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Ridgelake Energy, Inc. v. Apache Corp.

United States District Court, E.D. Louisiana

June 18, 2015




Before the Court is Plaintiff Ridgelake Energy, Inc.'s ("Ridgelake") "Motion for Summary Judgment, " wherein it contends that it is entitled to summary judgment dismissing Apache's counterclaim.[1] Having considered the motion, the memoranda in support and in opposition, the statements made during oral argument, the record, and the applicable law, the Court will deny the motion.

I. Background

This lawsuit arises out of a contract dispute between co-owners of an oil well. At all times relevant to this lawsuit, Defendant Apache Corporation ("Apache") owned and operated the Ship Shoal Block 26 production platforms (the "Host Facility").[2] Ridgelake and Apache each owned a fifty percent interest in Ship Shoal Well #14 (the "Well"), the production from which flows through the Host Facility.[3]

In 1995, Ashlawn Energy, Inc. ("Ashlawn") and Forcenergy Gas Exploration, Inc. ("Forcenergy") entered into a "Letter Agreement, " which provides that Ashlawn "shall pay to Forcenergy its pro-rata share of all operating expenses directly attributable to the well or wells in which it participates."[4] At some point, Ridgelake acquired Ashlawn, and Forest Oil Corporation ("Forest Oil") acquired Forcenergy.

On September 30, 2005, Ridgelake and Forest Oil entered into a Participation Agreement, which provides, in part, that Ridgelake "shall pay its pro-rata share of all Host Facility operating expenses, including, but not limited to LOE and routine maintenance costs, that are directly attributable to the SS 26 #14 Well and the SS 26 #14 Production."[5] Forest Oil was later purchased by Mariner Energy, Inc. ("Mariner"), which was then acquired by Apache. It is undisputed that the relationship between Ridgelake and Apache is governed, at least in part, by the Participation Agreement.

On September 30, 2014, Ridgelake filed the underlying complaint in this case, seeking reimbursement for payments that it made to Apache for expenses which, it claims, were not directly attributable to the Well.[6] Ridgelake additionally alleges that Apache owes it a refund of $16, 960.56 for "estimated plug and abandonment expenses" related to the Well.[7] In total, Ridgelake seeks damages of $608, 434.66 from Apache.[8]

On October 28, 2014, Apache filed a counterclaim against Ridgelake, seeking $531, 299.00 in unpaid Joint Interest Billing ("JIBs") related to maintenance work that was performed on the Host Facility.[9] According to the counterclaim, Ridgelake has wrongfully refused to pay its fifty percent share of costs related to platform coatings to the Host Facility and for the replacement of a boat landing on one of the Host Facility's production platforms.[10]

Ridgelake filed the pending Motion for Summary Judgment on April 28, 2015, wherein it seeks dismissal of Apache's counterclaim because, it contends, the expenses at issue were not "directly attributable" to the operation of the Well.[11] Apache filed a memorandum in opposition on May 18, 2015, [12] and Ridgelake filed a memorandum in reply on May 21, 2015.[13] The Court heard oral argument on the pending motion on May 27, 2015.

II. Parties' Arguments

A. Ridgelake's Arguments in Support of Summary Judgment

Ridgelake contends that it is entitled to summary judgment on Apache's counterclaim because, under the terms of Letter Agreement and the Participation Agreement, Ridgelake is only required to pay its pro-rata share of expenses "directly attributable" to the well.[14] According to Ridgelake, the costs of painting the Host Facility and replacing an attached boat launch are not "directly attributable" to the Well, but are rather matters of "routine maintenance" of the Host Facility.[15]

Ridgelake argues that the phrase "directly attributable, " as it appears in the Participation Agreement, is unambiguous, and that the Court need not consider extrinsic evidence in resolving this dispute.[16] However, if the Court finds that the phrase is ambiguous, Ridgelake states that it "has presented affidavits from both of the sides [sic] that negotiated the very language at issue and both agree that the painting and boat landing expenses at issue are not expenses directly attributable' to the [Well] and its production and, hence, not owed by Ridgelake."[17] Ridgelake submits the affidavits of Louis F. Gilbert ("Gilbert"), former shareholder of Ashlawn, and J. Russell Porter ("Porter"), the former Vice President of Financial Planning and Analysis of Forcenergy.[18] Both Gilbert and Porter state that they negotiated the 1995 Letter Agreement and intended the language "operating expenses directly attributable" to exclude "expenses or costs for general maintenance of the Host Facility, such as the painting of those facilities and/or the replacement thereto of a boat landing."[19] According to Ridgelake, Apache, as successor to the Participation Agreement, cannot offer any interpretation of that document ...

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