Who’s In Charge?

[dropcap]D[/dropcap]uring the past two months, as a part of our ongoing investigative series “F#*ck This,” The Bayou Brief has exclusively reported on an officially declared but publicly undisclosed environmental emergency in DeSoto Parish, the heart of the Haynesville Shale. 

The Haynesville Shale is one of the country’s most profitable and productive natural gas formations. According to a report issued last week by the Energy Information Administration, the Haynesville Shale currently generates “8.5% of total U.S. dry gas production.”

“The initial productivity rate in the Haynesville region… has nearly doubled from 2010 to 2017,” the report states.

But the surge in production has resulted in a series of environmental catastrophes, which have been concealed from both the general public and, more troublingly, DeSoto Parish residents and property owners.

DeSoto Parish may not be the only area affected; there is evidence of increased gas pressure in the Carrizo-Wilcox aquifer, a major source of water for 60 counties in Texas and a large swath of northwest Louisiana.

[dropcap]L[/dropcap]ast week, we posed the question, “Why hasn’t the state Department of Natural Resources (DNR) put a temporary moratorium on drilling and fracking new wells in the sections of the Haynesville Shale directly adjacent to those where there’s documented evidence of bubbling and blowouts of water wells?”

The obvious answer is they don’t want to. Less obvious is why. 

When I met with DNR officials on August 23rd, one of my final questions concerned their investigation plan for the whole “DeSoto Parish matter,” and the wording which oh-so-politely asks the area well operators to voluntarily check for leaks or other problematic signs at their wells.

“Since this is classified as an ‘emergency,’ why don’t you demand they check every well in the area, as soon as possible.?” I asked.

“And if we don’t find the source, pathway, or multiple…,” Office of Conservation Environmental Division director Gary Snellgrove began. 

“We’re a team. And we here at DNR are open to suggestions from the oil and gas well operators as to how we can collectively work to find the best path forward. We’re open to discussion, as we are having with you.”

“Then what?” I prompted.

“We’ll look outside the nine-section area, and keep looking until we find the source,” Snellgrove finished.

But the problem clearly extends beyond the “nine-section area,” as documented in this series’ prior article, “Bubble, Bubble: This Gas Means Trouble.”

And that concept of “we’re a team” – meaning DNR’s Office of Conservation and the oil and gas industry collectively — was the subject of a scathing performance audit by the Louisiana Legislative Auditor in May of 2014.

The primary purpose of that audit was to answer the question: Has the Office of Conservation effectively regulated oil and gas wells?

The answer was a resounding “no.”

The audit notes, in its introduction, “Effective regulation is important for ensuring that oil and gas wells are operating in compliance with regulations and that environmental and public safety risks, such as contamination of ground and surface water, are identified and addressed.” (Italics mine.)

“Overall, we found that OC (the Office of Conservation) has not always effectively regulated oil and gas wells to ensure operators comply with regulations. OC does not sufficiently monitor wells to determine if they are in compliance with regulations, and does not always take enforcement action when it identifies noncompliance.”

Sound familiar?

The audit found 53% (26,828) of all wells in the state (50,960 total at the time) were not being routinely inspected once every three years as required. It also found 25% (12,702) of all wells hadn’t been inspected even once during the six years of records that were examined.

Specifically looking at the enforcement steps available to DNR’s Office of Conservation and how consistently and effectively they’d been utilized, the audit states “OC has not developed an effective enforcement process that consistently addresses noncompliance and deters operators from committing subsequent violations.”

When routine inspections were done and the operator failed, 15% were not served with compliance orders to correct the violation. OC’s response at the time was “Some of the violations were not major, and so a compliance order wasn’t warranted.”

For those that did warrant compliance orders, the Legislative Auditor found 16% were not reinspected to ensure the violations were corrected.

And for those that failed a re-inspection, an astonishing 55% received no penalty. The standard operating procedure was to just issue an extension instead. Of the operators failing at least one inspection, 63% failed multiple inspections, with ten operators having between 97 and 255 failed inspections during the six years of records reviewed.

DNR’s Office of Conservation gave a list of reasons for not living up to their inspection responsibilities, including budget cuts, loss of staff and hiring freezes, hurricanes, the Haynesville Shale boom, and the BP oil spill. Of course, the district with the highest percentage of wells not timely inspected (72%) or not inspected at all (40%) was Shreveport, which – you guessed it – covers all the Haynesville Shale activity, including DeSoto Parish.

Additionally, the audit spells out the course of action available to the Commissioner of Conservation when oil and/or gas well operators don’t comply with regulations, and thereby put the environment and public at risk.

State law, R.S. 30:4, allows the Commissioner enforcement powers through issuing compliance orders and issuing penalties of up to $5000 per day for violations. If those penalties are not paid, the Commissioner can suspend an operator’s ability to sell oil or gas. If that doesn’t fix the problem, the final and most extreme means of enforcement allows the Office of Conservation to take over and shut down all of a non-compliant operator’s wells.

One might think this threat should be a way to get Indigo Minerals to stop drilling and fracking new wells and instead put some resources into figuring out what is causing pressurization of the Carrizo-Wilcox aquifer and blowouts of water wells in the Bethany-Longstreet area.

Yeah, right.

Though the 2014 audit doesn’t say so in so many words, it strongly implies that the Office of Conservation is entirely too cozy with the industry it is supposed to regulate, repeatedly remarking on consistent inconsistencies in enforcement.

For example, the report states: “Although regulations require that all producers submit well tests, OC allows operators of certain wells to be exempt” (Some 25,000 wells, according to the audit). And it states, “Although OC has the authority to impose civil penalties, it does so infrequently,” along with remarking, “DNR stated that it does not routinely seek recovery costs.”

In summation, the audit says, “OC’s informal enforcement process does not appear to deter subsequent noncompliance.”

Then-Commissioner of Conservation Jim Welsh’s official response to the 21 findings was weak:  “Conservation agrees with the recommendations, and will draft standard operating procedures to address this.”

Even if those “standard operating procedures” were drafted now – more than four years later – they have done little to alter the “we’re a team” culture within the Office of Conservation, as Snellgrove described their relationship with oil and gas operators.

If the buddy-buddy enforcement culture (or lack thereof) at OC wasn’t enough to assure Indigo Minerals that they’re immune to repercussions for this looming environmental disaster, then all you really have to do is – as they say – “follow the money.”

Haynesville Shale is the nation’s third most productive natural gas formation, and the Bethany-Longstreet area is the Haynesville Shale’s third most productive field overall, with 800 total active wells. 381 of those are operated by Indigo.

Yet the Office of Conservation doesn’t have the authority to only shut down Indigo’s wells in that one area. Instead, they’d have to shut them ALL down.

At the most recent inventory, Indigo had 1447 active wells in the state, and in 2017 was Louisiana’s #4 gas-producing operator overall: a total of 131,852,676 mcf of natural gas. (At an average price of $2.99 per mcf, that’s $394,239,501.24. And remember, Louisiana’s horizontal drilling incentive, enacted in 1994, rebates their state severance taxes on each fracked well for up to two years, while the well produces up to 90% of its total gas.)

Additionally, up until this year, horizontal wells were exempt from paying into the Oilfield Site Restoration Fund, which is what has been paying for the work being done around this particular emergency.

If state officials were to press the issue to the limits of their enforcement powers, it would bankrupt the entire Department of Natural Resources.

As required by law, Indigo has provided the maximum blanket security bond for its operations in Louisiana: $2.5 million. But the cost to the state for shutting down Indigo’s 1447 wells would be in excess of $200 million, not counting remediation of each well site. DNR’s total budget for the current fiscal year is $15,091,491.

Implementing such a shutdown and finding a way to pay for it would fall under the oversight of the Oilfield Site Restoration Commission (OSR). That ten-member board includes two representatives of the Louisiana Oil and Gas Association (Don Briggs and Steve Maley), and two representatives of the Louisiana Mid-Continent Oil and Gas Association (Tyler Gray and Grant Black).

The minutes of the April 19, 2018 OSR Commission meeting – when that board was notified about the on-going emergency in DeSoto Parish – show that Gray, who is also LMOGA’s chief counsel, insisted LOGA and LMOGA working with OC could handle this and “protect the environment.” While acknowledging that the situation is “problematic” and “complicated,” they were also insistent that it is “controlled.”

But what if officials of this petro-colonial state actually took to heart what Louisiana’s Constitution requires and decided to hold Indigo accountable? “The natural resources of the state, including air and water, and the healthful, scenic, historic, and aesthetic quality of the environment shall be protected, conserved, and replenished insofar as possible and consistent with the health, safety, and welfare of the people.” 

It may be inconvenient for the company, but they’ll just file bankruptcy and re-form as a new LLC. With a new name comes a “clean record” with Louisiana regulators.

Meanwhile, there’s still gas pressure in the Carrizo-Wilcox aquifer, and it’s far from “drinking water safe.”