Louisiana Law Blog

By Lou Grossman

The Subsequent Purchaser Doctrine is a judicially created limitation on the rights of a current landowner to sue for pre-acquisition damages. For over 160 years, Louisiana courts have held that a current landowner has no right of action to sue for damages to his/her property occurring prior to the date of sale in the absence of an express assignment of that right. In environmental contamination disputes, appellate courts were divided on whether the doctrine should apply to cases involving non-apparent or subsurface property damage.

In a recent 4/3 decision, a majority of the Justices of the Louisiana Supreme Court rejected the notion that property damage must be overt, and held that a landowner has no right to sue for non-apparent damages to land inflicted before the act of sale in the absence of an express assignment of, or subrogation to, that right. Eagle Pipe and Supply, Inc. v. Amerada Hess Corporation, 2010-2267 (La. 10/25/2011) –So.3d --. In reaching this decision, the majority acknowledged 160 years of jurisprudence constante regarding the subsequent purchaser rule and found that the rationale should also extend to the situation where damage to the property is not apparent.

In reaching this decision, the Louisiana Supreme Court also rejected various theories advanced by Eagle Pipe, most notably of which was Eagle Pipe’s continuing tort theory. According to the Court, the presence of alleged contamination on Eagle Pipe’s property was not caused by “overt, persistent and ongoing acts,” but was simply a continuing ill effect from the original tortious acts. As such, it was not a continuing tort and could not give rise to a separate tort claim under that theory.

This decision resolves any dispute among the appellate courts and explicitly limits the rights of current landowners to bring suit for environmental harm inflicted prior to the date they acquired the property, regardless of whether the purchaser could have known of the contamination. Such landowners may still seek claims against prior owners and are further permitted to seek environmental remediation, but private actions and damages have been severely abrogated by the Court’s ruling. Moreover, in rejecting the continuing tort theory, the Court refused to allow private claims for environmental harm to exist in perpetuity, providing greater certainty to industry with respect to tort liabilities.

Notably, the Court’s decision created a sharp divide among the justices which continues to persist. Justice Clark, who authored the majority opinion, and Justice Weimer, who authored the dissent have both provided additional written opinions, days after the original opinion was released. As this dispute continues, it is important to recognize a number of similar cases currently pending before the Court, including two arising from oil and gas exploration and production activities performed pursuant to mineral leases. The Court will continue to face such sharp divisions in ruling on these matters and the issue is far from final resolution.
 

By Lee Vail

On October 15, 2010, the former Bureau of Ocean Energy Management, Regulation and Enforcement (“BOEMRE”) issued new regulations, incorporating in its entirety and making mandatory the implementation of the American Petroleum Institute’s Recommended Practice 75 (API RP 75).  The rule requires development of Safety and Environmental Management Systems (SEMS) plans by “a lessee, the owner or holder of operating rights, a designated operator or agent of the lessee(s), a pipeline right-of-way holder, or a state lessee granted a right-of-use and easement.” 30 C.F.R § 250.105. According to BOEMRE, “the purpose of SEMS is to enhance the safety and cleanliness of operations by reducing the frequency and severity of accidents.” This final rule applies to all Outer Continental Shelf oil and gas and sulphur operations and the facilities under BOEMRE jurisdiction including drilling, production, construction, well workover, well completion, well servicing, and DOI pipeline activities.

Responsibility for developing and implementing a SEMS program lies with the lessee (or owner or holder of an operating right), unless it delegates the responsibility to another (likely the operator). Contractors are not responsible for developing the plan; however if compliant, contractor procedures may be incorporated into the lessee’s/operator’s SEMS plan.
 

By Esteban Herrera and Dwayne Johnson

On October 14, 2009, the Louisiana Department of Environmental Quality (DEQ) issued General Permit No. LAG260000 for discharges within the territorial seas of Louisiana from oil and gas exploration, development, and production facilities.

In a lawsuit filed in state district court in Baton Rouge, the Louisiana Environmental Action Network challenged this General Permit. In a May 2010 decision, the state district court upheld the permit. However, in a ruling dated June 10, 2011, the Louisiana First Circuit Court of Appeal remanded the permit to DEQ for further proceedings.  In a Notice published in the Potpourri Section of the Louisiana Register on October 20, 2011, DEQ said it would be modifying the General Permit to remove produced water discharges from coverage under the permit.  Facilities wishing to discharge produced water within the territorial seas of Louisiana now must seek authorization to do so under an individual permit.  In addition, facilities discharging produced water currently covered by the General Permit must file the O and G-IND permit application for an individual permit no later than April 1, 2012.  The notice states that “the individual permit will require an evaluation of the effects of produced water discharges on the environment and human health.”  DEQ further said that “the regulated community will be responsible for providing information that will be utilized to determine whether authorization to discharge produced water in the territorial seas will be granted.”

By R. Lee Vail and Maureen N. Harbourt

On July 15, 2011, the House of Representative, Committee on Energy and Power, Subcommittee on Energy and Commerce held hearings on a draft of the “Pipeline Infrastructure and Community Protection Act of 2011.”  Chairman Fred Upton’s initial comments focused on recent pipeline incidents: the 20,000 barrel oil spill into Talmadge Creek, Michigan in the summer of 2010, the September 2010 gas pipeline explosion that killed 8 people in San Bruno, California and the most recent spill of 1,000 barrels of oil near Billings, Montana. (1)  Chairman Upton concluded that these incidents indicate that pipeline laws must be strengthened. Included within the draft legislation are the following provisions:

• one-hour time limit to report incidents;
• use of automatic or remote control shutoff-valves;
• better leak detection technology;
• substantial increase in civil penalties for releases from pipeline;
• enhanced inspection techniques; more miles of pipeline inspected; and
• increased number of pipeline inspectors.
   

Cynthia Quarterman, Administrator of the Pipeline and Hazardous Materials Safety Administration (“PHMSA”), within the Department of Transportation, appeared and offered general support for the bill. However she offered specific recommendations to various provisions to strengthen the legislation. Among the recommendations were: (2)

• higher administrative penalties should apply in High Consequence Areas;
• eliminate statutory exemption for gathering lines; and
• clarity should be added that shut-off valve requirements apply to gas and hazardous pipelines.
   

Because changes in regulatory programs often occur quickly after incidents such as these recent three pipeline events, interested parties should be aware of the above issues and recommendations. Owners and operators of regulated pipelines should expect more inspection/detection requirements and the likelihood of enhanced PHSMA and state agency inspections and enforcement actions.
 

(1)   Opening Statement of Chairman Fred Upton (July 15, 2011), found at http://republicans.energycommerce.house.gov/Media/file/Hearings/Energy/071511/Upton%20.pdf (last visited July 18, 2011).

(2)  Written Statement of Cynthia Quarterman, Administrator, PHMSA (July 15, 2011) found at http://www.phmsa.dot.gov/staticfiles/PHMSA/DownloadableFiles/Testimony/House%20Energy%20and%20Commerce%20Written%20Testimony%20-%20July%2015%202011%20-%20For%20Web%20_2_.pdf (last visited July 18, 2011).

By R. Lee Vail

In response to the Gulf of Mexico Deepwater Horizon Incident, the Louisiana Department of Natural Resources (“DNR”), Office of Conservation (“Conservation”) issued a series of emergency rules with effective dates: July 15, 2010(1) , December 9, 2010(2), January 12, 2011(3) and most recently May 12, 2011(4).  . The initial emergency rule created:

“a new Chapter within Statewide Order No. 29-B (LAC 43:XIX.Ch. 2) to provide additional rules concerning the drilling and completion of oil and gas wells at water locations, specifically providing for the following: rig movements and reporting requirements, additional requirements for applications to drill, casing-header requirements, mandatory diverter systems and blowout preventer requirements, oil and gas workover operations, diesel engine safety requirements, and drilling fluid regulations.” See, 36 La. Reg. 1427.

The initial emergency rule also amended Statewide Order No. 29-B-a (LAC 43:XIX. Ch. 11) “to provide for and expand upon rules concerning the use of storm chokes in oil and gas wells at water locations.” Id.

In the emergency rules, Conservation has reviewed and incorporated “all provisions of the MMS [Minerals Management Service] regulations concerning well control issues at water locations” that were not repetitive, duplicative or otherwise inapplicable to the situations encountered in Louisiana waters. See, 37 La. Reg. 1548. In addition to providing Conservation more time promulgate final comprehensive rules, the most recent version of the emergency rules contains a few noteworthy changes from the January 2011 version of the rule. These are:

• The Oil and Gas Well-Workover Operations section, located at LAC 43:XIX.211, contains specific requirements for blow out preventer components and configuration. Conservation removed a provision (formally located at LAC 43:XIX.213.L) allowing the Commissioner to grant an exemption from specific equipment requirements mandated by that section. The January 2011 version of the rule allowed an exemption from specific equipment requirements where the operator could demonstrate the unavailability of the mandated equipment and that anticipated surface pressures minimize the opportunity for loss of well control.

• Conservation changed the mandatory industry standard for design and operation of subsurface safety valves (“SSSV”) from “API RP 14B” to “API RP 14H”. See, LAC 43:XIX.1104.E (making the emergency rule consistent with 30 C.F.R. §250.804(a)(5)). 

• All four versions of the emergency rule require that installed subsurface-controlled SSSV’s be removed and tested every twelve or six months, depending on whether they were installed on a landing nipple or not. However, the most recent emergency rule also included a requirement that all SSSVs be inspected for leakage every month to six weeks. See, LAC 43:XIX.1104.E.2.a.

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(1)  36 Louisiana Register 1427, July 20, 2010, available at: http://www.doa.louisiana.gov/osr/reg/1007/1007.pdf
(last visited June 27, 2011).

(2)  36 Louisiana Register 2823, Dec. 20, 2010, available at: http://www.doa.louisiana.gov/osr/reg/1012/1012.pdf
(last visited June 27, 2011).

(3)  37 Louisiana Register 460, Feb. 20, 2011, available at: http://www.doa.louisiana.gov/osr/reg/1102/1102.pdf
(last visited June 27, 2011). 

(4)  37 Louisiana Register 1547, June 20, 2011, available at: http://www.doa.louisiana.gov/osr/reg/1106/1106.pdf (last visited June 27, 2011).
 

By R. Lee Vail

On April 28, 2011, Governor Bobby Jindal declared a State of Emergency as a result of growing concern over the predicted crest of the Mississippi River well above flood stage in many areas. Consistent with his authority, on May 13, 2011, James Welsh, Commissioner of Conservation, also issued an emergency and administrative order. It is expected that substantial flooding in the state will likely lead to adverse effects on many oilfield sites which could result in serious threats to public safety and the environment. The order specifically applies to following throughout the state:

• Oilfield sites – including injection wells
• Other facilities – including commercial E&P waste disposal and transfer stations
• Structures and Pipelines

Ordered actions are both general calls for alert monitoring of the situation and a more specific list of necessary steps (as appropriate). The Order contains a practical, common sense mandate, to keep track of forthcoming proclamations, orders, warnings, predictions, forecasts, directives or other communications from federal, state and local authorities and to monitor water levels and weather activity. Additionally, the order requires operators to take all necessary steps and perform all necessary actions to avoid damage to the environment or threats to life or safety, including the following, where appropriate:

• Empty petroleum tanks and re-fill with water
• Remove chemicals from sites
• Remove or secure loose items
• Ensure that storm chokes or downhole plugs are installed in wells
• Empty active pits of E&P waste
• Shut in and secure wells where necessary
• Protect sites from stray debris

The above list of actions is discretionary, tasking each operator with the duty to determine which actions are necessary as each operator is in the best position to assess the potential risks and dangers.

The Order also requires notification to the Office of Conservation within 12 hours should an operator shut down one of the covered facilities. The Order will extend for 120 days, unless modified or extended. The order may be found here. 

By Len Kilgore and Esteban Herrera

In the January 20, 2010 Louisiana Register, the Office of Conservation, Louisiana Department of Natural Resources issued a Notice of Intent to amend Statewide Order 29-B to incorporate new rules for the evaluation and remediation of groundwater conditions at exploration and production sites.

The proposed rules can be found at this link.   As part of the proposal, Conservation has published a draft manual entitled “Exploration and Production Waste Site Evaluation and Remediation Procedures Manual” or “SERP Manual.”   A copy of the SERP Manual can be found here. 

Conservation will accept comments on the proposal through March 8, 2010.   A public hearing on the proposal is scheduled for March 1, 2010, at 9:00 a.m. (CST).   Anyone with interests involving energy exploration and production sites should carefully review the proposal.

by Erich P. Rapp

The New Orleans Times Picayune posted a story to their web site on July 3, 2007 at 7:45 PM stating that the Corps of Engineers has formally recommended to Congress that the Mississippi River - Gulf Outlet ("MR-GO") be closed. MR-GO is a 60 mile long shipping channel running from the Louisiana coast to the Industrial Canal in New Orleans. Construction on MR-GO started in 1958 and was completed in 1968. The canal was designed to be 36 feet deep and 500 feet wide.

by Erich P. Rapp

On June 1, 2007, the Louisiana Legislature unanimously passed the state's first comprehensive master plan for coastal restoration and hurricane protection. In response, the governor has asked the legislature to commit $200 million of the state's surplus to the coastal fund and allow for the securitization of the tobacco settlement funds, of which 20% is constitutionally dedicated to the coastal fund. The new master plan is entitled, "Integrated Ecosystem Restoration and Hurricane Protection: Louisiana's Comprehensive Plan for a Sustainable Coast." 

by Erich P. Rapp

The new chief of the Army Corps of Engineers, Lt. General Robert Van Antwerp, told a New Orleans audience on Thursday May 31, 2007 that three important reports would be released by the Corps this summer. The first report due in June is a comprehensive study of the vulnerability of low lying areas of coastal Louisiana to future hurricanes. This report will show residents of the low lying area how their homes will do during about 150 hypothetical storms.