In April, a Louisiana state jury decided that Houston-based Chevron Corp. owes Plaquemines Parish $740 million for harm done to the local coastal environment by Chevron and its corporate predecessors during oil and gas exploration more than seven decades ago.
On Thursday, the U.S. Supreme Court is scheduled to consider a grant of certiorari for an argument by Chevron and other oil companies that the case shouldn’t have been heard by a state court in the first place.
The Chevron argument seeks to reverse a 2020 decision by the U.S. Court of Appeals for the Fifth Circuit which concluded that the mere fact that the company provided aviation fuel to the military during World War II doesn’t qualify the action for removal from state court under the federal officer removal statute (28 U.S.C. § 1442).
The case is one of 42 such cases filed more than a decade ago by six parishes in Louisiana against oil and gas companies that populate much of the local on-shore and off-shore landscape along Louisiana’s Gulf Coast. They were joined by the Louisiana attorney general and the state’s secretary of natural resources, alleging that the various companies engaged in unpermitted exploration activities as early as the 1940s.
Federal courts in both the Eastern and Western Districts of Louisiana have consistently rejected efforts to move the cases to federal venues, as has the Fifth Circuit. But Chevron’s defense in the Plaquemines Parish case has proven to be the most persistent.
The federal officer removal statute was designed to preclude the use of state courts to interfere with the efforts of federal officials and agencies to do their legitimate jobs: collect taxes, build federal highways and enforce federal laws. The object was to settle legitimate disputes with federal officials in federal courts.
In its petition to the U.S. Supreme Court, Chevron is asking the court to decide whether the Fifth Circuit wrongly interpreted the statute, which was amended in 2011 to allow removal “for or relating to any act under color of such office.” The issue is an interpretation of the phrase “related to.”
Under the Coastal Zone Act passed by Congress in 1972, states were encouraged to manage their own coastal environments through federally approved programs. Louisiana elected to do so by passing its own State and Local Coastal Resources Management Act (SCLRMA) in 1978. The state law created a permitting regime for any significant “use” of resources in Louisiana’s coastal zone and authorized state courts to impose liability and damages, and to order restoration measures for adjudicated violations of the act.
But there was a grandfather clause, now at the heart of the ongoing Chevron dispute, that allows “uses legally commenced or established prior to the effective date of the coastal use permit program” to continue without such a permit if they did so legally before 1980.
The parishes complained, nearly uniformly, that the various oil companies had established operations that proved damaging to the coastal environment did so without proper authority and were in violation of a variety of rules and standards established by the state in the early 1940s by the Louisiana Office of Conservation. And when the companies tried to remove the cases to federal courts, the state asserted — and the courts uniformly agreed — that the individual disputes involved no questions of federal law.
The cases were returned back to state courts, and the Fifth Circuit affirmed that decision, saying that the request was both untimely and involved no questions of federal law.
In April 2018, however, in response to a state court’s order that the parishes provide specific details of each company’s violation of SCLRMA, Plaquemines Parish submitted an expert report alleging that many of the environmentally harmful practices — especially those in the 1940s — had neither begun in good faith nor abided by industry practices deemed prudent at the time.
The report, dubbed the “Rozel Report,” was intended as expert analysis for use in each of the parish cases. It alleged a variety of dubious and environmentally harmful practices at the time, especially during the exploration and drilling process: canals dredged instead of overland roads for site access; wells drilled vertically instead of directionally, requiring the need for more well sites; the use of earthen pits at well heads for storage instead of steel tanks; the excessive extraction of oil along with the absence of saltwater injection wells to minimize surface water contamination.
Chevron and the other oil companies, however, claimed that the Rozel Report was their first notice that the allegations against them stemmed primarily from exploration that had taken place during World War II, when many of them were refining aviation fuels (“avgas”) to support the war effort. As a result, they renewed their efforts to remove the cases to federal court, arguing that the companies were, in effect, acting in direct response to a wartime federal agency: the Petroleum Administration for War (PAW).
In February 2020, the issue of removal had similarly arisen in an asbestos case, Latiolais v. Huntington Ingalls Inc. In that case, the Fifth Circuit agreed to review the issue of removal because its own precedents “were extraordinarily confused” following the 2011 amendments to the federal officer removal statute.
The case involved a machinist who contracted mesothelioma and died four decades after his exposure to asbestos while aboard a ship undergoing refurbishing under a U.S. Navy contract. The contractor was sued in Louisiana state court, and stayed there until the Fifth Circuit decided to align itself with other circuits in its interpretation of §1442(a).
In Latiolais, the Fifth Circuit settled on a “causal nexus” test that would align with the text of the statute, requiring that federal removal be allowed “[a] civil action … that is against or directed to … any person acting under [a federal] officer … for or relating to any act under color of such office” for work “related to” a federal contract.
The oil companies argued that their work in service to PAW should be considered federally directed work. They asked the Fifth Circuit for a rehearing on two grounds: federal-officer jurisdiction and federal-question jurisdiction.
The Fifth Circuit panel agreed to rehear the case, vacating their previous opinion. The panel rejected the oil companies’ arguments. The broader court also rejected an en banc hearing. And in an opinion submitted in August 2021, the appeals court affirmed in part, reversed in part and remanded the cases back to the trial court for further review in line with the court’s causal nexus test in Latiolais.
Writing for the 2-1 majority, Judge James Ho reiterated the court’s contention that there were no questions of federal law involved in the cases, even with the “new evidence” claimed concerning the Rozel Report.
Specifically, the oil companies argued that the Rozel Report revealed a variety of conflicts between the Louisiana state requirements of the time and federal wartime policy: Federal steel allocations required the use of earthen pits; federal maritime restrictions did not permit salt water injection wells; and, likewise, federal regulations prohibited directional drilling.
But Ho notes that none of that is found among the specific parish allegations filed against the oil companies. In essence, the very vagueness of the state petitions precluded any argument by the oil companies that they were being accused of violating federal laws or regulations.
“None of the provisions of these World War II-era regulations cover the specific conduct that the companies rely on to establish federal-officer jurisdiction. And even if a particular provision of the orders did cover such conduct, none of the petitions’ factual allegations revealed that the companies violated that specific provision,” Ho wrote.
The contention by Chevron and the other oil companies that their work during World War II — essentially the sale of avgas to the government — was both federally directed and vital to the war effort. And their view is supported in amici briefs filed by two well-known military leaders as well as the American Petroleum Institute and the U.S. Chamber of Commerce.
Retired Navy Admiral Michael Mullen, a former chairman of the Joint Chiefs of Staff, and retired Air Force general Richard Meyers, a former vice-chairman, point out in their amici briefs that both major decisions at the Fifth Circuit were decided by the vote of a judge: the 2-1 vote by the panel and a 7-6 rejection of the oil companies’ request for an en banc hearing.
“From our perspective garnered through decades of service and leadership throughout all levels of our military, this single-vote majority, against the backdrop of the split among other circuit courts, cries out for this Court to resolve the circuit-split regarding the proper venue for these federal-officer related disputes,” reads their joint filing.
For their part, Plaquemines Parish denies there is a split, pointing out that the Fifth Circuit decision in Latiolais was crafted precisely to eliminate any such split.
That part of the dispute, at least, will be decided Thursday.
Chevron is represented by Paul Clement of Clement & Murphy. Plaquemines Parish is represented by Louisiana Solicitor General J. Benjamin Aguiñaga and Victor Marcello of Talbot, Carmouche & Marcello in Baton Rouge.
The SCOTUS case is No. 24-813