Summary
In NCX Co., LLC v. Samedan Oil Corp., 2004 WL 203079 (E.D.La. 2004), NCX filed suit in state court for payment of processing fees it claimed were due under a contract with the defendant.
Summary of this case from LLOG EXPLORATION v. CERTAIN UNDERWRITERS AT LLOYD'SOpinion
CIVIL ACTION NO. 03-3284, SECTION "T" (3)
January 28, 2004
ORDER AND REASONS
This cause carne for hearing on January 28, 2004, upon the motion of plaintiff, NCX Company, LLC ("NCX"), to remand the case to state court pursuant to 28 U.S.C. § 1447 (c). Oral argument was not entertained by the Court; therefore, the matter was taken under submission on the briefs only. The Court, having studied the record, the legal memoranda submitted by the parties, as well as the applicable law and jurisprudence, is now fully advised in the premises and ready to rule.
I. BACKGROUND
In May, 1992, Chevron U.S.A. ("Chevron") and the defendant, Samedan Oil Corporation, which merged into Noble Energy, Inc. in December, 2002, ("Noble"), entered into a platform and facilities Throughput Agreement ("Agreement"). Pursuant to the Agreement, Chevron, one of the owners and the operator of a processing facility located on the OCS on High Island Black A-270, agreed to allow Noble to connect and produce a certain well or wells through the facility. The Agreement allowed each party to assign their rights and obligations under the Agreement.
Subsequently, Pennzoil Petroleum Company obtained all of Chevron's rights under the Agreement, following which NCX obtained Pennzoil's rights in September, 1993. From April 1996 to June 1999, Noble failed to pay $407,176.57 it owed NCX in processing fees, and from August 2002 to August 2003, Noble failed to pay $826,140,02 it owed NCX in processing fees.
Based on their audit rights included in the Agreement, Noble performed a limited audit of NCX's charges for processing and alleges that NCX overcharged parties using the facilities on High Island Block 270 by more than $1.2 million.
NCS filed the instant action to recover the amounts owed under the Agreement, plus attorney's fees and costs, based upon Noble's breach of the Agreement. The petition was originally filed in the 25th Judicial District Court, Parish of Plaquemines, State of Louisiana. Noble removed the matter to federal court based upon 28 U.S.C.A. § 1331, alleging that the action arises under federal laws, specifically the Outer Continental Land Act, 43 U.S.C.A. § 1349(b)(1)(A). NCX now seeks to remand the matter to state court.
II. PLAINTIFF'S ARGUMENT IN SUPPORT OF MOTION TO REMAND
The plaintiff argues that as the sole basis for Noble's removal is 42 U.S.C.A. § 1349(b)(1)(A) and because the instant litigation does not arise out of or relate to an operation involving the production of minerals on the OCS and will not affect the flow of product or exploitation of natural resources in the OCS, this Court does not have subject matter jurisdiction.
The plaintiff relies upon the holding of the United States Court of Appeal for the Fifth Circuit in Brooklyn Union Exploration Company, Inc. v. Tejas Power Corporation, to support its argument that this Court does not have subject matter jurisdiction over this contractual dispute. The Brooklyn court found that to hold that "a controversy exclusively over the price of gas which has already been produced, as in the instant case, simply does not implicate the interest expressed by Congress in the efficient exploitation of natural resources on the OCS." Accordingly, the matter was dismissed for lack of subject matter jurisdiction.
Brooklyn Union Exploration Company, Inc. v. Tejas Power Corporation, 930 F. Supp. 289 (S.D. Tex. 1996).
Id. at 292.
The plaintiff argues that the present dispute concerns solely contractual provisions regarding the payment/price for services rendered, not provisions governing production or development. Therefore, they contend that NCX's breach of contract claims do not implicate the interest expressed by Congress in the efficient exploitation of natural resources of the OCS and the matter should be remanded to state court.
III. DEFENDANTS ARGUMENTS IN OPPOSITION TO MOTION TO REMAND
The defendant argues that the guidelines established by the Fifth Circuit and district court cases regarding subject matter jurisdiction under the OCSLA show that subject matter jurisdiction does exist in this case, as the action relates to the exploration, development, or production of minerals on the OCS. The defendant argues that as opposed to the contract in Brooklyn Union Exploration which had expired before the suit was filed, the agreement between NCX and Noble is still in force and effect. Further, they contend that the dispute concerning the processing fee being charged by NCX clearly affects the efficient exploitation of mineral from High Island Block 281, because Noble can no longer economically produce the minerals from that Block. Moreover, the pricing dispute makes it uneconomical for Noble to exploit other formations believed to underlie High Island Block 281.
Because the defendants submit that this dispute has a "nexus with production," they contend that the instant case is more like Amoco Production Co. v. Sea Robin Pipeline Co. In Sea Robin, the controversy between the parties was whether the defendant was obligated to either purchase a minimum quantity of gas from the plaintiff or to pay the plaintiff not to do so under the "take-or-pay" provisions of a gas purchase agreement. After explaining that interruptions in the flow of gas caused by the ongoing contractual dispute may impact the total recovery which may be had from the well, the Fifth Circuit held that jurisdiction existed over the controversy because the "dispute alters the progress of production activities on the OCS [and consequently] threatens to impair the total recovery of the federally-owned minerals from the reservoir or reservoirs underlying the OCS."
Amoco Production Co. v. Sea Robin Pipeline Co., 844 F.2d 1202 (5th Cir. 1988). (" Sea Robin").
Id. at 1203, 1207.
Id.
In conclusion, the defendant argues that NCX's action effectively blocks them from producing and exploiting all of the recoverable hydrocarbons located on the OCS underlying High Island Block 281. Under the existing Fifth Circuit guidelines of federal court subject matter jurisdiction over contractual disputes related to the OCS, the defendant contends that this Court has subject matter jurisdiction and therefore, NCX's Motion to Remand should be denied.
IV. LAW AND ANALYSIS
A. Standard of Review
A defendant may remove a civil action to federal court if the federal court would have had original jurisdiction. In this case, federal question jurisdiction is the asserted basis for federal jurisdiction. A removed case should only be remanded if it appears that the district court lacks subject matter jurisdiction.
The statutes addressing removal are jurisdictional; for that reason, and because removal raises significant federalism concerns, removal statutes must be strictly construed in favor of state court jurisdiction and against removal. On the motion to remand, the defendant, as the removing party, bears the burden of establishing federal subject matter jurisdiction.
Shamrock Oil and Gas v. Sheets, 313 U.S. 100, 108-09, 61 S.Ct. 868 (1941).
B., Inc. v. Miller Brewing Company, 663 F.2d 545, 549 (5th Cir. 1981).
B. Analysis of the Court
The instant litigation involves the contractual provisions regarding the payment/price of services which have been already rendered, not provisions governing production or development. NCX performed its obligations under the Throughput Agreement. The narrow issue before the court is whether Noble owes NCX for those services rendered during two distinct time periods. The petition for damages seeking payment of processing fees for services performed has nothing to do with Noble's future operations.
The alleged basis for removing this matter is 43 U.S.C.A. 1349 (b)(1)(A), which provides in pertinent part
". . . the district courts of the United States shall have jurisdiction of cases and controversies arising out of, or in connection with any operation conducted on the outer Continental Shelf which involves exploration, development, or production of the minerals (including natural gas), of the subsoil and seabed of the outer Continental Shelf."
The Fifth Circuit Court of Appeals and its district courts have addressed the application of § 1349 to contractual disputes. Based on the case law cited by both parties, this Court finds that the precise issue presented on NCX's motion to remand has previously been decided in Brooklyn Union, which involved a breach of contract action against a buyer after the services have already been rendered. The Brooklyn court held that, "a controversy exclusively over the price of gas which has already been produced, as in the instant case, simply does not implicate the interest expressed by Congress in the efficient exploitation of natural resources on the OCS."
Brooklyn at 292.
Similarly, this Court finds that the present dispute does not affect the flow of production or development, nor does it affect the efficient exploitation of natural resources in the OCS. It is simply a breach of contract claim which does not implicate the interest expressed by Congress in the efficient exploitation of natural resources of the OCS.
Accordingly,
IT IS ORDERED that the Motion to Remand filed on behalf of the plaintiff, NCX Company, LLC, be and the same is hereby GRANTED.