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By Zoe W. Vermeulen

In November 2016, the Eastern District of Louisiana again confronted the “marshland” involved in categorizing a contract as maritime or non-maritime. In In re: Crescent Energy Services, LLC, No. 15-819 (E.D. La. Nov. 7, 2016), the court held that a contract to plug and abandon a well in Louisiana waters was maritime in nature.

Crescent Energy Services, LLC brought a limitation action as owner of the spud barge S/B OB 808 after its employee, a crewmember of the OB 808, was severely injured in a well blowout. Crescent had been hired by Carrizo Oil & Gas, Inc. to plug and abandon one of Carrizo’s offshore wells, located in Louisiana state waters. The contract between the parties included a standard contractual indemnity provision that, if enforceable, required Crescent to indemnify Carrizo for the crewmember’s injuries.

Crescent and Carrizo brought cross motions for summary judgment asking the court to decide whether the contract between them was maritime or non-maritime. If the contract was maritime, the indemnity provisions therein would be valid and enforceable. But, if the contract was non-maritime and instead subject to Louisiana law, the Louisiana Oilfield Anti-Indemnity Act would void the indemnity obligations.

Crescent and Carrizo were parties to a Master Service Agreement governing all dealings between them. Additionally, the plug and abandon work being performed at the time of the injury was done pursuant to a Turnkey Bid. The Turnkey Bid discussed the specifics of the plug and abandon work and listed the equipment to be used in the job, which included a quarter barge, tug, and cargo barge. To determine whether a contract is maritime, the U.S. Fifth Circuit in Davis & Sons v. Gulf Oil Corp., 919 F.2d 313 (5th Cir. 1990) instructed courts to look to the historical jurisprudential treatment of similar contracts and conduct a fact-specific inquiry. That inquiry considers six factors: (1) what does the specific work order in effect at the time of the injury provide?; (2) what work did the crew assigned under the work order actually do?; (3) was the crew assigned to work aboard a vessel in navigable waters?; (4) to what extent did the work being done relate to the mission of the vessel?; (5) what was the principal work of the injured worker?; and (6) what work was the injured worker actually doing at the time of injury?

In deciding that the contract was maritime, the court focused on the historical jurisprudence of similar contracts. It acknowledged that both parties had authority in their favor, but ultimately determined that because the plug and abandon work required the use of a vessel and was performed at all times on a vessel, the case law favored a maritime finding. The court distinguished a Fifth Circuit case holding that a contract for wireline services (which were also part of the plug and abandon operations here) was non-maritime by noting that the wireline services contract “did not address in any way the use of a ship.”

Conversely and importantly, here, the contract called for three vessels, including a vessel specifically designed for plug and abandon work to “perform the function for which that vessel was designed,” and it would not have been possible to plug and abandon the well without the use of a vessel. In doing so, the Court reiterated that the inquiry will turn more on the necessity of vessel for the work than the type of work being performed. In other words, even though plug and abandon work is not itself maritime by nature, the fact that Crescent had to do its work from a vessel made the contract maritime. Accordingly, the court found that the work done by the crew of the OB 808 was inextricably intertwined with maritime activities and the contractual indemnification of Carrizo was enforceable

The court’s reasoning was clearly heavily influenced by the contracted for, and actual use and necessity of vessels to perform the plug and abandon work. This result is consistent with existing case law and provides future litigants further guidance that contracts requiring the use of a vessel will most likely be considered maritime. See also Davis & Sons, Inc., supra; Clay v. ENSCO Offshore Co., No. 14-2508, 2015 WL 7296787 (E.D. La. Nov. 18, 2015). However, given the long and sometime brackish history in this area of law and the valuable nature of indemnity coverage, we do not expect this to be the last fight over the maritime nature of an oilfield contract.