Louisiana Can Seek More Than Cleanup Costs

(CN) - Oil and gas drillers that polluted their surroundings may owe Louisiana more than what it costs to clean up the property, the state Supreme Court ruled.

Louisiana and the Vermilion Parish School Board sued for remediation costs in 2004 over oil and gas damage to property in Vermilion Parish owned by the state, and managed by the school board.

The East White Lake Field allegedly incurred damage by work done pursuant to a 1935 oil and gas lease, and a surface lease granted in 1994.

Louisiana and the school board alleged damage to the land's soil, surface and ground waters. Their state court complaint sought damages from the Louisiana Land and Exploration and other outfits that have since been dismissed without prejudice. The remaining defendants are Union Oil Co. of California; Union Exploration Partners; Carrollton Resources; Chevron USA; and Chevron Midcontinent.

In addition to seeking demanding a property evaluation and cleanup, the complaint seeks damages for negligence, strict liability, unjust enrichment, trespass, breach of contract, and violations of the Mineral Code and Civil Code.

Louisiana created a scheme for oilfield cleanups with the passage of Act 312 in 2006. The law establishes several procedural hoops a landowner seeking environmental damages must first jump through.

After filing a lawsuit covered by the act, the plaintiffs must notify the Louisiana Department of Natural Resources and the attorney general about the litigation.

The department and attorney general can intervene in the suit if they want, but they retain the authority to independently bring a civil or administrative enforcement action.

At trial, a court must determine if environmental damage exists, and whether defendants are legally responsible. A finding of liability compels the responsible parties to develop a remediation plan that it must submit to the court and the department of natural resources.

The plaintiffs, and any other party, are allowed to submit their own remediation plans to the department, which then holds a public hearing on the submissions.

Thereafter the department determines the best plan, and forwards it to the court for review. The court then adopts the plan approved by the department unless a party can prove another plan is better.

The court then orders the responsible parties to fund implementation of the plan by depositing funds into the court's registry, which is considered a final judgment for appeal purposes.

In the Vermilion case, the defendants fought the claim for damages in excess of those needed to fund a court-approved remediation plan.

The trial court sided with the defendants and granted Chevron summary judgment after finding that it was not a successor to Union Oil Co.

Louisiana and the school board appealed both issues, and court of appeal consolidated the issues and reversed both rulings.

The Louisiana Supreme Court affirmed last week, rejecting claims that Act 312 caps remediation damages at the amount needed to fund the court-approved plan.

An express contract between the land owner and lessee can affect how much remediation damages an owner gets, outside of the system set up by Act 312, according to the 30-page ruling.

"If a court awards remediation damages pursuant to an express contract provision that is a greater amount than that ordered to be placed into the court's registry to fund the remediation plan, then the landowner is entitled to those 'excess' remediation damages," Justice Marcus Clark wrote for the majority. "Likewise, 'any award' for 'additional remediation' may be kept by the landowner, as well. If the money judgment for remediation exceeds the amount necessary to fund the plan, the plaintiff is granted a personal judgment for the 'excess' remediation damages."

If the court finds that remediation will cost more than what has been deposited, it can order the responsible parties to deposit more, the majority added. Remaining funds are then returned to the depositor after the completion of work.

In a six-page dissenting opinion, Justice Jeffrey Victory interpreted Act 312 differently.

Without a private contract that provides for additional remediation, the law "limits the recovery of remediation damages to those awarded by the trial court in its determination of the most feasible regulatory plan," Victory wrote.

Justice Greg Guidry concurred with the majority but also questioned the Legislature's intention with Act 312.

"I write separately because I question whether the legislature intended that a landowner, in the absence of a contract to the contrary, may recover remediation damages in excess of, or in addition to, those required to fund the feasible plan for remediation selected by the trial court," Guidry wrote in a six-page opinion.

In maintaining Chevron as a defendant, the majority found that Chevron may have service agreements with Union Oil, which could include environmental issues.

Chevron's agent testified in a deposition that its acquisition of Union Oil did not otherwise provide for the transfer of Union Oil's liabilities and assets.

Because Louisiana and the school board do not have access to the service agreements to prove successorship, the majority refused to dismiss Chevron from the case.

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