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Louisiana Adopts Lawsuit Relief for Oil/Gas Industry

A bill intended to help Louisiana's energy industry clear the decks of what it considers to be exploitative lawsuits is on its way to the desk of Gov. Bobby Jindal, who is a supporter of the measure. Meanwhile, industry is watching the progress of legislation to quash lawsuits that could put companies on the hook for billions in past coastal damage.

SB 667 was sponsored by state Sens. Robert Adley (R-Benton) and Ronnie Johns (R-Sulphur). The legislation was announced last March to address legacy lawsuits, an issue that the state and its energy interests have dealt with for years (see Daily GPIMarch 31).

More than 355 legacy lawsuits with 2,856 named defendants have been filed against the oil and gas industry in Louisiana, according to the Louisiana Oil & Gas Association (LOGA). Additionally, the South Louisiana Flood Protection Authority-East has sued 97 companies for past coastal damage, while Plaquemines and Jefferson parishes have filed 28 coastal lawsuits naming 259 energy industry defendants, according to LOGA (see Daily GPIJuly 25, 2013).

SB 667 sets ground rules for handling legacy environmental cases (see Daily GPIApril 16). Among its provisions are measures to make the state's "limited admission process" work more effectively. The process was created in 2012 and is intended to encourage operators to admit to fouling the environment, clearing the way for remediation to take place before protracted and expensive litigation, according to SB 667 backers.

"Our state's history on legacy issues has been to sue first and talk later," said Stephen Waguespack, president of the Louisiana Association of Business and Industry (LABI). "That model was flipped on its head today [Tuesday]. This legislation will help speed up responsible remediation of property."

SB 667 passed the Senate on a 37-0 vote after an amendment was added that would exclude pending cases from the bill's provisions. However, the House stripped the amendment before passing the bill on a 74-18 vote and sending it back to the Senate, where it passed Tuesday without the controversial amendment on a vote of 27-12.

On Wednesday LOGA and LABI held a press conference in Baton Rouge where industry representatives talked about how the legal environment in Louisiana has hindered business.

"...[W]ithin the last 10 years we have found it increasingly difficult to continue to do business in Louisiana, due in large part to the adverse legal climate created by these oilfield legacy liability lawsuits," said PetroQuest Energy Inc. CEO Charles Goodson. "These lawsuits are not just against big oil companies but include many small companies as well simply because they may have bought an interest in oil and gas properties which are the subject of a lawsuit.

"It is difficult to find investors and industry partners willing to participate in projects in the state as Louisiana has become a hostile place to the oil and gas industry. Many oil and gas companies have divested of their assets in Louisiana and left the state while the remaining companies have scaled back their operations in the state."

Moncla Marine co-owner Mike Moncla talked about the mega-lawsuits that are targeting pipeline operators for past damage to coastal wetlands with penalties estimated to be in the billions of dollars overall. Multiple bills have been introduced during this legislative session to counter such lawsuits. On Wednesday one such bill, Adley's SB 553, was referred to the House Committee on Civil Law and Procedure after an amended version passed the Senate last week on a 23-15 vote.

"Since no 'Big Oil' companies are left in the Louisiana inland waters and since 100% of our customer base is made up of smaller independents, we at Moncla are quite fearful that these lawsuits will devastate our business and the 600 jobs that we have created over that past four years," Moncla said. "If the independent oil and gas companies have to pay billions in these lawsuits, not only will this cripple their budgets for several years to come, but it could also bankrupt many of them."

Lawsuits and the threat of them are chilling oil and gas activity in Louisiana and sending industry dollars across state lines and farther away, said Swift Energy Co. President Bruce Vincent.

"...[I]t is relevant to note that Swift spent approximately $410 million in Louisiana in 2008 compared to approximately $114 million in Texas. In contrast, in 2013, Swift spent approximately $102 million in Louisiana compared to $396 million in Texas," Vincent said. "This amounts to a roughly 75% reduction in capital spending in Louisiana over this time period with a corresponding increase in capital spending of roughly 247% in Texas."

Stone Energy CEO David Welch said his company would like to invest more in Louisiana but it is difficult to find partners because of the legal climate. "We have experienced large investors who have changed their minds about operating in Louisiana because of the risk of legacy and coastal lawsuits," he said. "We believe that these hurt the oil and gas business in Louisiana."

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