed.

“They still had crews on them, so a lot of services stayed intact when they were waiting to go back to work,” Briggs said.

Briggs pointed out that local energy service companies serve the Lafayette area, other parts of Louisiana and several other states, including Texas and Pennsylvania.

“Lafayette is so unique in that, when things are going good even in Texas or north Louisiana, then our people and our

services companies do well also,” Briggs said. “You can see all the different services companies all up and down Hwy. 90. Those companies aren’t just serving the Gulf of Mexico and Louisiana drilling operations. They are doing work in all parts of the country.”

That leads to a trickle-down effect that helps other local businesses.

“When those companies do well, people have expense accounts, they spend more money, so it filters down to local grocery stores, clothing stores and all the different businesses that exist in the community, small and large,” Briggs said.

Conque said he thinks Lafayette remains in good economic condition and the city’s prosperity should continue, barring any major unforeseen problems.

“Will there be hiccups? Yes,” Conque said. “You look at Transcom which laid off all of those people recently, and you feel bad for those people. However, I think that was an anomaly. Health care is doing really well, and if you look at sales tax collections, we are doing quite well in Lafayette Parish. I think we are pretty consistently up month to month, and that’s a good indicator of how we are doing economically in terms of retail sales.”

original article

It’s still early in the Tuscaloosa Marine Shale’s development, but energy industry members say a St. Helena Parish well’s initial production, nearly 800 barrels a day, is encouraging.

The Encana Weyerhauser well, completed in November, averaged 784 barrels of oil per day and 309,000 cubic feet of natural gas, according to Encana’s filing with the state Department of Natural Resources.

“This is certainly a key well. There’s no doubt,” said Dan Collins, a Baton Rouge landman who spent much of last year negotiating lease agreements with landowners in the shale.

“You know, 800 of anything coming out of the ground daily is a lot,” Collins said.

That’s especially true when the anything in question fetches nearly $100 a barrel.

Around two dozen wells have been drilled or are being drilled in the Tuscaloosa Marine Shale, an oil-rich formation that covers Louisiana’s midsection. Energy companies have leased more than 1 million acres in the formation, but so far the firms aren’t sharing much of their early production figures.

Kirk A. Barrell, president of Amelia Resources, of Texas, said before the formation can be considered economically viable, 10 to 20 wells will have to be completed.

“You need the initial (production) rates for 10 to 20 wells, but you also need to get 12 to 15 months out and see what the decline of that rate is,” Barrell said.

Still, Collins said it appears the energy companies believe they have something.

Oil companies have proposed a number of wells and discussed putting multiple drilling pads on landowners’ property, Collins said. The shale’s future remains to be seen, but there probably wouldn’t be so much activity if the energy companies didn’t believe their investment is worthwhile.

Encana has leased around 270,000 acres in the play, has completed one horizontal well, and has two new wells under way, according to its investor presentations.

Encana spokesman Alan Boras said he could not discuss any details of the company’s Tuscaloosa wells.

But the company will release more information during its fourth-quarter earnings report, scheduled for Feb. 17, Boras said.

A lot of people think every well in the Tuscaloosa should produce 1,000 barrels a day, but it takes time for drilling companies to figure out the best approach, Barrell said.

Barrell, the author of a blog on the Tuscaloosa Trend, said people forget or don’t realize that the early results varied from wells drilled in the Eagle Ford Shale in Texas.

While there were a few good wells whose maximum production was around 1,000 barrels per day, there were a number of wells whose daily production never reached double figures, Barrell said.

Collins said in order to recover the millions in drilling costs, a well’s initial production has to be pretty strong because the production curve declines pretty rapidly.

Shale wells’ production rates generally fall about 75 percent after 12 months.

“I liken it to a ski slope. We certainly don’t want the black ski slope. We want one of those greens or blues that’s going to … gently drop over time,” Collins said.

Gifford Briggs, vice president of the Louisiana Oil and Gas Association, said the Encana well’s results will encourage additional testing.

But it’s difficult to say how significant the well is without knowing the costs and how long the well will continue producing at the same rate, Briggs said.

In this early phase, Encana and other companies operating in the Tuscaloosa are still trying to answer a number of questions, such as what is the right depth to drill and how to get the most effective fracture, he said.

Wells in the Tuscaloosa are drilled vertically for around 11,000 feet and then horizontally. Drillers then fracture the formation in multiple stages, forcing millions of gallons of water, mixed with sand and/or ceramic and chemicals into the formation to crack the shale. The sand and ceramic materials prop the cracks open, releasing the oil.

Fracking has drawn criticism from environmentalists and some landowners, who say the practice pollutes the air, contaminates water and consumes too much water. The oil and gas industry’s position is that fracking has been used for more than 50 years on thousands of wells with no evidence of groundwater pollution.

Collins said leasing activity in the area has slowed this year as companies have turned to drilling, but Barrell said his firm and its partners are still actively leasing.

Lease prices in the Tuscaloosa Marine Shale, compared to other shale plays, remains a “great, great value,” Barrell said.

Last year, leases were going for around $150 an acre.

Briggs said he has heard that leases are fetching $250 to $500 per acre.

original article

Drivers could be paying more than $4 for a gallon of unleaded gasoline by the late spring and summer months as demand increases, tensions rise in the Middle East, companies switch to new formulas and maintenance work takes place at refineries across the country.

In Lafayette on Monday, the average for a gallon of gas was $3.42, according to the gas-price tracking website gasbuddy.com. That’s up from an average of $3.01 in February 2011 and

$2.46 in February 2010.

Gregg Laskoski, senior petroleum analyst with gasbuddy.com, said the national average on Dec. 31 was $3.25 per

gallon.

“We expect that gas prices are going to go up significantly because we are starting at the highest price point we have ever seen in the United States,” Laskoski said. “If we start 2012 at such a high price point, and we know that every spring gas prices go higher, it’s not outlandish to see them hit $4 a gallon.”

Over the last seven years, gas prices have increased an average of 93 cents from Dec. 31 to the peak price point in the following year. That means if the nationwide average is $3.25 per gallon, the national average by the summer could be around $4.18 per gallon.

“The dominant issue right now is the potential threat and conflict that could occur in the Middle East,” Laskoski said. Federal intelligent officials believe there is a chance that Israel could attack Iran sometime this spring.

“That creates a lot of nervousness in the financial market and builds a premium into the price of crude oil,” Laskoski continued. “Even if that were not to occur, we could see prices going higher because they do the same thing every spring. The refineries are in a difficult spot because they have to produce a ’summer blend’ gasoline, and at the same time they also have some scheduled maintenance issues. You also have aging infrastructure, so the refineries have unscheduled maintenance before they can ramp up and produce a ’summer blend.’”

Don Briggs, president of the Louisiana Oil and Gas Association, said a large company like Exxon can make more than 20 different kinds of “boutique” fuels, and different fuels are made for different cities, depending on emission requirements and specific local needs. But that kind of specialization is more costly for companies and refineries, and that cost is passed on to consumers at the pump.

“The refineries have to change what they are doing and make these different fuels,” Briggs said.

Laskoski said that because of federal regulations, refineries must produce a summer blend from May 1 to Sept. 30 that burns cleaner to reduce smog and pollution as more drivers hit the road for the summer travel season. The special additives needed to make this blend are pricey, another factor that leads to increased costs. On Monday, unleaded gas at most Lafayette stations ranged from $3.31 to $3.41 per gallon. The highest was at three Chevron locations, where gas was $3.51 a gallon, while the lowest was at Cigarettes and Checks on Kaliste Saloom Road, where it was $3.25 per gallon.

The variations among gas stations are usually because of the timing of when gasoline arrives at a station and wholesale prices, Laskoski said. Distribution and transportation costs also can play a role in the variations, while some companies are able to sell gas at lower prices because the refineries they use are able to produce it at a lower cost than others. While south Louisiana residents will more than likely see higher gas prices, they may not be as high as in other parts of the country. In general, Louisiana prices are running about average in the country. The highest gas prices are in California, where cities along the coast such as Eureka and Oxnard are selling gas from $3.60 to $3.99 per gallon. The lowest prices are in western states such as Wyoming, Montana, Colorado and Utah.

For example, in Billings, Mont., a gallon of gas is $2.94 to $3.16 a gallon, while in Salt Lake City, Utah, the price is $2.90 to $3.09 per gallon.

Louisiana’s proximity to refineries and oil-producing rigs is a main reason why the state’s prices usually don’t go as high as some other parts of the country.

“It can cost less because we refine it right here. It costs money to transport the oil to other parts of the country, so it may cost less here because it doesn’t cost very much to transport it,” Briggs said. “Those transportation costs and taxes do make a difference. There’s a lot of different ingredients that go into it.”

Laskoski said taxes in Louisiana average about 38.4 cents per gallon, as do most Gulf Coast states. But in Florida, the tax amounts to about 53.4 cents, and other states can see taxes as high at 67 cents per

gallon.

“The states like New York, Illinois and California, which all have extremely high taxes, are most likely to see the extremely high end of the price range when we talk about peak prices,” he said.

original article

The Caddo Parish Sheriff’s Office is converting 13 vehicles to a fuel system that will allow them to operate using compressed natural gas, Sheriff Steve Prator said.

Four passenger vans and nine sedans will be converted in a process that is expected to save on fuel costs because of the lower price of natural gas. With gasoline now well above $3 a gallon in most areas, Prator said the converted vehicles will run at an equivalent cost of $1.81.

There are no CNG fuel stations in Shreveport, so Prator said drivers will fuel-up in Bossier City. The system allows the vehicles to return to gasoline fuel with a flip of a switch if drivers run low on fuel and can’t reach the CNG fueling point.

The conversion is being paid for with a $173,000 grant from the Louisiana Department of Natural Resources.

“CNG is cleaner burning with no emissions,” Prator said. “It’s better for our environment and it’s certainly better on the pocketbook as we look for ways to reduce our monthly fuel costs.”

Mike Gregory, who manages the sheriff’s fleet, said deputies should notice no change in vehicle performance after the conversion.

original article