Court Opinion

ID: 38729
Source: CourtListenerOpinion
Date Created: 2010-04-25 20:14:30+00
Date Added: 2024-06-11T17:16:05.033357
License: Public Domain

United States Court of Appeals
                                                                       Fifth Circuit
                                                                    F I L E D
                IN THE UNITED STATES COURT OF APPEALS
                                                                      July 12, 2005
                          FOR THE FIFTH CIRCUIT
                                                                Charles R. Fulbruge III
                                                                        Clerk

                               No. 04-30395

     BASIN EXPLORATION INC (DELAWARE);
     STONE ENERGY LLC; STONE ENERGY
     CORPORATION,

                                               Plaintiffs-Appellees,

           versus

     TIDEWATER INC; ET AL,

                                               Defendants,

     TIDEWATER INC; JACKSON MARINE LLC, in personam,

                                               Defendants-Appellants.

            Appeal from the United States District Court
                for the Eastern District of Louisiana
                            2:01-CV-2271-S

Before GARWOOD, GARZA and BENAVIDES, Circuit Judges.

PER CURIAM:*

     *
       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should not be published and is not precedent except under the limited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.
      Tidewater Inc and Jackson Marine, L.L.C., in personam, and the

M/V SARA TIDE, in rem (collectively, Tidewater) appeal the district

court’s judgment in favor of Basin Exploration, Inc., Stone Energy,

L.L.C., and Stone Energy Corporation (collectively, Basin), for

damages occasioned by an allision between a Tidewater vessel and an

oil and gas well owned by Basin.                Only the amount of damages

awarded is challenged.           We affirm.

                          Facts and Proceedings Below

      On July 26, 2000, the M/V SARA TIDE, a Tidewater supply

vessel, struck Basin’s well, well number 10 in the West Cameron

Block 45 field in the Gulf of Mexico off the Louisiana coast.               The

allision bent the well more than 70 degrees down toward the sea

floor, leaving the entire structure under water. The two outermost

layers of the well casing were split open, the pipeline connections

to   the   well    were   torn    off,   and   the   platform   was   destroyed.

Tidewater does and did not contest liability, so that the sole

issue between the parties is the amount of damages awarded.

      Basin decided to plug and abandon (P&A) the well, which had

been shut-in (out of production and closed with temporary plugs)

since 1986.       The year following the allision, Basin sued Tidewater

in the district court below, seeking damages for the P&A costs and

the cost of drilling a replacement well.              Basin contended that it

had planned to use the structure and casings of the No. 10 well to

drill a sidetrack well from there into the field at a nearby

                                         2
location.     The district court awarded Basin a total of $3,847,802

plus prejudgment interest from the date of loss.                   This award

included $2,079,172 in out-of-pocket costs for the P&A operation

and debris cleanup, $458,630 as the extra cost of the replacement

well compared to the originally planned sidetrack well, $780,000

for a replacement platform and $530,000 for replacement flow lines.

                                Discussion

      In general, the injured party in a tort action is entitled to

be placed in as good a position financially as if the injury had

not occurred.     Gaines Towing and Transp., Inc. v. Atlantia Tanker

Corp., 191 F.3d 633, 635 (5th Cir. 1999).               In a maritime action,

recovery is limited to economically justified expenditures.                  See

id. (when the cost to repair a vessel exceeds the market value of

the vessel, recovery is limited to the market value).

      Tidewater argues that there were insufficient gas reserves in

the   field    surrounding   Basin’s       well    to   economically   justify

replacement of the well.       If drilling a replacement well was not

economically justifiable, then Tidewater should not be assessed

damages for it.    In addition, if further drilling in the field was

not   economically   viable,   Basin       would   have   been   obligated   to

permanently plug and abandon the well at some point even if there

had been no allision.        Tidewater therefore argues that damages

assessed should be reduced by the cost of this eventual P&A

                                       3
operation, making Tidewater liable only for the additional P&A

costs occasioned by the allision.

      Even if the field was viable, Tidewater argues that the well

could have been repaired at a lower cost than the combined cost of

the P&A and the well replacement (minus the sidetrack costs).

Therefore, according to Tidewater, Basin’s recovery should be

capped at the amount that the well could have been repaired for,

estimated by Tidewater’s expert to be $900,000.

I.    Standard of Review

           On appeal from a judgment after a bench trial, this court

reviews legal issues de novo and findings of fact for clear error.

Houston Exploration Co. v. Halliburton Energy Servs., Inc., 359
F.3d 777, 779 (5th Cir. 2004).   A clearly erroneous finding is one

that gives a reviewing court a “definite and firm conviction that

a mistake has been committed.”   Anderson v. City of Bessemer City,

105 S. Ct. 1504, 1511 (1985).     A factfinder’s choice between two

permissible views of the evidence cannot be clearly erroneous, even

if the reviewing court would have decided the case differently.

Id.

II.   Gas Reserves

      Basin presented testimony from two employees, Bruce McDonald

(McDonald) and Randy Young (Young), a geologist and a petroleum

engineer, on their estimate of the proved gas reserves accessible

                                 4
from the vicinity of the destroyed well.1              These employees had

estimated the proved reserves at 2.9 billion cubic feet (BCF), but

had used a more conservative estimate, 2.3 BCF, for purposes of

reporting Basin’s assets as required by the Securities and Exchange

Commission (SEC) and calculating projected profits from extraction

of the gas.       Young testified that these profit projections ranged

from $14.8 million to $4.8 million between late 2000 and mid-2001,

depending on the price of gas at the time the projections were

made.       Basin also presented evidence of a prior proved reserves

estimate made by another Basin geologist, and a very similar

estimate made by a third-party auditor.             Although these earlier

analyses indicated different boundaries for the reservoir than

those determined by McDonald and Young, the earlier proved reserves

projection was also 2.3 BCF.

       Tidewater presented testimony on estimated proved reserves

from two experts, a geologist and a petroleum engineer.                The gas

reservoir projected by Tidewater’s experts had smaller boundaries

than       that   arrived   at   by   McDonald   and   Young,    and   roughly

corresponded to the area common to the boundaries of McDonald and

Young and those of the earlier Basin projection (i.e., generally

excluding any area that was not common to all those reserve

       1
       Tidewater argues that these witnesses were not properly designated as
experts, and that the district court erred in treating their testimony as expert
testimony. Each of these witnesses was tendered by Basin as an expert during the
trial.   In response, Tidewater’s counsel indicated willingness to let each
witness testify on certain topics, and made few, if any, objections to the
witness’s subsequent testimony.

                                        5
projections presented by plaintiffs).                  The differences in the

projections apparently arose from disagreements over interpretation

of data from another well in the field, the existence and extent of

a particular fault in the field, and the water level in the

reservoir.    Tidewater’s experts estimated the proved gas reserves

at between 0.5 and 0.8 BCF, and projected that recovery of the

reserves would result in a net loss, rather than a net profit.

      The   district    court    found       Basin’s   testimony   to   be   more

credible,2 and found that “it was economically feasible to attempt

to produce the proved reserves.” This finding was not clear error,

in that there were competing permissible findings from the evidence

presented.     Tidewater argues that the court erred in failing to

apply an adverse inference it had granted to Tidewater, where the

inference involved data from a seismographic study of the gas field

that Basin had not disclosed to Tidewater.               It is not clear from

the record that the court actually granted Tidewater’s request for

an adverse inference, however.3                Adverse inferences regarding

unproduced evidence are normally a result of a party’s acting in

bad faith.     King v. Ill. Cent. R.R., 337 F.3d 550, 556 (5th Cir.

      2
       Tidewater contends that the court disregarded the testimony of its experts
solely because they were paid experts. Although the court’s opinion mentions
that Tidewater’s experts developed their opinions for the purposes of litigation,
there is no indication that the opinions were completely disregarded for this
reason. The court as factfinder has discretion to weigh the evidence.
      3
        Although Tidewater’s written motion in limine included the request for an
adverse inference, the court did not explicitly act on the written motion. When
the evidence came up at trial, the court orally ruled that it would “grant the
motion in limine and exclude it.”

                                         6
2003); Caparotta v. Entergy Corp., 168 F.3d 754, 756 (5th Cir.

1999).       The court did not appear to find that Basin had acted in

bad faith, and did not abuse its discretion in failing to so find

or in failing to draw an adverse inference.4

       Because     the    district   court    did   not    err   in   finding   that

production from the vicinity of Basin’s well was economically

justified, the court did not err in awarding damages to Basin for

repair or replacement of the well.

III.       Repair vs. Replacement

       The district court found that repairing the well as opposed to

plugging it and drilling a replacement well would not have been

economically feasible.          This finding does not constitute clear

error.       Although the evidence of actual environmental damage was

scant,5 the severity of the structural damage to the well made

concern       about   potential      environmental        liability     reasonable.

Although Basin’s expert Jim Wilkinson conceded that the well would

likely      have   been   repaired    after   the   accident      had   it   been   a

       4
       The court expressed understanding of Basin’s explanation that licensing
restrictions with the third-party provider of the data prevented disclosure, but
noted that Basin could not “have it both ways.”
      Furthermore, even if an adverse inference had been granted, it appears to
us that there is no reasonable likelihood that applying the inference would have
produced a different result. The court excluded the plaintiff’s seismographic
map and refused to allow the plaintiff’s witness to testify on whether the
seismographic map supported the witness’s independently generated reserves map.
There was no assertion or evidence of any particular suspect features of the
seismographic map (which had been furnished to Tidewater pre-trial) that might
have formed the basis of an adverse inference.
      5
        All that was observed coming out of the well after the allision were small
bubbles that may have been associated with a pre-existing leak.

                                         7
producing well, he also testified to concerns with the ability of

a repaired well to withstand the stresses involved in the planned

sidetrack drilling operation.           In addition, Tidewater’s expert on

this issue was unwilling to describe Basin’s choice not to repair

the well as unreasonable.

      Because the district court did not err in finding that Basin’s

plugging and abandonment of the well was reasonable under the

circumstances      and   that    drilling     of    a    replacement    well    was

economically justifiable, the court did not err in awarding Basin

its out-of-pocket costs in plugging the well and the costs of the

replacement well to the extent these costs exceeded that of the

originally planned sidetrack well.             With respect to Tidewater’s

argument that the damages should be reduced by the amount Basin

would have paid to plug and abandon its well in the absence of the

allision,    the   present      value   of   this   eventual     cost   would   be

difficult to determine, given that when the well would have been

plugged and at what cost are not known.6                Furthermore, as noted by

the district court, Basin’s replacement well will eventually need

to be plugged and abandoned at Basin’s cost. This obligation takes

the place of Basin’s pre-allision obligation to plug and abandon

the original well, so that Tidewater is not entitled to a reduction

in damages.

      6
       A Basin employee testified that a permanent P&A operation on the original
well could likely have been delayed for about ten years, and that costs of P&A
operations had been declining over time.

                                         8
                        Conclusion

For the foregoing reasons the district court’s judgment is

                        AFFIRMED.

                            9