COASTAL LITIGATION IS A DRAIN ON STATE'S ECONOMY
Coastal lawsuits targeting Louisiana’s critical energy industry stretch the law far beyond its intent, ignore critical facts and involve private lawyers in a space meant for democratically elected decision makers who are accountable to the public. Coastal lawsuits attempt to outsource the enforcement of state-issued permits to local governing authorities. Even though energy companies provide thousands of quality jobs for hard- working Louisianans and millions in tax dollars for state coffers, these baseless lawsuits continue to move forward under Governor Edwards and his high-paid trial attorney friends. A 2020 report by the Louisiana Mid-Continent Oil and Gas Association found the oil and natural gas industry has contributed $73 billion to the state GDP and supported 249,800 jobs in 2019. The industry provided nearly $4.5 billion in state and local taxes, 14.6 percent of the state’s total taxes.
According to a recent economic study by the Pelican Institute for Public Policy, Louisiana’s coastal litigation leads to an economic loss of $44.4 million to $113 million each year. The increased risk of litigation for oil drilling companies has resulted in 53-74 fewer oil wells from 2014 to 2016. As a result, Louisiana has seen “a decrease of more than 2,000 employees across four occupations in the state’s oil and gas industry, and these lost jobs equate to lost earnings of $70 million per year.” These coastal lawsuits continue to move the state in the wrong direction and only serve as a burden on the state’s economy as it looks to rebound from a difficult year.
As it stands now, seven parishes have filed more than 40 lawsuits. These lawsuits have yet to be heard, though the U.S. Court of Appeals for the Fifth Circuit in New Orleans recently affirmed a decision to keep two of these cases in their preferred forum, Louisiana state courts, which are viewed as more friendly to plaintiffs than neutral federal courts. While the initial decision only directly impacts two of the cases brought by the Plaquemines and Cameron Parishes, it sets the stage for the others.
To date, the oil and gas industry has funded over $230 million in “coastal building and protection projects.” If the energy companies are unsuccessful defending themselves, they could be forced to pay billions of dollars. While the defendants are perceived as “Big Oil” companies, the majority of the over 200 defendants are small, independent operators. The litigation has so far failed to accomplish anything substantial, and while it’s pending, the state is losing out on a minimum of $22.6 million each year in industry royalties.
In an effort to stop this unprecedented abuse of the Coastal Zone Management Authority (CZMA), legislation introduced during the 2020 Regular Legislative Session would have clarified and reaffirmed that authority of local government to bring enforcement action under the CZMA is limited to uses of local concern. The legislation would have further clarified that enforcement action for issues of state concern (i.e., state- issued permits) is limited to the Secretary of the Department of Natural Resources or the Attorney General, reinforcing that the state alone is vested with the authority to issue, regulate and bring enforcement action over coastal use permits. This legislation ultimately failed to pass.
POTENTIAL SETTLEMENT ON THE HORIZON?
Meanwhile, a reported settlement with Freeport-McMoRan announced in Fall 2019 has yet to come to fruition. John Carmouche, the coastal ligation’s lead plaintiffs’ attorney, negotiated the deal behind closed doors, and the exact terms of the agreement, including the lawyers’ share of the settlement, still have not been revealed to the public.
However, according to news accounts published in 2019, the proposed deal could generate $23.5 million in cash payments to be directed into a yet-to-be-created state fund dedicated to coastal restoration. Reportedly, another $76.5 million in questionable income could be generated through the sale of ill-defined “environmental credits” created by settlement-mandated “restoration activities” to be carried out over a period of 22 years. There is no explanation of how this vague commitment would be enforced or what security backstops this long-term obligation.
Carmouche’s attempt to pass legislation to effectuate the proposed settlement deal during the 2020 Regular Legislative Session was met with swift opposition and failed to make it out of even one committee. A broad coalition of opponents, including energy industry advocates, landowners, and dozens of business organizations across the state, successfully argued the flawed settlement framework designed by plaintiffs’ lawyers would have: (1) diverted funds away from coastal restoration, (2) incentivized more meritless litigation targeting the energy industry, and (3) effectively allowed for the wholesale outsourcing of state coastal policy and regulatory enforcement authority. There is a clear lack of transparency. Policy, not trial lawyers, should drive solutions. Any settlement framework should also clearly outline the process for funding to flow directly to impacted areas specifically for coastal restoration.
Newly elected Louisiana Supreme Court Justice Will Crain was the subject of successful recusal motions by Carmouche, discussed in secret by the court, citing a campaign mailer mentioning Carmouche as proof of “actual bias.”