Oil and gas companies have long been at the forefront of Louisiana’s economic growth and development. But in recent years, lawsuits against them for affecting the state’s wetlands and coastal areas have become a key part of the business development plan for a number of law firms. It’s an unfair and counterproductive practice, oozing with politics.
Since the discovery of Jennings oilfield in 1901, almost a quarter-million wells have been drilled in Louisiana. Nearly 120 years later, the oil and gas industries pump some $75 billion into the state’s economic life. The roughly $2 billion in taxes and fees paid by the industry accounts for around 15 percent of total state revenues. Even amid the boom in hydraulic fracturing all over the U.S., Louisiana is among the top five states in the country in natural gas production and tenth in oil production.
Unfortunately, where some see a vibrant industry that provides hundreds of thousands of decent-paying jobs in the state, others see an opportunity for a big payday. For the past five years, trial lawyers have persuaded a number of parishes (equivalent to other states’ counties) to file lawsuits against oil and gas companies. The suits allege the companies’ drilling operations damaged or destroyed wetlands and marshes, and they want the companies to pay out as much as $100 billion for the cleanup, of which they hope to take a percentage cut.
The flurry of lawsuits against the industry arising in Louisiana and elsewhere in the nation may cause jitters among investors, at a time when a dim view of the industry has taken hold among some segments of the American public that fear that the burning of fossil fuels will eventually lead to rising sea levels and other natural catastrophes due to global warming.
Indeed, as trial lawyers, environmental activists, and pandering politicians turn to the judicial system to target the industry after failing to achieve many of their aims legislatively, energy companies will undoubtedly need to raise cash for reserve accounts on their balance sheets to respond to the impending litigation, no matter how dubious the legal claims against the industry are.
For all that, investors have a reason for a certain degree of confidence that the oil industry remains a safe bet. There are, for instance, some key factors that will keep oil prices rising in the near future, including a global demand that remains strong with no signs of easing. The price of oil is at the highest it has been in more than three years, with the possibility of reaching $80 per barrel before year’s end. Moreover, the political unrest in the Middle East has sparked concerns of a potential shortage of supply, without any foreseeable new supplies coming to market. That will help keep prices relatively high too.
As for Louisiana, the balance between economic development and environmental protection goes back nearly a half-century. The oil and gas industry has long abided by federal, state, and local laws and permitting guidelines to minimize the impact of drilling in these fragile coastal areas, but it would have been impossible to harness these energy resources with no adverse effect on them. Conscious of this, the industry has helped finance environmental restoration and protection, either directly through grants or indirectly through tax revenues that governments dedicate to environmental stewardship.
In addition, the oil and gas companies in the state have taken on this responsibility, even though the extent of the industry’s role in damaging coastal areas is a matter of debate. The loss of Louisiana’s wetlands has also been attributed to the levee system on the Mississippi River. The unintended consequences of trying to fashion the natural landscape to suit human needs were laid bare during Hurricane Katrina. We all contributed to the problem, and we must all solve the problem.
None of this matters to high-powered trial lawyers prospecting for potentially billions of dollars in fees. Since 2014, the handful of lawsuits originally filed by the parishes of Plaquemines, Cameron, Vermilion, and Jefferson have proliferated into some 40 filings. Five of these have trial dates set for early next year. The suits were spurred on by high-powered firms such as Talbot, Carmouche & Marcello, based in Baton Rouge. The firm has made its name suing oil and gas companies and is breaking new ground in the environmental law arena with possibly adverse outcomes for the state.
Trial lawyers have combed through laws and exploited such opportunities to get rich ever since there have been courts. Most people accept this. Resourcefulness is part of capitalism. What raises significant red flags in this spate of litigation in Louisiana is how trial lawyers also appear to be bending the political system to achieve the outcomes they want.
In short, they have swooped into coastal parishes and used contingency contracts to nudge officials to file suits. The suits won’t cost the parishes anything unless they win. At that point, they could result in billions of dollars in payments to the lawyers.
To further grease the wheels, trial lawyers have contributed money to the campaigns of the very local officials who decide whether to agree on such schemes. For example, the president of St. Bernard Parish signed a contract with Talbot, Carmouche & Marcello just days after taking office. The firm had contributed $15,000 to his campaign. On top of that, in Louisiana, the contingency paid to a law firm is set by local judges, so it should surprise no one to learn that the law firm has contributed to campaigns of many judges as well.
In one case, the Talbot, Carmouche & Marcello officials contributed $10,500 to the campaign of a judge who is set to preside over a lawsuit brought by Plaquemines Parish, with TCM as counsel. If not a reason for the judge to recuse himself, at the very least it demonstrates the trial lawyers’ determination to win.
If they do win, the oil and gas companies won’t be the only losers. The thousands of people who work in the sector and the millions of others who benefit indirectly from economic activity that comes from oil and gas operations will be harmed as well. Ironically, the state’s coastal areas will suffer as well. Money spent on dubious litigation can’t also be used to protect, restore, and preserve coastal wetlands and marshes.
John Burnett is CEO of 1 Empire Group in New York.
