Act 312 is intended to require that proven environmental damage arising from oilfield operations is actually remediated according to consistent standards to protect the public interest. The Act was initiated by the Louisiana oil and gas industry in reaction to the Corbello v. Iowa Production decision in which the Louisiana Supreme Court held that in a claim for breach in a contractual obligation to restore property, damages need not be tethered to the value of the property. Act 312 addresses litigation claiming environmental damage arising from oilfield operations, i.e. legacy lawsuits, by requiring:1. Timely notice to the State of such litigation;2. The stay of such litigation until 30 days after such notice is given;3. Allows the State to intervene in such litigation;4. Provides a role for the Office of Conservation within the Louisiana Department of Natural Resources in determining

the most feasible plan for evaluation and/or remediation of environmental damage;5. Provides that the Court and the Office of Conservation shall oversee actual implementation of the plan;6. Allows the landowner and the State to recover attorney and expert fees and costs from the responsible parties.

What is Act 312?

A Feb. 1, 2012 Report on Act 312 by the Louisiana Office of Conservation was used by the Louisiana Oil and Gas Association to “verify” that the state is a “judicial hellhole” of legacy litigation. THE REPORT SHOWS NO SUCH THING.

I. “Poor legal climate”: Say What?FACT: According to the Fraser Institute Global Study of Oil and Gas Executives, 2011: A Survey of 501 Oil and Gas Executives and Managers (the bluebook on oil and gas investment)

• Louisiana ranks 14th of 135 jurisdictions on investment environment (17 factors considered)

• Over the last three years-2009-2011-Fraser Studies indicate Louisiana has steadily shown improvement in investment environment

• On “Legal System”, Fraser Study finds 22% of these executives say Louisiana legal system “encourages investment”

• 63% Say Louisiana legal system “no detterent” to investment

• 85% Say Louisiana legal system “encourages or is no deterrent” to investment in oil and gas projects in state

• Other factors found to be far more salient to investment in Louisiana than legal system: for example, the Louisiana taxation system has 27% of the executives citing it as a “mild to strong deterrent” to oil and gas investment.

Fact: The most important factor in oil and gas decision-making is market factors, and no where is legacy lawsuits mentioned as a factor.

Source: 2011, Headwaters Economics Report: Drilling Rig Activity Nears 20-Year High

FICTION:

“Louisiana’s poor legal climate toward oil and gas industry is causing the state to lose out on substantial conventional drilling opportunities and thousands of well-paying jobs to other states, notably Texas.”LOGA’s Don Briggs Assertion:

II. Louisiana Losing Investment: Come Again!FACT:

• 9043 Drilling Permits issued (not counting OCS) in Louisiana since 2007 (the year Act 312 became effective), excluding November and December 2011 due to lack of current data

• Permits have remained consistent over period of time except in 2009 when prices dramatically decreased

• 217 MILLION Barrels of oil have been pumped out of Louisiana lands from 2007-2011 (excluding November and December of 2011 due to lack of data)

This has remained consistent over this period of time… If oil rigs are idle, what’s this all about?

At estimated $60 a barrel (a low estimate), one can see how much ADDED TO COMPANY’S TOTAL REVENUE

FICTION:

“Most conventional oil rigs in the pelican state are idle…”Judicial hell hole statement

“Simply making the decision to move forward with this kind of project and see it through is a vote of confidence by the industry in energy potential and the economic future of this state. It is especially encouraging when you see Louisiana’s deep natural gas potential has attracted interest from a deepwater giant such as Chevron, a company that can drill anywhere on the globe.”Scott Angelle, Secretary Louisiana. Dept. of Natural Resources, Jan. 12, 2012

What Other Factors Impact Permit And Rig Counts?“We are very concerned about President Obama’s proposed new $36 billion tax on the extraction industry, which in our judgment, has already adversely impacted the rig count in Louisiana.”Louisiana Economic Outlook 2011-2012 Louisiana Dept. Economic Development

2007 ... 47 Million Barrels2008 ... 45 Million

2009 ... 43 Million (falling price)2010 .... 44 Million

2011 .... 38 Million (not including Nov. and Dec.)2011 .... Est. Total based on previous months : 49 Million

III. Oil Permitting Depends On Price, Not Legacy Suits

The number of suits filed pursuant to Act 312 since it was passed in 2006 has remained fairly consistent, i.e. less than 50 filed per year. None of the cases it has received pose immediate or short-term risks to public health (p. 19). Of the 271 cases for which the State received notice under Act 312, roughly half (134) have reached some level of settlement. Settlement means a polluter has signed an agreement with the State to clean up a site to state standards. In the same report, however, the state office notes that it lacks the enforcement capability to ensure operators are meeting compliance orders to clean or maintain the integrity of a legacy site (p. 19-20)

While LDNR’s report underscores its inability to actually achieve cleanup of legacy sites, the Louisiana Oil and Gas Association in its 2012 Legislative Outlook says the law still needs to undermined through lobbying on one hand, while it appears the industry as a whole is scuttling the law through non-performance on the other.

Price and Permits Chart Price per year

Permits per year

Suits per year

0

500

1000

1500

2000

2500

2006 2007 2008 2009 2010 2011

Fact: The trend in permits for oil and gas correlates to the price of oil and the economy. Period. Source: Louisiana Department of Natural Resources, Louisiana Energy Facts, 2010

Fact: The trend in exploration is not in conventional drilling but in EXPLOITATION of unconventional resources, like Haynesville Shale.

Rig count: Gas Prices need to rise to entice more drillingLong Term: Fewer rigs in fewer placesSouth region: Historically, peak production ~30 bcf/d. We forecast region growing to 32 bcf/d by 2013

Source: 2009, Report by Tudor Pickering Holt & Co. Energy Investment

Price and Permits Chart LOGA and LSU: Legacy lawsuits loosing Louisiana jobsREALITY: No such evidence

While the Louisiana Oil and Gas Association’s spokesperson Don Briggs says legacy lawsuits are harming Louisiana’s oil industry, he gave a report on Feb. 23 (Tri Parish Times, LOGA Chief: US to lead oil and gas production by 2020, by Mike Nixon) that said “business is coming back”, especially in Louisiana where “growth in natural gas is changing everything for us”.

Big Oil seeks one thing: a return to the days that caused legacy sites: No rules, no requirements for cleanup and no process for insuring that landowners and citizens will be treated responsibly and fairly.

Case in Point: The Broussard heirs in Vermillion Parish. They utilized Act 312 and a settlement was reached with Chevron and its subsidiaries to clean up the mess on lands the Broussards have owned since 1765. The cost is estimated to cost hundreds of millions, because some of the pollution is radioactive. But to avoid the cleanup, the oil companies turned around and tried to seize the Broussards’ lands as a national “emergency”. Having failed to dilute the Broussards’ legal rights at the state level, the oil companies simply moved to take away the Broussards’ rights altogether.

Case in Point: Big oil is starting to utilize a process called “fracking” in central and North Louisiana. This process could eat up Louisiana’s piney woods, as fracking pits are spaced in 10-acre sites. Without landowner protections, property and water rights could be negated and the public’s rights to clean water acquifers could be ignored.

Unlike the claims of LOGA, the evidence in numerous cases has been considered through examination and cross-examination of witnesses and evidence. When the evidence and witnesses are tested, the conclusions as to oil companies’ behavior are clear.

EXAMPLES:“Exxon has knowledge since 1930s and 1940s that unlined pits could leak and were the potential for significant damage to soil conditions, that Exxon’s pits leaked into the soil, resulting in ‘outrageous levels’ of chemicals in soil and that Exxon was given ample opportunity to remediate…”“…the acts of Exxon were wanton and reckless…reprehensible…supported by the record…”“Exxon suppressed material facts…and acted with a callous indifference toward plaintiffs and their properties.”“Exxon’s repeated conduct…an indifference to or reckless disregard of the health and safety of others.”Martin v. Exxon Mobil Corp., La. 10/19/10, 28 So. 3d 262

“Exxon’s repeated conduct from 1985 to 1992…did involve an element of deceit.”“Exxon officials intentionally withheld information…”“Exxon took no step to remove the radioactive material…”“…callous, calculated, despicable and reprehensible conduct of Exxon…”“…Exxon showed no regard…no concern for human safety…”Grefer v. Alpha Technical, La. App. 4th Cir., 3/15/05, 90 So. 2nd, 1117, 1149, (La. Ct. App. 2005)

“…CITGO’s corporate management…made decisions and enforced policies regarding engineering and construction that resulted in the ultimate release of millions of gallons of toxic oil and wastewater into the Calcasieu waterways, causing injuries and damages to plaintiffs.”Arabie v. Citgo Petroleum Corp, La. App. 3rd Cir., 10/27/09, 49 So. 3d 529, 558

Solution: The Louisiana Landowners Protection Law (HB 853-Montoucet). This law would do the following:

1. Specify compensation to landowners for damages caused to their private property;

2. Require disclosure indicating the impact mineral extraction will have on a landowner’s land;

3. nsure-as much as possible-that surface use and compensation agreements are negotiated between the private parties;

4. Easily understandable standards on the installation and operation of oil and gas wells and related facilities;

5. Reasonable accommodation to the landowner for use of his/her property;

6. Detail the responsibilities of the landowner, mineral owner and the oil and gas operator;

7. Posting of bonds and insurance by operators prior to operations to pay for environmental damage and land restoration.

Solution: Strengthen Act 312, don’t dilute it. Support SB 528 (Long).

1,449

1,542

1,619

1,691

1,758

1,8351,869

1,945

2,0282,056

2,1092,149

1,500

2,000

Producing

Waiting on Completion/Fracturing/Testing/Other Operations

Drilling in Progress

Permitted/Not Drilling

Total Well Count

Number of Haynesville Shale Wells by Month57

0 608

702 76

8 833 89

6 959 1,03

6 1,09

7 1,16

7 1,23

7 1,30

5

458 499

478 517

506

466 51

2

437 50

0

449

454

421

132

124

141

143

129

128

128

125

122

114

105

104

289 311

298

263 290 34

5

270

347

309

326

313

319

0

500

1,000

Jul '10 Aug '10 Sep '10 Oct '10 Nov '10 Dec '10 Jan '11 Feb '11 Mar '11 Apr '11 May '11 Jun '11

Well totals equal the number of wells for each activity category for the end of the month.Total well count equals the total number of wells for all activity categories for the end of the month.

Number of Haynesville Shale Wells by Month