Lawyers v drillers
OVER the past century Louisiana has lost nearly 2,000 square miles of coastal wetlands, an area the size of Delaware. This not only leaves the state denuded—with less than 75% of the wetlands it used to have—but also makes New Orleans, its biggest city, more vulnerable to hurricanes.
Two of the factors that caused the erosion were the building of levees (dykes) along the Mississippi river, which starved the swamps around New Orleans of sediment, and the oil-and-gas boom of the 20th century, which led to the digging of thousands of miles of canals across the wetlands, letting in salt water. But despite broad consensus that the petroleum industry is at least partly to blame, no effort has been made to force it to pay for the damage—until now.
The board that oversees the levees protecting New Orleans filed an audacious lawsuit in July demanding that nearly 100 oil and gas firms should either repair the wetlands, or pay damages that could be used for levee upkeep. The defendants are a roll-call of industry giants, including BP (formerly British Petroleum), ConocoPhillips, ExxonMobil, Shell and Chevron.
The suit has been inspired by the successful assault on Big Tobacco in the late 1990s by state attorneys-general, who won a multi-billion-dollar settlement by arguing that cigarette-makers had increased their states’ medical costs. The legal arguments in the levee case are, if anything, even simpler: the oil companies drilled and dug under permits that required them to restore the land to its original condition. Their failure to do so has made Louisiana’s coast more fragile, and that has increased costs for the levee board, which must build taller, stronger structures to protect New Orleans from storms. The fact that regulators haven’t squeaked till now is of no moment, the plaintiffs say.
Depending on your point of view, the suit is either a brilliant scheme to protect the environment or a bonanza for greedy lawyers that will stifle a vital industry and hurt Louisiana’s business-friendly reputation. The Republican governor, Bobby Jindal, immediately denounced it, and seems keen to block it. An association of state levee boards also voted to oppose it. State legislators are discussing ways either to put the kibosh on the suit, or to limit the potential award.
The plaintiffs’ lawyers could get very rich. If the suit succeeds, they stand to pocket 32.5% of the first $100m and smaller slices of anything beyond that. But if they lose, they will get nothing, and would normally be liable for their own expenses. The levee board has tried to protect its lawyers with a “poison pill”: if the board withdraws the suit of its own accord—which could happen if Mr Jindal replaces a majority of members, as he may—it will first have to pay the lawyers their expenses.
The Jindal administration says the real villain of the piece is the federal Army Corps of Engineers, which built most of the levees in south Louisiana. The levee board does not disagree that the corps is also to blame. But its members take the position that it has tried to make amends, notably by investing $14.5 billion in a new levee system for the region after Hurricane Katrina in 2005. The plaintiffs’ lead lawyer, Gladstone Jones, says: “It’s a fair question…How much has the federal government spent to address this, and how much has the oil and gas industry spent?”
On August 15th Mr Jindal’s coastal adviser and the levee board made an uneasy compromise. The board agreed to put its suit on ice for 45 days while the Jindal administration casts about for another solution. But the lawsuit’s backers are in no mood to drop it. John Barry, the board’s vice-president (and one of those who dreamed up the suit in the first place), warned that any alternative would have to involve “significant” payouts by oil firms.
He added, in front of the press corps in Louisiana’s capital, Baton Rouge, that the public liked the lawsuit fine; it was only the state’s politicians who did not. “People used to say the flag of Texaco flies over the state capitol,” he said, according to the New Orleans Advocate. “People have to ask themselves if that’s still true.”
Two of the factors that caused the erosion were the building of levees (dykes) along the Mississippi river, which starved the swamps around New Orleans of sediment, and the oil-and-gas boom of the 20th century, which led to the digging of thousands of miles of canals across the wetlands, letting in salt water. But despite broad consensus that the petroleum industry is at least partly to blame, no effort has been made to force it to pay for the damage—until now.
The board that oversees the levees protecting New Orleans filed an audacious lawsuit in July demanding that nearly 100 oil and gas firms should either repair the wetlands, or pay damages that could be used for levee upkeep. The defendants are a roll-call of industry giants, including BP (formerly British Petroleum), ConocoPhillips, ExxonMobil, Shell and Chevron.
The suit has been inspired by the successful assault on Big Tobacco in the late 1990s by state attorneys-general, who won a multi-billion-dollar settlement by arguing that cigarette-makers had increased their states’ medical costs. The legal arguments in the levee case are, if anything, even simpler: the oil companies drilled and dug under permits that required them to restore the land to its original condition. Their failure to do so has made Louisiana’s coast more fragile, and that has increased costs for the levee board, which must build taller, stronger structures to protect New Orleans from storms. The fact that regulators haven’t squeaked till now is of no moment, the plaintiffs say.
Depending on your point of view, the suit is either a brilliant scheme to protect the environment or a bonanza for greedy lawyers that will stifle a vital industry and hurt Louisiana’s business-friendly reputation. The Republican governor, Bobby Jindal, immediately denounced it, and seems keen to block it. An association of state levee boards also voted to oppose it. State legislators are discussing ways either to put the kibosh on the suit, or to limit the potential award.
The plaintiffs’ lawyers could get very rich. If the suit succeeds, they stand to pocket 32.5% of the first $100m and smaller slices of anything beyond that. But if they lose, they will get nothing, and would normally be liable for their own expenses. The levee board has tried to protect its lawyers with a “poison pill”: if the board withdraws the suit of its own accord—which could happen if Mr Jindal replaces a majority of members, as he may—it will first have to pay the lawyers their expenses.
The Jindal administration says the real villain of the piece is the federal Army Corps of Engineers, which built most of the levees in south Louisiana. The levee board does not disagree that the corps is also to blame. But its members take the position that it has tried to make amends, notably by investing $14.5 billion in a new levee system for the region after Hurricane Katrina in 2005. The plaintiffs’ lead lawyer, Gladstone Jones, says: “It’s a fair question…How much has the federal government spent to address this, and how much has the oil and gas industry spent?”
On August 15th Mr Jindal’s coastal adviser and the levee board made an uneasy compromise. The board agreed to put its suit on ice for 45 days while the Jindal administration casts about for another solution. But the lawsuit’s backers are in no mood to drop it. John Barry, the board’s vice-president (and one of those who dreamed up the suit in the first place), warned that any alternative would have to involve “significant” payouts by oil firms.
He added, in front of the press corps in Louisiana’s capital, Baton Rouge, that the public liked the lawsuit fine; it was only the state’s politicians who did not. “People used to say the flag of Texaco flies over the state capitol,” he said, according to the New Orleans Advocate. “People have to ask themselves if that’s still true.”
You can return to the main Market News page, or press the Back button on your browser.
