The State's Role in Land Loss

The state of Louisiana officially laid claim to Thibodeaux No. 1 and its proceeds in 2012, just as Petroquest Energy began producing oil from the well, at depths of more than 30,000 feet.

In March of that year, the International Business Times reported that the high-producing well may have increased investor interest in the company. “Petroquest Energy Inc. (PQ) shares surged 5.65 percent to $6.54 in aftermarket session,” reported the Times, noting that Petroquest had “recently begun production from its Thibodeaux #1 discovery well at its La Cantera prospect in South Louisiana.”

In late 2011, the Thibodeaux family sensed something was amiss when they received a letter from Petroquest noting that the company was waiting for information about titles on some of the family’s land. The letter didn’t say who would provide that information. No one from Petroquest or the state could answer that question either.

On Feb. 6, 2012, Thibodeaux family leader L.D. Miguez received a call from a man named Tommy Barry, who is listed on company documents as Petroquest’s Gulf Coast onshore land manager.

Barry didn’t return repeated phone messages. Miguez, now 74, took notes during the call. He said that Barry told him the state had claimed 40 acres of Thibodeaux land and advised Miguez to call Rick Heck, director of petroleum lands in the state DNR’s Office of Mineral Resources. Miguez immediately called Heck, who told him to call Larry Decker, chief of titles, surveys and GIS with the Office of State Lands, who told him to call someone else within State Lands, who in turn sent him back to the DNR to Heck’s deputy director.

“Nobody explained anything,” Miguez said. “All of them suggested that it’d be best if I get myself a lawyer." That’s when the family asked Perrin to represent them.

On May 30, 2012, the state issued a division order for 40.21 acres, but its effective date was March 10, 2012, two days before the well’s first official day of production, according to a July 2013 Petroquest presentation to its investors.

Still, the situation seemed like a mere misunderstanding to the Thibodeaux family who, after convening a meeting of heirs, opted to negotiate instead of sue, Trahan said, noting that negotiations proved impossible because no one from the state would formally hear their claims. “It was a big uphill battle,” Trahan said. A two-year escrow period, meant to provide for resolution of disputes, lapsed without any resolution, and the royalties ended up in the state’s general fund.

Last year, from the disputed land, nearly $1 million of the royalties from Thibodeaux No. 1 were diverted to Louisiana state coffers. That portion alone makes the well a top producer for the state of Louisiana, which received $646 million from 1,888 active mineral leases – an average of $324,000 a well – on state-owned land and water bottoms in 2012. Nearly two-thirds of those leases were along the Gulf Coast.

Here’s how the oil-well process works: Before oil companies search for oil, they sign leases with landowners like the Thibodeauxs, who – for a per-acre lease fee followed by a percentage of oil royalties – give oil companies permission to access and drill on their land. Then, before a well is tapped, oil companies take detailed surveys to the DNR, which groups pieces of property together to create a “drilling unit” and notifies affected property owners, based upon geologic assessments of each well and the land it will drain. In the case of Thibodeaux No. 1, family members were notified that they were part of the drilling unit. DNR scientists and oil company engineers then determined that 221 acres from the Thibodeaux estate would be drained of oil by Thibodeaux Well No. 1.

To determine drilling units, the DNR holds drilling-unit hearings every Tuesday except holidays, Courreges said. “An owner can present evidence based on geology arguing that the unit should be a different size,” he said.

It’s unclear what happens next, at the royalty stage, because spokespeople from the Office of State Lands and DNR were not able to describe the process or identify anyone in their offices who decides when property should shift from state land to private land. Barry at Petroquest also did not respond to inquiries. Courreges said there is no administrative hearing or appeals process for royalties. All complaints must be brought judicially, he said.

Perrin, who has practiced law for 42 years, says there’s been sea change, literally. The state is increasingly declaring private lands submerged at the royalty stage, just as oil is located and royalties are imminent, he said.

The state says that the timing is due to new information, not greed. According to Meghan Parrish, a spokeswoman for the Office of State Lands, oil companies must submit new surveys gauging water levels and mean high-tide boundaries whenever drilling units are created.

"It’s a problem that’s been festering for a long time. Nobody has ever gone out and accurately mapped which waterways the state owns and what private owners own.”

- Jim Wilkins, director of the Louisiana State University Sea Grant Law and Policy Program

There is another reason for the royalty-stage timing, said DNR spokesman Courreges. According to state law, if the state waits and declares the land submerged after oil and gas wells begin producing, owners can still hang onto their mineral rights, which are “frozen” in the owners’ favor. That’s not the case with new wells if the state steps in before the well begins producing, Courreges said. “So this is the time when the state would want to recognize submerged land, because there are state assets – royalties – at stake, often for years to come,” he said.

No one interviewed for this story argued that the Oaks Canal hasn’t widened into Thibodeaux family property.

The effects of receding shorelines, powerful storms and rising waters are clear to everyone on Louisiana’s Gulf Coast. And, while Perrin disputes that the Thibodeaux land is enough underwater to be considered “navigable,” he agrees that the water is likely deeper than it once was.

But the state is not an innocent bystander. It played a key role in putting that land underwater, Perrin said, recalling how the area has lost much of its intact marshland within the past few decades.

State officials have a high level or control over what erodes and what doesn’t, Perrin said.

Louisiana officials, along with the U.S. Army Corps of Engineers, decide where to curb erosion through the placement of dredged material, earthen levees and marsh-reclamation projects. And for decades, state officials issued oil companies permits and gave them wide leeway to cut the pipeline and well-access canals that now crisscross the fragile wetland and carry marsh-killing saltwater far inland.

So Perrin finds it highly ironic that the state – in partnership with the same oil and gas industry that laid waste to much of Louisiana’s coastal land – is claiming more wells like Thibodeaux No. 1 and using public trust doctrine as its precept, even though the state has long neglected the key role assigned to it through that doctrine: caretaker of public resources. “The state failed to protect coastal land,” he said.

The state of Louisiana officially laid claim to Thibodeaux No. 1 and its proceeds in 2012, just as Petroquest Energy began producing oil from the well.

The idea that water should be public property, managed by the state for the sake of its citizens, is a concept that dates back to ancient Rome.

Nearly every state has adopted some form of the public trust doctrine to govern public land, water and its resources, like fish and wildlife.

Jim Wilkins, director of the Louisiana State University Sea Grant Law and Policy Program and an expert in public trust doctrine, co-wrote a paper in 1992 about the difficulty of establishing set boundaries in a changing environment like Louisiana’s coastal zone, “where what is land today can become open water tomorrow,” rendering permanent legal boundaries impossible. “Law is not at its best when applied to nature’s whims,” he wrote.

Some states have higher proportions of public land along their waterfronts. But submerged-land claims along Louisiana’s coast predominantly affect private property owners like the Thibodeaux family.

Don Davis, emeritus director and director of oral history in LSU’s Sea Grant Program and author of the encyclopedic book Washed Away? The Invisible Peoples of Louisiana Wetlands, estimates that “at least 80 percent” of coastal Louisiana land is in the hands of private landowners.

How state-private boundaries are defined also vary from state to state. Many coastal states, like Louisiana, use the line of mean high water, basically the average of all high-water heights over a 19-year period. Hawaii and Washington define the line as the mark of floating debris left during high tide. In five early states – Maine, Massachusetts, Delaware, Pennsylvania, and Virginia – English land grants gave private owners much more land, out to the low water mark, but the public can access it to hunt and fish. And along Lake Erie’s shoreline in Ohio, which recedes and expands cyclically like the other Great Lakes, the state determines its boundary by the edge of the bluff and other land features, not navigable water.

And while coastal states like Louisiana may be able to seize eroded land from private property owners, states face similar seizures themselves from the federal government, which nudges at Louisiana’s boundaries in the same way Louisiana eats into private property along its coastline.

“The whole system is ripe for scandal and favoritism and is an abomination."

- Warren Parren, attorney for the Thibodeaux family

Technically, states’ boundaries extend seaward for three miles before becoming federally controlled territorial waters. Then, in 1969, the U.S. Supreme Court ruled that the federal-state boundary for Louisiana is “ambulatory,” and can move inland as land erodes, which causes Louisiana to lose oil revenues from wells drilled farther from shore, in deeper water.

But the Thibodeaux family’s struggles to keep their land may mark the start of a broader struggle for coastal property owners, even those not affected by oil company surveys.

Parrish from the Office of State Lands explained that her agency is completing an update to its water-bottom inventory, thanks to detailed 2012 images that her office received. A state employee who did not want to be identified said that the high-definition aerial photos come from the National Agriculture Imagery Program.

Parrish said that the most current review includes adjusted water-land boundaries based upon aerial photography and examinations of every state township done by professional land surveyors, who will make their determinations based upon historic maps and data. She cautioned, however, that no review can be definitive, since coastal property boundaries change “often and rapidly.”

Wilkins of LSU’s Sea Grant Law and Policy Program believes that the state’s ongoing review is likely to affect thousands of property owners. “This is only the beginning of this stuff,” he said. “But it’s a problem that’s been festering for a long time. Nobody has ever gone out and accurately mapped which waterways the state owns and what private owners own.”

In the past, Wilkins said, the state was not very exact about its property or aggressive about its claims. Often, when ownership was contested, he said, neither party would litigate, for fear of losing. “So they would negotiate: ‘You think you own it. We think we own it. Let’s divide things.’ That’s why we didn’t have a real accurate picture of the boundaries.”

Parrish says that the Office of State Lands is willing to modify any disputed state’s water-bottoms claims based on information provided by landowners, who can either accept the decision or file suit in court. Perrin says that used to be true but that no one will talk with him anymore and that he has been unable – as has The Weather Channel – to get the state to lay out the specific standards and processes it uses to make water-bottoms decisions. “The whole system is ripe for scandal and favoritism and is an abomination,” he said.

Wilkins knows both Acadian history and the close ties that many coastal residents have to the marsh.

“I understand very well the emotional tie of the land,” he said. “It’s very upsetting to see it go away. I don’t know what the answer to it is. Because a lot of land is going to go away. And people will be hurt by it.”

For some pieces of marshland, which were sold or granted to private owners centuries ago, the real question may be whether they were ever truly above water, said Don Davis, the emeritus director of LSU’s Sea Grant Program. “Were they above mean high water or was they submerged?” he said. “These issues have been part of Louisiana’s legal history for decades.”