Gov. Jeff Landry said Tuesday that the oil industry was engaging in “hypocrisy” for claiming that Louisiana’s litigation environment was stifling their business yet, at the same time petitioning state government to help with many new carbon capture projects.
Landry, a longtime supporter of the oil industry, leveled the criticism in a surprise appearance in the House Natural Resources and Environment Committee, where he threw his political weight behind a bill that would make numerous changes to state laws and regulations.
Senate Bill 244, sponsored by state Sen. Bob Hensgens, R-Abbeville, began as a bill to reorganize the Department of Energy and Natural Resources, and it had already passed the Senate. But pages of new amendments were added in committee on Tuesday morning, some of which Landry said were written Monday night.
Among them was a controversial amendment that Landry said he wrote himself: It would prohibit indemnification, a legal tool that allows companies to pass off the responsibility to clean up old wells when it sells them to another company. The amendment would also retroactively remove those protections from previous deals.
Some Republican committee members aired concerns about the last-minute nature of the changes. They also raised fears about the indemnification amendment and other proposed changes to legacy oil field cleanup litigation, which they said had already alarmed constituents who are large landowners or work in oil and gas.
One representative of a Louisiana landowner trade group, Don Caffery of the Natural Resources Management Association, told the committee the indemnity provision is his group’s major concern, claiming the change would be unconstitutional.
Without it and the guarantee of protection from legal liability for past actions, itwould lock out future oil and gas exploration for Louisiana landowners, he argued.
“And so it’s wide open. I can’t signal to industry that I would like them to come and drill on my property with this type of discussion being had in this body today,” Caffery said.
Landry seemed to have little sympathy, saying oil companies are asking for state help with carbon capture and other efforts.
“You can’t say that litigation is so bad in this state that you will not conduct activity on one side of the equation and yet in the very next moment say, ‘Guess what? I need some help from you all to do the same types of activities on this side in the same litigation environment,” Landry said. “That is the definition of hypocrisy.”
Rep. Joseph Orgeron, R-Golden Meadow, shot back: “No, that’s the definition of being forced to work … to go and play in the playground where the bullies at.”
While Caffery, the landowner representative, agreed legacy cleanup and indemnification do create problems, including orphan wells, he argued that packing an attempted fix in the DENR reorganization bill was not the answer.
His group has been considering, potentially for the next session, a new requirement for baseline testing to protect new drillers from old problems.
“We just think that if we’re going to do something this bold and extreme, it should be in one instrument, not in an instrument like that,” Caffery said.
Louisiana’s two major oil and gas trade groups didn’t comment during the hearing.
In a later statement, Mike Moncla, president of the Louisiana Oil and Gas Association, agreed with Caffery’s assessment that the retroactive anti-indemnification language was unconstitutional. He said his group planned to fight it on the House floor.
“The governor was certainly spirited today,” Moncla said.
He added that much of the rest of the language on legacy lawsuits had been in a previous bill, HB694, that his group supported but hadn’t made it out of committee.
“With very little time remaining in session, there is a whole lot to consider in this 200-page bill,” Moncla said.
A longstanding issue
Landry skipped a planned press conference on the economic impacts of this year’s Super Bowl to testify. He emphasized the importance of finding a way to deal with the “dark cloud” that he said was being left by the proliferation of legacy lawsuits — 612 at the latest state count.
These legacy lawsuits have long been a contentious issue in Louisiana’s energy sector.
Oil industry critics argue that indemnification provisions allow companies to pass off old, less productive wells to smaller companies as a way of shirking the responsibility to clean them up. They argue lawsuits are the only way to force companies to take care of the problem.
But industry leaders say the lawsuits are simply a boon to lawyers, and they sometimes don’t do enough to actually clean up the mess.
The abrupt addition of a bill that would end indemnification drew a surge of concern from industry. Orgeron said his phone was blowing up over the language and its last-minute arrival in the bill.
“Oh, I’m sure nobody likes that. I’m glad you brought that up, Joe. Let’s talk about that. Let’s talk about that,” Landry told Orgeron.
Landry said the indemnification language has plagued the state and “the crux of the problem of this entire litigation that has haunted this state is those indemnity agreements.”
“And so, if there is one piece that I will stake myself on, it is those indemnity agreements,” he said.
He argued his language removing the protections would “set the table” for the future. The governor urged the oil and gas industry to talk to him about the bill, though he hasn’t heard from them yet.
“No one has texted me, but I certainly would love the industry to text me,” Landry said. “Where y’all at?”
The bill cleared the House committee, with only Orgeron opposed.
Before the committee vote, Orgeron warned Landry that he would likely propose a floor amendment to exclude the language on legacy lawsuits and allow the rest of the bill to advance.
