Doiron Test is Broadened: Decommissioning Offshore Platform is a Maritime Contract
As we discussed a few months ago, the US Fifth Circuit Court of Appeals (en banc) established a new test for determining what is a “maritime contract.” See In re: Larry Doiron, Inc., 879 F. 3d 568 (5th Cir. January 11, 2018) (en banc). Under the new Doiron analysis, a contract is a maritime contract if two conditions are met – if the contract is for providing services “to facilitate the drilling or production of oil and gas on navigable waters” and if the contract or the parties’ expectations provide that a vessel will play a “substantial role” in completing the contract.
A new case from the Fifth Circuit provides further illumination on the Doiron test. See In re Crescent Energy Servs., L.L.C., Case No. No. 16-31214 (US 5th Cir. July 13, 2018). In Crescent Energy, the court considered whether the contract at issue was a maritime contract. If the contract is deemed a maritime contract, then such is governed by federal maritime law; if not, then the contract is governed by state law. The issue of state vs. federal law is very important with respect to offshore drilling operations because Louisiana has enacted the Oilfield Anti-Indemnity Act — La. R. Stat. § 9:2780 — which prohibits any provision in a contract involving oil drilling which would require a contractor to indemnify its principal from the principal’s own fault in causing death or bodily injury. Under federal maritime law, such an indemnity provision would be valid and enforceable. This is significant to the insurance carriers involved. Every party has insurance. Thus, the question is, which insurance policy covers the injury — the policy owned by the principal or the policy purchased by the contractor?
In theory, under the Doiron first prong, decommissioning a drilling platform would NOT be a maritime contract since decommissioning does not “facilitate the drilling or production of oil and gas on navigable waters…” As such, any indemnification provision would be unenforceable under Louisiana law.
However, the Crescent Energy court held otherwise. The court accomplished this by broadening the Doiron first prong. In January 2018, the Doiron en banc court phrased the first prong in this manner:
“First, is the contract one to provide services to facilitate the drilling or production of oil and gas on navigable waters?”
By contrast, the Crescent Energy court stated that “[w]e start with whether the activity concerns development of oil and gas offshore.” Note the words “concerns” and “development.” Framing the issue as whether a contract “concerns” oil and gas “development” is much broader than whether a contract is “to facilitate” “drilling or production.” By using words with broader reach than those used in Doiron, the Crescent Energy court was easily able to reach the conclusion that decommissioning an oil platform was a “maritime contract.”
Interestingly enough, the Crescent Energy case did not arise in the typical manner. Often, these cases arise with drilling platforms on the continental shelf. However, here the case involved the decommissioning of wells in coastal waters off of Lafourche Parish. The location of the drilling platform was a relevant factor in the pre-Doiron test; but now the situs is not important.
The Crescent Energy case also had some interesting teachings with respect to the second Doiron prong: use of a vessel. We will discuss those issues in a separate article.
Louisiana Maritime Defense: Contact New Orleans Attorney Kristin M. Lausten
If you need additional information, contact Louisiana attorney Kristin M. Lausten. Ms. Lausten has experience in maritime law and defends complex tort litigation in both state and federal courts. She can be contacted at 504.377.6585 or via email at email@example.com.
The author may be contacted at:
Kristin M. Lausten
This article is provided as an educational service for general informational purposes only. The material does not constitute legal advice or rendering of professional services.