State officials raised concerns about Baton Rouge company now at heart of corruption probe (2024)

Months before allegations of corruption involving a Louisiana Office of Conservation employee came to light, high-ranking officials raised concerns that the company at the heart of that investigation had violated its state contract to plug abandoned oil wells.

Johnny Adams, an assistant conservation commissioner, is accused of receiving $780,000 to buy a house from the Louisiana Oilfield Restoration Association, or LORA, a private company with a state contract investigators say he oversaw.

Under that contract, or cooperative endeavor agreement, LORA was to collect fees from drillers in exchange for promising to pay to plug “orphan” wells left behind if those drillers went bust. Once it collected $5 million, it was supposed to use some of its excess funds to plug other existing orphan wells in Louisiana.

In February, state officials told LORA it was not fulfilling those obligations. Those concerns were laid out in a compliance letter that Monique Edwards, then the commissioner of conservation, and Tyler Gray, the new secretary of the Department of Energy and Natural Resources, sent to Van Mayhall III, LORA’s president.

The letter said LORA was failing "to plug orphan wells as designated by the Office of Conservation, and not providing financial security or plugging wells for which you have provided financial security.”

Mayhall disputed that notion in an emailed reply to Adams, a copy of which the DENR made public Tuesday along with the compliance letter.

“I’m honestly not sure what this even means. LORA has been and remains currently in compliance with the Cooperative Agreement,” Mayhall wrote in February. “We have provided financial security and plugged orphan wells, including plugging more than 50 wells in calendar year 2023.”

Louisiana has approximately 4,700 orphan wells. Abandoned oil and gas infrastructure can pose hazards to the environment and to the public.

The state requires drillers to obtain "financial security" meant to ensure there is enough money to plug wells when operators go bust. Such security often comes in the form of a promise from a bank. In 2019, the Office of Conservation enlisted LORA to provide that financial backing.

Of the 175 wells for which LORA took financial responsibility, it has yet to plug 130 of them, Patrick Courreges, a DENR spokesperson, said Tuesday. Overall, the organization plugged 109 wells in 2022 and 2023, he said, including some that LORA had not financially backed.

In a statement, David LaPlante, who gave a statement on behalf of LORA, put the latest number of wells plugged at over 120. He also reemphasized that LORA complied with the cooperative endeavor agreement.

The DENR last week placed Adams, the conservation official, on leave after the allegations against him came to light through a search warrant for his financial records. That warrant, filed by the East Baton Rouge Parish Sheriff’s Office, states Adams is under investigation for malfeasance in office.

Adams disputes the allegations.

“There is a lot of misinformation out there and we will set the record straight in due time,” his attorney, John McLindon, said Tuesday in a statement on his behalf.

Further noncompliance allegations

In addition to their accusations surrounding its well-plugging activities, Edwards and Gray said LORA was out of compliance with a state law that required its cooperative endeavor agreement to give theLouisiana Legislative Auditor full access to its records and operations.

That requirement applies to organizations that sign agreements with the commissioner of conservation “to assist with plugging orphaned wells, in order to alleviate the burden on operators in meeting financial security requirements.”

The law establishing that requirement was passed in 2020, the year after LORA entered into its cooperative endeavor agreement.

In his email to Adams, Mayhall said LORA was not out of compliance because the company’s agreement preceded that law.

He also noted the agreement included a different provision, one giving the Office of Conservation access to LORA’s financial records, and said LORA was open to revising the agreement to grant access to the legislative auditor.

“In fact, just the day before we received this (compliance letter), we had a lengthy meeting with the Legislative Auditor in which we discussed LORA in detail. We are preparing additional documents and records to submit to the Auditor, as they have requested,” Mayhall wrote, adding that Lora wanted to cooperate with state officials.

Courreges, the DENR spokesman, said LORA never signed a revision allowing access for the legislative auditor, which is currently reviewing the organization's activities.

Former commissioner raised concerns

Edwards, who was conservation commissioner from April 2023 until early this year, said she became concerned about LORA after she took office.

She said she grew worried because LORA registered as a business in Louisiana less than two months before it signed the agreement— and was not an established bank or financial institution. Instead, it collected a fee from drillers in exchange for providing financial security.

Edwards said she did not believe LORA was providing a viable form of financial security.

“I was concerned about what the impact was going to be on the state long-term. We already had an inordinate number of orphaned wells,” said Edwards, adding that financial security helps prevent new orphan wells. “I saw the state having an extreme liability situation.”

As of April, LORA had up to $160 million in liabilities but just $5.1 million in the bank, according to the search warrant for Adams’ financial records.

In June 2023, Edwards wrote a letter to the legislative auditor raising concerns about LORA. She did not want to interfere with the program until the audit was completed, she said.

Edwards did, however, issue a memo stating that going forward, all financial security had to be provided by a federal or state regulated financial institution, she said.

Richard Ieyoub, the former conservation commissioner who signed the contract with LORA, died in 2023.

Ethics board weighed in on Adams’ actions

It is unclear how much control Adams had over the LORA contract. The search warrant states he was the main contact for LORA’s dealings with the state, and Edwards described him as a “proponent and champion” of the LORA program.

But according to a July ethics advisory opinion, it was the commissioner of conservation who controlled the cooperative endeavor agreement.

“The Commissioner has maintained direct supervision and control over the CEA with LORA, and has not deferred any of that to any other employee, including (Adams),” the opinion states.

Ieyoub’s name endorsed the agreement with LORA, and Adams notarized it.

Adams sought the opinion to see whether ethics laws would prevent a subcontractor for LORA from employing his daughter. In addition to the allegation about money for a house, the search warrant claims Adams did favors for LORA in exchange for employing two of his children.

According to the board’s opinion, issued in June, Adams' daughter could work for the subcontractor, Arkus Management Services, as long as she dealt with projects unrelated to LORA’s cooperative endeavor agreement with the state.

Adams’ daughter had previously worked for Arkus Management Services and was seeking to return, the ethics opinion states, adding that Adams’ son also had worked for the firm.

Arkus provides support services for companies including LORA, the opinion states. Mayhall, LORA’s president and director, also manages Arkus, according to filings with the Louisiana Secretary of State.

Editor's Note: This story has been updated to reflect that David LaPlante is not an attorney but gave a statement on LORA's behalf.