The following is prepared by the Kean Miller LLP Utilities Regulation team on important topics affecting consumers of electrical power in Louisiana related to recent and current proceedings of the Louisiana Public Service Commission (“LPSC”).  For more information, please contact us at client_services@keanmiller.com

LPSC Rulemaking on Customer-Centered Options:  The LPSC has a proceeding underway to research and evaluate customer-centered options.  In the proceeding, an industrial customer trade association – – the Louisiana Energy Users Group (“LEUG”), has proposed an Industrial Customer Market Option that would provide access to off-site CHP generation, the bilateral wholesale power market and the MISO energy, capacity and operating reserve markets.  LEUG proposes the option as a means to offset some of the need for Entergy to replace aging generation fleet, and thereby help avoid or reduce costs for all ratepayers, while also helping industrials maintain competitive rates in Louisiana.

LPSC Rulemaking on Renewable Generation Options:  The LPSC has an ongoing rulemaking proceeding to consider customer options to access renewable generation.  In the proceeding, an industrial customer trade association – – the Louisiana Energy Users Group (“LEUG”), has proposed tariff options for industrial customer participation in renewable projects through “sleeve transactions” and “virtual PPAs”.

Louisiana Task Force on Climate Change: Through participation in the Power Production Committee, an industrial customer trade association – – the Louisiana Energy Users Group (“LEUG”) is pursuing interests that include long-term reliable and competitive power supply for Louisiana, exploring access to renewable power, and use of cogeneration to increase efficiencies and reduce emissions.

Electric Grid Status / Maintenance: In December 2021, the LPSC initiated a proceeding to evaluate the Louisiana electric grid regarding status, maintenance and whether there is more that could have been done and can be done to benefit Louisiana customers.  In urging the need for the evaluation, a presentation by an LPSC Commissioner showed Louisiana SAIDI / SAIFI levels at well-above national averages.

Electric Grid Resiliency / Hardening: In December 2021, the LPSC initiated a proceeding to conduct an assessment of the Louisiana utility grid infrastructure for resilience and hardening for future storm events.

Minimum Generation Capacity Obligation: In January 2022, the LPSC initiated a new rulemaking to consider whether to adopt a Minimum Physical Capacity Threshold obligation for electric generation for jurisdictional electric utilities.

Energy Efficiency:  The LPSC has issued and has under consideration a proposed new Phase II Energy Efficiency Rule that would have the LPSC take-on the implementation of programs in Louisiana rather than the utilities, including retention by the LPSC of an: (a) Administrator, (b) Energy Efficiency Manager, (c) Fiscal Agent, (d) EM&V Contractor, and (e) Fiscal Auditor.  Costs of the programs would be funded through a new Public Benefits Fee (“PBF”).  Opt-out provisions are included in the proposed rule for certain larger customers.

Entergy Storm Restoration Cost Securitization and Recovery:   Proceedings are underway at the LPSC to consider $4+ Billion of Entergy restoration costs for Hurricanes Laura, Delta, Zeta in 2020 and Winter Freeze Uri and Hurricane Ida in 2022.  In February 2022, the LPSC approved $3.1 Billion of costs to proceed to securitization financing and recovery from ratepayers including $290 million to replenish reserves for future storms.  And, proceedings are underway at the LPSC for review of an additional $1.6 Billion of costs submitted by Entergy for recovery.

LPSC Audit of Additional Fuel Adjustment Costs From Winter Freeze Uri: Audit proceedings are underway at the LPSC on $163 million of additional fuel adjustments costs incurred during the February 2021 freeze event.  The $163 million additional costs were recovered from ratepayers through the fuel adjustment, amortized over the months of April-August 2021.

Entergy Integrated Resource Plan (“IRP”):  Proceedings are underway at the LPSC on the Entergy 2023 IRP, including a stakeholder process.  The draft IRP is due in October 2022, and the final IRP is due in May 2023.  The objective of the IRP process is for the utility to provide its evaluation of a set of potential resource options that offers the most economical and reliable approach to satisfy future load requirements of the utility. However, the IRP process does not result in LPSC approval of the proposed resource plan or approval of construction or acquisition of any particular resources. Rather, LPSC consideration of resource approvals occurs in separate certification proceedings on individual proposals submitted by the utility on a case-by-case basis.

LPSC Rulemaking on Demand Response: In May 2021, the LPSC approved a new rule that emphasizes the importance of Demand Response in Louisiana and requires electric utilities to pursue Demand Response tariffs or justify why they are not.

Entergy Market Value Demand Response (“MVDR”) Tariff: In September 2020, the LPSC approved a new Entergy tariff that allows customers and aggregators to access MISO Demand Response products.

Entergy Proposed Experimental Interruptible Option (“EIO”) Tariff: In July 2021, the LPSC approved new Entergy tariffs that provide interruptible rate options for industrial customers.

Entergy Proposed Certification of 475 MW Solar Generation and Geaux Green Subscription Tariff: Proceedings are underway at the LPSC to consider an Entergy request for certification of three purchase power agreements and a build-own-transfer agreement for 475 MW of new solar generation development projects, plus a new tariff that would allow customers to purchase subscriptions in the projects.  Costs of the subscriptions would be incremental to the customer’s existing electric bills, and the subscriptions would be capped initially at 50 MW.  Subscribing customers would receive credits for market revenues, and also benefit from associated Renewable Energy Credits (“REC”), relative to their subscribed share.

Entergy Proposed Green Pricing Option (“GPO”):  In March 2021, the LPSC approved new Entergy tariffs that provide for sale of Renewable Energy Credits (“REC”).

Entergy Proposal for Distributed Generation: Proceedings at the LPSC are underway to consider an Entergy application seeking approval to deploy 120 MW of utility-owned distributed natural gas fired generation ranging in size from 100 kW to 10 MW, including a rate schedule to charge host customers for a portion of the generators as back-up power costs.

Entergy Proposal for Increase in Nuclear Decommissioning Cost Funding: Proceedings are underway at the LPSC to consider an Entergy request to increase its funding for nuclear decommissioning costs, based on evaluations for its Waterford and River Bend nuclear generation units.

Plan (“FRP”) Extension: In May 2021, the LPSC approved an extension and modification of Entergy’s FRP for annual filings and rate adjustments in 2021, 2022, and 2023, subject to settlement terms reached by Entergy, LPSC Staff and intervenors.  The settlement terms included, among other things: a 9.50% ROE; a $63 million rate reset for 2021; a 9.0-10.0% earnings bandwidth subject to a $70 million cumulative rate cap for 2022/2023; resolution of lost revenue claims from covid and hurricanes; a distribution investment cost recovery rider; and a transmission investment cost recovery rider.

LPSC Rulemaking on New Generation Deactivation Transparency Rule:  In October 2018, the LPSC issued a rule which requires electric utilities to report generation unit deactivations and retirements 120 days prior to implementation, including support for the decisions and continuing reports on units that are placed in deactivation status for possible return in the future. The final rule creates more transparency and accountability on the part of utilities.

Entergy 980 MW Power Plant in St. Charles Parish:  In December 2016, the LPSC approved Entergy’s proposal to construct a 980 MW CCGT unit located in Montz, Louisiana (near New Orleans), at a site adjacent to the existing Little Gypsy generation units.  The project was selected as a self-build project in a Request-for-Proposals (“RFP”), was estimated to cost $869 million, and went into service in 2019.

Entergy 994 MW Power Station in Lake Charles, Louisiana:  In July 2017, the LPSC approved Entergy’s proposal to construct a 994 MW CCGT unit located in Westlake, Louisiana.  The project was selected as a self-build project in a Request-for-Proposals (“RFP”), was estimated to cost $872 million, and went into service in 2020.

Entergy 361 MW Combustion Turbine in Washington Parish:  In May 2018, the LPSC approved Entergy’s acquisition of the Washington Parish Energy Center, a new 361 MW simple cycle combustion turbine (“CT”) to be constructed in Bogalusa, Louisiana by a subsidiary of Calpine Corporation (“Calpine”) for a purchase price of approximately $222 million.  Calpine had submitted an unsolicited offer to Entergy to construct the CT and sell it to Entergy for a turn-key price.  The acquisition and related assets was estimated to cost $261 million, and the unit went into service in 2020.

Under Louisiana law, uninsured/underinsured (“UM”) insurers are under strict requirements to issue “good faith” unconditional tenders of the undisputed portion of the plaintiff’s damages. These unconditional tenders are not contingent on the final disposition of the case, rather they must be paid up front and cannot be recovered in the event of a lower judgment or settlement after the fact. The amount that is required is only that which is “undisputed”, meaning that amount which the insurer does not reasonably dispute is owed to the plaintiff. When an insurer receives “satisfactory proof of loss”, it is then under a requirement to issue an unconditional tender within 30 or 60 days.[1] However, if the insurer has knowledge of a plaintiff’s pre-existing injuries/conditions that warrant a reasonable investigation, then the insurer can rely on those injuries to delay payment while it investigates the condition, or to withhold payment altogether (if warranted) without being subject to the penalties imposed by the statutes.

The current statutory bases for these requirements come from Louisiana Revised Statute § 22:1892(A)(1) and § 22:1973. These statutes “prohibit “virtually identical” conduct, and the primary difference between them is the time period allowed for payment.”[2] Whereas § 22:1892(A)(1) allows the insurer 30 days to issue payment, § 22:1973 allows the insurer 60 days.

Louisiana Revised Statutes 22:1892(A)(1) requires all insurers to pay the amount of any claim due any insured within thirty days after receipt of satisfactory proofs of loss. Louisiana’s First Circuit Court of Appeal restates the requirement as follows:

Failure to make such payment within thirty days after receipt of such satisfactory written proofs and demand therefor …, when such failure is found to be arbitrary, capricious, or without probable cause, shall subject the insurer to a penalty, in addition to the amount of the loss, of fifty percent damages on the amount found to be due from the insurer to the insured, or one thousand dollars, whichever is greater, payable to the insured, … or in the event a partial payment or tender has been made, fifty percent of the difference between the amount paid or tendered and the amount found to be due as well as reasonable attorney fees and costs.[3]

However, Revised Statute § 22:1973 requires payment “within sixty days after receipt of satisfactory proof of loss from the claimant”. Breach of this statute will subject the insurer to penalties: “in an amount not to exceed two times the damages sustained or five thousand dollars, whichever is greater” only “when such failure is arbitrary, capricious, or without probable cause.”

So, failure to tender within 30 days will subject the insurer to a penalty in the amount of an additional 50% of the total amount later found to be owed as well as reasonable costs and attorney’s fees. However, failure to tender within 60 days will subject the insurer to a greater amount which is not to exceed two times the amount of damages sustained.

Note that “[b]oth statutes are penal in nature and must be strictly construed.”[4] Louisiana law requires that statutes authorizing punitive damages be interpreted subject to strict construction.[5] Thus, as a statute authorizing penal damages, Louisiana Revised Statutes 22:1892(A)(1) is strictly construed,[6] and “this statute is applicable to a UIM claim.” [7]

However, these statutes only require that an insurer pay amounts due after a satisfactory proof of loss. The Louisiana Supreme Court held in McDill v. Utica Mut. Ins. Co. that an insurer must tender an amount that is not in dispute only when the insurer has received sufficient facts that fully apprise the insurer (1) the owner or operator of the other vehicle involved in the accident was uninsured or underinsured; (2) that he was at fault; (3) that such fault gave rise to damages; and (4) establish the extent of those damages.[8] In other words, the insurer cannot delay payment until it has acquired satisfactory proof of the exact and entire extent of the loss. Rather, whenever a portion of the amount due becomes proven beyond dispute the insurer must pay at least that portion (the amount “not in dispute”). If the insured proves these things (or if the insurer receives such proof from a different source), then “the insurer cannot stonewall the insured because the insured is unable to prove the exact extent of his general damages.”[9] The insurer is required to tender this amount “to show their good faith in the matter and to comply with the duties imposed upon them under their contract of insurance with the insured. The amount that is due would be a figure over which reasonable minds could not differ.”[10]

The elements listed above are referred to as “satisfactory proof of loss”, and in order to recover penalties, the plaintiff is required to show both that the insurer received such satisfactory proof of loss and failed to pay the undisputed amount within 30 or 60 days, but also that the insurer’s failure to pay was conducted arbitrarily, capriciously, or without probable cause.

An insured who claims penalties and attorney’s fees under this statute has the burden of proving that the insurer received a “satisfactory proof of loss” as a necessary predicate to a showing that the insurer was arbitrary, capricious, or without probable cause. Id., 437 So.2d at 827–828.[11]

In this context, arbitrary and capricious means that the insurer did not have a reasonable basis for rejecting or delaying payment. Reed v. State Farm Mut. Auto. Ins. Co.,

The sanctions of penalties and attorney fees are not assessed unless a plaintiff’s proof is clear that the insurer was in fact arbitrary, capricious, or without probable cause in refusing to pay. Block v. St. Paul Fire & Marine Ins. Co., 32,306, p. 7 (La.App. 2 Cir. 9/22/99), 742 So.2d 746, 751. The statutory penalties are inappropriate when the insurer has a reasonable basis to defend the claim and acts in good-faith reliance on that defense. Rudloff v. Louisiana Health Services and Indemnity Co., 385 So.2d 767, 771 (La.1980), on rehearing. Especially when there is a reasonable and legitimate question as to the extent and causation of a claim, bad faith should not be inferred from an insurer’s failure to pay within the statutory time limits when such reasonable doubts exist. Block, 32,306 at 8, 742 So.2d at 752. (emphasis added).[12]

Thus, if the insurer has reasonable grounds for rejecting a claim, the plaintiff cannot recover penalties.[13]

For example, investigation of a pre-existing injury affords the insurer a reasonable basis for delaying tender. In Reed v. State Farm Mut. Auto. Ins. Co., the Louisiana Supreme Court found that the UM insurer provided a reasonable timetable of as long as 15 months for tendering payment, and its decision to delay tender was not arbitrary and capricious due to concerns surrounding Plaintiff’s pre-existing medical history.[14] “Thus, the fact that State Farm subsequently tendered the full UM limits is immaterial; State Farm presented a reasonable defense for the timetable in which it tendered payment.”[15]

The question of how long the insurer can delay/withhold payment is ultimately a question of reasonableness and depends on the nature of the investigation and timeline in which it delayed/denied payment.

In Duncan v. Allstate Insurance Company, the insurer was reasonable to delay unconditional tender by approximately 7 months after questioning medical causation due to Plaintiff’s pre-existing medical history.[16]

Additionally, in Carey v. Thomas, the insurer originally paid approximately $500 in medical bills for the Plaintiff’s treatment.[17] The insurer then requested additional medical documentation for the Plaintiff’s claim. Plaintiff attempted to argue that the defendant’s failure to pay the clam was arbitrary and capricious. However, the court held that the insurer’s decision was not in bad faith as it was waiting on additional documentation from the insured.

Although a plaintiff is not required to prove to the insurer the exact extent of his damages in order to have provided an adequate proof of loss, it is also not enough for the plaintiff merely to show that he has in all likelihood suffered some damages. For the Plaintiff to succeed he must show that the insurer has received enough information for the insurer (not the plaintiff) to make a judgment on the extent of damages.

Thus, the issue in the instant case, as it was in McDill, is whether the insurer received satisfactory proof of loss; specifically, both cases address whether the insured “fully apprised” the insurer of the extent of damages occasioned by the accident. After an insurer receives notice of the claim, the basis of the claim, and the identity of the doctors involved, in order for the insurer to avoid being arbitrary or capricious, it is necessary for the insurer to determine whether there exists a legitimate basis for not paying at least what it considers to be undisputed (emphasis added).[18]

Especially when there is a reasonable and legitimate question as to the extent and causation of a claim, bad faith should not be inferred from an insurer’s failure to pay within the statutory time limits when such reasonable doubts exist. In those instances where there are substantial, reasonable, and legitimate questions as to the extent of an insurer’s liability or an insured’s loss, failure to pay within the statutory time period is not arbitrary, capricious or without probable cause.[19]

This distinction is important because the plaintiff may attempt to argue that he (the plaintiff) is not required to prove the “exact” extent of his damages (which is true). However, this is insufficient. The plaintiff may not be required to prove this to an exact number, but the plaintiff must at least give the insurer enough information[20] to make a specific determination for itself.

Note also that an insurer is not required to be satisfied by the mere allegations and contentions as represented by the Plaintiff in determining whether satisfactory proof of loss has been obtained. “A claimant’s mere contention that he has suffered a loss is not sufficient to meet the burden of showing a satisfactory proof of loss”[21] Rather, an insurer is entitled to investigate claims and perform its own analysis.

Thus, although insurer is under a strict timeline for the unconditional tender of damages, it is not required to issue an unconditional tender before engaging in a reasonable investigation of a plaintiff’s pre-existing conditions. If the plaintiff’s pre-existing conditions warrant an investigation, then the insurer is not “arbitrary, capricious, or without probable cause” in delaying/denying payment based on these facts, and penalties are not applicable.

[1] McDill v. Utica Mut. Ins. Co., 475 So. 2d 1085 (La. 1985).

[2] Cazenave v. Anpac Louisiana Ins. Co., No. CV 16-1420, 2016 WL 7368414, at *4 (E.D. La. Dec. 20, 2016).

[3] Richardson v. GEICO Indem. Co., 2010-0208 (La. App. 1 Cir. 9/10/10).

[4] Reed, 857 So.2d at 1020. Lemoine v. Mike Munna, L.L.C., 2013-2187 (La. App. 1 Cir. 6/6/14), 148 So. 3d 205, 215.

[5] “Furthermore, when a statute does authorize the imposition of punitive damages, it is subject to strict construction. International Harvester Credit, 518 So.2d at 1041; State v. Peacock, 461 So.2d 1040, 1044 (La.1984).” Ross v. Conoco, Inc., 2002-0299 (La. 10/15/02), 828 So. 2d 546, 555.

[6] “This statute must be strictly construed because it is penal in nature.” Richardson v. GEICO Indem. Co., 2010-0208 (La. App. 1 Cir. 9/10/10), 48 So. 3d 307, 314.  Citing Hart v. Allstate Ins. Co., 437 So.2d 823, 827 (La.1983).

[7] Richardson v. GEICO Indem. Co., 2010-0208 (La. App. 1 Cir. 9/10/10), 48 So. 3d 307, 314.

[8] 475 So. 2d 1085, 1089 (La. 1985).

[9] McDill v. Utica Mut. Ins. Co., 475 So. 2d 1085, 1091 (La. 1985).

[10] Id.

[11] Richardson v. GEICO Indem. Co., 2010-0208 (La. App. 1 Cir. 9/10/10), 48 So. 3d 307, 314.

[12] 2003-0107 (La. 10/21/03), 857 So. 2d 1012, 1021.

[13] “An insurance carrier must make an attempt to determine the reasonableness of a demand made upon it and the reasonableness of the amount demanded. If an insurance company has reasonable grounds for refusing to pay a claim made under a policy for uninsured motorist coverage, it will not be held liable at a later date for penalties if it is determined that the amount demanded is due and owing under an uninsured motorist policy.” Pitard v. Davis, 599 So. 2d 398, 403 (La. Ct. App. 1992).

[14] 2003-0107 (La. 10/21/03), 857 So. 2d 1012, 1023–24.

[15] Reed v. State Farm Mut. Auto. Ins. Co., 2003-0107 (La. 10/21/03), 857 So. 2d 1012, 1023–24.

[16] 01–840, pp. 8–9 (La.App. 5 Cir. 12/26/01), 803 So.2d 420, 425.

[17] 603 So. 2d 263 (La. Ct. App. 1992).

[18] Reed v. State Farm Mut. Auto. Ins. Co., 2003-0107 (La. 10/21/03), 857 So. 2d 1012, 1022.

[19] Lemoine v. Mike Munna, L.L.C., 2013-2187 (La. App. 1 Cir. 6/6/14), 148 So. 3d 205, 21.

[20] The plaintiff is not under a strict requirement to provide this information to the insurer, if the insurer obtains this information on its own or through another source, that will be sufficient to begin the clock.

[21] Marie v. John Deere Ins. Co., 1996-1288 (La.App. 1 Cir. 3/27/97) 691 So.2d 1327.

Russia’s unprovoked attack on the Ukraine has not been restricted to land. Ukrainian tech resources have been hit by cyber-attacks, particularly against its government and banking systems in a coordinated effort by Russia’s military intelligence unit.[1] Several websites of Ukrainian government departments and banks were hit with distributed denial of service attacks (DDoS), which is a form of attack where threat actors overwhelm a website with traffic until it crashes. While the conflict has not yet spread to western countries, U.S. businesses may still feel the impact due to their reliance on Ukrainian IT services and from potential retaliatory attacks from Russia due to significant U.S. sanctions.

Though not having a physical presence in the Ukraine, many U.S. companies use outsourced Ukrainian IT services. According to the Ukraine’s Ministry of Foreign Affairs, 1 in 5 Fortune 500 companies rely on the Ukraine’s IT outsourcing sector.[2]  Ukraine’s tech workers support banking, insurance, and financial operation services around the world. To mitigate potential impacts, software and technology providers are working to move services and workers elsewhere. For example, SAP SE has closed its office in Kyiv and website development platform Wix.com Ltd. moved its workers to Poland and Turkey last week.[3] However, technology resources such as code, designs, and documentation may still be vulnerable.

The Department of Homeland security has yet not advised of any specific or credible threats to the U.S. homeland, but the Cybersecurity & Infrastructure Security Agency (CISA) published a “Shields Up” memo advising U.S. businesses to prepare to respond to disruptive cyber activity.[4] Though Russia’s cyber attack efforts have primarily targeted the Ukrainian government and critical infrastructure, growing support for Ukraine in the US and other NATO countries increases the likelihood of Russian cyber-attacks against businesses, governments, and critical infrastructure of those allies. Attacks are also a possibility as a retaliation for the heavy sanctions being levied against Russia by the U.S., with direct targets being critical infrastructure.

All businesses, large and small, should remain vigilant during this time of heighted risk and vulnerability. As part of its support of U.S. businesses, CISA has compiled a catalog of free cybersecurity services and tools, which include very helpful resources and up to date information about the latest attack and defense strategies. Certain additional steps recommended by CISA and industry leaders can help shore up vulnerabilities and lower the risk of a cyber incident, as well as renew the commitment as a business to maintaining a strong cybersecurity program. These steps include but are not limited to:

  1. Hope for the best, plan for the worst. It is near certain that all U.S. businesses will be the victim of an attempted cyber-attack at some point (whether that be from Russia or other threat actors); what is in question is the level of success. Businesses should check with their cloud providers to ensure all protections are enabled, even if there is increased cost. Ensure that data is being regularly backed up to minimize business interruption from an encryption event or if data is wiped. If it has been a while since you have updated your cyber incident response plan, review the plan to ensure it is up to date and conduct tabletop exercises to run through how a cyber event will be handled.
  2. Take proactive steps to reduce the likelihood of a cyber event. Review policies regarding remote access, authentication requirements, and secure controls to ensure they are up to date and consistent with best practices. Ensure that all software is updated to the latest version, and that IT has disabled ports and protocols that are not essential for a business purpose. Particularly if your organization or your critical service providers work with Ukrainian organizations, take extra care to monitor, inspect, and isolate traffic from those organizations. IT should also take additional care to monitor unexpected traffic from overseas.
  3. Conduct trainings with employees. Regular cyber security trainings with employees should already be a part of your business’ practices for employees with access to company networks and data. However, the heightened risk presented today merits additional reminder trainings, as well as targeted trainings about how to best protect business computer systems by employees with significant access.

[1] Ryan Browne, “The world is bracing for a global cyberwar as Russia invades Ukraine”, CNBC (Feb. 25, 2022) (https://www.cnbc.com/2022/02/25/will-the-russia-ukraine-crisis-lead-to-a-global-cyber-war.html).

[2] Edward Segal, “Why The Impact of Russian Cyberattacks On Ukraine Could Be Felt Around the World”, Forbes (Feb. 23, 2022) (https://www.forbes.com/sites/edwardsegal/2022/02/23/the-impact-of-russian-cyberattacks-in-ukraine-could-be-felt-around-the-world/?sh=649680cb56b2).

[3] Isabelle Bousquette and Suman Bhattacharyya, “Ukraine’s Booming Tech Outsourcing Sector at Risk After Russian Invasion,” The Wall Street Journal (Feb. 24, 2022) (https://www.wsj.com/articles/ukraines-booming-tech-outsourcing-sector-at-risk-after-russian-invasion-11645749755).

[4] “Shields Up”, CISA (last accessed Feb. 25, 2022) (https://www.cisa.gov/shields-up).

The U.S. Interior Department recently announced that it is awarding Louisiana with about $47 million to be used to plug and abandon the orphaned well sites throughout the state.  This is part of phase one of many under the Infrastructure Investment and Jobs Act, which was signed by President Biden in November.

Louisiana first turned its attention to orphaned well sites in 1993, when the Louisiana Department of Natural Resources (LDNR) created the Louisiana Oilfield Site Restoration Program (“OSR Program”) to address a growing number of unrestored orphaned oilfield sites throughout the state.  See La. Rev. Stat. Ann. § 30:80, et seq. (known as “Louisiana Oilfield Site Restoration Law”).   Under the statute, an oilfield site is orphaned when it “has no continued useful purpose for the exploration, production, or development of oil or gas” and has been declared to be orphaned by the Assistant Secretary of the Office of Conservation.  La. Rev. Stat. Ann. § 30:82(9).  To be declared orphaned, either (1) no responsible party can be located, or the responsible party cannot financially undertake the plugging and abandonment, and (2) the well was not closed or maintained properly under the regulations or is dangerous or potentially dangerous to public health, the environment, or an oil or gas strata.  La. Rev. Stat. Ann § 30:91(A).  Essentially, the State takes on the plugging and abandonment obligations of a well when the responsible party is unresponsive or no longer financially viable.  But the State does not take ownership of the orphaned well.  Instead, the last operator of record remains the owner. La. Rev. Stat. Ann. § 30:93(A).

Since launching the OSR Program in 1993, the Louisiana Department of Natural Resources has plugged about 3,300 wells, [1] and the OSR Program aims to undertake approximately 46 well sites per year.[2]  Louisiana’s list of orphan wells currently sits as 4,605. State officials are certain that there are many more undocumented orphaned wells across the state, a number that can likely increase due to the impacts of lower oil prices (i.e., bankruptcies and downsizings of smaller oil companies).

Funding from the federal government under the Infrastructure Investment and Jobs Act will significantly help tackle the growing number of orphaned well sites throughout the state.  Louisiana is expected to receive a total of at least $111.4 million in later phases, which is estimated to cover only about 25% of the State’s documented orphan wells.

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[1] State of Louisiana Department of Natural Resources, Office of Conservation, Oilfield Site Restoration (OSR) Program, http://www.dnr.louisiana.gov/index.cfm/page/155.

[2] State of Louisiana Department of Natural Resources, Office of Conservation, OSR Program, Frequently Asked Questions, http://www.dnr.louisiana.gov/index.cfm/page/157.

In August of 2020, Louisiana Governor John Bel Edwards issued an executive order establishing emission reduction goals of reaching net zero greenhouse gas (GHG) emissions by 2050, putting the state in line with pledges made under the Paris Agreement, and by the federal government, 25 other states, and hundreds of companies in the private sector.[1] Approximately a year and half later, Governor Edwards’ Climate Initiatives Task Force has unanimously approved the state’s first ever Climate Action Plan.[2] Prior to Louisiana’s Climate Action Plan, the City of New Orleans implemented the State’s first renewable and clean energy standard. Under the local ordinance, by 2050, New Orleans’s power must be 100% emissions free.[3] The Louisiana Climate Action Plan contains 28 strategies (theoretical approaches) and 84 actions (implementation policy steps) to reduce GHG emissions across the entire state economy.[4]

The first strategy on Louisiana’s Climate Action Plan is the transformation of Louisiana’s electric grid to clean and renewable energy sources. The plan defines “clean” as energy generation that results in emission of little to zero GHGs (i.e., nuclear, biowaste, and natural gas with carbon capture) and “renewable” as naturally replenishing energy sources with zero GHG emissions (i.e., solar, wind, hydropower, and geothermal).[5] The first action in pursuit of the shift towards a clean and renewable power grid is the adoption of a Renewable and Clean Portfolio Standard (RCPS).

A Renewable and Clean Portfolio Standard (“RCPS”) is a law or regulation that seeks to reduce GHG emissions by imposing requirements associated with electricity generation. According to the Plan, Louisiana’s RCPS would require electricity used in Louisiana to be generated from an increasing percentage of renewable or clean sources. In addition to Louisiana utilizing utility-scale solar or other more traditional renewable generation resources, two studies conducted by National Renewable Energy Laboratory (NREL) and funded by the Bureau of Ocean Energy Management (BOEM) examined the range of clean and renewable energy in the context of the Gulf of Mexico and quickly determined offshore wind power to be a viable energy source, finding offshore solar power, tidal energy, wave energy, and ocean current to all be unreasonably burdensome for the foreseeable future.[6] According to the aforementioned studies, the Gulf has the potential to generate 1,806 terawatt-hours of offshore wind energy per year—significantly greater than the current energy needs of all five Gulf states.[7]

Resultantly, in June 2021, the BOEM initiated a process that will open the Gulf to wind lease sales by 2025. However, to date, discussions with major developers of offshore wind power have focused on the need for Louisiana to make the same commitment to clean and renewable energy that New Orleans previously made so as to increase developers’ access to a larger customer base. Now that Louisiana’s Climate Action Plan has been adopted, the Climate Initiatives Task Force is set to meet again in early March to begin moving forward with the plan’s implementation.  At this time, it is unclear whether the Governor, the Louisiana Legislature, the Louisiana Public Service Commission, or other governmental entities, will take the next steps.  It will be interesting to see how the Louisiana Climate Action Plan unfolds as Louisiana moves towards carbon reduction and net zero GHG emissions goals for the future.

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[1] Exec. Order No. JBE 2020-18 (Aug. 19. 2020).

[2] Press Release, Off. of the Governor, (Jan. 31, 2022), https://gov.louisiana.gov/index.cfm/newsroom/detail/3551.

[4] Press Release, supra note 2.

[5] Climate Initiatives Task Force, Louisiana Climate Action Plan 44 (2022).

[6] See e.g. Walter Musial et al., Survey and Assessment of the Ocean Renewable Energy Resources in the US Gulf of Mexico, (2020); see also Walter Musial et al., Offshore Wind in the US Gulf of Mexico: Regional Economic Modeling and Site-Specific Analyses (2020).

[7] Walter Musial et al., Offshore Wind in the US Gulf of Mexico: Regional Economic Modeling and Site-Specific Analyses, at 33.

In support of the Biden administration’s goal of permitting 30 gigawatts of offshore wind by 2030, the Bureau of Ocean Energy Management (“BOEM”) announced that it has been begun preparing its draft environmental assessment to evaluate the potential impacts of offshore wind development in federal waters in the Gulf of Mexico.

The area to be assessed spans almost 30 million acres from west of the Mississippi River to the border with Mexico and is the same area for which BOEM issued a call for information from the public on November 1, 2021. The areas selected for development will be narrowed based on stakeholder and ocean user input and the suitability of discreet areas for wind development. BOEM’s preparation of a draft environmental assessment for the entire call area now lays the foundation for future development in areas that may not be presently viable based on current technology.

BOEM’s draft environmental assessment is only a single step in the process. Should any lease sale occur and prior to the approval of the construction of any offshore wind energy facility, BOEM will also prepare an Environmental Impact Statement specific to the proposed project and further consult with all stakeholders on the impact of the proposed project.

BOEM noted that the Gulf of Mexico is uniquely positioned for the development of offshore wind because much of the necessary infrastructure already exists. The Gulf Region is also home to many of the companies, contractors, and workforce that has supported offshore energy development over the past several decades; making it an optimal location for implementation and development of the US offshore wind industry. Furthermore, the Gulf of Mexico has long enjoyed an accepted synergy between offshore oil and gas and commercial fishing industries, who have so far pushed back on wind projects on the East Coast. While we can expect some similar resistance to the introduction of yet another infrastructure intensive industry in the Gulf by both fisheries and oil and gas, it is expected that the Gulf Region – the traditional leader in US energy production – will eventually be more accepting to offshore wind than other parts of the country.

At present, BOEM is seeking comments from stakeholders to be included in the draft environmental assessment. For more information, including how to submit comments to the environmental assessment, visit https://www.boem.gov/renewable-energy/state-activities/gulf-mexico-activities.

Last month, the Financial Crimes Enforcement Network (“FinCEN”) published proposed regulations to implement the Corporate Transparency Act (“CTA”), which was enacted into law on January 1, 2021. The CTA is designed to help prevent the use of anonymous shell companies in money laundering and other illicit activities by requiring U.S. companies to report personally identifiable information about their owners to FinCEN. Once the proposed regulations are finalized, the CTA is expected to have a sweeping impact on small businesses in the U.S.

The reporting requirements of the CTA apply to domestic private corporations and limited liability companies, as well as foreign entities doing business in the United States. “Large operating companies” are exempt from the CTA’s reporting requirements, which is defined to mean any company that: (a) employs more than 20 employees on a full-time basis in the United States; (b) filed federal income tax returns in the prior year demonstrating more than $5,000,000 in gross receipts or sales; and (c) has an operating presence at a physical office within the United States.

Reporting companies will need to submit to FinCEN a Beneficial Ownership Information (“BOI”) Report. The BOI Report must include, for each beneficial owner and company applicant, the individual’s full legal name, date of birth, current residential or business street address, and either a unique identifying number from an acceptable identification document (e.g., a passport) or a FinCEN unique ID. A “beneficial owner” is defined by the CTA as any individual who, directly or indirectly either: (1) “exercises substantial control” over the reporting company; or (2) “owns or controls” at least 25% of the ownership interests of the reporting company.

Under the proposed rules, domestic reporting companies created before the effective date of the final regulation would have one year to file their initial reports; reporting companies created or registered after the effective date would have 14 days after their formation to file. The same deadlines would apply to existing and newly registered foreign reporting companies.

Reporting companies would have 30 days to file updates to their previously filed reports, and 14 days to correct inaccurate reports after they discover or should have discovered the reported information is inaccurate.

While the CTA has been praised by some as a necessary tool to combat money laundering and the financing of terrorism, it will undoubtedly have significant implications for many small businesses in the United States. Business owners should be mindful of the new burdens imposed by the CTA and take the steps necessary to ensure compliance once the reporting requirements go into effect.

Department of JusticeOn December 22, 2021, Taylor Energy Company LLC (“Taylor Energy”), a Louisiana based oil and gas company, and the United States Department of Justice reached a settlement concerning Taylor Energy’s role in the longest running oil spill in United States history. The oil spill began in September 2004 when Hurricane Ivan crossed the northeastern Gulf of Mexico. The hurricane caused a seafloor shift that toppled one of Taylor Energy’s oil and gas production platforms in the Mississippi Canyon Area, Block 20 (“MC-20”), approximately 10 miles off the coast of Louisiana, initiating an oil discharge. The resulting oil leakage has been ongoing ever since.

Under the proposed Consent Decree, which was filed in the U.S. District Court for the Eastern District of New Orleans in the matter United States v. Taylor Energy Company LLC (Civil Action No. 20-2910), Taylor Energy agreed to pay over $43 million – all of the company’s remaining assets – for civil penalties under Section 311(b) of the Clean Water Act, removal costs incurred by the United States under OPA, and natural resources damages (“NRD”).[1] The State of Louisiana is a co-trustee for natural resources impacted by the spill and the NRD money is a joint recovery by the federal and state trustees.

Additionally, Taylor Energy will transfer to the U.S. Department of Interior (“DOI”)’s Bureau of Ocean and Energy Management (“BOEM”) over $432 million currently held in a decommissioning trust fund for plugging the seafloor oil wells, permanently decommissioning the facility, and remediating contaminated soil. Moreover, Taylor Energy agreed to relinquish any possession, custody, and control of its MC-20 facility in the Gulf of Mexico, and not interfere in any way with the Coast Guard’s oil containment efforts, removal, remediation, or decommissioning efforts.

Further, Taylor Energy agreed to turn over to the DOI and Coast Guard all documents, including all reports, surveys, studies, etc., that would assist with the response, containment, and decommissioning efforts. Upon liquidation, Taylor Energy will also turn over all of its remaining assets to the United States as its final payment and to resolve its liability for the oil spill. Taylor Energy does not admit to any liability as part of this agreement.

As a result of this ongoing oil spill, the United States filed a civil complaint that initiated this lawsuit against Taylor Energy in the United States District Court in New Orleans on October 23, 2020 seeking removal costs, civil penalties and NRD under the Oil Pollution and Clean Water Acts arising from the discharge of oil from the MC-20 Facility. Between 2016 and 2020, Taylor Energy filed several lawsuits against the United States, including challenging the Coast Guard’s decision to install a spill containment system and appealing the Coast Guard’s denial of Taylor Energy’s $353 million spill-cost reimbursement claim submitted to the U.S. Oil Spill Liability Trust Fund.

The proposed Consent Decree also requires Taylor Energy to dismiss the three lawsuits it filed against the United States, including two cases in the Eastern District of Louisiana – Taylor Energy Co. LLC v. Captain Kristi M. Luttrell, in her Official Capacity as Federal On-Scene Coordinator for the MC20 Unified Command and Taylor Energy Co. LLC v. U.S. Department of the Interior — and a case pending in the District Court for the District of Columbia, Taylor Energy Co. LLC v. United States.

The proposed Consent Decree is subject to a 40-day public comment period and court review and approval. A copy of the consent decree is available at https://www.justice.gov/enrd/consent-decree/file/1458186/download.

[1] The $43 million is allocated as follows: $15 million for civil penalties; over $12 million for removal costs and $16.5 million for natural resource damages.

The Louisiana Legislature adopted the Geologic Sequestration of Carbon Dioxide Act in 2009. Recent policy changes at the federal level have drawn increasing attention to the Act’s provisions regarding the permits needed to operate a carbon dioxide storage facility in Louisiana.

The Act grants jurisdiction over the permitting process to the Commissioner of Conservation.[1] It requires that the Commissioner hold a public hearing to obtain evidence regarding the suitability of a particular underground reservoir for carbon dioxide storage.  Before permitting use of a reservoir for carbon dioxide storage, the Commissioner must find that the reservoir is not capable of producing oil, gas, condensate or other commercial minerals in paying quantities or that one of the following conditions applies:

  1. All owners in such reservoir or relevant part thereof have agreed to such use;
  2. The volumes of original reservoir, oil, gas, condensate, salt, or other commercial mineral therein which are capable of being produced in paying quantities have all been produced; or
  3. Such reservoir has a greater value or utility as a reservoir for carbon dioxide storage than for the production of the remaining volumes of original reservoir oil, gas, condensate, or other commercial mineral, and at least three-fourths of the owners, in interest, have consented to such use in writing.

The Commissioner must also find that use of the reservoir for the storage of carbon dioxide will not contaminate other formations containing fresh water, oil, gas, or other commercial mineral deposits and that the proposed storage will not endanger human lives or cause a hazardous condition to property.

The Act requires the Commissioner to issue a certificate of public convenience and necessity to any person applying therefor once he has made the determinations described above. The holder of such a certificate is authorized to exercise the right of eminent domain to acquire needed property including surface and subsurface rights and property interests necessary or useful for the purpose of constructing, operating, or modifying a storage facility and the necessary infrastructure including the laying, maintaining, and operating of pipelines for the transportation of carbon dioxide to a storage facility, together with utility, telegraph, and telephone lines necessary and incidental to the operation of these storage facilities and pipelines.

The operator of a carbon dioxide storage facility will also need to obtain a Class VI underground injection well permit. The Louisiana Department of Natural Resources recently adopted extensive regulations governing the issuance of such permits.[2] Those will go into effect if the EPA grants the state’s pending application for primacy over such wells under the Clean Water Act. Until that application is granted, the EPA retains jurisdiction to issue these permits.

[1] La. R.S. 30:1104

[2] 43 LAC:XVII:601 et seq.

The Louisiana Third Circuit Court of Appeal held that an insurer waived coverage defenses where the insurer failed to timely assert the specific coverage defense prior to the assignment of defense counsel by the insurer via a reservation of rights. See Teresa Jeffries v. Prime Insurance Company, et al., 2021-161 (La.App. 3 Cir. 11/3/21), — So.3d —-.

In Jeffries, Elvis Thompson was driving an eighteen-wheeler owned by Graham Trucking, Inc. which was insured by Prime Insurance Company when he was involved in an automobile accident on March 31, 2017. Teresa Jeffries then sued Thompson and Graham and asserted claims directly against Prime via the Louisiana Direct Action Statute.

Prime assigned defense counsel who answered the lawsuit on behalf of its insured, Graham, and then filed a separate answer on behalf of Thompson. In those answers, Prime pled the limitations, terms and conditions of the policy “as if copied in extenso.” Additionally, counsel assigned by Prime continued to represent all three defendants until days before trial was to begin and no reservation of rights letter was proven to have been received by Graham or Thompson.

“Just days” before the October 7, 2019 trial, Prime filed a motion to continue the trial. Prime’s assigned defense counsel argued that he had a “conflict” in representing all three of the defendants at trial because Prime now sought to exclude coverage on the alleged basis that Thompson was an “unscheduled driver” not covered by policy. The trial court issued a ruling finding “no conflict. If there was a conflict I find that it’s been waived by the insurance company.” The appellate court affirmed.

Jeffries reinforced long-standing Louisiana jurisprudence that an insurer must timely issue a reservation of rights to the insured if the carrier wishes to offer a defense and reserve the right to assert coverage defenses. This rule applies not just to the insured, but to any other defendant who may be owed coverage under the policy and the carrier must be prepared to prove that the reservation of rights letter was actually received by those persons.

Here, Prime hired a single lawyer for all three defendants, no reservation of rights letter was proven to have been received by the insured or to have been sent or received by Graham. As explained by the court in Jeffries, due to the insurer’s actions “…the insured were led to believe the insurer had relinquished its coverage defenses as the insurer continued to defends the insureds while having knowledge of facts indicating noncoverage.”