Baton Rouge Advocate / April 7, 2020
Energy producers may have to shut-in more than half the oil and natural gas wells operated in Louisiana, potentially reducing their workforce by as much as 70% over the next 90 days without emergency relief from an oil glut and price slump, an industry survey shows.
The glut is being exacerbated by reduced demand caused the coronavirus and production increases by Saudi Arabia and Russia.
The survey of 450 companies conducted by the Louisiana Oil and Gas Association says the back-to-back knock-out punches could prove to be potentially fatal for many independent energy producers and service companies and the thousands of workers they employ across the state.
Some company leaders indicated they are also contemplating bankruptcy.
According to the Department of Natural Resources, there are 33,650 oil and gas wells currently operating in the state. As many as 16,800 of those could be shut in, according to survey respondents.
The operation of these wells directly employs approximately 33,900 workers, according to the Louisiana Workforce Commission’s most recent quarterly report. Based on survey projections, more than 23,000 jobs, which generate $2.2 billion dollars in earnings annually, are at immediate risk, LOGA said.
“Our members are doing everything they can to keep their doors open and protect their workers, whose livelihoods are at risk,” said Gifford Briggs, president of the Louisiana Oil & Gas Association. “But if prices don’t recover above $40 per barrel by June 1, my members have told me it’s going to be devastating. We cannot do this alone."
State tax revenue will also suffer drastically from the sharp decline in oil prices and staggering job losses across the state.
Emergency measures the organization suggests to help the industry survive, some of which the industry has been pushing in recent years, include:
• Suspend state severance tax collections for a period of one year, while protecting vital resources for local governments.
• Support legislation to end government-led coastal lawsuits against the industry.
• Ease regulatory burdens at the Office of Conservation and lease requirements on state lands.
• Identify any opportunities at the federal and state level to expedite additional storage capacity.
“Our industry is facing the same challenges that every business is in regards to COVID-19,” Briggs said. "However, we are also having to adjust to the complete collapse of the prices of the products we sell, full storage facilities and a geopolitical war being waged against us,” Briggs said.
The list from LOGA seem driven by operators in the coastal area of Louisiana. That's where most of the state lands are, and where, I think, nearly all of the environmental lawsuits are pending. Others on this site will know far more than me, but not much of this list is geared to help out Haynesville Shale gas operators.
The US Department of Energy has already announced its intention to open up the storage facilities at the Strategic Petroleum Reserve (SPR) and make those available to US crude producers.
As to all of the pending lawsuits, and I don't have any idea how many there are, I wouldn't support legislative action to dismiss all of those, and I'm not exactly how that would happen anyway, but legislation to put those suits on hold for 12 months might make sense.
Having the federal government start purchasing US produced crude and placing those purchases in the SPR makes much more sense to me. That was one of the provisions of the recently passed $2T relief bill, that was taken out, presumably by those opposed to fossil fuels. I realize that the producers don't want to sell at today's prices, but that may be besides the point.
LOGA does not represent the industry writ large. Small independents, primarily located in south Louisiana, drive the association agenda. I agree that it is inappropriate to support legislation to end the lawsuits brought by coastal parishes. LOGA would gladly take away any plaintiff's right to have their day in court and avoid facing the facts that there are industry caused problems. Much better for the tax payers to cover the cost to mitigate the damage and rescue the industry infrastructure at risk from rising sea levels.
Regulatory burdens??!! Really??!! As many operating companies like to point out when currying favor with investors and The Street, Louisiana is very industry friendly and has a favorable regulatory environment. Oft times the industry has regulations changed to benefit them or legislation passed to bolster their bottom lines. Furthermore the industry ignores many regulations and their hired hands in the legislature make sure that the Office of Conservation is underfunded and too short staffed to fulfill their compliance duties. The regulations are lax and under enforced as is.
Jobs are important and no one wishes to see mass layoffs but think about it; all businesses are in the same boat and the Families First Coronavirus Response Act was passed to support enhanced unemployment pay and to fund loans for businesses. Nothing stands in the way of the workers and the companies getting the assistance available now and what is likely to come after as additional legislation is currently under discussion.