‘Legacy’ Lawsuits Negatively Impact Exploration

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 state’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.

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