§142. Board as agency to receive, administer, and control royalties in-kind; contract authority

A. In addition to the powers and duties of the board as specified in R.S. 30:129 and other provisions of this Subpart, the board is hereby designated as the agency of the state of Louisiana authorized to exercise the option granted to the state by R.S. 30:127(C) to receive in kind the portion due to the state as royalty of any minerals produced and saved from leased premises and to receive, administer, and control royalties due in kind to the state of Louisiana. The board may adopt rules in accordance with the Administrative Procedure Act providing for the assessment of fees from the purchaser to recover the costs associated with the administration of the sale of in-kind royalties pursuant to this Section.

B. The board may contract under terms which it deems to be most advantageous to the state with persons, corporations, municipalities, other political subdivisions, associations, and partnerships engaged in the storage, transportation, refining, processing, distribution, sale and/or use of oil, natural gas, and other minerals, for the storage, transportation, refining, processing, distribution, sale and/or use of such royalties.

C. In the exercise of these powers and duties, the board is specifically authorized to negotiate such contracts with applicants desiring the acquisition and use of the in-kind natural gas royalties to satisfy and meet human needs, and public bidding shall not be required. For these purposes, the contract for the use of in-kind royalties shall not constitute nor be defined as a conveyance, lease, or royalty agreement of minerals or mineral rights.

D. Human needs for purposes of this Section are defined as those needs involving the public health, welfare, safety, and economic well-being for the following:

(1) Maintenance of gas and electrical services for residences, such as individual homes, apartments, and similarly occupied dwelling units, hospitals, nursing homes, dormitories, education facilities, hotels, motels, juvenile and adult correctional institutions, and publicly owned water, sewerage and storm drainage systems producing their own energy, which systems supply services to the aforesaid.

(2) Maintenance of agricultural operations and processing of agricultural products, including farming, ranching, dairy, water conservation and commercial fishing activities, operations of food processing plants, fertilizer manufacturing plants, businesses and facilities processing products for human consumption, and services directly related to the activities described in this Paragraph.

(3) Maintenance of commercial and industrial business activities utilizing less than three thousand Mcf of natural gas on a peak day.

(4) Maintenance of all public services including facilities and services provided by municipal, cooperative, or investor owned utilities required for customers who come under Paragraphs 2 and 3 of this Subsection or by any state or local government or authority, and including transportation facilities and services which serve the public at large.

(5)(a) Maintenance of depressed energy-intensive industry, the closure of which Louisiana facilities is threatened as a result of high energy costs and competition from comparable industries located outside of Louisiana to which energy is offered at significantly lower costs. The purpose of this Subpart is to encourage the retention of such depressed energy-intensive industries and the substantial number of jobs that they provide in Louisiana.

(b) An industry may qualify as a "depressed energy-intensive industry" if the Board of Commerce and Industry, after hearing conducted pursuant to the Administrative Procedure Act, certifies that the industry applying therefor meets each of the following requirements:

(i) The applicant industry verifies that the expense of electricity and natural gas utilized for facility power requirements and not for feedstock purposes to its Louisiana facility exceeds thirty-three percent of the total cost of the product or products manufactured at such facility.

(ii) The applicant industry verifies that the amount of electricity or natural gas consumed for facility power requirements and not for feedstock purposes at the facility is in excess of one billion Btu's in a peak hour per month and that the ratio of hourly peak demand is not in excess of three million Btu's per employee. For the purposes of this Subsubparagraph, one kilowatt hour of electrical energy is deemed equivalent to ten thousand Btu's and one thousand cubic feet of gas is deemed equivalent to one million Btu's.

(iii) The applicant industry verifies that its Louisiana facility has been substantially curtailed for a period of at least twelve months prior to June 1, 1984 resulting in the loss of direct employment at that single facility in excess of one thousand regular employees and that qualifying as a depressed energy-intensive industry for purchase of energy available to such qualifying industry would substantially aid in the reopening of or the preclusion of closure of such facility.

(iv) The accounting procedure for allocation of costs to the Louisiana facility of the applicant is certified by the Board of Commerce and Industry, and the applicant agrees that based upon that method of allocation, twenty-five percent of any net profit after taxation realized by that Louisiana facility on an annual fiscal basis subsequent to the receipt of energy available to certified depressed energy-intensive industries will be utilized for and dedicated to capital improvements to the Louisiana facility in question.

(c) The Department of Economic Development shall review the application of any industry wishing to qualify as a depressed energy-intensive industry to determine whether the requirements set forth above have been satisfied and shall make recommendations with respect thereto to the Board of Commerce and Industry. If the Board of Commerce and Industry concurs in the recommendation of the Department of Economic Development and concludes pursuant to hearing that applicant has made the appropriate verifications required by Subsection D hereinabove, the board shall notify the mineral board and the Public Service Commission. Upon certification to the mineral board, the depressed energy-intensive industry shall qualify for in-kind royalty gas pursuant to the provisions of this Section.

E.(1)(a) Upon receipt of a written proposal by an applicant to enter into a contract with the board authorized by Subsection C of this Section concerning the acquisition and use of available in-kind natural gas royalties and after publication of its intent to do so in the official journal of the state, the board may undertake arm's-length negotiations with the applicant resulting in terms which it deems to be most advantageous to the state and assuring that the applicant will use the in-kind royalties to satisfy and meet bona fide human needs, as defined herein. Under any such contract, the price at which any natural gas is to be sold shall be not less than the first of the month published price for the subject month for Henry Hub natural gas as reported in McGraw-Hill Companies' Platts Inside FERC's Gas Market Report or its successor, plus or minus the basis differential for the pipeline system into which the natural gas is delivered. However, for those leases for which an existing pricing mechanism provides a higher price than the above published price, the price the state receives for those specific leases shall not be less than the existing pricing mechanism. If the Inside FERC's Gas Market Report ceases to be published, the secretary of the Department of Natural Resources shall designate a substitute published source for the price data. If the above-referenced Henry Hub natural gas spot market price is discontinued, the secretary of the Department of Natural Resources shall designate a substitute reference price, to ensure a reasonably consistent pricing mechanism, until the legislature adopts a replacement.

(b) Sale of natural gas to a certified depressed energy-intensive industry shall be at a price which will enable that industry to restart and/or continue the operation of its Louisiana facility and that price, established by the board, may be less than the average price of purchases reported to the Public Service Commission by intrastate pipeline companies. If the board establishes a price for the sale of natural gas to a qualifying depressed energy-intensive industry below that of the average paid by intrastate pipelines, the contract establishing the price for sale to that applicant must include a provision for monthly adjustment of the price in accordance with a generally referenced market price for the specific product or products manufactured by the applicant at its Louisiana facility.

(2) The board shall publish in the official journal of the state an advertisement which will appear at least ten but not more than sixty days prior to the approval of the contract by the board. The board may publish other such advertisements in its discretion. The advertisements shall contain the terms of the contract to be executed including the name of the applicant, the source of the in-kind royalties, the consideration to be given for the in-kind royalties, and the general use intended for the in-kind royalties and any other information that the board may consider necessary. This advertisement and any others published by the board shall constitute a judicial advertisement and legal notice within the contemplation of Chapter 5 of Title 43 of the Louisiana Revised Statutes of 1950.

(3) Any proposed contract authorized by this Subsection which is negotiated and approved by the board shall be submitted to the governor and to the Senate Committee on Natural Resources and the House Committee on Natural Resources and Environment for their approval. The minutes of the board or of such a committee reciting its approval shall be official evidence of its approval. No such contract shall be valid unless it is approved by the board and by the Senate Committee on Natural Resources and the House Committee on Natural Resources and Environment and is signed by the chairman of the board and by the governor. The provisions of this Paragraph shall not apply to any such contract if the applicant is a state agency or a local governmental subdivision.

F. Except as otherwise provided in this Section, in the exercise of the powers and duties granted in this Section, the board shall publish in the official journal of the state an advertisement for a period of not less than fifteen days. This advertisement shall contain such information as may be necessary and desirable to solicit the most advantageous bids and the advertisement shall contain in addition thereto, the time when bids will be received and any other information the board may consider necessary. These advertisements need not appear more often than once a week. These advertisements shall constitute judicial advertisements and legal notices within the contemplation of Chapter 5 of Title 43 of the Louisiana Revised Statutes of 1950. The board may also cause notices to be sent to those whom it thinks may be interested in submitting bids. Bids received by the mineral board shall be opened and considered in the same manner and under the same restrictions as are applicable to the board in the leasing of the public domain. The board may reject any and all bids.

Acts 1972, No. 749, §1; Acts 1974, No. 151, §1; Acts 1975, No. 479, §1; Acts 1984, No. 201, §1 and §2; Acts 1986, No. 477, §1; Acts 1990, No. 1017, §1, eff. July 26, 1990; Acts 2001, No. 864, §2; Acts 2008, No. 580, §2.