Pogo Producing Co. v. Sea Robin Pipeline Co.

493 So. 2d 909, 93 Oil & Gas Rep. 103, 1986 La. App. LEXIS 7576
CourtLouisiana Court of Appeal
DecidedAugust 29, 1986
Docket85-394
StatusPublished
Cited by15 cases

This text of 493 So. 2d 909 (Pogo Producing Co. v. Sea Robin Pipeline Co.) is published on Counsel Stack Legal Research, covering Louisiana Court of Appeal primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Pogo Producing Co. v. Sea Robin Pipeline Co., 493 So. 2d 909, 93 Oil & Gas Rep. 103, 1986 La. App. LEXIS 7576 (La. Ct. App. 1986).

Opinion

493 So.2d 909 (1986)

POGO PRODUCING CO., Plaintiff-Appellee,
v.
SEA ROBIN PIPELINE CO., Defendant-Appellant.

No. 85-394.

Court of Appeal of Louisiana, Third Circuit.

August 29, 1986.
Writ Denied November 21, 1986.

*910 David R. Richardson, Barham & Churchill, New Orleans, Patrick S. Ottinger, Blauche, Hartley, LaPeyre & Ottinger, Lafayette, Paul G. Van Wagenen, Houston, Tex., for plaintiff-appellee.

Louis R. Davis, Michael R. Mangham and George W. Hardy, III, Broadhurst, Brook, Mangham & Hardy, Lafayette, and H. Bruce Golden, of Mayer, Brown & Platt, B.J. Bradshaw and M.W. Parse, Jr., Fulbright & Jaworski, Houston, Tex., for defendants-appellants.

Before FORET, KNOLL and MOUSER,[*] JJ.

KNOLL, Judge.

This appeal questions the granting of a preliminary injunction in favor of Pogo Producing Company (Pogo) to enforce specific performance against Sea Robin Pipeline Company (Sea Robin) on six gas purchase contracts. The trial court directed Sea Robin: (1) to take and to pay during each year the Annual Minimum Quantity (AMQ) of gas equal to 85% of Pogo's delivery capacity (DC) from six blocks; and (2) to take at least and pay for the Minimum Monthly Quantity (MMQ). Sea Robin appeals, assigning as error that the trial court erred in finding that: (1) Pogo made a prima facie showing of a likelihood of success on the merits; and (2) Pogo established that irreparable injury will occur before trial on the merits. The issue presented is whether the six contracts entered into between Pogo and Sea Robin are enforceable against Sea Robin since its five year stated term has expired. We affirm, finding Section XI.06 of the contracts a valid agreement made in contemplation of deliveries of gas made after expiration of the contracts which entitles Pogo to specific performance caused by Sea Robin's breaches.

*911 FACTS

The six contracts at issue were entered into between Pogo or its predecessor, Pennzoil Offshore Gas Operators, Inc., and Sea Robin, a joint venture of two wholly owned subsidiaries of United Gas Pipeline and Southern Natural Gas Company, covering six blocks with one or more reservoirs in each block, identified as: East Cameron 609; West Cameron 617; East Cameron 334; East Cameron 335; South Marsh Island 128, and Eugene Island 261. All of the gas in five of the blocks is committed to Sea Robin under the contracts; the gas in the East Cameron 335 Block is under a split contract of 50% to United Gas Pipeline and 50% to Sea Robin. All of the contracts were for stated terms of five years from date of first delivery and expired during 1982 through 1984. The contracts provided Sea Robin make up rights for gas paid for but not taken; the make up rights expired as each contract expired. All of the contracts were issued a certificate of public convenience and necessity by the Federal Energy Regulatory Commission (FERC) which is required of all contracts for the sale of natural gas resold in interstate commerce. Phillips Petroleum v. State of Wisconsin, 347 U.S. 672, 74 S.Ct. 794, 98 L.Ed. 1035 (1954). Once the certificate is issued, the contracting parties are bound to a continuing service obligation imposed by federal statute and regulations (15 U.S.C. § 717f(b)), although the contracts have expired, until the producer receives FERC approval to abandon such service. Sunray Mid-Continent Oil Co. v. Federal Power Com'n, 364 U.S. 137, 80 S.Ct. 1392, 4 L.Ed.2d 1623 (1960).

In 1982, Sea Robin began breaching its take requirements under the "take or pay" provisions of the contracts and continued breaching the take requirements through the expiration of the contracts, which prompted Pogo, after settlement negotiations failed, to file suit for a preliminary and permanent injunction, and for a declaratory judgment. Sea Robin removed the case to federal court on allegations of federal question jurisdiction, but the United States District Court for the Western District of Louisiana remanded the case to the Fifteenth Judicial District Court. Sea Robin filed a motion to dismiss for laches, a motion to strike, and exceptions of prematurity, lack of subject matter jurisdiction, no cause of action and unauthorized use of summary process. The motions and exceptions were denied. Since the trial of the preliminary injunction, Pogo and Sea Robin have settled the AMQ delinquencies for 1982, 1983, and 1984, but Pogo reserved the right in that settlement to recite Sea Robin's history of breaches because of the injunctive relief granted, i.e., specific performance.

Pogo alleged that Sea Robin had failed to either take or pay for the AMQ (85% of DC) both in 1982 and 1983, and that the delinquencies for the two years combined exceeded $33,000,000. Pogo further alleged that in numerous months during 1982, 1983, and 1984, Sea Robin had failed to take the MMQ (55.28% of DC) on one or more contracts, and that Sea Robin's breaches of contract were causing Pogo irreparable injury of two types: (1) injury to its rate-sensitive partial water drive reservoirs by loss of gas to commerce as a result of Sea Robin's low takes; and (2) loss of revenues, resulting in Pogo's inability to carry out its exploration and production programs, which inability would lead in turn to the loss of huge but unquantified amounts of future revenue.

Pogo's petition prayed that Sea Robin be enjoined to take and pay for at least the MMQ for every future contract month and that Sea Robin be enjoined to take and pay for the AMQ by the end of each future contract year. Sea Robin claims the contracts cannot be enforced against it after the five year stated term expired, and at most it is required to take that amount of gas necessary to fulfill its obligation under the Natural Gas Act (NGA) to serve its customers.

Pogo contends that Section XI.06 of the contracts requires Sea Robin to continue performing the same obligations which it had before the stated terms of the contracts *912 expired, but without the pre-expiration rights it had vis-a-vis Pogo, for as long as Pogo is required by applicable law, rule or regulation to keep selling gas to Sea Robin. Section XI.06 of the contracts provide:

"Section XI.06. Deliveries After Termination of Contract.
If Seller shall be required for any reason by any applicable law, rule, regulation or order to continue making deliveries to Buyer of the gas which is the subject matter of this Contract notwithstanding that this Contract shall have been terminated for any reason, whether by its own terms or by Seller or Buyer, it is expressly agreed and recognized by Seller and Buyer that Seller shall have no contractual obligations by reason of this Contract to Buyer in any such event, but Seller shall be entitled to enforce each and every provision of this Contract against Buyer, such provisions being conclusively deemed, in the absence of a showing by Seller of a greater fair value, to be the fair value of the services performed and the subject matter delivered by Seller to Buyer under legal constraint, but without a Contract.

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Bluebook (online)
493 So. 2d 909, 93 Oil & Gas Rep. 103, 1986 La. App. LEXIS 7576, Counsel Stack Legal Research, https://law.counselstack.com/opinion/pogo-producing-co-v-sea-robin-pipeline-co-lactapp-1986.