Pontchartrain Natural Gas Sys. v. Tex. Brine Co.

• Decision Date: 30 December 2020
• Docket Number: 2018 CA 1249
• Court: Court of Appeal of Louisiana — District of US
• Parties: PONTCHARTRAIN NATURAL GAS SYSTEM, k/d/s Promix, L.L.C., and Acadian Gas Pipeline System v. TEXAS BRINE COMPANY, LLC

317 So.3d 715

PONTCHARTRAIN NATURAL GAS SYSTEM, k/d/s Promix, L.L.C., and Acadian Gas Pipeline System

v.TEXAS BRINE COMPANY, LLC

2018 CA 1249

Court of Appeal of Louisiana, First Circuit.

Judgment Rendered: DECEMBER 30, 2020

Rehearing Denied February 10, 2021

Martin A. Stern, Leigh Ann Schell, Raymond P. Ward, Sara Valentine, Alexandra Roselli, New Orleans, Louisiana, Kathy Patrick, Laura Kissel Cassidy, Samuel W. Cruse, III, Houston, Texas, Richard Hymel, Lafayette, Louisiana, Brad Brian, Bethany Kristovich, Grant Davis-Denny, Daniel Levin, Los Angeles, California, Christopher Friend, Justin Wood, Tarak Anada, Nicole Duarte, Meghan Smith, New Orleans, Louisiana, Attorneys for Appellant/Defendant Occidental Chemical Corporation

Martin A. Stern, Leigh Ann Schell, Raymond P. Ward, Sara Valentine Alexandra Roselli New Orleans, Louisiana Kathy Patrick Laura Kissel Cassidy Samuel W. Cruse, III Houston, Texas Attorneys for Appellant/Defendant OXY USA Inc.

Martin Stern Leigh Ann Schell Raymond P. Ward Sara Valentine, Alexandra Roselli, New Orleans, Louisiana, Kathy Patrick, Laura Kissel Cassidy, Samuel W. Cruse, III, Houston, Texas, Attorneys for Appellant/Defendant Occidental Petroleum Corporation

Roy C. Cheatwood, Kent A. Lambert, Tyler Weidlich, Adam B. Zuckerman, Paul C. Thibodeaux, Matthew S. Chester, Joseph Atiyeh, Colleen C. Jarrott, Matthew C. Juneau, New Orleans, Louisiana,Tony M. Clayton, Port Allen, Louisiana, Attorneys for Appellant/Defendant Legacy Vulcan, LLC

James M. Garner, Leopold Z. Sher, Peter L. Hilbert, Jr., Martha Curtis, Jeffrey D. Kessler, Christopher T. Chocheles, David A. Freedman, Melissa R. Harris, Laurie A. Dearman, New Orleans, Louisiana, Robert Ryland Percy, III, Gonzales, Louisiana, Eric J. Mayer, Houston, Texas, Travis J. Turner, Gonzales, Louisiana, Dane S. Ciolino, Metairie, Louisiana, Attorneys for Appellant/Defendant Texas Brine Company, LLC

Leopold Z. Sher, James M. Garner, Peter L. Hilbert, Jr., Christopher T. Chocheles, Jeffrey D. Kessler, David A. Freedman, Melissa R. Harris, Laurie A. Dearman, New Orleans, Louisiana, Robert Ryland Percy, III, Gonzales, Louisiana, James E. Kuhn, Ponchatoula, Louisiana, Eric J. Mayer, Houston, Texas, Travis J. Turner, Gonzales, Louisiana, Dane S. Ciolino, Metairie, Louisiana, Attorneys for Appellant/Defendant United Brine Services Company, LLC

James C. Percy, Kevin O. Ainsworth, F. Gibbons Addison, Baton Rouge, Louisiana, Brett S. Venn, New Orleans, Louisiana, Attorneys for Appellants/Plaintiffs Pontchartrain Natural Gas System, K/D/S, Promix, L.L.C., and Acadian Gas Pipeline System

Shawn Carter, Matthew Randazzo, III, Christopher Bailey, Will Montz, Lafayette, Louisiana, Counsel for Appellees/Defendants Browning Oil Company, Colorado Crude Company, LORCA Corporation

Jason Cerse, Jacob Weixler, New Orleans, Louisiana, Counsel for Appellee/Defendant Adams Resources Exploration

Joseph L. Shea, Jr., Counsel for Appellee/Defendant

Katherine Smith Baker, Ashley G. Gable, Joshua S. Chevallier, Shreveport, Louisiana, Reliance Petroleum Corporation

Frank H. Spruiell, Jr., Reid A. Jones, Seth M. Moyers, Anna W. O'Neal, Shreveport, Louisiana, Counsel for Appellee/Defendant Sol Kirschner

BEFORE: HIGGINBOTHAM, PENZATO, AND LANIER, JJ.

Lanier, J. Pontchartrain Natural Gas System, K/D/S Promix, L.L.C., Acadian Gas Pipeline System, Legacy Vulcan, LLC, Occidental Chemical Corporation, Occidental Petroleum Corporation, OXY USA Inc., and Texas Brine Company, LLC appeal a judgment determining causation, liability, and apportionment of fault for the formation of a sinkhole and the damage it caused in Assumption Parish, Louisiana.¹ For the following reasons, we reverse in part, amend in part, and affirm in part.²

FACTS AND PROCEDURAL HISTORY

On August 3, 2012, a multi-acre sinkhole opened up above the Napoleonville Salt Dome in Assumption Parish, Louisiana. Following the emergence of the sinkhole, numerous lawsuits were filed by different plaintiffs, all of whom suffered damages due to the sinkhole. An arbitration proceeding was also initiated and pursued concurrently between two parties to the litigation, Occidental Chemical Corporation and Texas Brine Company, LLC.

In this particular suit, the plaintiffs, Pontchartrain Natural Gas System, K/D/S Promix, L.L.C., and Acadian Gas Pipeline (collectively Pontchartrain), own and operate natural gas pipelines and storage facilities in the vicinity of the property affected by the sinkhole. Pontchartrain, like other affected pipeline companies,³ sought to recover damages for its inoperable pipelines from Texas Brine Company, LLC (Texas Brine). Pontchartrain alleged that Texas Brine negligently operated the Oxy Geismar No. 3 Well (OG3), which collapsed and created the sinkhole.

Texas Brine responded to this lawsuit by filing incidental demands asserting tort and contract claims against various parties, including Legacy Vulcan, LLC f/k/a Legacy Vulcan Corp. and/or Vulcan Materials Company (Legacy Vulcan) and Occidental Chemical Corporation (Oxy). Texas Brine sought to recover reimbursement expenses for environmental response costs paid after the sinkhole appeared, litigation expenses and lost profits. It also asserted claims for indemnity and/or contribution for the damages allegedly sustained by Pontchartrain. Texas Brine filed amended petitions, naming additional parties and asserting additional theories of recovery, including claims against Oxy's parent company, Occidental Petroleum Corporation (Oxy Petro), and OXY USA.⁴

The district court issued a trial order on September 23, 2016, outlining four phases of trial. The Phase 1 liability trial was held for the purpose of determining what caused the sinkhole to form and which parties, if any, were at fault under any theory of law for causing the formation of the sinkhole. All other issues were reserved for trial in Phases 2 through 4.

On September 18, 2017, the multiple-week Phase 1 liability trial began, wherein the following history was presented.

On July 18, 1975, Hooker Chemicals & Plastics Corporation, the predecessor-in-interest to Oxy, leased to Texas Brine the right to produce salt from a 40-acre tract of land (Salt Lease), commonly referred to by the parties as the "North 40." The Salt Lease is situated on the western edge of the Napoleonville Salt dome in Assumption Parish, Louisiana. Within a year, Texas Brine entered into a series of interdependent contracts with Legacy Vulcan, including an "Assignment of Salt Lease," a "Construction Contract and Facilities Lease" (Facilities Lease), and an "Operating and Supply Agreement" (Operating Agreement). The agreements provided that Texas Brine would construct and operate facilities on the North 40 and would produce and deliver a certain quantity of brine to be used by Legacy Vulcan within its chloralkali business at its Geismar facility.

Pursuant to the Facilities Lease, Texas Brine sited, drilled, and constructed the Oxy Geismar No. 2 Well (OG2) and Oxy Geismar No. 1 Well (OG1), in that order. Although the OG2 was drilled to its designed depth at over 6,000 feet, the OG1 drilled out of salt at approximately 3,680 feet, well shy of the depth contemplated in Texas Brine's design and plans.⁵ This was the first signal to all parties involved that this particular salt dome may be irregular (i.e., with an overhang) and that the edge of the salt dome may be near. Legacy Vulcan contacted its operator, Texas Brine, to discuss this discovery and what it meant for Legacy Vulcan's long term business venture.

In the late summer of 1976, Texas Brine retained a local geologist, Leon Toups, of Ted Hoz and Associates, to analyze available data on the North 40 in order to make certain predictions in regards to operation thereon. Mr. Toups, in a series of correspondence, advised Texas Brine that drilling another well on the North 40 would be "risky" because there was simply not enough information about the domal overhang. Mr. Toups elaborated that the "risk" consisted of not knowing whether another well could be drilled successfully and stay in salt, making it a costly gamble in a business with such trim profit margins. However, Mr. Toups suggested a location for a third well that he determined would have an excellent chance of staying in salt to an estimated depth of 7,000 feet. Mr. Toups created a map reflecting his interpretation of the dome edge and overhang, along with the placement of the wells. This information was forwarded to Legacy Vulcan by Texas Brine on November 11, 1976.

In 1978, Texas Brine strongly recommended that Legacy Vulcan drill a third well as soon as possible, predicting that the OG1 and the OG2 would be under-producing wells that could not fulfill Legacy Vulcan's brine requirements. Legacy Vulcan hired an outside consultant, Larry Sevenker of PB-KBB, to examine the geological risks associated with adding another well on the North 40. It also asked Mark Juzsli from its commercial development division to weigh in on the issue. Mr. Juzsli concluded that Legacy Vulcan did not need another well, especially a shallow 4,000-foot well that had been suggested in a Texas Brine proposal, because it appeared to be a costly endeavor that did not provide a long-term solution to Legacy Vulcan's brine needs. Mr. Sevenker echoed the concerns of Mr. Toups regarding the unknown salt dome edge or overhang, explaining that this posed the greatest apprehension in developing the North 40. Further, Mr. Sevenker found the OG1 to be at risk for fracture and suggested it be retired to a monitor or reserve capacity. He also suggested it was possible for Legacy Vulcan to drill more wells on the North 40, approximately five in total, but all would have to be shallower than 5,000 feet, with a narrow 150-foot diameter.

Considering the state of the OG1,⁶ and the need for brine, Legacy Vulcan agreed to drill a third well. Texas Brine and Legacy Vulcan, both armed with outside analysis, contracted to drill the OG3 in the "Drilling Agreement" dated February 2, 1982....