TOTAL E&P USA, Inc. v. Marubeni Oil & Gas (USA), Inc.

REPLY in Support of 99 MOTION Apply Louisiana Law Under OCSLA

S.D. Tex.March 19, 2018

UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF TEXAS HOUSTON DIVISION TOTAL E&P USA, INC. Plaintiff/Counter-Defendant v. MARUBENI OIL & GAS (USA) INC. Defendant/Counter-Claimant § § § § § § § § § CIVIL ACTION NO. 4:16-CV-2671 JUDGE NANCY ATLAS TOTAL E&P USA INC.’s Reply in Support of its Motion to Apply Louisiana Law Under OCSLA Case 4:16-cv-02671 Document 130 Filed in TXSD on 03/19/18 Page 1 of 15 ii TABLE OF CONTENTS Page Summary of Argument ........................................................................................................ 1 Argument ............................................................................................................................. 3 A. Factor 1: MOGUS brushes aside geographic proximity. ............................. 3 B. Factors 2 and 4: MOGUS almost singularly relies on Coastal Zone Management maps that were not created to—and so are unhelpful to—determine adjacency. .............................................................................. 3 1. CZM maps fulfill multiple non-OCSLA purposes, and so they include overlapping areas that do not clearly indicate in which single state a given location lies. ........................................................ 4 2. CZM maps ignore the impact of Louisiana’s peninsula and the actual direction of the land borders, and thus fail to fulfill OCSLA’s line-drawing requirements. ............................................... 6 3. The decision in Danos addressed a different block and did not grapple with the overlapping areas that make the CZM maps problematic. ........................................................................................ 7 C. Factor 3: Prior court decisions for the most relevant blocks favor Louisiana as the adjacent state. ..................................................................... 9 1. All other blocks within Mississippi Canyon for which a court has determined or stated adjacency have pointed to Louisiana. ........ 9 2. MOGUS’s cited court decisions are less relevant because they determined adjacency for blocks well north of MC 305, MC 348, and the majority of CEPS. ........................................................ 10 Conclusion ......................................................................................................................... 11 Case 4:16-cv-02671 Document 130 Filed in TXSD on 03/19/18 Page 2 of 15 iii TABLE OF AUTHORITIES Page Danos & Curole Marine Contractors, Inc. v. BP Am. Prod. Co., 61 F. Supp. 3d 679 (S.D. Tex. 2014) ......................................................................... 7, 8 Lewis v. Helmerich & Payne Int’l Drilling Co., 2015 WL 1040458 (E.D. La. 2015) ............................................................................. 10 Reeves v. B.S. Welding, Inc., 897 F.2d 178 (5th Cir. 1990) ........................................................................................... 7 Snyder Oil Corp. v. Samedan Oil Corp., 208 F.3d 521 (5th Cir. 2000) ............................................................................ 3, 8, 9, 10 Statutory Authorities 16 U.S.C. §§ 1451–52 ......................................................................................................... 5 43 U.S.C. § 1333(a)(2)(A) ............................................................................................... 6, 7 Rules and Regulations 15 CFR § 930.57 .................................................................................................................. 5 Additional Authorities Coastal Zone Management Act, Office for Coastal Management, https://coast.noaa.gov/czm/act/ (last visited Jan. 10, 2018) ............................................ 4 Coastal Zone Management, National Ocean Service https://oceanservice.noaa.gov/tools/czm/ (last visited Jan. 10, 2018). ........................... 5 Case 4:16-cv-02671 Document 130 Filed in TXSD on 03/19/18 Page 3 of 15 1 UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF TEXAS HOUSTON DIVISION TOTAL E&P USA, INC. Plaintiff/Counter-Defendant v. MARUBENI OIL & GAS (USA) INC. Defendant/Counter-Claimant § § § § § § § § § CIVIL ACTION NO. 4:16-CV-2671 JUDGE NANCY ATLAS TOTAL E&P USA, INC. (“TEP USA”) files this Reply in Support of its Motion to Apply Louisiana Law Under OCSLA (Dkt. 99). MOGUS filed a similar motion asking the Court to apply Alabama law (Dkt. 93), to which TEP USA has responded (Dkt. 113). The Court should apply Louisiana law to any matters in this dispute that are governed by state law under the Outer Continental Shelf Lands Act (“OCSLA”). Accordingly, the Court should grant TEP USA’s motion (Dkt. 99) and deny MOGUS’s motion (Dkt. 93). Summary of Argument The parties do not dispute that a four-factor test applies for determining which state’s law governs this case. As to the first and most obvious of these factors—geographic proximity—MOGUS does not dispute that the Mississippi Canyon 305 (“MC 305”) and 348 (“MC 348”) blocks, along with the Canyon Express Pipeline System (“CEPS”), are closest to Louisiana. MOGUS simply argues that fact “is not necessarily conclusive,” MOGUS Resp. at 2, even as it provides no conclusive argument as to any other factor. Case 4:16-cv-02671 Document 130 Filed in TXSD on 03/19/18 Page 4 of 15 2 For instance, when analyzing the third factor—prior court cases—MOGUS downplays the significance of the many cases which decided (or acknowledged) that numerous other blocks within Mississippi Canyon are adjacent to Louisiana. Even where some of those cases did not fully analyze the four factors, they remain relevant to this Court’s inquiry. Indeed, in support of its arguments for Alabama, MOGUS itself relies on prior cases that did not fully analyze the four factors—but all of which addressed blocks in fields other than Mississippi Canyon. As to the second and fourth factors—prior agency determinations and projected boundaries—MOGUS relies on two Coastal Zone Management (“CZM”) maps. But upon proper analysis, even those maps reflect that Louisiana has at least an equal claim as Alabama as the adjacent state for MC 305, MC 348, and CEPS. Indeed, a right-of-way CZM map relied upon by MOGUS expressly excludes MC 305 and MC 348 from the Alabama area. Regardless, the CZM maps do not purport to satisfy the requirements of OCSLA’s boundary-drawing instructions and are of little probative value. Worse, MOGUS ignores other more probative maps drawn by the Bureau of Ocean Energy Management (“BOEM”) (or its predecessor)—the agency responsible for leasing various blocks in the Gulf—that place MC 305, MC 348, and CEPS squarely within Louisiana’s boundaries. In short, the four-factor analysis that controls the Court’s inquiry on balance points definitively to Louisiana as the controlling state law, when and where such law applies. Case 4:16-cv-02671 Document 130 Filed in TXSD on 03/19/18 Page 5 of 15 3 Argument On the whole, the four factors of the “adjacency” test point to Louisiana as the “adjacent state” for MC 305, MC 348, and CEPS. This is particularly so where the parties do not dispute that Louisiana is the geographically closest state, and each other factor at least equally points to Louisiana. A. Factor 1: MOGUS brushes aside geographic proximity. MOGUS expressly agrees that all three assets—including CEPS—are closest to Louisiana. See MOGUS Resp. at 3 n.5. At best, MOGUS argues that the other factors outweigh this factor. Nonetheless, the undisputed fact remains that Louisiana is, in reality, the closest adjacent state. B. Factors 2 and 4: MOGUS almost singularly relies on Coastal Zone Management maps that were not created to—and so are unhelpful to— determine adjacency. BOEM is the “responsible federal agency” for making the OCSLA adjacency determination, and it has determined that MC 305, MC 348, and CEPS are all adjacent to Louisiana.1 In 2006, BOEM’s predecessor, the Mineral Management Service (“MMS”), published in the Federal Register its “Projected State Boundaries,” which places all three assets well within Louisiana’s border. See TEP USA Mot. Ex. A. After reorganizing as BOEM, the agency reaffirmed its prior map in 2010 when it published the Outer Continental Shelf Administrative Boundaries, which draws the same boundaries as the 1 See Snyder Oil Corp. v. Samedan Oil Corp., 208 F.3d 521, 524 (5th Cir. 2000) (identifying MMS (and now BOEM) as the “responsible federal agency”); see also TEP USA Mot. at 5–6 and Ex. B (indicating that MMS (and now BOEM) is the federal agency directly responsible for oil and gas mapping, leasing, and planning in the Gulf). Case 4:16-cv-02671 Document 130 Filed in TXSD on 03/19/18 Page 6 of 15 4 2006 map. See TEP USA Mot. Ex. C. Not surprisingly, TEP USA relies on the determinations made by the agencies with authority over the leasing, development, and decommissioning of the properties in dispute between the parties.2 To the contrary, MOGUS ignores these maps, seeking instead to rely on CZM maps created for very different statutory purposes. 1. CZM maps fulfill multiple non-OCSLA purposes, and so they include overlapping areas that do not clearly indicate in which single state a given location lies. MOGUS argues that the Court should find “probative” the CZM maps included on BOEM’s website. MOGUS Resp. at 8–9. But nowhere in its briefing does MOGUS explain exactly how these maps are “used” and what relevance such use has to the OCSLA adjacency determination. Even a cursory dive into the creation and purpose of CZM maps indicates that they are not helpful in identifying in which single state a block lies. The CZM Act is administered by the National Oceanic and Atmospheric Administration (“NOAA”), not BOEM or BSEE.3 Moreover, the CZM Act addresses a 2 Other agencies, like the U.S. Energy Information Administration, have also determined that the assets are adjacent to Louisiana. TEP USA Mot. at 6–7 and Ex. F. MOGUS quibbles with this determination as “less probative,” MOGUS Resp. at 7, but still, there it is. MOGUS also quibbles with other proffers of agency determinations from TEP USA as “random” or “merely recit[ing]” that the assets are closer to Louisiana than Alabama, MOGUS Resp. at 6, but still, there they are. See TEP USA Mot. at 6–7 and Exs. D and E. 3 See Coastal Zone Management Act, Office for Coastal Management, https://coast.noaa.gov/czm/act/ (last visited Jan. 10, 2018). Case 4:16-cv-02671 Document 130 Filed in TXSD on 03/19/18 Page 7 of 15 5 “wide range of issues” beyond the purview of BOEM and BSEE, including climate change, public access, habitat protection, and water quality.4 Consistent with these broad purposes, CZM maps are designed to indicate all of the multiple states that may have a shared interest in the above issues related to the Gulf. This is why the “Notice” to pipeline right-of-way holders to which MOGUS refers, MOGUS Resp. at 7–8, expressly states that right-of-way applicants must “[p]rovide a coastal zone consistency certification (15 CFR § 930.57) to each affected State.” See MOGUS Resp. Ex. A-4 at 5 (emphasis added). Given the close proximity of states surrounding the Gulf, and the peninsular and archipelagic “boot” of Louisiana, most of the blocks south of Alabama and Mississippi are located within multiple states’ zones. See MOGUS Resp. Ex. E (right-of-way map reflecting substantial overlap among zones) and Ex. D (OCS plans map reflecting that all of Mississippi’s zone overlaps with Louisiana’s, and half of Alabama’s overlaps with Florida). Thus, under CZM policies, Alabama is merely “an affected state” with respect to blocks in its zone. MOGUS Resp. Ex. A-4 at 5 (emphasis added). One of MOGUS’s preferred CZM maps does not even place MC 305 and MC 348 within Alabama’s borders. See MOGUS Resp. Ex. E. Indeed, the CZM appendix MOGUS cites expressly excludes MC 305 and MC 348 from its list of blocks for which Alabama is 4 See Coastal Zone Management, National Ocean Service, https://oceanservice. noaa.gov/tools/czm/ (last visited Jan. 10, 2018); see also CZM Act §§ 302–03 (codified at 16 U.S.C. §§ 1451–52) (setting out many broad findings and purposes for passing CZM Act). Case 4:16-cv-02671 Document 130 Filed in TXSD on 03/19/18 Page 8 of 15 6 an affected state (and actually locates MC 305 and MC 348 within no state’s zone). See MOGUS Resp. Ex. A-4 at 6. That same appendix also states that “Louisiana is an affected State if the proposed ROW pipeline is adjacent to the State of Louisiana or if any support facilities will be located in the State.” MOGUS Mot. Ex. A-4 at 5 (emphasis added). It is undisputed that the main support facilities for operations at MC 305, MC 348, and, in particular, CEPS, were located in Louisiana.5 Thus, Louisiana is itself “an affected state” for CZM purposes. The CZM maps thus (and, at least, also) point to Louisiana. Given the broad purposes of the CZM maps and the overlapping areas they contain, they are simply less probative than BOEM’s administrative boundaries map for determining which single state is adjacent for purposes of OCSLA. 2. CZM maps ignore the impact of Louisiana’s peninsula and the actual direction of the land borders, and thus fail to fulfill OCSLA’s line-drawing requirements. On their face, the CZM maps are flawed with respect to OCSLA’s mandate. OCSLA established that the President would publish “projected lines extending seaward and defining” the area of each state as “if its boundaries were extended seaward to the outer margin of the outer Continental Shelf.” See 43 U.S.C. § 1333(a)(2)(A). Just as on land, drawing state boundaries in the deepwater Gulf of Mexico is—as a matter of simple logic and sound policy—necessarily a mutually exclusive endeavor. No given location can lie 5 See, e.g., Ex. G. This exhibit contains only the first page of a “Shorebase Activity Report,” a spreadsheet produced by MOGUS in native form (MOGUS441613). As reflected on this front page of the report, the “shorebase” supporting CEPS hydrate remediation and pipeline abandonment was in Port Fourchon, Louisiana. Case 4:16-cv-02671 Document 130 Filed in TXSD on 03/19/18 Page 9 of 15 7 within two states, or it undermines the very purpose of drawing exclusive boundary areas. And so, the overlapping boundaries reflected in the CZM maps are plainly contrary to the mandate to extend state boundaries “seaward to the outer margin of the outer Continental Shelf.” 43 U.S.C. § 1333(a)(2)(A). Indeed, the CZM maps simply draw the boundaries of Louisiana, Mississippi, Alabama, and Florida in a straight, north-south line rather than as a continuation of their land borders. This is particularly glaring with respect to the angled land border between Louisiana and Mississippi. This runs contrary to evidence the Fifth Circuit considered under factor 4 in Reeves (and relied on by Snyder), that “the boundary between [state 1] and [state 2] projected out into the Gulf in its original direction from the shore.” Reeves v. B.S. Welding, Inc., 897 F.2d 178, 180 (5th Cir. 1990) (emphasis added). In short, the projected boundary lines on the CZM maps are simply arbitrary, running straight lines directly south that take no account of Louisiana’s land borders, its peninsula, and its archipelago. 3. The decision in Danos addressed a different block and did not grapple with the overlapping areas that make the CZM maps problematic. MOGUS suggests the decision in Danos & Curole Marine Contractors, Inc. v. BP Am. Prod. Co., 61 F. Supp. 3d 679 (S.D. Tex. 2014), is persuasive when weighing the Snyder factors. See MOGUS Resp. at 5–9. Danos is not binding here. That case determined the adjacency of Viosca Knoll 915, a block in an entirely different field and well north of MC 305 and MC 348. See id. at 681. This field was thus much closer geographically to Alabama. Case 4:16-cv-02671 Document 130 Filed in TXSD on 03/19/18 Page 10 of 15 8 Danos is also unpersuasive in its interpretation of 43 U.S.C. § 1333(a)(2)(A). One of the parties in Danos submitted the MMS/BOEM Projected State Boundaries Map, which draws exclusive state boundaries, and upon which TEP USA relies. See TEP USA Mot. Exs. A and C. The Danos court determined that the MMS map had less probative value as to factor 2 of the Snyder inquiry because the map did not “completely follow the statute … because the state’s borders do not extend to the outer margin of the OCS, as Mississippi’s boundary and Alabama’s boundary stop short of the OCS.” 61 F. Supp. 3d at 690. But the plain language of the statute does not demand that each state have some area that extends all the way to the outer limit. It simply requires that state boundary lines extend seaward such that they account for the entire OCS waters, which can plainly occur even if two states’ boundaries converge before reaching all the way to the outer limit. In this way, both Mississippi and Alabama’s boundaries extend to their outer margins within the OCS waters while accounting for the relative and merging boundary with Louisiana and Florida. This method is logical and ensures that every location in the Gulf lies within only one state’s area. Moreover, Danos neglected to note that it is the CZM maps that actually fail the requirements of § 1333(a)(2)(A) because they do not draw exclusive borders, do not extend the existing land borders seaward, and create overlapping areas. See supra, Part B.2. As such, the Court should reject Danos’s reasoning and give greater weight to the MMS/BOEM maps, or, at the very least, consider them equally alongside the CZM maps for purposes of factors 2 and 4. Case 4:16-cv-02671 Document 130 Filed in TXSD on 03/19/18 Page 11 of 15 9 C. Factor 3: Prior court decisions for the most relevant blocks favor Louisiana as the adjacent state. 1. All other blocks within Mississippi Canyon for which a court has determined or stated adjacency have pointed to Louisiana. TEP USA has already explained that every case to address the adjacency of other blocks in Mississippi Canyon has determined or acknowledged that each of those blocks was adjacent to Louisiana for purposes of OCSLA. TEP USA Mot. at 11–12. Simply put, treating blocks in the same field the same, where possible, promotes consistency and predictability in applying OCSLA’s choice of law analysis. MOGUS points out the obvious, that CEPS itself traverses north from Mississippi Canyon. MOGUS Resp. at 9–10. But TEP USA’s point was equally obvious: MC 305 and MC 348, as two of the three assets at issue, are in Mississippi Canyon. MOGUS goes on to make a point about blocks it expressly acknowledges are not at issue here—Viosca Knoll Blocks 38 and 98—arguing that one is closer geographically to Alabama, and the other is closer geographically to Louisiana. MOGUS Resp. at 11. MOGUS’s exact point is unclear, but it cannot possibly matter in any event, where MOGUS has conceded that MC 305, MC 348, and CEPS are all closest geographically to Louisiana. See MOGUS Resp. at 3 n.5. MOGUS quibbles with some of the decisions cited by TEP USA that they did not conduct a robust Snyder analysis and instead accepted a stipulation among the parties. MOGUS Resp. at 11–14. Even so, these courts had to—and did—make an adjacency determination. See Snyder, 208 F.3d at 523 (because President has not drawn definitive boundaries, “courts must adjudicate adjacency in private disputes governed by OCSLA” Case 4:16-cv-02671 Document 130 Filed in TXSD on 03/19/18 Page 12 of 15 10 (emphasis added)). Stipulation or not, these courts decided that Louisiana was adjacent. Regardless, MOGUS is being disingenuous. As noted in TEP USA’s response to MOGUS’s own choice of law motion, MOGUS cited several cases outside the Mississippi Canyon block that also lack a robust Snyder analysis for the same reason. See TEP USA Resp. to MOGUS Mot. for Partial Summ. J. on Choice of Law (Dkt. 113) at 11–12. 2. MOGUS’s cited court decisions are less relevant because they determined adjacency for blocks well north of MC 305, MC 348, and the majority of CEPS. MOGUS purports to provide the Court with prior court determinations for blocks that are assertedly “within the [v]icinity” of the assets. MOGUS Resp. at 16. Yet every one of those blocks are well north of MC 305 and MC 348 and located in entirely different fields. Indeed, one of the authorities MOGUS cites referenced other court determinations where “the block at issue ‘is ever so slightly east of the Block discussed in’ [the prior case].” MOGUS Resp. at 10 n.34 (emphasis added) (quoting Lewis v. Helmerich & Payne Int’l Drilling Co., 2015 WL 1040458, at *4 (E.D. La. 2015)). To the contrary, the blocks in the decisions MOGUS asks the Court to look to are not “ever so slightly” north of the assets—particularly MC 305 and MC 348—they are well beyond them. MOGUS singles out Snyder Oil Corp. v. Samedan Oil Corp., 208 F.3d 521 (5th Cir. 2000), for special attention. See MOGUS Resp. at 15. The court there determined—based on additional evidence, including expert evidence, not before this Court—that the northernmost block on CEPS was adjacent to Alabama. As TEP USA has acknowledged, the northernmost points of CEPS do in fact approach more closely to Alabama. Even so, Case 4:16-cv-02671 Document 130 Filed in TXSD on 03/19/18 Page 13 of 15 11 all of CEPS is geographically closest to Louisiana, and MMS and BOEM maps place all of it within Louisiana’s projected borders. See TEP USA Mot. Exs. A and C. Conclusion For the reasons stated above, and as argued in TEP USA’s prior briefing (Dkts. 99 and 113), TEP USA requests that the Court grant its Motion to Apply Louisiana Law Under OCSLA. At the same time, the Court should deny MOGUS’s Motion for Partial Summary Judgment on Choice of Law (Dkt. 93). Dated: March 19, 2018. Respectfully submitted, /s/ Charles Eskridge Charles Eskridge Texas Bar No. 06666350 charleseskridge@quinnemanuel.com Karl Stern Texas Bar No. 19175665 karlstern@quinnemanuel.com Kate Kaufmann Shih Texas Bar No. 24066056 kateshih@quinnemanuel.com Carl Hennies Texas Bar No. 24104029 carlhennies@quinnemanuel.com QUINN EMANUEL URQUHART & SULLIVAN, LLP 711 Louisiana St., Suite 500 Houston, Texas 77002 713.221.7000 – Telephone 713.221.7100 – Facsimile Philip G. Eisenberg Texas Bar No. 24033923 peisenberg@lockelord.com Alicia Castro acastro@lockelord.com Texas Bar No. 24069705 Case 4:16-cv-02671 Document 130 Filed in TXSD on 03/19/18 Page 14 of 15 12 LOCKE LORD LLP 600 Travis St., Suite 2800 Houston, Texas 77002 713.226.1200 – Telephone 713.223.3717 – Facsimile ATTORNEYS FOR PLAINTIFF/COUNTER-DEFENDANT TOTAL E&P USA, INC. CERTIFICATE OF SERVICE A copy of the foregoing reply was served on all counsel of record for the parties via CM/ECF on March 19, 2018. /s/ Carl Hennies Carl Hennies Case 4:16-cv-02671 Document 130 Filed in TXSD on 03/19/18 Page 15 of 15