310 F.3d 870 (5th Cir. 2002), 01-31190, Terrebonne Parish School Bd. v. Mobil Oil Corp.

Docket Nº:01-31190.
Citation:310 F.3d 870
Party Name:TERREBONNE PARISH SCHOOL BOARD, Plaintiff-Appellant, v. MOBIL OIL CORPORATION, Defendant-Appellee.
Case Date:November 13, 2002
Court:United States Courts of Appeals, Court of Appeals for the Fifth Circuit

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310 F.3d 870 (5th Cir. 2002)



MOBIL OIL CORPORATION, Defendant-Appellee.

No. 01-31190.

United States Court of Appeals, Fifth Circuit

November 13, 2002

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Michael X. St. Martin, Joseph G. Jevic (argued), St. Martin & Williams, Houma, LA, Andrew J. Gray, III, Wade Thomas Visconte, The Gray Law Firm, Lake Charles, LA, for Plaintiff-Appellant.

Robert Beattie McNeal (argued), Monica Levine Lacks, Frilot, Partridge, Kohnke & Clements, New Orleans, LA, for Defendant-Appelee.

Appeal from the United States District Court for the Eastern District of Louisiana.

Before SMITH and BENAVIDES, Circuit Judges, and ENGELHARDT, District Judge.[*]

KURT D. ENGELHARDT, District Judge:

Plaintiff, the Terrebonne Parish School Board ("School Board"), as royalties holder of a Section 16 tract, appeals the district court's dismissal of its diversity-based delictual and contractual action against the defendant, Mobil Oil Corporation ("Mobil"), on statute of limitation grounds. The School Board argues that its claims against Mobil are imprescriptible under Louisiana law, and thus the district court erroneously concluded that the expiration of Louisiana's one-year and ten-year liberative prescription periods applicable to tort and contract claims, respectively, serve to

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bar the School Board's claims for damages and restoration of Section 16 land. Concluding that the State of Louisiana's constitutional immunity from prescription does not enure to the benefit of the School Board suing solely in its capacity as royalty owner and not in the name of the state, we affirm for the following reasons.


This case involves a suit for restoration and money damages arising out of the erosion and diminishment of a Section 16 tract owned by the State of Louisiana and managed by the School Board. This dispute centers on an approximately 640 acre tract (§ 16,T18S,R12E/TRACT) in western Terrebonne Parish, Louisiana. It is one of many Section 16 tracts managed by the School Board located in Terrebonne Parish's coastal marsh. The State's "Section 16" lands are public lands consisting of the sixteenth sections of various townships that parish school boards are entitled to use to support education. The School Board leased this particular property for various purposes, including oil and gas activities.

Via three-year lease dated December 12, 1957, the School Board let the subject 640 acre tract to Southern Natural Gas Company ("SNG") for an initial payment of $38,834.91. The lease specifically granted to SNG and its assignees the right to dredge canals on the property and to perform other works conducive to oil and gas exploration. The lease did not require that SNG refill any canals upon termination of the lease.

Although the School Board's contract claim is labeled as one for breach of a "servitude, right-of-way(s) and/or mineral lease(s)," 1 the School Board admits that it has no contract in the nature of a servitude, right-of-way, or mineral lease with Mobil, or its predecessor Magnolia Petroleum Company (hereinafter referred to as "Mobil"). Rather, the basis of the School Board's contractual claim for erosion damage is a farm-out agreement, by and between SNG and Mobil.2 The School Board claims SNG's farm-out agreement with Mobil somehow renders Mobil liable under SNG's 1957 mineral lease with the School Board.

Mobil obtained a permit from the Louisiana Conservation Office to drill the well. Pursuant to the 1959 farm-out agreement with SNG, Mobil dredged a canal in the southeast corner of the tract to access the surface location of School Board Well # 1. Mobil's drilling and all other activities associated with Well # 1 ceased when the well was completed. On December 24, 1959, School Board Well # 1—a dry hole on § 16,T18S,R12E/TRACT—was plugged and abandoned.

Drilling and well-completion operations associated with a well-site abandoned over 42 years ago form the basis of the School Board's claims against Mobil. The School Board maintains that the existence of the accessory canal, which was left intact, has contributed to the erosion of the land and the demise of the marshland habitat.

The summary judgment record demonstrates that since the early 1980's, the School Board acquired actual knowledge of erosion damage caused by oil field canals, albeit erosion damage to Section 16 lands generally, and not necessarily to the particular tract at issue. In May, 1981, the School Board reconsidered a request to

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dredge a canal on some of its marsh property, fearing that it would make the erosion problem worse. Soon thereafter, the School Board hired an engineering firm to prepare a survey and memorialize in report form the findings relative to the problematic erosion of Section 16 lands. Indeed, the stated purpose of T. Baker Smith's January, 1982 preliminary erosion study was "to assist the Terrebonne Parish School Board and residents of Terrebonne Parish to become aware of the rate of erosion occurring within Terrebonne Parish." 3 The School Board intended that the January 13, 1982 erosion study of Section 16 lands "serve as a basis for approximating land loss rates throughout the parish." 4 Summarizing the causes of erosion affecting all of Terrebonne Parish's Section 16 lands, T. Baker Smith, Inc.'s 1982 report concluded that "direct, man-influenced causes" included "(1) the breakup of fresh marsh and flotant because of increased salinities introduced by navigation, drainage, and petroleum-related canals, [and] (2) the replacement of land area by canals. . . ."5 Hence, on August 17, 1982, the School Board passed a resolution that acknowledged the erosion problem.6

In February 1984, the environmental consulting firm Coastal Environments prepared a listing of Section 16 lands for the School Board, specifically referring to a 1955-1978 Land Loss map of Terrebonne Parish.7 Coastal Environment's February 1984 Report identified thirty-six Title 16 Lands on the land loss map, one being the instant tract (T18S-R12E Hackberry Bayou).8 On July 31, 1985, the School Board's Section 16 Lands Committee considered hiring Coastal Environments to address the mitigation issue,9 but subsequently decided to hold the issue in abeyance, and did not hire the firm.10

On April 21,1993, Coastal Environments submitted a Section 16 lands management proposal suggesting a partial contingency fee arrangement in return for its assistance quantifying damages for restoration of areas affected by development of the Section 16 land. Coastal Environment's plan for a base-line study contemplated an evaluation and report on each Section 16 tract individually.11

In 1994, the School Board received the plan from the USDA Soil Conservation Service to manage land that included seventeen Section 16 tracts in Terrebonne Parish, including the land at issue herein

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(T18S-R12E). This plan again acknowledged "manmade changes which have altered the hydrology of the basin [include] . . . the construction of extensive oilfield canal networks in the interior marsh. . . ." 12

The School Board hired Morris P. Hebert, Inc. ("Hebert") to determine whether the plan would provide for closing any canals on its Section 16 lands, including the subject 640 acre tract.13 Regarding the particular tract at issue (T18S-R12E), Hebert reported to the School Board that the property's current mineral lessee, Pennzoil, objected to closing any canal on the tract, including the canal at issue in this case.14 In addition, Hebert instructed the School Board that:

Although there is [sic] no active oil and gas operations on the property at this time, the existing well canal is an attractive feature for future operations. The existing canal, trenasses, and pond are being used for recreational and commercial hunting and fishing activities. Closure of the location canal in the Southeast quarter (SE 1/4) of the section and the trenasses would significantly affect its usefulness to the present and future lessees. However, because access can be gained to the pond from the southerly trenasse off the location canal, closure of the northerly trenasses would not appear to cause significant impact to the section. Closure of the northerly trenasse would curtail the large volume of water moving across the section through the pond and would eliminate the aforementioned scouring and channelization. Approximately $2,650.00 in revenues from the oil and gas lease is expected in fiscal year 1995-1996 with the hunting and trapping lease earning the Board $3,800.00 annually until 5/31/98.15

In conclusion, Hebert advised the School Board that "[a]ny canal or waterway closure which affects leaseholder access to their lease could jeopardize the viability of the property and hence the income the Board." 16 Despite notification of effects of scouring and channelization due to the existence of the location canal on the subject tract (§ 16T18S-R12E), the School Board took no action to close the canal.

In August 1996, the School Board was again informed that it could file an action to recover erosion-related damages allegedly caused by oilfield canals. Despite the references to the possibility of a "monstrous amount of damage," 17 and an offer of assistance in any such litigation, the School Board still did not respond. It was not until March 1997, when the mineral lessee LLOG Exploration Company's lease terminated, that the School Board commissioned an inspection of the subject 640 acre tract for environmental damage. Via report dated March 27, 1997, Malcolm Poiencot issued his findings to the School Board, replete with photographs of the subject canal and an opening at the end of the canal where "erosion" allegedly had

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occurred.18 The School Board took no action against LLOG or any other entity in response to the report.


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