Alert

Alert: Update on Legislation Impacting Legacy Oilfield Litigation

June 9, 2011

In Corbello v. Iowa Production, 2002-0826 (La. 2/25/03), 850 So.2d 686, the Louisiana Supreme Court awarded plaintiff landowners $33 million in damages against Shell Oil Company.  Most of those damages represented the cost of addressing contamination of the Chicot Aquifer.  The Court’s decision did not, however, require restoration of the contaminated property.  Dozens of “legacy lawsuits” alleging historical oilfield contamination have been filed in Louisiana since Corbello.

In the years following Corbello, the Louisiana Legislature has considered a number of measures to prevent landowners from receiving enormous damage awards without any corresponding obligation to remediate the contamination.  Most notably, the 2006 Louisiana Legislature mandated a procedure for recovering environmental damages from oilfield operations.  Act 312 of 2006.  That statute was designed to assure that funds awarded in a lawsuit for environmental damage arising out of oilfield production would, in fact, be used to remediate groundwater contamination.  Act 312 amended several sections of Title 30 of the Revised Statutes to authorize the Office of Conservation to conduct hearings and develop the most feasible plan for evaluation and remediation of environmental damage.  La. R.S. 30:29(C)(1).  Under this new procedure, the district court then adopts and implements the Office of Conservation plan unless one of the parties proves by, a preponderance of the evidence, that another plan is more feasible.  La. R.S. 30:29(C)(5).  Act 312 requires the responsible parties to make payment into the registry of the court in order to assure that funds are available to restore the property. La. R.S. 30:29(C)(6)(a); 29(D)(3).

As of this date, only one case has worked its way through the procedure mandated by Act 312 [1]. Oil and gas interests in Louisiana claim that the statutory procedure does not efficiently serve its purpose because the parties must go through the Office of Conservation hearing and a full trial before restoration begins.  Defendants, particularly small operators, frequently are forced to settle rather than incur the expense of a full trial.

In an effort to address these and other concerns, House Bill No. 563 was introduced in the current 2011 Legislative session.  The proposed legislation would give allegedly responsible parties 120 days to acknowledge fault for the environmental damage.  Responsible parties would develop a remediation plan and submit it to the Office of Conservation.  Once approved, the plan immediately would become final and enforceable.  The parties would have no right to litigate the relative merits of an alternate to the plan approved by Conservation.  Other private claims still would be litigated in district court; however, only the Office of Conservation would have jurisdiction to determine the appropriate remedy for restoration of the property.  Even if the parties choose to settle a claim of contamination, HB 563 would require that any remediation plan must first be approved by the Department of Conservation.

It now appears unlikely that HB 563 will be enacted into law during the 2011 Legislative Session.  Absent further Legislative action, oil and gas interests in Louisiana will continue to face the prospect of expensive and protracted litigation to resolve “legacy claims.”

[1] Tensas Poppadoc, Inc. v. Chevron USA, Inc. from Concordia Parish. Archived Broadcasts of House of Representatives Natural Resources and Environment Committee Meeting, May 18, 2011.