The impacts of COVID-19 have rapidly swept across the country and the globe. Coupled with the recent decline in oil and gas prices, many operators are left scrambling in an attempt to navigate unprecedented circumstances. With shutdowns and stay-at-home orders in place and regulatory deadlines looming, Louisiana operators are looking for guidance from regulators on how to proceed.
Fortunately, yesterday the Louisiana Office of Conservation, at the request of LOGA and LMOGA, provided some guidance on leniencies that might be granted during these uncertain times. In a letter (which can be found here), Commissioner of Conservation Richard Ieyoub addressed concerns raised by LOGA and LMOGA and agreed to work with operators where feasible to “ease the burden on operators while maintaining [Conservation’s] duty as regulators to ensure responsible operations.” Specifically, the letter addressed the following circumstances:
Plugging Requirements: Regulations require any well that has been identified by the operator as inactive with no future utility to be placed on a schedule of abandonment or plugged within 90 days. Conservation stated that in light of the current circumstances, it will automatically grant a six-month extension to the 90-day deadline. For wells that have already been placed on a schedule of abandonment, Conservation already allows operators to delay the plugging of wells for up to a year.
Well Test Reports and Production Reports: Under current regulations, operators must submit well test reports every six months and production reports on a monthly basis. Failure to timely submit reports could result in a Compliance Order with a civil penalty. However, Conservation stated that it will grant 60-day extensions in addition to the 60-day delay within which operators may submit their reports. Conservation also agreed to send a “Notice of Violation” without penalty prior to issuing a Compliance Order “for as long as the operator remains responsive, to give operators the maximum opportunity to comply with the law.”
Minor Violations: For minor violations such as late filings, missing well signs or overgrown vegetation too close to production equipment that creates a fire hazard, Conservation stated that it will issue a “Notice of Violation” without civil penalties in lieu of issuing a Compliance Order “for as long as the operator remains responsive, to give operators the maximum opportunity to comply with the law.”
Mechanical Integrity Pressure Testing (MIPT): Mechanical Integrity Pressure Testing (MIPT) is designed to ensure protection of the Underground Sources of Drinking Water (USDW) from injection activities. To retain “Primary Enforcement Authority” over injection activities, the Office of Conservation’s Underground Injection Control Program is required to adopt regulatory standards that are at least as restrictive as those imposed by the United States Environmental Protection Agency (EPA). Accordingly, relaxing the requirements currently in place could result in a loss of “Primary Enforcement Authority.” However, Conservation stated that does have the authority to grant extensions and deferments on a case-by-case basis and currently utilizes this authority.
Financial Security for Inactive Wells with Future Utility: Conservation stated that in addition to the standard one-year window in which to obtain financial security, it will consider the current industry crisis as sufficient cause for an extension and will grant a request for an extension by any operator.
These are general situations which Conservation has addressed at the request of industry and might not apply to any particular factual scenario. Additionally, there are many other situations an operator in Louisiana can find itself in where an extension of time or waiver of a particular regulation might be appropriate. If you have any questions about these regulatory developments or require assistance with any other oil and gas matters, please contact Jamie Rhymes, Jeff Lieberman, or Caleb Madere.
The health, safety and well-being of our clients and colleagues are foremost in our minds as we continue to closely monitor the COVID-19 outbreak. Liskow & Lewis is fully operational. We have taken the necessary steps to ensure that our services continue uninterrupted while implementing procedures to protect our team members.
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