Ben Israel | President, Cypress Operating, Inc.
Louisiana’s Haynesville Shale is one of the most important natural gas regions in the United States. It supplies gas to homes and businesses, supports energy exports, and provides thousands of jobs across North Louisiana. That success depends on operators, but it does not depend on operators alone. Many other working interest owners, investors and partners have helped pay for wells, shared in the drilling risk, and have made development possible. Specifically, these owners give royalty and mineral owners a second leasing option instead of only negotiating with operators. These owners may not operate the wells, but they provide an invaluable competitive service while still paying their share of the drilling, completion, and equipment costs and owning their share of the gas produced.
For decades, the practical procedure in Louisiana has been simple: when an owner helps pay for a well, that owner has been able to receive and sell its own share of production without duplicative capital expenses. Most every operator abides by this policy. It works today. It works for operators, investors, mineral owners, and Louisiana communities. A recent small number of operators are trying to use operator control over facilities, paperwork, and marketing arrangements to force other owners to sell gas through the operator and on their terms. This is not just a technical contract issue. It is a basic ownership issue. Governor Landry has made the property-rights principle clear: “Private property rights are already protected—by law and by our Constitution,” and no company should be able to take property rights for oil, gas, or carbon storage. That same principle matters here. When an owner pays hundreds of thousands or even millions of dollars to participate in a well, that owner should be able to market its share of production without having to unreasonably duplicate its capital expenses.
Taking that option away would force non-operating owners to sell their gas through the well operator, even when better options are available. This would reduce competition, give larger operators unnecessary control over gas that belongs to others, and make it harder for independent owners and smaller investors to compete. Recently when marketing outside interest’s gas, the operators have begun charging mineral, royalty, and non-operated working interest owners punitive fees to market this gas. Retaining the ability to market their own gas is the only way a non-operating party can avoid these costly expenses. Without this, the operator would have no check or balance to charge whatever level of fee they want against all owners. This new-found tactic would drive the non-operating working interest parties out of investing which would lead to less leasing competition and reduce all future bonuses and royalty payments to mineral and landowners.
The effects would not stop with today’s investors. Capital goes where ownership rights are protected and business choices are respected. Future investors may be less willing to put money into Haynesville or other future projects if they know they can be required to pay for wells but then lose control over their own share of production. Less investment means fewer wells, fewer jobs, and less tax and royalty revenue for Louisiana communities.
The issue is especially important in the Haynesville. Because North Louisiana is connected to major gas markets and Gulf Coast export demand, the ability to choose the best buyer, transportation path, or marketing arrangement can create real value. Some owners have their own sales relationships, transportation options, or business plans. A system controlled only by the operator would take away those opportunities and shift value away from the owners who helped pay for the wells.
Some may argue that allowing owners to sell their own gas makes operations more complicated. But the best answer is simple: we’ve already been doing this process for years and it works quite seamlessly. This is not a theoretical new system. It is the existing practice across the entire play. Louisiana should preserve what already works and prevent a few new companies from using operator status to control other people’s gas and extract extra fees.
The Haynesville Shale has become a world-class natural gas region because many different companies and investors have been able to participate. Louisiana should protect that model. An owner who pays its share of the well should be able to receive and sell its share of the gas.
That is fair. That protects competition. And that protects Louisiana energy investment.