Yuma Reversed: Commissioner May Pursue Current Owner for Remediation Costs

In Yuma Petroleum Company v. Thompson, 731 So.2d 190 (La. 1999), the Louisiana Supreme Court reversed the First Circuit Court of Appeal, holding that the Commissioner of Conservation of the state of Louisiana (the Commissioner) could order the current owner of an oil and gas lease to pay for remediation of a pit on its lease without having to bring in all prior owners to determine who actually caused the contamination.

Yuma acquired an oil, gas, and mineral lease by instrument signed November 15, 1990, but effective November 1, 1990. In 1991, following receipt of orders from the Department of Environmental Quality and the Commissioner, Yuma undertook certain remediation. In October of 1993, the Commissioner issued a compliance order to Yuma, ordering it to undertake further investigation and to submit a remediation plan. Yuma requested a hearing before the Commissioner, wherein the Commissioner affirmed the prior order. Yuma sought judicial review of the Commissioner's decision. The trial court held that Yuma was the current owner and, as such, was responsible for site remediation. The First Circuit Court of Appeal reversed, holding that the Commissioner had to bring in all of the prior owners and allocate the obligation, if any, for remediation of the prior owners. The Louisiana Supreme Court reversed, finding that the Commissioner had the discretion to proceed against the prior owners or to proceed solely against the current owner.

A couple of additional points should be noted. Yuma reminds us of the importance of environmental due diligence prior to acquiring a producing property. As Yuma demonstrates, the Commissioner will normally look to the current owner for remediation of the property, regardless of whether the current owner actually caused the contamination. Secondly, it should be noted that this case only deals with the Commissioner's ability to pursue the current owner. Depending upon the circumstances and the terms of applicable agreements, the current owner will likely have rights, including in contract or warranty, against prior owners for reimbursement or contribution.