Proponents say Louisiana will continue to lose business to Texas without reform

Controversial litigation practices built around environmental remediation claims would be curtailed under legislation Rep. Page Cortez (R-Lafayette) has advanced.

The proposed policy change relates to “legacy sites,” which landowners leased out for drilling purposes and then later filed suit over for contamination violations. If approved, the legislation would provide state government officials with greater authority over cleanup exercises and the claims process. This would include any pending litigation that does not yet have a plan in place to assess environmental damage.

The opening for legal mischief came in 2003 when the Louisiana Supreme Court in Corbella v. Iowa ruled that the money awarded in environmental lawsuits did not necessarily have to be spent cleaning up a damaged property.

Plaintiffs have targeted almost 60 percent of the state’s top crude oil producers with legacy lawsuits, and 40 new cases have been filed in 2010, according to the Louisiana Oil and Gas Association (LOGA).

Supporters view Cortez’s Minerals Bill (HB 563) as a long overdue corrective measure to existing law that would help restore the state’s competitive standing.

Other states like Texas, that do not have legacy suits, stand to benefit from the loss of onshore drilling activity in Louisiana, Melissa Landry, executive director of the Louisiana Lawsuit Abuse Watch, laments.

Landry notes that many national groups have consistently rated Louisiana’s court system as lacking fairness and objectivity. A 2010 national survey conducted by the U.S. Chamber Institute for Legal Reform, which included more than 1,000 attorneys representing many of the nation’s largest employers, placed Louisiana courts 49th out of 50 for legal fairness, just ahead of the last place, West Virginia.

In addition, the Manhattan Institute’s Center for Legal Policy has labeled Louisiana as a “magnet for mass tort lawyers” and a “hotbed for new legal theories.”  The American Tort Reform Association has also described some areas of the state as “judicial hellholes” because of the conduct of some judges who do not apply the law evenhandedly to all litigants and do not conduct trials in a fair and balanced manner.

By contrast, recent study by The Perryman Group estimated that legal reforms have strengthened Texas’ economy and created jobs, and they attribute 8.5 percent of Texas’ economic growth since 1995 resulting from lawsuit reforms.

“Clearly, Louisiana’s negative legal climate needs to get back on track,” Landry said. “These claims are typically filed in remote areas, and in the initial claim plaintiffs assert astronomical damages and the case is usually settled some years later. What usually happens is most of the money goes into the back pockets of landowners and lawyers and only a small fraction of the money is spent on the initial claim for cleanup.”

In 2006, state lawmakers sought to re-prioritize environmental cleanup efforts over lawsuit profit motives with Act 312. The idea  was to ensure that state experts work with landowners to develop a remediation plan and to be certain that the financial resources committed by the responsible parties are actually spent on remediation and recovery of actual losses.

However, it is possible to avoid the Act 312 process in court, Landry explained. When that happens, environmental damage experts are not part of the process and “there is no reality check on damage claims” made by attorneys, she added. In some cases plaintiffs’ attorneys have been able to persuade judges that ACT 312 is not applicable to their particular claim.

Sen. David Vitter (R-La.) has expressed  strong support for Cortez’s bill.

The legislation is needed, he has argued, to help alleviate the burden on business in a difficult economic climate.

“Every Louisianan knows too well that the ongoing shutdown of Gulf production is directly tied to the federal permitting moratorium,” Vitter said.  “But now, they face an additional hit to job security and job growth tied to onshore production faced with these legacy lawsuits threatening to our state’s businesses.  I’m very concerned this declining business climate may be detrimental for the future of Louisiana’s energy jobs and our capital investment in energy exploration and production.  I strongly endorse the efforts of LOGA, Representative Cortez’s legislation, and those working to keep our jobs here in Louisiana.”

At the same time, in the aftermath of the BP oil spill, a number of elected officials and advocacy groups remain committed to subjecting oil companies to increased litigation.

Sen. Patrick Leahy, (D-Vt.), chairman of the judiciary committee, for example, remains opposed to any legislation that would alleviate litigation against oil companies.

“The [federal] Senate begins debate this morning on a Republican bill that would give exclusive jurisdiction of civil cases involving Gulf of Mexico oil spills to the Fifth Circuit Court of Appeals,” he said earlier this week.  This provision is nothing more than forum shopping to benefit big oil.”

The House Natural Resources and Environment Committee voted to defer the bill at the conclusion of a hearing on Wednesday.  Afterwards, Don Briggs, the LOGA president, warned that business will continue to face a climate of uncertainty until Act 312 is clarified.

“Legacy oilfield lawsuits are my association’s top priority,” he said. “The current process, which was intended
to be fair and pro-environment, isn’t working well and needs to be adjusted in a way that is good for the
environment and good for Louisiana’s energy workers and employers.”

Kevin Mooney is an investigative reporter with the Pelican Institute for Public Policy. He can be reached at kmooney@pelicanpolicy.org. Follow him on Twitter.