By Don G. Briggs, President – LOGA (Louisiana Oil & Gas Association)

If six consecutive hours of grueling, sometimes vicious, debate were not enough to send you packing, then imagine that replayed in three more rounds of the lawmaking process, and you will begin to get just a hint of how Louisiana Senate Bill (SB) 655 became Act 312 of the 2006 Regular Legislative Session.

The opposition to SB 655 included top-dollar trial lawyers, individual landowners and a recently formed group of landowners organized for the sole purpose of defeating SB 655. There was no doubt these factions had muscle, clout and money, and hired the top guns of the public relations and lobbying trades to provide them the winning edge. Web sites and voter callboxes were prime tools for the opposition’s spreading of innuendo and half-truths.

Hypothetically, if the Louisiana Oil and Gas Association (LOGA) spent $100,000 in its effort to support SB 655, then surely the opposition trumped that figure five times over. Well, history has been written, and this time it was not all about the money.

Act 312 is a new environmental law that addresses how contaminated oilfield sites are cleaned up all across the state by those responsible for damages. Ask the proponents, and we will tell you that this new legislation brings fairness to what could have wreaked havoc on the oil and gas industry in Louisiana.

Ask Governor Kathleen Babineaux Blanco, and she will tell you it not only represents fairness but good public policy as well. She was able to overcome the odds and, in my opinion, credit her own legacy to sign into law this unprecedented legislation.

In the end, after the legislative process played out, lawmakers voted to see things her way. Landowners would get their property cleanup, trial lawyers could still work issues through the courts, environmentalists considered it a step in the right direction and oil interests would not have to face enormous judgments for remediation.

The Louisiana Legacy Law

If you ever need a champion litigator, choose Sen. Robert R. Adley (D-Benton), but keep in mind: Robert is a businessman and not an attorney. And if you are looking for leadership, political wit and inexhaustible energy, look no further than Department of Natural Resources Secretary Scott A. Angelle. With these two men moving and shaking things up – plus backing from State Representative William Daniel (R-Baton Rouge) and a small assembly of expert staff, including Commissioner of Conservation James Welsh – Gov. Blanco formulated a working team capable of a Herculean effort.

Gov. Blanco has always been a good listener. I remember the day I first briefed her, back in 2003 when she was still candidate for governor, on behalf of the LOGA board on the subject of what was being called “legacy lawsuits.” It started with Corbello v. Iowa Production, when the trial court jury awarded the plaintiffs $33 million, and by the time all the appeals were done, the award was $80 million. To top that off, the Supreme Court stated that the plaintiffs did not have to use their award to restore the property. (In essence, a landowner would file suit against a company who last operated on their property, and anyone else or any other company that may have drilled there could be brought into the court battle. In these cases, a price would be paid, including other private claims, but cleaning up the land was not a requirement.)

Like a flame sparking a raging wildfire, hundreds of suits started to saturate the courts, and many businesspeople worried about the perception of Louisiana as a litigious state.

At LOGA, we were concerned over the devastating impact on our industry if this trend were to continue. Something had to be done. So we reached out for the hand of a tremendous ally, the Louisiana Association of Business and Industry, and together our associations began a mission to change things. Our sights were set on keeping rigs and operators alive in a state where for years drilling activity had outpaced most all other energy-producing states.

State’s Regulatory Office Plays Key Role

The state Office of Conservation operates within the Department of Natural Resources (DNR), maintaining jurisdiction over activities of the oil and gas industry, including drilling and the production of wells and the disposal of exploration and production waste. In 1986, the Office of Conservation enacted Statewide Order No. 29-B, which provides for standards in oilfield site and pit closures. These rules, while stringent, are based on sound science. I, too, recall Commissioner Welsh testifying before the legislative Natural Resource committees that Louisiana’s 29-B rule had been reviewed and extensively used by other states across the country prior to their adopting similar oilfield cleanup regulations.

The DNR, Attorney General’s Office and the state Department of Environmental Quality will all have a role in Act 312. DNR’s main function will be to investigate and determine a plan for remediation based on appropriate standards for cleaning up polluted sites, addressing claims of damages to ground water, soils, sediments and surface water.

In accordance with the new law, 10 measures will be taken by the appropriate entities:

Should a landowner choose to file suit seeking a claim for environmental damages, he retains the right to do so in the court of appropriate jurisdiction. For those suits that are already filed, the process in the court continues, except that the plaintiff must provide the state with notice of the suit.
For those suits to be filed subsequent to the signing of Act 312 (June 8, 2006), there is a requirement that DNR/Office of Conservation and the Attorney General be given timely notice of any such suit so that the interest of the public can be represented and protected from that day.
The trial court will then perform its traditional duty of deciding the facts and apply the law to determine if environmental damages exist and, if they do, who the responsible parties are. Nothing contained in Act 312 allows the Office of Conservation to decide liability or to name the responsible parties.
The responsible parties will be required to submit a plan of remediation to the Office of Conservation for review. The plaintiff will also have the right to submit his suggested plan of remediation. After a public hearing, the Office of Conservation will be allowed to investigate and ultimately decide on a plan of remediation, picking and choosing from any of the applicable and appropriate standards for cleanup that have been approved by any state agency. This allows the agency with the most experience dealing with exploration and production waste to be fully accountable for a solution. By definition, the plan for remediation must include the estimated cost of said remediation.
Act 312 allows for the trial court to review the Commissioner of Conservation’s decision, or proposed cleanup plan on remediation, and to impose a different plan if by a preponderance of evidence another plan is proven to be more feasible.
To ensure justice, all parties retain the right to appeal the judgment of the trial court to the court of appeal of appropriate jurisdiction.
Once the remediation plan is approved, the court issues a partial judgment, and the necessary funds are placed in the registry of the court. The Office of Conservation maintains an active role supervising the remediation efforts and is required to keep the court informed of the progress.
Once remediation goals are reached, any remaining funds within the registry of the court are returned to the responsible parties; however, if during the remediation efforts additional funds are required to meet remediation goals, the responsible parties shall be required to place additional funds with the registry of the court.
The trial for private claims (for example, loss of use of farmland, pain and suffering or stigma damages) are required to remain in the court of appropriate jurisdiction. Conservation has nothing to do with these claims.
Finally, Act 312 has a provision that requires settlements to be approved by the court and that funds for cleanup be deposited in the registry of the court. Oil companies will no longer receive a credit for monies paid for cleanup unless the cleanup is actually performed.
Ongoing Progress

At the time of this writing, the Commissioner of Conservation has started working with an advisory committee to assure that the rule-making process is followed as is necessary for public agencies under the Louisiana Administrative Procedure Act.

In closing, I want to reiterate the notion that passing legislation of this magnitude took a great deal of concerted effort and will. It took time, energy, strategy, determination and awareness building. And it surely took exceptional leadership and vision along with dedicated partnerships to triumph over real adversity

By Don G. Briggs, President – LOGA (Louisiana Oil & Gas Association)

“Make no mistake: this is not an idle threat.” These words of Louisiana Governor Kathleen Blanco bellowed memorably through the halls of the state capitol as she addressed lawmakers on the first day of the 2006 regular legislative session in Baton Rouge. She was referring to an announcement she had made in late January, and again at the annual meeting of the Louisiana Independent Oil and Gas Association (LIOGA), that she would exercise her option to object to future oil and gas lease sales in the Gulf of Mexico if the federal government didn’t take seriously the state’s revenue-sharing pleas.

Noting that “Louisiana is fighting for our fair share,” Gov. Blanco added that “for the first time in more than a decade we are seeing signs of movement on this issue. The storms may have produced a small silver lining to the horrible tragedy we have just weathered. Perhaps the federal government will finally see the wisdom of giving us the revenues we deserve.”

Blanco’s position is crystal clear and is one that many of the state’s leaders have been pushing for years. The difference now is that this storm-ravaged state has much higher octane (pun intended) in its tank to push for a bigger percentage of royalties from oil and gas drilled off the state’s coast to pay for coastal restoration and hurricane protection.

The governor, of course, gained notoriety in the wake of Hurricane Katrina as one of the many local, state and federal leaders thought to have significantly dropped the ball (if not several) when it came to storm readiness and first response. She famously ordered National Guard troops to “shoot and kill” post-flood looters; her words and actions led Time magazine to label Blanco a “failure” in an article titled, “The Worst Governors in America.” Blanco, wrote Amanda Ripley, “waited seven weeks to appoint a recovery commission. She was slow to call the legislature back into session to deal with a nearly $1 billion decline in tax revenue. Her suggested cuts – to education and health care – came under fire É as unrealistic.”

Now with one post-hurricane Mardi Gras under its belt, Louisiana is contemplating new ways to boost its economy. Former U.S. Senator John Breaux also pushed for the revenue-sharing effort in the 32 years he served in Congress, and he says now that things look better than before for approving a split of the federal money.

U.S. Congressman Bobby Jindal did not skip a beat either in February, when he introduced new legislation designed to give Louisiana a fair share of energy royalties generated off its coast. He is quick to make note of the bell-ringing fact that Louisiana is ranked first in the United States in crude oil production, including the outer continental shelf (OCS), and second in natural gas production, including what is collected from the OCS.

According to Darren Goode’s National Journal article, Jindal’s bill grants states as much as 75 percent of the revenue gained from offshore drilling. The Republican representative “predicted that Bush administration officials ‘very likely’ will support giving states a guaranteed share of the revenue for new production that occurs in areas that are not now leased and where revenue is not projected by the Congressional Budget Office,” noted Goode. “One energy lobbyist suggested that the funding would be couched as Ôcoastal impact assistance’ rather than called Ôrevenue sharing,’ to try to appease budget hawks.”

Consider this: Western energy-producing states today receive more than 20 times what Louisiana does from federal mineral royalties for onshore mineral extraction. Louisiana has a very valuable coast (also referred to as a “working coast”), and while the Minerals Management Service has collected about $6 billion annually in oil and gas revenues from federal offshore leases in current years, about $3 billion came from offshore Louisiana.

I am not an historian, nor was I a player in the political scene back in the 1950s, but I want to offer a timeline and some background that may help explain the inequity the state says it faces, which a little research can provide.

Background. Louisiana’s coastal region and wetlands provides storm protection for ports, pipelines, drilling slips and production facilities. Its subsurface salt domes store a significant portion of the nation’s strategic petroleum reserve. Its LNG (liquefied natural gas) terminal is the site of one of the nation’s major import facilities for natural gas, and LOOP (Louisiana Offshore Oil Port) is the nation’s primary import terminal for foreign oil. Port Fourchon and Louisiana Highway 1 are located directly on the Gulf Coast, and the port is the primary source of domestic crude oil production in the United States. Five of the nation’s top 15 largest ports are located in Louisiana. And here is yet another revealing fact: More than 30 percent of the nation’s fisheries catch comes from offshore Louisiana.

Timeline. In 1920, the Mineral Lands Leasing Act provided 37.5 percent revenue sharing for states for mineral development on onshore federal lands. In 1976, the Act was amended to provide for 50 percent revenue sharing.

1945. President Truman gave the federal government jurisdiction over all offshore resources. Just about a decade later, the government began leasing those lands, charging companies from 12 to 16 percent royalty on what they produced. The Truman administration offered Louisiana control of the first three miles off its shores and a share of royalties beyond that. But the very colorful, outspoken and politically powerful Plaquemines Parish district attorney Leander Perez pressured the state to hold out for more, the deal fell through, and the state got nothing. I must add, “Judge Perez,” as he is often referred to, would be considered by many to be in the “top five” of Louisiana most colorful politicians.

1953. Congress gave coastal states the rights to the waters up to three miles off their coasts. But here is how the numbers stacked up: Louisiana, 3 miles; Texas, 10.3 miles; Florida, 10.3 miles. Texas and Florida scored better because they established their boundaries before becoming states.

1986. States began collecting 27 percent of the federal royalties for production from three to six miles offshore to compensate for energy production from pools of fuel that may have been siphoned closer to shore. In Louisiana, this is known as the 8g Settlement, and the funds are lawfully earmarked for education.

Just last year, U.S. Senator Mary Landrieu and the state’s congressional delegation managed to win federal approval for payment of $1 billion to energy-producing coastal states for four years, allowing Louisiana to receive $540 million that will be used for coastal impacts to communities that support activities of the industry. Sen. Landrieu now believes that since hurricanes Katrina and Rita, the need to restore Louisiana’s coast and beef up its levee systems has become more apparent to the rest of the nation. She reminds Congress the Gulf Coast’s recovery could be tied to a steady stream of revenues from the state’s offshore production, much like compensation going to states with onshore drilling on federal lands.

Whose Fair Share?

Right now, support for this “fair share” plan is apparently growing far and wide. Gov. Blanco and her cabinet head, Department of Natural Resources Secretary Scott Angelle, moved quickly after the storms to invite board members and members of LIOGA and the Louisiana Mid-Continent Oil and Gas Association (LMOGA) to meet at the Governor’s Mansion to seek backing of her plan. Both organizations have endorsed the state’s efforts.

Additionally, Shell Oil, ExxonMobil, Chevron-Texaco and, since March, Duke Energy all have pledged their support to the state’s promotional and awareness campaign, known as the America’s WETLAND effort. This organization has recently presented a petition on its Web site (www.americaswetland.com) encouraging support of the state’s effort to save Louisiana’s wetlands, via email endorsement to members of Congress. At last count, some 38,000 people online had participated.

With all of that being said, Gov. Blanco’s announcement to exercise her option to object to future oil and gas lease sales in the Gulf of Mexico if the federal government didn’t take seriously the state’s revenue-sharing pleas sent a chill throughout Louisiana’s offshore oil and gas industry. What else could you possibly expect? “Will she really exercise her option?” is a question many asked, almost hoping not to find out. Some would say Gov. Blanco would be cutting off her nose to spite her face. Such a move would potentially hinder future offshore operations, crippling the vast infrastructure that supports Louisiana’s offshore industry. So why would she pursue this? Or is it a bluff?

Indeed, “There’s a danger in [Blanco's] strategy – setting the state to put payouts over principles. But it’s understandable given the feds’ failure to stand firm on royalties,” noted a Sarasota Herald-Tribune article titled “Royal Foul-Up.”

Living here in Louisiana and watching the politics of our state move through the halls of Washington, I would be a little cautious to call the governor’s bluff. Then again, let’s say it is not a bluff other than telling the nation that years ago our state got a bum deal on sharing in offshore revenues, which is vital to our country’s energy security and Louisiana’s delicate infrastructure. With supplies tightening and prices rocketing, what better time to get the ear of our nation than now?

As I see it, Blanco and Landrieu are two very bold women on a crucial mission, and their bottom line is this: “Give Louisiana and the other coastal states the same deal given to Western states in 1920.” Both of these politicians share a deep and abiding love for their state and its people, its diverse cultures and its abundant natural resources. They will not let anyone they encounter forget that the state’s history includes providing the nation with 80 percent of its offshore energy supply for many decades.