Court Opinion

ID: 26541
Source: CourtListenerOpinion
Date Created: 2010-04-25 08:53:44+00
Date Added: 2024-06-11T08:02:47.525659
License: Public Domain

IN THE UNITED STATES COURT OF APPEALS

                          FOR THE FIFTH CIRCUIT
                          _____________________

                               No. 01-30293
                          _____________________

MILLER EXPLORATION COMPANY,

         Plaintiff - Counter Defendant - Appellant-Cross-Appellee,

                                      versus

ENERGY DRILLING CO.,

           Defendant - Counter Claimant - Appellee-Cross-Appellant.

__________________________________________________________________

           Appeal from the United States District Court
        for the Western District of Louisiana, Alexandria
                        USDC No. 99-CV-802
_________________________________________________________________
                         January 16, 2002
Before JOLLY, SMITH and BENAVIDES, Circuit Judges.

PER CURIAM:*

     We have thoroughly considered the arguments and briefs of each

of the parties and after some deliberation have concluded that the

district    court   did   not   err    and   that   its   judgment   should    be

affirmed.      The district court determined that, under the oil-

drilling contract between Miller and Energy, Miller was liable for

drill pipe and a drill rig that were swallowed by a crater.                   The

crater resulted when underground pressure forced a large volume of

salt water up the drill hole and eroded the ground near the rig.

The district court also determined that, once Miller terminated the

     *
       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this opinion should not be published and is not precedent except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.
contract, Miller was not required to make daily payments to Energy

while the rig was out of commission for repairs.

     With respect to Miller’s contractual liability for the damage

to Energy’s rig, we agree with the district court’s conclusion that

Section 10 of the contract controls this case and is unambiguous.

Paragraph 10 of the contract provides:

          [Miller] shall prepare a sound location
          adequate in size and capable of properly
          supporting the drilling rig, and shall be
          responsible for a conductor pipe program
          adequate to prevent soil and subsoil wash out.
          It is recognized that [Miller] has superior
          knowledge of the location and access routes to
          the location, and must advise [Energy] of any
          subsurface    conditions,    or    obstructions
          (including, but not limited to, mines,
          caverns, sink holes, streams, pipelines, power
          lines, and telephone lines) which [Energy]
          might encounter while en route to the location
          or during operations hereunder. In the event
          subsurface conditions cause a cratering or
          shifting of the location surface, or if seabed
          conditions prove unsatisfactory to properly
          support the rig during marine operations
          hereunder, and loss or damage to the rig or
          its associated equipment results therefrom,
          [Miller] shall, without regard to other
          provisions   of   this   Contract,    including
          Paragraph 14.1 hereof, reimburse [Energy] to
          the   extent   not   covered    by   [Energy's]
          insurance, for all such loss or damage
          including payment of force majeure rate during
          repair and/ or demobilization if applicable.

     This provision clearly places the risk of damage to the rig

(in excess of Energy’s insurance policy limits) on Miller if the

damage   is   the   result   of   “cratering”   caused   by   subsurface

conditions.   Although Paragraph 10 also refers to Miller’s duty to

“prepare a sound location” and to advise energy of any relevant
“subsurface conditions or obstructions,” we agree with the district

court that these portions of the paragraph do not limit the

language imposing liability on Miller for damage to the rig from

cratering.    Because   the   crater   here   was   attributable   to   a

subsurface condition (namely, underground pressure), the district

court did not err in holding that Miller must reimburse Energy for

the uninsured cost of repairing its drill rig.

     We also agree with the district court that the drill pipe lost

in the crater may properly be characterized as “in-hole” equipment

subject to Paragraph 14.2 of the contract. Paragraph 14.2 provides

that Miller “shall assume liability at all times for damage to or

destruction of [Energy’s] in-hole equipment, including, but not

limited to, drill pipe, drill collars, and tool joints. . . .”

Following the plain language of this provision, the district court

did not err in granting summary judgment in favor of Energy on its

damages claim for the value of the destroyed drill pipe.

     Finally, we agree with the district court that, once Miller

exercised its right to terminate the contract under Paragraph 6.3,

Miller was no longer obligated to compensate Energy (at the force

majeure rate) while Energy repaired its drill rig.        Accordingly,

the judgment of the district court is

                                                             AFFIRMED.