§127.1. Tertiary recovery incentive

A. It is recognized as essential to the continued growth and development of the mineral resources of the state of Louisiana and to the continued prosperity and welfare of the people of the state that tertiary recovery operations be encouraged. It is also recognized that tertiary recovery methods are experimental and more costly than traditional enhanced recovery operations, thus preventing recovery of oil in many fields because it is not economically feasible. It is the purpose of this Section to provide an economic incentive to producers to allow them to invest in tertiary recovery projects to enhance the state of Louisiana's crude oil production to the ultimate benefit of the state.

B.(1) In order to accomplish the purposes set forth in Subsection A of this Section, the State Mineral and Energy Board may enter into an agreement with the lessee under any present and future state mineral lease or leases, under which such lessee may be relieved from the payment of all or part of the royalty otherwise due to the state under the applicable mineral lease or leases in regard to production from the particular reservoir involved in a qualified tertiary recovery project, until such project has reached payout from the total production, "payout" to be defined by the board on a project-by-project basis based on:

(a) Investment costs, and

(b) Expenses peculiar to the tertiary recovery project, not to include charges attributable to primary and secondary operations on that reservoir.

(2) The board shall have sole discretion to waive payment of all of the state's royalty, part of the state's royalty, or none of the state's royalty, or even to increase the state's royalty after payout, and to impose such other conditions as the board may deem advantageous to the state. Such agreement may contain such other terms and conditions as the board deems to be in the best interest of the state.

(3) Once payout has been achieved, royalty shall be due on all future production within the qualified tertiary recovery project according to the terms and conditions of the affected state mineral lease or leases and any agreement effected under the authority hereof.

(4) Any agreement executed pursuant to this section shall not become effective unless three-fourths of the royalty owners in interest and three-fourths of the overriding royalty owners in interest within a tertiary recovery project, inclusive of the state's royalty interest, will relieve their lessees from the payment of all or part of the royalty otherwise due until payout.

C. For purposes of this Section, a "qualified tertiary recovery project" is an enhanced crude oil recovery project utilizing one of the following methods:

(1) Miscible fluid displacement.

(2) Steam drive injection.

(3) Micro emulsion, or micellar/emulsion flooding.

(4) In situ combustion.

(5) Polymer augmented waterflooding.

(6) Cyclic steam injection.

(7) Alkaline (or "caustic") flooding.

(8) Carbon dioxide augmented waterflooding.

(9) Immiscible carbon dioxide displacement.

(10) Specific variations of any of the above listed general techniques, as determined in any particular case by the assistant secretary of the office of conservation.

(11) Any other method approved by the assistant secretary of the office of conservation as constituting tertiary recovery within the contemplation of that term in the profession of petroleum engineering.

D. This section shall apply to tertiary recovery activities on any reservoir that is no longer capable of producing by methods other than tertiary. It shall also apply to reservoirs which are still capable of producing by primary and secondary methods after an amount of production has been recovered during a tertiary recovery project equal to that which would have been recovered by utilizing primary and secondary methods, which amount shall be determined by the assistant secretary of the office of conservation at the hearing required under Subsection B of this Section.

E. This Section shall not apply to reservoirs on which tertiary recovery operations are being conducted prior to the effective date of this Section.

F. Repealed by Acts 1986, No. 321, §1.

G. This section shall not apply to royalties in regard to production from a qualified tertiary recovery project to the extent such royalties must be remitted to the governing authority of the parish in which the severance or production occurs in accordance with Article VII, Section 4(E) of the Louisiana Constitution of 1974, as implemented by R.S. 30:145, 146 and 147.

H. This section shall not apply to lands or mineral interests owned or administered by any school board, levee board or district, or other political subdivision.

Added by Acts 1983, No. 644, §1. Acts 1986, No. 321, §1; Acts 2009, No. 196, §2, eff. July 1, 2009.