As Legacy Lawsuit Count Rises, Rig Count Falls

As we have reached the decade mark for when the first legacy lawsuit was filed in the state of Louisiana, a clear correlation can be observed. As the legacy suits have risen, the rig counts have fallen.

Opposition groups have always blamed this correlation as a mere coincidence, but the proof is in the pudding. A survey was conducted by Southern Media for LOGA in 2005 and was sent to 450 oil and gas operators in Louisiana.

The basis of the survey was to determine LOGA members’ awareness of legacy lawsuits and the impact of legacy suits on the companies operations and investments in Louisiana.

The results confirmed LOGA’s assumption that legacy suits were driving investment dollars out of the state. Of the companies that replied to the survey, over 90% were familiar with legacy suits. Over 90% of the companies said they would not purchase properties in Louisiana due to the legacy threat.

Mike Moncla, the owner of the largest workover barge rig company on the Gulf Coast, recently said in a letter to the editor, “What company in its right mind would purchase a property in Louisiana right now, all the while knowing that they will likely be sued once the purchase has been made?”

One specific response from the LOGA survey is to be noted: over 60 percent of the companies, in 2005, said they were already reducing or eliminating investments in Louisiana due to legacy suits.

Around the same time frame that LOGA conducted their survey, the Louisiana Department of Natural Resources and Louisiana Economic Development started to see a drop in both rig counts and job numbers for the state of Louisiana. At this time, these two agencies hired Dr. David Dismukes, of the LSU Center for Energy Studies, to conduct a study to determine any connection between legacy suits and the downturn in oil and gas activity. The results of Dismukes’ study looked very similar to the LOGA survey conducted for its members.

In 2012, the Dismukes study was updated due to additional years of data being available since the first legacy suits were filed. One bullet in the Executive Summary said, “Legacy lawsuits are strongly and negatively correlated with Louisiana drilling activity. Increases in Legacy Lawsuits are correlated with reductions in conventional Louisiana oil and gas drilling.”

His study produced very damning numbers. Again, as of 2012, legacy suits have led to the loss of over 1,200 new wells being drilled. These lost wells translate to over $6.8 billion in lost Louisiana drilling investments. These well and dollar numbers translate to an even more troublesome data point: legacy suits have led to the loss of 30,000 potential jobs in the oil and gas industry for the state of Louisiana. As a side note, 30,000 lost job opportunities equals $1.5 billion in lost wages for our state’s economy.

As if this data is not enough, over a dozen companies have recently come forward to confirm that indeed legacy lawsuits are prohibiting their companies from bringing new investment dollars to the state. While the brick and mortar stays in Louisiana, the investments and jobs are making their way to other states like Texas, North Dakota and Pennsylvania. 357 legacy suits having been filed against 2,856 named defendants, and an all-time low rig count in South Louisiana is not mere coincidence. Something must be done to prevent the departure of this storied industry and for the future well being of our great state of Louisiana.