Louisiana Court Considers Buried and Surface Flowlines

Gray Reed

Gray Reed

In Emerald Land Corp. v. Trimont Energy (BL) LLC, a Louisiana federal court considered whether a lessee was required to remove flowlines buried beneath the surface and canal bottoms of property subject to mineral leases.

What the leases said

Each of three leases granted to lessee Chevron the exclusive right to construct lines, tanks, storage facilities, and other structures necessary “to produce, save, take, care of treat and transport” oil and gas products.  All three had identical damages provisions: “Lessee shall pay all damages caused by its operations hereunder to the land, buildings and improvements presently existing… [.]”  Chevron contended that the granting language included the express right to install buried flowlines in connection with its activities. No provision expressly required restoration of the land by removing buried flowlines or paying the cost of removal.

Addressing lease terms and Castex

Relying on the lease terms and Terrebonne Parish School Board v. Castex Energy, Inc., Chevron differentiated between buried flowlines (buried below “plow depth”, which here was at least three feet) from surface flowlines, alleging that buried lines did not cause damage to the land. Chevron admitted it had to remove the surface lines.

Emerald distinguished Castex arguing that, unlike the canals dredged on the property in that case, these flowlines were foreign equipment attached and buried on the property. Therefore, Chevron was obligated to remove the lines as part of its obligation to restore the land to its original condition minus normal “wear and tear.” Emerald also pointed to evidence showing that buried flowlines were exposed at the surface of the property and, presumably, created a hazard.

The court’s view

The court disagreed with Emerald. Castex was not based on the nature of the modification (dredged canals vs. buried flowlines). Rather, it was based on the meaning of “wear and tear” in context of Civil Code Article 2683 requiring a lessor to return leased property in its original condition minus “wear and tear.” The court construed wear and tear in terms of the specific rights granted in the lease. Here, the leases expressly granted Chevron the right to lay flowlines and, and the request of Emerald, required Chevron to bury the flowlines at ordinary plow depth. The court in Castex also held that in the absence of an expressed lease provision, the Mineral Code does not impose or imply a duty to restore the surface to its original, pre-lease condition absent proof that the lessee has exercised his rights unreasonably or excessively.

After disposing of Emerald’s other arguments, the court ultimately agreed that Chevron was not required to remove buried flowlines. Emerald’s evidence appeared to reflect damage caused largely by surface flowlines, which was not the subject of Emerald’s damage claims. Emerald’s claims for removal of buried flowlines were dismissed.

Your musical interlude (a final tribute to Coach O).

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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