Total E&P USA, Inc. v. Marubeni Oil & Gas (USA), Inc. et al

REPLY in Support of 141 Opposed MOTION To Apply Louisiana Law Under OCSLA

S.D. Tex.January 22, 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-2674 JUDGE DAVID HITTNER TOTAL E&P USA Inc.’s Reply in Support of its Motion to Apply Louisiana Law Under OCSLA Case 4:16-cv-02674 Document 187 Filed in TXSD on 01/22/18 Page 1 of 18 ii TABLE OF CONTENTS Page Introduction ................................................................................................................ 1 Legal Standard ........................................................................................................... 3 Argument.................................................................................................................... 3 I. Each of the four factors of the “adjacency” test point to Louisiana as the “adjacent state” for MC 305, MC 348, and the relevant portions of CEPS. ............................................................................................................... 3 II. MOGUS almost singularly relies on Coastal Zone Management maps that were not created to—and so are unhelpful to—determine adjacency. ........................................................................................................ 5 A. MOGUS brushes aside geographic proximity (factor 1). ..................... 5 B. The Coastal Zone Management maps upon which MOGUS relies do not follow OCSLA’s dictates because they were created for broader purposes, ignore the direction of actual land borders, and contain overlapping areas that delineate multiple adjacent states (factors 2 and 4). ................................................................................... 5 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................................... 5 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. .............................. 8 3. The decision in Danos addressed a different block and did not grapple with the overlapping areas that make the CZM maps problematic. ....................................................................... 9 III. Prior court decisions for the most relevant blocks favor Louisiana as the adjacent state. ................................................................................................. 11 A. All other blocks within Mississippi Canyon for which a court has determined or stated adjacency have pointed to Louisiana................. 11 Case 4:16-cv-02674 Document 187 Filed in TXSD on 01/22/18 Page 2 of 18 iii B. All of MOGUS’s cited court decisions are less relevant because they determined adjacency for blocks outside of the Mississippi Canyon field and well north of MC 305 and MC 348. ....................... 12 Conclusion ............................................................................................................... 12 Case 4:16-cv-02674 Document 187 Filed in TXSD on 01/22/18 Page 3 of 18 iv TABLE OF AUTHORITIES Page(s) Cases Danos & Curole Marine Contractors, Inc. v. BP Am. Prod. Co., 61 F. Supp. 3d 679 (S.D. Tex. 2014) .........................................................9, 10 Lewis v. Helmerich & Payne Int’l Drilling Co., 2015 WL 1040458 (E.D. La. 2015) ...............................................................12 Reeves v. B & S Welding, Inc., 897 F.2d 178 (5th Cir. 1990) .......................................................................3, 9 Snyder Oil Corp. v. Samedan Oil Corp., 208 F.3d 521 (5th Cir. 2000) ............................................................ 3, 4, 9, 11 Statutes 16 U.S.C. §§1451–52 ................................................................................................. 6 43 U.S.C. §1333(a)(2)(A) ............................................................................... 8, 9, 10 15 CFR § 930.57 ........................................................................................................ 6 Other Authorities Costal Zone Management Act , https://coast.noaa.gov/czm/act/ (last visited Jan. 10, 2018) ................................................................................................... 6 Case 4:16-cv-02674 Document 187 Filed in TXSD on 01/22/18 Page 4 of 18 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-2674 JUDGE DAVID HITTNER TOTAL E&P USA, INC. (“TEP USA”) files this Reply in Support of its Motion to Apply Louisiana Law Under OCSLA (Dkt. 141). MOGUS filed a similar motion asking the Court to apply Alabama law (Dkt. 157), to which TEP USA has responded (Dkt. 166). 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. 141) and deny MOGUS’s motion (Dkt. 157). Introduction The parties do not dispute that a four-factor test applies for determining which state’s law governs this case. Yet MOGUS asks the Court to ignore the first and most obvious of these factors—geographic proximity. There is no disputing that the Case 4:16-cv-02674 Document 187 Filed in TXSD on 01/22/18 Page 5 of 18 2 Mississippi Canyon 305 (“MC 305”) and 348 (“MC 348”) blocks, along with the Canyon Express Pipeline System (“CEPS”), are closest to Louisiana. 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, and not Alabama, is 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 and MC 348 squarely within Louisiana’s boundaries. Case 4:16-cv-02674 Document 187 Filed in TXSD on 01/22/18 Page 6 of 18 3 In short, the four-factor analysis that controls the Court’s inquiry definitively points to Louisiana as the controlling state law, when and where such law applies. Legal Standard “[C]ourts must adjudicate adjacency in private disputes governed by OCSLA.” Snyder Oil Corp. v. Samedan Oil Corp., 208 F.3d 521, 523 (5th Cir. 2000). The Fifth Circuit has considered “four types of evidence in the ‘adjacency’ analysis: (1) geographic proximity; (2) which coast federal agencies consider the subject [property] to be ‘off of’; (3) prior court determinations; and (4) projected boundaries.” Id. at 524 (citing Reeves v. B & S Welding, Inc., 897 F.2d 178, 180 (5th Cir. 1990)). This is not a strict four-factor test, but instead four categories of relevant evidence for courts to consider. Snyder Oil, 208 F.3d at 525. Argument I. Each of the four factors of the “adjacency” test point to Louisiana as the “adjacent state” for MC 305, MC 348, and the relevant portions of CEPS. As argued in TEP USA’s motion, the four Snyder factors definitively point to Louisiana as the adjacent state for MC 305, MC 348, and CEPS. As to factor 1, MOGUS does not dispute that all three assets are closest to Louisiana. MOGUS Mot. at 7 (Dkt. 157); MOGUS Resp. at 3 n.4 (Dkt. 161). At best, MOGUS argues that the other factors outweigh this factor. But for reasons discussed below and in prior briefs, MOGUS is wrong. Case 4:16-cv-02674 Document 187 Filed in TXSD on 01/22/18 Page 7 of 18 4 Regarding factors 2 and 4, 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 (Dkt. 141-2). 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 2006 map. See TEP USA Mot. Ex. C (Dkt. 141-4). Other agencies, like the U.S. Energy Information Administration, have also determined that the assets are adjacent to Louisiana. TEP USA Mot. at 5 (Dkt. 141). With respect to factor 3, every case of which TEP USA is aware that addresses blocks within the Mississippi Canyon field has determined or acknowledged that those blocks are adjacent to Louisiana for purposes of OCSLA. See TEP USA Mot. at 10-11 (Dkt. 141). While blocks well north of MC 305 and MC 348, and in different fields, have been held adjacent to Alabama, treating blocks in the same 1 See Snyder, 208 F.3d at 524 (identifying MMS (and now BOEM) as the “responsible federal agency”); see also TEP USA Mot. at 4 (citing Ex. B, Dkt. 141- 3 (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-02674 Document 187 Filed in TXSD on 01/22/18 Page 8 of 18 5 field the same, where possible, promotes consistency and predictability in applying OCSLA’s choice of law analysis. See TEP USA Mot. at 11. The four factors point strongly toward Louisiana. MOGUS’s arguments to the contrary should be rejected. II. MOGUS almost singularly relies on Coastal Zone Management maps that were not created to—and so are unhelpful to—determine adjacency. A. MOGUS brushes aside geographic proximity (factor 1). As noted above, MOGUS agrees that all three assets are closest to Louisiana. See MOGUS Resp. at 3 n.4 (Dkt. 161); MOGUS Mot. at 7 (Dkt. 157). MOGUS suggests that the Court should ignore this factor. Nonetheless, the undisputed fact remains that Louisiana is, in reality, the closest adjacent state. B. The Coastal Zone Management maps upon which MOGUS relies do not follow OCSLA’s dictates because they were created for broader purposes, ignore the direction of actual land borders, and contain overlapping areas that delineate multiple adjacent states (factors 2 and 4). 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 makes the blanket assertion that the CZM maps included on BOEM’s website are “used by the oil and gas industry.” MOGUS Mot. at 2 (Dkt. 157). 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. Case 4:16-cv-02674 Document 187 Filed in TXSD on 01/22/18 Page 9 of 18 6 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 addresses a “wide range of issues” beyond the purview of BOEM and BSEE, including climate change, public access, habitat protection, and water quality. 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). The CZM Act is administered by the National Oceanic and Atmospheric Administration (“NOAA”), not BOEM or BSEE. See Costal Zone Management Act, Office for Coastal Management, https://coast.noaa.gov/czm/act/ (last visited Jan. 10, 2018). Consistent with these broad purposes, the 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 Lessees” that MOGUS relies on expressly states that right-of-way applicants must “[p]rovide a coastal zone consistency certification (15 CFR § 930.57) to each affected State.” MOGUS Mot. Ex. B at 5 (Dkt. 157-5) (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 TEP USA Resp. Ex. A (Dkt. 166-2) (right-of-way map reflecting substantial overlap Case 4:16-cv-02674 Document 187 Filed in TXSD on 01/22/18 Page 10 of 18 7 among zones); MOGUS Mot. Ex. C (Dkt. 157-6) (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 Mot. Ex. A-3 (Dkt. 157-4) (emphasis added). One of MOGUS’s preferred CZM maps does not even place MC 305 and MC 348 within Alabama’s borders. The CZM appendix MOGUS cites expressly excludes MC 305 and MC 348 from its list of blocks for which Alabama is an affected state (and actually locates MC 305 and MC 348 within no state’s zone). See MOGUS Mot. Ex. B at 6 (Dkt. 157-5); see also TEP USA Resp. Ex. A (Dkt. 166-2) (providing a visual representation of the appendix list). 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. B at 5 (Dkt. 157-5) (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, and so Louisiana is “an affected state” for purposes of CZM.2 2 See, e.g., Ex. D. This exhibit contains only the first page of a “Shorebase Activity Report,” an excel spreadsheet produced by MOGUS in native form (MOGUS441613). As reflected on this front page of the report, the “shorebase” Case 4:16-cv-02674 Document 187 Filed in TXSD on 01/22/18 Page 11 of 18 8 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 requires the President to 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 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 Mississippi’s boundary in a straight, north-south line rather than as a continuation of its angled land border with supporting CEPS hydrate remediation and pipeline abandonment was in Port Fourchon, Louisiana. Case 4:16-cv-02674 Document 187 Filed in TXSD on 01/22/18 Page 12 of 18 9 Louisiana. 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.” 897 F.2d at 180 (emphasis added). Worse, Mississippi’s CZM zone arbitrarily begins a straight line directly south of Louisiana’s peninsula and archipelago, both of which jut across the Mississippi area. The Mississippi zone is thus nowhere near, or in line with, the actual, angled Mississippi-Louisiana border. 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. But Danos plainly is not binding, or even controlling, here. It 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. 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. See TEP USA Mot. Exs. A and C (Dkts. 141-2 and -4) (attaching same map). 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 Case 4:16-cv-02674 Document 187 Filed in TXSD on 01/22/18 Page 13 of 18 10 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, 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. Indeed, Danos failed 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 II.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-02674 Document 187 Filed in TXSD on 01/22/18 Page 14 of 18 11 III. Prior court decisions for the most relevant blocks favor Louisiana as the adjacent state. A. 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. TEP USA Mot. at 11 (Dkt. 141). 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 quibbles with some of the decisions cited by TEP USA that did not conduct a robust Snyder analysis and instead accepted a stipulation among the parties (likely because Louisiana adjacency was so obvious to them). MOGUS Resp. at 10– 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” (emphasis added)). Stipulation or not, these courts decided that Louisiana was adjacent. Regardless, MOGUS is being disingenuous—it cited several cases outside the Mississippi Canyon block that also lack a robust Snyder analysis for the same reason. TEP USA Resp. at 10. Case 4:16-cv-02674 Document 187 Filed in TXSD on 01/22/18 Page 15 of 18 12 B. All of MOGUS’s cited court decisions are less relevant because they determined adjacency for blocks outside of the Mississippi Canyon field and well north of MC 305 and MC 348. MOGUS purports to provide the Court with prior court determinations for blocks that are assertedly “in the vicinity” of MC 305 and MC 348. MOGUS Resp. at 14 (Dkt. 161). Yet every one of those blocks are 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 (Dkt. 161) (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 MC 305 and MC 348, they are well beyond them. Conclusion For the reasons stated above, and as argued in TEP USA’s prior briefing (Dkts. 141 and 166), TEP USA requests that the Court grant its Motion to Apply Louisiana Law Under OCSLA (Dkt. 141). At the same time, the Court should deny MOGUS’s Motion for Partial Summary Judgment on Choice of Law (Dkt. 157). Case 4:16-cv-02674 Document 187 Filed in TXSD on 01/22/18 Page 16 of 18 13 Dated: January 22, 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 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. Case 4:16-cv-02674 Document 187 Filed in TXSD on 01/22/18 Page 17 of 18 14 Certificate of Service A copy of the foregoing reply was served on all counsel of record for the parties via CM/ECF on January 22, 2018. /s/ Carl Hennies Carl Hennies Case 4:16-cv-02674 Document 187 Filed in TXSD on 01/22/18 Page 18 of 18