• Louisiana Legislature Modifies Oilfield Cleanup Legislation
  • June 8, 2012 | Author: Robert B. McNeal
  • Law Firm: Liskow & Lewis A Professional Law Corporation - New Orleans Office
  • Significant revisions and amendments to Louisiana’s oilfield cleanup legislation, La. R. S. 30:29 (commonly known as Act 312) obtained final legislative approval on May 31, 2012 and are expected to become law shortly. Procedures have been added to expedite the remediation of oilfield contamination, the procedures for the formulation of remediation plans by the Louisiana Department of Natural Resources have been modified, and new provisions have been added to deal with various issues, including the admission of remediation evidence at trial. Generally, the legislation furthers the public interest in prompt remediation in accordance with Louisiana’s regulatory standards by encouraging the prompt assessment and remediation of contamination, rather than delaying cleanup activity until after trial in legacy lawsuits. These changes are summarized below.
     
    ACT 312 BEFORE THE NEW LEGISLATION

    Act 312 of the 2006 legislative session was enacted in response to judicial decisions that awarded significant damages for remediation costs with no obligation for landowners to actually use such awards for cleanup work. Defendants in such cases could avoid additional cleanup responsibility by operation of law as well as doctrines of res judicata and issue preclusion. The result was that contaminated property at issue in litigation was left unremediated despite conditions that exceeded regulatory standards. The courts recognized the negative public policy considerations created by this jurisprudence, but the Louisiana Supreme Court concluded that the solution was a legislative issue. The legislature responded by enacting Act 312.

    Act 312 applies to private lawsuits which seek relief for oilfield contamination. In general, when a defendant is found liable for environmental damage, Act 312 provides that the court shall seek a recommendation from the Louisiana Department of Natural Resources (“LDNR”) with the parties’ input for the most feasible plan to remediate the contamination to regulatory standards and shall thereafter adopt the most feasible plan. The responsible party is required to deposit sufficient funds to implement the plan and thereafter the court and Louisiana Department of Natural Resources shall oversee the remediation. If necessary, the court can require the responsible party to provide additional funding or, conversely, the responsible party is reimbursed any excess funds not used for remediation.
     
    However, a landowner can pursue a remedy or award for private claims suffered as a result of environmental damage with some limitations. Also, a landowner can receive damages for the implementation of additional remediation in excess of the requirements of the plan adopted by the court as may be required in accordance with the terms of an express contractual provision.
     
    NEW LEGISLATION

    Litigation over the application and interpretation of Act 312 had effectively delayed remediation of oilfield sites until after trial and impeded the prompt resolution of contamination claims. In addition, regulators were criticized for their handling of Act 312 issues. Due to both plaintiffs’ and defendants’ dissatisfaction with the existing law, two bills were passed that modify Act 312: House Bill 618 and Senate Bill 555.
     
    House Bill Number 618 modifies Act 312 by amending the Louisiana Code of Civil Procedure. It enacts two new articles, 1552 and 1563. These articles provide for environmental management orders to expedite testing and a limited admission of environmental liability to allow defendants to remediate sites using the existing Act 312 procedure before trial on the merits.
     
    Senate Bill Number 555 contains a variety of amendments to La. R.S. 30:29. It limits the timing of discovery of LDNR plan formulation evidence, creates a preliminary hearing to test the existence of environmental damage and liability for such damage, extends prescription for plaintiffs who perform environmental testing after giving notice, prohibits ex parte communications with LDNR and agency personnel prior to the issuance of a remediation plan, provides for additional agency review of LDNR’s plan, and adds a waiver of indemnity rights for punitive damage claims by any defendant who makes a limited admission of liability for environmental damage.
     
    Environmental Management Orders
     
    Code of Civil Procedure article 1552 is new. It creates a procedure for environmental management orders “EMO”’s) in legacy litigation. Upon the request of any party or the LDNR, the court will direct attorneys for the parties to appear before the court and develop an environmental management order to govern site inspections and environmental testing.
     
    The EMO shall authorize all parties to access the allegedly impacted property for inspections and environmental testing. It shall also require each party to submit all test results to the other parties and LDNR within thirty days of receipt. In addition, the EMO shall include reasonable terms for all of the following:

    1. Access to the property;
    2. Investigation and environmental testing;
    3. Sampling and testing protocols; and
    4. Specific time frames within which to conduct testing and sampling.

    The EMO can also affect the admissibility of testing evidence. The failure of a party to provide results of testing to other parties under an EMO shall preclude the admission of those results in the litigation, absent good cause demonstrating why the results should be admissible.
     
    The EMO procedures provide a method for obtaining site access and ensuring that site testing will generate compatible data. When parties have unequal knowledge of alleged contamination or test data, they also ensures that all parties will have timely access to the property and data about environmental conditions. When large tracts of land are at issue, an EMO can help pinpoint the particular sites at issue. In addition, an EMO can prod the parties to complete site testing in a timely fashion so that contamination issues are defined earlier in litigation. Finally, it allows site access and testing rights for parties who otherwise would need regulatory action or other legal permission to access property.
     
    Limited Admission of Environmental Liability
     
    Code of Civil Procedure article 1563 is also new and creates a procedure for limited admission of environmental liability by defendants in legacy litigation. It allows a defendant to admit liability for the limited purpose of remediating all or a portion of environmental damage at issue. Upon admitting liability, the defendant becomes obligated to evaluate or remediate the environmental damage in accordance with the most feasible plan, which is developed in accordance with Act 312’s existing procedures for court approval of such a plan after obtaining a recommendation from LDNR. This change serves the public interest by allowing environmental damage to be promptly remediated to applicable regulatory standards rather than waiting until after trial or a settlement.
     
    Several procedural requirements apply to the admission. It must be made in writing by filing the admission into the record of the litigation. It must be made no later than ninety (90) days after the completion of environmental testing set forth in the EMO. An admission of limited liability by one party does not automatically extend to other parties. Instead, when a defendant files the first admission, the other defendants have sixty (60) days thereafter to file their own admissions of limited liability, provided that an additional admission also must be filed within the ninety day deadline for the original admission to be filed. In addition, a limited admission of liability does not establish primary jurisdiction for LDNR over the environmental damage.
     
    When a limited admission is made, the court will follow Act 312’s existing procedures for the formulation of the most feasible plan for addressing the environmental damage with some modifications.
     
    First, the court will make the reference to LDNR for a public hearing on the most feasible plan to evaluate or remediate environmental damage after the expiration of the ninety (90) day period for all defendants make a limited admission. Second, an admitting party remains obligated to pay LDNR’s costs for reviewing and formulating the most feasible plan, but it also is required to make an initial deposit of $100,000.00 with LDNR to cover these expenses prior to or with the submission of the party’s plan to LDNR. Any portion of the deposit that is not needed to pay expenses is returned to the admitting party.
     
    Second, an admitting party becomes liable for the plaintiff’s investigation costs. Within thirty (30) days of LDNR’s filing of its recommended plan with the court, an admitting party shall reimburse plaintiff’s costs under La. R.S. 30:29.(E)(1) which the court determines to be recoverable. These expenses consist of a plaintiff’s costs of proving environmental damage. No provision is made in the event that the court does not make this determination within the thirty day period, either due to plaintiff’s failure to seek such a determination or other delays.

    Third, a limited admission precludes another plan hearing later in the case. When a public hearing is held on the feasible plan in response to a limited admission, LDNR will not conduct an additional public hearing for the same environmental damage.
     
    An admission of limited liability does not affect other claims against a defendant. It is not an admission of liability to the plaintiff for private damages or for remediation in excess of any applicable regulatory standards. It does not waive any rights or defenses of the admitting party. Likewise, it does not limit or restrict plaintiff’s claims for such relief.

    However, the limited admission of liability does have an evidentiary effect. The limited admission, the plan approved by LDNR, and written comments provided by other agencies to the plan shall be admissible as evidence in any action.

    Finally, a party who makes a limited admission waives some indemnity rights. By admitting limited liability, a party is deemed to waive any contractual rights against other persons for indemnity against punitive damages caused by the admitting party’s acts or omissions. If a claim for punitive damages arises from the acts or omissions of another person, the admitting party’s indemnity rights are not waived. Also, an admitting party’s waiver of indemnification against punitive damages does not apply to indemnification rights for any other claims or damages.
     
    LDNR Discovery and Ex Parte Commnications

    Formerly, Act 312 had no explicit restrictions on discovery of LDNR personnel involved in formulating the agency’s feasible plan recommendation to the court. Litigation had ensued between parties and LDNR when such discovery was sought and courts had attempted to identify the appropriate scope and circumstances of such discovery.
     
    In response, Act 312 was amended to add new provisions governing such discovery. Parties are now prohibited from obtaining discovery from LDNR, its personnel and its contractors regarding its review, approval and structuring of the feasible plan until LDNR has submitted its final, feasible plan recommendation with reasons to the court. When a party issues a subpoena for a deposition or documents to LDNR, it must pay the LDNR’s costs to respond.

    In a related amendment, parties are also prohibited from having any ex parte communication with LDNR or any other agency involved in the formation of a feasible plan. To verify such communications have not occurred, LDNR and any other agency involved in the plan formulation are required to submit an affidavit of compliance with this restriction with the submission of the recommended plan to the court.

    Preliminary Dismissal
     
    Defendants in legacy lawsuits often faced protracted litigation involving other parties and issues before getting information about their particular involvement with alleged contamination. Exceptions of vagueness seeking this information had varied levels of success, and some courts concluded that such information would be obtained in discovery.
     
    To address this issue, a preliminary hearing was added to Act 312 to allow defendants to seek preliminary dismissal at the outset of a case. Within sixty (60) days of being served, a defendant can request a preliminary hearing to determine whether good cause exists for maintaining the defendant as a party to the litigation. Unlike a vagueness exception, this is an evidentiary hearing. The plaintiff has the initial burden to introduce evidence to support the allegation of environmental damage. If this burden is carried, the moving defendant has the burden to demonstrate the absence of a material fact that it caused or is otherwise legally responsible, such as by contract, for the alleged environmental damage. Evidence may be introduced by affidavit or in written form and the rules governing summary judgments in the Code of Civil Procedure do not apply to the preliminary hearing.
     
    The court is required to issue an order within fifteen (15) days after the preliminary hearing.

    A defendant who obtains a preliminary dismissal is not necessarily out of the lawsuit. Dismissal is without prejudice. Any party can rejoin the dismissed defendant during the lawsuit if evidence is discovered that was not reasonably available at the time of the hearing on the motion for preliminary dismissal. Prescription does not run when a preliminary dismissal is granted; a pleading rejoining a previously dismissed defendant relates back to the filing of the original petition or any amendments as provided by Code of Civil Procedure Article 1153.
             
    A preliminary dismissal does not affect the remaining claims. It is without prejudice to any party’s rights to litigate the legal responsibility of any potentially responsible party, theallocation of responsibility among the potentially responsible parties, and any other issues incident to the finder of fact's determination of the party or parties who caused the damage or who are otherwise legally responsible for the alleged environmental damage. The procedure for a preliminary dismissal is in addition to the pretrial rights and the remedies available to the parties under the Code of Civil Procedure, including the right to discovery.

    Suspension of Prescription

    Consistent with amendments that allow dismissal of defendants who are sued with little factual justification, the new legislation also protects plaintiffs from prescription while they investigate environmental contamination.
     
    A plaintiff can suspend the prescriptive period for any claim subject to Act 312 for one year by mailing or physical delivery of a notice of intent to investigate to LDNR. The notice of intent must include all of the following information:

    1. A description of the property alleged to have been damaged;
    2. A description of the alleged environmental damage;
    3. The general location of the alleged environmental damage on the property;
    4. The name and address of all known owners of the property; and
    5. The name and address of the current operator.

    In addition, the party issuing the notice of intent must mail a copy of the notice by certified mail return receipt requested to all persons identified in the notice.
     
    The notice of intent also triggers an additional pleading requirement with adverse consequences if unsatisfied. When a party who submitted a notice of intent subsequently files a petition, the petition must identify on a map the location of any alleged environmental damage and include the results of any environmental testing performed on the property. It is important to note that the failure to include this information at the time of the filing of the judicial demand shall result in exclusion of this information.
     
    Remediation Standards

    The amendments clarify that a defendant who is found liable shall submit a plan to evaluate or remediate the environmental damage to applicable “regulatory” standards, rather than simply “applicable standards.” In addition, LDNR shall use applicable “regulatory” standards in approving or structuring its most feasible plan recommendation.
     
    Additional Agency Review of Plan
     
    Under prior law, LDNR determine the most feasible plan with no requirement to seek input from other agencies. The amendments now require an opportunity for other agencies to provide comments to LDNR as it formulates its recommended plan.
     
    Within fifteen (15) days after making a preliminary structuring or approval of a plan, LDNR must submit the plan to the Louisiana Department of Agriculture and Forestry and the Louisiana Department of Environmental Quality, and the Department of Natural Resources for review and comment. Within thirty (30) days thereafter, each agency may provide written comments regarding the plan. Within thirty (30) days after the receipt of other agencies’ written comments, LDNR shall file the final plan with written reasons for its determination together with comments submitted by any other agencies in response to the plan.

    An agency providing comments shall submit a schedule of its costs for the plan review to the court for reimbursement by the responsible party. However, comments are not required and the failure of an agency to respond to LDNR does not affect the validity of LDNR’s planrecommendation.

    To assist in implementing this process, LDNR and agency heads are required to coordinate and establish a protocol to ensure inter-agency communication regarding plan development, timely delivery of all proposed plans to the appropriate agency heads, and timely receipt of all agency comments back to LDNR.

    Compliance Orders
     
    Currently, La. R. S. 30:29.B(2) states that Act 312 does not affect the enforcement powers and authority of LDNR. However, a recent decision stayed LDNR from enforcing a compliance order while litigation was pending, thereby allowing the existence of private litigation to trump the public’s interest in remediation and regulatory compliance.

    The amendments address this issue by reaffirming LDNR’s enforcement authority. Based on its findings, LDNR may issue any compliance order it deems necessary to either the operator of record or, where applicable, a party found responsible or admitting responsibility for implementing the most feasible plan. If a compliance order is issued against the responsible party who is not the current operator of record, the responsible party shall give the current operator of record notice of the compliance order within thirty days of the responsible party's receipt of the compliance order.
     
    Effective Date
     
    House Bill 618 and Senate Bill 555 shall not apply to any case in which the court issued or signed an order setting the case for trial on or before May 15, 2012, regardless of whether such trial setting is continued.

    CONCLUSION
     
    The modifications to Act 312 are largely intended to expedite the identification and remediation of environmental damage. New procedures provide for a prompt determination of the basis for claims in Act 312 cases, a limited admission of liability to allow prompt remediation of contamination, more robust agency review of remediation plans, and appropriate delineation of contamination at the commencement of litigation with a suspension of prescription to allow plaintiffs adequate time to obtain evidence of environmental damage before suit is filed. Ultimately, these revisions should streamline legacy cases and allow remediation under Act 312 to be performed efficiently consistent with the public interest in a clean environment.