Report Pits Oil Against La. Oyster Farmers

March 29, 2007

Some oyster farmers in Louisiana may be using unused leases solely in hopes of collecting damage settlements from oil companies, according to a new report that is sparking tension between the seafood and energy industries.

An oyster-industry representative blasted the report, calling it inaccurate and one-sided.

“It’s appalling, and it makes absolutely no sense,” said Mike Voisin, Louisiana Oyster Task Force president.

An oil-and-gas industry group, meanwhile, said the report shows the need for reform.

Oyster farmers lease coastal wetlands from the state for 15 years at a time. When an oil-and-gas company damages an oyster bed, the lease owner can sue for damages.

That money flows to lease owners regardless of whether the leases are producing oysters, suggesting that many leases in nonproductive areas are there to receive compensation payments, the report says. Those lease holders, the report states, are hoping to profit from the damage settlements but have no intention of actually harvesting any oysters.

“On average, oyster leases generate the majority of their net income from non-oyster-producing activities,” according to the report, which was commissioned by the state Department of Natural Resources and written by two LSU natural resource economists.

The Louisiana Oyster Task Force will meet next week to form a response to the report, said Voisin, who’s also chief executive of Motivatit Seafood in Houma and a seventh-generation oyster farmer whose family works between 5,000 and 6,000 acres in the Terrebonne Basin.

Voisin said he knew of no one in the oyster industry who was consulted by the report’s authors. He also said he doesn’t know of anyone in the industry using speculative leases and said payments from energy companies probably make up less than 5 percent of the industry’s revenue, not the “ludicrous” 50 percent or more the report suggests.

The report says the state charges rental fees of $2 per acre per year to oyster farmers, while those farmers can expect to net between $24 and $36 per acre from oil-and-gas activities. Meanwhile, income from oyster production averages $31 per acre.

The report’s authors suggest that raising the rate, or starting an auction system for lease rentals, would cut down on unproductive leases and allow more alternative uses.

Voisin said the $2 rental fee is only a tiny portion of the oyster farmer’s costs. He said the true cost of holding the lease, including surveying costs and application fees, is closer to $100 per acre, and he said it can cost well over $17,000 to prepare the site.

Varying levels of salinity leads farmers to leave some acres fallow while growing oysters somewhere else, he said. Non-producing acres around producing acres helps with security by providing a buffer zone between someone else’s property.

Don Briggs of the Louisiana Oil and Gas Association, which represents companies that drill and service offshore wells, said most oyster farmers don’t have speculative leases but said the industry needs to police those who do.

“I have known for years that speculative leasing has been part of the oyster industry,” Briggs said.

He said oyster leases have gone from taking up 75,000 acres to nearly 400,000 acres with no increase in production.

The Oyster Damage Evaluation Board was set up about 10 years ago to settle disputes between energy companies and oyster farmers. Briggs acknowledges that few cases ever reach the board, but said that’s because it’s usually cheaper for the oil-and-gas companies to settle a dispute and move on.

He suggested that one solution may be to limit the number of years a farmer can hold on to an unproductive lease.

The DNR commissioned the report in 2005 to study economic incentives in the oyster industry at a time when the state was dealing with billion-dollar lawsuits over the impact of coastal-restoration projects on oyster leases.

Gerald Duszynski, acting assistant secretary with the department’s Office of Coastal Restoration and Management, said those issues have since been settled. But, he said the state had already paid for the report so the department is circulating it to seek comment from interested parties.

Information from: The Courier,

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