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Fifth Circuit: LOIA Applies to Agreement to Salvage Platform

LOIA Voids Certain Oilfield Indemnity Provisions

Louisiana’s Oilfield Indemnity Act (“LOIA”) may invalidate certain indemnity agreements in oilfield contracts. See La. R.S. 9:2780.  There is a two-part test to determine if LOIA applies:  (1) the agreement must pertain to an oil, gas, or water well, and (2) the contract must involve operations related to the exploration, development, production, or transportation of oil, gas, or water.  The test is fact-intensive and must be applied on a case-by-case basis.

Recently, in Tetra Technologies, Inc. v. Continental Ins. Co., 2016 WL 730824 (5th Cir. Feb. 24, 2016), the U.S. Fifth Circuit Court of Appeals analyzed whether LOIA voided an indemnity provision in a contract to salvage a decommissioned oil production platform.


Activities Collateral to Plugging and Abandoning a Well

The initial question in Tetra was whether the salvage operations had the “required nexus to a well” since the well was not in use.  The Fifth Circuit first looked to prior decisions involving similar facts.  For example, in Howell v. Avante Servs., LLC, 2013 WL 1681436 (E.D. La. April 17, 2013) , the Eastern District of Louisiana held that the removal of casings from a well had the necessary nexus.  In Teaver v. Seatrax of La., Inc., 2012 WL 5866042 (E.D. La. Nov. 19, 2012), the court held that the dismantling of a platform crane on a well that had been dry for years also had the required nexus.

In both Howell and Teaver, the contracted operations were performed as part of larger plug-and-abandon operations.  LOIA expressly invalidates agreements for “plugging” operations and “any act collateral thereto.”  La. R.S. 9:2780(C).  Accordingly, the Fifth Circuit agreed with the Howell and Teaver decisions:  “Accepting the argument that LOIA could never apply to a nonproducing well would have required the district courts to interpret LOIA in such a manner as to exclude an expressly covered activity.”

The Court ultimately held that “a contract for salvaging a platform from a decommissioned oil well has a sufficient nexus to a well under LOIA.” Therefore, LOIA invalidated the indemnity provisions at issue in the case.


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