Aug. 18 (Bloomberg) -- Claude Luke throttles down his 21-foot aluminum work boat. Off to the left, the snout of an alligator disappears near the mouth of a watery gash in the Louisiana marshland.
The 51-year-old Cajun crab fishermen is touring the epicenter of an unfolding environmental disaster that dwarfs the BP Plc spill and predates it by decades, according to state scientists and environmentalists. If unchecked, the destruction threatens to undermine the world’s seventh largest estuary and one of the most important U.S. energy corridors.
His boat idles near a canal dredged more than two decades ago for a petroleum pipeline. Back then it was about 15 feet (4 1/2 meters) wide. Now it sprawls 100 feet wide, opening this once-protected upland marsh to toxic salt water. Not far away, Luke nods toward a water tower visible across about 2 miles (3 kilometers) of almost open water.
“You used to be able to walk there from here,” says Luke, who moonlights as a warden on the private Harry Bourg Corp. preserve deep in Louisiana’s delta. “Before the oil companies came, this was good, solid marsh.”
More than half the 17,000 acres (6,600 hectares) of marshland purchased about 80 years ago by Bourg, a barely literate muskrat trapper, have been lost to erosion and subsidence, according to engineering surveys. The inheritance of Bourg’s descendants is vanishing under a profusion of these runaway canals. They were dug to lay pipelines or float in equipment for the drilling of 90 oil and gas wells that made Bourg one of the wealthiest men in South Louisiana before he died in 1963.
Long before BP’s blowout menaced the Gulf of Mexico, an oil industry-related coastal crisis of another kind began unfolding all over the Mississippi River coastal delta. Dredging for navigation, oil and gas drilling and pipeline construction has ripped apart the estuary’s fragile system of fresh and saltwater marshes.
Between 1901, when drilling began in Louisiana, and the 1980s, the oil and gas industry laid tens of thousands of miles of pipelines and dredged 9,300 miles of canals in an industrial invasion of a wetland that once covered 3.2 million acres. Since the 1930s, more than a third of it has vanished, an area the size of Delaware. Each year, 15,300 acres more disappear, according to Louisiana’s Comprehensive Master Plan for a Sustainable Coast.
Not all this can be laid to oil and gas drilling; the industry rejects the notion that it is chiefly responsible. Whatever the case, the destruction of marshland reverberates far beyond Louisiana. The state’s waters and wetlands underpin a commercial seafood industry that generates about $2.4 billion a year in wages and sales and provides almost a quarter of the catch in the contiguous U.S., according to the Louisiana Seafood Marketing Board. They serve as wildlife breeding grounds, sheltering and feeding 5 million migratory birds a year, according to state data.
The wetlands also absorb and filter out pollutants and help slow storm surges. Marsh losses in the past 40 years alone could raise the height of a Category 3 storm surge by as much as 10 feet under certain conditions; marsh loss and the presence of a badly eroded navigation channel called the Mississippi River Gulf Outlet may have magnified Hurricane Katrina’s surge in 2005 and helped turn the storm into a $150 billion catastrophe for the New Orleans region, according to computer modeling by Louisiana State University scientists.
Coastal Louisiana accounts for 27 percent of U.S. energy production while an 83,000-mile infrastructure of pipelines and transfer stations transports 40 percent of its energy needs, counting petroleum from imports and offshore wells, according to data from the state’s Department of Natural Resources and the Louisiana Mid-Continent Oil & Gas Association.
The collapse of Louisiana’s coastal marshes is “an international economic and ecological calamity unequaled in history,” jeopardizing more than “$100 billion in energy infrastructure,” said America’s Wetland Foundation, a Louisiana coastal preservation group partly underwritten by the oil industry, in a 2008 report. Much of the pipeline network is buried beneath marshes. Erosion has already exposed high-pressure pipelines to storms and marine traffic, causing oil spills and accidents.
Mechanism of Destruction
Hurricanes Katrina and Rita in 2005 damaged 457 pipelines, destroyed 113 oil and gas platforms and caused more than 44 spills totaling 9 million gallons of oil, according to post-Katrina reports by the Coast Guard and the federal Minerals Management Service. The 1989 Exxon Valdez spill in Alaska amounted to 11 million gallons.
The state has floated an ambitious marsh and barrier-island rebuilding program that since Katrina it has tied to hurricane protection. The cost may come to $50 billion over time, according to the plan. To compensate victims for its spill, BP set up a $20 billion escrow fund.
Several factors are at play in the state’s coastal decimation. Coastal deltas naturally expand and contract over time. Since the U.S. built levees along the Mississippi following devastating floods in 1927, silt that once built land as the river meandered through the marshes has been falling into the deep waters of the Gulf. Starved of sediment, wetlands become waterlogged, sink and die. This is compounded by rising seas and the natural settling of subsea geological structures, scientists say.
Oil Industry’s Share
That doesn’t fully explain why a delta built over eight to 10 millennia has shrunk so much in the past eight decades, the scientists say. Dredging to locate drilling rigs and construction of navigation channels have disrupted the delicate interface between upland marshes and saltwater wetlands, says Kerry St. Pe, director of the Barataria-Terrebonne National Estuary Program, a marsh-preservation group headquartered in Thibodaux, Louisiana. Salt water poisons freshwater marshes and swamps, he says. Currents, tides, boats and storms hasten the erosion, especially along the unstable banks of dredged canals.
St. Pe also points to the billions of barrels of oil and trillions of cubic feet of gas that have been sucked from beneath the state’s coastal zone by oil and gas development. “We’re not just eroding, we’re sinking,” he says. “The oil and gas extraction has set off a collapse in our coast.”
A consensus of coastal scientists puts wetland losses attributable to oil and gas activities at 36 percent, says Douglas Meffert, a deputy director of Tulane University’s Center of Bioenvironmental Research. The Gulf Restoration Network estimates the share as high as 60 percent, says Aaron Viles, the group’s campaign director.
“The idea that we’re mostly to blame is crap,” says Don Briggs, president of the Louisiana Oil & Gas Association, a 1,100-member trade group based in Baton Rouge. He cites a U.S. Department of Energy estimate that the industry accounted for no more than 15 percent of coastal loss.
Economic gains to the state from oil and gas -- in jobs, taxes and growth over the decades -- far outweigh the damage, according to the association. Oil and gas extraction and refining contribute about $70 billion annually to Louisiana’s economy and supports 320,000 jobs. State oil and gas taxes last year topped $570 million.
The state’s view is that much of the damage from dredging is attributable to canals dug before 1980, when the state created its Coastal Resources Program and began to clamp down on oil and gas access canals, says Karl Morgan, administrator of the Permits and Mitigation Division for Louisiana’s Office of Coastal Management. Between 1980 and 1989, the lengths of permitted access canals shrank from 1,300 feet on average to just over 400 feet, he says.
These days, permits are seldom granted except to deepen existing canals, Morgan says. Backfilling is rare because many access canals still serve active wells or production units. The exceptions are canals or trenches dredged for laying pipelines. Before 1980, these canals “were not backfilled in many cases,” says Morgan. Since the advent of the Coastal Resources Program, the state “has always required backfilling,” he says.
In the history of Harry Bourg’s muskrat marsh, about 75 miles southwest of New Orleans, lies a parable of Louisiana’s paradoxical relationship with the oil industry. Bourg and four generations of descendants have reaped untold millions of dollars in royalties over more than seven decades. In 1938, the year oil was discovered under his marshes, Bourg was raking in as much as $100,000 a month in royalties, according to a newspaper report at the time.
Yet his heirs have also had “the heartbreak of watching the beautiful marshland that Harry truly loved be damaged perhaps beyond repair,” says James M. Funderburk, the Harry Bourg Corp. attorney.
“If my grandpa knew what was coming,” says Bourg’s grandson, Cyrus Theriot Jr., 68, one of 50 shareholders in the family run corporation and its president, “I think he would have done things differently.”
A portrait of Bourg emerges from a 1938 article in the New Orleans Times-Picayune, a short biography by Bourg’s former accountant and interviews with Bourg relatives and Funderburk.
Bourg was an unlikely candidate to become a multimillionaire. He was born in 1888 in the hamlet of Dulac, Louisiana, one of eight children in a farming and fishing family. Harry’s people descended from the French Canadians who were kicked off their lands in Canada’s Acadian provinces by the British in 1755.
The survivors became known as Cajuns and eventually settled up and down the Louisiana coast and wove themselves into it, fishing, hunting, trapping and farming the high ground, leaving only a small footprint. Education was sparse, family was central, food was the second religion behind Catholicism. Their cooking, music and joie de vivre took roots from this land.
Harry grew up with a fitful grade-school education. When he married at age 20, his entire fortune was the 35 cents in his pocket, a small house he’d built with his own hands and the shrimp boat his father, a fisherman and farmer, had given him. His wife had to teach him how to speak English, not to mention how to add, subtract, multiply and divide.
Pennies an Acre
Bourg did have a prodigious work ethic, a knack for invention and, despite his lack of formal education, a keen eye for business. Most shrimpers pulled seines by hand or dragged trawls with sail-powered boats. Harry adapted a new-fangled invention, the gasoline-powered outboard motor, and crafted special rigging to go with it.
The shrimp piled up in his nets. In 1908, his first season as a commercial fishermen, he made $300 -- equivalent to about $31,000 in wages today.
In 1929, Bourg embarked on a mystifying real estate journey. He began buying up marshland at estate sales and tax auctions, amassing his 17,000 acres by 1933.
Though he sometimes paid just pennies an acre, people thought Harry was crazy. Conventional wisdom said marshland was valuable only if you could drain it to farm or build on. The marsh grew two things in profusion -- mosquitoes and muskrats. Mosquitoes gave you malaria.
Muskrats were valuable for their pelts, but trapping a few hundred every season was backbreaking work in the boggy marsh. Undaunted, Bourg gave up shrimping for muskrat trapping. He became an entrepreneur, bringing in a dozen or so other trappers each winter. They’d live in his cabins, trap his lands and hand him a share of their profits.
According to one family story, Bourg hired a surveyor and over time walked all 17,000 of his acres. One day he carried the surveyor on his back when the exhausted man couldn’t manage the boggy terrain. Bourg invented a small dredging contraption and ringed the entire boundary with a channel -- called a “trainasse” in Cajun -- just wide enough to accommodate a trapper in a pirogue, the Cajun equivalent of a canoe.
In 1938, Big Oil came calling. Representatives of Standard Oil Co. of California, a Texas oil baron named J.P. Fohs and a New Orleans investor, O.P. Montagnet, stood at Bourg’s farmhouse door. Pools of oil and gas were being discovered up and down the Gulf Coast. The oil men said they had a hunch about his land.
He signed a mineral lease and struck a mother lode of crude. It was so light and sweet the wildcatters called it “gasoline distillate.”
Uncashed Royalty Checks
Sudden wealth didn’t change the way he lived, dressed and carried on. Harry still liked his trapper’s boots, his dungarees, his floppy hats. He spoke English with a Cajun accent so thick some uplanders found it incomprehensible. He stayed in his small farm house on the banks of Bayou Grand Caillou in Dulac, trading up later to a modest brick ranch house.
Although Bourg helped start a bank in Houma, he mistrusted money men. His oil royalty checks often sat uncashed in a desk drawer in the office where he ran his muskrat trading business. Unconvinced that the oil men had calculated his royalties properly, he would summon them to his office and demand that they show him the math amid the stink of drying muskrat hides.
Bourg’s first oil strike, the Standard Oil well, was a technological marvel at the time, says Funderburk. The oil men brought in a dredge and dug a six-mile-long canal through Bourg’s marsh just wide enough to float in a rig on a barge.
“This is a well smack in the middle of Harry’s marsh,” says Funderburk. “How they figured the location, given the technology back then, is mystifying.”
At a depth of 13,300 feet, the well was also the deepest in the U.S. at the time.
“That was the beginning,” says Funderburk. “More leases, and more canals, more laterals off of those canals. I’m sure Harry had no idea at the beginning what they were going to do to him over time.”
Today, where the marsh remains intact, egrets still fly, bull alligators still prowl, and redfish and shrimp still school in a tableau as old as the marsh itself. In other sectors, 80 percent of Bourg’s marshes have turned to open water, according to an engineering survey commissioned by the Bourg estate. About 55 percent of the entire 17,000-acre tract is under water, the survey found.
“We’re just trying to hold on to what we have left,” says Theriot, the grandson.
By the time he died, Bourg was no longer ignorant of the effects of all the dredging. In the late 1950s, the U.S. Army Corps of Engineers pushed for construction of a 36.5-mile channel called the Houma Navigation Canal. Its sole purpose was to speed workers and equipment from the nearby port of Houma to rigs multiplying offshore in the Gulf.
The proposed channel boundary brushed Bourg’s property. Bourg fought it at public hearings and was the last holdout to grant a right-of-way. He predicted -- correctly it turned out -- that the channel would become a salt water siphon and poison upland marshes, including his.
Since the channel opened in 1962, its banks have been plagued by chronic erosion. Plans are afoot to build a lock as part of program to prevent saltwater flooding in Houma during storms. The Corps itself said in a report last year that saltwater intrusion from the canal threatens to destroy the 7,400-acre Falgout Canal Marsh Management Area, popular for fishing and hunting, unless rock dikes are placed along the channel’s banks.
One Well Left
These days only one of the 90 wells on the Harry Bourg property is pumping oil, Theriot says. The corporation supplements its income by selling fishing and hunting permits to local sportsmen. It still has a large alligator population that generates revenue from an annual hunt.
In 2004 the Bourg Corp. settled a lawsuit it filed against Exxon Mobil Corp. and several other oil companies to clean up pits full of toxic chemicals and residues. Theriot will say only that the property was restored at oil-company expense. Exxon Mobil declined to comment.
As for suing oil companies to redress damage from the runaway canals, the state supreme court erected a barrier in 2005, says Funderburk, the corporation’s lawyer. In a 4-3 decision in case known as Terrebonne Parish School Board vs. Castex Energy, the court found that companies can’t be required to refill eroded canals or pay damages unless a mineral lease specifically contains language compelling them to do so.
Who Will Pay
Who will pay to rebuild Louisiana’s wetlands has been under debate for years. Environmental scientists and lawyers argue that the oil industry should help foot the bill. The state says the federal government should pay because its flood-control projects helped cut off the river’s delta-building and its navigation channels fueled erosion.
“I don’t think anyone in the state is denying that oil and gas plays a role, but the overwhelming majority of our problems come from the federal interference in the natural waterways,” says Chris Macaluso, a spokesman for the state’s Coastal Protection and Restoration Authority.
“The industry, in a way, is already paying,” Macaluso says, as Louisiana spends some of its oil and gas royalties on restoration projects. The state is also pinning some of its plans on an additional $500 million a year in shared federal royalties from offshore drilling starting in 2017, he says.
“The oil industry damage to the Louisiana coast via oil and gas exploration over the past 80 years dwarfs the BP spill and all other spills past, present and future,” says Oliver Houck, director of Tulane University’s environmental law program in New Orleans. “The exploration has torn us to shreds, and for this damage the industry has yet to pay a penny. Nor has the state asked. Such is our subservience to the industry.”
Only Good News
Other industry critics say oil and gas operators shouldn’t be treated any differently from strip miners that have been required to restore lands.
The state’s reticence, says Camilo Salas, a New Orleans lawyer who has made a study of Louisiana’s wetlands and its oil politics, reflects Louisiana’s “coal-mining town mentality toward oil and gas.”
“That the state won’t even put the oil industry in the conversation about who is responsible for coastal erosion and who ought to pay for it is laughable,” he says.
At Harry Bourg’s muskrat marsh, the only good news lately is that oil from the BP spill hasn’t encroached on it. The value of the estate had dwindled to $3 million by 1990, according to a district court filing that was part of a lawsuit by two Bourg heirs against the corporation over money lent to a fish-farming enterprise.
Into the Marsh
That was after a $3 million payout to shareholders, the documents disclosed. Theriot declines to discuss corporation assets or finances except to say that it continues to pay dividends as cash reserves permit.
Though he worked 31 years in a white-collar job for Texaco Inc., now part of Chevron Corp., Theriot rejects the argument that jobs and taxes were a fair tradeoff for damage to Louisiana wetlands.
“Some of these oil companies could come back and step up to the plate and try to help fix the devastation they caused,” Theriot says. “But I guess not. You don’t see too many stepping up. Have you seen any of them trying to help BP?”
Claude Luke, the part-time Bourg Corp. warden, still frets that oil left over from the BP spill will wash into the marsh, even though the well has been capped. Fishing grounds near barrier islands to the south remain closed. “If the oil comes here,” Luke says, “we’re doomed.”
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