Settlement reached in Jeff Island accident

BATON ROUGE, La. -- An out-of-court settlement between Diamond Crystal Salt Co., Texaco Inc. and a drilling contractor in a mining accident has saved Louisiana up to $200 million in damages, the attorney general's office said Thursday.

'This case marks a major defense victory for the state, since our exposure and potential liability could have been more than $200 million,' Guste said. 'Under the settlement terms, we won't have to pay anything.'


Diamond Crystal, headquartered in St. Clair, Mich., Wednesday accepted $32 million from Texaco and Wilson Brothers Corp. in an out-of-court settlement stemming from a bizarre accident that flooded Diamond Crystal's salt mine at Jefferson Island in November 1980. Diamond Crystal originally sued Texaco for $260 million in the accident.

An attorney for Wilson Brothers said the drilling firm agreed to pay 6.25 percent of the $32 million settlement, and Texaco was to pay the remainder.


After the settlement was reached, Diamond Crystal agreed to dismiss the state as a defendant in the case, Guste said.

Diamond Crystal sued the state because Louisiana owns and leases land on which the drilling took place. The company claimed the state was responsible for keeping the mining and drilling operations safely separated, Guste said.

He also said the state Office of Conservation had issued drilling permits to Texaco. Diamond Crystal claimed the office should have realized a potential danger stemming from the two operations working so closely together.

Guste said the state argued it had no liability and was not responsible for daily operations of the companies.

The state also is named as a defendant in 10 other cases pending in state courts, Guste said. Attorneys for the state are negotiating to have Louisiana removed as a defendant in those cases, he said.

Trial on the cases was scheduled to begin Tuesday, but U.S. District Judge Eugene Davis in Lafayette continued the trial until July 18 to allow parties to negotiate settlements on suits totaling nearly $500 million.

Diamond Crystal sued the two firms after the Nov. 20, 1980, flooding and loss of the company's salt rock mine under Lake Peigneur on Jefferson Island. The suit claimed a rig operated for Texaco by Wilson Brothers penetrated the roof of an excavated room on the mine's 1,300-foot level.


The piercing of the roof, the suit said, caused Lake Peigneur to drain into and destroy much of the mine.

Wilson Brothers' attorney said some experts who have investigated the accident for more than two years disagreed with Diamond Crystal's contention the rig punctured the mine's roof.

'There are a number of experts who have reached contrary conclusions that the well did not drill into the salt mine,' he said.

No one was injured in the accident, which turned Lake Peigneur into a whirlpool that sucked into the mine a drilling rig, trees, boats and tons of dirt.

The settlement reached Wednesday included dismissal of Texaco's countersuit against Diamond Crystal, said Diamond Crystal President C.D. Cronenworth.

In Lafayette, J. L. Bayless, Live Oak Gardens Foundation and Live Oak Gardens Ltd. received $12.8 million in damages from Texaco, Wilson Brothers and Diamond Crystal. The mining accident destroyed Bayless' home and the surrounding tropical gardens.

Wilson Brothers' attorney said Texaco would pay 70 percent of the sum, Diamond Crystal 25 percent and the drilling contractor 5 percent.

Diamond Crystal attorney John Torian said the settlements ended claims by the salt company and Texaco. There still could be claims outstanding by Wilson Brothers, he said.


Class-action suits brought by miners and other employees also are outstanding.

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