Basin Exploration Inc. v. Tidewater Inc. , 139 F. App'x 605 ( 2005 )

United States Court of Appeals
Fifth Circuit
F I L E D
IN THE UNITED STATES COURT OF APPEALS
July 12, 2005
FOR THE FIFTH CIRCUIT
Charles R. Fulbruge III
Clerk
No. 04-30395
BASIN EXPLORATION INC (DELAWARE);
STONE ENERGY LLC; STONE ENERGY
CORPORATION,
Plaintiffs-Appellees,
versus
TIDEWATER INC; ET AL,
Defendants,
TIDEWATER INC; JACKSON MARINE LLC, in personam,
Defendants-Appellants.
Appeal from the United States District Court
for the Eastern District of Louisiana
2:01-CV-2271-S
Before GARWOOD, GARZA and BENAVIDES, Circuit Judges.
PER CURIAM:*
*
Pursuant to 5TH CIR. R. 47.5 the Court has determined that this opinion
should not be published and is not precedent except under the limited
circumstances set forth in 5TH CIR. R. 47.5.4.
Tidewater Inc and Jackson Marine, L.L.C., in personam, and the
M/V SARA TIDE, in rem (collectively, Tidewater) appeal the district
court’s judgment in favor of Basin Exploration, Inc., Stone Energy,
L.L.C., and Stone Energy Corporation (collectively, Basin), for
damages occasioned by an allision between a Tidewater vessel and an
oil and gas well owned by Basin. Only the amount of damages
awarded is challenged. We affirm.
Facts and Proceedings Below
On July 26, 2000, the M/V SARA TIDE, a Tidewater supply
vessel, struck Basin’s well, well number 10 in the West Cameron
Block 45 field in the Gulf of Mexico off the Louisiana coast. The
allision bent the well more than 70 degrees down toward the sea
floor, leaving the entire structure under water. The two outermost
layers of the well casing were split open, the pipeline connections
to the well were torn off, and the platform was destroyed.
Tidewater does and did not contest liability, so that the sole
issue between the parties is the amount of damages awarded.
Basin decided to plug and abandon (P&A) the well, which had
been shut-in (out of production and closed with temporary plugs)
since 1986. The year following the allision, Basin sued Tidewater
in the district court below, seeking damages for the P&A costs and
the cost of drilling a replacement well. Basin contended that it
had planned to use the structure and casings of the No. 10 well to
drill a sidetrack well from there into the field at a nearby
2
location. The district court awarded Basin a total of $3,847,802
plus prejudgment interest from the date of loss. This award
included $2,079,172 in out-of-pocket costs for the P&A operation
and debris cleanup, $458,630 as the extra cost of the replacement
well compared to the originally planned sidetrack well, $780,000
for a replacement platform and $530,000 for replacement flow lines.
Discussion
In general, the injured party in a tort action is entitled to
be placed in as good a position financially as if the injury had
not occurred. Gaines Towing and Transp., Inc. v. Atlantia Tanker
Corp., 191 F.3d 633, 635 (5th Cir. 1999). In a maritime action,
recovery is limited to economically justified expenditures. See
id. (when the cost to repair a vessel exceeds the market value of
the vessel, recovery is limited to the market value).
Tidewater argues that there were insufficient gas reserves in
the field surrounding Basin’s well to economically justify
replacement of the well. If drilling a replacement well was not
economically justifiable, then Tidewater should not be assessed
damages for it. In addition, if further drilling in the field was
not economically viable, Basin would have been obligated to
permanently plug and abandon the well at some point even if there
had been no allision. Tidewater therefore argues that damages
assessed should be reduced by the cost of this eventual P&A
3
operation, making Tidewater liable only for the additional P&A
costs occasioned by the allision.
Even if the field was viable, Tidewater argues that the well
could have been repaired at a lower cost than the combined cost of
the P&A and the well replacement (minus the sidetrack costs).
Therefore, according to Tidewater, Basin’s recovery should be
capped at the amount that the well could have been repaired for,
estimated by Tidewater’s expert to be $900,000.
I. Standard of Review
On appeal from a judgment after a bench trial, this court
reviews legal issues de novo and findings of fact for clear error.
Houston Exploration Co. v. Halliburton Energy Servs., Inc., 359
F.3d 777, 779 (5th Cir. 2004). A clearly erroneous finding is one
that gives a reviewing court a “definite and firm conviction that
a mistake has been committed.” Anderson v. City of Bessemer City,
105 S. Ct. 1504, 1511 (1985). A factfinder’s choice between two
permissible views of the evidence cannot be clearly erroneous, even
if the reviewing court would have decided the case differently.
Id.
II. Gas Reserves
Basin presented testimony from two employees, Bruce McDonald
(McDonald) and Randy Young (Young), a geologist and a petroleum
engineer, on their estimate of the proved gas reserves accessible
4
from the vicinity of the destroyed well.1 These employees had
estimated the proved reserves at 2.9 billion cubic feet (BCF), but
had used a more conservative estimate, 2.3 BCF, for purposes of
reporting Basin’s assets as required by the Securities and Exchange
Commission (SEC) and calculating projected profits from extraction
of the gas. Young testified that these profit projections ranged
from $14.8 million to $4.8 million between late 2000 and mid-2001,
depending on the price of gas at the time the projections were
made. Basin also presented evidence of a prior proved reserves
estimate made by another Basin geologist, and a very similar
estimate made by a third-party auditor. Although these earlier
analyses indicated different boundaries for the reservoir than
those determined by McDonald and Young, the earlier proved reserves
projection was also 2.3 BCF.
Tidewater presented testimony on estimated proved reserves
from two experts, a geologist and a petroleum engineer. The gas
reservoir projected by Tidewater’s experts had smaller boundaries
than that arrived at by McDonald and Young, and roughly
corresponded to the area common to the boundaries of McDonald and
Young and those of the earlier Basin projection (i.e., generally
excluding any area that was not common to all those reserve
1
Tidewater argues that these witnesses were not properly designated as
experts, and that the district court erred in treating their testimony as expert
testimony. Each of these witnesses was tendered by Basin as an expert during the
trial. In response, Tidewater’s counsel indicated willingness to let each
witness testify on certain topics, and made few, if any, objections to the
witness’s subsequent testimony.
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projections presented by plaintiffs). The differences in the
projections apparently arose from disagreements over interpretation
of data from another well in the field, the existence and extent of
a particular fault in the field, and the water level in the
reservoir. Tidewater’s experts estimated the proved gas reserves
at between 0.5 and 0.8 BCF, and projected that recovery of the
reserves would result in a net loss, rather than a net profit.
The district court found Basin’s testimony to be more
credible,2 and found that “it was economically feasible to attempt
to produce the proved reserves.” This finding was not clear error,
in that there were competing permissible findings from the evidence
presented. Tidewater argues that the court erred in failing to
apply an adverse inference it had granted to Tidewater, where the
inference involved data from a seismographic study of the gas field
that Basin had not disclosed to Tidewater. It is not clear from
the record that the court actually granted Tidewater’s request for
an adverse inference, however.3 Adverse inferences regarding
unproduced evidence are normally a result of a party’s acting in
bad faith. King v. Ill. Cent. R.R., 337 F.3d 550, 556 (5th Cir.
2
Tidewater contends that the court disregarded the testimony of its experts
solely because they were paid experts. Although the court’s opinion mentions
that Tidewater’s experts developed their opinions for the purposes of litigation,
there is no indication that the opinions were completely disregarded for this
reason. The court as factfinder has discretion to weigh the evidence.
3
Although Tidewater’s written motion in limine included the request for an
adverse inference, the court did not explicitly act on the written motion. When
the evidence came up at trial, the court orally ruled that it would “grant the
motion in limine and exclude it.”
6
2003); Caparotta v. Entergy Corp., 168 F.3d 754, 756 (5th Cir.
1999). The court did not appear to find that Basin had acted in
bad faith, and did not abuse its discretion in failing to so find
or in failing to draw an adverse inference.4
Because the district court did not err in finding that
production from the vicinity of Basin’s well was economically
justified, the court did not err in awarding damages to Basin for
repair or replacement of the well.
III. Repair vs. Replacement
The district court found that repairing the well as opposed to
plugging it and drilling a replacement well would not have been
economically feasible. This finding does not constitute clear
error. Although the evidence of actual environmental damage was
scant,5 the severity of the structural damage to the well made
concern about potential environmental liability reasonable.
Although Basin’s expert Jim Wilkinson conceded that the well would
likely have been repaired after the accident had it been a
4
The court expressed understanding of Basin’s explanation that licensing
restrictions with the third-party provider of the data prevented disclosure, but
noted that Basin could not “have it both ways.”
Furthermore, even if an adverse inference had been granted, it appears to
us that there is no reasonable likelihood that applying the inference would have
produced a different result. The court excluded the plaintiff’s seismographic
map and refused to allow the plaintiff’s witness to testify on whether the
seismographic map supported the witness’s independently generated reserves map.
There was no assertion or evidence of any particular suspect features of the
seismographic map (which had been furnished to Tidewater pre-trial) that might
have formed the basis of an adverse inference.
5
All that was observed coming out of the well after the allision were small
bubbles that may have been associated with a pre-existing leak.
7
producing well, he also testified to concerns with the ability of
a repaired well to withstand the stresses involved in the planned
sidetrack drilling operation. In addition, Tidewater’s expert on
this issue was unwilling to describe Basin’s choice not to repair
the well as unreasonable.
Because the district court did not err in finding that Basin’s
plugging and abandonment of the well was reasonable under the
circumstances and that drilling of a replacement well was
economically justifiable, the court did not err in awarding Basin
its out-of-pocket costs in plugging the well and the costs of the
replacement well to the extent these costs exceeded that of the
originally planned sidetrack well. With respect to Tidewater’s
argument that the damages should be reduced by the amount Basin
would have paid to plug and abandon its well in the absence of the
allision, the present value of this eventual cost would be
difficult to determine, given that when the well would have been
plugged and at what cost are not known.6 Furthermore, as noted by
the district court, Basin’s replacement well will eventually need
to be plugged and abandoned at Basin’s cost. This obligation takes
the place of Basin’s pre-allision obligation to plug and abandon
the original well, so that Tidewater is not entitled to a reduction
in damages.
6
A Basin employee testified that a permanent P&A operation on the original
well could likely have been delayed for about ten years, and that costs of P&A
operations had been declining over time.
8
Conclusion
For the foregoing reasons the district court’s judgment is
AFFIRMED.
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