Oil and gas operators have lost their luster in Louisiana, Lafayette resident Mike Stagg, a civic activist and organizer with the grassroots Green Army group, said in New Orleans this month. Before the oil boom went bust in the 1980s, the industry was regarded as benevolent because its severance taxes paid for Louisiana's roads, bridges and hospitals. "And before the BP spill, oil companies were seen as benign because nothing really bad had happened here," he said at First Unitarian Universalist Church on South Claiborne Avenue on Aug. 19. His topic was "Oil and Water Don't Mix."
Stagg called Louisiana a "petro-colonial state," exploited by oil and gas companies since the first well was drilled in Evangeline near Jennings in 1901. Operators from Texas and Oklahoma have been particularly aggressive. "Do what you want to do has been Louisiana's oilfield ethic," he said. "The industry owns the state legislature and has been protected by it." Louisiana's severance tax on oil was implemented in 1910. But twenty years ago, the state partly exempted oil and gas extracted from land wells, including fracking operations, from those taxes.
In northwest Louisiana, "Haynesville has been the most protected shale trend in the country," Stagg said. And at this juncture, oil extraction from the Tuscaloosa Marine Shale or TMS deposit, running from central Louisiana into St. Tammany Parish and southwest Mississippi, is growing.
Severance taxes are rooted in the concept of "the commons," resources including air, water and ecosystems that are shared by all residents, Stagg said. When public mineral resources are converted to private wealth, Louisiana citizens collect a share of it through severance taxes. But since 1994, new wells on land have been exempt from state severance taxes for up to two years or until a well is paid for--whichever is first.
"With these exemptions, the incentive is to drill quickly, pull out and pay no taxes," Stagg said. Because of its policies, Louisiana has pocketed little in severance dollars from sizable Haynesville gas extraction. In its "Tax Exemption Budget 2013-2014," released late last year, the state's Department of Revenue estimated that Louisiana lost nearly $250 million in severance taxes from horizontal drilling over five years--the three preceding years, the current one and the coming year. The report covers a period of substantial drilling in the Haynesville play. Lost revenue from severance tax exemptions for all oil and gas activities in the five-year span was estimated at $482 million.
State law requires that revenues lost to tax exemptions be tallied, Stagg noted. And he said Louisiana needs the cash forfeited to severance-tax exemptions. For one thing, "the state has a really nice, $50 billion coastal master plan but doesn't have the money to pay for it," he said.
Stagg said one difference between today's TMS operations and recent Haynesville activity is that TMS drillers are going after oil as it hovers around $100 a barrel, and are flaring off cheap natural gas. Partly because of ambitious Haynesville extraction, natural gas prices were hammered from 2008 to 2012 and remain weak. In the Haynesville play, 2,700 wells have been drilled to date, and TMS operators might drill even more wells than that, Stagg said. "If the Helis Oil application in St. Tammany is approved, it will be ten wells, not just one, on 60,000 acres," he said. "And if Helis is allowed to drill, you'll see a massive flare-off of natural gas," affecting air in that parish.
Plans to drill in St. Tammany by New Orleans-based Helis Oil & Gas Co. are in limbo, however. On Aug. 5, the U.S. Army Corps of Engineers said the company 's application to drill near Mandeville wasn't valid, based on concerns from the Louisiana Geological Survey--which assists the Corps. Helis must prove to authorities that its site will be able to produce oil. The firm can submit new permit applications to the Corps and the state's Department of Environmental Quality.
Meanwhile, the state's Office of Conservation, part of the Department of Natural Resources, announced on Aug. 29 that the 960-acre production unit Helis sought near Mandeville was approved. The unit's authorization is needed to determine mineral royalties but isn't an approval for drilling.
St. Tammany residents and politicians had to learn about fracking in a hurry this spring and summer. "The incestuous relationship between industry and the arms of Louisiana's government came as a shock to St. Tammany residents," Stagg said. The parish has the highest incomes and is one of the most educated in the state. "But they didn't know that Louisiana government gives industry what it wants," he said.
At one time, St. Tammany was considered a retreat, Stagg noted. "People moved there for clean air and water," he said. "But both could be jeopardized if Helis drills." Helis wants to drill through the Southern Hills Aquifer that supplies St. Tammany's drinking water. "St. Tammany wasn't a hotbed of radicals before but it is now," Stagg said.
Stagg weighed in on a lawsuit filed a year ago by the Southeast Louisiana Flood Protection Authority-East, also known as the New Orleans East Bank levee board, against 97 oil and gas companies to make them fill canals they dug in wetlands. Louisiana Senate Bill 469 to block the suit just barely passed in June though the Louisiana Oil & Gas Association had done a lot of lobbying for it, Stagg said. On June 6, Governor Bobby Jindal signed SB 469 into law, barring the levee district from pressing its suit against oil and gas operators for harming land that had protected New Orleans from storms.
Stagg said big oil companies would have been able to cope with the levee board lawsuit but smaller operators opposed it. "The little guys represented by the Louisiana Oil & Gas Association don't want it," he said.
Stagg discussed the Gulf offshore drilling moratorium imposed by the feds in 2010 in response to the BP spill. He said a handful of Louisiana State University professors, whom he called "shills for LOGA," forecast gloom and doom and substantial job losses from the ban. As it turned out, the professors--three economists and a finance expert--were too pessimistic. Predictions of layoffs proved to be wrong as oil companies held onto skilled workers during the nearly six-month drill ban. When 2010 ended, the state's jobs had grown, and the oil patch's unemployment--which was relatively low in late 2009--had fallen further.
Soon after the 2010 moratorium was imposed, a lawsuit was filed by marine companies that served offshore oil and wanted the drilling ban to end, Stagg noted. Thirty-seven companies joined Hornbeck Offshore in Covington, La. in an anti-drilling-moratorium suit that looked like a mass revolt. But of those 37 firms, more than half were controlled by vessel builders Bollinger Shipyards in Lockport, La. and the rest by the owners of Edison Chouest Offshore in Cut Off, La.
Stagg is writing a book, which should be published next year, about the Gulf Coast's campaign against the U.S. Department of Interior's 2010 drilling ban.
As for Louisiana, it doesn't have two or more political parties like other states, according to Stagg. "We have one big party, the Oil Party," he said. "The industry has veto power over the choice of the secretary of the Department of Natural Resources, and the Department of Environmental Quality lives on the industry's fees." If Louisiana wants to see progress on coastal issues, the oil and gas industry's political grip must be broken, he said.
Stagg's lecture Tuesday kicked off a series of talks to be held at First Unitarian Universalist Church on the state's coast and environment. Sandra Slifer, president of the League of Women Voters of Louisiana, will discuss fracking threats in St. Tammany at 5:30 p.m. on Sept. 9 at the New Orleans church, located at South Claiborne and Jefferson Avenues. end
(This article was published in "The Louisiana Weekly" in the August 25, 2014 edition.)