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Shell Offshore Inc. v. Freeport-McMoRan Oil & Gas, LLC

United States District Court, E.D. Louisiana

June 13, 2018

SHELL OFFSHORE, INC.
v.
FREEPORT-MCMORAN OIL & GAS, LLC

         SECTION: "A" (5)

          ORDER AND REASONS

          JAY C. ZAINEY UNITED STATES DISTRICT JUDGE

         The following motion is before the Court: Motion to Dismiss for Lack of Personal Jurisdiction (Rec. Doc. 62) filed by defendant, PXP Gulf Coast LLC. Plaintiff, Shell Offshore, Inc., opposes the motion. The motion, noticed for submission on May 16, 2018, is before the court on the briefs without oral argument.

         I. BACKGROUND

         Shell Offshore, Inc. filed this action to recover plugging, abandonment, and decommissioning costs that it incurred for certain facilities located on Eugene Island Block 30 (“EI30”), which is located on the OCS near Louisiana.

         In 1988, Shell leased EI30 from the federal government for oil and gas activities. Effective January 1, 1992, via a Purchase and Sale Agreement (“PSA”), Shell transferred all of its right, title, and interest in the EI30 lease to Pel-Tex Oil Co. (Rec. Doc. 43-1, Amended Comp. Exh. A). According to Shell, under Paragraph 8 of the PSA, Pel-Tex assumed all of Shell's EI30 liabilities and agreed to indemnify Shell for certain “claims” associated with the EI30 lease. (Rec. Doc. 43, Amended Comp. ¶ 14).

         On July 17, 2013, Shell received a letter from the federal Bureau of Safety and Environmental Enforcement notifying Shell, as a former lessee of EI30, that it was responsible for plugging, abandoning, or decommissioning all wells, pipelines, platforms, and other facilities in EI30 for which it had accrued decommissioning costs.[1]Under federal law, a former OCS lessee remains liable to the federal government for decommissioning obligations despite the transfer of its legal interest in the lease. Shell incurred approximately $6.35 million to carry out the required work.

         Pel-Tex Oil, the original party to the PSA with Shell, no longer exists. Shell contends that defendant and movant PXP Gulf Coast, LLC is the successor in interest to Pel-Tex Oil's contractual indemnity obligations to Shell stemming from the PSA. The alleged succession history of Pel-Tex's contractual obligations is outlined in detail in Shell's amended complaint. (Rec. Doc. 43, Amended Comp. ¶¶ 18-25). Shell provided the following demonstrative depiction of the succession in its complaint:[2]

         (IMAGE OMITTED)

         (Id. ¶ 26).

         Defendant Freeport-McMoRan Oil & Gas, LLC (“FMOG”) is PXP's sole member; PXP is a wholly-owned subsidiary of FMOG.

         In 2014, Shell made a formal demand on FMOG for indemnity for the EI30 decommissioning costs. According to Shell, it engaged in extensive negotiations with FMOG regarding the decommissioning costs for EI30 and during those negotiations FMOG never suggested that Shell was dealing with the wrong entity. When negotiations broke down, Shell initially filed this lawsuit against FMOG alone based the parties' prior dealings. After FMOG moved to dismiss the complaint, Shell amended its complaint to join PXP as a defendant. Shell alleges that PXP and/or FMOG breached the PSA by refusing to pay for the EI30 decommissioning costs.

         PXP now moves to dismiss the complaint arguing that it is not subject to specific personal jurisdiction in a Louisiana court.

         II. ...


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