North Louisiana’s Haynesville Shale boom has been a starring player in the country’s natural gas renaissance. However, conventional drilling in the southern part of the state has been stymied by the threat of litigation over things that occurred decades ago, producers have argued and a new study asserts.
Since 2000, Louisiana producers, particularly those in South Louisiana, have been faced with a variety of environmental lawsuits, according to the study. These have come to be known as “legacy lawsuits” and are based on claims in which some of the alleged damaging actions happened decades ago.
“The state’s conventional oil and gas drilling activity, largely concentrated in South Louisiana, is well below levels experienced in other states, due in part to the negative perceptions associated with the filing of numerous ‘legacy lawsuits,’ environmental cases based on claims occurring, in some instances, several decades in the past,” Louisiana State University (LSU) researcher David Dismukes said in a new report. “These suits have contributed to a significant decrease in conventional Louisiana drilling activity that has resulted in near-term economic losses, and could have longer-term implications for the state’s mineral revenue collections.”
Dismukes, associate executive director of the Center for Energy Studies at LSU, has updated work included in a 2005 report produced by the Louisiana Department of Natural Resources and the Louisiana Department of Economic Development examining decreasing drilling activity its economic impacts.
According to his research, over the last eight years legacy lawsuits have led to a loss of about 1,200 new wells, translating into a total statewide reduction of about $6.7 billion (in 2010 dollars) in lost drilling investment. “The estimate is likely conservative since it excludes the impacts these reduced drilling activities would have on oil and natural gas production, and the mineral revenues generated by this foregone production,” he said.
Additionally, the thwarting of drilling by the threat of legacy lawsuits has cost the state $10.5 billion in economic output over the last eight years, 30,000 jobs in oil and gas and supporting industries and more than $1.5 billion in wages for those directly and indirectly employed by the industry, according to the research.
“…[L]egacy lawsuits are merely court-sanctioned extortion where there is no need for remediation in most cases,” said Louisiana Oil and Gas Association (LOGA) President Don Briggs. “This legalized extortion takes place at the expense of companies that drilled on a given piece of property, sometimes dating back several decades, with little or no proof from the landowner that any environmental damage to the property even exists. Dr. Dismukes’ indisputable research estimates that legacy lawsuits have led to the loss of nearly 1,200 new wells in Louisiana, translating to an astounding $6.8 billion dollars in lost drilling investments. “
Louisiana’s Act 312 was signed into law in 2006 and was intended to ensure that money awarded by legacy lawsuits was used to remediate environmental damages allegedly caused by drilling sites.
The Louisiana Department of Natural Resources (DNR) released data in a 2012 study for the House Natural Resources and Environment Committee showing that 210 of 271 Act 312 cases were brought to courts with no environmental data submitted to the Louisiana Office of Conservation, which is required by the law, according to LOGA. “Out of 64 notices of settlement filed, only three have been remediates. The most astonishing figure is that 35 of the 64 settlements (over 54%) required no further action to meet regulatory standards,” Briggs said.
“The conclusions drawn in the study are particularly disturbing and dismaying to those who are interested in or dependent upon the future vitality of Louisiana’s oil and gas industry,” said Louisiana Mid-Continent Oil and Gas Association (LMOGA) President Chris John. “While all of Louisiana has been very excited about the potential of unconventional drilling in the Haynesville Shale, the Tuscaloosa Marine Shale or the Brown Dense, Dr. Dismukes’ study emphatically highlights a grave problem for conventional drilling in south Louisiana and other parts of the state.
“Louisiana’s poor legal climate toward the oil and gas industry is causing the state to lose out on substantial conventional drilling opportunities and thousands of well-paying jobs to other states, most notably Texas.”
The situation in Louisiana has not gone unnoticed nationally. Late last year the American Tort Reform Association released its annual “Judicial Hellholes” report, “documenting abuses of the civil justice system in jurisdictions it says are among the most unfair and out-of-balance in the nation.” Louisiana was prominently featured for its “job-killing” rules governing legacy lawsuits.
“Unfortunately, Louisiana’s pattern of doling out millions of dollars for hugely exaggerated claims of environmental damage as a result of decades-old oil and gas production has spawned a cottage industry of cookie cutter lawsuits that are giving Louisiana a bad name and threatening the survival of a critical aspect of our energy sector,” said Melissa Landry, executive director of Louisiana Lawsuit Abuse Watch.
“The findings [of the LSU study] are a call to action for all the workers and businesses in Louisiana who depend — directly or indirectly — on the well being of the oil and gas industry,” John said. “The status quo is not acceptable, and LMOGA and its members are committed to resolving this issue.”
With the state’s lawmaking season due to get under way March 12, LMOGA, LOGA and others in the “sportsman’s paradise” are loaded for trial lawyers with legislation in development to target legacy lawsuits, Briggs said.
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