Federal judge sends Plaquemines oil and gas damage suit back to state court

Source:, May 28, 2019
By: Mark Schleifstein

A lawsuit charging six oil and gas firms with damaging wetlands and land within the Potash Oil & Gas Field in Plaquemines Parish in violation of Louisiana’s coastal zone management laws should be heard in state 25th Judicial District Court in Plaquemines, a federal judge ruled Tuesday (May 28).

The order is the first to return to a state court of 42 lawsuits charging that the historic operation of oil and gas companies in six parishes along Louisiana’s coastline — including the construction of service canals, the improper disposal of hazardous wastes and saltwater, and other operations — caused damage to wetlands that state law requires the companies to either pay compensation for or repair.

There’s a good chance that the opinion issued by U.S. District Judge Martin L.C. Feldman of New Orleans will be followed in returning other suits to state courts that are under consideration by other federal judges in New Orleans. A similar ruling might also follow for the suits that were removed to the federal court in Lafayette.

“The governor is pleased that the judge approved the Department of Natural Resources’ motion, which is also supported by Attorney General Jeff Landry and simply says that these Louisiana claims should be heard in a Louisiana court,” said a statement issued by the office of Gov. John Bel Edwards. Edwards, Landry and the state Department of Natural Resources have intervened in all the suits in an effort to assure that any restoration or money coming from an ultimate ruling on behalf of the parishes will be used in compliance with the state’s coastal Master Plan.

“Today’s ruling by Judge Feldman clears the way for an appeal to the Fifth Circuit, which is the next step in legal proceedings that will continue for the foreseeable future,” said Gifford Briggs, President of the Louisiana Oil & Gas Association. “These unproductive lawsuits put the interests of the plaintiffs’ lawyers over the people of Louisiana and divert time and resources away from activities that actually support the economic and environmental resiliency of our coast.”

“Today’s ruling is another procedural step in the judicial process, which unfortunately takes time and resources away from what could be collaborative efforts working towards real solutions for our coast,” said Tyler Gray, president and general counsel of the Louisiana Mid-Continent Oil & Gas Association, in a statement. “As we’ve learned from the Levee Board lawsuit and many years of litigation involving this case, the solutions to securing our coast will not be found in the courtroom.

“Louisiana oil and natural gas companies recognize our working coast is an invaluable cultural, economic and environmental asset. For decades our member companies have voluntarily invested millions of dollars in restoration and hurricane protection projects and spent countless hours advocating for major federal funding opportunities like GOMESA to help make our coastal communities safer and stronger,” he said.

The Gulf of Mexico Energy Security Act (GOMESA) provides Louisiana, Texas, Alabama and Mississippi with a share of revenue paid by oil and gas companies to the federal government to extract and sell oil and gas from the Gulf of Mexico.

“Partnering with Louisiana’s oil and natural gas industry is the path to protecting Louisiana’s working coast. Nothing good comes from lawsuits,” said a statement issued by the Grow Louisiana Coalition, an organization supporting oil and gas development. “In places like Port Fourchon and other parishes across south Louisiana, the industry is working on large-scale, innovative ideas that can increase commerce, while protecting infrastructure and building up the working coast. Industry, science and communities are coming together to make things happen.

“The courtroom should not be viewed as a potential income stream for parishes and the state,” the coalition statement said. “On the contrary, these years-long efforts take critical time and resources away from the industry’s support of Louisiana’s coastal efforts, which have been underway for decades.”

In issuing his decision, Feldman also granted the oil and gas firms their request to appeal his decision to the 5th Circuit appeals court. However, the parish suit might be restarted in state court while that appeal is under way, if they do not also request a stay halting action at the state level until the appeal is decided, said John Carmouche, lead attorney for the parishes.

“Finally, Louisiana’s coastal claims will be tried in Plaquemines Parish, where real and provable damages occurred,” Carmouche said. He said that there have not been any discussions or negotiations with the oil and gas firms in this suit or the other suits.

“We are going to move towards trial now, but the parishes, as always, have been open to discussing a resolution of the provable damages caused by the oil and gas industry,” he said.

The lawsuits had been filed in state courts in Plaquemines, Jefferson, St. Bernard, St. John the Baptist, Vermilion and Cameron parishes between 2012 and 2017. All of those suits were filed by the Talbot, Carmouche and Marcello law firm of Baton Rouge on behalf of parish governments. Seven Jefferson and 14 Plaquemines suits were removed to federal court in New Orleans and returned to state courts for action in 2017.

In May 2018, those 42 suits were removed to federal courts in New Orleans and Lafayette by the oil and gas company defendants, who contend that they all include issues involving federal law that should properly be heard in federal courts.

A 43rd lawsuit filed by New Orleans against oil and gas companies, using other attorneys, also was recently removed to federal court.

The second removal of the suits to federal courts occurred just a few months before the first case was scheduled to be heard in Plaquemines Parish. An attempt to have all the cases considered by a single federal judge was quashed in July 2018 by a national panel of judges that governs multi-district litigation.

Attorneys representing the oil and gas firms said a report filed in Plaquemines state court in 2018 in advance of the courtroom trial in the first case, Plaquemines vs. Rozel, et. al., showed that many of the alleged violations actually occurred during or before World War II, a period when federal laws governed oil and gas exploration in an attempt to increase production for the war effort while also limiting use of steel and other scarce wartime resources.

That was long before the state Legislature passed the State and Local Coastal Resources Management Act of 1978, which went into effect in 1980 and regulates development operations in the state’s official coastal zone.

Feldman ruled it was “simply too late” in the legal process – during a second removal attempt – to claim the information concerning the history of oil and gas operations before and during World War II included in the Rozel report was new.

“Although the defendants suggest that the Rozel Report presents ‘new theories’ of bad faith and changed impacts, these expert opinions simply put a finer point on what the plaintiffs already placed at issue: whether the defendants’ activities in these operational areas were lawfully commenced prior to (the state law’s) enactment,” Feldman wrote. “If so, then come 1980 (when the new law requiring coastal permits went into effect), no permit was required; if not, then a coastal use permit was required once (the state law) became effective.”

And he said other papers filed in the case before that report also pointed to “inquiries into conduct as far back as before and during World War II.”

Feldman also found that the oil and gas companies were not “acting under” the authority of a federal officer in operating their facilities and exploration activities during and before the war, which the companies contended gave them the right to be heard in federal court.

“Merely being subject to federal regulation will not suffice to bring private action within the scope of the (Federal Officer Removal statute they cited); rather, oily private parties that are (often, contractually) obligated or ‘authorized to act with or for {federal officers or agents} in affirmatively executing duties under … federal law’ are sufficiently ‘acting under’ federal control,” he said. Simply complying with a regulatory order, even a highly complex order, was not enough, he said.

And he also dismissed the companies’ broader argument that the federal government’s wartime regulation of oil and gas production aimed at increasing production while reducing use of steel should show the industry’s actions under that regulatory scheme should be heard in federal court, and not in state court.

“The court finds that the difference between wartime regulations and other types of administrative regulation is simply ‘one of degree, not kind,’” he said.

And unlike past lawsuits involving companies required under federal contract to install asbestos on ships or to manufacture Agent Orange for use during the Vietnam War, the regulations cited by the oil and gas companies provide “mere oversight.”

And Feldman agreed with attorneys for the parish that their lawsuit is aimed at the failure of the companies to follow the requirements of the coastal zone law. The Rozel report said that in the Bayou Gentilly oil field, oil and gas operations that followed existing laws before the coastal zone law was passed would be exempt and would not require a permit under the new law, unless activities changed after 1980 and negated the initial exempt status.

“Examples include continued operations of canals without seeking a permit for modification and continued discharge of produced water,” the ruling said.

And the report also said that certain uses that began before 1980 were not exempt from the new law because they were not legally commenced or not commenced in good faith, and in such cases, a coastal zone permit would have been required. That might include waste pits and salt discharges that occurred before 1980 in violation of then existing laws.

Maintenance dredging and the plugging and abandoning of wells after 1980 were listed as examples of actions requiring permits, and in some cases, “failing to fully disclose cumulative impacts in applications for coastal use permits seeking to dredge or maintain canals” could also be a violation.

The oil and gas companies argued that based on wartime regulations and directives, they vertically drilled wells, spaced wells, used earthen pits, discharged produced water and dredged canals, all under the color of federal office, and thus should not be liable for those actions.

But Feldman wrote that just because the federal government had the power to exercise control over those actions during the war doesn’t establish that that power was exercised. There were detailed exceptions allowed and operators could have sought relief, he wrote.

Feldman said the oil and gas firms also failed to show that “federal jurisdiction” outweighs the rights of plaintiffs to have a case heard under state law. There’s a four-part test that has been fashioned for determining federal jurisdiction by the U.S. Supreme court: only if a federal issue is necessarily raised, actually disputed, substantial, or capable of resolution in federal court without disrupting the federal-state balance approved by Congress.

In this case, Feldman said, the parish carefully restricted its claims in the wording of its original lawsuit to only include state law and to specifically exclude a variety of federal laws, such as the Clean Water Act, that might also govern the oil and gas companies’ actions.

And while the oil and gas plaintiffs cited a U.S. 5th Circuit Court of Appeals decision confirming that a similar lawsuit against oil and gas interests by the Southeast Louisiana Flood Protection Authority-East did fall under federal law and belonged in federal court, Feldman said that unlike the limitations in the parish suit, the levee authority suit specifically cited violations involving three federal laws in seeking damages and “never pointed to any specific Louisiana statutes or regulations.”

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