Lawyers: BP claims at risk if Jindal signs levee lawsuit bill

Measure would kill lawsuit against energy companies

Billions of dollars in damage claims filed by state and local government bodies stemming from the 2010 Gulf of Mexico oil spill may soon hang in the balance, some legal experts say, as Louisiana officials consider the potential consequences of a measure intended to kill an unrelated lawsuit by a New Orleans-area levee board against 97 energy companies.

Louisiana Attorney General Buddy Caldwell has called the language of Senate Bill 469, passed recently by the Legislature, “vaguely broad,” and he has urged Gov. Bobby Jindal to veto it after concerns were raised in recent days that the measure may work against claims for environmental damages for past energy production as well as damages in connection with the Deepwater Horizon disaster, which dumped millions of barrels of oil into the Gulf, wetlands and Gulf Coast beaches.

So far, Jindal has not signed the bill, though his top lawyer has publicly disagreed with Caldwell’s assessment. In the meantime, local officials across south Louisiana, including in Jefferson and St. Bernard parishes, are sizing up the bill’s potential unintended consequences, and wondering whether it could give BP a possible “out” on pending lawsuits.

Jefferson Parish President John Young on Thursday joined the chorus of those asking Jindal to veto the measure. “Such confusion so early in the life of this legislation justifies further legislative analysis in order to avoid any unintended consequences,” Young wrote.

The Deepwater Horizon rig caught fire and exploded in federal waters about 50 miles off the Louisiana coast on April 20, 2010, killing 11 men and causing one of the worst environmental disasters in U.S. history.

This week, Caldwell said he believes the bill’s wording carries “the potential for an unintended effect on the state’s, or a local governmental entity’s, claims against BP related to the Deepwater Horizon incident.” He suggested that legislators try again next year to write a more narrowly focused bill.

BP declined to comment on the measure Thursday.

Lawyers involved in the high-profile, 4-year-old BP litigation and other court observers seemed to agree there is some level of risk that the measure could affect the spill claims, though they varied in their views of how real the risk is.

Edward Sherman, a Tulane University law professor who specializes in complex litigation, said he’s unsure whether the bill would affect Louisiana’s pending spill claims, which he estimates could run into the tens of billions of dollars. “It’s a risk that it may impact the ... Deepwater Horizon (claims), and of course one question is whether BP is prepared to use that as a defense,” he said.

The controversial lawsuit, filed last year by the Southeast Louisiana Flood Protection Authority-East, alleges that the 97 named oil and gas companies did not abide by their permits in digging but then abandoning about 10,000 miles of canals through Louisiana marshes, which it says led to saltwater intrusion that killed vegetation and eroded wetlands that had long served as a buffer against the full impact of hurricane storm surges.

The bill would retroactively limit the agencies that could bring legal claims involving allegations about permits in coastal areas to the state, the secretary of the Department of Natural Resources, the attorney general, parish governments with coastal management plans and local district attorneys for parishes without a plan.

Its legislative co-sponsor, state Sen. Bret Allain II, R-Franklin, has contended the measure would not affect similar lawsuits that have been filed by the governments of Jefferson and Plaquemines parishes, and would not stop other local governments from filing lawsuits, nor would it affect lawsuits filed against BP over the spill.

Likewise, Steve Herman, co-lead counsel of the Plaintiffs’ Steering Committee that brokered a multibillion-dollar class action oil-spill settlement with BP, has said he doesn’t believe the bill would affect the claims because the Deepwater Horizon site was outside the geographic area covered by the bill.

All told, nearly 500 lawsuits seeking damages have been filed against BP by a range of government bodies across the Gulf Coast, including parish and city governments, sheriffs, school boards and local taxing districts, typically seeking money for lost resources and tax revenue in the wake of the disaster as well as for costs incurred as part of the spill response.

In hard-hit St. Bernard Parish, officials filed a $119.4 million suit against BP. Parish President David Peralta said Thursday that he’s worried the legislation could hamper his parish’s efforts to collect.

“I just don’t know, as far as will it or won’t it,” said Peralta, who did not take a position for or against the levee board’s suit. “If there’s any chance it will impact the settlement process or the legal process with BP, then in all likelihood they should veto this bill and rewrite it.”

Sherman, the Tulane law professor, speculated that the legislation could give BP a ready-made defense, and that lawyers for the company may move quickly to dismiss the pending lawsuits in federal court if Jindal signs the bill into law. That doesn’t mean U.S. District Judge Carl Barbier, who is overseeing the federal-civil oil-spill litigation in New Orleans, would rule as quickly on the issue, since it could be another year or more until the claims would be looked at anyway.

“They may have a defense that it’s retroactive by its terms, and therefore it would affect the liability of the Deepwater Horizon,” Sherman said. “BP could choose not to raise that defense, but good lawyering would seem to say that if now the legislation has been passed and you can get off the hook by coming under that legislation, that they might well raise it as defense.”

On the other hand, Sherman said, even though the legislation has “ambiguity and vagueness,” BP — which has been handed several recent defeats by the 5th U.S. Circuit Court of Appeals — “may potentially simply decide that they’ve been up to the 5th Circuit and not succeeded very much on a lot of issues, and they’re just not prepared to argue the new legislation’s effects.”

After grappling with sharp drops in state higher education funding and a declining enrollment in recent years, officials at the University of New Orleans will also be keeping a close eye on how this plays out.

That’s because UNO has filed suit against BP for almost $123.7 million in damages, federal court records show. UNO contends that while its enrollment fell after Hurricane Katrina in 2005, it “grew steadily” after that point until the 2010 oil spill.

“As the economy of New Orleans suffered greatly, the economic hardships of the region were reflected in continually diminished enrollment,” according to a 24-page economic analysis that accompanied UNO’s April 2013 filing.

The analysis makes a case that damages to the Gulf Coast tied to the oil spill are expected to exceed $65 billion.

“As employment was lost, the ability of students to fund their own college educations also diminished. This inability is reflected in attendance losses and a failure of the university to meet national enrollment growth averages,” the analysis states.

Walter Leger Jr., a New Orleans lawyer, represents more than 40 government claims against BP across south Louisiana, including in St. Bernard, Lafourche and Terrebonne parishes, as well as New Orleans. He pegs the total damages of those claims at about $5 billion.

“It’s always a risk when there’s a concern,” Leger said about the bill’s unanswered questions. “I think ultimately we will prevail on this issue, but we wish this issue wasn’t here.”

His son, state Rep. Walt Leger III, D-New Orleans, voted against the bill, which passed 59 to 39 in the House, with six absent.

Follow Richard Thompson on Twitter, @rthompsonMSY.