Master Service Agreements for Oil and Gas: Key Provisions, Court Treatment

Transcription

1 Presenting a live 90-minute webinar with interactive Q&A Master Service Agreements for Oil and Gas: Key Provisions, Court Treatment TUESDAY, MARCH 13, pm Eastern 12pm Central 11am Mountain 10am Pacific Today s faculty features: C. Peck Hayne, Jr., Member, Gordon Arata Montgomery Barnett McCollam Duplantis & Eagan, New Orleans Scott A. O'Connor, Member, Gordon Arata Montgomery Barnett McCollam Duplantis & Eagan, New Orleans William W. (Bill) Pugh, Shareholder, Liskow & Lewis, Houston The audio portion of the conference may be accessed via the telephone or by using your computer's speakers. Please refer to the instructions ed to registrants for additional information. If you have any questions, please contact Customer Service at ext. 1.

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5 5 MSA BASICS An MSA provides a frame of reference and a means of retaining a contractor or a subcontractor to perform work on a given project on either a one-time or long-term basis. 3/13/2018

6 6 MSA BASICS 1. An MSA is more of a framework than a standalone contract. 2. Work orders provide specific details and scope of work. 3. Oral or written orders subject to the MSA create the detailed contracts. 4. MSAs are particularly useful for defining broad concepts common to oil & gas operations. 5. An MSA unifies assumptions and expectations for multiple parties. 6. It avoids or minimizes misunderstandings and, consequently, litigation. 3/13/2018

7 AN MSA PROGRAM 7 MUST BE INTEGRATED 1. An MSA must not be considered in isolation. 2. More than a contract, it s a program to standardize effort and to manage risk. 3. Most beneficial when companies have as few MSA forms as possible. 4. Least beneficial when poorly managed and when different contractors are bound by different MSA forms with different terms and conditions (at least on issues that may affect multiple parties, such as indemnity). 3/13/2018

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9 9 TYPICAL SUBJECTS IN AN MSA 1. How a work order is made and memorialized. 2. How payment is made. 3. Warranties for the contractor s services and goods. 4. Indemnity and insurance. 5. Use of subcontractors. 6. Responsibility for liens/privileges. 7. Procedures for accidents and incidents. 8. Choice-of-law. 3/13/2018

10 TYPICAL SUBJECTS IN AN MSA 9. Confidentiality provisions. 10. Intellectual property. 11. Term; termination. 12. Integrating pertinent statutory or regulatory requirements. a. Peculiarities of potentially applicable Anti-Indemnity Statutes. b. For work on the OCS: SEMS, Bridging Agreements. c. Federal labor laws. d. LA law: workers comp language for La. R.S. 23:1061. e. Anti-Terrorist/Money Laundering representations. 3/13/2018

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55 In re Larry Doiron, Inc., 879 F.3d 568 (5th Cir. 2018) (en banc) In 2005, Apache Corporation entered into a master services contact with Specialty Rental Tools & Supply, L.L.P. In 2011, Apache issued an oral work order that directed Specialty to perform flow-back services to remove obstructions affecting the flow of a gas well in navigable waters in Louisiana. The only access to the well was via a stationary production platform. This work order did not require a vessel, and neither party anticipated that a vessel would be necessary to perform the job. Eventually determined that a barge equipped with a crane would be needed to move equipment. 55

56 During these operations, one of Specialty s employees was accidentally injured by a Doiron crane operator and he brought suit in federal court against Doiron. Doiron sought to enforce the indemnity provisions from the MSA, but the injured employee sought to have those declared unenforceable under the Louisiana Oilfield Indemnity Act, La. Rev. Stat. 9:2780. Federal law would have allowed enforcement of the indemnity provisions. Dispute hinged on weather the MSA was a maritime contract or not. v. 56

57 Louisiana Oilfield Indemnity Act La. Rev. Stat. 9:2780(A)-(B): A. The legislature finds that an inequity is foisted on certain contractors and their employees by the defense or indemnity provisions, either or both, contained in some agreements pertaining to wells for oil, gas, or water, or drilling for minerals which occur in a solid, liquid, gaseous, or other state, to the extent those provisions apply to death or bodily injury to persons. It is the intent of the legislature by this Section to declare null and void and against public policy of the state of Louisiana any provision in any agreement which requires defense and/or indemnification, for death or bodily injury to persons, where there is negligence or fault (strict liability) on the part of the indemnitee, or an agent or employee of the indemnitee, or an independent contractor who is directly responsible to the indemnitee. B. Any provision contained in, collateral to, or affecting an agreement pertaining to a well for oil, gas, or water, or drilling for minerals which occur in a solid, liquid, gaseous, or other state, is void and unenforceable to the extent that it purports to or does provide for defense or indemnity, or either, to the indemnitee against loss or liability for damages arising out of or resulting from death or bodily injury to persons, which is caused by or results from the sole or concurrent negligence or fault (strict liability) of the indemnitee, or an agent, employee, or an independent contractor who is directly responsible to the indemnitee. 57

58 Prior Precedent Under the Fifth Circuit s prior precedent in Davis & Sons, Inc. v. Gulf Oil Corp., 919 F.2d 313 (5th Cir. 1990), the district court had to look at six factors to determine if the contract was or was not a maritime contact: (1) What does the specific work order in effect at the time of 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 that 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? Following this test, the district court held that federal maritime law applied. 58

59 A More Sensible Approach On appeal, the Fifth Circuit panel, while bound by Davis & Sons, admitted that the test was too inflexible to allow the parties or their attorneys to predict whether a court will decide if a contract is maritime or non-maritime or for judges to decide the cases consistently, and urged for rehearing en banc. Upon rehearing, the full Fifth Circuit considered more recent Supreme Court jurisprudence and created the following test: First, is the contract one to provide services to facilitate the drilling or production of oil and gas on navigable waters? The answer to this inquiry will avoid the unnecessary question from Davis & Sons as to whether the particular service is inherently maritime. Second, if the answer to the above question is yes, does the contract provide or do the parties expect that a vessel will play a substantial role in the completion of the contract? If so, the contract is maritime in nature. Nevertheless, the Fifth Circuit did not fully dispose of Davis & Sons, and stated that its factors may be relevant when the scope of the contract is unclear. 59

60 The Result Applying this test for the first time, the full Fifth Circuit found that the contract was non-maritime in nature. Reasoned that the vessel used to lift equipment was an insubstantial part of the job and therefore the contract was non-maritime, thus permitting the application of Louisiana law and voiding the indemnity provision. 60

61 Thank you C. Peck Hayne, Jr. Scott A. O'Connor William W. (Bill) Pugh 61