Breton Energy, L.L.C. v. Mariner Energy Resources, Inc.
764 F.3d 394
5th Cir.2014Background
- Conn Energy owns WC171 in the Gulf of Mexico; Breton and Conn explore WC171 for hydrocarbons under a 2009 agreement.
- Plaintiffs sue owners/operators of WC172, including IP Petroleum and others, alleging unlawful drainage and waste affecting a shared reservoir (K-1 sands).
- IP allegedly perforated K-1 sands; MMS required two separate completions for K-1 and K-2; IP reportedly completed in both zones, potentially violating MMS order.
- Allegations include commingling of K-1 and K-2 hydrocarbons, reduced recoverable oil/gas, and disposal of reservoir energy, with evidence drawn from MMS records and company reps.
- District court dismissed the Second Amended Complaint; on appeal, the court affirms some claims, vacates others, and remands for waste claim against IP.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the waste claim against IP survives Rule 12(b)(6). | IP perforated K-1; commingling reduces recoverable hydrocarbons. | Allegations are conclusory and lack plausible basis for waste. | Yes; complaint plausibly states waste against IP. |
| Whether non-perforating defendants can be liable for waste. | Non-perforators’ failure to report MMS data could cause waste. | Regulatory reporting failure does not establish waste. | No; waste claims against non-perforating defendants dismissed. |
| Whether the unlawful drainage claim is barred by Article 14 | Correlative rights violations constitute unlawful drainage. | Article 14 bars drainage claims; correlative-right theories do not salvage drainage. | Barred; drainage claims precluded. |
| Whether trespass provides an exception to the Rule of Capture for drainage. | Regulatory violations equal trespass; MMS violations permit exception. | No physical trespass alleged; regulatory violations do not create trespass. | Not established; trespass exception not met. |
| Choice of law governing waste and correlative rights. | OCSLA applies; Louisiana analogs govern correlative rights. | Federal and state law align; apply the applicable framework. | OCSLA governs; Louisiana law applies to correlative rights where not inconsistent. |
Key Cases Cited
- Huggins Realty, Inc. v. FNC, Inc., 634 F.3d 787 (5th Cir. 2011) (well-pleaded facts can shield from Rule 12(b)(6) dismissal)
- Total E&P USA Inc. v. Kerr-McGee Oil & Gas Corp., 719 F.3d 424 (5th Cir. 2013) (OCSLA: federal law governs with surrogate state law when applicable)
- Guste v. United States, 832 F.2d 935 (5th Cir. 1987) (correlative rights and drainage distinction under waste framework)
- Wilson v. Birnberg, 667 F.3d 591 (5th Cir. 2012) (pleading plausibility standard under Twombly/Iqbal applied to motion to dismiss)
- Elliff v. Texon Drilling Co., 210 S.W.2d 558 (Tex. 1948) (regulatory noncompliance relevant to waste; drainage vs. waste distinction)
- Mobil Exploration & Producing N. Am., Inc. v. Certain Underwriters Subscribing to Cover Note 95-3317(A), 837 So.2d 11 (La. Ct. App. 2002) (conservation/regulatory context informing waste analysis)
- Romero v. Mobil Exploration & Producing N. Am., Inc., 939 F.2d 307 (5th Cir. 1991) (regulations as relevant evidence in culpability)
- Ashcroft v. Iqbal, 556 U.S. 662 (U.S. 2009) (plausibility standard for complaint sufficiency)
- Bell Atl. Corp. v. Twombly, 550 U.S. 544 (U.S. 2007) (pleading standard requiring plausible entitlement to relief)
- Randall D. Wolcott, M.D., P.A. v. Sebelius, 635 F.3d 757 (5th Cir. 2011) (pleading standards and inference of liability)