The availability of excess remediation damages, which are damages for additional remediation beyond state regulatory standards that can be pocketed by landowners instead of deposited with the court, has been a hotly contested issue in Louisiana legacy cases involving oilfield remediation claims governed by Act 312 (La. R.S. 30:29). On April 19, 2024, the Louisiana First Circuit Court of Appeal issued an opinion in which it affirmed the dismissal of the landowner’s claim for excess remediation based on implied lease obligations against BP America Production Company. See Louisiana Wetlands, LLC v. Energen Resources Corp., 2023-0564 (La. App. 1 Cir. 4/19/24), — So. 3d –, 2024 WL 1694715. In doing so, the First Circuit clarified that a landowner cannot simultaneously be awarded the cost to remediate property to state regulatory standards and directly pocket additional damages for excess remediation absent an express contractual provision allowing a right to excess damages. Liskow attorney Kelly Brechtel Becker argued the appeal on behalf of BP.
Louisiana Wetlands is a legacy lawsuit in which a landowner seeks remediation damages against BP and others for environmental damage to property from historic oil and gas operations. Subsection M of Act 312 provides that “only” four categories of damages may be awarded in Act 312 cases:
(a) The cost of funding the feasible plan adopted by the court.
(b) The cost of additional remediation only if required by an express contractual provision providing for remediation to original condition or to some other specific remediation standard.
(c) The cost of evaluating, correcting or repairing environmental damage upon a showing that such damage was caused by unreasonable or excessive operations based on rules, regulations, lease terms and implied lease obligations arising by operation of law, or standards applicable at the time of the activity complained of, provided that such damage is not duplicative of damages awarded under Subparagraph (a) or (b) of this Paragraph.
(d) The cost of nonremediation damages.
La. R.S. 30:29(M)(1).
Relevant here, the trial court previously dismissed all claims against BP except for alleged excessive and unreasonable operations triggering implied restoration obligations under Subsection (M)(1)(c) of Act 312. BP filed a motion for summary judgment to dismiss the remaining claim for two reasons: (1) the claim was extinguished when the landowner was made whole by the adoption of the most feasible remediation plan when two co-defendants who operated on the property deposited $1,082,400 into the registry of the court to cover the cost of remediation to state regulatory standards; and (2) BP was only a passive lessee under the lease (i.e., BP did not actively operate on the property). The trial court agreed with BP, albeit for different reasons, and dismissed BP from the suit.
On appeal, the First Circuit affirmed in a 2 to 1 decision, resolving this issue for the reasons argued by BP. In the opinion, the First Circuit expressed that “Act 312 limits direct damages (those that need not be deposited into the court’s registry) to those described in Subsection M(b) for ‘additional remediation’ when a contractual provision explicitly compels that result.” Since the landowner had already been awarded a regulatory cleanup and the lease was silent on additional remediation here, the landowner had no remaining claim against BP. The majority also found it significant that BP never actively operated on the property and that other parties who operated had already provided specific performance to the landowner through the funding of the most feasible plan.
In sum, the recent Louisiana Wetlands decision recognizes that regardless of the theory of liability (i.e., whether a claim sounds in tort or contract), the primary remedy for a landowner in an Act 312 case is specific performance by way of remediation to state regulatory standards through the implementation of a most feasible plan unless an express contractual provision provides for remediation above those standards. The authors note that the Plaintiff filed an application for rehearing on May 3, 2024.
For further questions regarding this case, contact Liskow attorneys Michael Schimpf, Kelly Brechtel Becker, and Kathryn Gonski and visit our Energy Litigation practice page.
Disclaimer: This Blog/Web Site is made available by the law firm of Liskow & Lewis, APLC (“Liskow & Lewis”) and the individual Liskow & Lewis lawyers posting to this site for educational purposes and to give you general information and a general understanding of the law only, not to provide specific legal advice as to an identified problem or issue. By using this blog site you understand and acknowledge that there is no attorney-client relationship formed between you and Liskow & Lewis and/or the individual Liskow & Lewis lawyers posting to this site by virtue of your using this site. The Blog/Web Site should not be used as a substitute for legal advice from a licensed professional attorney in your state regarding a particular matter.
Privacy Policy: By subscribing to Liskow & Lewis’ E-Communications, you will receive articles and blogs with insight and analysis of legal issues that may impact your industry. Communications include firm news, insights, and events. To receive information from Liskow & Lewis, your information will be kept in a secured contact database. If at any time you would like to unsubscribe, please use the SafeUnsubscribe® link located at the bottom of every email that you receive.