Louisiana: An Exciting Energy Exploration Province
DNR Secretary Angelle notes increasing activity across the state
BATON ROUGE – Louisiana Department of Natural Resources (DNR) Secretary Scott Angelle has released maps and data today showing the benefits provided to state and local government by exploration of the Haynesville Shale natural gas formation and the increasing interest and activity in energy exploration throughout the rest of the state.
“Louisiana’s long and distinguished history of providing energy is known throughout the world, and we are seeing the energy industry’s confidence in our ability to coordinate responsible management of our natural resources with economic development that benefits us all,” Angelle said.
Louisiana was recently ranked in the top 10 percent of the most attractive areas for exploration investment in the world, according to a recent Fraser Institute survey of energy industry executives rating more than 130 global producing areas, and development of the Haynesville Shale natural gas play has been a dominant story in both the state and national energy industry.
“Exploration of the Haynesville Shale has been a tremendous asset for our economy– generating more than $320 million in revenue from lease bonuses, royalties and rental payments to state and local governments since 2008, not including taxes and support activity,” Angelle said. “More than 2,000 wells have been permitted, begun drilling or are already producing, and the U.S. Department of Energy designated the Haynesville Shale as the most productive natural gas play in the nation this year.”
Though Haynesville Shale drilling activity has eased off from its 2010 peak as development has matured into a phase of focus on production and more measured drilling pace, the most recent rig count is still roughly double what North Louisiana averaged in the five years prior to 2008, when leasing and exploration of the play began in earnest.
Elsewhere in the state, the past two years have brought a transformation not only in the amount of investment and interest in energy exploration in the state, but in the geographic scope of drilling in Louisiana – as a snapshot of the most recent Louisiana rig count compared with the same time of year in 2009 and 2010 shows.
The South Louisiana rig count, which had fallen and flattened after 2008, has more than doubled – from 19 running rigs in July 2009 to having recently reached 50 for the first time since October 2008. Over that same period, the state as a whole saw an increase in the number of parishes with active drilling, from 22 parishes to 32.
“In this state, we understand that the critical balance of energy, environment and economy – what I call the 3 E’s -- must be maintained," Angelle said.
Louisiana’s having embraced and promoted the use of natural gas is a key example of that balance – especially in the widespread use of natural gas as fuel for electricity generation, as evidenced by a recent study released by the Natural Resources Defense Council environmentalist.
The study showed that nearly half of all air pollution in the U.S. is generated by power plants, including a list of the “Toxic 20” – the 20 states with the most air pollution released by power plants. While Louisiana ranks 16th in the nation in electricity generation, its power plant industry releases only about half as much as that of Iowa, the state with the lowest amount of pollution in the NRDC’s list.
“The reason for that is simple – our primary source of fuel for generating electricity is natural gas, the cleanest-burning of our traditional energy sources,” Angelle said.
The increasing use of the water-intensive practice of hydraulic fracturing in energy exploration has been another area where Louisiana has worked to ensure industry is given the tools it needs to develop energy and provide economic benefits while ensuring protection of the environment – particularly in the early rush of activity in the Haynesville Shale Play.
The Office of Conservation acted in the early stages of Haynesville Shale operations to steer drilling companies to minimize the use of ground water, and followed that by ensuring that operators report the source and volume of water used – leading to hydraulic fracturing operations making use of Louisiana’s abundant and constantly renewed surface water resources for 75 percent of their total draw.
In its primary role of managing development in the state’s designated coastal zone, DNR’s Office of Coastal Management’s manages development in and near Louisiana’s coastal wetlands under a mandate of “no net loss” of vegetated wetlands – meaning that any loss or damage to such wetlands that cannot be avoided must be mitigated through actions that help create new wetlands to offset the loss.
For the fiscal year that just ended, the area of wetlands provided for through mitigation was 102 percent of the amount that was impacted – meaning the program achieved a level of mitigation that was actually greater than the level of wetlands impact for the year. Coastal Management achieved that at the same time that it was able to halve the time needed to process a coastal use permit over the past two year – from about six weeks to three weeks.
“We are doing more and providing greater protections for our environment, while cutting the amount of bureaucracy developers must deal with in trying to move forward on projects,” Angelle said. “We have been working on all fronts to make Louisiana an attractive province to invest capital and create jobs without sacrificing our environmental stewardship responsibilities and the numbers show our collective efforts have been successful.”
One of those fronts has been in the federally controlled waters off Louisiana’s coast, where the livelihoods of Louisiana employers and workers, as well as the state’s hard-won rights to a share of federal mineral revenue, have been threatened by the ongoing slowdown of exploration activity in federal waters that followed the total federal deepwater moratorium that was put in place in 2010 following the BP oil spill.
“The tragedy of the loss of 11 lives in that accident and the historic oil spill that followed meant that offshore exploration could not be ‘business as usual,’” Angelle said. “But we in Louisiana have proven that it is possible to have strong regulation of the industry without near-strangulation.”
The pace of federal permitting in the offshore Gulf has been improving through 2011, and even federal Bureau of Ocean Energy Management, Regulation and Enforcement (BOEMRE) Director Michael Bromwich has noted Louisiana’s leadership role in acting as liaison between the federal government and the energy industry, commending Gov. Bobby Jindal, Angelle and members of the Back toWork Coalition they helped form.
The drilling rig count in Louisiana’s federal waters has risen to about 30, an improvement on the dozen or so running in the midst of the moratorium in July 2010, but activity in those waters is still down 25 percent from pre-moratorium levels, while drilling in the rest of the nation has seen a 25 percent increase.
"We have broken the initial log jam on federal offshore permitting, but we have a long way to go,” Angelle said.
For energy activity within the boundaries of the state, the most recent estimates for the 2011 fiscal year just ended indicate a rebound of more than $45 million in general fund mineral revenue over 2010’s collection, with drilling and production still continuing to increase.
“Mineral income in Louisiana is dedicated to our general fund and, since over 80 percent of that fund is appropriated for education, health care and public safety, a strong, responsibly managed and appropriately regulated oil and gas industry is important to all of Louisiana," Angelle said.
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