TOTAL E&P USA, Inc. v. Marubeni Oil & Gas (USA), Inc.
MEMORANDUM AND ORDER denying 2 Motion to Remand. Joint Discovery/Case Management Plan due 11/7/16, and initial pretrial and scheduling conference set for 11/14/16 at 2:00 p.m.(Signed by Judge Nancy F Atlas) Parties notified.(TDR, 4)
United States District Court
Southern District of Texas
IN THE UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF TEXAS
TOTAL E&P USA, INC.,
MARUBENI OIL & GAS USA, INC.,
October 14, 2016
David J. Bradley, Clerk
CIVIL ACTION NO. H-16-2671
MEMORANDUM AND ORDER
This removed case is before the Court on the Motion to Remand [Doc. # 2] filed
by Plaintiff Total E&P USA, Inc. (“TEP”), to which Defendant Marubeni Oil & Gas
USA, Inc. (“MOGUS”) filed a Response [Doc. # 16], and TEP filed a Reply [Doc.
# 20]. Having considered the full record and applicable legal authorities, the Court
concludes that there is federal subject matter jurisdiction pursuant to the Outer
Continental Shelf Lands Act (“OCSLA”). As a result, the Motion to Remand is
TEP is a corporation engaged in the oil and gas industry. Prior to July 1, 2006,
TEP owned an undivided 25.834% interest in the Canyon Express Pipeline System
(“CEPS”) on the Outer Continental Shelf (“OCS”). The management and operation
of the CEPS was governed by the CEPS Operating Agreement executed by the CEPS
owners on June 1, 2000.
On July 1, 2006, TEP assigned all its rights in the CEPS to ATP Oil & Gas
Corporation (“ATP”). In accordance with the Purchase and Sale Agreement, ATP
assumed all of TEP’s obligations in connection with the CEPS, including “all
Plugging and Abandonment obligations.” See Purchase and Sale Agreement, Exh. C
to Original Petition, § 9.2.
In August 2012, ATP filed a petition pursuant to Chapter 11 of the United
States Bankruptcy Code. In February 2014, United States Bankruptcy Judge Marvin
Isgur entered a Final Order approving the sale of ATP’s interest in the CEPS to
Eventually, the Bureau of Safety and Environmental Enforcement (“BSEE”)
and the Bureau of Ocean Energy Management (“BOEM”) required that the CEPS be
MOGUS began the decommissioning process and sought
contribution from TEP for the related expenses.
TEP filed this lawsuit in Texas state court on August 23, 2016, seeking a
declaratory judgment that it owes no obligation to reimburse MOGUS for the
decommissioning costs. MOGUS filed a timely Notice of Removal, removing the
lawsuit to federal court pursuant to OCSLA. TEP filed a timely Motion to Remand,
which has been fully briefed and is now ripe for decision.
APPLICABLE LEGAL STANDARDS
“‘Federal courts are courts of limited jurisdiction.’” Gunn v. Minton, __ U.S.
__, 133 S. Ct. 1059, 1064 (2013) (quoting Kokkonen v. Guardian Life Ins. Co. of Am.,
511 U.S. 375, 377 (1994)); Rasul v. Bush, 542 U.S. 466, 489 (2004); Hotze v. Burwell,
784 F.3d 984, 999-1000 (5th Cir. 2015); Howery v. Allstate Ins. Co., 243 F.3d 912,
916 (5th Cir. 2001). “‘They possess only that power authorized by Constitution and
statute, which is not to be expanded by judicial decree.’” Rasul, 542 U.S. at 489
(quoting Kokkonen, 511 U.S. at 377 (citations omitted)). The court “must presume
that a suit lies outside this limited jurisdiction, and the burden of establishing federal
jurisdiction rests on the party seeking the federal forum.” Howery, 243 F.3d at 916
(citing Kokkonen, 511 U.S. at 377).
OCSLA provides federal question jurisdiction over the Outer Continental Shelf
by extending “[t]he Constitution and laws and civil and political jurisdiction of the
United States . . . [to the OCS] and all installations and other devices permanently or
temporarily attached to the seabed . . . for the purpose of exploring for, developing,
or producing resources therefrom.” Baker v. Hercules Offshore, Inc., 713 F3d 208,
213 (5th Cir. 2013) (quoting 43 U.S.C. § 1333(a)(1)). “The jurisdictional grant in
OCSLA is broad, covering a wide range of activity occurring beyond the territorial
waters of the states.” Id. (internal quotations and citation omitted).
“A plaintiff does not need to expressly invoke OCSLA in order for it to apply.”
Id. (citing Amoco Prod. Co. v. Sea Robin Pipeline Co., 844 F.2d 1202, 1205 (5th Cir.
1988)); see also In re Deepwater Horizon, 745 F.3d 157, 163 (5th Cir. 2014). Indeed,
“the well-pleaded complaint rule does not apply to removal under the OCSLA.”
Plains Gas Solutions, LLC v. Tenn. Gas Pipeline Co., LLC, 46 F. Supp. 3d 701, 703
(S.D. Tex. 2014) (citing Amoco, 844 F.2d at 1205).
“Courts typically assess jurisdiction under [OCSLA] in terms of whether (1) the
activities that caused the injury constituted an ‘operation’ ‘conducted on the outer
Continental Shelf’ that involved the exploration and production of minerals, and (2)
the case ‘arises out of, or in connection with’ the operation.” In re Deepwater
Horizon, 745 F.3d at 163. An “operation” is the performance of “some physical act”
that involves the “exploration, development, or production of minerals” on the Outer
Continental Shelf. Tenn. Gas Pipeline v. Houston Cas. Ins. Co., 87 F.3d 150, 154 (5th
Cir. 1996); Plains Gas, 46 F. Supp. 3d at 705. “Development” is defined under
OCSLA as “those activities which take place following discovery of minerals in
paying quantities . . ..” 43 U.S.C. § 1331(l). “Production” is defined under OCSLA
as “those activities which take place after the successful completion of any means for
the removal of minerals . . ..” 43 U.S.C. § 1331(m). Activities relating to the
plugging and abandoning of oil and gas facilities on the OCS constitute operations
under OCSLA. See GOM Shelf, LLC v. Sun Operating Ltd. P’ship, 2008 WL 901482,
*8 (S.D. Tex. Mar. 31, 2008); Chieftain Int’l U.S., Inc. v. Statoil Exploration U.S.,
Inc., 1999 WL 350831, *2 (E.D. La. June 1, 1999).
TEP argues that the relevant activities for purposes of this declaratory judgment
action are MOGUS’s attempts to collect payment from TEP for the decommissioning
expenses. The Court finds the argument unpersuasive. The only claim in this case is
one for a declaration regarding TEP’s obligation for contribution toward the
decommissioning expenses. The declaration regarding contribution is the relief TEP
seeks, not the activity that caused the injury. Instead, the relevant activities are those
involved in the decommissioning process for which MOGUS seeks contribution,
which constitute an “operation” under OCSLA. See, e.g., GOM Shelf, 2008 WL
901482 at *8; Chieftain, 1999 WL 350831 at *2. To hold otherwise would permit a
party to avoid clear OCSLA jurisdiction by filing a pre-emptive declaratory judgment
TEP’s reliance on the Plains Gas decision is unavailing. In that case, Hon.
Keith Ellison held that “Targa’s demands for deficiency payments” was not an
“operation” for purposes of OCSLA jurisdiction. See Plains Gas, 46 F. Supp. 3d at
In that case, however, the deficiency payments were not related to
decommissioning or other operations on the OCS. The plaintiff in Plains Gas had a
plant located onshore, not on the OCS. At its plant, Plains Gas removed heavy
hydrocarbons from natural gas and, pursuant to a Hydrocarbon Exchange Agreement
with Targa Liquids Marketing and Trade, LLC (“Targa”), sent this removed byproduct
(“raw make”) to Targa for further breakdown into components propane, ethane, and
butane. Plains Gas would ship this “raw make” from its onshore plant, through an
onshore pipeline, to Targa’s plant also located onshore. Pursuant to the Hydrocarbon
Exchange Agreement, Plains Gas was required deliver a minimum amount of “raw
make” to Targa each quarter. If Plains Gas failed to deliver the minimum amount,
Plains Gas was required to make a deficiency payment to Targa unless the inability
to make the minimum delivery was the result of force majeure. When Plains Gas
failed to make the minimum delivery, Targa demanded the deficiency payment.
Plains Gas filed a declaratory judgment action seeking a declaration that the force
majeure provisions of the Hydrocarbon Exchange Agreement applied to excuse the
failure to deliver the minimum amount of “raw make.” See Plains Gas’s First
Amended Petition, Civil Action No. 4:14-0472 ECF Doc. # 1-8, ¶¶ 71-73.1 Unlike the
The Court may take judicial notice of matters of public record, including court
situation between TEP and MOGUS, the dispute between Plains Gas and Targa did
not involve activity on the OCS. In this case, however, the activity for which
MOGUS seeks payment from TEP occurred at least in part on the OCS. As a result,
the Court finds that the decommissioning activities that caused MOGUS to seek
contribution from TEP constituted an “operation” on the OCS that involved
production of minerals for purposes of OCSLA jurisdiction. MOGUS has satisfied
the first prong of the jurisdictional analysis.
It is clear from TEP’s state court Petition that this lawsuit arises out of
MOGUS’s decommissioning activities and the dispute regarding whether TEP has any
financial obligation to pay for them.
This satisfies the second prong of the
jurisdictional analysis. As a result, the Court has federal subject matter jurisdiction
over this dispute based on OCSLA.
CONCLUSION AND ORDER
As explained above, the Court has subject matter jurisdiction over this dispute
pursuant to OCSLA. Accordingly, it is hereby
ORDERED that Plaintiff’s Motion to Remand [Doc. # 2] is DENIED. It is
pleadings in other cases. See, e.g., Funk v. Stryker Corp., 631 F.3d 777, 783 (5th Cir.
ORDERED that counsel shall file their Joint Discovery/Case Management Plan
by November 7, 2016, and shall appear for an initial pretrial and scheduling
conference at 2:00 p.m. on November 14, 2016.
SIGNED at Houston, Texas, this 14th day of October, 2016.
NAN Y F. ATLAS
STATES DISTRICT JUDGE
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