“Legacy” Report Lambasted: Economist Calls LSU Analysis in Support of Oil Industry “Nonsense”

Louisiana oil companies suffered a major setback last week in their effort to restrict lawsuits brought by property owners seeking cleanup of land and groundwater contamination left behind from decades of drilling operations. With hundreds of millions in environmental cleanup costs at stake, neither side is pulling any punches in the fight surrounding “legacy lawsuits,” which has now spilled into the state legislature (see links to my previous related posts at bottom).

The Louisiana oil and gas industry and its government allies are attempting to negate contractual obligations to clean up oilfield contamination at sites across the state by pushing through legislation that would inhibit landowner suits. To sway legislators (and anybody else who will listen), the oil companies have long argued – and hailed a favorable report from LSU – that legacy lawsuits will deny Louisiana tens of thousands of industry jobs.

Not so fast. According to a noted economist, the LSU report is utter “nonsense” – an enormously damaging revelation that has significantly weakened the position of the oil companies in this increasingly contentious legislative fight.

Consider this from an April 19 Advocate report by Mark Ballard:

An Oregon economist told legislators Monday that a report by an LSU professor on which the oil and gas industry has relied to support its arguments for restricting lawsuits over old oilfield damage is riddled with “rookie errors.”

W. Ed Whitelaw, a professor of economics at the University of Oregon, said the widely quoted analysis omitted relevant facts, including any mention of two hurricanes.

David Dismukes, an LSU professor who works for the LSU Center for Energy Studies, released an analysis in February that found that during the past eight years, Louisiana missed out on more than 30,000 oil and gas jobs and support positions because of what are called “legacy lawsuits.”

Professor Whitelaw meticulously picked apart Professor Dismukes report in compelling and dramatic fashion during last week’s legislative hearing. Whitelaw effectively gutted the report, completely undermining the industry’s argument and embarrassing Dismukes as the author of the report. More from the Advocate report:

“Legacy lawsuits are strongly and negatively correlated with Louisiana drilling activity,” Dismukes’ report says. “Increases in legacy lawsuits are correlated with reductions in conventional Louisiana oil and gas drilling.”

Whitelaw, founder of ECONorthwest, a Portland, Ore., company that provides financial analysis for businesses and governments, said Dismukes’ widely quoted analysis has several major flaws.

“Understand that these errors, and there are three or four big ones, any one of which is enough to render his analysis nonsense,” Whitelaw said. “These are rookie errors.”

For instance, Whitelaw said, the analysis omits a relevant variable. Dismukes included data from 2005 and 2006, when the Louisiana energy industry was battered by two hurricanes, and stops his analysis in 2007.

“He fails to mention Hurricane Katrina or Hurricane Rita anywhere in the report,” Whitelaw said.

“In our opinion, the Dismukes document fails to meet any of these professional standards. And this failure matters to the degree that the Dismukes document is fatally flawed, both theoretically and empirically. Nowhere does Dr. Dismukes present a coherent economic model linking legacy lawsuits and decisions to drill in Louisiana,” the ECONorthwest report states.

Ouch! This is industry junk science at its worst. This kind of drivel would never be admissible in court.

You can bet Professor Dismukes and his friends in the industry are licking their wounds and scrambling to regain their footing.

Stay tuned. We’ll be keeping an eye on the legislative actions taking place in the coming weeks. The fireworks have just begun.

Read the Advocate report here: http://theadvocate.com/home/2590200-125/economist-hits-legacy-report

Read my April 19 post on an egregious conflict of interest in the “legacy lawsuit” legislative battle: http://www.stuarthsmith.com/louisiana-lawmakers-financial-ties-to-oil-industry-expose-stunning-conflict-of-interest-in-legacy-lawsuit-battle

Read my April 17 post detailing how Louisiana’s largest oil producer, Hilcorp, is trying to shirk its contractual obligation to clean up contamination in Erath Oil Field: http://www.stuarthsmith.com/not-so-fine-print-louisianas-largest-oil-producer-tramples-on-contractual-obligation-to-clean-up-toxic-waste

© Smith Stag, LLC 2012 – All Rights Reserved

Leave a Reply

Your email address will not be published. Required fields are marked *

*

You may use these HTML tags and attributes: <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <strike> <strong>