In first for energy industry, Freeport-McMoRan to settle Louisiana lawsuits aimed at restoring coast by Tyler Bridges with contributions by Mark Schleifstein, Sept 26, 2019, NOLA.com
Lawyers representing coastal Louisiana parishes have negotiated their first settlement with one of the oil and gas companies accused in court of damaging the state’s coast, a potentially ground-breaking move in the effort to find funds for coastal restoration.
The settlement, with mining giant Freeport-McMoRan Inc. and its subsidiaries, will result in payments totaling up to $100 million in cash and environmental credits over many years, according to John Carmouche, an attorney with the Baton Rouge-based firm of Talbot, Carmouche & Marcello.
Linda Hayes, the vice president of communications for Freeport, confirmed the settlement agreement.
The deal represents a possible breakthrough in the years-long push by coastal parishes, and the lawyers representing them, to force oil and gas companies to contribute toward restoring land lost to the Gulf of Mexico over the past century.
The lawsuits charge that oil and gas firms failed to follow state law in drilling wells, building canals, disposing of waste and restoring the land and wetlands to the condition they were in before oil and gas operations began.
It’s unclear whether other oil and gas firms might follow Freeport’s lead. The company’s wells account for only 4% of the wells drilled in the coastal zone since 1911, Carmouche said, suggesting that the $100 million could be just a fraction of any broader settlements, should they come to pass.
Full terms of the settlement weren’t made public.
Carmouche said money collected from Freeport would have to be spent by the state or local governments to restore coastal marshes and wetlands.
“It’s a big deal,” Carmouche said in an interview Thursday. “We have been fighting for five years, and an oil company has finally validated the claims and is willing to be involved in a business solution to solve the real and provable damages caused by the oil companies. And there’s a lot more to come.”
Gov. John Bel Edwards expressed satisfaction with the settlement.
Two of the state’s most powerful energy lobbyists, the Louisiana Oil and Gas Association and the Louisiana Mid-Continent Oil and Gas Association, denounced the deal, calling it a win for trial lawyers and their plans “to shake down Louisiana oil and gas companies for legally conducting production activities” that followed the rules laid out by state and federal regulators over decades.
“This misguided effort to go back in time and rewrite history amounts to an all-out legal attack on the entire regulatory framework through which oil and gas operations have been conducted for nearly a century,” the two lobbying groups said in a joint statement. “Regardless of how one company may choose to handle their case, LOGA, LMOGA and our members remain confident these claims will not stand up in federal court.”
The office of Attorney General Jeff Landry, who intervened in the lawsuits on behalf of the state, said it wasn’t consulted on the deal but would be reviewing it.
“We have not seen the proposed settlement nor were we consulted about its details,” said Bill Stiles, the chief deputy attorney general, in a prepared statement. “We look forward to reviewing it, evaluating it, and determining if it is in the best interest of the state.”
The agreement “protects those companies, along with their parents and affiliates including Freeport-McMoRan Inc., from any further litigation,” Hayes said in an email Thursday.
“While we believe the plaintiffs’ theories of liability are unfounded, we recognize the importance of coastal restoration regardless of its cause. As a result, we decided to make an early investment in a creative solution rather than continue to engage in years of litigation.” [Settle and gag is the way the oil and gas industry hides corporate crimes, pollutions and harms! What oil and gas companies settle and gag for no reason?]
The deal still requires the approval of 12 coastal parish governments, although Carmouche said he expects agreement from all 12 before year’s end.
Parishes could go to court against each other and the state if they think the planned distribution of the settlement money shortchanges their claims.
As part of the deal, Freeport would make an upfront payment of $15 million upon formally signing the settlement, would pay an additional $4.25 million each in 2023 and 2024, conditioned on the creation of a special fund by the Legislature to receive the money, and would contribute up to $76.5 million more “subject to contemporaneous reimbursements from the proceeds of the prior sales of environmental credits,” according to Hayes. [What if the company declares bankruptcy protection, as so many of them do when it’s time to pay to clean up and or restore?]
Carmouche estimated that Freeport would disburse the money over 22 years. [That doesn’t sound creative at all, sounds more like a fabulous escape hatch via time]
The coastal parishes would receive money that is not available today for restoration work, under a contract that the Carmouche law firm has agreed to with Freeport. The six parishes that have filed suit are Plaquemines, Jefferson, St. John, Cameron, Vermilion and St. Bernard.
Carmouche said another six coastal parishes would be part of the deal because they have hired lawyers to prepare a damage model in case there is a settlement. Those parishes are: Lafourche, Terrebonne, St. Charles, St. Mary, St. Martin and Iberia.
The contract provides strict stipulations on how to spend that money and calls for the Legislature to create a structure to receive the funds from Freeport and other oil and gas companies that might settle, Carmouche said.
For Freeport, the benefit is ending the possibility of losing the lawsuit and having to pay hundreds of millions of dollars more in damages, ending the legal uncertainty caused by the lawsuit and gaining access to environmental credits that the company can sell to other companies looking for environmental offsets. [Seems like a mighty sweet deal for the company that caused the harms]
“The only way that the settlement does not go through is if politicians kill it,” Carmouche said.
News of the settlement will likely have implications in the governor’s race.
Edwards, a Democrat, has supported the coastal lawsuits while his two Republican opponents, U.S. Rep. Ralph Abraham and businessman Eddie Rispone, have decried them as frivolous attempts to extort money from oil and gas companies.
The Louisiana Oil and Gas Association’s political action committee endorsed Abraham on Thursday.
Both oil and gas association groups say that the lawsuits are discouraging investment in Louisiana.
The Carmouche law firm and its legal partners first sued the oil and gas companies in 2013. The number of cases now total 42, and they target 98 different companies.
Freeport was accused of causing damage in 14 of the cases, Carmouche said.
Carmouche said that he and his legal team are not working on a contingency basis in which they would receive a percentage of the damage award.
“The lawyers have agreed to ask a court at a later date for reasonable attorney fees, per the contracts with the parishes,” he said.
The first case has yet to receive a trial date. The law firms representing the parishes have been battling oil and gas attorneys over whether the cases will be heard in state court under state law, which the parishes’ lawyers favor, or in federal court under federal law, as the oil and gas companies favor.
Any settlement money could speed the state’s coastal restoration efforts because Louisiana lawmakers have resisted efforts to raise taxes to fund coastal projects. If all oil companies settled claims on the basis of the $100 million Freeport deal, based on the share of wells Freeport operated the state would receive only around $2.5 billion.
But Carmouche said Freeport “contributed to less than 1% of the environmental damage caused by the coastal zone violations.” suggesting that the ultimate payday could be much higher.
The state’s Coastal Master Plan calls for spending $50 billion over 50 years, with half the money to be spent on coastal restoration. Only about $10 billion – mostly BP oil spill-related money – has been identified for restoration projects so far.
Louisiana has lost 1,900 square miles of coastline since 1930, an area bigger than Rhode Island.
Author John Barry, who as a member of the Southeast Louisiana Flood Protection Authority-East was the architect of another major lawsuit filed against the industry over coastal land loss, said the Freeport settlement represented a step in the right direction.
“It’s a start. I’m glad that at least one company has recognized their tremendous liability,” Barry said.
Refer also to: