Louisiana’s Coast Is Vanishing. Can a Mining Company’s $100 Million Offer Help Save It?
Freeport-McMoRan’s deal to resolve claims that its aggressive drilling damaged the coast could lead to more. But oil giants like BP, ExxonMobil and Shell have bristled at the idea.
By Nicholas Bogel-Burroughs Published Sept. 26, 2019Updated Sept. 27, 2019, 11:28 a.m. ET
Coastal Louisiana parishes announced on Thursday that they had reached a deal with a mining company over claims that its aggressive drilling for oil damaged the state’s vanishing coast, a settlement that could lead to other agreements with energy giants as the state scrambles to stop its disastrous land loss.
In a tentative agreement with 12 coastal parishes, the company, Freeport-McMoRan, said it would pay up to $100 million toward restoring the coast, much of which it could recoup through environmental credits.
Freeport-McMoRan is just one of 98 companies that have been sued in 46 lawsuits over coastal damage, according to John Carmouche, a lawyer representing eight of the 12 parishes that are part of the tentative agreement. But the deal is likely to blaze a trail for future negotiations between the parishes and industry leaders like ExxonMobil, Chevron, BP and Shell.
“This is definitely a starting point, and I think they all understand that the ones that come first get the better deals,” Mr. Carmouche said.
More than 2,000 square miles of coast — roughly the size of Delaware — have sunk underwater since the 1930s. Studies, including those sponsored by oil and gas industry groups, have shown that private enterprise is responsible for a substantial portion of the land loss, largely from the construction of pipelines and access canals.
But the energy industry has remained a powerful force in Louisiana, which accounts for 7 percent of all gas production in the United States and is capable of processing 3.3 million barrels of crude oil each day, according to the federal government’s Energy Information Administration.
Some of the largest oil and gas companies bristled at the idea that they would agree to a similar deal.
“It’s a long way away from presenting a legitimate solution,” said Melissa Landry, a spokeswoman for five of the defendants: BP, Chevron, ConocoPhillips, ExxonMobil and Shell. She declined to say whether the companies had discussed possible settlements with the parishes.
In a statement, Ms. Landry said oil and gas companies had been operating within the scope of the law for decades and that the “complex and multifaceted problem” of protecting and restoring Louisiana’s coast “will not be resolved in a courtroom.”
Gov. John Bel Edwards, a Democrat who in 2016 intervened as a third party in the lawsuits and encouraged other coastal parishes to sue the oil and gas companies, said he hoped other corporations would strike similar deals with the local governments.
State officials have estimated that it would cost $50 billion to neutralize land loss. The money from the proposed settlement would go toward a Coastal Zone Recovery Fund, managed by the state, that would distribute the cash toward coastal projects in the affected parishes.
“Ensuring these funds stay in the communities that are impacted for dedicated coastal restoration is why the state of Louisiana intervened in these lawsuits, despite the fact that they were filed before I was governor,” Mr. Edwards said in a statement, adding that he hoped the deal would be a model for future agreements.
The deal still needs the formal approval of all 12 parishes, which Mr. Carmouche said he expects before the end of the year, but the tentative settlement marks the latest turn in litigation battles against the oil and gas industry in Louisiana.
Private landowners allowed companies to use their lands, but some later sued after they said the companies had polluted their property. In 2017, a federal appeals court threw out a lawsuit from a state levee authority, which claimed that oil and gas companies had weakened New Orleans’s defenses from storm surges by destroying coastal wetlands that act as a buffer zone.
John Barry, a former member of the authority that led that charge, said on Thursday that he was glad to see Freeport-McMoRan’s willingness to reach a settlement, but that it was a drop in the bucket compared with the impact of other companies that have larger operations in the state.
“Compared to the scope of the problem, and the liability of the industry, it’s a small but important step,” Mr. Barry said.
Oliver Houck, a law professor who advised the parishes’ lawyer early in the case, said that the settlement was significant, but that he had nearly given up hope that larger companies would take responsibility for the disappearing coast.
“They just can’t accept it,” he said.
Considerably less than if Freeport-McMoRan had gone to court and lost. Instead of a focus on "lawyers" maybe the real issue here is something that all Louisianans should consider. The O&G industry has significant exposure to losing these suits, settling may be the cheaper way out. But there is another way to view this settlement. The O&G industry has billions of dollars of infrastructure on the coast that is at risk to the effects of a changing climate. Freeport-McMoRan just may have come to the conclusion that the best business decision is to settle, work with the state, and while addressing coastal problems get some help protecting, relocating or replacing the most vulnerable O&G infrastructure with some help from tax dollars, federal and state. Toward that end, $100M is a drop in the bucket and quite possibly a smart investment.
The marshes are not suitable for either wind or solar but floating solar and offshore wind are growing niches in renewable energy. The O&G industry isn't going anywhere, they have too much invested in Louisiana. And much of the end user demand is located in SE LA. Any assertion that those existing facilities would go anywhere, including Texas, is a fairy tale.
Can we save Louisiana’s coast?
Andrew J. Yawn | USA TODAY NETWORK
An oil company accused of polluting and destroying parts of Louisiana’s quickly-dissolving coastline has agreed to a multi-million dollar settlement, a potential watershed moment that could help the state combat land loss and lead similarly accused energy titans to follow suit. Freeport-McMoRan is one of 98 oil and gas companies named in 42 lawsuits seeking reparations for environmental damage. Six years after the first suits were filed by several coastal Louisiana parishes, Freeport-McMoRan is the first to settle.
“I’m pleased that other oil companies are calling, talking resolution,” said John Carmouche, the attorney representing the parishes. “I’ve been very vocal that the first companies to come, get the better deal. I think Freeport started something I think can be very great for Louisiana.”
Freeport-McMoRan did not admit liability but has agreed to pay up to $100 million, much of which could be reimbursed by environmental credits, said Linda Hayes, the company’s vice president of communications.
“While we believe the plaintiffs’ theories of liability are unfounded, we recognize the importance of coastal restoration regardless of its cause,” Hayes said via email. “As a result, we decided to make an early investment in a creative solution rather than continue to engage in years of litigation.”
The deal could take decades to be paid in full and still requires approval from 12 parishes that will receive the funds. Those12 include the six that have filed suit —Plaquemines, Jefferson, St. John, Cameron, Vermilion and St. Bernard — and six others that will be included because they prepared a damage model in the event of a settlement: Iberia, St. Mary, St. Martin, Lafourche, Terrebonne and St. Charles.
Carmouche and environmental law experts believe Freeport’s decision will set off an avalanche of similar agreements by companies who want to keep details of their operations out of the courtroom and off public record.
Opponents say suing the oil and gas industry is the wrong way to address environmental issues on the lands where they operate. The state’s energy industry is an influential lobbying force in Louisiana, which accounts for 7 percent of total U.S. gas production. Oil and gas companies are also one of the state’s largest employers, with a workforce of approximately 260,000 people that took home $19.2 billion in household earnings in 2015.
“...This litigation threatens the future of the oil and gas industry in Louisiana, which has been a critical driver of job creation, tax revenue, and economic growth in the state,” said lobbying groups Louisiana Oil and Gas Association and Louisiana Mid-Continent Oil and Gas Association in a joint statement. “Revenues generated by oil and gas production also provide more than 30 percent of the state’s funding for coastal restoration and hurricane protection projects.” The lobbying groups also said in the joint statement, that instead of supporting these lawsuits, state and local officials should focus on finding ways to support oil and gas production. This will “create much-needed jobs
and generate even more funding for our coast,” the groups stated.
Since the 1930s, Louisiana has lost approximately 2,000 square miles of coast to erosion, enough to cover the state of Delaware, according to the U.S. Geological Survey. A key contributor has been the locks and levees built along the Mississippi River, which eliminated flooding, and in turn, the marsh-replenishing freshwater and sediment the annual floods brought.
But at the center of the lawsuit is the idea that the wetlands have also been harmed by canals cut through the marsh and groundwater extraction that has caused the land to sink.
Chris Dalbom, assistant director at Tulane University’s Institute of Water Resources, Law and Policy, said that’s “pretty solid science.”
“The levying along the river has meant (the wetlands) can’t heal itself while we go on injuring it. But when you cut a canal for navigation or oil and gas, that’s a harm to the wetlands and can introduce saltwater that can further that harm,” Dalbom said.
The lawsuits claim oil and gas companies failed to follow state law in drilling wells, building canals and disposing of wastes. But Carmouche’s case is unique in that he is not assigning general blame. Instead, a combination of aerial photography, oil well maps and internal documents obtained from energy corporations have allowed for specific — and in his words “provable” — charges of environmental harm tied to exact locations.
A native of Napoleonville, Carmouche grew up taking fishing trips to Plaquemines Parish, one of the parishes he now represents where thousands of acres of marsh have disappeared and hundreds of oil rigs can be seen from the beach.
Carmouche said Freeport’s $100 million offer, which could take two decades to be paid out in full if approved, is personally vindicating for a cause close to his heart.
“All of the naysayers who said it would never happen and that the claims are frivolous, it proves them wrong. I know what
documents I have and what we can prove and what they knew,” Carmouche said. “To finally have it get out in the public and have people recognize there’s an issue and real and provable damages caused by the oil and gas companies to our coast and be able to contribute in some way to the restoration to protect future generations is a big deal. It’s huge.”
Freeport’s settlement is relatively minuscule compared to the estimated cost of repairing the coast. The state’s Coastal Master Plan projected $50 billion is needed to halt land loss. Taking into account inflation, Dalbom estimated $100 billion would be a more realistic figure.
Freeport operated 4 percent of the wells drilled in the coastal zone and was responsible for “less than 1 percent” of calculated coastal damage, Carmouche said. If there will be a financial windfall robust enough to make an impact, it will come from the big five accused in the lawsuits: BP, Exxon, ConocoPhillps, Chevron and Shell.
Melissa Landry, a spokesperson for the those companies, called the suits “terribly unproductive” and “misguided,” adding that the oil and gas industry has contributed $230 million to coastal restoration in the past five years.
“Oil and gas companies have operated in the state for decades,” Landry said. “Our operations have been, and will continue to be, in compliance with federal, state and local laws and regulations specifically enacted to permit and encourage the responsible use and development of Louisiana’s coastal resources while also protecting the environment.”
It’s yet to be seen if the settlement will be approved, if other companies will join Freeport in avoiding litigation, or how the parishes will use the funds. There are also unanswered questions about how the money will be dispersed and how much oil and gas companies will pay. The agreement would require the Legislature to create a new fund to house this settlement and any future settlements. But the structure of the contract would allow for oil and gas companies to be reimbursed via environmental credits. Oil and gas companies can generate environmental credits gained from restoration activities. According to Carmouche’s proposed funding plan, the sale of credits yield significant
funds. For example, the price of a single acre of marsh credit in Louisiana ranges from $100,000 to $150,000.
While there is still much to figure out, Carmouche said the settlement was purposefully designed to be more of a business agreement than a punitive measure. And it’s a deal he hopes will attract the rest of the defendants to the table.
“The best way we felt to deal with it was to give the industry assets,” Carmouche said. “We’re for industry. We’re for oil and gas companies to come operate. We just need a balanced approach, operations that won’t harm the environment yet will provide jobs for future generations.”