In a surprise move, the Southeast Louisiana Flood Protection District- East filed a lawsuit against scores of oil and gas companies to try to force them to pay what could be many billions of dollars to remediate deteriorated sections of Louisiana’s coastal wetlands. Many issues surround the suit, not the least of which is the question as to whether the district has the legal authority to go to court on this matter. Governor Jindal has reacted strongly against the lawsuit, saying that only the state has the legal standing to file lawsuits of this nature and that his administration does not think it is proper to do so. If the flood protection district jumps that hurdle, there will undoubtedly be dueling expert testimony regarding numerous factors contributing to coastal deterioration including sea level rise, subsidence, state-sanctioned permitting of the prior oil and gas activities, and many other factors.
The suit may or may not be able to proceed, but it will definitely have a negative impact on oil and gas operations. Louisiana has already seen a legion of legacy lawsuits aimed at oil and gas companies for operations often conducted many decades ago. The BP oil spill settlement controversy that is currently unfolding raises the specter of entities that suffered no verifiable losses related to the Gulf spill receiving large sums of money in the settlement process. All of these legal actions send a message to companies looking to do energy extraction business in Louisiana that they do so at the risk of huge potential legal costs for the “privilege” of creating high-paying jobs and contributing greatly to state and local government coffers.
The Jindal administration has also just been notified of another lawsuit being filed to declare legislation enacted in 2012 to be unconstitutional. State probation and parole officers have asked a state district judge in Baton Rouge to nullify a legislative act that swept several million dollars from their retirement fund into the state general fund. Fund sweeps are not new. The Jindal administration swept funds from numerous statutorily dedicated funds into the general fund for several years, arguing that higher education and health care would be disproportionately affected from budget cuts without the sweeps.
It is important to keep in mind that user fees that were enacted to provide funding for specific services the fee payers deemed necessary fund most of those dedicated funds. Those services cover the gamut from coastal erosion to artificial reefs to Public Service Commission operations and the Department of Environmental Quality and Office of Conservation permits, to name a few. Business and industry volunteered to pay many of those swept fees in order to get timely action on permits that the government required them to hold. In recent budgets, tens if not hundreds of millions of dollars in fee funds have been taken away from their dedicated purposes to offset shortfalls in the state general fund.
State government pumped too much money into the budget when the Katrina/Rita rebuild money was flowing through state coffers along with oil prices at $145 per barrel. Budgeting unrealistic revenues and papering over them with one-time federal stimulus money and other gimmicks led to the budget problems we are currently experiencing in state government. If our state leaders want to propose putting every state revenue source–including constitutionally dedicated funds–on the chopping block to deal with budget deficits, that is one thing. However, sweeping statutorily dedicated funds to avoid dealing with unsustainable spending practices and to maintain state funding for purely local governmental services when critical state services are in jeopardy doesn’t make sense.