HLS 20RS-1855 ORIGINAL
2020 Regular Session
HOUSE CONCURRENT RESOL UTION NO. 90
BY REPRESENTATIVE COUSSAN
ENERGY PRODUCTION: Suspends from March 11, 2020, until September 30, 2020, the
provisions of law applicable to mineral leases maintained in production in paying
quantities
1 A CONCURRENT RESOL UTION
2To suspend until September 30, 2020, the provisions of R.S. 31:124 relative to oil and gas
3 leases that were producing in paying quantities on March 11, 2020, within the state
4 of Louisiana except those leases on lands and water bottoms owned by the state of
5 Louisiana which are affected by Resolution Number 20-04-001 adopted by the State
6 Mineral and Energy Board and those leases which all parties have entered into a
7 specific agreement on or after March 11, 2020, with respect to the effect on lease
8 maintenance of the unprecedented collapse of oil prices, and to provide with respect
9 thereto.
10 WHEREAS, the collapse of oil prices to unprecedented levels, including in certain
11instances negative prices, has created a substantial and ongoing hardship on operators and
12mineral lessees, as well as their mineral lessors, throughout the State of Louisiana; and
13 WHEREAS, the Louisiana Legislature finds that substantial reasons for this collapse
14include an unprecedented decrease in the demand for oil due to the exercise by governments
15of the United States and other countries of their police power to prevent the spread of the
16ongoing novel Coronavirus Disease 2019 (COVID-19), as well as a shortage of storage
17capacity within the United States; and
18 WHEREAS, the legislature notes that Governor Edwards exercised the police
19powers of this state and proclaimed a Public Health Emergency on March 11, 2020 (25 JBE
202020), as supplemented, that included a "stay-at-home" order closing all state office
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HCR NO. 90
1buildings to the public and closing nonessential businesses, requiring the cancellation of all
2meetings of ten people or more, and directing all members of the public to remain home
3unless performing an essential activity; and
4 WHEREAS, as of April 7, 2020, forty-two other state governors have issued similar
5orders with an additional three governors issuing "partial lock-down" orders; and
6 WHEREAS, the legislature further notes that the numerous petroleum industry
7service companies necessary to support continued and safe operations likely reside in states
8or territories affected by COVID-19 and are confronting staffing issues due to social
9distancing; and that COVID-19 has caused disruption in the supply chains and the labor
10force which impacts the ability of many mineral lessees to make leasehold payments,
11conduct lease maintenance operations, maintain production in paying quantities, and comply
12with their obligation to reasonably develop the entire lease premises for minerals including
13oil; and
14 WHEREAS, the legislature recognizes that, due to the historically low prices, lack
15of excess storage capacity, and the extreme drop in demand for oil as a result of COVID-19,
16operators and mineral lessees that produce oil are struggling to produce or market the oil
17from leases within Louisiana, which forces such operators and mineral lessees to either
18decrease production substantially or to shut-in otherwise productive wells, which creates a
19hardship for both mineral lessees and mineral lessors; and
20 WHEREAS, the legislature recognizes that mineral lessors are harmed if, on the one
21hand, their lessees continue to produce oil at drastically reduced prices, reducing greatly the
22prices upon which royalties would be paid, or, on the other hand, if their lessees lose their
23leases when they shut-in production, resulting in premature lease termination, plugging of
24otherwise productive wells, removal of necessary infrastructure and loss of recoverable
25reserves; and
26 WHEREAS, the legislature further recognizes that the foregoing government
27restrictions impede the ability of mineral lessors and mineral lessees to attempt to negotiate
28and execute contractual provisions to specifically deal with these circumstances; and
29 WHEREAS, the legislature further recognizes that the oil industry is vital to the
30Louisiana economy, employs many citizens of this state, and must remain strong in order
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HCR NO. 90
1to help continue to drive the state's economy; and that the challenges to lease maintenance
2caused by COVID-19, related governmental directives, the historically low oil prices, and
3the limitations on oil storage capacity were unforeseeable and not susceptible to mitigation
4by most operators and mineral lessors in the state; and
5 WHEREAS, this resolution is enacted to prevent additional hardship on operators
6and mineral lessees that produce oil, and their mineral lessors, by temporarily allowing
7certain mineral leases to be deemed to have continued to produce oil in paying quantities
8regardless of the actual production from such leases during the temporary period, which will
9in turn promote stability and security in the oil industry during this public health emergency
10and unprecedented period for the state.
11 THEREFORE, BE IT RESOLVED that the Legislature of Louisiana hereby suspends
12until September 30, 2020, the provisions of R.S. 31:124 relative to oil and gas leases that
13were producing in paying quantities on March 11, 2020, within the state of Louisiana except
14those leases on lands and water bottoms owned by the state of Louisiana which are affected
15by Resolution Number 20-04-001 adopted by the State Mineral and Energy Board and those
16leases which all parties have entered into a specific agreement on or after March 11, 2020
17with respect to the effect on lease maintenance of the unprecedented collapse of oil prices.
18 BE IT FURTHER RESOLVED that it is the intention of the Legislature of Louisiana
19that as a result and during the period of this suspension, the mineral leases to which it applies
20shall be deemed to have continued to produce oil in paying quantities regardless of the actual
21amount of production.
22 BE IT FURTHER RESOLVED that this suspension shall become effective upon
23adoption of the resolution and shall remain in effect until and through September 30, 2020.
24 BE IT FURTHER RESOLVED that for periods on and after October 1, 2020, actual
25production, proceeds and costs shall be used to determine production of oil in paying
26quantities for applicable mineral leases.
27 BE IT FURTHER RESOLVED that royalties and other payments for production of
28oil during the period of suspension payable under applicable mineral leases shall be
29calculated and paid at the time and in the manner provided for by the provisions of said
30leases using actual production, proceeds, or other factors provided in said lease.
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HCR NO. 90
DIGEST
The digest printed below was prepared by House Legislative Services. It constitutes no part
of the legislative instrument. The keyword, one-liner, abstract, and digest do not constitute
part of the law or proof or indicia of legislative intent. [R.S. 1:13(B) and 24:177(E)]
HCR 90 Original 2020 Regular Session Coussan
Abstract: Suspends from March 11, 2020, until September 30, 2020, the provisions of law
applicable to oil and gas leases maintained in production in paying quantities.
Present law provides that when a mineral lease is being maintained by production of oil or
gas, the production must be in paying quantities. Further, present law specifies that paying
quantities means that production allocable to the total original right of the lessee to share in
production under the lease is sufficient to induce an operator to continue production in an
effort to secure a return on his investment or to minimize any loss.
Proposed law suspends this provision until Sept. 30, 2020, for wells that were producing in
paying quantities on March 11, 2020. Further, present law excepts leases on lands and water
bottoms owned by the state of Louisiana which are affected by Resolution Number
20-04-001 adopted by the State Mineral and Energy Board and those leases for which all
parties have entered into a specific agreement on or after March 11, 2020, with respect to
the effect on lease maintenance of the unprecedented collapse of oil prices.
Proposed law further provides that it is the intention of the Legislature of Louisiana that
during the period of suspension, the mineral leases to which it applies shall be deemed to
have continued to produce oil in paying quantities regardless of the actual amount of
production.
Further provides that for periods on and after October 1, 2020, actual production, proceeds
and costs shall be used to determine production of oil in paying quantities for applicable
mineral leases.
Further provides that royalties and other payments for production of oil during the period
of suspension payable under applicable mineral leases shall be calculated and paid at the
time and in the manner provided for by the provisions of said leases using actual production,
proceeds or other factors provided in said lease.
Effective upon adoption of the resolution and it shall remain in effect through September 30,
2020.
(Suspends R.S. 31:124)
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