Business News

Suitable Damages

by Patrick Flanagan

Will big oil pay to save our wetlands?

It didn't take long for the oil and gas industry to play a political trump card in the nascent but epic legal battle over who should pay to rebuild Louisiana's vanishing coastal wetlands. Gov. Bobby Jindal rushed to the industry's defense the same day that a local flood protection authority sued 97 oil and gas companies over coastal land loss. Jindal said the flood board had been "hijacked by a group of trial lawyers."

Photo by Robin May

This aerial photograph shows canals oil and gas companies cut through Louisiana's wetlands. The SLFPA-E's suit claims the companies ravaged the state's coastal landscape, which is the first line of defense for South Louisiana's communities against the destructive forces of hurricanes.

The governor also claimed the Southeast Louisiana Flood Protection Authority-East, which filed the suit on July 24, "overstepped its authority" by tackling coastal land-loss issues, which historically are overseen by the Coastal Protection and Restoration Authority. Jindal called the suit "nothing but a windfall for a handful of trial lawyers."

It should come as no surprise that the energy industry, arguably the richest in the world, applied political pressure to resolve a potentially expensive legal issue. After all, political connections - forged by free-flowing campaign money and year-round lobbying and schmoozing - have allowed oil and gas companies to have their way with state regulators, governors and legislators for decades.

And why not start with pressure from the top? The list of named defendants includes some of the biggest names in Big Oil - and some of the biggest political contributors: Koch Industries, Atlantic Richfield, BP, Chevron, ConocoPhillips, Exxon Mobil, McMoRan, Shell, Tennessee Gas Pipeline and Pickens, to name just a few.

Coincidentally, or perhaps not, Jindal issued his attack against the lawsuit and the plaintiff lawyers from Aspen, Colo., where he was attending the Republican Governors meeting. On July 25, Jindal was scheduled to speak at an Aspen Institute-sponsored event called

The McCloskey Speakers Series. David Koch, one of the Koch brothers, is on the board of trustees of the Aspen Institute. Koch Industries is among the named defendants in the lawsuit.

Applying political pressure from the get-go also follows a familiar script. Two decades ago, when local plaintiff attorneys took on Big Tobacco, the first thing the cigarette companies did was seek a meeting with then-Louisiana Attorney General Richard Ieyoub to try to convince him it was a bad idea for the state to follow the lead of Mississippi, which had just filed its own suit against the tobacco industry.

To his credit, Ieyoub ignored the arguments of the tobacco lawyers and lobbyists. As a result, state lawmakers and Jindal are still spending the billions Louisiana received for successfully pursuing a case against the tobacco industry.

Another line of attack by Big Tobacco was to demonize the plaintiff attorneys as greedy trial lawyers out to make a fast buck at the expense of taxpayers. That was a lie, but apparently it's still a popular yarn in some quarters, judging by Jindal's statement that the board was "hijacked."

Ironically, the first lawyers who will make piles of dough on the lawsuit are those working for the oil and gas defendants. They bill by the hour - at sky-high rates - and get paid promptly by clients who believe, like the late Vince Lombardi, that winning is the only thing.

By contrast, plaintiff lawyers hired by the flood authority will get paid (a sliding-scale percentage of the damages awarded) only if they win - or if the flood board abandons the suit. In the latter instance, the plaintiff attorneys will get reimbursed for their out-of-pocket expenses (which could run into the millions) and for "reasonable fees."

"[The flood authority lawyers are] taking a tremendous risk in filing this suit," says John Barry, flood board vice president and historian.

Photo by Cheryl Gerber


"They only get paid if they win. Before they win, they will have to put at risk not only tens of thousands of hours of legal work but also millions of dollars funding the scientific research to back up our filing. They could win big. They could also go bankrupt if they lose."

Barry issued a measured response to Jindal's broadside, which followed similar criticism by state Coastal Protection and Restoration Authority Chairman Garret Graves, who doubles as Jindal's top adviser on coastal matters. Barry has worked closely with Graves on coastal restoration issues, and Barry says he believes the governor has done a lot for Louisiana's coast.

Photo by Cheryl Gerber


"It pains me personally to be at odds with them over this," Barry says. "But our board is independent and arrived at its position based on its collective scientific and policy judgment."

Barry adds that Jindal cited the wrong statute when he said that the flood board did not have authority to enter into a contingency-fee contract with its lawyers. "He is relying on the statute for state boards and commissions, not the statute that applies to the [flood] authority," he says. "No one hijacked this board. Before anyone ever approached a lawyer, the board discussed whether we wanted to do this. We agreed - and we were unanimous - that we did."

The flood protection authority was created by the Legislature after Hurricane Katrina as part of levee board consolidation in southeast Louisiana. SLFPA-E comprises the Orleans Levee District, the Lake Borgne Basin Levee District (in St. Bernard Parish) and the East Jefferson Levee District.

IN ADDITION TO TAKING ON the oil and gas industry, Barry and other flood authority board members face near-certain political fallout for their role in the lawsuit. In fact, sources say the governor already is making moves against Barry - despite saying publicly he would not interfere with the lawsuit.

Barry's term on the flood board expired June 30. State law requires a local nominating committee (comprised of area business leaders) to either renominate Barry or to nominate several others. The governor gets to make the appointment. The vetting committee members typically meet in the autumn and are mostly if not all Jindal supporters. They could ask the governor to reappoint Barry, who has been a favorite of the group, but Jindal is notoriously intolerant of people whose actions displease him or conflict with his ambitions.

If Jindal's past actions are any indication, he is already making moves to get Barry off the board. He also will find ways to put pressure on other flood authority board members to withdraw their support for the lawsuit. For example, board president Tim Doody's term also expired June 30. Doody works at the downtown law firm of Chaffe McCall, one of the city's old-line defense firms. It would not be difficult for Jindal and/or Big Oil to put pressure on the firm as well as Doody.

But Jindal's options also could be limited, at least somewhat. If the vetting committee renominates Barry and Doody, the governor may have no options. If Jindal tries to replace them with nominees who oppose the suit, area state senators could refuse to confirm them next year, and they would have to resign from the board. While board members are appointed by the governor, they do not serve at his pleasure; they serve staggered four-year terms and remain on the board until their replacements are named.

"I would like to stay on the board, no question about that," Barry says, "and I also understand that this might prevent that." Barry adds that he was compelled to weigh his desire to continue as a commissioner against the importance of restoring coastal Louisiana. When he did, he says, "It was a pretty easy choice to make."

The political pressure that the defendants are likely to bring won't end with Jindal and Graves' opposition. Former Congressman Chris John of Lafayette, who now leads the Louisiana Mid-Continent Oil and Gas Association - a powerful player in state politics - already has said the group may ask lawmakers to derail the lawsuit. Many of the association's members were named as defendants.

The industry may even try to get Attorney General Buddy Caldwell, who approved the flood board's contingency contract with lead plaintiff attorney Glad Jones and other lawyers, to withdraw that approval. Considering that Caldwell readily approved contracts for lawyers to sue BP on behalf of public bodies after the Deepwater Horizon disaster, such a reversal seems unlikely - but that won't stop the energy giants from trying.

If it survives the initial procedural and political grenades that the defendants are expected to lob, this lawsuit has the potential to be even bigger (in terms of scope and damage awards) than the BP litigation. Barry says other flood protection boards across coastal Louisiana "may have no choice" but to join this litigation or file their own lawsuits if the local flood authority gains traction in court.
Jones, the lead plaintiff lawyer, says he and his colleagues are "ready for this fight." While Barry struck a conciliatory tone in response to Jindal's opening volley, Jones answered in kind.

"The governor's power play on behalf of oil and gas companies is, to say the least, disappointing to the good civil servants on the Southeast Louisiana Flood Protection Authority-East," Jones writes in an email response. "While the coastline disappears, this governor decides to play politics and make demands on an independent board rather than take steps to hold oil and gas companies responsible for their share of the damages. We hope the governor and his team will put politics aside and do the right thing here, which is let the SLFPA-E do its job and protect the people of Greater New Orleans as they are charged to do."

AT SOME POINT, and fairly soon, the defendants will have to fire back on another front by formally answering the lawsuit. The suit was filed in Civil District Court in New Orleans. The case was allotted to Judge Paula Brown, who was first elected to the CDC bench in 2010.

But the defendants' first line of legal defense was a "notice of removal" to transfer the case to federal court, where judges and juries - and jurisprudence - are likely to be more favorable to them. That came even before the oil and gas defendants filed general denials of the flood board's allegations.

The suit will be tried in federal court pending a likely fight by the levee board to get it back into state court. The case also could drag on for years.

The suit seeks environmental damages for oil and gas exploration and development east of the Mississippi River, mostly in St. Bernard and Plaquemines parishes. It focuses on miles of pipeline and access canals that oil and gas companies carved out of Louisiana's coastline, starting in the 1930s. If the suit is successful, it will be to Big Oil what the Tobacco litigation was to that industry: a game-changer.

Photo by Robin May

A New Orleans flood protection authority is seeking environmental damages from oil and gas exploration companies that cut through Louisiana's wetlands.

"If they believe the expert scientific testimony given by our witnesses, then we win the lawsuit," Jones told writer Bob Marshall of The Lens. "That's what this will all come down to - the science."

Well, almost. It also will come down to the law. Now that the suit has been removed to federal court, say defense attorneys interviewed by Gambit, there is ample jurisprudence that could scuttle the case. In state court, where the case was filed, the law offers more opportunities for the plaintiffs to succeed.

Jones worked closely with Barry, author of Rising Tide, to draft the suit. The opening pages of the suit read like a chapter of Barry's award-winning book, which chronicled the catastrophic 1927 flood. A few excerpts:

"Coastal lands are the natural protective buffer without which the levees that protect the cities and towns of southern Louisiana are left exposed to unabated destructive forces. This protective buffer took 6,000 years to form. Yet it has been brought to the brink of destruction over the course of a single human lifetime. Hundreds of thousands of acres of the coastal lands that once offered protection to south Louisiana are now gone as a result of oil and gas industry activities."

"For nearly a century, the oil and gas industry has continuously and relentlessly traversed, dredged, drilled and extracted in coastal Louisiana. It reaps enormous financial gain by exploiting the resources found there, sharing some of that bounty with the many residents whom it employs. Yet it also ravages Louisiana's coastal landscape. This canal network injects corrosive saltwater into interior coastal lands, killing vegetation and carrying away mountains of soil. What remains of these coastal lands is so seriously diseased that if nothing is done, it will slip into the Gulf of Mexico by the end of this century, if not sooner."

The suit also notes the more than 200 miles of levees, hundreds of floodwalls and floodgates, and other flood control structures operated and maintained by the three area levee districts. It then goes on to describe "the crisis" presented by coastal wetland destruction:

"Coastal lands are the first line of defense for south Louisiana's communities against the destructive force of hurricanes. Those lands form a buffer that reduces the height and energy of hurricane storm surge and waves, thereby aiding the Authority in its mission to protect south Louisiana. Hurricanes lose intensity as they travel over land. Hence, the more land that a given hurricane must traverse before reaching Louisiana's coastal cities, the weaker that hurricane's impact on those communities, and, concomitantly, the more effective the levee system.

"The coastal landscapes and levee systems thus work in harmony, with the former acting as a natural first line of defense in abating the flood threat, and the latter serving as the last line of defense against the widespread inundation of inhabited areas."

The suit alleges that the land loss caused by oil and gas exploration and development "has raced on unabated since the early 1930s, averaging thousands of acres lost per year and is anticipated to grow at an aggressive pace. The coastal lands that remain have been left severely diseased by the constant intrusion of corrosive saltwater, leaving them highly susceptible to being washed away by the next storm. This consequence was demonstrated by the tremendous excavation of wetlands caused by Hurricane Isaac in August 2012."

The suit claims that the energy industry's network of canals and channels - many of which were dug before some of the federal and state laws cited in the lawsuit - have killed off vegetation, inhibited sedimentation, eroded coastal lands and generally caused or accelerated coastal land loss.

"Oil and gas activities have transformed and continue to transform what was once a stable ecosystem of naturally occurring bayous, small canals and ditches into an extensive - and expanding - network of large and deep canals that continues to widen due to Defendants' ongoing failure to maintain this network or restore the ecosystem to its natural state," the suit alleges. "That canal network continues to introduce increasingly larger volumes of damaging saltwater, at increasingly greater velocity, ever deeper into Louisiana's coastal landscape and interior wetlands.

"The increasing intrusion of saltwater stresses the vegetation that holds wetlands together, weakening - and ultimately killing - that vegetation. Thus weakened, the remaining soil is washed away even by minor storms."

The suit also alleges that "additional, ongoing oil and gas activities" continue to contribute to coastal land loss. Those activities include road dumps, ring levees, drilling activities, fluid withdrawal, seismic surveys, the use of marsh buggies, spoil disposal and dispersal, watercraft navigation, impoundments and propwashing/maintenance dredging.

The citation to "ongoing oil and gas activities" is no doubt intended to address anticipated legal defenses by the energy industry, including an assertion that the claims brought by the flood authority expired or were waived by lax state enforcement. That will be one of the main legal fights in the early, pre-trial stages of the litigation - if Jindal and lawmakers don't quash it sooner.

The suit further claims that the oil and gas companies exacerbated coastal land loss by failing to maintain the canal network and banks of the canals.

"Those acts and omissions, which continue through today, have caused both the erosion of the canal banks and the expansion beyond their originally permitted widths and depths of the canals comprising that network, resulting in the steady infiltration of saltwater into the coastal lands," the suit contends. "The consequent ecological degradation to these areas has produced weakened coastal lands and extensive land loss. This in turn has created markedly increased storm surge risk, attendant flood protection costs, and, thus, damages."
THE SUIT DOES NOT SEEK** a specific dollar amount in damages, but it does identify specific "costs" to the flood protection authority as a result of oil and gas activities. Those costs include abatement and restoration of coastal wetlands; paying for the hurricane and storm damage risk reduction system put in place by the U.S. Army Corps of Engineers (including the local share of maintaining levees - estimated to be many millions); levee certification costs (including extensive engineering studies); and "additional costs associated with flood protection."

The suit also seeks court costs, expenses, attorneys' fees and "other damages."

The legal framework for the suit is grounded in both state and federal law. Jones and Barry acknowledge that the canals were legally permitted, but they contend that the defendants have not lived up to promises - and, in some cases, legal requirements - that the canals be maintained so as not to damage area levee systems or increase flooding in residential areas.

The suit cites six theories of recovery under the law - negligence, strict liability, a centuries-old legal concept known under Louisiana law as "natural servitude of drainage," public nuisance, private nuisance and breach of contract.

Natural servitude of drainage prohibits one property owner from taking action - or failing to take action - that causes adjoining or nearby property owners to flood. In this case, the suit alleges that destruction of the wetlands has changed the natural hydrology of southeast Louisiana such that areas in and around New Orleans now flood because of oil and gas activities in the natural drainage areas below the city.

Barry says the flood authority will have to spend millions more in future years to protect people and property in the metro area because of the coastal land loss.

"No one denies - not even the oil industry - that the canals they dredged helped cause this problem," he says. "The industry is not responsible for all of the land loss. There are multiple causes for that. But the federal government has already spent more than $15 billion for its share of the problem. All we're asking of the oil and gas companies is to pay their fair share for the damage that they did.

"Someone will pay the costs of future flooding and flood protection," Jones says. "This lawsuit will determine who pays those costs - the citizens, the state and feds alone? Or will the oil and gas companies pay their fair share as well?"

This story originally appeared in New Orleans' Gambit.