Louisiana Oilfield Indemnity Act Does Not Apply to Well Plug and Abandon Contract
Crescent Energy Servs., L.L.C. v. Carrizo Oil & Gas, Inc., 896 F.3d 350 (5th Cir. 2018).
By: Cameron Robichaux
The Fifth Circuit affirmed the decision of the United States District Court for the Eastern District of Louisiana which applied the test of In re Doiron, 849 F.3d 602 (5th Cir. 2017) to a claim for contractual indemnity in a contract to plug and abandon an oil well. The issue was whether Federal Maritime law or Louisiana state law applied to the contract. Louisiana law nullifies indemnity clauses as against public policy in certain oilfield contracts, see La. Stat. Ann. § 9:2780, but, Federal Maritime law does not prohibit these clauses. To determine which law is applicable, the Fifth Circuit recently developed a new test, In re Doiron, supra.
The Doiron test asks (1) "is the contract one to provide services to facilitate the drilling or production of oil and gas on navigable waters?" and (2) "does the contract provide or do the parties expect that a vessel will play a substantial role in the completion of the contract?"In applying the test, the court found plugging and abandoning oil wells is "part of the total life cycle of oil and gas drilling" because state law regulates from exploration to plugging and restoring as one process. The court also rejected the argument that the vessel was attached to the ground, and only looked at navigability in fact of the location. The first prong was satisfied.Second, the court denied claims that the work was not inherently maritime, but instead found that a substantial amount of work needed to be done on the vessel. The court drew from Jones Act cases to establish a rule of thumb. Thirty percent of work done on a vessel is a substantial amount. The evidence showed that fifty percent of all work was “wireline” work which was done by the sole crane on the vessel. The court found this was a substantial role. The substantive maritime law preempted the state statute allowing the enforcement of the indemnity clause.
