Acadiana Business

Oregon economist: Dismukes' legacy study 'fatally flawed'

by Leslie Turk

An economics prof at the University of Oregon told Louisiana lawmakers Monday that an LSU professor's study showing the negative impact of legacy lawsuits on oil and gas activity is "fatally flawed, both theoretically and empirically." The study now being cited time and again by the state's oil and gas lobby in its ongoing battle over legacy lawsuits had come under harsh criticism by an Oregon economist.

Released in February, the study by LSU Professor David Dismukes of the LSU Center for Energy Studies shows legacy lawsuits have cost Louisiana citizens more than 30,000 jobs and $1.5 billion in wages over the past eight years.

But W. Ed Whitelaw, an economics prof at the University of Oregon, told state legislators Monday that the report over old oilfield damage from drilling activity is riddled with "rookie errors," according to a Tuesday story in The Advocate.

The now widely quoted analysis omitted relevant facts, Whitelaw said, including any mention of two hurricanes. The Advocate reported:
A joint hearing of the Louisiana House and state Senate committees on Natural Resources met Monday to "informally discuss the issues" involving legislation that would change the procedures leading to lawsuits over the environmental damage.

"Legacy lawsuits are strongly and negatively correlated with Louisiana drilling activity," Dismukes' report says. "Increases in legacy lawsuits are correlated with reductions in conventional Louisiana oil and gas drilling."

Whitelaw, founder of ECONorthwest, a Portland, Ore., company that provides financial analysis for businesses and governments, said Dismukes' widely quoted analysis has several major flaws.

"Understand that these errors, and there are three or four big ones, any one of which is enough to render his analysis nonsense," Whitelaw said. "These are rookie errors."

For instance, Whitelaw said, the analysis omits a relevant variable. Dismukes included data from 2005 and 2006, when the Louisiana energy industry was battered by two hurricanes, and stops his analysis in 2007.

"He fails to mention Hurricane Katrina or Hurricane Rita anywhere in the report," Whitelaw said.

"In our opinion, the Dismukes document fails to meet any of these professional standards. And this failure matters to the degree that the Dismukes document is fatally flawed, both theoretically and empirically. Nowhere does Dr. Dismukes present a coherent economic model linking legacy lawsuits and decisions to drill in Louisiana," the ECONorthwest report states.
Dismukes said in an email to The Advocate late Monday that he could not comment because he had not yet seen the Whitelaw report.

Read The Advocate story here.

Don Carmouche, who represents many landowners in the legacy battle, is seeking to depose Dismukes on the accuracy of the study's conclusions and also wants to find out who funded the study.

In a March 28 report by, Don Briggs of the Louisiana Oil and Gas Association said Carmouche is using the deposition to sway public opinion.
"I can assure the Louisiana Oil and Gas Association did not put a dime into the study and never requested it," Briggs said. "It's political strategy. It's intimidation and for lack of a better word-trickery."

Carmouche said the most recent action in the case has been LSU's attempt to stop the deposition from occurring.

"It's absurd to me that our flagship university in the face of our complete awareness that this was bought and paid for by the major oil companies-that they would deny us the right to depose this so-called expert over there, but they are moving to quash it," Carmouche said.
Read that report here.