Economist hits ‘legacy’ report


04 17, 2012 by The Advocate

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.”

The lawsuits are over the extent of cleanup of environmental damage caused by oil producers’ drilling practices years ago.

A joint hearing of the Louisiana House and state Senate committees on Natural Resources met Monday to “informally discuss the issues” involving legislation that would change the procedures leading to lawsuits over the environmental damage.

“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.

Dismukes said in an email late Monday that he could not comment because he had not been given a copy of nor had the chance to study the Whitelaw report.

In the joint committee hearing, state Sen. Norby Chabert, R-Houma, came to Dismukes’ defense, asking former U.S. Rep. Chris John, who now heads the Baton Rouge-based industry group Louisiana Mid-Continent Oil and Gas Association, how he felt about Whitelaw’s testimony.

“It always chaps my hide when folks come in here from out of state and degrade our universities and our faculty,” Chabert said.

John agreed, saying the oil and gas industry works closely with LSU, his alma mater.

“It is something that we should consider when a person from the Oregon Ducks would actually sit at this table; we’ve had our issues with the Oregon Ducks,” Johns said.

State Sen. Gerald Long, the Winnfield Republican who chairs the Senate Natural Resources committee, said he would reconvene the “informal” joint committee hearing on April 23 and request Dismukes attend and testify.

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