One of Donald Trump’s main objectives over the next four years is to restore America’s energy independence. “Drill baby, drill!” didn’t make it into his second inaugural, but it might as well have. He and his team, led by Interior Secretary Doug Burgum, went straight to work on efforts to reduce the nation’s dependence on energy imported from politically unstable parts of the world.
To get there, they’ve got to overcome lots of roadblocks. One of them, strangely enough, emanates from the newly renamed Gulf of America, where Republican Louisiana Gov. Jeff Landry has seemingly partnered with settlement-seeking trial lawyers and radical environmentalists on activities that impede the growth of the nation’s energy sector.
You’d think the leaders of a state hunting for every dollar it can find would consider the revenue impacts before deciding whether to go on with lawsuits.
Energy analyst David Blackmon pointed out in a recent Forbes column that Landry is a plaintiff in lawsuits against energy producers working to help Trump fulfill his promise of energy independence. This doesn’t make much sense. Perhaps the president asked him about it when both were in New Orleans for Super Bowl LIX.
Even if he didn’t, here are the facts: 43 lawsuits have been filed, starting in 2013 while Landry was serving in the U.S. Congress. These lawsuits, brought by several Louisiana parishes, aim to hold private entities responsible for coastal erosion — a problem that, like many environmental issues, is a “commons” problem.
This means that because coastal erosion generally happens in nature, no single person or entity is automatically responsible unless a court finds that someone or something is. With states and local governments facing budget constraints, they have increasingly partnered with special interests to ask courts to hold deep-pocketed corporations accountable for the costs of remediation.
As Blackmon also noted, the Louisiana-based Pelican Institute for Public Policy, a nonpartisan think tank, found the state has suffered significant economic consequences because “when the risk of getting sued increases, the expected costs faced by companies increases, and as a result, drilling activity decreases.”
In its report, Pelican found:
- Between 53 and 74 fewer oil wells were drilled offshore Louisiana than would have been drilled if the threat of lawsuits was lower in the state.
- This decrease in drilling activity led to economic losses in the range of $125.7 million to $320.3 million during those 34 months for Louisiana’s oil and gas economy, which work out annually to something in the range of $44.4 million to $113 million per year.
- Given that the average royalty rate in the coastal zone of Louisiana is approximately 20%, Pelican estimated Louisiana’s state and local governments lose $8.9 million per year to $22.6 million per year in royalty revenue.
Focus on that last point. According to the think tank, Louisiana is “losing more in royalty revenue than oil and gas producing companies are losing in profit, which are likely less than 20% of revenues on average, due to litigation risk.”
You’d think the leaders of a state hunting for every dollar it can find would consider the revenue impacts before deciding whether to go on with the lawsuits. Instead, as the state’s attorney general, Landry supported the parishes’ right to bring claims under the State and Local Coastal Resources Management Act and agreed not to endorse any substantive defenses raised by defendants.
Landry’s critics complain this decision may have compromised his obligation to uphold state law since, significantly, the courts later affirmed some of these defenses. In any event, it has left some of them asking if he favors the interests of the plaintiff bar over those of the oil and gas industry, a critical economic driver in the state he leads.
The U.S. Energy Information Administration has recently forecasted that natural gas and oil will be the most used fuels in the U.S. through 2050. Trump’s day-one executive order on “Unleashing American Energy” encourages “energy exploration and production on Federal lands and waters, including on the Outer Continental Shelf, in order to meet the needs of our citizens and solidify the United States as a global energy leader long into the future.”
It’s basic economics. Increased energy demand (as the EIA predicts) combined with continual increases in supply produce lower prices. By suing the producers for billions, the governor and the other plaintiffs are handcuffing the companies providing abundant and affordable energy. Landry, unusual for such an allegedly market-friendly conservative, appears to be on the opposite side of President Trump when it comes to promoting America’s energy dominance.
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