Taylor Energy Company, L.L.C. v. Interior

990 F.3d 1303
Court of Appeals for the Federal Circuit·Decided March 9, 2021·No. 20-1909·Published·Cited by 2 cases

Opinion

United States Court of Appeals for the Federal Circuit

TAYLOR ENERGY COMPANY, L.L.C., Plaintiff-Appellee

v.

DEPARTMENT OF THE INTERIOR, SCOTT DE LA VEGA, IN HIS OFFICIAL CAPACITY AS ACTING SECRETARY OF THE UNITED STATES DEPARTMENT OF THE INTERIOR, BUREAU OF OCEAN ENERGY MANAGEMENT, Defendants-Appellants

2020-1909

Appeal from the United States District Court for the Eastern District of Louisiana in No. 2:18-cv-14065-GGG- MBN, Judge Greg Gerard Guidry.

Decided: March 9, 2021

CARL D. ROSENBLUM, Jones Walker LLP, New Orleans, LA, argued for plaintiff-appellee. Also represented by ALIDA C. HAINKEL, LAUREN C. MASTIO; PAUL A. DEBOLT, Venable LLP, Washington, DC.

ROBERT J. LUNDMAN, Environment and Natural Resources Division, United States Department of Justice, 2 TAYLOR ENERGY COMPANY, L.L.C. v. INTERIOR

Washington, DC, argued for defendants-appellants. Also represented by JONATHAN D. BRIGHTBILL, ERIC GRANT.

Before PROST, Chief Judge, PLAGER and O’MALLEY, Circuit Judges.

O’MALLEY, Circuit Judge.

Appellants, United States Department of the Interior, et al. (collectively, “Interior”), appeal the decision of the United States District Court for the Eastern District of Louisiana, transferring this case to the United States Court of Federal Claims (“Claims Court”). Order, Taylor Energy Co. LLC v. United States Dep’t of Interior, No. 18- 14065 (E.D. La. Mar. 31, 2020), ECF No. 71; J.A. 1–2 (Transfer Order). Because we hold that the Claims Court does not have subject matter jurisdiction over this case, we reverse and remand to the district court for further proceedings .

I. BACKGROUND

A. Factual Background

In 1994, Taylor Energy Company, LLC (“Taylor”) became the lessee and operator of oil and gas properties in the Gulf of Mexico, located on the Outer Continental Shelf, offshore Louisiana. Taylor Energy Co. LLC v. United States, 975 F.3d 1303, 1307 (Fed. Cir. 2020). In 2004, Hurricane Ivan destroyed Taylor’s offshore operations at the site, causing oil to leak from the wells into the waters of the Outer Continental Shelf. Id. at 1308. Three federal statutes —the Outer Continental Shelf Lands Act (“OCSLA”), the Clean Water Act, and the Oil Pollution Act—and their implementing regulations, require Taylor to decommission the site and stop the oil leaks. To comply with its statutory and regulatory obligations, Taylor and Interior developed a plan to decommission the wells and associated facilities.

TAYLOR ENERGY COMPANY, L.L.C. v. INTERIOR 3

Taylor’s leases at the site terminated in June 2007, and it ultimately decided to leave the offshore oil production business in 2008. Pursuant to OCSLA regulations, Interior approved Taylor’s assignments of its active leases to third parties on the condition that Taylor set aside part of the proceeds from those lease sales in order to provide sufficient funding for its decommissioning obligations. Although Interior’s regulations generally provide for a bond to ensure sufficient funding of decommissioning obligations, 30 C.F.R. §§ 556.900(a)–(d), 556.901(d), the regulations also authorize Interior to accept equivalent financial assurances , id. § 556.904. Here, Interior required additional financial assurance and Taylor decided to establish and contribute to a “lease-specific abandonment account” in an amount equal to Interior’s initial estimate of the decommissioning costs. Taylor, 975 F.3d at 1307–09.

Taylor and Interior entered into three agreements in 2008—the Trust Agreement, the Disbursement Agreement , and the Bond Agreement. These agreements addressed how Taylor would fund the trust account and how Interior would disburse payments from it. The Trust Agreement requires Taylor to comply with the regulatory decommissioning requirements. The Disbursement Agreement establishes procedures for approving and disbursing funds from the trust account. The Bond Agreement required Taylor to deposit $666,280,000 into the trust account , consistent with the cost estimate in the Trust Agreement. Id. at 1308–09. Taylor deposited that amount on the agreed upon schedule.

The agreements require Taylor to seek reimbursement from its insurance policies for work performed at the site and prevent Taylor from receiving payment from the trust account for costs covered by such reimbursement. The Trust Agreement specifically provides that “[n]o disbursements will be given for amounts reimbursed to [Taylor] by insurance proceeds.” J.A. 28. The Bond Agreement further provides that “Taylor will not be entitled to payment under 4 TAYLOR ENERGY COMPANY, L.L.C. v. INTERIOR

the Trust Agreement for costs reimbursed by insurance companies,” but that Taylor will be able to reduce or offset required deposits if the work is completed with insurance or other funds. J.A. 27–28. In compliance with the agreements , Taylor secured contracts, began decommissioning work, submitted insurance claims, and requested disbursement from the trust account.

In August 2009, Taylor sent a letter to Interior proposing that Taylor “make the full final deposit into the trust account,” without any offsets, and “retain all insurance proceeds it has received and will receive in the future as reimbursement for work performed.” J.A. 16. Interior rejected Taylor’s proposal on August 28, 2009 (“the 2009 Decision”). The agency explained that Taylor: (1) must make the full deposit due because Taylor had “not yet completed any phase of the ‘Work,’ as defined by the Trust Agreement”; and (2) must reimburse the trust account for any disbursements Taylor received that duplicated reimbursement from Taylor’s insurance company. J.A. 17. Taylor appealed the 2009 Decision to the Interior Board of Land Appeals (“IBLA”), seeking to compel Interior to accept Taylor’s proposal to keep the proceeds of any future payouts under its insurance policies.

While its administrative appeal was pending, Taylor continued its decommissioning work, including plugging and abandoning wells and removing damaged equipment and debris. As the decommissioning progressed, Taylor temporarily suspended work pending assessment of certain risks. During the periods of suspension, Taylor incurred downtime costs associated with its decommissioned rig, because Taylor was required to pay its contractor when the rig was idle. J.A. 30.

In August 2011, Taylor sent a letter to Interior, requesting reimbursement from the trust account for rig downtime costs. Interior denied the request on November 7, 2011 (“the 2011 Decision”), finding that Taylor had been

TAYLOR ENERGY COMPANY, L.L.C. v. INTERIOR 5

overcompensated by the trust. Taylor timely appealed the 2011 Decision to the IBLA.

In a single consolidated opinion issued in October 2018, the IBLA affirmed Interior’s 2009 and 2011 Decisions (“the IBLA Decision”). According to the IBLA, the agency’s “2009 and 2011 Decisions reflect a proper construction of the Agreements.” J.A. 41. The IBLA concluded that Interior properly denied: (1) Taylor’s requests to retain insurance proceeds in lieu of offsetting them against the final supplemental deposits to the trust account; and (2) the disbursement of trust account funds for rig downtime costs. Id.

B. Related Case

In a related case involving the same Trust Agreement at issue here, Taylor filed suit against the government in the Claims Court in January 2016, asserting a variety of contract claims and alleging violation of Louisiana law. The government moved to dismiss that complaint under Rules 12(b)(1) and 12(b)(6). In particular, the government argued that the court lacked jurisdiction because the statute of limitations barred Taylor’s claims.

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Taylor Energy Company, L.L.C. v. Interior, 990 F.3d 1303 (Fed. Cir. 2021).

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