Taylor Energy Co. LLC v. United States, No. 19-1983 (Fed. Cir. 2020)Annotate this Case
Taylor's leases for the Outer Continental Shelf (OCS), set to expire in 2007, incorporated Outer Continental Shelf Lands Act (OCSLA), 43 U.S.C. 1301, regulations. They required Taylor to leave the leased area “in a manner satisfactory to the [Regional] Director.” Taylor drilled 28 wells, each connected to an oil platform. In 2004, Hurricane Ivan toppled Taylor’s platform, rendering the wells inoperable. Taylor discovered leaking oil but took no action. In 2007, Taylor was ordered to decommission the wells within one year. Taylor sought extensions. The government required Taylor to set aside funds for its decommissioning obligations. For Taylor to receive reimbursement, the government must confirm the work was conducted “in material compliance with all applicable federal laws and . . . regulations" and with the Leases. The resulting Trust Agreement states that it “shall be governed by and construed in accordance with the laws of" Louisiana. Taylor attempted to fulfill its obligations. The government approved a departure from certain standards but ultimately refused to relieve Taylor of its responsibilities.
Taylor filed claims involving Louisiana state law: breach of the Trust Agreement; request for dissolution of the trust account based on impossibility of performance; request for reformation for mutual error; and breach of the duty of good faith and fair dealing. The Federal Circuit affirmed the dismissal of the complaint. OCSLA makes federal law exclusive in its regulation of the OCS. To the extent federal law applies to a particular issue, state law is inapplicable. OCSLA regulations address the arguments underlying Taylor’s contract claims, so Louisiana state law cannot be adopted as surrogate law.