On Louisiana Coast, Damage From Oil Goes Much Deeper Than Spill

Last summer's Deepwater Horizon disaster in the Gulf of Mexico -- the largest offshore oil spill in recorded history -- made the Gulf Coast states the poster children for the enormous environmental risks posed by energy production near their shores.

But while the BP spill was conspicuous, an even more profound wave of environmental destruction has been steadily battering the Gulf Coast with little public scrutiny for most of a century: Continuous oil and gas development has contributed to the disintegration of nearly 2,000 square miles of Louisiana's coastline -- an area larger than the state of Delaware -- making New Orleans far more vulnerable to the flooding inflicted by hurricanes that regularly roll in off the Gulf.

Pipelines and navigation channels meant to ferry oil and natural gas from the vast reservoirs beneath the Gulf have chiseled away at the natural landscape of Louisiana, degrading coastal forests, swamps and marshlands. Many scientists believe the weakening of this formerly protective layer of land enabled Hurricane Katrina to lay waste to key areas of the city.

"These are long term problems that make the effects of the oil spill, even in the worst-feared case, pale by comparison," said Donald Boesch, the president of the University of Maryland Center for Environmental Sciences who has studied coastal Louisiana and the Gulf for more than 30 years.

Yet despite the damage the oil and gas industry has imposed on Louisiana, the state has received only a minute fraction of the billions of dollars in royalties doled out by oil companies over the years in exchange for leasing the Gulf from the federal government. Instead, most of that money has landed in the coffers of the U.S. Treasury by dint of a decades-old disagreement over who controls the bounty of the sea -- the states, or the federal government?

Huge stakes hang in the balance: Offshore oil and gas revenues, primarily from the Gulf, have contributed more than $150 billion to the federal government's coffers since the 1950s, the second largest source of revenue behind taxes.

To be sure, Louisiana has seen significant economic benefits from the presence of the oil and gas industry -- not least, approximately 15 percent of household earnings, according to the state, and tax revenues and fees that contributed about 14 percent of the state's general fund. But state leaders argue that a lack of direct compensation via a slice of offshore energy royalties has left them with inadequate funds to restore lands that have been harmed through oil and gas extraction.

The damage has left southern Louisiana, and particularly New Orleans, acutely exposed to the anticipated effects of climate change. The city is widely considered the most vulnerable in North America to the impacts of rising seas.

By contrast, western states such as Wyoming, New Mexico, Colorado and Utah secured billions of dollars over the years as part of a deal that splits the royalties from oil and gas drilling straight down the middle between states and the federal government. In recent years, Louisiana has sought to redress this imbalance. Following the widespread floods inflicted by Hurricane Katrina, the state sued the branch of the federal Department of the Interior that regulates offshore oil and gas, seeking formal recognition of the environmental problems exacerbated by the industry.

The state argued that regulators were liable for having failed to calculate the devastating impact of Katrina and another storm the previous year, Hurricane Rita, as well as the damage wrought by the industry over the years.

The lawsuit prompted Congress to intervene and craft a compromise: States along the Gulf, including Louisiana, would receive 37.5 percent of the royalties from new offshore oil and gas in the Gulf, beginning in 2017. On leases established before 2006, the federal government would keep all the royalties.

But even when the cash begins flowing in six years, the amount of money that the Gulf Coast states will claim each year has been capped at $500 million. Estimates are that Louisiana would receive some $200 million of the money each year. That is only expected to cover a fraction of the mounting costs of building back the land that has been lost.

The current estimate for a slew of environmental restoration projects in southern Louisiana is upwards of $100 billion -- more than five times the cost of repairing levees damaged by Katrina. It would be the largest environmental remediation project ever undertaken by the U.S. government.

Yet despite the eye-catching price tag, the costs of doing nothing are estimated to be higher, leaving New Orleans and southern Louisiana exposed to the potential ravages of the next well-placed storm.

"The less work that nature does, the more work the Federal Emergency Management Agency (FEMA) will have to accomplish," stated a recent report on coastal collapse in Louisiana published by the Environmental Law Institute, penned by eight well-regarded natural resource economists and coastal scientists.

The coastal land at issue is now so degraded that nature alone will continue to carve away, with tidal action, rain, and wind eroding the remains, and Hurricane Rita making inroads into previously freshwater areas.

"Every day that you wait, your options get fewer," said Mark Davis, director of the Institute on Water Resources Law and Policy at Tulane University's Law School in New Orleans. "The costs of doing what you can go up dramatically. It's far easier to conserve an acre of marsh than it is to recreate it."

Numerous studies following Katrina have documented how the loss of coastal wetlands surrounding New Orleans was akin to removing speed bumps from a school zone: Waves and storm surges from hurricanes now wash in with greater force and velocity, encountering much less resistance before crashing into levees.

"In many places, restoring the wetlands or restoring estuaries is viewed as an enhancement, as simply icing on the cake," said Paul Harrison, who heads the coastal Louisiana restoration project for the Environmental Defense Fund. "But in Louisiana, it's absolutely critical to the continued existence of the economy and society. Louisiana is facing an existential crisis."

OIL AND WATER

In southern Louisiana, water and land are often indistinguishable. South and west of the New Orleans metro area, miles of swamps, coastal marshes and wetlands stretch in every direction until eventually giving way to the open Gulf of Mexico.

For thousands of years, the geography of this complex landscape has been shaped by the interactions of the mud-laden Mississippi River, carrying a continent's worth of sediment, and the ocean. It's the largest river delta in North America, and for years the system morphed and shifted as the river changed course.

But in the last century, human impacts have injected imbalance into the system, rendering the delta exposed to the force of the Gulf.

As oil exploration began in the early 1900s, companies needed access through the byzantine maze of bayous, lakes and bays that made up the Louisiana coast. Canals were dug straight through the wetlands to allow access to wells and to lay pipelines for conveyance.

In addition, over the first half of the 20th century, the U.S. Army Corps of Engineers built myriad levees along the Mississippi River, both to maintain a deep channel for ships to access the Midwest, and to protect communities along the river from constant flooding. The levees allowed farms and towns to sprout up along the lower river, but the walls disconnected Louisiana's coastal wetlands from the mud and fresh river water that had sustained the system for centuries. As a result, coastal lands began to wash away without being naturally replenished.

In recent decades, as oil and gas exploration has expanded, so has the onshore infrastructure needed to support it, adding to the pressures on the environment.

The Gulf states, and particularly Louisiana, have continued to be the backbone of the offshore industry, fabricating pipes, building rigs and supplying the equipment necessary to fuel an isolated industry operating in ultra-deep waters. This has increased local jobs and tax revenues. It has also, say environmental scientists and Louisiana's leaders, added to the risks without a compensating reward.

"If you've not seen a map of the pipelines of the Louisiana coastline that have been laid down over the course of 50 years, it looks like a bowl of spilled spaghetti," said Taylor Henry, a spokesman for Sen. Mary Landrieu, a Louisiana Democrat. "Over 25,000 miles of pipelines that deliver oil and gas from offshore to refineries in Louisiana. Those all become vulnerable, and the degradation of coastal wetlands in Louisiana impacts that directly."

The fact that Louisiana and other Gulf states do not receive a direct slice of the royalties owes to one of the great miscalculations in the history of states' dealings with the federal government.

Back in the 1940s, when ownership of the oil and gas resources off the Gulf coast had yet to be decided, the offshore industry barely resembled the industrial Goliath it is today. Platforms were much closer to shore, and in much shallower water. But in the quest for more troves of oil, companies continued to push their operations farther out into the Gulf, and into deeper waters.

It was in this murky environment that the dispute over claims to the mineral wealth began, pitting Gulf coast states, particularly Louisiana and Texas, against the federal government.

Setting specific boundaries in the sea has historically been a challenge for governments across the world. It was no different along the Gulf coast in the 1940s, when the federal government began expressing an interest in leasing acreage in the open sea to companies for oil and gas exploration.

After a series of contentious hearings, the U.S. Supreme Court ultimately designated most waters beyond three miles from a state shoreline to be under federal jurisdiction, according to a 2004 history of the Gulf's offshore industry written at the request of the federal government.

But the question of how and whether to share the wealth with states dominated political discussions. In Louisiana, a larger-than-life political leader named Leander Perez -- de-facto boss of the oil-rich local parishes south of New Orleans -- took on the role of trying to capture a slice for his state.

Perez was a legendary figure known widely for his segregationist views and iron-fisted rule when then-governor Earl Long -- brother of the legendary master of patronage, Huey Long -- appointed him as a legal advisor. Perez was handed the task of preparing the best legal argument that could justify Louisiana's claims on a share of oil royalties.

Thus commenced several years of often-intense negotiations and much legal wrangling. In 1949, Louisiana officials were on the verge of accepting 37.5 percent of the royalties from the Gulf -- ironically, the same deal they are now set to receive nearly six decades later. But Perez blocked the deal, arguing that the state deserved much more of the revenues, according to the report. That led to the impasse that has prevailed ever since: In lieu of a deal, Louisiana got nothing, with the federal government simply holding on to all the proceeds.

"He ended up forfeiting billions of dollars of revenue for the state as the industry expanded into progressively deeper water in subsequent decades, though at the time he could hardly have foreseen the magnitude of his miscalculation," the authors noted in the historical account.

Decades later, it turned out that Perez had a personal financial interest in the royalties that appears to have motivated him to seek out as large a deal as possible. He had been secretly taking oil revenues from wells inside the state's boundaries and diverting them into a private venture that he controlled, effectively stealing funds that should have gone to local governments instead, according to a longtime aide who testified in a subsequent lawsuit. His heirs settled the case in the 1980s, handing local governments $13 million along with the rights to the leases.

Perez, according to Louisiana lore, was a classic victim of his own greed. Seeking a bigger share of the royalties from Washington, he and his state settled for nothing.

Beginning with that blunder, Louisiana politicians have fought for years to capture a piece of the royalty money, but with little success.

Arguments often drew on comparisons to the revenue sharing formula for drilling on land: States have received about 50 percent of the royalty revenues from drilling on federal areas within their borders, a deal that primarily benefits western states that have significant amounts of federally managed lands.

Those deals have rested on the concept that the predominantly rural western states that were being opened up to oil and gas drilling needed revenues from mineral royalties to provide the necessary infrastructure, such as roads and education systems, to govern themselves as states.

States along the Gulf coast, despite being the supply depots for the offshore industry, could not make similar claims to the federal waters of the Gulf, which were clearly outside their jurisdictions.

Yet the lack of revenue accruing from the presence of the oil and gas industries has sown bitterness in Louisiana, with some complaining that the state is like a colony of the rest of the country.

"There's a huge equity issue," said Paul Templet, a former secretary of Louisiana's Department of Environmental Quality and professor of environmental studies at Louisiana State University. "Louisiana has got oil, has had oil, and yet we're a very poor state. If you look at the numbers, our per-capita income is among the lowest in the U.S., our poverty is the highest, and our gap in income levels is huge. We're like the northernmost banana republic."

KATRINA BRINGS ACTION

After Hurricane Katrina pummeled the Gulf coast and highlighted southern Louisiana's extreme vulnerability from land loss, state voters overwhelmingly approved a constitutional amendment dedicating any potential offshore revenue to coastal restoration and protection measures.

At about the same time, Louisiana's Congressional delegation initiated the talks that finally secured the state its long-sought slice of offshore energy royalties.

Members of the delegation argued that Gulf states were effectively bearing the burdens of extracting offshore energy without collecting any of the benefits. Opponents raised an obvious question: Where would the Treasury recoup the money?

When Congress eventually approved revenue sharing in 2006, the main transfer to the Gulf states was delayed until 2017 to keep the revenue hit outside of the ten-year budget projections issued by the Congressional Budget Office.

Louisiana could receive as much as $200 million of the maximum $500 million per year that will be distributed to the Gulf states. Those funds alone would give the state its largest ever source of money for coastal restoration. Yet many who have followed the trajectory of land loss in Louisiana say even that sum will not be enough to fix what has been damaged.

We're in real trouble," said John Day, a professor at LSU's department of oceanography and coastal sciences, who has penned multiple studies exploring how land loss has contributed to diminished coastal protection. "And I don't think a lot of people really have come to grips with that -- even here. There's a lot of days of reckoning coming."

Despite years of trying, Louisiana has repeatedly failed to secure funds to restore and rebuild its lost coastline.

A year before Katrina, the Army Corps of Engineers proposed some $14 billion in engineering projects aimed at returning much-needed mud to the coast and rebuilding historic features of the degraded. In essence, the Corps proposed to spend this money helping undo much of the damage that its own legacy of misguided projects had inflicted.

The Office of Management and Budget, under President George W. Bush, directed the Corps to significantly pare back the budget to about $2 billion. Congress eventually authorized several of the proposed projects in 2007, but as of yet, none has received appropriations.

Sticker shock is a factor. But leaders in Louisiana point to even more tremendous costs on the horizon if nothing is done to reverse course: interruptions to the nation's energy supplies, as seen in the months after Katrina; disruption of commerce along the Mississippi River; and, potentially, the full-scale relocation of New Orleans.

After Katrina, the federal government doled out approximately $150 billion in emergency aid to the state, noted Garret Graves, coastal advisor to Louisiana Gov. Bobby Jindal. Those costs, he said, could be replicated if nothing is done to restore the natural coastal buffer and another storm hits in the right spot.

"The federal government is going to spend that money one way or another," said Graves. "They can spend it responding to disasters, and every consumer, every taxpayer is going to feel it. Or you can spend it proactively and ensure the viability of the area, and spend exponentially fewer dollars."

WHO GETS THE BLAME?

One of the key historical impediments to gaining sufficient resources for coastal restoration has been a general uncertainty over how to apportion the blame for decades worth of problems.

Oil and gas development has played a significant role in land loss because of channels bored through the marsh to construct pipelines, as well as navigation channels that were dug to transport supplies. On that much, scientists generally agree. But how much of a role exactly did energy extraction play as compared to other factors, from the levees to commercial shipping? Studies have varied widely over the years in estimating the percentage of wetland loss tied to oil and gas activity -- anywhere from 10 percent to more than 60 percent.

Many of the impacts from oil and gas extraction are indirect and, therefore, hard to quantify. A canal dug in the 1960s may have altered the effect of natural forces, causing water to flow into new areas, and gradually disintegrating the landscape far beyond the canal itself. Levees built along the Mississippi River to afford ships access to the Midwest and protect residents from flooding also choke off the river's mud from being deposited in wetlands. Most of the mud instead billows into the Gulf of Mexico and off the edge of the continental shelf.

This complicated picture, combined with the powerful political influence of the oil industry in Louisiana, has prevented leaders from specifically targeting the industry and asking them to pay more of the damages.

That has left open the broader question of how to balance the benefits of extracting energy from the Gulf against the costs -- a downside that is more evident than ever following the BP spill.

"That's the deep ambivalence for Louisiana," said Tyler Priest, the director of global studies at University of Houston's Bauer College of Business, who has written numerous historical studies on the Gulf oil industry. "The industry has brought a lot of revenue and infrastructure and jobs over time, but at a cost -- at a big cost, and a long-term cost that was imperceptible for so long but now is very visible."