Two small energy companies settle coastal damage claims with N.O. levee authority _lowres

Central marshes in St. Bernard Parish, La. (AP Photo/Eric Gay)

Two small Texas energy firms settled with a New Orleans-area levee authority on Thursday, becoming the first defendants to throw in the towel in a massive lawsuit accusing almost 100 oil and gas companies of directly contributing to coastal erosion in southeast Louisiana.

Details of the settlements between the Southeast Louisiana Flood Protection Authority-East and the two firms, White Oak Operating Co. and Chroma Operating, were not available Thursday, though officials said the entire amount paid by the companies would go toward coastal restoration.

The law firm Jones, Swanson, Huddell and Garrison, which is representing the Flood Protection Authority, released a statement saying, “We are pleased to have come to what all sides feel are reasonable, responsible terms.”

The attorneys would not answer questions about the settlement.

While the two settlements are not expected to amount to a significant sum, given the size of the firms, they represent another in series of small victories racked up by the Flood Protection Authority as it pursues its lawsuit in the face of opposition by Gov. Bobby Jindal, legislators and representatives of the energy industry.

The suit is now set to face its largest test yet, a mid-November hearing that could decide whether it will continue to advance in the federal courts or be stopped in its tracks by a new state law aimed at killing it.

The suit does not put a price on the coastal damage attributed to each company named as a defendant, and it is not clear how much the settlements announced Thursday are worth. However, both companies are relatively small players in the energy sector, particularly when compared to some of the largest defendants, such as BP and Exxon.

While a team of lawyers working for the Flood Protection Authority stands to gain between 22.5 percent and 32.5 percent of the proceeds of the suit, authority President Stephen Estopinal said the attorneys had agreed not to take a cut of the money brought in by the two settlements. It is not clear whether that would be the case with any potential future settlements.

Another open question is what will happen with the money from the settlement, though representatives of the authority have previously suggested those funds could be deposited in accounts used to fund the state’s 50-year, $50 billion Coastal Master Plan.

Ed Sherman, a Tulane Law School professor who specializes in complex litigation, said a variety of factors could convince defendants to settle at this point in the case, including the potential for legal costs to outweigh the cost of a settlement or perhaps a favorable offer that convinced the companies not to proceed with the risks of a trial.

While there can be a psychological effect if some of the defendants “cave and settle,” and that will likely be used to the fullest extent by the plaintiffs, Sherman said small settlements do not necessarily signal that other, larger players will follow.

“If they’re just two smaller companies and not likely to be central to the activities or be potentially liable for substantial sums of money, then I would think the effect would not be enormous and there wouldn’t be a stampede to settle,” Sherman said.

The Flood Protection Authority’s case is in federal court, and lawyers for both sides are preparing for a hearing next month on whether the case can advance even though the Legislature this year passed a law aimed at stopping it.

A state district judge has ruled that the new law does not apply to the flood authority and is currently considering whether the law is constitutional, though the federal judge is not bound by those rulings.

Follow Jeff Adelson on Twitter, @jadelson.