Litigation Against Fossil Fuel Producers Is An Obnoxious Money Chase

Litigation Against Fossil Fuel Producers Is An Obnoxious Money Chase
(AP Photo/Vita Jureviciene)
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I betray no secret when I report that the modern litigation drive against the fossil-fuel industry is oriented overwhelmingly toward the age-old money chase rather than a concern with environmental improvement. The climate-change lawsuit game by now is old, old news, the central characteristics of which are the inanity of the claims and the inventiveness of the lawyers. For the latest iterations of the argument that fossil producers “misled” everyone on climate science---that they “knew” things decades ago that are not known today, even by the Intergovernmental Panel on Climate Change---see here and here.

For those who consider the “money chase” description of such litigation unfair, a straightforward question is obvious: In the event that the litigation succeeds in extracting significant numbers of dollars from the fossil producers, precisely how and to what extent would that outcome engender progress against the climate “crisis” (for which there is no actual evidence)?

The answer to that question also is obvious. But the money chase stimulates the legal imagination, and not in a way that increases aggregate economic productivity. Instead, the litigation obviously is intended to extract wealth produced by others, and so no principle limits it to the various “climate” arguments. Consider the ongoing lawsuits in Louisiana blaming the fossil producers for coastal erosion and other types of environmental harm; since 2013 forty-three such suits have been filed by six parishes and the city of New Orleans against more than 200 oil and gas companies. The state Attorney General and Department of Natural Resources have intervened as third-party plaintiffs in the coastal lawsuits, and a number of identical (“copy-cat”) suits have been filed by private landowners.

As a crude generalization, the suits allege violations of the 1978 Louisiana State and Local Resource Management Act (SLCRMA) and attendant regulations. The relevant fossil operations date back many decades---from the 1920s in some cases and in many others from the period surrounding World War II, when federal permits governed operations. Those production activities were permitted and conducted legally, and were encouraged and driven by incentives created by various federal, state, and local tax, regulatory, land-use, and other policies. Unsurprisingly, the policies and regulations have evolved over time, a reality that complicates significantly the compliance evaluation of given operations. In substantial part due to that reality, SLCRMA has never been applied retroactively, and the state Department of Natural Resources, charged with enforcement of SLCRMA, has maintained for decades that coastal use permits were not required for operations conducted in the coastal zone before the law took effect in 1980. Such a retroactive application of a 1978 law would be deeply problematic in the context of the rule of law, creating obvious artificial risks in that operations widely deemed legal and devoid of tort liabilities currently might prove highly problematic legally at some unknown future time. But that is the current state of the money chase in Louisiana.

Attempting to rewrite the rules long after the game has been played, the current plaintiffs and their attorneys now are arguing that oil and gas operations decades past violated the state coastal zone management statute, and are responsible for land erosion and localized surface damage and aquifer pollution.

With respect to coastal erosion in the state delta region: It is a serious problem. But for the plaintiff attorneys to place the blame on fossil operations is fatuous. There exists an enormous technical literature on the erosion problem, which stems first from the levee system constructed and maintained since the 1930s to channel the Mississippi River for flood control purposes. Flooding in the Louisiana coastal plain is a major problem, and massive engineering efforts to control it are hardly controversial. But one unintended long-term effect of the regional levee system is a disruption of the natural process in which sediments are deposited by the river in the coastal plain. Are fossil producers responsible for that?

There also are the effects of the extensive system of dredged canals and flood-control structures constructed over the decades to facilitate fossil exploration and production, large commercial shipping operations, and recreational boat traffic. Allocation of blame for the adverse erosion impacts of the canal system inevitably is arbitrary, which is the obvious reason that the plaintiff attorneys simply assert that responsibility rests with the fossil producers. There also is the history of wetlands drainage in the delta, conducted over many decades to facilitate normal development and agricultural operations. Moreover, some nontrivial part of the erosion problem stems from such natural processes as subsidence of the marsh surface, caused primarily by the downward movement of faults.

The litigation ignores the beneficial impacts of the levees, canals, and general economic activities conducted in the coastal zone, focusing instead only upon the adverse effects, asserted to be the responsibility of (deep-pocketed) fossil producers while shunting aside the fact that the fossil operations were permitted federally and conducted legally. This is a major reason that litigation is perverse as a tool with which to address complex environmental problems, in that courts are in a poor position to evaluate the relevant tradeoffs. Instead, it is legislature that should enact any additional needed statutory requirements, which would be the result of a bargaining process among competing interests that would balance those conflicting imperatives, however crudely. Again: The physical infrastructure system was constructed in substantial part before the enactment of SLCRMA, few if any accusations of permit violations can be found in the historical record, and a backward look at compliance issues in all their complexity is deeply problematic.

SLCRMA empowers the state with the permitting process applicable to economic activity extending beyond the boundaries of any given locality; fossil operations obviously fall into that category. Litigation by a given or group of parishes cannot yield enforcement consistency or an analytic process that yields a rational evaluation of regulatory impacts across parishes.

The economic value of fossil operations in Louisiana is enormous; estimates vary, but the industry generates $50-100 billion in overall economic activity, employs tens of thousands, and makes annual tax and royalty payments on the order of about $2 billion. Consider a world in which litigation extracts significant resources from the industry while yielding few if any environmental benefits. Can anyone believe that a reduction in wealth and employment would be consistent with aggregate efforts to increase investment in environmental improvement?

Recent restoration activity in the coastal sector has been financed with part of the $21 billion Deepwater Horizon litigation settlement, finalized in 2010. Unlike the piecemeal litigation now being pursued by the parishes and New Orleans, the Deepwater Horizon settlement incorporated federal, state, and local claims in a unified proceeding, and addressed a specific set of environmental harms created by a single identifiable event.

But such a source of funding is highly unlikely to be repeated. Far more important is the continuing stream of revenues disbursed to Louisiana (and to Alabama, Mississippi, and Texas) under the terms of the 2006 Gulf of Mexico Energy Security Act (GOMESA). Disbursements in fiscal year 2019 to Louisiana were $101.3 million, rising to a planned $155.7 million in FY2020. These are revenues paid by the industry, the continuation of which depends on continued operations and a consistent legal and regulatory environment. That imperative yields useful incentives for all interested parties, and the use of those revenues furthers actual environmental improvement. The current litigation will yield no environmental benefits, while increasing economic risks and the erosion of the rule of law, all in pursuit of payouts for some attorneys and local governments and their favored interest groups. It is difficult to justify any such outcome.

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