Total E&P United States, Inc. v. Marubeni Oil & Gas (Usa), Inc., CIVIL ACTION NO. H-16-2671
| Decision Date | 24 August 2018 |
| Docket Number | CIVIL ACTION NO. H-16-2671 |
| Citation | 393 F.Supp.3d 515 |
| Parties | TOTAL E&P USA, INC., Plaintiff, v. MARUBENI OIL & GAS (USA), INC., Defendant. |
| Court | U.S. District Court — Southern District of Texas |
By Order [Doc. # 71] entered November 1, 2017, motions and other pretrial matters in this case were referred to United States Magistrate Judge Dena Palermo pursuant to 28 U.S.C. § 636(b)(1)(A) and (B). On June 28, 2018, Magistrate Judge Palermo issued a Report and Recommendation [Doc. # 163], recommending that this Court grant the Motion for Partial Summary Judgment filed by Defendant Marubeni Oil & Gas (USA), Inc. ("MOGUS") [Doc. # 92], grant the Motion for Summary Judgment filed by Plaintiff Total E&P USA, Inc. ("Total") as to MOGUS's unjust enrichment claim, and deny Total's Motion for Summary Judgment Regarding Contract Claims [Doc. # 97] and Motion for Summary Judgment Due to Prior and Complete Satisfaction of Decommissioning Obligations [Doc. # 98] in all other respects.
Total filed timely Objections [Doc. # 172] to the Magistrate Judge's Report and Recommendation, to which MOGUS filed a Response [Doc. # 178], and Total filed a Reply [Doc. # 179]. The Court has reviewed the Report and Recommendation, the evidence submitted in connection with the summary judgment motions,1 and the parties' briefing in connection with the summary judgment motions and with Total's Objections. The Court has also reviewed the applicable legal authorities. The Court's review of the Report and Recommendation is de novo . See FED. R. CIV. P. 72(b) ; 28 U.S.C. § 636(b)(1) ; Funeral Consumers Alliance, Inc. v. Serv. Corp. Int'l , 695 F.3d 330, 347 (5th Cir. 2012).
Total's Objections regarding its contractual and subrogation liability for a share of decommissioning costs involve arguments presented to and rejected by the Magistrate Judge. Contrary to Total's arguments, the express terms of the CEPS Operating Agreement, settled legal principles concerning a party's retention of its obligations following an assignment, and the extensive body of case law involving predecessor decommissioning liability all demonstrate that Magistrate Judge Palermo's analysis and recommendation are well-reasoned and correct. Indeed, all relevant legal authority – as cited and fully discussed by Magistrate Judge Palermo in her Report and Recommendation – is contrary to Total's arguments regarding its liability for a share of the decommissioning costs.
Similarly, Magistrate Judge Palermo correctly analyzed the effect of the ATP bankruptcy on Total's obligation for a share of the decommissioning costs for the CEPS. The relevant documents in the bankruptcy proceeding, including the Bankruptcy Court's Final Order, demonstrate that MOGUS preserved and retained its rights against Total for a share of decommissioning costs. Agreements between ATP and MOGUS, limited to "as between themselves only," did not eliminate or otherwise restrict MOGUS's retained rights as to Total.
Total argues also in its Objections that there are issues that need to be resolved by a jury. Contrary to Total's position throughout the summary judgment briefing and argument, Total now suggests that the language in the CEPS Operating Agreement is ambiguous and needs to be construed by a jury. Total cannot in Objections to a Report and Recommendation dramatically change its position. Moreover, as discussed in the Report and Recommendation, the language in the CEPS Operating Agreement is clear and unambiguous.
Total argues that the value of the overriding royalty interest MOGUS received as part of the ATP bankruptcy settlement is a fact to be decided by the jury. As the Magistrate Judge noted, Total failed to present evidence in the summary judgment process to raise a genuine issue of material fact beyond mere speculation regarding the value of the royalty interest. Total had a full and fair opportunity to present evidence on this issue to the Magistrate Judge, but presented only evidence that was highly speculative and insufficient to raise a genuine issue of material fact to be submitted to a jury.
Total argues that if it retained obligations under the CEPS Operating Agreement, it also retained corresponding rights of notice and participation that MOGUS failed to observe. As explained fully and accurately by Magistrate Judge Palermo, Total's rights – unlike its obligations – under the CEPS Operating Agreement were extinguished upon its assignment of the agreement to ATP. Total had no rights to notice and participation, having assigned those rights to ATP.
The Court, based on its de novo review, agrees fully with Magistrate Judge Palermo's Report and Recommendation. The Report and Recommendation will be adopted as this Court's Memorandum and Order. Accordingly, it is hereby
ORDERED that Total's Objections [Doc. # 172] to the Report and Recommendation are OVERRULED . It is further
ORDERED that the Magistrate Judge's Report and Recommendation [Doc. # 163] is hereby ADOPTED as the Court's Memorandum and Order. It is further
ORDERED that MOGUS's Motion for Partial Summary Judgment [Doc. # 92] is GRANTED . It is further
ORDERED that Total's Motion for Summary Judgment Regarding Contract Claims [Doc. # 97] and Motion for Summary Judgement Due to Prior and Complete Satisfaction of Decommissioning Obligations [Doc. # 98] are GRANTED only as to MOGUS's unjust enrichment claim and DENIED in all other respects. It is further
ORDERED that MOGUS's Motion to Strike Untimely Exhibits [Doc. # 180] is GRANTED . It is further
ORDERED that the docket call on September 10, 2018, is CONVERTED to a status conference.
Before the Court are the Parties' cross motions for summary judgment.1 Defendant Marubeni Oil & Gas USA, Inc. ("MOGUS") filed a Motion for Partial Summary Judgment. ECF No. 92.2 Plaintiff Total E&P USA, Inc. ("Total") filed a Motion for Summary Judgment Regarding Contract Claims, ECF No. 97,3 and a Motion for Summary Judgment Due to Prior and Complete Satisfaction of Decommissioning Obligations, ECF No. 98.4 The Parties agreed the essential facts to resolve these motions are not disputed and that the motions are ripe for decision. ECF No. 92 at 10-24; Pl.'s Resp. to Def.'s Statement of Undisputed Facts at 2-7, Ex. 2, ECF No. 120-2; ECF No. 97 at 9-17; Def.'s Resp. to Pl.'s Statement of Undisputed Facts at 1-6, Ex. A, ECF No. 102-1; ECF No. 98 at 11-16; Def.'s Resp. to Pl.'s Statement of Undisputed Facts at 1-5, Ex. 1, ECF No. 104-1. The Parties appeared before the Court on April 6 and 10, 2018, to argue these motions. Having considered the arguments of counsel and the exhaustive record, which contains both factual evidence and applicable legal authorities, the Court recommends that MOGUS' motion should be granted and one of Total's motions should granted in part.
This dispute arises out of the liability for the decommissioning of three properties located in the Outer Continental Shelf ("OCS") in the Gulf of Mexico. This includes two oil and gas fields—Mississippi Canyon Block 305 ("MC 305") and Mississippi Canyon Block 348 ("MC 348")—and the Canyon Express Pipeline System ("CEPS") (collectively "the Assets") that connects these fields and others. Total filed a separate action as to each MC 305, MC 348, and CEPS. Total's action concerning CEPS is pending before this Court.5 MOGUS filed identical counterclaims in each case relating to all three properties.6
MOGUS asserts that Total is liable for its share of decommissioning costs incurred with respect to the Assets, and MOGUS seeks reimbursement of Total's share of the costs pertaining to CEPS in this case. Total has refused to pay, claiming that it is not liable under the respective Operating Agreements ("OAs") because it was no longer an owner at the time of abandonment and MOGUS already has been fully satisfied for any such costs from the third party who acquired Total's interests in the Assets.
The following are the pertinent undisputed facts:
A. Ownership.
From 1998 through 2006, Total owned interests in the three Assets: the MC 305, MC 348, and CEPS. ECF No. 97 at 9-10. The CEPS was constructed in 2002 to gather production from the Canyon Express fields (including MC 305 and MC 348) and deliver it to the Canyon Station production facility. ECF No. 92 at 10; CEPS OA, Ex. B-1 at 8, ECF No. 92-4; Ex. 2 at 3, ECF No. 120-2. The various Canyon Express lease owners agreed to jointly participate in the "ownership, operation, maintenance, use and abandonment" of CEPS. Ex. B-1 at 7, ECF No. 92-4. Total was one of the original owners of CEPS. Id.7 Total also was the original operator of CEPS and installed the entire pipeline system infrastructure. Ex. B-1 at ¶ 3.1, ECF No. 92-4.
Ownership in the Assets changed over time. ECF No. 92 at 11; ECF No. 97 at 10. In early 2006, MOGUS acquired its interests in the Assets while Total was the operator. ECF No. 92 at 12; ECF No. 97 at 9-10. A few months later, in July 2006, Total assigned its interests in the Assets to another energy company, ATP Oil & Gas Corporation ("ATP"). ECF No. 97 at 10. ATP replaced Total as the operator of CEPS. Id. The present owners of the Assets are MOGUS, ATP, and Black Elk Energy Offshore Operations, LLC ("Black Elk"). Id. Since its assignment to ATP, Total has not participated in the operation of the Assets. Id. at 11. In August 2012, ATP filed a petition under Chapter 11 of the United States Bankruptcy Code. Petition, No. 12-36187 (Bankr. S.D. Tex. Aug. 17, 2012), ECF No. 1. In February 2014, the bankruptcy court entered a Final Order approving the transfer to MOGUS of certain interests in the Assets ATP had acquired from Total. Ex. M, M-1, M-2, ECF Nos. 98-35, 98-36, 98-37.
B. Abandonment Operations/Decommissioning.
The government required MOGUS to decommission the Assets. ECF No. 97 at 14....
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