WETLANDS:

Levee board picks fight with oil and gas industry, roiling La.

NEW ORLEANS -- Flying over southeast Louisiana, it's easy to see human fingerprints on what's left of the wetlands below.

Marshes have been slashed by straight-edge canals, pipelines and trappers' lines. In many areas, banks of dredged muck piled along canals are all that's left of coastal prairies. Many other canals have vanished entirely as wetlands eroded into open water.

The oil and gas industry, which owns about 80 percent of Louisiana's coast, has carved 10,000 miles of canals in the marshes. While scientists debate the scope of industry's role in the state's loss of 1,900 square miles of land over the last century, few dispute that it has had one.

Now, a government panel created to oversee protective levees here in the wake of Hurricane Katrina has filed a lawsuit against 97 oil and gas companies that aims to force them to repair or pay for the damage they caused to the marshes.

The lawsuit, filed last month in civil district court in New Orleans, is the brainchild of Southeast Louisiana Flood Protection Authority-East Vice President John Barry, well-known in these parts for his 1997 book "Rising Tide," which chronicles how the devastating 1927 Mississippi River flood transformed the country's relationship with its longest river. With this lawsuit, he stands to write the next chapter in the region's history.

"This lawsuit is about making sure that New Orleans has a fighting chance to survive," Barry said in an interview. "As we go forward and we look at the requirements of protecting people's lives and property, it's simply not possible to do that with the kind of financial resources that we can call upon. So it makes sense that someone -- an industry that is a significant contributor to the problem -- pay to fix the problem that they created."

But taking on the oil and gas industry, which provides a significant share of jobs and revenue to the state, is one sure way to find a fight. During a time of year when life here has usually slowed to a steamy simmer, the Big Easy is roiling with controversy over the lawsuit.

Gov. Bobby Jindal (R) and his coastal adviser have come out swinging against the lawsuit, contending that it is unconstitutional and ill-thought out and that it jeopardizes the state's ability to carry out a coastal restoration plan.

And while Louisiana's federal lawmakers have mostly been taking a wait-and-see approach with the suit, some state legislators are not. The Legislature doesn't come back into session until next March, but already lawmakers are talking about ways of intervening.

'Keep the people safe'

For decades, stakeholders here have been whispering about the prospect of such a lawsuit, but until now, no one had seriously tried it.

Proving standing -- that the plaintiff was injured by companies' actions -- was one major hurdle.

Mark Davis, a senior research fellow and director of Tulane University Law School's Institute on Water Resources Law and Policy, said the East Bank levee authority is one of the few entities that could show that it has been directly affected.

"It has one job and one job only, and that is to keep the people safe," he said.

The authority was created after Katrina, when legislators took dramatic steps to remove politics from levee boards. A constitutional amendment, which passed overwhelmingly, consolidated the levee districts around New Orleans and downriver into just two boards: one responsible for the protection of communities on the river's east bank and the other for the west. It also set detailed requirements for who could be nominated to those boards to ensure that they would be filled with technical experts rather than political appointees.

Those boards are tasked with maintaining and operating the levees, storm barriers and other infrastructure, including the new $14.5 billion flood-control system nearing completion by the Army Corps of Engineers. That is no small -- or cheap -- job, given the scale of the new system and Louisiana's constant battle against subsidence.

The levee authorities are also responsible for finding the funding for their work. They don't receive state support and are not slated to receive funds from fines or settlements related to the 2010 Deepwater Horizon oil spill.

"The Authority is responsible for protecting a great majority of the Greater New Orleans region from the mortal threat of hurricane storm surge," the lawsuit states. "It alone manages the levee system that is designed to check the floodwaters that threaten to inundate the city each year during hurricane season. It alone must confront the reality that with the disappearance of the land buffer that protects the levees from the ocean, its mission could become a physical and a fiscal impossibility."

The board voted unanimously to file the suit in June. The list of defendants includes some of the biggest and most influential oil companies, including BP America Production Co., ConocoPhillips Co., Chevron Inc., Shell Oil Co., Exxon Mobil Corp. and Koch Industries Inc.

Three venerable legal theories

The lawsuit relies on the well-established legal theories of nuisance, negligence and liability.

It stands on three main arguments.

First, it alleges that companies violated their permits by failing to "maintain and restore" the wetlands affected by their work. Although individual permit obligations vary, lawyers say many required companies to backfill canals when they finished them, meaning that the dredge spoil piled on the banks would be returned to the canal. Depending on the location, such backfilling can over time help wetlands rebuild.

The suit contends that those original restoration requirements remain in effect for companies that first did the work or businesses that now own the land.

Second, the suit argues that the companies' actions violated the federal River and Harbors Act of 1899, which prohibits actions that reduce the effectiveness of federal levees.

Finally, it points to a centuries-old legal principle, "servitude of drain," which holds that someone is liable for damages if he does something that increases the flow of water onto another person's property. Significantly, the courts have ruled that properties don't have to be contiguous.

The principles at play here are similar to those that have been used by individual landowners to successfully sue oil and gas companies, said Oliver Houck, a professor at Tulane University Law School, but this is the first time that such a suit has been attempted on a landscape scale.

He said that one major hurdle to the suit is the fact that oil and gas companies' behavior was never challenged over the decades since the dredging was done. Under the legal concept of prescription, this could be seen this as a type of easement allowing that activity.

But, Houck said, prescription was conceived of with respect to fixed events, not continuous ones like the ongoing erosion of wetlands.

"It's not like somebody went and burned down your shed some time ago, and now you're left with a burnt shed," he said. "It's like your shed is burning every day. It's a continuing kind of problem."

A caveat in the permit language could also be a critical issue in determining whether the suit moves forward. Gene Turner, a wetlands scientist at Louisiana State University who has spent decades studying the impacts of canals, said that most permits obligations go into effect "upon abandonment."

"That's a legal term," he said. "Companies will not declare it abandoned because they say, 'Well, we might want to go back there.' And there's not a requirement to declare it abandoned when they finish drilling."

Levee board is targeted

The lawsuit's biggest hurdle now is not its merits, but the staunch opposition of the Jindal administration and the Legislature.

In a press statement fired off the day after the suit was filed in late July, Jindal demanded it be withdrawn, saying that the levee authority had been "hijacked" by trial lawyers.

The board's contract with the New Orleans firm Jones, Swanson, Huddell & Garrison LLC would award the firm 32.5 percent of the first $100 million won in the suit and lesser percentages for additional amounts. The firm would not get paid if it loses.

"This is nothing but a windfall for a handful of trial lawyers," Jindal said. "We're not going to allow a single levee board that has been hijacked by a group of trial lawyers to determine flood protection, coastal restoration and economic repercussions for the entire state of Louisiana."

Opponents have also objected to a "poison pill" provision in the contract, as levee board member Barry calls it, aimed at heading off political pressure. It would have the board -- and thus taxpayers -- on the hook for attorneys' fees if it withdraws the suit now or in the future. Those fees already exceed $300,000.

Ultimately, Jindal and his coastal adviser, Garret Graves, contend that the levee board lacked authority to file the lawsuit.

While the board has the right to hire lawyers, the attorney general must sign off on any compensation. The board has released a letter showing it had approval for the contract from the attorney general's office, but the board's attorney, T. Robert Lacour, said he was asked only to submit the resolution it passed authorizing the hiring, not the contract itself.

Last week, the state agency responsible for coastal protection, the Louisiana Coastal Protection and Restoration Authority (CPRA), voted to ask the levee authority to drop the lawsuit. After the meeting, Graves, who also chairs the coastal authority, said the agency wouldn't immediately intervene, but that actions by other state officials could soon end the lawsuit.

Indeed, state lawmakers have largely sided with the Jindal administration in opposing the lawsuit. At a hearing earlier this month of the Joint Committee on Transportation, Highways and Public Works on the suit, committee Chairman Robert Adley (R) criticized the board's lack of coordination with other state entities and said that it lacked the authority to file the suit.

"CPRA is the ultimate authority," he told Barry. "There is no independence that you describe."

When the Legislature returns next spring, lawmakers are expected to file bills to limit the levee board's authority.

Legislation could also be passed to alter the terms of board members. Even without it, four of the nine seats are already in play, since Barry, board President Tim Doody and two other members have expired terms. They are required to continue serving until a replacement is confirmed.

'A much bigger picture'

Big bucks and turf wars are clearly at play in the battle over the lawsuit, but behind the bombast is a deeper reason for the opposition: It upsets a carefully crafted campaign by lawmakers of both parties at both the state and national levels to draw money for coastal restoration.

"There's a much bigger picture," Graves said in an interview. "This is a very narrow view by an entity that simply doesn't have the jurisdiction, isn't responsible for the bigger picture of our coast."

In that campaign, the Army Corps of Engineers, not the oil and gas industry, is the enemy of choice.

For years, Louisiana has been battling the corps over management of the Mississippi River and whether the material dredged from its bottom should automatically be used to rebuild wetlands and barrier islands. Scientists widely agree that the state's marshes were dramatically damaged when the corps walled off the river. Without regular floods, the marshes are deprived of the nourishing sediment carried by river water (Greenwire, Aug. 19).

Although the corps was found to have broad immunity in lawsuits related to failures during Hurricane Katrina, the state has been searching for ways of forcing its hand on river management.

To be sure, Graves does not deny that oil and gas activities have had an impact on the coast, too, but for now he said the preferred avenue for addressing it is through revenue sharing.

Louisiana's congressional delegation has pointed repeatedly to the historical damages to coastal resources in its push to have a greater share of offshore oil revenues sent to Gulf Coast states.

Louisiana Democratic Sen. Mary Landrieu and Alaska Republican Sen. Lisa Murkowski introduced a measure in March that would allow Gulf Coast states to receive 37.5 percent of oil and gas revenues off their shores sooner than they are slated to under current legislation, and would gradually lift a $500 million revenue cap set to take effect in 2015 (E&E Daily, March 20).

But Graves said the lawsuit "throws a wrench" in this effort.

"This begins yanking the rug out from under it," he said. "People start saying, 'Well, wait a minute! Are you double-dipping here?'"

Moreover, even when the state does have cash for restoration, it relies heavily on the cooperation of the oil and gas companies simply because they own the lion's share of land along the coast.

Graves said that the industry has "welcomed us with open arms" to do restoration work on or near its land in the past, giving the state free rights of way, helping with surveys and sometimes providing funds or in-kind services. But since the lawsuit was filed, he said, there have been two instances in which companies have suddenly raised concerns over restoration projects.

John Lopez, executive director of the nonprofit Lake Pontchartrain Basin Foundation and a former oil industry scientist who works with CPRA on restoration, said there's reason to worry that the lawsuit could change industry attitudes. Companies have been passively cooperative in the past, he said, as long as the funding for restoration came from elsewhere.

"This [suit] would be going from ambivalence to a place where suddenly they have a reason to care," Lopez said.

And the factor that no one is eager to discuss is the potential for the levee board's lawsuit to impact the ongoing case against BP for civil fines related to the 2010 spill.

Worried about tipping their legal hand to the oil giant, state officials won't publicly discuss the specifics of their concerns, but the Louisiana Attorney General's office last week blasted Barry for comments he made suggesting that he had been assured that the suit wouldn't negatively affect the Deepwater Horizon litigation.

"Mr. Barry's statements are totally untrue," said the statement from the AG's office, which Graves tweeted with the hashtag "I made that shit up."

Robert Verchick, Gauthier-St. Martin Chair in Environmental Law at Loyola University New Orleans, said that it's not entirely clear what is driving the state's concerns, but it may have to do with the suit complicating the causes of wetlands destruction in the BP case.

"Officials for the state might be concerned that because the levee authority is making an argument that some of this coastal damage was caused by the oil and gas industry before the BP oil spill, that somehow that is detracting from the importance of the BP oil spill as a causative factor for damaging the coast," Verchick said.

However, he noted, "everyone understands the coastal wetlands were on life support before the oil spill ... there's no confusion about that."

For his part, Barry said that even if the levee board's suit were to turn up evidence that could impact the BP trial, the timing makes it unlikely since the BP trial is expected to conclude shortly.

"Once they're suit closes, which is going to be pretty soon, my understanding is you can't introduce new evidence on appeal," he said. "You have to deal with the record of the trial.

Time to pay

With pressure being applied to the East Bank levee authority, the board recently offered an olive branch, voting to consider a 45-day pause in the lawsuit to allow for negotiations with the state and with energy companies.

Board member Barry has said that he is open to settling the suit if enough is offered in exchange. But legal experts say that's unlikely to happen until oil and gas companies are certain that the litigation is moving forward, and the two sides still appear to be fundamentally at odds on this.

"The possibility for a grand bargain exists, but not until we cross the first hurdle of whether or not this case stays in," Davis of Tulane Law said. "If they could get something that put the issue to bed, at least with respect to state and local government, that would be a pretty big chapter to close."

One option would be for the Legislature to raise the tax on oil production and transmission in exchange for granting oil and gas companies immunity from similar suits. Such a tax hike would give the state a long-term funding source for restoration.

But as long as lawmakers stand prepared to intervene and the Jindal administration maintains its opposition to the lawsuit, a deal like that is seen as a long shot.

Instead, stakeholders are worried that the Legislature may move more immediately to roll back some of the reforms instituted following Hurricane Katrina.

This was a key factor when the state's levee board association, which includes the West Bank levee authority, voted to oppose the suit earlier this month.

"Please, please do not throw the baby out with the bath water," the West Bank authority's regional director, Giuseppe Miserendino, told the legislative committee.

But eventually, somebody is going to pay for the restoration, Davis said. While civil fines from the 2010 Deepwater Horizon spill and oil and gas revenue sharing are a start, he said, they won't get the job done.

"Take out the parochial interest -- the Cajun food and New Orleans -- America has something really big at stake here and America has expended a lot here," he said. "The real question is, how do we secure that investment? Somebody's going to have to pay."