As the federal government works to hold BP accountable for cleaning up the ongoing oil spill in the Gulf of Mexico, Louisiana regulators and residents are engaged in another battle to address decades-old pollution at oil and gas fields across the state.
Landowners from Plaquemines Parish to Shreveport who lease their property for energy development have filed hundreds of lawsuits during recent years against oil and gas companies, saying their land was damaged – many years ago, in some cases – by spilled oil, chemicals and other toxins. The wave of so-called “legacy lawsuits” increased in 2003, after the state Supreme Court ordered Shell Oil Co. to pay about $76 million for polluting a farm in Calcasieu Parish – the biggest reported payout to a landowner ever.
The ruling was remarkable – and led to even more legacy lawsuits – because it cleared the way for landowners to seek more money in damages than their property was actually worth. Oil and gas companies were quick to condemn the decision, saying it would allow landowners to rake in windfalls. The reason why? Nothing on Louisiana’s law books at the time required landowners to use their court winnings to actually clean up their property.
In 2006, the legislature intervened by passing a law, Act 312, to establish a new framework for legacy lawsuits. The law, which last year saw its first test case, puts the state Office of Conservation, within the Department of Natural Resources, in charge of remediating property that has been ruled damaged by the courts. Additionally, any money that would have previously gone to the landowner must now be deposited in an escrow account used exclusively for cleanup.
The idea was to better protect the public by obliging companies to fix environmental problems and giving the state a regulatory role in that process. But Act 312 has not settled the controversy, and in fact, has brought new opponents into the fray with detractors from the very environmentalist community the law was supposed to appease saying the new regulation only slows the pace of cleanup by creating bureaucratic buffers for polluters.
“What it does is put DNR between the courts and the companies,” said Paul Templet, an environmental consultant and former secretary of the Louisiana Department of Environmental Quality. “It affords a measure of protection for the industry.”
First Case
As an example, Templet points to the first case to fall under the purview of Act 312: Tensas Poppadoc Inc. v. Chevron USA Inc.. A Concordia Parish jury in 2008 said Chevron polluted the landowner’s property, including a drinking aquifer near Lake St. John.
During a series of hearings in February 2009, a five-member panel in the Conservation Office reviewed plans for addressing pollution on the site: Chevron’s proposal would have cost about $1 million while the landowner’s plan could have surpassed $100 million, said Blake Canfield, an attorney for the Natural Resources Department.
The panel rejected both plans in April 2009, ordering further study of the property, a process that would take three years and cost Chevron about $1.75 million, according to court documents. The Conservation Office has filed its decision with Judge Leo Boothe of the 7th Judicial District Court in Concordia Parish, who has not yet approved the plan, Canfield said.
Although the judge will have the final say in the matter, Templet called the Conservation Office’s decision “a delaying tactic,” signaling that the office is disinterested in pushing oil and gas companies to deal with environmental problems.
“As this first case, Poppadoc, showed, DNR isn’t interested in really doing anything,” Templet said. “Act 312 is just another in a long line of attempts by the oil industry to have a large say in how they are regulated.”
As Templet sees it, the Conservation Office should not be managing cleanup cases because of its position under the Department of Natural Resources, which leases state land for oil and gas development and collects royalties from production.
“That’s an inherent conflict,” Templet said, explaining how the Office of Conservation may have a difficult time enforcing tough remediation guidelines for companies that do business with the Department of Natural Resources.
Gregory Miller, a consultant with ICON Environmental Services Inc. of Port Allen, also expressed doubt about the Conservation Office’s regulatory abilities. The persistence of pollution at oil and gas fields across the state is proof of lax oversight, said Miller, who has inspected more than 100 fuel production sites in Louisiana and has found hazardous contamination in “90 percent” of cases.
“Our state is a mess. It’s disgusting,” he said. “There’s no rhyme or reason to what the regulators are doing. Industry controls for the most part what is going on.”
Canfield disputed the suggestion of a conflict of interest, saying that the Conservation Office is structured to act separately from the Natural Resources Department.
“Independent of the Secretary of the Department of Natural Resources, the Commissioner of Conservation, through the Office of Conservation, has sole authority over regulating oil and gas exploration and production activities, including the cleanup and closure of oil and gas exploration and production sites,” Canfield wrote in an e-mail.
Canfield also pointed to the role of the courts in remediation cases, which trumps the Conservation Office.The trial judge must consider any plan adopted by the state, including the price tag put on it. But the court does not have to accept the state’s plan and reserves the right to choose a different cleanup program.
Landmark Case
For the energy industry, anyway, Act 312 has been perceived as a saving grace.
“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,” Don Briggs, president of the Louisiana Oil and Gas Association wrote in a statement praising the passage of Act 312.
What Briggs feared “could have wreaked havoc” on the industry was the landmark Louisiana Supreme Court decision in Corbello v. Iowa Production, in which landowners sued several companies for polluting a 320-acre farm in Calcasieu Parish. In 2003, the Supreme Court ordered Shell Oil Co., which owned the original surface lease on the site, to pay damages worth about $76 million. Landowners settled with the other smaller companies that also worked on the property, said J. Michael Veron, who represented the plaintiffs.
The ruling – which mentioned the problem of using “understaffed and underfunded state agencies” to police Louisiana’s sprawling oilfields – opened the door to an even greater deluge of legacy lawsuits. Fearing the economic repercussions of those cases, the Oil and Gas Association went to bat lobbying in Baton Rouge for Act 312.
“It’s extraordinarily clear under the Corbello decision that the landowners had the right” to collect damages without any obligation to decontaminate polluted property, said Loulan Pitre, an attorney with the Gordon Arata law firm in New Orleans.
Pitre, who has represented oil firms and written about Act 312 for the Tulane Environmental Law Journal, called the 2006 legislation “a correct thing to do” in terms of forcing plaintiffs to deal directly with pollution by depositing clean-up cash in an escrow account. Landowners reserve the right to file a separate suit to seek additional damages.
But considering the departments’s response in the Poppadoc case, Pitre conceded, “it’s hard to say at this point whether it’s (Act 312) more beneficial for plaintiffs or defendants.”
Veron, the landowner representative in the Corbello case, gets riled up when the oil industry defends Act 312 by citing the potential for windfall damages. Veron said his clients placed $33 million in an escrow account expressly to bankroll remediation – even though they didn’t have to. But Veron said his clients were blocked from decontaminating the property by the U.S. Army Corps of Engineers, which would not issue a permit necessary to begin the work.
Veron said Corps officials refused to issue a permit unless the plaintiffs re-examined pollution levels in the soil and ground water and agreed to let the Corps oversee remediation. Veron said the Corps’s intervention was out of line and that he considered suing the agency for obstructing cleanup.
“The conditions were going to be let them dictate the cleanup with no end in site,” Veron said. “We just spent 10 years fighting that war with Shell, and I said, ‘Do you want to spend another 10 years fighting a war with the federal government?’ ”
Amanda Jones, a spokeswoman with the Corps in New Orleans, said the agency had no record of a permit application in the Corbello case and could not comment further.
Veron believes that Shell’s attorneys, who he said were present at meetings he had with state and Corps officials, used their influence with the federal agency to keep the Corbello plaintiffs from working on the site.
“I think the oil companies wanted to make sure we didn’t clean it up…to be able to go before other courts and say these landowners are putting money in their pockets and not cleaning up,” Veron said. “It (the property) still sits there today and, frankly, I don’t think we’ll ever be able to do anything.”
Shell officials did not return phone calls seeking comment.
Cleaning Up
Veron is no fan of Act 312, which he said “disincentivizes landowners from bringing lawsuits.” Among other provisions, the act limits the amount of money plaintiffs can seek for attorneys’ fees, he said. Veron also believes the Natural Resources Department has “sold its soul” to the oil industry.
Miller, the environmental consultant from Port Allen, pointed to a more recent sign that the Conservation Office is catering to energy producers: a stipulation in a new playbook governing pollution remediation.
Miller’s main problem with the manual is a new rule that would limit pollution liability to a depth of three feet, meaning that oil and gas companies would not have to go any deeper than that level when they are decontaminating oil and gas fields.
“This looks like another attempt to try to chop away at environmental regulations, to ease up on the criteria, so companies are not left with liability on the entire site,” said Miller, who has filed a protest against the proposed rules.
Department of Natural Resources attorney Canfield said the agency has not yet decided whether to adopt the proposed regulations.
For those worried about the Conservation Office’s treatment of future pollution cases – more than 200 lawsuits affected by Act 312 have been filed so far – Pitre emphasizes the courts’ authority over any clean-up plan put into place. With Poppadoc’s remediation plan hanging in limbo, however, it is difficult to know whether Act 312 will help or hurt polluters or how the Department of Natural Resources’ proposed cleanup guidelines would affect similar cases.
“The court has the chance to say, ‘No, I think DNR got it wrong,’ ” if the court finds the evidence supports that,” he said. “So ultimately it’s going to be the judge who decides with illumination from DNR.”