A landmark deal between several Louisiana parishes and energy conglomerate Freeport McMoRan Inc. may pave the way for more operators to settle a bevy of coastal erosion lawsuits as the state grapples with the loss of land linked in part to oil and gas development.
Several parishes have filed lawsuits against close to 100 oil and gas operators that work in Louisiana, including Freeport, alleging their activities over several decades befouled coastal wetlands and placed them at an increased risk of flooding. The City of New Orleans earlier this year filed a similar lawsuit against producers because of coastal erosion, with the state in support of the litigation
In the tentative settlement with 12 parishes, Freeport and its subsidiaries agreed to pay up to $100 million over 22 years. The settlement requires approval by all the parishes before it is finalized.
Freeport today mostly is a mining conglomerate but it still has oil and gas operations. Its wells account for about 4% of all the wells drilled in Louisiana’s coastal zone since 1911, which suggests that the preliminary settlement could be a guidepost for what other potential agreements might bring.
The U.S. Geological Survey last year estimated that Louisiana's coastal parishes lost close to 2,000 square miles between 1932 and 2016, an area larger than Rhode Island. Louisiana’s long-range coastal plan has estimated restoration could cost up to $50 billion over 50 years.
"Ensuring these funds stay in the communities that are impacted for dedicated coastal restoration is why the state of Louisiana intervened in these lawsuits, despite the fact that they were filed before I was governor," Gov. John Bel Edwards said. "While the details are being conclusively negotiated, I am hopeful that the conceptual framework in this settlement will be used as a model for resolving other similar actions."
The office of Attorney General Jeff Landry, who intervened on behalf of the state, said it would be reviewing the details “and determining if it is in the best interest of the state."
Edwards, Landry and the state’s Department of Natural Resources have intervened in all the lawsuits in an effort to assure that any restoration or money from ultimate rules be used in compliance with the state’s coastal master plan.
The Louisiana Oil and Gas Association (LOGA) and the Louisiana Mid-Continent Oil and Gas Association (LMOGA) denounced the deal, calling the agreement “just the latest chapter in the trial lawyers' playbook to shake down Louisiana oil and gas companies for legally conducting production activities, which were encouraged by state incentives and carried out under rigorous state and federal regulations many decades ago."
The “misguided effort,” the industry groups said, “to go back in time and rewrite history amounts to an all-out legal attack on the entire regulatory framework through which oil and gas operations have been conducted for nearly a century. Regardless of how one company may choose to handle their case, LOGA, LMOGA and our members remain confident these claims will not stand up in federal court."
The divisive litigation could drag on for decades, “creating uncertainty and unpredictability” that could drive jobs and investments from Louisiana.
“Many factors influence investment decisions, including the price of oil, but there's no question the increased litigation risk created by these meritless lawsuits is having a major impact. Enough is enough,” the groups said.