Railroad Commission v. Gulf Energy Exploration Corp.

482 S.W.3d 559, 59 Tex. Sup. Ct. J. 309, 2016 Tex. LEXIS 98, 2016 WL 363771
CourtTexas Supreme Court
DecidedJanuary 29, 2016
DocketNo. 14-0534
StatusPublished
Cited by28 cases

This text of 482 S.W.3d 559 (Railroad Commission v. Gulf Energy Exploration Corp.) is published on Counsel Stack Legal Research, covering Texas Supreme Court primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Railroad Commission v. Gulf Energy Exploration Corp., 482 S.W.3d 559, 59 Tex. Sup. Ct. J. 309, 2016 Tex. LEXIS 98, 2016 WL 363771 (Tex. 2016).

Opinion

. Justice Lehrmann

delivered the opinion of the Court.

After agreeing with an oil-and-gas lessee to postpone plugging' several abandoned offshore wells, the Railroad Commission of Texas mistakenly. plugged one. of those wells. The lessee sued the Commission with legislative permission and obtained a favorable jury verdict on the lessee’s negligence and breach-of-contract claims. The court of appeals affirmed the judgment on the verdict. The Commission complains that the trial court erred in failing to submit á jury question on a statutory good-faith defense, which the'Commission contends forecloses its liability on both claims, and in failing to submit a question about whether the Commission and lessee entered into a binding contract before the well was plugged. We hold that the trial court erred in refusing to submit a jury question on the good-faith defense. We also hold that a fact question exists on the contract-formation issue. Accordingly, we reverse the court of appeals’ judgment and remand the case, for a new trial.

I. Background

A. Statutory Framework

This case arises out of the Commission’s duties with respect to abandoned oil-and-gas wells, which are governed by Texas Natural Resources Code chapter 89. One of the statute’s express purposes is to protect Texas’s water and land from pollution by providing “additional means” for the plugging of abandoned wells. Tex. Nat. Res. Code § 89.001. The statute and accompanying Commission rules' place primary responsibility on an inactive well’s1 operator2 to plug the well.3 Id. §§ 89.011(a), .042(a); 16 Tex. Admin. Code § 3.15(b)(1)(B), (d)(1)(B). Nonoperators, defined as persons with a working interest in a well who do not qualify as operators, have secondary plugging responsibility. Tex. Nat. Res. Code §§ 89.002(a)(3), .042(b). If the Commission determines after notice and a hearing that a well has not been properly plugged, and the operator and nonoperatof (if any) either cannot be found or do not have sufficient assets, the Commission may plug the well. Id. § 89.043(a); 16 Tex. Admin. Code § 3.14(b)(3)(A).

Chapter 89 also provides a liability defense to those engaged in plugging opera[563]*563tions in good faith. . Specifically, “[t]he commission and its employees and agents, the operator, and the nonoperator' are not liable for any damages that may occur as a result of acts done or omitted to be'done by them or each- of them ■ in a good-faith effort to carry out this chapter.” Tex. Nat. Res. Code § 89.045. The application of this defense is the parties’ principal íogus in this Court.

B. Facts

In January 2008, the Commission issued orders requiring American Coastal Enterprises (ACE) to plug a number of inactive offshore wells the company operated in the Gulf of Mexico. Those plugging orders became final in March 2008. Because ACE did not have sufficient assets to carry out the orders — the company declared bankruptcy in May 2008 — the Commission took over that responsibility. On April 24, 2008, the Commission awarded Superior Energy Services a contract to plug eight of the ACE wells, including the two at issue in this case identified as 707S-5 and 708S-5.4 .

When the plugging order was issued, Gulf Energy Exploration Corporation was the lessee of the offshore area that included the 708S-5, having acquired the lease from the General Land Office in 2007. Gulf Energy’was considering applying to the Commission to take over as operator of some of the abandoned ACE wells. On May 19, 2008, representatives of Gulf Energy, ACE, and the Commission, including lawyers from the Attorney General’s Office, met to discuss Gulf Energy’s proposal. As of that date, Superior had commenced plugging operations and had already plugged. one of the eight wells. The representatives reached an oral agreement at the meeting that the Commission would delay plugging four of the remaining wells covered by the plugging order, including the 708S-5. Meanwhile, Gulf Energy would post a bond and would apply to the Commission to supersede the plugging order and take over as operator of those four wells no later than June 12, 2008. The other three wells, including the 707S-5, would be plugged as planned.

In the days following the meeting, the participants confirmed the terms of the agreement in a series of e-mails and reduced it to writing in a formal Settlement and'Forbearance Agreement.5 The Commission representative signed the written agreement on June 6, 2008, and ACE’s president and Gulf Energy’s CEO signed it on June 9. The bankruptcy court approved the' settlement, and the Commission does not dispute that Gulf Energy fulfilled its obligations with respect to the bond and required Commission filings.

In September 2008, the Commission issued several orders superseding the plugging orders on the wells covered by the agreement and approving Gulf Energy’s application to transfer their operation. A few months later, Gulf Energy discovered that the 708S-5 was plugged. As it turned out, the Commission had plugged the well on May 25, 2008 under the mistaken belief that it was plugging the 707S-5. The circumstances surrounding that error were the subject of the resulting lawsuit.

The mistake originated with an admitted clerical error by Commission employee [564]*564Jimmy Zambrano. Before the- Commission contracted with Superior to plug the eight wells, Zambrano took aerial photographs of and prepared a plugging procedure sheet for each well. But Zambrano inadvertently 'transposed the coordinates for several of the wells, resulting in 708S-5⅛ photo and coordinates being labeled as those of 707S-5, and -vice versa. These mislabeled procedure sheets were provided to Superior' with the plugging contract.

' Gulf Energy’s theory at trial was that Superior received information from Fugro Chance, Inc., the subcontractor Superior hired to perform sonar surveys of the ocean floor- around the well sites in advance of the plugging operation, alerting it that the coordinates on the procedure sheets were incorrect. Gulf Energy pre; sented evidence that Fugro Chance provided this information to Superior employees several days before the 708S-5 was plugged, and that they failed to pass it along to the boat crew conducting the operation. Gulf Energy also explored the theory that the crew members, including the Commission representative on board, ignored obvious -indicators that they were at the wrong well when they mistakenly plugged the 708S-5.

C. Procedural History

After discovering that the 708S-5 had been plugged," Gulf Energy sought and obtained 'legislative consent to sue the Commission. Specifically, the -Legislature adopted Senate Concurrent Resolution No. .72, which authorized Gulf Energy to sue the Commission for no more than $2,5 million, in damages, subject to Texas Civil Practice and Remedies Code chapter 107. Pursuant to chapter 107, the resolution did not waive the Commission’s immunity from liability, nor did it waive any defense of law or fact “except the defense of immunity from suit without legislative permission.” Tex. Civ. Peac. & Rem. Code § 107.002(a)(7)-(8), (b).

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Cite This Page — Counsel Stack

Bluebook (online)
482 S.W.3d 559, 59 Tex. Sup. Ct. J. 309, 2016 Tex. LEXIS 98, 2016 WL 363771, Counsel Stack Legal Research, https://law.counselstack.com/opinion/railroad-commission-v-gulf-energy-exploration-corp-tex-2016.