Louisiana’s legacy lawsuit lottery

Clean up the environment and everyone is a winner. Sounds like a reasonable bet. But with a few subtle plays, big money payouts tend to turn in favor of aggressive players and against the house when Louisiana residents look to restore areas subject to legacy lawsuits.

“All the money spent on the process was supposed to go to cleanup and payment of reasonable legal and expert fees,” Louisiana Lawsuit Abuse Watch Executive Director Melissa Landry said in a printed statement.

Landry charges select trial lawyers and corporate winners with, “manipulating the system in an effort to pocket big settlements, rather than get our land cleaned up,” she said.

A plan intended to address environmental issues resulting from damage claims connected to abandoned, and sometimes forgotten, oil fields, has, according to industry insiders, become a big-ticket opportunity for those looking to scratch a little for fast cash.

“It’s a lottery,” Louisiana Association of Business and Industry spokeswoman Ginger Sawyer said.

Louisiana’s legacy lawsuits, currently 253 are active in the state with 1,500 defendants named, date back nearly a decade to the case of Corbello vs. Iowa Production.

In 2003, the Louisiana Supreme Court issued a decision regarding a concept intended to benefit the environment and improve the oil and gas industry’s image, but ended up shuffling both the legal community and the oil and gas industry efforts.

In this landmark case, Corbello vs. Iowa Production resulted in the court deciding that damages involving terra firma in Calcasieu Parish, a mineral lease was established there in 1929 and a surface lease in 1961, should equal the value of the property rather than the cost to rebuild or restore the property.

Louisiana landowners, believed that the payout for property damage should be determined by contract language and that the value of the property had no bearing on the amount of damages to be paid. At the time of litigation, the 320-acre tract of land in question had a real estate market value of $108,000.

In Corbello vs. Iowa Production, cleanup costs totaling $33 million were awarded to the landowner. The court’s decision meant that if a contract called for restoration of property, then the property must be restored regardless of costs associated with restoration.

There was another catch in the court’s decision. In the ruling it was specified that plaintiffs who won legacy lawsuit awards did not have to use that award to restore property.

As a result, some trial lawyers began filing lawsuits with the cost of damages hugely inflated, according to oil and gas leaders.

“The state’s process of addressing oilfield claims is being circumvented,” Louisiana Oil and Gas Association President Don Briggs said. “[Cases like this are] placing lawsuit profits ahead of cleanup.”

“The [Act 312] legacy law actually was litigated all the way up to the Supreme Court and its constitutionality was tested,” Sawyer said. “In 2008, the Supreme Court held that the bill was constitutional. But trying to implement the provisions of Act 312, we found that some of the things we had to negotiate has kept it working like we intended.”

Briggs and Sawyer specified that although many outside the system refer to legacy lawsuits as pitting the oil and gas industry against landowners, such is not necessarily the case.

“Legacy lawsuits are filed against the industry for practices that were legal decades ago that we don’t do today,” Briggs said. “So [landowners] sue [oil and gas companies] for what we did when it was legal. There are a lot of environmental claims that are not valid [in relation to current defendants] at all.”

“The landowners are the ones claiming environmental damage,” Sawyer said. “Some of them have purchased property with the intention of litigation because they knew there were some contaminated properties. Then there are other landowners who do have legitimate concerns and claims. We have been trying to identify those.”

Briggs said that once Corbello vs. Iowa Production was ruled upon, a new lawsuit industry was started. “So you got a lot of landowners, some large and some small, that saw an opportunity to make a whole bunch of money. Most of the lawsuits you can’t even tell that there has been anything out [on the property in question].”

“What we want to do is allow the companies to go in and clean up those properties,” Sawyer said. “If you are not an existing operator on those particular properties, you are not allowed to go onto those properties. It would be considered trespassing.”

Sawyer said that many legacy law issues were created as many as 50 years ago when major producers pulled out of parts of Louisiana and sold drilling sites to smaller operations. Independent producers signing onto a piece of property took over those sites, but indemnified people down the chain.

“One lawsuit may have 30 different companies involved,” Briggs said. “The reason why is back in 1930, let’s say as an example, Exxon drilled the original well in the original field. But then that field was sold time after time after time. So landowners sue everybody who ever owned that piece of land.”

“You have the little guys supporting the guys that originally did the damage,” Sawyer said. “What we are trying to do is work it out so if there will be some way that whoever may think they have been in the chain that contaminated the property to be allowed to go in to clean up those without admitting liability for other things.”

Some landowners have been accused of holding off cleanup efforts because, depending on the purpose of their property, the value of litigation could be diminished.

Sawyer said if a jury knows the property has been cleaned, land owners may be unable to convince a court of their case.

Louisiana Landowners Association Executive Director Paul Fre said that for those he represents, the issue is not one of oil and gas against landowners, but a matter of legal language that is leaving all parties playing with the odds against them.

“Our association was in opposition to the legislation that was filed,” he said. “We are not in opposition to cleanup of sites, obviously, because most of those sites occur on private property. It is the manner in which those issues are resolved.”

Landowners Association members also argue that legacy lawsuit litigation removes power from local courts and places all legal decisions in Baton Rouge. “We are working with the oil and gas folks to draw language that will resolve all the concerns,” Fre said. “We want the legislation to be pro-landowner as well as pro-oil and gas. We’ve got members on both sides of this issue.”

Telephone messages left with a selection of environmental law attorneys, seeking their input on legacy lawsuits, were not returned by press time.

Briggs and Sawyer said that LOGA and LABI would like to see legacy lawsuit legislation that limits the number of defendants sued in individual cases, allows companies that want to clean a given area access without negative consequences, and restricts landowners from being able to take advantage of the system by betting on a easy financial return.

“Let’s just get this cleaned up and get on to other things,” Sawyer said.

Oil and gas leaders and landowners each contend they want to work together to help those that have legitimate claims. They just do not enjoy a game of legal skill or chance where the odds appear fixed.