Pittencrieff Resources v. Firstland Offshore Explor., Civil Action No. 95-3495.
| Decision Date | 15 October 1996 |
| Docket Number | Civil Action No. 95-3495. |
| Citation | 942 F.Supp. 271 |
| Parties | PITTENCRIEFF RESOURCES, INC. Successor in Interest to Aberdeen Petroleum (USA) Inc. v. FIRSTLAND OFFSHORE EXPLORATION COMPANY, Union Oil Company of California, Continental Land & Fur Co., Inc., Denny Offshore Exploration Company, Walker Exploration Company, Princeton Energy Group II Ltd., Wheatley Natural Gas, Inc., and Day Exploration, Inc. |
| Court | U.S. District Court — Eastern District of Louisiana |
Robert Stephen Rooth, Chaffe, McCall, Phillips, Toler & Sarpy, New Orleans, LA, James H. Baumgartner, Jr., Larry J. Bridgefarmer, Vial, Hamilton, Koch & Knox, Dallas, TX, for Pittencrieff Resources Inc.
Winston Edward Rice, Samuel A. Giberga, Rice & Fowler, New Orleans, LA, for Firstland Offshore Exploration Co.
Patrick Wise Gray, Liskow & Lewis, Lafayette, LA, for Union Oil Company of California.
M. Taylor Darden, David Lyman Browne, Carver, Darden, Koretzky, Tessier, Finn, Blossman & Areaux, LLC, New Orleans, LA, for Continental Land & Fur Co., Inc.
Glenn Gates Taylor, C. Dale Shearer, Copeland, Cook, Taylor & Bush, Jackson, MS, for Denny Offshore Exploration, Inc. and Day Exploration Inc.
Jefferson D. Stewart, Brunini, Grantham, Grower & Hewes, Jackson, MS, for Walker Exploration Co.
ORDER AND REASONS
This matter is before the Court on a motion for summary judgment by plaintiff Pittencrieff Resources, Inc., successor-in-interest to Aberdeen Petroleum (USA) Inc. ("Pittencrieff"). For the reasons stated below, the motion is GRANTED in part and DENIED in part.
This is an action for declaratory relief brought pursuant to 28 U.S.C. § 2201, et seq., concerning the proposed plugging and abandonment of two nonproducing offshore gas wells and the proposed abandonment of an offshore drilling and production platform located in Main Pass Blocks 253 and 254 ("Main Pass 253/254"). The parties to the suit are all either direct parties or successors-in-interest of direct parties to an Offshore Operating Agreement (the "JOA") covering two oil and gas leases ("the Leases") located in the Gulf of Mexico off the coasts of Alabama, Louisiana, and Florida, which were awarded by the United States Department of the Interior, through the Minerals Management Service ("MMS"), to Chevron USA, Inc. ("Chevron") in April 1982.
Successful exploratory drilling by Chevron and Shell on leases in Main Pass 253/254 led to the installation of a Chevron platform in 1975. In 1978, the leases were abandoned after developmental drilling proved unsatisfactory, although the platform was not removed. In 1982, Chevron re-leased the area, and gas was subsequently discovered in the surrounding area. On March 2, 1987, Chevron assigned its interest in the Leases to Hughes-Denny Offshore Exploration, Inc. ("Hughes-Denny"), who agreed to assume all of Chevron's obligations and liabilities with respect to the Leases, including the continuation of drilling and development operations in accordance with the terms of Chevron's Schedules of Activity, which had been approved by the MMS. In return for Hughes-Denny's assumption of these obligations and liabilities, Chevron agreed, subject to certain express conditions, to pay Hughes-Denny the sum of $1,500,000 upon proper abandonment of the wells, facilities, and platforms located on the Leases (the "Chevron contribution"). See Complaint ¶¶ 12, 13; Firstland answer ¶¶ 12, 13; Unocal answer ¶¶ 12, 13; Continental answer ¶¶ 12, 13; Day and DOE answer ¶¶ 12, 13; Walker answer ¶¶ 12, 13; and by default Princeton and Wheatley. The Chevron contribution is presently scheduled to expire on January 27, 1997.
Shortly after Chevron assigned its interest in the Leases to Hughes-Denny, the JOA was entered into on July 27, 1987.1 The JOA contains express provisions governing proposals to plug and abandon a platform and/or a well. Specifically, the agreement provides, in relevant part:
8.26 At the request of any party owning an interest in a platform, Operator shall furnish to the owners thereof the estimated net deficit or net value resulting from the salvage and removal of the platform.... [W]ithin thirty (30) days after the of such estimate, any party owning an interest in a platform may propose to the other owners thereof that it be salvaged and removed from the lease, at the same time agreeing to convey its interest therein to any owner thereof desiring to retain the platform and to pay to or accept from such other owners such proposing party's share of such estimated net deficit or net value, as the case may be. Any such other owner may, within thirty (30) days after receipt of such a proposal, elect to retain the platform by giving notice thereof to the other owners, at the same time agreeing to accept its pro rata share of the interest of any parties desiring salvage and removal and to make or accept payment for the estimated net value or net deficit attributable to such interest as hereinabove provided. The parties will properly thereafter make such payments and execute a conveyance, as of the date of the earliest notice given by a party desiring to retain the platform, of the interest of the parties desiring to salvage and opinion to the parties desiring to retain such platform.... If no party desires to retain the platform, Operator shall proceed promptly to have same salvaged and removed at the cost of the owners thereof.
9.1 .... [N]o well on the Joint Property which is producing or has once produced shall be abandoned without the consent of all the parties then owning an interest therein. The parties last sharing in the production shall bear the cost and risk of abandonment. If the parties are unable to agree as to the abandonment, the party or parties desiring to abandon shall notify the other party or parties to that effect, and the party or parties desiring that the well be retained, within thirty (30) days after receipt of such notice shall pay to the party or parties desiring abandonment the proportionate share of such latter party or parties' interest in the salvage value of the material and equipment in on said well (less the proportionate part of such receiving party or parties' share of the estimated cost of plugging and abandoning), such value to be determined in accordance with the Accounting Procedure set forth in Exhibit "B" attached hereto. If such estimated plugging and abandonment cost exceeds such value, the party or parties desiring to abandon shall pay their proportionate part of the amount of such excess to the party or parties desiring to retain the well. (Emphasis added)
The agreement also contains express provisions governing the effect of a party defaulting under the agreement. Specifically, the agreement provides in relevant part that:
23.2 In the event any Non-Operator should fail to pay its share of the charges, costs and expenses incurred under this Agreement within forty-five (45) days after actual receipt of a statement of same for any month, such Non-Operator shall be deemed delinquent. If after fifteen (15) days following actual receipt of notice of delinquency by the Non-Operator (or by an officer of the Non-Operator if it is a Corporation), Operator has not received payment, or the Non-Operator has not made other arrangements for payment satisfactory to Operator, the delinquent Non-Operator shall be deemed to be in default and Operator, without prejudice to other existing remedies, is authorized, at its election, to collect from the purchaser or purchasers of oil and gas, the proceeds accruing to the working interest or interests in The Joint Property of the delinquent Non-Operator free and clear of any burdens thereon....
23.4 Any party in default shall, until such time as such party's payments are current, have no further access to the maps, records, data, interpretations or other information obtained in connection with the operations under this Agreement, shall be a "non-participant" in all operations and shall not be entitled to vote on any matter. In the event of such default, the Percentage Interest of the party in default shall not be considered in the votes of the parties and, therefore, the minimum Voting Interest to carry any proposal hereunder shall be decreased to a percentage amount equal to the current minimum Voting Interest times the total of the percentage interest in The Joint Property of all parties other than the party in default. Furthermore, such party shall not be entitled to receive any notice of meetings or decisions of the parties.
In February 1994, in conformity with the requirements of Sections 8.26, and 9.1 of the JOA, Unocal, the operator at that time, sent all of the non-operators a written proposal to plug and abandon the wells and abandon the platform. See Complaint ¶ 18; Firstland answer ¶ 18; Unocal answer ¶ 18; Continental answer ¶ 18; Day and DOE answer ¶ 18; Walker answer ¶ 18; and by default Princeton and Wheatley. Three of the non-operator owners2 subsequently agreed to Unocal's proposal. Three of the other non-operator owners3 rejected the proposal. No payments or assignments were made by the operator and the non-operator owners who wanted to plug and abandon the wells and the platform to the non-operator owners who rejected the proposal. On June 10, 1994, Unocal notified the non-operators in writing that it was withdrawing its plug and abandonment proposal and that it planned to sell its interest under the JOA to a third party. There is presently no plug and abandonment proposal pending between the operator and the nonoperators.
The present suit has divided the parties to the JOA into two warring camps: those who support Unocal's former plug and abandonment proposal and those who oppose it.4 The supporters claim that all of the non-operators to the agreement are in default of the JOA because they have failed to pay Unocal sums owed in connection with the exploration, development and operation of the...
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