After the 2003 Corbello decision, the Louisiana legislature attempted to enact a workable procedure for recovering environmental damages arising from oil and gas operations known as Act 312. The main goal of Act 312 was to ensure that property contaminated by oilfield operations would be cleaned up to applicable regulatory standards. Since the enactment of Act 312, very few cases have made it through the Act 312 process. Thus, in an attempt to expedite the identification and remediation of contaminated property, the Louisiana legislature recently passed two new measures revising the Act 312 procedure.

Summary of the New Legislation

The first measure (a House bill enacted as Act 754) amends the Louisiana Code of Civil Procedure to provide for:

  • The issuance of an environmental management order (EMO) to expedite site inspections and sampling, and
  • A limited admission of environmental liability that allows defendants to begin to remediate property before trial (limited to the most feasible plan to remediate the property).

The second measure (a Senate bill enacted as Act 779) provides for a number of amendments to Act 312:

  • Allows a plaintiff to provide a notice of intent to investigate potential environmental damage that suspends prescription of the claim for one year upon the notice being provided to LDNR,
  • Requires the plaintiff to identify the alleged environmental damage and the results of any environmental testing if a lawsuit is filed after a notice of intent to investigate is filed,
  • Permits a defendant to request an early preliminary hearing to determine whether there is good cause for it to remain a defendant in the case,
  • Grants subpoena power over agency personnel involved in developing the feasible plan and allows for discovery regarding the development of the plan after a final plan has been submitted,
  • Prohibits ex parte communications with agencies, officials, and contractors who are involved in formulating the feasible plan,
  • Requires the Departments of Agriculture, Forestry, and Natural Resources, along with the Department of Environmental Quality (DEQ), to comment if LDNR approves or structures a preliminary plan that applies regulations other than those of LDNR, and
  • Provides for a waiver of indemnity rights against punitive damages caused by a party who admits limited liability.

The New Legislation:

Environmental Management Orders

In an attempt to prevent a party from prohibiting access to property subject to litigation, the new legislation provides that if an EMO is requested by any party or by LDNR’s Office of Conservation, the court must grant all parties access to property so that the parties may conduct inspections, sampling, and testing. However, parties who test on the property must be cognizant that any sampling results must be submitted to all other parties and LDNR within thirty (30) days of receipt or the party will be prevented from admitting the results into evidence.

The Limited Admission

Perhaps one of the most significant changes to Act 312 is the provision allowing for a limited admission of environmental liability. If a limited admission of environmental liability is made, LDNR must conduct a public hearing within a specific period of time after the expiration of the delay by which a party may file a limited admission. The limited admission, along with the most feasible plan approved by LDNR and all written agency comments, are admissible into evidence. Procedurally, the party making the limited admission must deposit $100,000 with LDNR to support LDNR’s review of the plan and the costs of a public hearing. The depositing party is entitled to reimbursement of unused sums. Furthermore, the limited admission does not waive any rights or defenses of the admitting party or affect other claims against the defendant

While the provision allowing for a limited admission of liability has a potential advantage for defendants, in response to these measures the requirement that $100,000 be deposited with LDNR does not include checks and balances, limits, or a specific process by which LDNR withdraws the deposited funds.

The Filing of a Notice of Intent to Investigate and its Effects

The new legislation requires that the plaintiff provide a notice of intent to investigate potential environmental contamination on their property which could lead to a pre-suit investigation of properties by LDNR and the remediation of land prior to the actual filing of the lawsuit. In addition to speeding up remediation of contaminated property, a defendant’s investigation of claims will likely be more efficient, as plaintiffs who have filed a notice of intent to investigate are now required, in any subsequent petition, to include sampling results and identify the specific areas of alleged environmental damage.

When a notice of intent to investigate is filed with LDNR, prescription of the claim is suspended for one year, which may allow for the development of additional evidence in support of a plaintiff’s claim. Additionally, should LDNR determine, based on its own findings, that remediation is warranted, it could issue a compliance order to a former operator without that operator having been provided notice of the intent to investigate, as notice is only required to be provided to LDNR and to current operators. Thus, landowners could begin taking samples on the property without providing notice to all potentially responsible parties in order that they may observe and also participate in the sampling activity. It is also possible that non-operators in the lease or unit chain would not receive any notice from LDNR.

Preliminary Dismissal

The amendment providing for the right to request a preliminary hearing to determine whether there is good cause for a defendant to remain a party in the case could allow for the early dismissal of a defendant who is not liable for environmental damage. The plaintiff has the initial burden, and written evidence or affidavits may be introduced, though the Code of Civil Procedure provisions governing summary judgments do not apply. Also, this new measure will provide a defendant with the ability to seek early dismissal based on the vagueness of the petition and its articulated claims.

While a defendant may be dismissed, all parties reserve the right to rejoin the dismissed defendant upon discovery of evidence not reasonably available at the time of the hearing. Thus, the legal responsibility of any potentially responsible party, including a party dismissed from the proceeding, could still be litigated following the judgment of the district court.

LDNR Discovery and Ex Parte Communication

The new legislation allows parties to subpoena, for the purposes of deposition or trial, any agency official, representative, or contractor involved in formulating the feasible plan or who provides comments to the plan. The party that subpoenas the witness is now responsible for the agency’s costs in responding to the subpoena. Discovery regarding the review, approval, or structuring of the feasible plan or its related comments is not allowed until after the final plan is submitted to the court. Also, no ex parte communications with agencies, officials, or contractors involved in formulating the feasible plan is allowed, which permits the agency to formulate a plan without interested parties impacting the process.

However, the provision does not limit the number of witnesses who may be subpoenaed for deposition or trial. The provision impliedly precludes subpoenaing, for the purposes of a deposition and/or trial, an agency official whose testimony may be needed, but where a feasible plan has not yet been finalized. On top of this, attorneys who may communicate with agency attorneys for the purposes of interpreting and promulgating the most feasible plan will now be precluded from engaging in this type of communication.

Additional Agency Review and Comment on Proposed Plans

Although not expressly called for in cases where only LDNR regulations are applied, the requirement of additional agency review and comment on a proposed plan moves the plan formulation process one step closer to being able to apply an exception to the default standard for remediation such as the DEQ RECAP standard

With the potential for additional agency review, it could potentially be more cumbersome to obtain an exception to the default regulatory standards currently in place. There is also a possibility of conflicting agency decisions if multiple agencies are involved.

Waiver of Indemnity Rights

Under the new legislation, a party who makes a limited admission is deemed to waive any contractual rights for indemnity against punitive damages caused by the admitting party’s acts or omissions. Thus, an indemnitor is protected from having to indemnify another party for wanton and reckless conduct. Nevertheless, most indemnity agreements do not expressly include indemnity against punitive damages, and the law generally does not favor this type of indemnity. However, there is a potential for this new provision to impair contractual and due process rights that an indemnitee may have negotiated and gained through arms length transactions.