Oilfield lawsuits headed for debate

03 10, 2012 by Daily Comet

Legacy lawsuits, long a subject of disagreement between oil-industry advocates and landowners, are headed for another round of debate in the Legislature during a session that starts Monday.

It’s become a perennial battle in the Legislature, engaging environmentalists, trial lawyers and government bureaucrats as well.

Landowners sometimes use the law sue oil companies that have leased and drilled on their property to clean up pollutants. They’re called “legacy lawsuits” because wells have often traded hands many times over generations, and the list of defendants may reflect decades of corporate lineage.

Environmentalists argue that legacy suits hold oil companies accountable for groundwater and soil contamination, while business advocates are concerned they create a litigious environment that unfairly punishes the oil industry and stifles the state’s economy.

How these oilfields should be cleaned and how liability is resolved are at the heart of the matter, said Rep. Gordon Dove, R-Houma. Proposals that address the issue will likely be navigated through the Natural Resources committees, for which Dove serves as House chairman.

The Legislature first got involved with the issue in 2003 after the state Supreme Court affirmed a $33 million damage award in Corbello v. Iowa Production.

Some lawmakers saw what they described as a disturbing trend in the judgment — landowners were not required to use the money for cleanup, and huge awards could endanger the business climate.

As a result, the Legislature adopted what was then referred to as the “Corbello bill,” which required the parties to work out their differences with the state Office of Conservation if possible. Once a plan and damage figure are brokered, money is placed in a court registry and used solely for cleanup. Anything left over goes back to the oil company.

The biggest problem from the oil-and-gas industry’s perspective is that companies operating a site that was contaminated by a previous user are being pulled into the system. Oil companies argue that landowners have been awarded multi-million-dollar judgments over the years, but nothing forces them to clean up the sites.

They also argue that it’s hindering activity. A study released earlier this year by the LSU Center for Energy Studies says all of the related lawsuits have stopped 1,200 wells from being drilled. Environmentalists call the study flawed.

To date, more than 270 legacy lawsuits have been filed in Louisiana.

Don Briggs, president of the Louisiana Oil and Gas Association, said just one lawsuit can have a chilling effect, especially considering all of the money spent on defense attorneys, an expense that kicks in before any cash is dropped on cleaning up land.

“While some of the larger oil-and-gas corporations have strong defense attorneys and sizeable budgets, it is the independent oil-and-gas companies that will potentially be forced out of business due to these suits,” Briggs said.

The state Department of Natural Resources started regulating cleanup efforts related to legacy suits in 2006.

New Orleans consultant Cheron Brylski, who opposed the oil-and-gas industry during last year’s debate on behalf of environmentalists, landowners and others, said the system is too favorable for oil companies and the state doesn’t have the power to make oil companies pay up like the courts can.

“There is no agreed-upon process, even when orchestrated under the direction of Big Oil’s friends at the Louisiana Department of Natural Resources,” Brylski said. “Big Oil seeks one thing: a return to the days that caused these legacy sites: no rules, no requirements for cleanup and no process for ensuring that landowners and citizens will be treated responsibly and fairly.”

Dove, who is preparing legacy legislation this session, said the oil-and-gas industry should be able to address cleanup plans without admitting responsibility, which sometimes causes an avalanche of other lawsuits.

“But this needs to be fair. We don’t want to take away the right of landowners to sue,” Dove said. “We really need to get a bill out of committee this year.”

Dove’s House Bill 655 adds new powers to DNR’s oversight and authorizes the agency’s chief to “require a responsible owner to investigate, test, and remediate an oilfield site found to be a danger to the environment or a potential orphan site.”

While legacy sites are largely located in south Louisiana, local lawmakers say there aren’t many to speak of in Terrebonne and Lafourche parishes.

Still, it’s an issue attracting attention from local lawmakers.

Rep. Joe Harrison, R-Napoleonville, has introduced House Bill 897, which appears to have mechanisms that mirror Dove’s proposal.

Freshman Sen. Brett Allain, R-Franklin, said he will soon file a bill as well, and he insisted that it wouldn’t favor oil and gas only.

“I’m not only a landowner, but I’m also vested in the oil-and-gas business,” Allain said. “I hope to be a catalyst in this debate for compromise.”

It’s unknown, however, what impact the locally sponsored bills might have.

Jimmy Faircloth, an attorney representing landowners, recently told independent journalist John Maginnis that property owners are seeking a compromise through legislation that will be introduced by Sen. Gerald Long, R-Natchitoches, chairman of the Senate Natural Resources Committee.

Briggs, meanwhile, is working on bills that will be sponsored by Sen. Robert Adley, R-Benton, and Rep. Jim Morris, R-Oil City.

The Legislature’s regular session is scheduled to begin at noon Monday at the state Capitol and must end by 6 p.m. June 4.