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Louisiana looks to encourage drilling in coastal waters Incentives similar to those offered by federal government in Gulf’s deeper waters considered as a way to encourage drilling deeper prospects in state waters Cain Burdeau Associated Press Writer
A state senator wants Louisiana to consider tax breaks to encourage oil and natural gas companies to drill in the state’s coastal waters.
In the past decade drilling has declined in the state’s coastal waters — which extend three miles offshore — because much of the drilling activity moved farther into the Gulf of Mexico to take advantage of federal tax incentives. Now, the state is considering whether to offer similar incentives to draw activity back into state waters.
State Sen. Reggie Dupre, D-Bourg, said he may lead the charge to get legislation that would offer the incentives passed in the upcoming legislative session.
In the mid-1990s, Congress passed legislation permitting oil and gas companies to delay payment of royalties until after their investment had paid off. Dupre said this deferred-payment scheme sparked a flurry of activity in deep waters. Companies pay royalties to the owners of mineral rights, which in this case is either the federal or state government.
If the state mimicked the federal incentive plan and passed its own royalty relief act there could be a similar boom in coastal waters, Dupre projected. “Venice and Morgan City could be back on the map.”
The Louisiana Department of Natural Resources is working on the details of the proposal, he said.
Scott Angelle, the secretary of the Louisiana Department of Natural Resources, advocates boosting drilling in Louisiana. He could not be reached for comment.
Although Angelle and Gov. Blanco want to increase drilling, the state’s ongoing budget problems could derail plans for tax breaks. Dupre said that Blanco told lawmakers that she would not support legislation that would cut into revenues.
“Royalty relief typically causes short-term shortall in revenue, but long-term benefits,” Dupre said. Dupre said he would work on drafting legislation the administration could support. Old drilling damage an issue Drilling in coastal waters is sensitive because the oil and gas industry has been blamed for carving up the coast. Coastal Louisiana has lost about 1,900 square miles of marshland and the state is asking Congress for billions of dollars to stop the land loss.
But officials feel that environmental damage to the wetlands and coastal environment can be limited with new technology, such as directional drilling.
“The difficulty I have with these incentive programs is that they don’t account for the costs of the environmental harm,” said Oliver Houck, an environmental lawyer at Tulane University. “Every step of the process, from the access canals to the drilling muds, to the brines, to the spills in transportation, the pipelines, they all damage the coast.”
He also charged that the oil and gas industry has gotten off without footing the bill for repairing Louisiana’s damaged coast.
“My problem with the drilling is not the incentives to the drilling, my problem is that drillers are not paying the cost of the harm and to amplify that they’re not even contributing to the $10- to $20 billion bill that we’re asking the nation’s taxpayers to pay,” he said.
Barry Kohl, the conservation chair at the Louisiana Audubon Council, questioned why the state would offer incentives. “My first thoughts are that with oil prices as high as they are they don’t really need a stimulus.”
But if the incentives do become a reality, he said “the state would need to take a much stronger role in protecting the environment and preventing any more degradation to the coastal zone.” Mitigation funds could be required “It is a delicate balance,” Dupre said about encouraging drilling along Louisiana’s coast. “We can’t allow oil and gas companies to use the same techniques they did before; we can’t give them a free hand to dig a canal wherever they want.”
But he added that “it’s no longer necessary to dig all these canals like we used to. We can still be good stewards while continuing to be an oil-producing state.”
Dupre said companies that do use the incentives could be asked to deposit funds to mitigate environmental damage in a central repository. The money collected in the repository could be used for coastal restoration, Dupre said.
Dupre said there could be a lot of interest in the incentives, especially for oil and gas lying deep under the surface.
“We depleted what might be called the low-hanging fruit, or the shallow resources,” Dupre said. “There are still some resources available, but they’re farther down.”
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