Indemnification Argument Fails Due to LOAIA

Harbor cranes at sunset on Vilagarcía de Arousa dockAuthor: Kirby P. Blanchard


Hilcorp hired Alliance for plug and abandonment services on a fixed platform in the Gulf of Mexico adjacent to the coast of Louisiana. An Alliance employee was killed when he fell through the deck grating of the platform during the operations. The Alliance employee’s family sued Hilcorp, and Hilcorp sued Alliance for indemnification pursuant to a master services agreement between the parties. Alliance denied that it owed indemnity due to the application of the Louisiana Oilfield Anti-Indemnity Act (“LOAIA”).

Hilcorp file a motion for a declaratory judgment that the indemnity provisions of the master services agreement are valid and enforceable. Alliance file a motion for summary judgement seeking enforcement of the LOAIA and nullification of the master services agreement. Hilcorp argued that the work did not pertain to a well as required by the LOAIA because the well was non-producing, and permanently plugged. Hilcorp put forth evidence showing the economic feasibility of producing oil from the well, and that they lost their right to extract oil from the well.

The court found that Hilcorp purchased the lease with the intention of finding more production and that the purpose of the well was to produce oil and gas. The court noted that any structure intended for use in the exploration for or production of any mineral refers to the general purpose of the structure, and not its use at the precise moment in time the work was performed. The court held that the agreement did pertain to a well. Hilcorps motion was denied and Alliance motion was granted.

Howell v. Avante Servs., LLC, CIV.A. 12-293, 2013 WL 1681436 (E.D. La. 2013).