Legacy Lawsuits No Comments
Ask almost any Louisianan what should happen if land is damaged by oil and gas developments, and you will likely hear the simple answer: “Clean it up!” Of course, that makes perfect sense, and Louisiana’s leaders have worked long and hard to design a fair and commonsense process to handle “legacy” oilfield environmental damage claims.
Unfortunately, a small number of plaintiff lawyers are abusing the process through egregious legacy lawsuit claims. These lawsuits delay for years and years the commonsense assessment and cleanup of any actual environmental damages. The end result is that most of the money paid out does not go to remediation but rather straight into the pockets of a few lawyers and plaintiffs. The state’s process for addressing oilfield claims, called “Act 312,” is being circumvented, placing lawsuit profits ahead of environmental cleanup.
The economic price Louisianans pay because of the negative impacts associated with “legacy” lawsuits is huge. Onshore exploration and production in Louisiana is stagnant, whereas the industry in other states is much more robust. That means that jobs and economic investment is going to other states where legacy lawsuit abuse is not a problem.
More than half of all onshore crude production in Louisiana is provided by companies named in legacy lawsuits. Most importantly, independent producers say this is a serious problem for them, because smaller companies cannot afford to make a big settlement to avoid a legacy lawsuit.
The looming threat of potential litigation hinders independent oil and gas companies from acquiring necessary insurance to cover their operations. David Russell, President of McGowan Working Partners, Inc. claims, “It’s not difficult to get insurance in Louisiana, it’s impossible. Recently, after 15 years of coverage, our provider declined pollution liability insurance coverage in the state of Louisiana simply due to the legacy lawsuit issues in the state.”
The purpose of Act 312 was to insure that state experts work with landowners to develop a remediation plan and ensure that the financial resources committed by the responsible parties gets spent on remediation and recovery of actual losses.
This law grew out of public outrage over the “Corbello” lawsuit in 2003 in which $33 million in clean-up costs were awarded to a landowner — and the Louisiana Supreme Court ruled that the money awarded did not necessarily have to be spent on cleaning up damaged property.
Now, only a few years later, the state’s even-handed legal process is being subverted. Here’s how it works. A few plaintiffs’ lawyers file suit, claiming hugely inflated damages. In court, these lawyers seek to avoid the state’s Act 312 process. If they can get a friendly judge to say a different law applies, then they are in the “lawsuit lottery.” Vast sums are acquired in a settlement and payment doesn’t have to be spent on remediation because the stateâ•˙s Act 312 process was avoided. This scheme is repeated again and again, and there are currently hundreds of these lawsuits in Louisiana.
It’s important that environmental damages are fairly assessed by state experts — and that responsible party payments actually go to prompt remediation and to cover actual losses. Without clarifying this process our state will experience continual job loss, curtailed oil and gas production, and Louisiana’s budget deficit issues will be exacerbated by lost severance and business tax revenue.
April 1st, 2006
Following the Money Well, Not This Time
Legacy Lawsuits No Comments
By Don G. Briggs, President – LOGA (Louisiana Oil & Gas Association)
If six consecutive hours of grueling, sometimes vicious, debate were not enough to send you packing, then imagine that replayed in three more rounds of the lawmaking process, and you will begin to get just a hint of how Louisiana Senate Bill (SB) 655 became Act 312 of the 2006 Regular Legislative Session.
The opposition to SB 655 included top-dollar trial lawyers, individual landowners and a recently formed group of landowners organized for the sole purpose of defeating SB 655. There was no doubt these factions had muscle, clout and money, and hired the top guns of the public relations and lobbying trades to provide them the winning edge. Web sites and voter callboxes were prime tools for the opposition’s spreading of innuendo and half-truths.
Hypothetically, if the Louisiana Oil and Gas Association (LOGA) spent $100,000 in its effort to support SB 655, then surely the opposition trumped that figure five times over. Well, history has been written, and this time it was not all about the money.
Act 312 is a new environmental law that addresses how contaminated oilfield sites are cleaned up all across the state by those responsible for damages. Ask the proponents, and we will tell you that this new legislation brings fairness to what could have wreaked havoc on the oil and gas industry in Louisiana.
Ask Governor Kathleen Babineaux Blanco, and she will tell you it not only represents fairness but good public policy as well. She was able to overcome the odds and, in my opinion, credit her own legacy to sign into law this unprecedented legislation.
In the end, after the legislative process played out, lawmakers voted to see things her way. Landowners would get their property cleanup, trial lawyers could still work issues through the courts, environmentalists considered it a step in the right direction and oil interests would not have to face enormous judgments for remediation.
The Louisiana Legacy Law
If you ever need a champion litigator, choose Sen. Robert R. Adley (D-Benton), but keep in mind: Robert is a businessman and not an attorney. And if you are looking for leadership, political wit and inexhaustible energy, look no further than Department of Natural Resources Secretary Scott A. Angelle. With these two men moving and shaking things up – plus backing from State Representative William Daniel (R-Baton Rouge) and a small assembly of expert staff, including Commissioner of Conservation James Welsh – Gov. Blanco formulated a working team capable of a Herculean effort.
Gov. Blanco has always been a good listener. I remember the day I first briefed her, back in 2003 when she was still candidate for governor, on behalf of the LOGA board on the subject of what was being called “legacy lawsuits.” It started with Corbello v. Iowa Production, when the trial court jury awarded the plaintiffs $33 million, and by the time all the appeals were done, the award was $80 million. To top that off, the Supreme Court stated that the plaintiffs did not have to use their award to restore the property. (In essence, a landowner would file suit against a company who last operated on their property, and anyone else or any other company that may have drilled there could be brought into the court battle. In these cases, a price would be paid, including other private claims, but cleaning up the land was not a requirement.)
Like a flame sparking a raging wildfire, hundreds of suits started to saturate the courts, and many businesspeople worried about the perception of Louisiana as a litigious state.
At LOGA, we were concerned over the devastating impact on our industry if this trend were to continue. Something had to be done. So we reached out for the hand of a tremendous ally, the Louisiana Association of Business and Industry, and together our associations began a mission to change things. Our sights were set on keeping rigs and operators alive in a state where for years drilling activity had outpaced most all other energy-producing states.
State’s Regulatory Office Plays Key Role
The state Office of Conservation operates within the Department of Natural Resources (DNR), maintaining jurisdiction over activities of the oil and gas industry, including drilling and the production of wells and the disposal of exploration and production waste. In 1986, the Office of Conservation enacted Statewide Order No. 29-B, which provides for standards in oilfield site and pit closures. These rules, while stringent, are based on sound science. I, too, recall Commissioner Welsh testifying before the legislative Natural Resource committees that Louisiana’s 29-B rule had been reviewed and extensively used by other states across the country prior to their adopting similar oilfield cleanup regulations.
The DNR, Attorney General’s Office and the state Department of Environmental Quality will all have a role in Act 312. DNR’s main function will be to investigate and determine a plan for remediation based on appropriate standards for cleaning up polluted sites, addressing claims of damages to ground water, soils, sediments and surface water.
In accordance with the new law, 10 measures will be taken by the appropriate entities:
Should a landowner choose to file suit seeking a claim for environmental damages, he retains the right to do so in the court of appropriate jurisdiction. For those suits that are already filed, the process in the court continues, except that the plaintiff must provide the state with notice of the suit.
For those suits to be filed subsequent to the signing of Act 312 (June 8, 2006), there is a requirement that DNR/Office of Conservation and the Attorney General be given timely notice of any such suit so that the interest of the public can be represented and protected from that day.
The trial court will then perform its traditional duty of deciding the facts and apply the law to determine if environmental damages exist and, if they do, who the responsible parties are. Nothing contained in Act 312 allows the Office of Conservation to decide liability or to name the responsible parties.
The responsible parties will be required to submit a plan of remediation to the Office of Conservation for review. The plaintiff will also have the right to submit his suggested plan of remediation. After a public hearing, the Office of Conservation will be allowed to investigate and ultimately decide on a plan of remediation, picking and choosing from any of the applicable and appropriate standards for cleanup that have been approved by any state agency. This allows the agency with the most experience dealing with exploration and production waste to be fully accountable for a solution. By definition, the plan for remediation must include the estimated cost of said remediation.
Act 312 allows for the trial court to review the Commissioner of Conservation’s decision, or proposed cleanup plan on remediation, and to impose a different plan if by a preponderance of evidence another plan is proven to be more feasible.
To ensure justice, all parties retain the right to appeal the judgment of the trial court to the court of appeal of appropriate jurisdiction.
Once the remediation plan is approved, the court issues a partial judgment, and the necessary funds are placed in the registry of the court. The Office of Conservation maintains an active role supervising the remediation efforts and is required to keep the court informed of the progress.
Once remediation goals are reached, any remaining funds within the registry of the court are returned to the responsible parties; however, if during the remediation efforts additional funds are required to meet remediation goals, the responsible parties shall be required to place additional funds with the registry of the court.
The trial for private claims (for example, loss of use of farmland, pain and suffering or stigma damages) are required to remain in the court of appropriate jurisdiction. Conservation has nothing to do with these claims.
Finally, Act 312 has a provision that requires settlements to be approved by the court and that funds for cleanup be deposited in the registry of the court. Oil companies will no longer receive a credit for monies paid for cleanup unless the cleanup is actually performed.
At the time of this writing, the Commissioner of Conservation has started working with an advisory committee to assure that the rule-making process is followed as is necessary for public agencies under the Louisiana Administrative Procedure Act.
In closing, I want to reiterate the notion that passing legislation of this magnitude took a great deal of concerted effort and will. It took time, energy, strategy, determination and awareness building. And it surely took exceptional leadership and vision along with dedicated partnerships to triumph over real adversity