Oil, gas and lawsuits
Debate over legacy site litigation could become testy
The expansive greenery now resembles a museum of abandoned oil work. Saltwater brine tanks sit leaking on several acres, the holes patched with nothing more than cotton gloves and broom handles. Pools of oil are as commonplace as clovers.
The oil companies Dore has contracted with since he purchased the land, as well as those who worked it previously since 1933, have left their marks. Dore has taken many of them to court, wanting restitution for the damages. This kind of action is becoming more common in the judicial system. In fact, some argue legacy site litigation is the new tobacco or asbestos -- the coveted trophy of trail lawyers.
The Louisiana Legislature first got involved in 2003, after the state Supreme Court affirmed a $33 million property damage award in Corbello v. Iowa Production. Some lawmakers saw a disturbing trend in the judgment: Landowners were not required to use the money for clean-up and the courts were beating up on oil companies by awarding huge sums, thus creating an unfriendly business climate.
As a result, the Legislature adopted the “Corbello bill,” which requires the feuding parties to work out their differences with the state Office of Conservation. Once a plan and monetary figure are brokered, funds are placed in a court registry and used solely for clean-up. Anything left over goes back to the oil company.
Most importantly, the law can also be applied retroactively, meaning in theory it could impact older cases, according to Rep. William Daniel, R-Baton Rouge, the author of the legislation.
The passage of that bill three years ago was shady and heated. Daniel recalls daily meetings between constituencies that didn’t even want to look at each other. Gov. Mike Foster got involved and, with a slight of hand, prompted a last-minute membership change on a key Senate committee to ensure passage.
Yet after all that turmoil, the law was plagued with loopholes. For starters, it only addressed groundwater. In response, lawyers simply excluded it from their suits. Additionally, not long after the law was enacted, the First Circuit ruled that it didn’t apply to a major case and the courts have been reluctant to apply it retroactively ever since.
“I don’t see any evidence that the bill has accomplished anything, other to give aid and comfort to independent oil producers,” said Michael Veron, a Lake Charles attorney who has argued both sides of the issue in court, most notably for the plaintiffs in the Corbello case.
Now Daniel, along with Sen. Robert Adley, D-Benton, is back with Corbello II to pick up the pieces during the ongoing regular session. The legislation wasn’t available at deadline, but Daniel says it will basically mirror the original bill. This time, however, it will seek to include all matters of contamination.
Already, it’s being characterized as a vehicle for independent oil, but Daniel disputes the generalization, arguing that landowners have sway in the bill as well.
“Plaintiffs would still be able to pursue other civil action under the legislation,” he said. “We want to make sure that we preserve the right of individuals to access the court system.”
Still, the divisions run deep: Independent oil would rather take their chances with the Office of Conservation, where delays will be long and faces friendly. Landowners have serious doubts and want to make sure they can use the courts to enforce contracts. Trail lawyers are concerned about smaller judgments and fewer billable hours.
The coming debate has become so heated that a group of landowners have combined forces – under the name of Property Owners for Louisiana Land and Water Restoration– to make a major media buy to run commercials statewide. It depicts a man on his front porch in a swing, questioning the integrity of oil companies in the state. “We want large oil companies to come here, but they have an obligation to restore the land and water they harm,” says Ken Killen, a self-proclaimed businessman and property owner, and the narrator of the 60-second spot.
Gov. Kathleen Blanco surprised many when she announced in her session-opening speech that she would take on the issue – less than a month after speaking at the annual meeting of the Independent Oil and Gas Association. Blanco told lawmakers that the huge awards resulting from legacy litigation had “chilled oil and gas exploration.”
After her remarks, LIOGA president Don Briggs positioned the bill as a winner for both oil and landowners. He said the economy is suffering because of the feeding frenzy and something has to be done soon.
“It’s a compromise and an important step for the state,” he said.
If there is indeed a compromise on the table, not everyone is confident it will last. Sen. Butch Gautreaux, D-Morgan City, who represents portions of Terrebonne and Lafourche parishes, has been pursuing this issue for more than two years and fears the oil lobby might get heavy-handed.
Gautreaux filed legislation last year that would have forced oil companies to take responsibility for damages and demanded that landowners use their judgments for clean-up. It also encouraged mediation. But after one volatile hearing, the bill was dead.
Gautreaux said he was “surprised” when Blanco overlooked all of his work and opted to go with another senator to author the legislation, even though he is one of her handpicked committee chairmen. He said he will give the new Corbello bill the benefit of the doubt, but still fears that Louisiana’s sweetheart industry will reverse the tide of compromise back in its direction.
“Whatever the oil companies want us to do, we do,” Gautreaux said. “Louisiana doesn’t get any respect from other states because of it. People tell oil companies if they want to be abusive, go to Louisiana, because other states won’t let them get away with it.”
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