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Government track in litigation denied

By Rebecca Mowbray

In a huge blow to state and federal government interests, U.S. District Judge Carl Barbier denied requests to have a separate government track in the oil spill litigation, making elected state attorneys general subordinate to private plaintiff attorneys and creating the risk that states will have to give a portion of any cleanup winnings to a committee of plaintiff attorneys.

Back in September, the U.S. Department of Justice and the state of Louisiana filed motions in the litigation over the April 20 explosion of the Deepwater Horizon and resulting oil spill requesting a special government track in the litigation because of the unique public interests in collecting money for things like natural resource damages and lost tax revenue.

Different tracks for different types of interests are normal in consolidated litigation proceedings, but in the oil spill litigation, Barbier agreed to try a new strategy in which different interests would be grouped into loose “bundles” under the management of a powerful committee of plaintiff attorneys overseeing the litigation. The idea was that having one group of people calling the shots with everyone underneath them sharing depositions to common benefit would be more efficient than multiple tracks with their own masters.

Louisiana was eventually joined by 16 other states in demanding a separate track, but the issue was never assigned a hearing. The powerful committee of plaintiff attorneys, known as the plaintiffs steering committee, was never asked to respond to the concerns the states and federal government raised.

On Thursday afternoon, Barbier denied the states’ multiple requests for hearings on the matter, and appointed Justice Department attorney Michael Underhill as “coordinating counsel for federal government interests,” and Alabama Attorney General Luther Strange as “coordinating counsel for state interests.” Underhill and Strange will be responsible for working with the plaintiff and defense steering committees and coordinating discovery.

Louisiana Attorney General Buddy Caldwell is furious. “This latest order is a direct denial and abridgment of the constitutional rights of the citizens of the state of Louisiana including the constitutional right to their own counsel, and is a discriminatory action that transcends the bounds of proper federal/state relations and state sovereignty rights,” Caldwell said in a press release Thursday evening.

The situation creates sovereignty issues for the states, because elected attorneys general won’t be able to represent the interests of their constituents without going through private plaintiff attorneys, who have the power to set schedules, decide what depositions get taken, and how much time everyone gets in asking questions.

Four depositions have been taken, and eight more are scheduled next month.

The situation could also deny Louisiana resources for restoring damaged wetlands, to the enrichment of private plaintiff attorneys. At a time when private plaintiff attorneys risk losing many of their clients to settlements with the Gulf Coast Claims Facility fund run by Washington attorney Kenneth Feinberg, the denial of the government track could allow private plaintiff attorneys to make up their fee losses at the expense of states, which stand to recover billions of dollars in damages. Without a government track, the state of Louisiana, which says it is prepared to press its own case against BP and the other corporate defendants, will need to go through the plaintiffs steering committee. That situation means that at the end of the litigation, the plaintiff attorneys could claim that their work was responsible for helping the state to win recoveries, so they deserve a cut for their services.

In filings, Caldwell also sought a specific declaration from Barbier that private lawyers who were not retained by the attorneys general should not be allowed to receive any payment of fees from winnings that states ultimately receive from the defendants. That request also did not receive consideration.

Also perplexing is that the Alabama attorney general, the person selected as “coordinating counsel” for all states, was one of the signatories to the proposal for a separate government track. Just as each of the corporate defendants in the case has its own representative on the defendants steering committee because companies’ individual interests will certainly diverge as the litigation progresses, having one person represent the interests of all states has the same problem. In some instances, for example, Louisiana and Florida’s interests in the oil spill litigation might be aligned, but if battles shape up over whether economic damage to tourism businesses or economic damage to fisheries and wetlands deserve more weight in the litigation, their interests might be opposed, yet they’ll both have to go through the Alabama attorney general in his stature under the private plaintiff attorneys.

“The states of this country are no less independent and sovereign than the corporate defendants herein and each state, just like the defendants, should be granted separate liaison counsel — their own Attorney General,” Caldwell wrote, calling for Barbier’s decision to be “vacated immediately.”

Caldwell, who had been scheduled to appear at this morning’s monthly status conference hearing on the oil spill before the dispute reached crescendo, said that his office is currently preparing formal requests for this relief and will be filed shortly.

The oil spill litigation is considered the biggest legal case ever undertaken in the state of Louisiana because of the amount of money at stake.

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By Jeremy Alford

BATON ROUGE — At this month’s oil and gas lease sale, the state awarded 22 energy leases covering more than 5,200 acres mostly in south Louisiana, including a sizable swath from the area where Lafourche Parish bumps up against Jefferson Parish.

It also marked the first time in two months that investors put money into state-owned portions of Lafourche.

Meanwhile, after a long run of consecutive sales dating back to last fall, no leases were awarded in Terrebonne Parish.

It was a lackluster monthly sale for the state Mineral and Energy Board, which collected only $2.2 million from oilmen and private companies, compared to $4 million in January 2010.

Overall, roughly $24 million has been collected this fiscal year, which ends June 30. At this time last year, the total was closer to $39 million.

Locally, the state leased more than 260 acres on the eastern edge of Lafourche Parish this month, but the local win is shared with Jefferson.

The area is divided between two leases, both of which are along Bayou Perot.

Patrick L. Donohue Petroleum Properties Inc. of Abbeville scooped up 121 acres for $25,000, while the Texas-based Castex Energy 2005 L.P. was able to secure 140 acres for $38,000.

All told, the state Mineral and Energy Board only sold leases in Acadia, Allen, DeSoto, Jefferson, Lafourche, Red River, Sabine, St. Mary and Vermilion parishes.

Of the 22 tracts awarded, three are in north Louisiana and 19 are in southern parishes.

Additionally, there was one offshore lease awarded to Baton Rouge’s Theophilus Oil, Gas and Land, which pursued a wet plot off the shores of neighboring St. Mary Parish.

It’s just the latest in the saga of shallow and deep water exploration, which have been in flux chiefly because of regulatory action at the federal level following the BP oil crisis.

Michael Bromwich, director of the Bureau of Ocean Energy Management, Regulation and Enforcement, said he expects new deepwater drilling permits to be issued by the federal government sometime this summer.

He also said the bureau is working to incorporate many of the findings of the National Oil Spill Commission, which released its final report on last year’s months-long spill.

But Don Briggs, president of the Louisiana Oil and Gas Association, said last week that those promises aren’t inspiring confidence or encouraging investors to get into the Gulf of Mexico.

“The industry feels the return of deepwater drilling is not just around the corner, as Bromwich would have us believe,” Briggs said. “Unfortunately, the only thing that is around the corner is a continued shutdown of a vital industry and, of course, higher energy prices for all Americans.”

The latest U.S. rig count, though, does offer some positive news for Louisiana in the form of three new rigs in action over the past week.

In fact, the number of active rigs searching for oil and natural gas in the U.S. increased by 13 last week to 1,713, according to Baker Hughes Inc.

Dan Juneau, president of the Louisiana Association of Business and Industry, said investors will also be keeping a close eye on Congress, where President Barack Obama is expected to make some bold moves on the energy front in the near future.

Specifically, Obama reportedly wants a renewable energy bill as part of his legacy.

The president “will have to be willing to compromise with members of Congress who want to increase domestic energy production from both renewable and non-renewable sources” to make the bill a reality, Juneau said.

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Bossier Parish Community College is located at 6220 E. Texas St., Bossier City. For more information, call 678-6000.

Oil and gas scholarships given

Officials from Bossier Parish Community College and Encana Corp. recognized 13 students with academic scholarships. All of the students are majoring in oil and gas production technology, a new degree at the college.

BPCC and the Louisiana Oil & Gas Association will hold the first speaking event for the program from 6:30 to 7:30 p.m. Thursday in the BPCC Theatre, Building C.

Guest speaker will be Don Briggs, president of Louisiana Oil & Gas Association.

People interested in the degree program can contact program director Linda Sonnier at lsonnier@bpcc.edu or 678-6524.

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By Jonathan Tilove

WASHINGTON — Jobs undoubtedly will be the focus of President Barack Obama’s State of the Union address tonight.

For the Louisiana congressional delegation, it would be nice if that included the jobs of those who make their living from oil and gas drilling in the Gulf of Mexico.

The president is expected to call for targeted spending to boost the economy, including a focus on improving the education, innovation and infrastructure of the United States as the way to provide a sounder economic base. He also will call for reducing the government’s debt — now more than $14 trillion — and overhauling government operations.

“Apparently a central theme of his address is going to be U.S. competitiveness and, clearly in line with that, I want to hear about energy and restarting drilling in the Gulf,” Sen. David Vitter, R-La., said Monday. “It seems the de facto moratorium on drilling and other steps we’ve taken are moving in the opposite direction.”

“I’d like to hear him focus on jobs and allowing our people to go back to work drilling safely in the Gulf, something he could do,” said Rep. Steve Scalise, R-Jefferson.

“It would be my hope that he would promise to actually allow permits to go forward, but I don’t expect that he’ll do that,” said Rep. John Fleming, R-Minden.

Even New Orleans Rep. Cedric Richmond, Louisiana’s lone Democrat in the House delegation, said he planned to press President Obama at a reception for freshman lawmakers at the White House on Monday night, to “make sure we set up a streamlined process to get us back to drilling.”

It would be hard for the president to avoid talking about the Macondo blowout and its aftermath in his address.

The worst oil spill in U.S. history, it dominated the headlines for half the year. The National Oil Spill Commission, named by Obama to investigate the causes and lessons of the disaster, issued its final report last week in the form of a 380-page book packed with recommendations for overhauling the industry and revamping the federal regulatory regime.

The co-chairs of the commission — former Florida senator and governor Bob Graham, a Democrat, and former EPA Administrator William Reilly, a Republican — will appear Wednesday before separate Senate and House committees to press their recommendations.

That includes a proposal, backed by the Louisiana delegation, to devote 80 percent of any Clean Water Act fines paid by BP to restoration of the Gulf Coast environment and economy. It is the one major recommendation on which the Louisiana lawmakers, the commission, and the administration see eye to eye.

Secretary of the Navy Ray Mabus, in his report to the president on Gulf Coast recovery, endorsed the idea, as has Carol Browner, the White House official in charge of energy policy, all of which suggests some considerable momentum for the idea. Sen. Mary Landrieu, D-La., said she plans to refile legislation in the Senate, a parallel version of what Scalise has filed in the House, to direct those fines to the coast.

But Mark Davis, director of the Tulane Institute on Water Resources Law and Policy, said, “In my view momentum will not be enough; it will take continued White House commitment” to make it happen. And a State of the Union shout-out would help.

“We’re hopeful that the state of the Gulf gets a mention,” said Aaron Viles, deputy director of the Gulf Restoration Network in New Orleans. “With the BP disaster in the nation’s rear-view mirror, it’s an important opportunity to put the headlights on the road to restoration, and commit BP’s fines and penalties to creating a healthy Gulf.”

Beyond funding for restoration, however, there are sharp divisions about the lessons of the spill.

In his own “Environmental State of the Union” message Monday, Peter Lehner, executive director of the Natural Resources Defense Council, described the BP blowout as a “national wake-up call to break our costly and dangerous dependence on oil and move faster toward cleaner, safer, more sustainable sources of energy.”

Lehner called for adopting the commission’s recommendation to raise the regulatory bar, putting a higher premium on safety and environmental protection.

On jobs, Lehner said, “we can put millions of Americans back to work by investing in renewable fuels, fostering sustainable communities and demanding even more energy efficiency in our cars, our workplaces, our homes and the products we use.”

But members of the Louisiana delegation have come to characterize the promise of green jobs as something of a mirage.

“All the green energy money exists because of taxpayer subsidies,” said Rep. Bill Cassidy, R-Baton Rouge. “We know that the road to jobs goes through plentiful energy, specifically plentiful natural gas and domestic oil production.”

Despite the tricky politics of it, Tulane political scientist Thomas Langston said, President Obama may well turn to the story of the nation’s response to the BP spill in his speech “because it fits easily into the story he is trying hard to tell now: from disaster to recovery through job creation. Sure, folks down here will say ’show us the jobs and the new drilling permits,’ but in the rest of the nation, that will likely sound like carping.”

And plainly, LSU political scientist Kirby Goidel said, “There isn’t much he can do in terms of his speech to move the dial in Louisiana, particularly among the Louisiana delegation.

“The speech is much more important for him nationally where he needs to regain the center and become the voice of reason in a crazy and unpredictable world,” Goidel said. “The best he can probably do in Louisiana is to soften some of the opposition.”

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By Don G. Briggs, President

Louisiana Oil and Gas Association

Policy makers in Washington need to remember that America’s abundant supply of natural gas is both an economic and environmental asset. Gas burns twice as clean as coal, and the natural gas industry contributes $385 billion a year to the U.S. economy while supporting 4 million American jobs, many of them right here in Louisiana.

Improvements in the technology known as hydraulic fracturing (or “fracking”) have made it practical to extract natural gas embedded in shale rock as deep as a mile below ground. This is producing more natural gas and generating badly needed jobs and tax revenue in some states. But just as we begin to see economic progress from fracking, the Department of the Interior is showing interest in restrictive regulations that would make this technique more difficult and expensive.

The Department of the Interior says it’s motivated by fears that fracking could contaminate underground water supplies. But those fears ignore the study by the Environmental Protection Agency (EP A) finding no evidence of groundwater contamination by fracking. If the Interior department decides to go ahead with unnecessary restrictions on fracking, it would be a serious economic setback for the whole country and particularly for Louisiana.

Northwestern Louisiana sits on top of the Haynesville shale formation. This is potentially one of the richest sources of natural gas in America, and fracking technology makes this resource accessible. Louisiana literally can’t afford to have this opportunity snatched away by misguided federal regulation.

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Industry experts say near term outlook remains grim

By RICHARD BURGESS

With oil hovering around $90 a barrel, near a two-year high, the mood should be upbeat in south Louisiana’s oil patch.

Yet many local oil companies and the businesses that support them remain largely sidelined by the uncertainty over deepwater drilling after the Deepwater Horizon disaster.  The moratorium imposed shortly after the rig exploded in April has officially ended, but no new permits have been issued for deepwater drilling in the Gulf of Mexico, the bread and butter of the south Louisiana oil economy.

Doomsday predictions that the industry would collapse during the moratorium have proven unfounded.

Many companies are making ends meet by going into shallower water or focusing on natural gas fields elsewhere in the state and country.

The question, say many in the business, is how long that can continue.

“Right now, the outlook for the near term is grim,” said Port of Fourchon Director Chett Chiasson, who oversees a Lafourche Parish facility that depends on deepwater oil-and-gas activity. “We know the industry is going to come back. It’s just a matter of when, and who is left standing when it does.”

Chris John, president of the Louisiana Mid-Continent Oil and Gas Association, said long-term prospects remain “very bright.” Major oil companies are invested heavily in the Gulf, with $8 billion worth of oil and gas leases made over the past three years waiting to be tapped, he said.

But he said that enthusiasm is tempered by the critical struggles the industry faces in the short term.

The diversification and globalization of south Louisianan’s oil industry in recent decades has made it a bit easier for companies to wait that future out.

Frank’s Casing Crew and Rental Tools is a Lafayette-based firm that specializes in such things as renting offshore tools, providing work crews, welding and securely connecting thousands of feet of giant pipe — a critical job offshore.

The portion of the company’s business tied to deepwater drilling has “been at standstill since the beginning of the Horizon incident,” said Frank’s VP of Engineering Mike Webre.

Pipe destined for the Gulf before the moratorium — 25,000 to 30,000 feet of it — sits in a yard at the company’s deepwater fabrication facility at the Port of Iberia in Iberia Parish.

“That’s an estimate on the low end,” said Kumar Mallenahalli, who manages the fabrication yard.

Deepwater work for long-term projects has been trickling in, and the company  has avoided layoffs, partly by sending crews to work emerging “shale” natural gas fields in north Louisiana, Texas and Pennsylvania, Webre said.

Webre said the work keeps employees active but has not made up for the loss in revenue from deepwater operations, which he hopes will pick up the first quarter of this year.

At other fabrication yards at the Port of Iberia, work has trudged along.

Despite the recent interruption in drilling, major deepwater projects are still planned for the long term and drilling is moving forward in foreign waters, said Port of Iberia Director Roy Pontiff.

“They still have to have rigs,” Pontiff said.

The global reach of south Louisiana’s oil-and-gas expertise has helped keep many of the larger firms afloat.

“We service companies and rigs all over the world out of a lot of these offices,” said Louisiana Oil and Gas Association President Don Briggs. “The rest of the industry is booming around the world. It’s only here that we are being shut down in the Gulf of Mexico.”

The Gulf is still the main market for much of south Louisiana’s industry. Pontiff said the moratorium has left its mark at the Port of Iberia, especially on the oil service businesses that depend on active drilling for survival.

“We did have significant downsizing of companies in the last half of last year,” he said.

The moratorium has pushed some businesses to refocus.

Lafayette-based Stone Energy, an independent oil-and-gas exploration and production company, has paid more attention to exploring for oil in the Rocky Mountains and to natural gas exploration  in the Marcellus Shale area in Pennsylvania and West Virginia, said Stone CEO David Welch.

Drilling at the company’s Amberjack platform in the Gulf was temporarily suspended after the Deepwater Horizon explosion but was allowed to resume after the initial moratorium was modified.

But the company’s plans for two to three additional deepwater exploration drills have been on hold, Welch said. He said the company is eager to get back into deepwater.

“It has tempered the growth of our company,” he said of the drilling suspension. “The biggest resource base that we have is in the Gulf.”

Badger Oil, another Lafayette-based exploration company, had been reaching out into the shallow waters of the Gulf in recent years after a history of land-based exploration.

Hurricanes and high insurance premiums had already started to give the company pause about offshore work, said Badger Operations Manager Steve Maley.

With the new regulations and uncertainty in permitting after the Deepwater Horizon incident, the company is considering looking inward once again, he said. Maley is optimistic about the company’s prospects for inland waters and land-based drilling.

But he said Badger is “taking a wait-and-see approach before making any financial commitments in the Gulf of Mexico.”

Other companies have looked to the natural gas finds in north Louisiana for work. The number of drilling rigs in north Louisiana has more than doubled in three years.

John, with the Mid-Continent Oil and Gas Association, cautioned that the natural gas wells offer less profit and less promise than deepwater drilling.

“The life expectancy of these shale plays, … they are not going to be there for years and years. You deplete them much quicker,” John said.

Although the natural gas fields and the international market offer some work, much of the service sector in south Louisiana has been built around offshore drilling in the Gulf, from the larger companies directly involved with building and servicing rigs to a second tier of smaller contractors.

There are also helicopter companies and shuttle buses that transport workers, the catering companies that feed them, and all the grocery stores, car lots and retail shops that depend on oil-patch paychecks.

“Everybody is in the oil-and-gas business here,” said state Sen. Norby Chabert, D-Houma.

Chabert and others say smaller operators can hold on only so long.

“Have we seen 20,000 jobs lost? No. But if we don’t get to drilling by Easter, we will see it,” Chabert said.

Some companies are banking on a turnaround.

Ema Haq owns two Lafayette restaurants and a catering business that serves the offshore industry. Haq said he signed a lease for a new 15,000-foot food distribution warehouse just before the Deepwater Horizon explosion.

“As a small business owner, you can imagine what I’m thinking,” said Haq, a former oil-field engineer who forged a new life as restaurateur.

Haq said business was good immediately after the Deepwater Horizon disaster as he served up food for the crews battling the oil leak. That activity helped keep many in the oil-and-gas service sector afloat.

“I think it got busy, and then it got slow, and now we are waiting,” Haq said.

Permits suggest more drilling is imminent in water less than 500 feet deep. “Shallow-water” drilling never fell under the formal moratorium but had faced what state officials called an unofficial ban.

Twenty-six permits for new shallow-water wells have been approved since June, said state Department of Natural Resources Secretary Scott Angelle. He said the feeling in the industry is that the “grip is

beginning to loosen” in shallow waters.

No new permits have been issued for deepwater wells, he said.

The federal Bureau of Ocean Energy Management, Regulation and Enforcement, which oversees permitting, is enforcing more stringent rules for deepwater drilling.

But the agency agreed to changes earlier this year that could make it easier for 13 companies that started drilling before the Deepwater Horizon incident to resume operations.

Angelle said he hopes the remaining issues for those 13 companies can be resolved in a month. He added that clearing regulatory hurdles for additional new permits is still a work in progress.

Angelle said deepwater permitting issues are the primary focus of his office and the industry.

“At this point in time, if you are a deepwater operator, you can afford to lend me all your talent on this,” he said. “Everybody is working with all hands on deck.”

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