By Don Briggs

President, Louisiana Oil & Gas Association

The Gulf of Mexico is the oil and gas hub for the Western Hemisphere with several thousand platforms standing at any given time. As with any industry, safety is of utmost concern. When a platform is built in the Gulf, there are safety concerns for human life, aquatic life, the environment and the Gulf of Mexico itself, to name but a few. However, certain legislation is being proposed in the United States Congress that would be detrimental to the oil and gas industry and have a stifling financial impact on Gulf of Mexico drilling activity  – Section 608 of the United States Coast Guard Reauthorization Bill (CGRB), also known as H.R. 2838.

Congressman Jeff Landry (R-LA) recently amended the bill in the House before passing it on to the Senate. Landry’s House amendment includes Section 608 which is language regarding the use of Stand-By-Vessels. The language requires Stand-by Vessels to be located within three miles of every manned oil and gas platform facility in the Gulf of Mexico, including mobile offshore drilling units (MODUs). This requirement would increase cost to oil and gas operations in the Gulf of Mexico by hundreds of millions of dollars.

The alleged intention of Landry’s amendment of this bill is to improve the ‘safety’ of offshore workers by adding these so-called Stand-By-Vessels. However, the oil and gas industry does not agree with this notion. A recent report by the Bureau of Safety and Environmental Enforcement (BSEE) stated that from the period of 1996 – 2009, there were only three fatalities that were related to hypothermia in the Gulf of Mexico. During this same timeframe, the industry voluntarily reported 1.04 billion man-hours equating to a workforce with an annual average of over 35-thousand personnel.

The industry is projecting that an additional 150-200 vessels would be needed to meet the Stand-By language requirements. Also, additional personnel would be required to operate the additional vessels. All in the name of safety, adding these Stand-By Vessels and personnel would not increase safety, but exponentially increase cost to the oil and gas industry by several hundred million dollars.

Regulations already exist using the most efficient technology that is designed specifically to protect offshore workers, and the regulations have been deemed adequate by the regulating bodies. Reports like the BSEE document and historical incident data do not show a need for such an onerous requirement like the Stand-By language pursues.

The Senate has now voted on the bill, passing it out without language regarding Stand-By-Vessels. However, this issue is far from dead. The bill can potentially go before a Conference Committee where the final language would be decided, but this will most likely not happen until after the November elections. If this Stand-By language were to be added in the Conference Committee and passed within the reauthorization bill, the outcome would be stifling for the oil and gas industry and its future production and success.

As the country is already trying to recover from the worst recession since the Great Depression, it is vitally important that the U.S. Congress not create barriers that prevent energy and economic development within the Gulf of Mexico region.

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By Don Briggs

President, Louisiana Oil & Gas Association

Louisiana is known as THE oil and gas state for a reason. Around 80% of the nation’s offshore oil and gas resources come from or through Louisiana. This is equal to nearly 30% of the entire energy consumption for the United States moving along the highways of Louisiana. The Louisiana oil and gas industry has an economic impact of well over $70 billion dollars. As new discoveries are being made in the outer continental shelf as well as inland areas, we need an efficient transportation infrastructure to serve our industry and allow for continuous movement of commerce.

A particular highway that plays a key role in the transportation system of  our state is Interstate 49 (I-49). This highway begins in Louisiana at the Arkansas state line and continues to Lafayette, where it then turns into U.S. Highway 90. Highway 90 runs from Lafayette to New Orleans connecting the offshore industries and all of the supporting commerce in southern Louisiana. This region of the state is known as the Energy Corridor. Hundreds of offshore oil and gas companies make this area their home due to the direct access to the Gulf of Mexico including Port Fourchon, which services 90% of the Gulf of Mexico rigs and platforms. This region is also home to around 36% of the entire state’s population. Completing I-49S is not only vitally important to the energy sector, but it would also serve as a hurricane evacuation route and would be an economic lifeline to this portion of the state for industries such as fishing and shrimping.

Louisiana currently has the opportunity to compete with other states for funding for the completion of I-49S due to a two-year bill that has recently been signed by President Obama. The federal government typically passes a six-year transportation bill that provides funding for state’s roads, but thanks to a congressional deadlock, a compromise amongst congress has produced a two-year transportation bill. This is a mere two-year window that Louisiana can compete against other states for funding for specific projects.  A major section of the new bill is called the Transportation Infrastructure Finance and Innovation Act (TIFIA).  This section makes $1.75 billion dollars available to the states as loan, to be repaid over a long period.  These funds are to be used for building new or upgrading the existing highways and dollars are made available to the states at low interest rates. The funds are available on a first-come-first-serve basis and the federal government awards the dollars to the state with the most attractive project. We have an opportunity that needs to be explored immediately. We don’t know if the next highway bill would include such a provision.

With the projected path of I-49 ranging from Winnipeg, Canada to New Orleans, it is absolutely essential that I-49 be finished. The completion of I-49 is necessary for the energy sector, but it is also crucial to the future economic development of the state of Louisiana. If Louisiana is to continue being a major economic engine for our country, then the necessary infrastructure must be in place to move our goods, our natural resources and our people.

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By Don Briggs

President, Louisiana Oil and Gas Association

The country is experiencing an oil and gas boom touching nearly every state in America. Shale plays that are producing dry natural gas and oil have become reachable thanks to the new technologies surrounding hydraulic fracturing and lateral drilling. However, there is much talk surrounding a “slow down” in new wells being drilled in Louisiana. Mainstream media fails to mention the cause of the decline and the chances for a market recovery.

As of this time last year, Louisiana had 178 rigs drilling for resources. Today, Louisiana has around 119 rigs drilling. Keeping perspective, Louisiana now boasts of 48 rigs in the Gulf of Mexico, which is nearly back to the amount of rigs prior to the 2010 oil spill. The southern portion of the state has 28 rigs running, while the coastal inland area is seeing around 18 rigs. The newly reachable Tuscaloosa Marine Shale (TMS), an oil play, has three rigs running at present time. While still in the exploratory phase, the TMS has great potential to add to Louisiana’s thriving oil and gas industry.

However, the decline in rig count in Louisiana is due to the natural gas sector. As the demand for natural gas has not equaled the now available supply of natural gas, thanks to the many shale plays across the country, the price of natural gas has dropped to a 10-year low. Due to this downturn in natural gas prices, Louisiana’s Haynesville Shale play has seen many of its operators scale back their “dry” natural gas operations. As recent as two years ago, the Haynesville Shale had over 140 rigs running compared to today’s 26 rigs.

Several keys factors play into how soon the natural gas demand will increase, thus causing the prices to return to a competitive rate. As the automotive industry makes strides to producing more vehicles that run off of Compressed Natural Gas (CNG), with the possibility of the exportation of Liquefied Natural Gas (LNG) and the increasing demand for natural gas as an electricity provider, the demand will only increase with each month. Again, as the demand for natural gas increases, the production will return, the rig count will climb and the economy will only grow stronger.

While the talk continues of a rig decline in Louisiana, the need for employees is still large. Oil field service companies are at job fairs, frequently reporting that the need for quality employees is still high. What causes a need for employees when rig counts are declining? Possibly due to the newer wells being drilled to depths of 12,000 feet, and then stretching out another 4,000 feet horizontally. With deeper and longer wells, comes the need more material and additional machinery, potentially producing a necessity for more manpower.

The rig count has dropped, many parishes are experiencing a decline in tax revenues, and the price of natural gas is low. However, with the hope of a market recovery and the numerous wells being added thanks to Louisiana’s crude oil supply, the industry will only continue to thrive, thus helping to stabilize the Louisiana economy in uncertain times.

By Don Briggs

President, Louisiana Oil and Gas Association

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For over a hundred years in America, coal has been one of the leading sources for power generation. As the Industrial Revolution brought about changes to our transportation, agriculture and manufacturing systems across the United States, coal stepped in as the leader helping to phase out steam power. While coal has served it purpose, we are now seeing a potential rewrite in our nation’s energy future as natural gas emerges as a new player in power generation.

For the first time in United States history, last month natural gas generated as much electricity as coal, representing one-third of all US power. What does this mean for our state and our country? First, we have to understand that natural gas is now readily available here in Louisiana, and across the US. Louisiana boasts the largest producing natural gas field in the United States known as the Haynesville Shale. The Haynesville Shale is merely one of many producing natural gas fields in America. According to the IPAA, over the next twenty years, 49% of our nation’s natural gas supply will be attributed to the shale plays in the US. This homegrown natural gas will also help our nation transition from our dependence on foreign resources to fuel our country.

While the availability and abundance are important factors, natural gas is also a cleaner burning fuel than coal. Lawrence Cathles, a professor at Cornell University recently conducted a study taking a closer look at natural gas usage. He says, “Replacing coal with natural gas would cut about 40 percent of carbon emissions. When you burn natural gas it’s a cleaner burning fuel.” The oil and gas industry typically receives much negative press regarding the environment, but the numbers surrounding the cleanliness of natural gas speak for themselves.

Finally, what else makes natural gas the major player that it has become? The advanced technology of hydraulic fracturing and lateral drilling has revolutionized the oil and gas industry. It is now estimated that nearly 85% of all wells drilled today are completed using the method of hydraulic fracturing. While this process began in 1947, we have this spike in hydraulic fracturing due to technology, yes, but also due to the numerous shale plays that stretch across the US. As with many developing technologies, comes scrutiny by the federal government as well as the mainstream media. However, multiple federally funded studies have shown that there are no risks associated with hydraulic fracturing.

Natural gas is, no doubt, a game-changer for the energy future of the United States. As natural gas is a clean, readily available and abundant resource, it has the potential to surpass coal as the chief generator of power. While this potential transition from coal to natural gas will not take place over night, the shale developments will continually offer a supply of natural gas that makes a transition truly possible. But as with any resource, responsible development and conservative consumption will play as a key factor as to when natural gas becomes THE resource for our nation.

Louisiana is known as THE oil and gas state of our country. 50% of the gasoline and diesel fuel that drives the engines of our country flows out of Louisiana. North Louisiana is the home to the most productive natural gas field in the country, the Haynesville Shale. But most importantly, around 30% of the nation’s crude oil is produced off the coast of Louisiana in the Gulf of Mexico.

This week, the Bureau of Ocean Energy Management (BOEM), which regulates offshore drilling, held a lease sale on Wednesday in New Orleans for the Central Gulf Of Mexico region. This was the first lease sale for the Central region since the April 2010 Deepwater Horizon incident. The BOEM said they received 593 bids submitted by 48 companies on 454 federally owned oil and natural gas drilling tracts, bringing in a grand total of $1.3 billion. While 48 companies submitted bids, it is interesting to note that in 2010, 77 companies were apart of the bidding process. This 38% decline in companies bidding is clearly due to the uncertainty that companies feel from the federal government and their unfavorable energy policies.

The economic impact of this lease sale for Louisiana is massive, as a significant amount of these dollars will make their way back into the Louisiana economy. While the oil and gas industry is the engine that drives the Louisiana economy, the ripple effect from a lease sale like this one reaches far and wide beyond the acreage of the Gulf of Mexico. This lease sale will create thousands of jobs for rig workers, those working on offshore vessels, helicopter companies, all the way inland to the hotels, restaurants, and shopping centers.

This lease sale or any other positive oil and gas development will always be met by environmental groups that want to stop drilling in general. This week, four national environment groups filed suit in Washington DC in protest of the lease sale. This is to be expected from these types of organizations.

Whether it is a new shale development in Ohio or a lease sale in the Gulf, the main goal of these environmental groups is to shut down drilling. These particular groups filed suits in 2011 challenging the first lease sale in the Gulf of Mexico after the Deepwater Horizon spill. Not only did their filings not stop the bidding process, but the December 2011 lease sale saw high bids of $338 million.

The success of this lease sale is yet another example of how the oil and gas industry truly serves as the backbone of the United States economy. When other industries are unloading employees, the oil and gas industry is adding thousands of news jobs thanks to the shale oil and gas boom and the vast amount of resources off the coast of Louisiana in the Gulf of Mexico. The oil and gas industry must continue to produce consumer-ready resources, create thousands of jobs for our workforce, and remain committed to the safety of our communities and the preservation of our environment to which we have been entrusted.

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By Don Briggs

President, Louisiana Oil and Gas Association

The 90-day 2012 Louisiana Legislative Session has come to a close. While most sessions have their ups and downs, this particular session was an all-out battle for the oil and gas industry. Several pieces of legislation were filed that would have been injurious to the industry, and numerous other bills were filed that would benefit the industry and offer new ideas of how to better the future of oil and gas in Louisiana. Overall, the bad bills were killed and the good bills were passed, and the oil and gas industry is pleased at the outcome.

Specifically, the oil and gas industry was able to work with the necessary legislators and stakeholders to pass two bills designed to reduce the backlog of the so-called “Legacy Lawsuits” and speed up remediation of landowners’ properties. House Bill 618 by Rep. Neal Abramson and Senate Bill 555 by Sen. Robert Adley have now passed out of both chambers and are on their way to the governor’s desk for his signature. State Representative Gordon Dove (R-Houma) was recently quoted in reference to the new legislation as saying, “It allows oil companies to take responsibility for the environmental portion of the site only, clean it up and have that admissible in court.” The Legacy issue has caused, according to a report released by the LSU Center for Energy Studies, the loss of nearly 1,200 new wells in Louisiana, translating to an astonishing $6.8 billion dollars in lost drilling investments, and the forfeiture of over 30,000 jobs.

Also an ultra-deep units bill, HB 504, passed allowing the Department of Natural Resources to consolidate leased lands so operational costs for ultra-deep drilling exceeding 22,000 feet could be shared. This bill enhances drilling in the southern portion of the state of Louisiana allowing for new economic development to take place. Not only will this bill help bring about new jobs directly tied to the drilling itself, but it creates a ripple effect for that region adding jobs to industries such as the hotel, restaurant and transportation sectors.

Other positive pieces of legislation were passed pertaining to hydraulic fracturing, water usage, coastal restoration and alternative fuel for vehicles. Individually, these bills each touch the process of how oil and gas companies conduct their day-to-day activities. If regulations are set at appropriate levels, the oil and gas industry is able to focus on exploration and production and not be bogged down by the red tape of laws that only hinder operations. When the industry is able to work with the legislators and come to peaceful compromise, we get the opportunity to see our democracy at work.

While this session brought about countless conversations, negotiations, and compromise, the end result was positive for the oil and gas industry. The next step in the process is for the necessary bills to be signed into law, and the industry move forward in a positive direction, not only for oil and gas, but also for the entire state of Louisiana.

By Don Briggs

President, Louisiana Oil & Gas Association

Travel to any region within the state of Louisiana and drilling rigs will most likely be visible. Due to the vast amount of natural gas within the Haynesville Shale, and large sections of crude oil beneath our land’s surface, Louisiana is THE energy state. The Tuscaloosa Marine Shale (TMS), the now accessible “wet” play in Central Louisiana offers both oil and gas resources. Unlike the low natural gas prices of the Haynesville Shale, the price of crude oil is sitting at around $93 a barrel. Therefore, this developing region of the TMS is experiencing an increase in permit applications and test exploration.

With the increase in drilling in Central and South Louisiana due to the TMS, many parishes that have not experienced much drilling are now seeing action. As the rigs and the workers show up in the parishes, so do the parish ordinances. While the parishes typically have good intentions of protecting their water, roads and land by enacting new parish ordinances, in some cases, they are simply stifling economic development. With over 20 different shale plays in the United States, companies can be more selective as to which play fits their exact needs.

The State of Louisiana, under the direction of the Louisiana Office of Conservation, is tasked with the primary statutory responsibility for regulation and conservation of oil, gas, lignite, and other natural resources. Conservation’s objectives are: to conserve oil, gas, and lignite resources; to regulate the exploration and production of oil, gas and other hydrocarbons and lignite; to control and allocate energy supplies and distribution; and to protect public safety and the State’s environment from oilfield waste, including regulation of underground injection and disposal practices.

While the State of Louisiana assumes the overall responsibility for oil and gas regulation, the parishes do play a key role in the development and production process. For example, each parish regulates their own parish roads. Thus far in the Haynesville Shale region, the oil and gas companies have been able to agree to terms put forth by the parishes regarding how roads will be kept up, and who will ultimately hold responsibility. While each parish has conducted their process differently, there has generally been a good working relationship in the Haynesville Shale between the oil & gas industry and the parish governments.

Louisiana is the home to thousands of producing wells with 25% of the oil and natural gas that fuel the United States flowing through the arteries of our state. 50% of the gasoline and diesel fuel that drives the engines of our country flows out of Louisiana as well. In order for our state to continue as a leader in oil and gas production, it will be vitally important for the oil and gas industry, the parish governments and the State of Louisiana to work together as we help move our country towards being less dependent on foreign resources.