Louisiana Record

Thursday, February 20, 2020

Lawsuit threat has caused 50% drop-off in La. oil drilling, study finds.

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By Zeta Cross | Oct 29, 2019


The Pelican Institute has released a new study confirming what it has long maintained: the increased risk of coastal lawsuits has caused a major decline in the oil drilling industry in Louisiana.

In the past six years, offshore drilling in Louisiana has declined more than 50 percent. Coastal erosion lawsuits are the biggest factor in the decline, the study, titled “The Cost of Lawsuit Abuse: An Economic Analysis of Louisiana’s Coastal Litigation” has found. 

“When you talk to small businesses that supply the oil and gas industry, when you look at the numbers of laid off workers, this is what we have suspected,”  Renee Amar, vice president of government affairs for the Pelican Institute, told the Record. “Now we can finally put numbers on it.” 

The first coastal erosion lawsuits in Louisiana were filed in 2013. Between May 2012 and May 2014, Louisiana lost 2,000 jobs in the industry, the study found, and it attributes it to the increased risk of coastal erosion lawsuits.

The author of the study, economist Gavin Roberts, says that the Louisiana economy continues to lose between $44 million to $113 million per year because of the state-sanctioned lawsuit threat. 

Roberts says that when corporations are considering where to invest and drill, capital looking for oil and gas has plenty of options across the United States and all over the world. The litigation threat has clearly put Louisiana at a disadvantage when it comes to competition and attracting new investment, he says.

As the threat of coastal lawsuits in Louisiana continues to increase, drilling in Louisiana has decreased, Roberts says.

“That’s what the numbers show me,” he said.

Since 2017, there have been 43 lawsuits filed against energy companies in Louisiana state courts, brought by six parishes and the city of New Orleans. 

Roberts says the study takes into account a number of changing marketplace factors, including the worldwide decline in oil prices and increased competition from shale drilling.

For comparison, the study looked at drilling in Louisiana coastal waters in relation to deepwater drilling in nearby federal waters, where the threat of coastal erosion lawsuits is not a factor. Since 2013, drilling and productivity of wells in federal waters has increased, while drilling in Louisiana waters has gone way down, according to the study. 

And, before the lawsuits, drilling and productivity numbers in Louisiana waters and in nearby federal waters moved up and down together, it says.

Industry royalties in Louisiana also have declined significantly as the amount of drilling has dropped. 

Finally, the study shows that coastal lawsuits have caused Louisiana state and local governments to lose as much as $22.6 million per year in industry royalties. Loss of jobs equates to approximately $70 million in lost earnings for Louisiana workers.

Amar said the Pelican Institute hopes to use the study findings to change the conversation. 

“We want to reshape the rhetoric around lawsuit abuse and give legislators and the public a better understanding of why our economy is stagnant,” she said. 

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