Speculative Leasing Does Exist
By Don G. Briggs, President – LOGA (Louisiana Oil & Gas Association)

The Louisiana Department of Natural Resources (DNR) recently released a report, “Economic Analysis of Oyster Lease Dynamics in Louisiana”. The overall purpose of the report was to “estimate the speculative value of oyster leases in Louisiana and show how the magnitude of that speculative value compares to the value derived from harvesting activities.” DNR contracted Walter R. Keithly, Jr.,Ph.D. and Richard F. Kazmierczak, Jr., Ph. D. of LSU to conduct the study, both are Natural Resource Economists.

Keithly and Kazmierczak summarized their findings, “At its core, our analysis indicates that the speculative value of leases is likely equal to, or exceeds, lease value based on income generated from oyster production and harvesting activities.” The report showed that oyster leased acreage has grown from 75,000 acres in 1960 to 400,000 in 2004, while oyster harvest production fell from 100 lbs per acre average in 1960 to just under 20 lbs per acre average in 2004.

The oil and gas industry has claimed for years that some oyster farmers lease acreage for speculative purposes with no intent of harvesting oysters. An oyster lease acquired for the potential to generate income other than from non-harvesting of oysters is speculative leasing. For decades oil companies have paid millions to oyster lease holders, where there never has and never will be an oyster harvested. I must say at this point, the vast majority of Louisiana’s oyster industry is made up of good, solid, hard working businessmen; and in no way am I suggesting they are carrying out speculative leasing. There is not an industry in this country that doesn’t have some bad actors.

In recent years, Louisiana’s oyster industry and oil and gas industry have worked together finding common guidelines so both industries can co-exist in the same environment; thus resulting in the creation of the Oyster Lease Damage Evaluation Board. The Oyster Lease Damage Evaluation Board (OLDEB) was created to address conflicts between mineral owners and oyster leaseholders "to effect an equitable solution ... which will result in fair and predictable treatment to the oil and gas industry while assuring the oyster fishermen actual compensation for damages to their oyster beds due to mineral activities". As a result of the OLDEB being created, few cases have come before the board, with the oysterman and oil company arriving at a compromise.

The OLDEB has been successful in curbing outlandish claims, however, speculative leasing still exists with the oil industry paying for passage across leases where potential oyster growth is non-existent. Time is money to oil executives and most would rather write a check than litigate. It is time for the oyster industry and the Louisiana Department of Wildlife & Fisheries to explore for a reasonable solution to speculative leasing.