Court will decide venue for oil and gas lawsuits

Local governments across south Louisiana are suing oil and gas companies over alleged damage to the state’s fragile coastline. Billions of dollars are at stake.
But before the cases can be resolved on the merits, an important legal question must be answered: Do the cases belong in state or federal court?
The U.S. 5th Circuit Court of Appeals in New Orleans is poised to decide whether federal or state courts will resolve 42 cases challenging the actions of more than 200 energy companies. For the plaintiffs, the answer is obvious: They believe the companies violated state law and state permits while harming the coastal environment, so the cases belong in state court.
“The parish that is affected should rule on if the laws were violated in their parish,” said John Carmouche, an attorney who represents many of the plaintiffs.
But Melissa Landry, a consultant who works with energy companies and is familiar with the lawsuits, makes two arguments as to why the lawsuits belong in federal court. The first is simple: The litigation involves important issues of national concern that should be decided in federal court.
The second is a bit more complicated. Many of the challenged actions were carried out during World War II, when the oil industry partnered with the U.S. government, specifically its Petroleum Administration for War, to ensure the war effort had the oil it needed, Landry says.
PAW directed the production, transportation, use and price of oil during the war, issuing directives to the industry that addressed or determined many of the methods, materials and other details related to much of the conduct and resulting industry infrastructure challenged by the plaintiffs, she says. According to this argument, the energy companies were acting under federal officers and are entitled to defend their actions in federal court.
But Carmouche says the lawsuits allege violations of the Louisiana State and Local Coastal Resources Management Act, which wasn’t enacted until 1978, decades after the end of World War II. The plaintiffs are not claiming violations of federal law.
“The parishes have brought only state law claims, so I do think this belongs in state court,” said Karen Sokol, an associate law professor at Loyola University New Orleans whose expertise includes environmental law.
State courts are closer to the affected communities and tend to be more familiar with state law, she said. Sokol says the energy companies likely prefer to avoid going through the discovery process in state court, where information they would rather not disclose would come to light.
“This is not uncommon on the part of the oil and gas companies in a lot of different suits,” she said. “If they can, they want to be in federal court because they perceive that as friendlier.”
Freeport-McMoRan, which drilled only a small fraction of the wells in Louisiana’s coastal zone, is the only company to settle so far. Though all the details have not been made public, the company reportedly has agreed to make payments totaling up to $100 million in cash and environmental credits.
Carmouche said the structure of the Freeport-McMoRan settlement could be applied to other companies. He said any money obtained by coastal parishes would go directly to the parishes’ restoration and remediation efforts.
But Landry says the settlement does not promote the public interest, and says the various lawsuits actually are counterproductive to efforts to protect and restore Louisiana’s threatened coastline. The coastal lawsuits are among the reasons a corporate-funded group that advocates for civil defendants calls Louisiana a “judicial hellhole.”
“Over the last five years, Louisiana oil and natural gas companies generated more than $230 million for coastal restoration and hurricane protection, while this divisive litigation has produced nothing,” Landry says.
“It is evident that this complex and multi-faceted problem will not be resolved in a courtroom.”
It is not clear when the 5th Circuit will rule on the proper venue for the coastal lawsuits. Once it does, either side could ask the U.S. Supreme Court to review the decision, though the justices would be under no obligation to take up the case.