Oil & Gas Clean-Up Not “Capped”

Louisiana’s long relationship with oil and gas has been profitable for both the oil and gas industry and Louisiana’s citizens. However, the nature and extent of the duty to restore the land after drilling has often been a disputed and litigated issue. Recently, the Louisiana Supreme Court’s decision in State v. Louisiana Land and Exploration Co., 2012-0884 (La. 1/30/13), – So.3d – added clarity to the law by establishing that the presence of a Court-approved remediation plan does not create a “cap” on damages.

The Louisiana Legislature passed La. R.S. 30:29 to provide a procedure for the clean-up, or “remediation,” of oilfield, exploration and production sites. Before this statute, a plaintiff who was awarded monetary “remediation” damages to restore land was not obligated to actually use the money to perform remediation work. The purpose of La. R.S. 30:29 was to ensure that any money awarded to remediate polluted sites be used for this purpose. By the statute, any such award is to be deposited with the Court and spent under a Court-approved plan.

Even after the statute, it remained unclear whether a Court’s approval of a remediation plan created a “damages cap” whereby the plaintiff landowner could not recover in excess of the plan. This issue was resolved in State v. Louisiana Land and Exploration Co.

The suit involved the State’s action for remediation of land owned by the State and managed by the Vermilion Parish School Board. The property was allegedly polluted by oil and gas exploration performed pursuant to a mineral lease. Consistent with recovery allowed in earlier cases, the State sought to recover damages in excess of the remediation costs. Attorneys for one of the defendants filed a motion for partial summary judgment and argued that, under La. R.S. 30:29, the plaintiffs did not have a right to seek damages in excess of the amount necessary to complete the Court’s remediation plan

The trial court held the plaintiffs could only recover damages equal to the amount listed in the Court’s remediation plan. The appellate court overturned the trial court’s decision and held that the landowner could recover damages in excess of the Court’s plan, whether those damages are based on a contract or tort law. The Supreme Court affirmed the appellate court’s decision and confirmed that there is no “cap” on damages.

Before and after State v. Louisiana Land and Exploration Co., an award for damages in excess of the remediation plan is available and arises from a private right in either contract or tort law. Contract damages are permitted if they are expressly provided by the contract. If contract damages are not available, tort damages may be recovered if the plaintiff shows that the defendant acted unreasonably or excessively in its exploration of gas, oil or minerals. See Terrebonne Parish School Bd. v. Castex Energy, Inc., 2004-0968, p. 10 (La. 1/9/05), 893 So.2d 789.

In view of the State v. Louisiana Land and Exploration Co. decision, oil and gas companies should be aware that they face exposure in excess of the statutory remediation plan, making them potentially liable for far more than just clean-up.

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