American Oil and Gas Reporter - February 2015 - 139

ConventionSection: Louisiana Oil & Gas Association
to pay higher fees to close orphaned well
sites.
Specific Concerns
Nevertheless, the association insists
that a provision in the initial draft proposal
to remove a financial security exemption
for companies classified as "good operators" constitutes a major policy shift that
will create additional burdens for all operators, especially smaller companies.
Furthermore, comments D. Briggs, financial security requirements must not
delay drilling permit applications. "Tying
financial security to well permitting can
upset the delicate scheduling with which
operators are customarily and historically
familiar," he stated. "The rule should expressly clarify this."
Financial security requirements for
amended permits should apply only to
those that impose risks to the orphaned
well program, D. Briggs holds. LOGA
also urges the state to add site-specific
trust funds to the available financial security instruments, and says an asset retirement obligation fund would be useful.
According to LOGA, its members
often plug wells at costs lower than the
state incurs. "While the financial security
amounts may need to increase moderately,
more research is necessary to ensure
plugging and abandonment costs are accurate," Briggs states.
The rule changes are necessary, LOGA
concurs, but the group also urges the
state to extend the five-year limit in which
an inactive well can remain unplugged.
"There are legitimate geological, economic, and environmental reasons for
keeping a well in future utility status for
more than five years," D. Briggs maintains.
Inactive wells remain assets, and reevaluated wells can be used for disposal,
injection, and gas or carbon dioxide storage, the association observes. LOGA also
advocates a new classification for idle
wells that normally would be reworked
every five-seven years. "These wells that
are part of an active-production program
should be classified under 'active utility'
status," LOGA suggests, adding that such
a designation would entail specific justification.
"The status would be awarded based
on an acceptable set of criteria to define
a 'production program,' which could be
implemented at a field-by-field level
based on activities in the field," D. Briggs

says.
It also may be appropriate to consider
the status of an operator's plugging program and ratio of active versus inactive
wells, he adds. "An 'active utility' status
would fill a gap in the regulations that
improperly categorizes wells in a manner
that hurts prudent operators," D. Briggs
maintains.
Members, Hanks says, recognize
LOGA needs to work with the state on
the issue. "We have been working hard
with all of our members to find solutions
that may accomplish the goal the state
has laid out without damaging our companies," he says.

Adjust And Survive
In the meantime, LOGA continues to
monitor federal issues, including potential
tax reform and possible revisions in the
Endangered Species Act, D. Briggs says.
With oil prices falling and policy, regulatory and legal challenges aplenty, he
urges members to remain active in the
association.
"These are difficult times, and we
have been through times like these in the
past," he says. "The market is correcting
and our industry-both producers and the
service sector-will adjust and survive
like we have all the past corrections." Ì

Louisiana Producers Continue
Fighting Back Against Lawsuits
BATON ROUGE, LA.-With lower oil
prices casting a pall and lawsuits continuing to hamper members of the Louisiana
Oil & Gas Association, LOGA leaders
are urging operators to stay plugged in
and keep moving forward as the association looks to its 2015 annual convention,
scheduled for March 11-13 at the
L'Auberge du Lac Resort in Lake Charles.
"The best way for our members to address these challenges is to get input
from all sectors and try to plan accordingly," says LOGA Chairman Bryan Hanks, CEO at Lafayette-based BETA Land
Services. "It is complicated in many
ways, but in many ways it's pretty simple.
The slowdown from lower oil prices has
forced some of our member companies
to let some people go with the intention
of bringing them back at some point.
When one of these events has happened,
I always have told my people there is not
one time that we have not come back
bigger and stronger within about six-12
months."
In mid-January, 108 rigs were running
in the Pelican State, reports LOGA President Don Briggs, adding that a conservative estimate suggests that count may
decline to 75-80 rigs soon.
"Companies are cutting their budgets-no doubt about it-anywhere from 30
to 50 percent," Briggs says. "They are
going to drill fewer wells. Without question, we are going to see less activity and
it is possible some companies may consolidate. I think strong companies that

are not heavily leveraged will survive
just fine. Heavily leveraged companies
may be seeking ways to make things
work.
"This is a normal cycle," he continues.
"We are going to have to ride through
this and buckle down and be conservative,
and also look for opportunities. These
types of situations do create opportunities
for people in good cash flow positions."
With so many venture capitalists involved in the industry, acquisitions and
divestitures involving Louisiana companies
should heat up with unprecedented speed,
Hanks predicts, and such a busy marketplace should constitute a bright spot amid
an otherwise cloudy outlook. "Companies
have criteria and certain benchmarks,"
he says. "I think they are going to go to
the open market quicker than if companies
were looking for traditional loans, or
mezzanine financing, which was common
in the past. All those things point to a
quicker move to acquisition and divestitures."
Life Among Lawsuits
Lower prices also mean members will
have less cash with which to defend
themselves against or settle lawsuits,
Briggs observes.
Litigation issues remain a major association focus, he says, as more than
350 so-called legacy lawsuits have been
filed by landowners against oil and gas
operators alleging environmental contamination. Louisiana's Jefferson and
FEBRUARY 2015 139



American Oil and Gas Reporter - February 2015

Table of Contents for the Digital Edition of American Oil and Gas Reporter - February 2015

Contents
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