Case Name: MAGNOLIA COAL TERMINAL v. PHILLIPS OIL COMPANY
Court: Louisiana Supreme Court
Jurisdiction: Louisiana
Decision Date: 1991-03-11
Citations: 576 So. 2d 475
Docket Number: Nos. 90 C 1646, 90 C 1663
Parties: MAGNOLIA COAL TERMINAL v. PHILLIPS OIL COMPANY.
Judges: CALOGERO, C.J., and HALL and LEM-MON, JJ., concur and assign reasons.
Reporter: Southern Reporter, Second Series
Volume: 576
Pages: 475–490

Head Matter:
MAGNOLIA COAL TERMINAL v. PHILLIPS OIL COMPANY.
Nos. 90 C 1646, 90 C 1663.
Supreme Court of Louisiana.
March 11, 1991.
Concurring Opinion by Justice Calogero March 15, 1991.
On Application on Denial of Rehearing May 23, 1991.
James J. Coleman, Sr., Charles B. Johnson, Peggy Wallace, Henry Lazarus, Coleman, Dutrey & Johnson, Allan Kanner, Reuben A. Guttman, Joel Waltzer, Kanner & Guttman, P.C., Mack A. Barham, Robert Arceneaux, Lee A. Archer, Barham & Mar-kle, for plaintiff-applicant Magnolia Coal Terminal.
Charles D. Marshall, Jr., David N. Schell, Jr., Milling, Benson, Woodward, Hillyer, Pierson & Miller, New Orleans, William G. Paul, John L. Williford, Kenneth E. Rogers, David M. Whitney, Patrick H. Martin, for defendant-respondent Phillips Petroleum Oil.
George C. Gibson, Andre Phillips La Place, James Berry St. John, Jr., Craig Wyman, Robert T. Jorden, Charles B. Grif-fis, III, Chevron, U.S.A. Inc., Douglas A. Molony, CNG Producing Co., Malcolm Johns, Louisiana Land & Exploration Co., Frederick J. Plaeger, III, New Orleans, So-nat Exploration Co., Philip C. Wrangle, Houston, Tex., Texaco Inc., Shirley C. Friend, John D. Fitzmorris, Jr., New Orleans, Amoco Production Company, Millard E. Matthews, Jr., Houston, Shell Offshore Inc., Susan K. Carter, New Orleans, J. Patrick Batchelor, Commissioner of Conservation, State of Louisiana, George C. Gibson, New Orleans, Louisiana, Department of Environmental Quality, Keith W. Petrie, Baton Rouge, amicus curiae.

Opinion:
WATSON, Justice.
Seeking damages to a 2,200 acre tract of land, the plaintiff/owner, Magnolia Coal Terminal, alleges that defendant/lessee, Phillips Oil Company, and Phillips' predecessors, have: failed to control oil seepage from a well which was not properly plugged and abandoned; failed to properly clean up the well site; failed to restore the surface to its original condition; and failed to comply with statewide order 29-B of the department of conservation. Plaintiffs petition alleges both past and continuing damage to the property, which has resulted in a permanent diminution of its market value.
After this suit was filed on September 27, 1985, Phillips Petroleum Company (the current name of defendant) filed a motion to transfer the case to federal court on the ground of diversity of citizenship. Magnolia Coal Terminal is a partnership. One of the partners, International Tank Terminals Ltd., is a corporation which, like defendant, is organized under the laws of the State of Delaware. Because complete diversity was lacking, the case was remanded to the civil district court for the Parish of Orleans. See Carden v. Arkoma Assoc., — U.S. -, 110 S.Ct. 1015, 108 L.Ed.2d 157 (1990).
Remand was ordered by the federal court on December 11, 1985, and trial in state court fixed for March 17, 1987. Phillips asked for a continuance on March 9, 1987, alleging that more time was needed for discovery. Trial was reset for May 26, 1987. On May 4, 1987, Phillips filed exceptions of no right and no cause of action on the ground that Magnolia had failed to exhaust its administrative remedies before the commissioner of conservation. The trial court overruled the exceptions and the court of appeal denied supervisory writs. This court denied supervisory writs on June 5, 1987.
The trial court heard evidence for thirteen days in May and June of 1987 and concluded that the oil well was still leaking and that Phillips had breached its contractual obligation to restore the surface of the leased premises. The trial court rejected Phillips' contention that plaintiff's only remedy was specific performance and awarded monetary damages. Calculating the cost of properly plugging the well at $2.1 million, the cost of clean up at $2.1 million and miscellaneous damages at $300,000, the trial court awarded total damages of $4.5 million.
The commissioner of conservation refused to defer to the ongoing proceedings even though this court declined review. After trial was concluded on June 22, 1987, the commissioner held a public hearing on June 25, 1987, in which Magnolia did not participate. Subsequent to the trial court judgment on September 3, 1987, the commissioner issued contradictory findings on March 11, 1988. The commissioner decided that the well had been properly plugged and abandoned; that the well was not leaking; and that Phillips should submit a plan for clean up and remediation of the site.
On appeal, defendant's exceptions of no right and no cause of action were sustained. Magnolia Coal Terminal v. Phillips Oil, 561 So.2d 732 (La.App. 4th Cir.1990). The court of appeal concluded that resolution of the underlying factual issues in the litigation: whether the well was properly plugged; whether it was leaking; and what procedures should be followed for clean up and remediation of the site were within the exclusive original jurisdiction of the commissioner of conservation. A writ was granted to review the judgment of the court of appeal. 568 So.2d 1068 (La.1990).
FACTS
The tract is situated in Plaquemines Parish, Louisiana, about halfway between New Orleans and the mouth of the river. A strong consideration in Magnolia's purchase was the property's 2.2 mile frontage on the Mississippi River. Magnolia obtained an option to purchase the property on March 13, 1981, for $6§5,000 and subsequently renewed the option for an additional $655,000. Magnolia acquired title on December 23, 1981, paying $6.5 million in a cash sale, with the original owners, the Vaccaro and D'Antoni families, retaining the mineral rights. Under the mineral lease on the property: "Lessee shall pay for all damages caused by Lessee's operations, including damage to . soil and other property_" (P-136)
The sale of the tract to Magnolia was negotiated by attorney Frank LaGarde. During the option period, LaGarde said the prospective purchasers became concerned about oil on the property. At a meeting on July 14, 1981, representatives of Aminoil USA, Inc., Phillips' predecessor, which later merged with Phillips, agreed to rectify the problems at the site. The Aminoil per sonnel said that the well had never been properly plugged and abandoned and they were going to take care of the problem. In a letter dated July 17, 1981, Aminoil acknowledged responsibility for properly plugging the well and cleaning the property. In pertinent part, the letter said:
"During the course of our conversation July 14, 1981, in the office of Mr. Frank LaGarde, the following agreements were made relative to Aminoil's cleaning up the surface location of the State Lease 2513 Well, to wit:
1. That Aminoil will, in a good and workmanlike manner, proceed with its efforts to plug and abandon said well. It was noted that Aminoil is currently studying the engineering problems involved in such operations but will move forward on the project with all expeditiousness .
⅜ * ⅜ ⅜ ⅜ #
3. That Aminoil will proceed with all due diligence in draining all of the pits for said well and restoring the surface of the property to a usable condition. The problems involved with such restoration were discussed and it was recognized that it may take Aminoil up to two (2) years to complete this operation." (P-6 and P-49, duplicate exhibits)
Because it has adjacent deep water navigation, the property is an outstanding industrial site. Construction bids for a coal terminal were obtained in the spring of 1982. The total cost of the facility, including capitalized interest, land cost and working capital, was projected at $86 million. Magnolia spent $3,828,000 for engineering and other preliminary construction costs.
Ingram Industries, one of the partners in Magnolia Coal Terminal, had guaranteed $43 million of the letter of credit involved in the terminal project. The company will no longer undertake such a guarantee because the danger of spontaneous combustion in coal, a significant problem in any coal facility, is increased by the oil pollution. It is impossible to store coal in an oil polluted area.
There are two major coal terminals in the New Orleans area and a third bulk terminal. There is an International Marine terminal just above the Magnolia location. Ingram Barge Company operates coal barges and would benefit from having its own terminal. With its own terminal, Ingram's barges would receive preferential treatment which would reduce demurrage costs, the holding charges.
The terminal proposal had anticipated fleeting 107 barges in the river adjacent to the property. It would be dangerous to do that in the presence of leaking oil. Without absolute assurance that oil is not leaking or traveling underground, it is impossible to insure, finance or build a coal terminal on the property.
Waldemar S. Nelson, chairman of the board of a firm of consulting engineers, testified as an expert in engineering with extensive experience evaluating waterfront sites for marine facilities. A stable river bank, adjacent deep water and a long straight shoreline comprise an ideal industrial riverside terminal location. Nelson's company designed this terminal and many plants on the river for major companies, including Dow Chemical, Exxon, Union Carbide, and BP Oil. The company has designed several coal facilities and did the design to convert Freeport Sulphur's Port Sulphur terminal to a coal terminal.
A commercial coal terminal requires a large storage area because it is necessary to separate the commodity by owners and also by grades. This project, designed to have ground storage for a million tons of coal, was to be a major terminal capable of handling 12 million tons of coal a year, primarily exports barged from the inland coal fields, transferred to storage and then loaded on ships.
Robert W. Merrick testified as an expert real estate appraiser and broker with an MAI designation. In 1980, when he took the Magnolia representatives to look at potential sites for a coal terminal, crude oil was selling at $35 a barrel and there was intense interest in the development of coal as an alternative energy source. In 1982, the coal bubble burst when the price of crude oil dropped. Merrick said that the Magnolia property is a desirable industrial site because of its two and a half miles of straight river frontage, lack of batture and deep water adjacent to the levee. He estimated the 1987 value of the tract at $2.2 million.
Construction of the terminal was halted in the spring of 1982 because none of the major contracts could be completed. Australia and China are the major world sources of raw coal, but Australia is operating at capacity. The third largest exporter of coal is South Africa. If exports from South Africa are restricted or the price of oil increases, the coal terminal project will again become viable.
Approximately 1000 linear feet of Magnolia's river frontage is occupied by the site of well number one on state lease 2513. The well is located near the Pointe-a-la-Hache ferry landing at the narrow upstream end of the Magnolia property. The well was completed on August 6, 1960, by U.S. Oil of Louisiana, Inc., one of Phillips' predecessors. It was described as having two lengths of tubing inside a easing. One string of tubing, the long string, reached the K-6 sand. The other string of tubing, the short string, reached the K-2 sand.
On September 29, 1964, there was an explosive blowout of the well from the K-6 sand. Neither Halliburton's well control unit nor Red Adair, a world renowned expert on blowouts, could control the problem. Halliburton pumped 2800 barrels of heavy drilling mud down the hole, but a lateral opening in the long string allowed the mud to escape. At the surface, a large volume of gas, water, oil and mud escaped and a crater developed about 200 feet across and 220 feet deep. The blowout was brought under control by a relief well drilled in December of 1964.
Leonard Casey, field foreman for U.S. Oil of Louisiana when this well was drilled and now an employee of Phillips, was present when the crater formed at the well head. Casey observed drilling mud being pumped down the long string into the well for eight or nine days and saw it return into the crater. In addition to the drilling mud, 350 to 400 barrels of oil and twice that much saltwater flowed into the crater daily for a total estimated volume of 16,670 cubic yards. Oil was siphoned out and burned twice in the area of the crater. Some of the fluid in the crater was pumped into the river until the state objected. Four spoil pits were dug. The crater's mixture of liquid drilling mud, salt water and production oil, which was working its way to the surface, had a pudding consistency.
Kenneth G. Martin testified as an expert in geology with extensive education and experience. After the relief well was drilled, well number one was plugged with drilling mud. According to Martin, the drilling mud should have been followed with cement to make a permanent plug. Instead, the operator drilled to a gas sand near the blowout sand and started producing from that level, leaving the original well without a permanent plug. Inter-office correspondence from U.S. Oil of Louisiana, Inc. confirmed Martin's testimony that the relief well, "a Plugback" to the "Same Sand," had substantial gas production. (P-41) The gas well continued producing until June of 1971.
In 1977, Signal Petroleum, one of the interim lessees, responded to a request from the Plaquemines Parish Commission Council and filled the crater around the well with over 16,000 cubic yards of river sand.
In 1980, the well head was 55 feet deep and work on the well required a cellar. Ten valves were opened which leaked green oil. Since green oil is fresh oil, this was conclusive evidence to Martin that the well was leaking. It was still leaking at the time of trial 23 years after the blowout. According to the oil companies' own reports, it was not only leaking but leaking at the rate of one gallon per hour or a half barrel a day.
In 1981, an attempt to plug the well from the surface with cement was unsuccessful: "1 inch tubing was run in the long string to 7,518 feet and while attempting to pull out the 1 inch tubing it parted leaving 7,200 feet in the long string." (P-135, Pretrial Order of Stipulated Facts). In Martin's opinion, a surface plug with cement is impossible because pressurized oil is still present. Since the long string is open, the cement, like the drilling mud, went out laterally at the point of least resistance.
Martin said 150 foot bore holes in the area prove the well is still flowing. There is oil contamination of the site a half mile away from the well head. Martin said the K-6 sand is still capable of blowing out because it has high pressure, which causes the leaking oil to rise to the surface. An inter-office communication from Aminoil of Louisiana, Inc., dated July 17, 1980, states: "No other well has produced from this K-6 reservoir and one must assume this zone still has as much pressure as when it was killed and is still capable of blowing out." (P-42) Plugging efforts are also hampered by kinks in the seven inch casing at approximately 20 feet and 60 feet.
Aminoil abandoned its efforts to plug the well on January 3, 1983, after expenditures of $690,756. Four and a half months later, an eight to ten foot cellar was dug around the well head. Gas flowed into the cellar at the rate of 336 cubic feet a day and is still coming to the surface, demonstrating its presence by bubbles in the water covered areas.
At least 600 barrels of oil were recovered between October 21, 1983, and July 13, 1984, less than a year's time. Aminoil completed its clean up operation on August 5, 1984, but oil pockets appeared on the surface in November. In a letter to the Louisiana Department of Conservation dated January 17, 1985, Phillips admitted oil was still seeping to the surface from an unknown source. (P-106)
On March 22, 1984, the U.S. Coast Guard made a water pollution violation report regarding oil in the marshy area of the site which was draining into the Mississippi river. On August 31, 1984, the U.S. Corps of Engineers sampled the area and found combustible gas in four places.
Martin said it is impossible to clean the well site while the well is still leaking. In Martin's opinion, the well was never properly plugged, was never sealed and is still leaking. Properly plugging the well will require isolation of a work area with sheet pilings 100 feet deep to remove the kinks in the casing. The well should be plugged at the K-6 sand, the K-2 sand and the surface. The cost would be approximately $3 million.
Charles Campbell was employed to look at the property in February of 1986. Campbell and the president of his company used an excavator, which is a hydraulic self propelled backhoe similar to a drag line, to dig into the black areas. The spots were outside the levee, which had been built for oil containment, and varied in diameter from four feet to over 100 feet. In the first spot, the excavator hit water and oil seepage at a depth of about two feet. After digging to a depth of four or five feet, the water became covered with a thick layer of black oil. At another spot, an oily mud, which appeared to be oil mixed with waste drilling mud, appeared at a depth of three feet. On March 28, 1986, they went downriver, dug into the largest black spot and found what appeared to be crude oil seepage at a depth of approximately 33 feet. When they returned to the first spot, the crust of the surface broke and the excavator sunk about four feet into the ground. The track of the excavator filled with oil. A bulldozer had to extricate the excavator. Green oil was sucked out of the pit areas with pumps: 140 barrels were sold to Murphy Oil Company for $12.14 a barrel, the spot price at the time. Approximately 100 barrels of additional oil were reclaimed from other spots.
Ellison T. Gordon, an expert in oil field waste processing, is chairman of the board of Zallco Pollution Control. His company treats waste oil and has cleaned over 300 oil pits for major companies such as Superi- or Oil, Shell, Conoco, Chevron, Union, Gulf and Amoco, as well as for independent operators. He and his son examined the site and observed black spots "all over the place." When they dug a hole four or five feet deep, oil came into the hole, rising at the rate of a quarter of an inch every hour. It was green oil, new oil, not old oil.
Just before trial, Gordon returned to the site. Oil was bubbling to the surface in three spots, which were in a line pattern leading downstream toward the balance of the property. Gordon estimated the price of cleaning the area at over $30 million, using on site thermal incineration. The process would cost $25,738,952, incinerating 1000 cubic yards a day for about 420 working days. Because 50 percent of the waste is water, it would be necessary to refill with dirt, at a cost of $3,457,690.83.
Webb Jay testified as an expert in chemical engineering with a specialty in the drill ing, production, plugging and cleanup of oil and gas wells. He inspected the well site twice, once in 1985 and then on December 30, 1986. In Jay's opinion, the well has not been properly plugged. The ground showed continuous seepage of fresh crude oil, which Jay believed to be coming from the well bore. The relief well only effected a temporary plug and the well is still leaking. According to Jay, no cement ever reached the perforation point where oil and salt water are mixing. Jay has drilled fifteen to twenty wells within a five mile radius of this well. None of the other wells have seepage around them. In Jay's opinion, the cost of properly plugging the well would be $2 million or more. Jay Engineering, Inc., gave a three phase cost estimate in January, 1985, of $2.1 million. (P-141) Jay said it is a high risk job which he would not guarantee at any price. In his opinion, the bottom hole pressure at the well is sufficient to cause the present flow from the well of less than a barrel per day.
Richard B. Adams testified as an expert in geotechnical engineering, groundwater assessment and oil field site investigation, describing himself as an environmental problem solver. Adams said there is serious contamination throughout the tract and an impregnated contamination zone around the well crater. The borings indicate contamination laterally and to a depth of 350 feet: the source of all the contamination shown by the borings is the well blowout. The groundwater at the site is contaminated.
Dr. Robert C. Weaver testified as an expert in environmental, chemical and petroleum engineering with expertise in regulatory policy enforcement and reservoir engineering. He is a former dean of the College of Engineering at the University of Tennessee. Weaver first investigated the Magnolia site in 1980 when he was working with the Department of Natural Resources. He next visited the site on November 20, 1984, and has visited the site at least once a month since that time. Employed by Gulf South Research Institute, he worked part time with Magnolia on a fee basis until he was engaged as a full time consultant.
Dr. Weaver took videotape records on three visits to the site. A twelve minute edited synopsis depicts the scope of the contamination and reflects the way the property looked May 22, 1987, on Weaver's last pretrial visit to the site. Oil is spreading to the surface in various random pathways. The radius of the pattern is expanding to the south in the general direction of the groundwater flow. In Dr. Weaver's opinion, the pollution has to be coming from the well, which is not properly sealed.
Department of conservation order 29-B recommends that a perforation of a reservoir be cemented. In Dr. Weaver's opinion, the mud did not provide a satisfactory permanent plug because it eroded. The well still needs to be plugged at the perforation of the K-6 reservoir. The Magnolia tract cannot be cleaned until the well is successfully plugged because there is a continuing source of contamination. The core borings document contamination running 1200 to 1500 feet downstream from the ferry road in an area about 300 feet wide. In the crater area, the contamination extends to a depth of 60 feet. The balance of the area is contaminated to a depth of 15 feet.
In Dr. Weaver's opinion, on site incinerator would be the preferred technology for cleaning the property, at an estimated cost of $30 million with a 50 percent contingency allowance or $45 million.
The trial court found the testimony of experts Martin, Jay and Weaver plausible and convincing. The record fully supports this finding.
William J. Clark, III, formerly operations manager in Baton Rouge for the Louisiana office of conservation, testified as an expert on the rules and regulations of that office which affect oil drilling. Prior to January 20, 1986, when the rules were amended, the office of conservation did not regulate the closure of pits containing nonhazardous oil field waste. Under the new rules, order 29-B requires that a well be plugged with 100 feet of cement at the perforated interval and a 30 foot surface plug. This well was not plugged according to order 29-B.
Marsha Barnett, an employee of Phillips Petroleum, testified that she is a compliance clerk and prepared a plug and abandon report on this well for the Louisiana department of conservation. The report was not filed until 1987, after the effective date of order 29-B, although the well was said to have been plugged and abandoned on March 22, 1983.
Bill R. Hise, who heads a consulting firm of petroleum engineers, testified that the well is not leaking from the K-6 reservoir. In his opinion, the well was successfully plugged; the oil present is old oil; and the pollution is primarily on the surface.
Dr. Gordon P. Boutwell testified as an expert geotechnical engineer and an expert in geohydrology. He conducted a study of the site between April 2, 1984, and trial. His tests and borings indicated that the well is not leaking, although he admitted a moderate contamination problem at the site. In his opinion, the well and pit areas are too distant from the remainder of the tract to affect the property's use for a coal terminal or any other industrial purpose. The maximum area requiring remediation is four or five acres. Although there is an area 50 or 60 feet deep at the crater which needs cleaning, the pits only need cleaning to a depth of six to eight feet. Boutwell recommended a recovery well to clean the area to a one percent standard.
H. Darryl Miller testified as an expert in environmental engineering. Prior to the enactment of order 29-B, there were no standards for oil field waste, which is specifically exempt from the federal and Louisiana hazardous waste regulations. In Miller's opinion, the maximum site area requiring treatment extends about 100 feet in diameter around the cone. The pit area should be remediated to an eight foot depth and the cone area to a ten foot depth. Miller said the best treatment would be biodegradation using microbes. Involved are 32,800 cubic yards which can be remedi-ated in six to eight months at a cost of $1,409,000. Miller's testimony was based on cleaning to a one percent standard, which he described as acceptable in the industry.
Yinod Jindal, an employee of Phillips with a master's degree in petroleum engineering, became manager of Aminoil's onshore operations in 1981. After allegedly plugging the well, Aminoil, in a letter dated January 14, 1983, said it was not possible to give a time schedule for cleaning the surface of the site. (P-8) According to Jindal, no time schedule was given because Aminoil did not know the extent of the problem.
After Aminoil claimed the well had been plugged and abandoned, Jindal admitted observing oil seepage at the site. In fact, his company recovered 2300 barrels of oil from the site between September of 1983 and September of 1984. Subsequently, they recovered another 200 barrels. Jindal admitted that there are still some problems with oil seepage. Aminoil's clean up plan for the property included removal of the oil in the pits, knocking down the oil levees and leveling the ground to an industry standard. This superficial clean up was completed in October of 1984. The site was then monitored and new black spots appeared in November. A pit and some trenches were dug to accumulate the oil for removal. On December 26, 1984, a fence was put up by Magnolia, which stopped further clean up efforts.
Kenneth Moise testified as an expert in petroleum engineering with extensive experience in the clean up of oil well sites as an employee of Louisiana Land and Exploration Company. None of the thousands of wells with which he was involved on behalf of LL & E were ever left improperly plugged and leaking.
John T. Dade, an employee of Phillips, testified that the well site is sloppy looking with several pits containing oil and a soft area around the old well site. Aminoil used a gravity separation procedure to recover roughly 2300 barrels of oil and oil emulsion and approximately 800 gallons of water. The oil was sold as waste instead of crude because it had a lot of sediment. In October of 1984, Aminoil had removed all the visible oil and closed the pits. Dade looked at the property the week before he testified and admitted there was still some oil on the property. He had paced off a contaminated area measuring approximately 25 by 75 yards.
Dr. Peter Smith, a rebuttal witness for Magnolia, testified as an expert civil engineer specializing in environmental science and industrial site selection. Dr. Smith said that the cleared area is contaminated with oil to a depth of 15 feet. The crater area is contaminated to a depth of 50 or 60 feet. Dr. Smith made borings. Sample number six, taken 2,000 to 2,200 feet south of the well site, shows oil contamination of virgin, uncleared territory which could not have come from the surface. In Smith's expert opinion, based on analysis of the soil, the well is the source of the contamination, which is spreading. Boring sample number five was taken approximately 100 feet into the woods south of the cleared area. It showed .18 percent of oil contamination.
On December 30, 1986, Waldemar S. Nelson observed oil around the old well site near the upriver end of the property. There was also extensive evidence of oil downriver extending to roadside ditches over two miles from the well site, near the end of the property. After sampling and testing, Nelson determined that the site could not be recommended for a coal terminal or any industrial purpose in its present condition.
At the conclusion of the evidence, the trial judge and counsel visited the site, accompanied by experts Boutwell and Weaver.
FACTUAL CONCLUSIONS
The testimony (fifteen volumes) and the exhibits (338) overwhelmingly support the trial court's conclusions that: (1) the well is not properly plugged and is still leaking; and (2) a substantial portion of the tract is contaminated with oil.
LEGAL CONCLUSIONS
The Louisiana constitution provides: "All courts shall be open, and every person shall have an adequate remedy by due process of law and justice, administered without denial, partiality, or unreasonable delay, for injury to him in his person, property, reputation or other rights." LSA-Const. art. I, § 22.
The judicial power is vested in the courts. LSA-Const. art. V, § 1. Except as otherwise provided by the constitution, the district courts have original jurisdiction of all civil and criminal matters. LSA-Const. art. V, § 16(A). Although the commissioner of conservation was a constitutional officer under the Louisiana constitution of 1921, that provision was not carried forward into the 1974 constitution. See LSA-Const. art. VI, § 1(C) of the constitution of 1921.
By Act No. 192 of 1990, enacted long after Phillips invoked a commissioner's hearing in this matter, the commissioner was given jurisdiction over site clean up of abandoned and unused wells. LSA-R.S. 30:4(C)(16)(a). The act clarifies any doubt about the commissioner's jurisdiction over site clean up prior to its enactment. In any event, monetary damages are within the exclusive original jurisdiction of Louisiana's courts.
Plaintiff's action for damage to its property is a matter of private law. See Moore v. Roemer, 567 So.2d 75 (1990) Magnolia's right to recover damages is a property right arising out of the original lease and attached to the property. Andrepont v. Acadia Drilling Co., 255 La. 347, 231 So.2d 347 (1969).
Because the commissioner cannot award damages, the question of plaintiff's damages is a matter for the courts. Compare O'Meara v. Union Oil Co. of California, 212 La. 745, 33 So.2d 506 (1947), where the only issues were overproduction and underproduction in violation of the conservation laws, and suit was not filed until the day before the commissioner's hearing was scheduled. O'Meara recognized other situations where the jurisdiction of the courts is appropriate.
The implied obligation of the mineral lessee to restore the surface is limited by a standard of reasonableness. See Bonds v. Sanchez-O'Brien Oil & Gas Co., 289 Ark. 582, 715 S.W.2d 444 (1986). However, this lease makes the lessee responsible for surface damage to the soil, and Phillips is the successor of the original lessee. Phillips' liability for damages is separate from its obligation to stop the leakage of oil. Although economic conditions caused Magnolia to defer construction of its coal terminal, this is still a prime industrial site, which Magnolia has been unable to use, sell or develop for any purpose from its purchase' in 1981 until the present.
The lease imposes an express obligation which is a matter of contract not within the purview of the mineral code. See, for example, Clement v. Marion Corp. 398 So.2d 130 (La.App. 3d Cir.1981); Street v. Equitable Petroleum Corp., 532 So.2d 887 (La.App. 5th Cir.1988), Edwards v. Jeems Bayou Production Co., 507 So.2d 11 (La.App. 2d Cir.1987); Broussard v. Waterbury, 346 So.2d 1342 (La.App. 3d Cir. 1977) writ denied, 350 So.2d 674 and Coon v. Placid Oil Co., 493 So.2d 1236 (La.App. 3d Cir.1986) writ denied, 497 So.2d 1002. Breach of a contractual obligation to pay for surface damage to soil and property is not within the jurisdiction of the commissioner of conservation.
Since 1964, the successive mineral lessees have shown a callous disregard for the damage being inflicted on this property. See Cities Service Oil Co., v. Merritt, 332 P.2d 677 (Okla.1958). The result is a complex problem, which the records of defendant and its predecessors show can only be cured at great expense. This is not the ordinary case in which the lessee has caused minor soil damage. Enormous damage was proven to the soil of the leased premises. Oil and gas have been flowing from this well for over 26 years, and it is still not properly plugged. Even a conservative estimate of repairing the damage exceeds the property's present value. Under these circumstances, the trial court did not abuse its discretion in fixing those damages at $2.1 million, which is less than the current value of the property.
The court of appeal erred in deciding that Magnolia's damages cannot be fixed until the commissioner of conservation holds a new hearing. Damages from soil pollution are within the conventional knowledge and expertise of a trier of fact. See Marshall v. El Paso Natural Gas Co., 874 F.2d 1373 (10th Cir.1989).
Since this is an ongoing problem which has not been corrected, Magnolia has the right to seek future damages to the property. Any damages which may be proven between the time of trial and the plugging of the welfare reserved.
Phillips and its predecessors have exercised their contractual rights as mineral lessees with an unreasonable disregard for the damage being inflicted on this tract of land. Not only the soil but the groundwater, the Mississippi river and the public have been damaged. See Save Ourselves v. La. Environ. Cont. Com'n, 452 So.2d 1152 (La.1984). There was an ongoing negligent failure to plug this oil well. LSA-C.C. art. 2315. Phillips is obliged not only to pay the contractual damages owed to the landowner but also to abate the nuisance by properly plugging the oil well. LSA-C.C. art. 667. See Hero Lands Company v. Texaco, Inc., 310 So.2d 93 (La.1975).
After being served in this matter on October 7, 1985, defendant Phillips sought removal to federal court. The case was remanded to state court on December 11, 1985, and set for trial on March 19, 1987. Phillips moved for a continuance on March 9, 1987, representing that additional time was necessary to complete its discovery. Trial was reset for May 26, 1987. It was not until May 4, 1987, after the original trial date, that Phillips filed its exceptions, claiming that Magnolia had failed to exhaust its administrative remedies. Cited in support of the exceptions was the language of the Louisiana Abandoned Oilfield Waste Site Law, LSA-R.S. 30:71, et. seq., which was not effective until July 10, 1986, long after the filing of this suit. That law only applies when "no financially responsible owner or operator . can be located, or such person has failed or refused to undertake actions ordered by the commissioner...." LSA-R.S. 30:75(A)(4). This situation does not come within the Abandoned Oilfield Waste Site Law because there is a financially responsible operator. After the exceptions were overruled, a writ was denied by this court on June 5, 1987.
Despite the overruling of its exceptions, Phillips asked for a hearing before the commissioner of conservation. Phillips then participated in a hearing by the commissioner on June 25, 1987, after trial was concluded on June 22, 1987.
The evidence leaves no doubt that well number one on lease 2513 has never been properly plugged and abandoned. The trial court was correct in this factual finding. After the trial court rendered judgment, the commissioner made a contrary determination that the well had been properly plugged and abandoned and was not seeping or leaking. This finding by the commissioner of conservation was based entirely on Phillips' evidence and is clearly wrong. By holding a hearing while this matter was under advisement in the trial court, the commissioner of conservation infringed judicial authority. Phillips is hereby ordered to seek a new hearing at which the commissioner is to consider this record and any additional evidence presented by the parties. LSA-Const. art. V, § 2.
The court of appeal correctly concluded that this record should be presented to the commissioner of conservation, who can order, monitor and supervise a plugging and abandonment of the well which will protect the public as well as the landowners. The jurisdiction of the commissioner of conservation, outlined in LSA-R.S. 30:4, extends to the plugging of oil and gas wells. Since the evidence establishes that this well has been leaking since 1964, the commissioner of conservation must determine at a new hearing what procedures should be followed to have the well properly plugged and abandoned. The parties are, of course, free to seek judicial review of the commissioner's orders.
For the foregoing reasons, the judgment of the court of appeal is reversed, and the judgment of the trial court is reinstated insofar as the trial court held that defendant is liable for damage to plaintiff's property in the sum of $2.1 million. Plaintiff's right to future damages from the time of trial until the well is properly plugged is specifically reserved.
The judgment of the court of appeal is affirmed insofar as it held that plaintiff had no cause of action to force proper plugging and abandonment of this oil well until the matter had been reconsidered by the commissioner of conservation. Defendant Phillips is hereby ordered to seek a new hearing before the commissioner of conservation in regard to the plugging of the well.
It is ordered, adjudged and decreed that defendant, Phillips Petroleum Company, be cast in judgment to plaintiff, Magnolia Coal Terminal, for the sum of $2.1 million, together with legal interest from the date of judicial demand until paid.
All costs are assessed to defendant, Phillips Petroleum Company. REVERSED IN PART; AFFIRMED IN PART; AND RENDERED.
CALOGERO, C.J., and HALL and LEM-MON, JJ., concur and assign reasons.
DENNIS, J., concurs in part, dissents in part and assigns reasons.
MARCUS, J., dissents and assigns reasons.