Don Briggs, President, Louisiana Oil and Gas Association
Consistently low oil and natural gas prices have set the industry back tens of billions of dollars.
According to the U.S. Energy Information Administration (EIA), the sharp decline in crude oil prices caused a stunning $67 billion in combined losses by 40 publicly-traded U.S. oil producers in 2015. Many of those losses hit home right here in Louisiana leaving some to compare this downturn to the crash of 1986.
As of September 2016, Louisiana lost more than 20,000 oil industry workers as the number of active rigs in the state declined more than 70 percent to a historic low of just 35 rigs.
It will not be easy, but the global industry will eventually recover. We know that. But when it does, will those jobs and investments come back to Louisiana? Will we see a rig count of 120 rigs or more in Louisiana ever again?
There’s no question the industry has changed over the last 10 years with the advent of the oil and natural gas shale plays. Our state is blessed with the Haynesville Shale in North Louisiana, and many geologists believe South Louisiana is home to many other “great rocks” as well. The potential for new production, new jobs and new revenue are big.
Unfortunately, the road blocks for oil and gas producers are big as well.
Ninety five percent of the wells in Louisiana are drilled by independent oil and gas producers, not the major oil companies. Independents live and work and help lead our communities. They are entrepreneurs, job creators and risk takers who invest their own money and bring in outside investments that create wealth and opportunities in our state.
They are also practical decision makers who have to assess risks before making investments. They read the newspaper. They carefully consider the business and legal climate of a state before beginning new projects. In fact, should you poll a group of potential investors today you will quickly find they are very unlikely to risk their hard earned capitol on investments in “judicial hellholes.”
To ignore this reputation and promote lawsuits and a legal system that is unbalanced and unpredictable is tantamount to putting up billboards that say, “Don’t invest. Louisiana is closed for business.” But that seems to be the message we are sending these days.
Some of the oil and gas producers who have been unfairly targeted by “legacy lawsuits” have been getting this message for years. But the coastal lawsuits filed by Jefferson, Cameron, Plaquemine and Vermilion parish District Attorney, which are now being championed by the Edwards administration, underscored this message and further devastated an already struggling industry.
The imbalance and unpredictability doesn't stop there. Gov. Edwards made headlines again when news outlets revealed the administration’s attempt to hire his top political supporters to represent the state in these coastal suits. The legally questionable contracts authorized by the Edwards administration could generate billions in legal fees for plaintiff lawyers.
In addition to the obvious ethical problems that should be addressed, this arrangement also calls into question the ability of the Louisiana Department of Natural Resources to act as an independent regulator. The private trial attorneys that Gov. Edwards is seeking to retain on behalf of LDNR are involved in a significant number of other active cases that will be brought before the department for review. With this team of conflicted private litigators now running their legal operations, how can the department possibly maintain independence in any of it administrative functions, which include permitting and promoting production in Louisiana?
When oil prices re-stabilize and global markets rebound, will potential investors look at all of the lawsuits and legal unpredictability and decide not to invest because Louisiana is closed for business?
Let’s hope not.