Apache Corp. v. Moore

• Decision Date: 29 July 1994
• Docket Number: No. 07-93-0069-CV,07-93-0069-CV
• Citation: 891 S.W.2d 671
• Parties: 132 Oil & Gas Rep. 369 APACHE CORPORATION, Appellant, v. Leo MOORE, Daisy Moore, and Bess Cole, Appellees.
• Court: Texas Court of Appeals

Page 671

891 S.W.2d 671

132 Oil & Gas Rep. 369

APACHE CORPORATION, Appellant, v. Leo MOORE, Daisy Moore, and Bess Cole, Appellees.

No. 07-93-0069-CV.

Court of Appeals of Texas Amarillo.

July 29, 1994.

On Motion for Rehearing

Oct. 20, 1994.

Liddell Sapp Zivley Hill & Laboon L.L.P., Jess H. Hall, Jr., Jeff Weems, James E. Essig, Kathy Osman, Houston, for appellant.

Clements O'Neill & Pierce L.L.P., Jack O'Neill, Kelly J. Kirkland, Jerry L. Mitchell, Jr., Burrow, Countiss & Ray L.L.P., Richard N. Countiss, Houston, for appellee.

Daisy Moore, pro se.

Before REYNOLDS, C.J., and BOYD and POFF, JJ.

REYNOLDS, Chief Justice.

A jury found Apache Corporation liable for actual and exemplary damages resulting from its negligence proximately causing a gas well to blow out. A portion of the damages were allocated to Leo Moore, Daisy Moore, and Bess Cole, designated as the Moore group, who are royalty interest owners in tracts adjoining the location of the well, and who intervened in the litigation as plaintiffs. By this appeal, Apache complains of the damages awarded to these plaintiff-intervenors.

As to these intervenors, Apache challenges (1-2) the legal sufficiency of the evidence to support their actual and exemplary damage awards, (3) the segregation of attorney's fees as a separate part of the exemplary damages awarded, (4) the constitutionality of the Texas scheme of awarding exemplary damages, and (5) the admission of testimony by an expert witness unidentified by, but presented on behalf of, Daisy Moore. On the rationale expressed, the judgment will be modified to eliminate the attorney's fees allocated to the intervenors and, as modified, affirmed.

In January of 1981, ¹ the Elk City, Oklahoma office of Apache, working as operator, was responsible for drilling and spudding one of the deepest wells, more than 16,000 feet, in the Anadarko Basin in Wheeler County, Texas, the Key 1-11 well. Apache, together with El Paso Exploration Company, now known as Meridian Oil Production, Inc., and referred to as Meridian, were each 50% working interest owners of the Key 1-11 well.

Ratliff Drilling Company was hired by Apache to drill the well. Although Apache maintained Ratliff was an independent third party, the evidence showed that Apache controlled the Ratliff employees in the drilling operation, its drilling superintendent took charge of the well, and was ultimately responsible for the safe and proper drilling of the well.

During the drilling of the well, metal shavings were found in the drilling mud. The testimony at trial showed that metal shavings were often indicative of worn out casings or tubing allowing the metal of the drilling pipe to rub and shave off, thereby weakening the equipment in the hole. No logs or tests were run to determine the origin or cause of the metal shavings.

In July, the well experienced a "kick," i.e., the well began to flow, causing cement, which had been placed to secure the liner at the bottom of the hole, to back up through the hole into the intermediate casing, where it hardened. The well was being attended by employees of Ratliff at the time of the kick since no one from Apache was present on the well-site. Although someone from Apache was to be present on the well 24 hours a day, no one could be reached for assistance for several hours after the kick occurred.

After the cement was drilled out of the casing, no tests were conducted to determine whether the casing had been damaged. Upon completion and perforation of the well, a pressure leak occurred at the surface, denoting pressure on the backside of the well, which placed the intermediate casing under stress. Ignoring its drilling superintendent's recommendation to pull the tubing and repair the leak, Apache conducted a single test to determine the source of the leak, but did not find it.

Without any further effort to determine the source of, or to repair, the leak, despite knowing the leak would create pressure and place stress on the intermediate casings, Apache shut in the well in July to await Originally, the relief valve was set up to use outside air to function, but when that system became unworkable, two nitrogen bottles were installed. Apache admittedly knew that without a flow of nitrogen, the valve would not operate, and if the valve became inoperable, the pressure in the well would continue to build, making the likelihood of a blowout a reality. Ralph Walker, Apache's drilling superintendent, directed that the valve be set to relieve pressure when it reached 7,000 pounds, and cut off when the pressure was relieved to 6,000 pounds. There was testimony that the settings were inordinately high.

connection to a pipeline. To relieve pressure on the well due to the leak, Apache had Axelson, Inc., a company which manufactured and marketed pressure relief valves for oil wells, install a casing relief valve on the well.

On October 4, the well blew out. The expert testimony, including that presented by Apache, was that the relief valve had not been in proper working order for approximately two weeks prior to the blowout. There was conflicting testimony concerning whether the nitrogen flow was hooked up to the relief system at the time of the blowout. Although there were differing theories as to the exact cause of the blowout and which portion of the well failed first, it was the overall consensus that, in all likelihood, the pressure from the leak built to more than 10,000 pounds, causing the seven and five-eighths inch casing to rupture.

Fortunately, no one was present at the well at the time of the blowout, but the well proceeded to vent, flare, dissipate, and waste natural gas at a significant rate until Apache was able to divert the gas into a pipeline of the Key number 3 well in June of 1992. The Key 1-11 well continued to flow as a result of the blowout until it was killed on 9 February 1993. In terms of the gas lost, the blowout was believed to be the largest gas well blowout in United States history, there being 14.3 billion cubic feet of gas drained from the reservoir, and the total value of the gas wasted was approximately 69 million dollars. Apache received approximately 41 million dollars for the gas it captured from the well from June, 1992 until the well was killed in February, 1993.

As a result of the blowout, Arkla Exploration Company and Stevens Production Company brought suit against Apache and Meridian seeking recovery for conversion of gas diverted from the neighboring Kiker No. 2-1 well, and for negligence. Subsequently, Apache and Meridian brought third party actions against Babcock & Wilcox Company, Hydril Company, Sooner Pipe and Supply Corporation, Axelson, Inc., and U.S. Industries, Inc., alleging that products manufactured by them were responsible for the blowout. The Scott group--comprised of Tom L. Scott, Inc., George S. Johnson, Sunshine Exploration Company, W.W. Braden, III, and Canyon Energy, Inc.--and the Moore group--comprised of Leo Moore, Daisy Moore, and Bess Cole--joined the suit as plaintiff-intervenors.

Claims of negligence and gross negligence against Apache stemmed from allegations that Apache company men working on the Key 1-11 well took kickbacks in the forms of money, cocaine, alcohol, prostitutes, and the like, in exchange for giving work to various companies, specifically White Stripe Inspection Company, which affected the quality of their work and their diligence and vigilance in operating the well. ² Apache was aware, prior to the blowout, that kickbacks were being taken by its employees, and formed an investigation team to determine the extent of the kickbacks. ³

In the time intervening between the original petition, filed in January of 1982, and the selection of the jury in the summer of 1992, all parties except Apache, Meridian, third-party defendant Axelson, the Scott group, and the Moore group had settled their controversies. Before the trial on the merits, Axelson settled its controversies and, as part of that settlement, agreed to pay attorney's fees for the Scott group.

In addition to evidence of the earlier recounted events, the jury had for its consideration this alphabetical cast of pertinent characters and their roles in connection with the Key 1-11 well:

Andy Atchley--a "worm" for Ratliff, was sent to get metal shavings found in the well while it was being drilled. He saw Apache use bent pipe in the hole, and testified that after the kick, he thought the Key 1-11 well was a "time bomb waiting to go off."

Gordon Clower--drilling foreman for Apache, was responsible for drilling the well and conducting all operations on the well after spudding. Clower was supposed to have been on the well site when the kick occurred, but was absent. Statements by Ralph Walker and others indicated Clower was not capable of handling the responsibilities given him by Apache; there was evidence that he was frequently drunk or incoherent on the job and that the Elk City office was aware of his problem with alcohol.

Bill Conner--drilling manager for Ratliff, testified Apache used crooked pipe in the hole and chose not to use drilling rubbers which would have kept the casings from wearing out. Ratliff hired Jim Gerlach over Conner's objections; Gerlach was inexperienced and drank on the job. Ralph Walker often left Gerlach alone and in charge of the well despite Walker's own testimony that Gerlach was not as knowledgeable as he should have been.

Earl Wayne Eller--who "dogged" Ralph Walker's heels but was never formally trained, was put in charge of drilling and completing wells for Apache. Upon Ralph Walker's orders, he ordered the Axelson relief valve after the kick. Eller described the effects of kickbacks on the Key 1-11 well prior to the blowout as "twenty four hours in paradise," and admitted, "Oh, I guess when I was using [cocaine], I always worked a little bit better with a nose full of coke." Eller is currently a recovering cocaine addict.

Jim Gerlach...