Emerald Land Corp v. Trimont Energy (BL) L L C

UNITED STATES DISTRICT COURT

WESTERN DISTRICT OF LOUISIANA

LAFAYETTE DIVISION

EMERALD LAND CORP CASE NO. 6:17-CV-01655

VERSUS JUDGE ROBERT R. SUMMERHAYS

TRIMONT ENERGY (BL) LLC ET AL MAGISTRATE JUDGE PEREZ-

MONTES

MEMORANDUM RULING

Presently before the Court is Chevron U.S.A. Inc.’s Motion for Partial Summary Judgment

to Dismiss Private Claims for Removal of Buried Flowlines [ECF No. 239]. The motion is opposed

by Plaintiff, Emerald Land Corporation (“Emerald”). For the reasons explained below, the motion

is GRANTED in part and DENIED in part.

I.

FACTUAL BACKGROUND

Emerald is a Louisiana corporation based in St. Mary Parish, Louisiana, where it owns

approximately 8,000 acres of land located along the Atchafalaya River immediately west of

Morgan City. The tract includes over 6,000 acres of natural marsh land below the Intracoastal

Waterway in the Atchafalaya Basin (“the Property”).! The Property is within the Bateman Lake

Field.”

! ECF Doc. 177, Ex. A at pp. 51:4-12; 53:7~16 (30(b)(6) Deposition of Emerald Land Corporation); Ex.

Declaration of M. Taylor Darden at 3.

2 ECF Doc. 177, Ex. B, Declaration of M. Taylor Darden at { 5.

The Property has been the subject of three Mineral Leases (“the Mineral Leases”) entered

into by predecessors to Emerald and Defendants.* The Mineral Leases provided Defendants and

Chevron’s predecessor, Texaco, with the exclusive right to construct lines, tanks, storage facilities,

buildings, stations and other structures necessary “to produce, save, take, care of treat and

transport” oil and gas products on over 6,000 acres of Emerald’s Property.* All three Mineral .

Leases contain an identical damages provision, requiring the lessees to pay for any damage to the

Property: “Lessee shall pay all damages caused by its operations hereunder to the land, buildings

and improvements presently existing, and crops now or hereafter planted.”°

Chevron ultimately assigned its interest in the Mineral Leases and related contracts to

EnerVest.® The interests in the Mineral Leases and related contracts changed hands multiple times

thereafter.’ Ultimately on May 5, 2020, Trimont Energy BL, the last remaining assignee of lessee

interests under the Mineral Leases, “agreed that the Mineral Leases have terminated” and therefore

released “all ... right, title and interest in and to the Mineral Leases.”

In the present motion, Chevron seeks partial summary judgment to dismiss the private

claims asserted by Emerald for the removal of flowlines buried beneath the surface and canal

bottoms of the Property.

3 Id. at] 6.

4 Chevron and Texaco are referred to collectively as “Chevron.” ECF Doc. 177, Ex. A at exhibits 3, 4, and 5, { 1,

attached thereto. (30(b)(6) Deposition of Emerald Land Corporation)

5 ECF Doc. 177, Ex. A at pp. 85-88, referring to { 13 of exhibits 3, 4, and 5 attached thereto. (30(b)(6) Deposition of

Emerald Land Corporation)

6 See Ex. B-2 to ECF No. 177, Act of Assignment from Texaco to EnerVest at p. 6; Ex. A at p. 116 (30(b)(6) Deposition

of Emerald Land Corporation)

7 See Ex. A to ECF No. 177, at pp. 94-95. (30(b)(6) Deposition of Emerald Land Corporation)

8 Id. at p. 95, Exhibit 10 thereto (30(b)(6) Deposition of Emerald Land’Corporation and Release of Mineral Leases)

Il.

THE SUMMARY JUDGMENT STANDARD

_ “A party may move for summary judgment, identifying each claim or defense—or the part

of each claim or defense—on which summary judgment is sought.” “The court shall grant summary

judgment if the movant shows that there is no genuine dispute as to any material fact and the

movant is entitled to judgment as a matter of law.”!° “A genuine issue of material fact exists when

the evidence is such that a reasonable jury could return a verdict for the non-moving party.”!! As

summarized by the Fifth Circuit:

When seeking summary judgment, the movant bears the initial responsibility of

demonstrating the absence of an issue of material fact with respect to those issues

on which the movant bears the burden of proof at trial. However, where the

nonmovant bears the burden of proof at trial, the movant may merely point to an

absence of evidence, thus shifting to the non-movant the burden of demonstrating

by competent summary judgment proof that there is an issue of material fact

warranting trial.'*

When reviewing evidence in connection with a motion for summary judgment, “the court

must disregard all evidence favorable to the moving party that the jury is not required to believe,

and should give credence to the evidence favoring the nonmoving party as well as that evidence

supporting the moving party that is uncontradicted and unimpeached.”'? “Credibility

determinations are not part of the summary judgment analysis.”!* Rule 56 “mandates the entry of

summary judgment .. . against a party who fails to make a showing sufficient to establish the

° Fed. R. Civ. P. 56(a).

10 Id.

11 Quality Infusion Care, Inc. v. Health Care Service Corp., 628 F.3d 725, 728 (5th Cir. 2010).

2 Lindsey v. Sears Roebuck and Co., 16 F.3d 616, 618 (5th Cir.1994) (internal citations omitted).

3 Roberts v. Cardinal Servs., 266 F.3d 368, 373 (Sth Cir.2001); see also Feist v. Louisiana, Dept. of Justice, Office of

the Atty. Gen., 730 F.3d 450, 452 (5th Cir. 2013) (court must view all facts and evidence in the light most favorable

to the non-moving party).

4 Quorum Health Resources, L.L.C. v. Maverick County Hosp. Dist., 308 F.3d 451, 458 (5th Cir. 2002).

existence of an element essential to that party’s case, and on which that party will bear the burden

of proof.”!°

iil.

DISCUSSION

A. The Scope of the Summary Judgment Motion.

Chevron seeks dismissal of Emerald Land’s private claims pertaining to the removal of

buried “flowlines” on the leased property. Emerald Land’s complaint seeks specific performance

and money damages with respect to the removal of flowlines. Relying on the terms of the Mineral

Leases and the Louisiana Supreme Court’s decision in Terrebonne Parish School Board v. Castex

Energy, Inc.,!® Chevron contends that it has no obligation to restore the leased land by removing

all of the flowlines buried on the property. Specifically, the Mineral Leases include granting

language that Chevron contends expressly grants it (or its predecessors) the right to install buried

flowlines on the leased land in connection with its oil and gas exploration and production activities.

Chevron also points out that the Mineral Leases contain no provision that expressly requires it to

restore the land by removing buried flowlines or paying the cost for removing those flowlines.

Chevron further argues that there is no evidence in the summary judgment record showing that the

buried flowlines (as opposed to surface flowlines) have caused any damage to the leased land.

Emerald Land, on the other hand, distinguishes Castex and argues that, unlike the canals

dredged on the leased property in Castex, the flowlines here are foreign equipment attached and

buried on the property.!” Accordingly, Emerald Land argues that Chevron has an obligation to

remove the flowlines as part of its obligation to restore the land to its original condition minus the

'5 Patrick y. Ridge, 394 F.3d 311, 315 (Sth Cir. 2004) (alterations in original) (quoting Celotex v. Catrett, 477 U.S.

317, 322 (1986).

16 393 So. 2d 789 (2005).

17 ECF No. 264 at 3.

“wear and tear” attributable to “ordinary, customary, and necessary acts which must be done by a

drilling company in order to put down a well.”!® Emerald Land also points to evidence in the

summary judgment record showing flowlines exposed at the surface of the property, and

presumably, creating hazards in the use of the property.!? Emerald Land also points to evidence

of leaks and other contamination from flowlines on the property.”?

The record reflects at least two broad categories of flowlines at issue: flowlines buried at

least “plow depth” below the surface (“buried flowlines”), and flowlines located on the surface of

the property or less than plow depth (“surface flowlines”). For purposes of its motion, Chevron

defines “plow depth” as at least three (3) feet below the surface. Chevron thus limits its Motion

for Partial Summary Judgment to the private claims involving the removal of “buried flowlines”—

flowlines at least three feet below the surface. Emerald Land’s Opposition does not always

distinguish between these types of flowlines and often refers to the buried flowlines and surface

flowlines interchangeably. The Court, however, will analyze Chevron’s motion as limited to buried

flowlines.

C. Buried Flowlines

Under the Louisiana Civil Code, a lessee is bound to “return the thing at the end of the

lease in a condition that is the same as it was when the thing was delivered to him, except for

normal wear and tear.”*! A lessee also has a duty to avoid unreasonable or excessive use of the

property during the term of the lease.”” In Castex, however, the Louisiana Supreme Court held that

“in the absence of an expressed lease provision, [the Mineral Code] does not impose or imply duty

18 Castex, 893 So. 2d at 799 (quoting Orhner v. Austral Oil Co., 104 So. 2d 253 (La. App. 3 Cir. 1958)).

19 ECF No. 264 at 7-8.

0 Td. at 9.

21 La. C.C. Art. 2683 (3).

22 Alford v. Chevron U.S.A. Inc., 13 F. Supp. 3d 581, 600 (E.D. La 2014).

to restore the surface to it’s original, pre-lease condition absent proof that the lessee has exercised

his rights under the lease unreasonably or excessively.””? According to the Court, a lessor in the

context of an oil and gas lease “maybe considered to have a given his assent to the ‘wear and tear’

normally involved in rights granted” in a mineral lease.** There, the Court held that the plaintiff

had no claim based on the canals that were dredged on the leased property because the right to

dredge canals was explicitly granted in the lease and, therefore, was merely “wear and tear.”*° In

Marin v. Exxon Mobile Corp.,° the Court clarified its ruling in Castex. According to Marin, a

lessee has a duty to remediate oilfield contamination under the Louisiana Mineral Code’s “prudent

operator standard.”*’ According to the Marin court, oilfield contamination does not constitute

“wear and tear” because such contamination is not a matter that the lessors consented to in the

lease.”® The Court also noted that the oilfield contamination at issue in that case arose from the

“unreasonabl[e] or excessive[]” use of the leased property”® □

Here, Chevron argues that Emerald Land has no private claim requiring it to remove or pay

to remove the buried flowlines because, like the canals in Castex, the Mineral Leases expressly

grant Chevron and its predecessors the right to install flowlines buried under the surface.

Considering the language of the Mineral Leases and the relevant case law, the Court agrees. The

Mineral Leases expressly grant Chevron’s predecessors the right to lay “pipelines” as well as tanks,

stations, telephone lines, and “other structures thereon necessary to produce, save, take care of,

3 893 So. 2d. at 801.

24 Td. at 800.

2 Id. at 800-01.

26 48 So, 3d. 234 (2010). □

27 Td. at 259.

28 Td. at 260.

2 Id.

treat, and transport said products....”3° Although the leases do not explicitly refer to flowlines, the

term “pipelines” encompasses flowlines.?! The Mineral Leases also expressly provide for the

flowlines to be buried: “when required by lessor, lessee shall bury all pipelines below ordinary

plow depths...”2? Therefore, like Castex, Emerald Land (or its predecessors) consented to the

installation of buried flowlines on the leased property.

Emerald Land first argues that Castex is distinguishable from the present case because, in

Castex, the lessee had “altered the land itself by digging canals and ditches....”°? In contrast, here,

the buried flowlines are “foreign equipment to Emerald’s Property” and “[t]he intrusion of this

equipment onto the Property is not a ‘modification’ of the land.’*4Emerald Land’s attempt to

distinguish Castex is not persuasive for at least two reasons. First, installing buried flowlines

underground is arguably a “modification” to the land because it changes or alters the land when

the flowlines are installed even if they are buried.*> Second, and more importantly, the Castex

court’s holding was not based on the nature of the modification—i.e. dredged canals versus buried

flowlines. Instead, the court’s holding was based on the meaning of “wear and tear” in the context

of the Civil Code rule requiring a lessor to return leased property in its original condition minus

“wear and tear.”°° The court construed wear and tear in terms of the “specific rights granted in the

lease.” According to the court: “The lessor may be considered to have given his assent to the ‘wear

30 Exhibits 3, 4, and 5 to the Deposition of Emerald Land Corporation through M. Taylor Darden, Exhibit A to

Chevron’s Motion for Partial Summary Judgment [ECF No. 239-4].

31 Larry W. Lake, Ed., SPE PETROLEUM ENGINEERING HANDBOOK, Ch. 9, at 317 (2006) (defining “flowlines” as

“piping and pipeline systems typically associated with producing wells ....”) (emphasis added).

32 Td.

33 ECF No. 264 at 4.

34 Td.

35 See, e.g, WEBSTERS THIRD NEW INTERNATIONAL DICTIONARY (1981) (defining “modification” as “the act or action

of changing something without fundamentally altering it.”)

36 893 So. 2d. at 800.

and tear’ normally involved in exercising the rights granted.”?” The Mineral Leases here expressly

grant Chevron (or its predecessors) the right to lay flowlines and, at the request of Emerald (or its

predecessors), requires Chevron to bury the flowlines at ordinary plow depth. Thus, Castex’s

holding applies here.

Emerald Land next appears to argue that Chevron is taking inconsistent positions with

respect to buried and surface flowlines. Specifically, the granting language in the Mineral Lease

applies generally to flowlines without distinguishing between buried and surface flowlines. Yet,

Chevron has agreed that the surface flowlines must be removed. In other words, according to

Emerald Land, Chevron’s position on surface flowlines is inconsistent with its argument that

removal of the buried flowlines is not required under Castex: “[N]or [are buried flowlines] more

“necessary and incidental’ to oil and gas operations than the surface equipment such as well heads

and storage tanks Chevron agrees it must remove.”?® The Court disagrees. Castex is grounded on

the lessee’s consent to the “‘wear and tear normally involved in exercising the rights granted.”°?

Based on Emerald Land’s summary judgment filings, it is reasonable to infer that surface flowlines

pose hazards and limit the use of the surface of the leased land in ways that flowlines buried at

least three feet below the surface do not. For example, Emerald Land’s Opposition describes

damage to the leased land caused by flowlines and includes images of flowline debris, but this

evidence appears to be damage and debris from surface flowlines.*° Emerald Land does not point

to any damage that can be specifically traced to buried flowlines. In sum, Chevron’s concession

on removing surface flowlines is not inconsistent with its position that, under Castex, it is not

38 ECF No. 264 at 4.

3? 893 So. 2d. at 800.

40 ECF No. 264 at 7-8.

required to remove flowlines buried at least three feet below the surface pursuant to the Mineral

Leases.

Emerald Land next argues that if Chevron removes any equipment from the leased land

(such as surface flowlines) it must remove all equipment from the land, including buried flowlines.

Emerald Land bases its argument on a provision in the Mineral Leases that states:

Lessee shall have the right at any time during or after the expiration of this lease to remove

all property and fixtures placed by lessee on said land, including the right to draw and

remove all casing.*!

Emerald Land argues that the term “all” means that Chevron cannot pick and choose which

equipment to remove but must remove all equipment. The Court disagrees. This language grants

Chevron the right to remove its equipment and fixtures from the leased land. In this context, the

plain and ordinary meaning of the term “all” is that Chevron’s removal right is not limited to

certain equipment or fixtures but encompasses “all” of the equipment and fixtures on the leased

land. Emerald Land, however, reads this term as creating a limitation on Chevron’s right to

remove—that Chevron can remove all but only all of the equipment and fixtures from the leased

property. Accordingly, Emerald Land is essentially reading an additional requirement into the

lease provision granting Chevron the right to remove property. The plain meaning of this granting

language simply does not limit Chevron’s right to remove equipment and fixtures in the way

Emerald Land argues.

Finally, Emerald Land argues that it is entitled to recover the cost of removing all flowlines

(including buried flowlines) based on the damages provision in the Mineral Leases. Specifically,

these leases provide that:

41 ECF Doc. 177, Ex. A at pp. 85-88, referring to § 13 of exhibits 3, 4, and 5 attached thereto. (30(b)(6) Deposition of

Emerald Land Corporation)

Lessee shall pay all damages caused by its operations hereunder to the land, buildings and

improvements presently existing, and crops now or hereafter planted.”

Emerald Land contends that the flowlines on the leased property have damaged the land by

creating navigation hazards,” that leaks from flowlines are contaminating the property,“* and that

flowlines protruding from the surface are limiting Emerald Land’s ability to enter into leases or

otherwise use the land. Under Castex, Emerald Land does not have a private claim (whether as

damages or specific performance) for the removal of buried flowlines. As with the dredged canals

in Castex, Emerald Land (or its predecessor) consented to the installation of buried flowlines in

the Mineral Lease and (like the canals in Castex) the mere presence of these buried flowlines does

not amount to “damages” in the sense of triggering the damages provision of the Mineral Lease or

a claim under the Mineral Code. On the other hand, even under Castex, Emerald Land could assert

private claims under the Mineral Leases and the Mineral Code with respect to buried flowlines if,

for example, those flowlines leaked fluids that contaminated the leased property.*°

42 Td. (emphasis added).

4 ECF No. 264, Ex. 6, Rule 30(b)(6) Depo. of Emerald, pp. 84: 5 ~ 12,214: 5-8.

“4 ECF No. 264, Ex. 7, Depo. of Rudy Sparks, at 71:10 — 18.

4 Td. at 175: 18 — 176: 5; 177: 18 — 24.

46 Marin, 48 So. 3d. at 259-60. According to the court in Marin:

In our view, the duty to remediate oilfield contamination exists under the prudent operator standard of the

Mineral Code by virtue of our holding in Castex, and it certainly exists under the Civil Code. The holding in

Castex merely recognized that in absence of unreasonableness or excessiveness, the lessee has the duty to

restore the surface minus normal wear and tear. Where the lessee has operated unreasonably or excessively,

as in this case, the lessee has additional obligations, e.g., the obligation to correct the damage due to the

unreasonable or excessive operations However, that does not necessarily mean that the lessee has a duty to

restore the land to its pre-lease condition, particularly where, unlike dredged canals, subsurface

contamination is not overt and cannot be considered “wear and tear.”

The damage caused by Exxon's unreasonable operations was the contamination of the soil, and it is clear

plaintiffs did not consent to this contamination. Therefore, Exxon's additional restoration duty is the duty to

correct the contamination.

Id, (citations omitted).

Chevron contends that, even if Emerald Land retains a private claim for damages caused

by buried flowlines, it has come forward with no evidence to support a damage claim with respect

to buried flowlines. The Court agrees. The evidence cited by Emerald Land appears to reflect

damage caused largely by surface flowlines, which are not the subject of the present motion. In

three instances, Emerald Land refers to “buried” flow lines:

e “Michael Fogarty, former President of Emerald, testified that ‘there were a couple

of times when there was some gas bubbling up, you know, out of a flowline’ that

was buried under the Property’s surface."

e “Mr. Cantrell took photographs of ‘flowlines sticking up that you got to watch for,’

and explained that the buried flowlines presented navigational hazards to boaters,

hunters and other recreational users.’**

e “[B]uried flowlines often do not actually remain buried—they migrate to the

surface and cause serious navigational hazards.””?

But these three statements do not create a triable issue with respect to buried flowlines. The

statement attributed to Fogarty is not supported by his deposition testimony. In his deposition,

Fogarty does refer to “gas bubbling up, you know, out of a flowline,” but he never identifies

whether the flowline was a surface flowline (on or less than three feet below the surface) or a

buried flowline—he merely refers to a “flowline.” Moreover, the statement attributed to Cantrell

appears to refer to surface flowlines causing navigational hazards. Finally, with respect to the

“migration” of buried flowlines, Emerald Land points to no evidence showing that flowlines buried

at least three below the surface have (or are likely to) “migrate” to the surface. At most the evidence

presented by Emerald Land is speculative and conclusory, and is not sufficient to create a triable

issue on a damages claim with respect to buried flowlines.

47 ECF No. 264 at 9.

48 Id.

49 Td. at 6.

In sum, Chevron’s Motion for Partial Summary Judgment is GRANTED and Emerald

Land’s private claims against Chevron are DISMISSED to the extent that they are based on the

removal of buried flowlines—flowlines buried at least three feet under the surface of the leased

land.*° In all other respects, the motion is DENIED.

/ ~

THUS DONE in Chambers on this 44rd 2pFt-

□

WK

A \ Au

ROBERT R. SUMMERHAYS

UNITED STATES DISTRIC JUDGE

°° Chevron’s Motion for Partial Summary Judgment as well as this Court’s ruling on that motion does not address any

claim that Emerald Land may have with respect to decommissioning the buried flowlines as opposed to physically

removing the flowlines. For example, Chevron points out that, as part of the plugging and abandonment process that

certain actions would be taken to flush and otherwise decommission the buried flowlines to prevent any oilfield

contamination. The Court’s ruling takes no position on any claims that may arise from the failure to undertake this

decommissioning process.