David Boulet is the assistant secretary of the Department of Natural Resources, where he leads the Office of Mineral Resources. OMR is an office few outside state government and the industry know exists. It plays an essential role in state finances — awarding mineral leases on state-owned lands and water bottoms — and is charged with ensuring that the state gets the royalty revenue it’s due from the companies that produce oil and gas from those leases.
Boulet makes clear in an interview at DNR that he is on a mission.
“I didn’t come to Baton Rouge because I needed a job,” he says. “I came here because I want to accomplish something.”
A Republican, Boulet says Gov. John Bel Edwards’ campaign theme of putting Louisiana first resonated with him, and that he sought the OMR leadership position because he recognized its significance as a revenue generator for the state; OMR acts as the state’s landman and royalty collector from mineral produced from state leases, Boulet explains.
“We have nomination of tracts, they become state leases, and leases lead to production,” Boulet says, explaining OMR’s work.
“We’re constantly in the flow of ensuring that we are receiving the monies from the oil companies that we expect.”
Louisiana government is the state’s largest landowner. Royalty payments are the landowner’s share of the revenue from oil and gas production. Royalty revenue accounts for up to 10 percent of state General Fund revenue. The percentage and amount fluctuate depending on the price of oil and natural gas as well as production volumes. Royalties peaked at $824 million in 2008; they sank to $239 million in 2015.
Boulet’s wife, Monique, is the daughter of former Gov. Kathleen Blanco. The Boulets and their four children live in Lafayette, and David commutes to work on most days, occasionally staying overnight in Baton Rouge with family there. A New Orleans native, he graduated from UL Lafayette in 1989 with a mechanical engineering degree and worked his way up at Cameron Ironworks as a sales engineer trainee to subsea marketing manager during his 11 years there, according to his LinkedIn profile.
Boulet worked in the financial securities industry for just over a year before returning to Louisiana to lead Louisiana Economic Development’s new oil and gas cluster initiative late in Mike Foster’s second term as governor. Boulet, however, says the job was a disappointment because the promised restructuring of LED never got traction. He left state government before his mother-inlaw became governor in 2004.
Boulet stayed in Lafayette and returned to the energy industry, dividing his time working in oil and gas between Lafayette and Houston. He also operated an energy consulting business, Louisiana Business Consultants, between 2009 until he was selected by Thomas Harris (Edwards’ newly appointed DNR secretary) to become assistant secretary and to run OMR.
Harris, who spent 10 years at the Department of Environmental Quality before moving to DNR in 2014, notes in a telephone interview that Boulet had the kinds of skills he was looking for as a leader for OMR.
“I was familiar with OMR from my time here, and I had a very good relationship with Secretary [Stephen] Chustz since we worked together at DEQ,” Harris recalls. “I knew that OMR offered some low-hanging fruit, if you will, on the revenue side if we could find the right person to run it. I was looking for someone with some marketing skills and [Boulet] fit the bill.”
Boulet’s approach as well as his title mark significant departures from OMR’s recent past. Performance audits of OMR by the legislative auditor in 2010 and 2013 found the office was less than aggressive in ensuring the state collected the royalty revenue it was owed. The 2010 report found that it had been 10 years since OMR had used desk volume audits — the most accurate production audit — to ensure the accuracy of royalty payments. OMR resumed the practice in 2013.
The 2013 performance audit noted that the number of audits performed by OMR had steadily declined. It also found that the state Mineral and Energy Board, which oversees OMR’s operations, had waived 45 percent of the penalties and fines for late payments of royalties owed the state during Bobby Jindal’s first term (2008-2011). In all, approximately $5.8 million out of $12.8 million in fines and penalties was waived.
DNR said the board waived the penalties in order to avoid litigation with the companies holding state leases. The waiving of the fines and penalties came during the period of annual revenue shortfalls in the state budgets. Coupled with Jindal’s commitment against new taxes, any dollar not collected from existing revenue sources resulted in cuts to programs not constitutionally protected; specifically, higher education and health care.
Boulet says he had heard about the two legislative auditor reports, but had not read them prior to taking the job. He notes that Secretary Harris had discussed the reports in general terms in Boulet’s job interview, and Boulet says he read the reports in preparation for his interview with The IND.
“There are a lot of good professionals in this department,” Boulet declares. “It’s a matter, though, of asking what are you doing to improve in the wake of these audits that kind of knocked a ding on OMR.”
Boulet says he has initiated a review of the OMR staff protocol for making recommendations on penalties and waivers to the Mineral and Energy Board.
OMR also suffered from a form of neglect during the Jindal years, according to Boulet. “It’s been four or five years since an assistant secretary sat in this position,” he notes. “The office has been without real leadership during that time. Without leadership, things slow down. There is a real opportunity to come in and re-energize the department. I believe that we can refocus on what our true needs are. We are a revenue generator.”
Boulet is the first Senate-confirmed assistant secretary to head OMR since Marjorie McKeithen left the position in early 2009. Three interim assistant secretaries (Monique Edwards, Louis Buatt and Jody Montelaro) were appointed but not submitted for confirmation after McKeithen’s departure. The position remained vacant from 2011 until Boulet’s appointment in March. For the first three of those years, OMR also had responsibility for auditing severance tax payments from wells on privately owned lands.
The November 2013 legislative auditor’s report on severance taxes said OMR failed miserably at that task, as severance tax audit revenue fell by 99 percent.
Leaderless OMR was left without advocates at the highest levels of the department to push for the hiring of additional auditors. The 2010 legislative auditor’s report on OMR said each auditor hired produced an average of $1.2 million in new revenue each year. OMR requested additional auditors over a number of years, but new positions were not funded.
Boulet says there are currently five audit vacancies in OMR that he will seek to fill in the next budget cycle, the planning for which is now underway. “Obviously, we suffered through the current budget cycle, but now in the 2018 budget cycle, we’re looking at how we can add field auditors in the department,” Boulet says, emphasizing that the hires are not only about building OMR’s capacity, but about maintaining it.
“We have a lot of good senior field auditors that could be retiring in the next few years and, to get auditors up to speed, takes at least a good two years,” he continues. “We’re coming up with a new training manual to try to shrink that time frame a little bit, as well as incorporating new efficiency tools that can help us bring audits to closure quicker and faster.”
Boulet says oil and gas production remains self-reported by the industry. Production data is collected at three points in state government. One is the Department of Revenue, which collects (and once again audits) severance taxes. DNR collects production data through OMR and through SONRIS (Strategic Online Natural Resource Information System), DNR’s proprietary online well database, which has information on every Louisiana well. Royalty payments and severance taxes are based on oil and gas production and pricing. The only way the state can ensure the accuracy of those payments is by rigorously cross-checking monthly production reports and through audits.
Boulet acknowledges that DNR and OMR’s once-cozy relationship with the industry has been altered by Gov. Edwards’ use of DNR as the vehicle to insert his office in Coastal Zone lawsuits over wetlands loss.
“Coastal lawsuits certainly have a lot of hostile connotations to it, but I’m trying to lease property. I’m looking for opportunities for people who want to invest to produce oil and gas,” Boulet says. “Yeah, it’s a challenge, but it’s got its own life cycle. We’ll see what transpires.”