210 F.3d 333 (5th Cir.

2000)

In Re: In the Matter of the Complaint of John E. Graham &

Sons As Owner of M/V Sean G for Exoneration From or
Limitation of Liability
JOHN E. GRAHAM & SONS, Plaintiff,
v.
HORACE BREWER, ET AL., Defendants,
ENRON OIL & GAS COMPANY, Defendant-Third Party
Plaintiff Appellee
v.
DYNAMIC OFFSHORE CONTRACTORS, INC., Third Party
Defendant Appellant.
No. 99-30301

UNITED STATES COURT OF APPEALS FOR THE FIFTH

CIRCUIT
April 18, 2000
1

Appeal from the United States District Court For the Western District of
Louisiana, Lafayette Division

Before HIGGINBOTHAM and PARKER, Circuit Judges, and WARD,*

District Judge:
T. JOHN WARD, District Judge:

An offshore contractor appeals a decision casting it in judgment to an owner on

an indemnity claim. Although it is a close question, we believe that the Texas
Oilfield Anti-Indemnity Act bars enforcement of the indemnity agreement.
Accordingly, we REVERSE.
I.
BACKGROUND AND PROCEDURAL POSTURE

In 1994, Enron Oil & Gas Company ("Enron") owned several offshore

In 1994, Enron Oil & Gas Company ("Enron") owned several offshore
platformsin the Matagorda Island Area off the coast of the State of Texas. A
bridge connected two of the platforms, and together they formed Enron's A-B
complex. The A platform supported eight gas wells, and the B platform held
the production facilities. The production side of the complex included gas
separators, testing equipment, meters, quarters, and other devices used in the
production of natural gas.1 In general terms, the gas flowed from the wellheads
located on the A platform through pipes to a manifold and then through a series
of pipes to separators and testing equipment on the B side of the complex.
After the initial separation of the liquid hydrocarbons from the gas, the gas
flowed through a sales meter and into a pipeline.

In addition to the two structures forming the A-B complex, Enron also operated
a nearby satellite platform. The satellite platform supported three gas wells
which Enron had completed in 1993 and 1994. However, the satellite platform
lacked its own separators and testing facilities, so Enron needed to move the
flow of gas from the wellheads on the satellite platform to the equipment on the
A-B complex. Enron could not produce the new wells until it connected the
satellite platform to the A-B complex.

Enron contracted with Offshore Pipeline, Inc. ("OPI") to lay a pair of pipelines
between the satellite platform and the A-B complex. Enron' agreement with
OPI also required OPI to install risers at the ends of the pipelines to facilitate
the connection of the new wells on the satellite platform to the new pipelines,
and, in turn, the new pipelines to the existing manifold located on the A-B
complex.2

After the installation of the pipelines, Enron needed to connect the wells on the
satellite platform to the risers installed by OPI. Enron also needed to attach the
risers running up the leg of the A platform to the existing manifold. Moreover,
the inclusion of the production from the three new wells required modifications
to the safety system located on the A-B complex. Enron hired Dynamic
Offshore Contractors ("Dynamic") to perform these portions of the job. Enron
and Dynamic had previously entered into a master service contract which
contained a provision requiring Dynamic to indemnify Enron for damages
caused by Enron's negligence.3 Pursuant to the master service contract, Enron
solicited and accepted Dynamic's bid to complete the tie-in of the satellite
platform. The work order between Enron and Dynamic called for Dynamic to
perform several tasks on both the satellite platform and the A-B complex. On
the satellite platform, Dynamic fabricated and installed a manifold, connected
flowlinesfrom the three individual Christmas trees to the new manifold, and
installed a pneumatic safety system.4 On the A-B complex, Dynamicinstalled
piping from the risers installed by OPI to the existing manifold, modified the

safety shutdown system on the A platform to incorporate the two new incoming
pipelines, and installed shut down valves and check valves. These
modifications allowed the operator to segregate the product from each
individual well for testing and enabled the operator to shut in any particular
well in case of an emergency.
8

During the project, Daniel Koonce ("Koonce") and Horace Brewer ("Brewer"),
two Dynamic employees, were injured while being lowered in a personnel
basket from the satellite platform onto the deck of a boat owned by John E.
Graham & Sons ("Graham"). OCS, Inc. ("OCS") employed the crane operator.
At the time of the accident, Brewer and Koonce were installing connecting
spools in a riser attached to the satellite platform. This case arose in admiralty
when Graham filed a petition seeking exoneration from or a limitation of
liability in response to the personal injury claims made by Brewer and Koonce.
When Brewer and Koonce filed cross-claims against Enron, Enron demanded
that Dynamic honor the indemnity covenant contained in the master service
contract. Dynamic refused, prompting Enron to file a third party action against
Dynamic for breaching the indemnity provision.

The parties settled the personal injury claims for $550,000. Thereafter, the
district court held a bench trial to apportion fault among OCS, Enron and
Graham. 5 The court found that OCS bore the majority of responsibility, at 75%.
The court found Enron 20% at fault, and Graham, 5%. The only remaining
question was whether the indemnity provision between Dynamic and Enron
was enforceable under the Texas Oilfield Anti-Indemnity Act ("TOAIA"). The
court originally invalidated the provision but, on rehearing, revisited the issue
and enforced it. Having concluded that Dynamic owed Enron an indemnity
obligation, the district court awarded Enron $110,000 against Dynamic
(representing 20% of the total settlement), plus an additional $56,200 in
attorney's fees and costs. Dynamic appeals, asserting that the indemnity
provision of the master service contract is unenforceable under the Texas
Oilfield Anti-Indemnity Act ("TOAIA").
II.
A. APPLICABLE LAW AND STANDARD OF REVIEW

10

The parties have agreed that Texas law governs this dispute. Because the facts
in this case are undisputed, we turn to the question whether the indemnity
provision is enforceable under Texas law. We review the district court's
determination of Texas law de novo. Salve Regina College v. Russell, 499 U.S.

225, 231, 111 S.Ct. 1217, 1220-21, 113 L.Ed.2d 190 (1991). We apply the law
of Texas as announced by that state's highest court, or, in absence of such a
decision, we must predict what the highest court would decide if it confronted
the same issue. Transcontinental Gas v. Transportation Ins. Co., 953 F.2d 985,
988 (5th Cir. 1992). In this case, there is an absence of authority from the Texas
Supreme Court on the dispositive issue. Therefore, we must anticipate what that
court would do under these facts.
11

Under Texas law governing statutory construction, the primary objective of a

court is to give effect to the Legislature'sintent. Mitchell Energy Corp. v.
Ashworth, 943 S.W.2d 436, 438 (Tex. 1997). In ascertaining legislative intent,
Texas courts would consider the object to attain, the circumstances of the
statute's enactment, legislative history, former statutory and common law, and
the consequences of a particular construction. Tex. Gov't Code ' 311.023;
Mitchell Energy, 943 S.W.2d at 438. The Texas Supreme Court would attempt
to give the statute the meaning the Legislature intended, keeping in mind the
old law, the evil, and the remedy. Id.

12

In this case, Dynamic asserts that its agreement with Enron contemplated well
or mine service, implicating the protections of the TOAIA. Therefore,
according to Dynamic, the district court erred when it enforced the indemnity
agreement contained in the master service contract. Enron asserts that
Dynamic's work fell within an exclusion, rendering enforceable Dynamic's
indemnity obligation. Our study of the TOAIA informs us that Dynamic's
agreement with Enron sufficiently contemplated well or mine service to render
the indemnity agreement unenforceable.
B. THE TEXAS OILFIELD ANTI-INDEMNITY ACT
1. HISTORY AND PURPOSE

13

The TOAIA invalidates certain indemnity provisions contained in agreements

pertaining to wells for oil, gas, or water, or to mines for minerals.6 In 1973, on
the heels of New Mexico's adoption of a similar statute, the Texas Legislature
created an interim committee to study the effects of hold harmless agreements
extracted from service contractors in the petroleum industry. House Interim
Study Committee on Hold Harmless Agreements, Report, 63rd Leg. i (1973).
The Legislature noted that the expense of contracting for the negligence of a
third party often put the small contractor in a precarious financial position. Id.
The committee considered the arguments for and against the adoption of the
TOAIA and, noting inequities between large oil companies and small

contractors, ultimately recommended that the Legislature adopt the TOAIA. Id.
at 3-8. After receiving the committee's recommendation, the Legislature
enacted the TOAIA to curb the perceived inequity. In general, the TOAIA
provides that certain agreements which provide for indemnification of a
negligent indemnitee are void as against public policy. Tex. Rev. Civ. Stat. art.
2212b (now codified at Tex. Civ. Prac. & Rem. Code ' 127.001-007).
14

2. THE SCOPE OF THE TOAIA AND ITS DEFINITION OF "WELL OR

MINE SERVICE"

15

The TOAIA invalidates indemnity provisions contained in agreements

pertaining to wells for oil, gas or water or to mines for minerals. Under the
TOAIA, an agreement pertains to a well if it requires the contractor to render
"well or mine services" or "to perform a part of those services or an act
collateral to those services . . . ." Tex. Civ. Prac. & Rem. Code ' 127.001(1)(A)
(i)-(ii). In turn, the TOAIA defines "well or mine service" to encompass a broad
range of activities, including:

16

(i) drilling, deepening, reworking, repairing, improving, testing,

treating,perforating, acidizing, logging, conditioning, purchasing, gathering,
storing, or transporting oil, brine water, fresh water, produced water,
condensate, petroleum products, or other liquid commodities, or otherwise
rendering services in connection with a well drilled to produce or dispose of oil,
gas, other minerals or water; and

17

(ii) designing, excavating, constructing, improving, or otherwise rendering

services in connection with a mine shaft, drift, or other structure intended for
use in exploring for or producing a mineral . . . .

18

Tex. Civ. Prac. & Rem. Code ' 127.001(4)(A)(i)-(ii) (Vernon 1997). If an
agreement calls for well or mine services, for a part of those services, or for an
act collateral to those services, it is within the scope of the TOAIA.

19

The Texas Supreme Court has counseled that the TOAIA is to be strictly
construed to permit parties to contract freely with regard to agreements not
covered by the statutory language. Getty Oil Co. v. Insurance Co. of N.
America, 845 S.W.2d 794, 805 (Tex. 1992), cert. denied sub nom., Youll &
Companies v. Getty Oil Co., 114 S.Ct. 16 (1993). In Getty Oil, the Court
addressed whether an "additional insured" provision in a purchase order was
invalidated by the TOAIA. Getty Oil, 845 S.W.2d at 805. The court strictly
construed the terms of the TOAIA and rejected the argument that sanctioning

the insurance shifting provision would have the practical effect of relieving the
oil company of responsibility for its sole negligence. Id. The Court held that the
TOAIA applied exclusively to indemnity agreements and did not prohibit
insurance shifting arrangements not expressly covered by the statute. Id.
Although the present case does not involve the same type of contractual
provision addressed by Getty Oil, we believe that the Texas Supreme Court
would strictly construe the TOAIA in assessing whether an agreement comes
within its scope.
20

Although the Texas Supreme Court has not considered the definition of well or
mine service, intermediate Texas courts have required a close nexus between
production activities and the agreement at issue. For instance, in Transworld
Drilling Co. v. Levingston Shipbuilding Co., 693 S.W.2d 19, 23 (Tex. App.-Beaumont 1985), the court held that the TOAIA did not apply to an agreement
to repair an offshore drilling rig when the contractor performed the repairs in a
shipyard. The contractor asserted that it was rendering services in connection
with a structure intended for use in the exploration for or production of a
mineral. Transworld, 693 S.W.2d at 23. The court rejected this argument and
reasoned that the Legislature did not intend to cover an on-shore repair contract
when the record revealed no connection with the drilling of an actual well. Id.

21

Likewise, in Singleton v. Crown Cent. Petroleum Corp., 713 S.W.2d 115, 121
(Tex. App.--Houston [1st Dist.] 1985), rev'd on other grounds, 729 S.W.2d 690
(Tex. 1987), the court summarily held that a contract between a petroleum
company and its contractor requiring work to be performed inside the
company's plant was not covered by the TOAIA. Consistent with Transworld,
the court characterized the TOAIA as a statute prohibiting certain agreements
pertaining to a well site for oil, gas, or water, or to a mine for a mineral.
Singleton, 713 S.W.2d at 121. Because the agreement involved in Singleton
was a construction contract for work to be performed at a plant, the TOAIA did
not apply.

22

Finally, in Coastal Transport Co. v. Crown Central Petroleum Corp., 2000 WL

33062 (Tex. App.--Houston [14th Dist.] 2000, n.w.h.), the court held that the
TOAIA did not invalidate an indemnity provision contained in a terminal
loading agreement between a trucking company and a petroleum refiner.
Thecase arose when an employee of Coastal, the trucking company, was
injured in a gasoline fire at Crown Central's loading terminal. Coastal argued
that the agreement concerned "well or mine services" because transporting
gasoline was an act collateral to well services. The court rejected this argument,
reasoning that the TOAIA only applies to contracts for "services involved in the
drilling or servicing of wells." Coastal Transport, 2000 WL 330062 at *7.

Because Crown was in the business of refining, supplying, and transporting

petroleum products, the TOAIA did not apply. Transworld, Singleton, and
Coastal Transport all stand for the proposition that, for an agreement to fall
within the TOAIA, it must bear a close nexus to a well drilled for oil, gas, or
water, or to a mine for a mineral.
3. THE PIPELINE EXCLUSION
23

The Legislature has also limited the definition of well or mine service. In 1991,
the Legislature amended the TOAIA to exempt from the definition of well or
mine service certain activities related to pipelines. Under the TOAIA, "well or
mine service" does not include:

24

(i) purchasing, selling, gathering, storing, or transporting gas or natural gas

liquids by pipeline or fixed associated facilities; or

25

(ii) construction, maintenance, or repair of oil, natural gas liquids, or gas

pipelines or fixed associated facilities.

26

Tex. Civ. Prac. & Rem. Code ' 127.001(4)(B)(i)-(ii).7

27

Our research has revealed only one decision that has considered the pipeline
exclusion. In Phillips Petroleum Co. v. Brad & Sons Const. Inc., 841 F.Supp.
791 (S.D. Tex. 1993), the court held that the TOAIA did not apply to a contract
to repair a leak in a pipeline located in a gathering field 800 feet from the
nearest well. Id. at 796. The court noted that the Legislature intended the 1991
amendments to the TOAIA to clarify the already existing definition of well or
mine service. Id. In reaching this conclusion, the court relied heavily on the fact
that the Legislature had expressly given the 1991 amendments retroactive
effect. Id. The court held that the contract did not call for work within the
definition of well or mine service existing before or after the amendments. In
other words, the agreement in Phillips called for work lacking the necessary
proximity to a well. Phillips, like the decisions announced by the intermediate
Texas courts, reinforces the requirement that a close nexus must existbetween
the agreement and an actual well drilled to produce oil, gas, or water.

28

C. THE LOUISIANA OILFIELD ANTI-INDEMNITY ACT--SIMILARITIES

AND DIFFERENCES

29

Although this court has only scarcely considered the scope of the TOAIA, it has

addressed on several occasions the breadth of the Louisiana Oilfield AntiIndemnity Act ("LOAIA").8 While we find some guidance in this court's
decisions under the LOAIA, we note differences in the structure of that act and
the TOAIA. Accordingly, while we refer to this court's LOAIA decisions for
guidance, we do so only to theextent that the particular holdings are supported
by similar language set forth in the TOAIA.
30

We first note the similarities in the two laws. Under the LOAIA, this court has
stressed that when the LOAIA speaks of invalidating "agreements," the
relevant agreement is the particular work order giving rise to the claim. See
Roberts v. Energy Development Corp., 104 F.3d 782, 784 n.3 (5th Cir. 1997)
(applying Louisiana's version of the Act and focusing on oral work order);
Johnson v. Amoco Production Co., 5 F.3d 949, 952 (5th Cir. 1993)(same). It is
common practice for companies and contractors to enter into master service
agreements, the specific terms of which govern future work performed by the
contractor pursuant to individual work orders or authorizations. Like its
Louisiana counterpart, the TOAIA invalidates "agreements," and we are
persuaded that the relevant agreement we must consider is the work order
between Dynamic and Enron giving rise to this claim.

31

Furthermore, because offshore production differs from land-based production,

we have held that multiple wells directionally drilled and situated on a single
platform constitute one "well" for purposes of the LOAIA. Transcontinental,
953 F.2d at 995 n. 40. Like many offshore platforms, the ones involved in this
case supported multiple wells. On this point, we find the reasoning of
Transcontinental persuasive and hold that multiple wells supported by a single
platform constitute a single "well" for purposes of the TOAIA.

32

But this court's decisions under the LOAIA provide less support for deciding
the question whether a particular agreement contemplates "well or mine
service" under the TOAIA. Under the LOAIA, this court applies a two step
approach to determine whether an agreement falls within the scope of that
legislation. Transcontinental, 953 F.2d at 991. First, the court assesses whether
the agreement "pertains to a well." Id. To determine whether an agreement
"pertains to a well," this court has adopted a functional approach. Id. at 994-95
(setting forth "Transcontinental factors").9 If, after applying the
Transcontinental factors, the court concludes that an agreement pertains to a
well, the court then asks whether the agreement involves operations related to
the exploration, development, production, or transportation of oil, gas, or water.
Id. at 991. If it does, the LOAIA applies; otherwise, it does not. Id.

33

Dynamic relies on this court's LOAIA cases to assert that its agreement with

Enron "pertained to a well." See, e.g., Lloyds of London v. Transcontinental

Gas Pipe Line Corp., 38 F.3d 193, 197 (5th Cir. 1994)(holding that work
performed ator upstream from metering point pertained to a well under the
LOAIA); Copous v. ODECO Oil & Gas Co., 835 F.2d 115, 116 (5th Cir. 1988)
(contract for the renovation of living quarters on a manned offshore platform
within the scope of the LOAIA). While we agree generally with Dynamic's
reading of this court's LOAIA cases, we disagree with Dynamic's conclusion
that those cases are controlling because it rests on the faulty assumption that
the LOAIA and the TOAIA are similarly structured. The language of the
LOAIA differs from the TOAIA, and that difference renders suspect Dynamic's
analogy to our decisions under the LOAIA.
34

Primarily, the TOAIA contains a provision exempting certain pipeline-related

activities. This court recently cautioned that the Transcontinental approach is
most relevant in a case where the contract provides for work to be performed on
a pipeline or other part of the transmission system and where that work has
little, if any, connection to a well. Roberts v. Energy Development Corp., 104
F.3d 782, 785 (5th Cir. 1997). The TOAIA's pipeline exclusion, absent from
the LOAIA, generates friction with this court's Transcontinental approach.
Roberts and the TOAIA's pipeline exclusion counsel against Dynamic's attempt
to apply, carte blanche, this court's LOAIA decisions to cases arising under the
TOAIA.

35

We further reject wholesale application of decisions under the LOAIA to the

cases arising under the TOAIA because the definitional section of the LOAIA
differs from the one provided by the TOAIA. The relevant language of the
LOAIA provides that " 'agreement' as it pertains to a well for oil, gas, or water .
. . . means any agreement or understanding . . . concerning any operations
related to the exploration, development, or production, or transportation of oil,
gas, or water . . . ." La. Rev. Stat. Ann. ' 9.2780 (emphasis added); see
Transcontinental, 953 F.2d at 991. Under the LOAIA, the phrase "as it pertains
to a well" is not defined as part of the preceding term "agreement." The
undefined phrase "as it pertains to a well" is, in part, language that led this
court to adopt a functional analysis to answer the question whether a given
agreement "pertains to a well." Transcontinental, 953 F.2d at 991 (noting that "
[w]e can come to no conclusion but that the legislature intended the Act to
apply if (but only if) an agreement pertains to a well"). By contrast, the TOAIA
defines the entire phrase "[a]greement pertaining to a well for oil, gas, or water
or to a mine for a mineral." Tex. Civ. Prac. & Rem. Code ' 127.001(1). Given
that the TOAIA defines this entire phrase, while the LOAIA leaves "as it
pertains to a well," undefined, this court's decisions applying the
Transcontinental factors are not on point.

36

Accordingly, we derive our holding from the language and purpose of the
TOAIA, as opposed to borrowing from decisions applying Transcontinental.
We begin by noting that the Legislature listed no less than fifteen specific
activities within the definition of well or mine services. The definition includes
well services ranging from pre-completion tasks such as "drilling" to postcompletion work such as "deepening" and "reworking." The definition also
includes general maintenance tasks such as "repairing" and "improving"
together with services performed with an eye toward regulatory requirements,
i.e. "testing." Finally, the definition includes "treating," a service necessary to
prepare the ultimate product for transportation and sale. Tex. Civ. Prac. & Rem.
Code ' 127.001(4)(A)(i).

37

In addition to the several activities specifically set forth within the definition of
well or mine service, the Legislature included a catch-all provision.
Specifically, the definition of well or mine services includes "otherwise
rendering services in connection with a well drilled to produce oil, gas, other
minerals, or water." Tex. Civ. Prac. & Rem. Code ' 127.001(A)(4)(i)(emphasis
added). We believe that the Legislature's use of theterms "otherwise rendering
services in connection with a well" indicates an intent to expand the scope of
activity constituting well or mine service to other types of work falling within
the same general class or category as the activities specifically listed in the
definition. See, e.g., Dawkins v. Meyer, 835 S.W.2d 444, 447 (Tex. 1992)
(discussing statutory construction and rule of ejusdem generis). The specifically
listed activities are all typically performed in close proximity to a well, but not
all of them are directed at the wellbore itself. Moreover, as relates to gas wells,
the specifically listed activities are directed toward the goal of obtaining or
maintaining production from a well. We hold that a contractor is "otherwise
rendering services in connection with a well" if the services called for by the
contract bear a close nexus to a well and are directed toward the goal of
obtaining or maintaining production from a well.
III. ANALYSIS AND HOLDING

38

A. DYNAMIC'S AGREEMENT WITH ENRON CONTEMPLATED

WELL OR MINE SERVICES

39

We hold that Dynamic's agreement with Enron contemplated well or mine

services. As we have noted, Texas law requires a close nexus between the
production activities and the agreement. We find that requirement satisfied in
this case. Particularly, the agreement called for Dynamic to fabricate and install
a manifold on the satellite platform and tie in flowlines to the actual wellheads

located on that platform. Likewise, on the A-B complex, Dynamic's

modification of the safety shutdown system to facilitate the preservation of the
production facilities and the employees manning them in case of an emergency
satisfies the requisite connection to a well. Moreover, Dynamic's services were
performed to further the goal of obtaining or maintaining production from
Enron's satellite wells. Our treatment of the multiple wells on the platforms as
one "well" under the TOAIA reinforces our decision, because we view these
platforms as integral to the drilling and production operations. Dynamic's
services, involving work on the platforms themselves, are directly supportive of
the wells.
40

B. THE PIPELINE EXCLUSION DOES NOT EXEMPT THE AGREEMENT

FROM THE DEFINITION OF WELL OR MINE SERVICE

41

Enron relies heavily on the TOAIA's pipeline exclusion to urge that its
agreement with Dynamic did not contemplate well or mine service. Although
we credit the Legislature's intent to restrict the activity comprising well or mine
service, we reject Enron's argument because Dynamic's contract with Enron
called for services above and beyond simply installing piping associated with a
well. For this reason, Enron's argument, though not without some force, does
not convince us that the exclusion validates the present indemnity arrangement.

42

Although the TOAIA contains a pipeline exclusion, it does not define

"pipeline." For the reasons discussed below, we need not determine where the
well "ends" and the "pipeline" begins to decide this case. However, Enron
suggested at oral argument that, for purposes of this and future cases involving
the pipeline exclusion, we should hold that the well "ends" and the pipeline
"begins" at the choke.10 In other words, Enron would have us hold that any
agreement calling for work to be performed downstream from the well choke
falls within the pipeline exclusion. We reject Enron's argument because it is
inconsistent with at least three terms contained in the definition of well or mine
service.

43

First, the definition of well or mine service includes "testing." The undisputed
facts of this case indicate that the testing facilities for the three wells located on
the satellite platform were actually located on the B side of the A-B complex.
The testing facility on the A-B complex was the location that the flow from the
individual wells could be segregated and directed through a test separator for
testing required by the Minerals Management Service ("MMS"). The
Legislature's use of the term "testing" indicates its intent to include at least
some types of service work performed downstream from the wellbore. Enron's
identification as the well choke as the point at which well service stops and

pipeline service starts would render meaningless the Legislature's inclusion of

"testing" as a type of well or mine service.
44

Second, well or mine service includes "treating." Again, the initial treatment of
the natural gas produced from the satellite platform occurred at the separation
facilities located on the A-B complex. Until the raw gas passed through the
separators, it still contained both natural gas and liquid hydrocarbons. Although
we note that natural gas may go through various stages of treatment throughout
its transmission to the ultimate consumer, we must strive to give effect to the
Legislature's use of the term "treating," as it relates to well service. The use of
the term "treating," at a minimum, indicates that the Legislature intended to
include at least initial treatment of product prior to its transmission and sale.
Enron's selection of the well choke, a point upstream from the initial treatment
point, fails to give effect to the Legislature's intent.

45

Finally, the definition of well or mine services includes "otherwise rendering

services in connection with a well . . . ." (emphasis added). The Legislature did
not limit well services to those performed in a well, but rather included work
performed in connection with a well. The broader language "in connection
with" indicates a legislative intent to include services other than those
performed in the wellbore itself. Enron's suggested limitation of well services to
those performed in the wellbore fails to give meaning to this phrase.

46

Enron also asserts that Dynamic's construction and fabrication work is not well
"service." Enron seems to assert that fabrication work or construction work
performed at or in close proximity to a well site can never constitute well
"service." We disagree. Construction work is a type of service often provided
by oil and gas service contractors. In fact, the parties' agreement is titled a
master service contract. It characterizes Dynamic as a "service contractor,"
albeit one engaged in the construction and fabrication business. While pipeline
construction is exempted from the definition of well or mine service, Dynamic's
contract with Enron contemplated work above and beyond simply installing
pipes. Even if we were to assume, arguendo, that connecting flowlines to the
risers on the legs of the platform constituted pipeline construction within the
meaning of the exemption, Dynamic also fabricated a manifold to be affixed to
the satellite platform, modified safety systems and tied flowlines into the
Christmas trees on the satellite platform. Although the pipeline exclusion
exempts pipeline construction from the definition of well or mine service, we
believe that the Legislature intended only to exempt those agreements which, in
their entirety, contemplate work within the exclusion. In this case, the
agreement between Dynamic and Enron was not limited solely to construction,
repair or maintenance of a pipeline, even if we assume that the piping installed

by Dynamic constituted a "pipeline" under the TOAIA. Therefore, the TOAIA

applies to the indemnity covenant in the master service contract.
IV. CONCLUSION
47

In conclusion, we hold that Dynamic's contract with Enron contemplated "well

or mine service" under the TOAIA. We also hold that the agreement was not
limited towork falling under the pipeline exclusion. As a result, the TOAIA
applies to invalidate Dynamic's indemnity obligation. We REVERSE the
judgment of the district court and RENDER judgment that Enron take nothing
by way of its third party action.

Notes:
*

District Judge of the Eastern District of Texas, sitting by designation.

Raw natural gas contains both gas and liquid hydrocarbons. Separators remove
the liquid hydrocarbons from the gas. Howard R. Williams et al., Manual of Oil
and Gas Terms 983 (10th ed. 1997)(defining Aseparation").

A riser is a vertical extension of the horizontal pipeline at the bottom of the

platform which allows the pipeline to run vertically up the platform.

The master service contract, entered in 1991, provided in part that:

[Dynamic] agrees to protect, defend, indemnify and hold [Enron] harmless
from and against all damage, loss, liability, claims, demands and causes of
action of every kind and character, without limit and without regard to the
cause or causes thereof, including but not limited to strict liability or the
unseaworthiness or unairworthiness of any vessel or craft, or the negligence of
any party, including but not limited to the sole or concurrent negligence of
[Enron], arising in connection herewith in favor of [Dynamic's] agents, invitees
and employees, and [Dynamic's] subcontractors and their agents, invitees and
employees, on account of damage to their property or on account of bodily
injury or death. . . .

The Christmas tree is the uppermost assembly of valves on a gas well.

Williams, supra, at 157. This assembly is shaped somewhat like and referred to
in the industry as a Christmas tree.

Enron stipulated that it owed an indemnity obligation to OCS and Graham.

And, at trial, Enron took the position that it, rather than OCS or Graham, bore

the bulk of responsibility for the accident. Apparently, the purpose behind this
strategy was to try to reduce the responsibility of OCS and Graham,
concomitantly lowering the amount Enron would owe because of its indemnity
arrangement with those parties. At the same time, if the court found that Enron
had been primarily at fault, Enron could attempt to pass its liability through to
Dynamic under the terms of the master service contract.
6

The current version of the TOAIA provides in part:

(a) Except as otherwise provided by this chapter, a covenant, promise,
agreement, or understanding contained in, collateral to, or affecting an
agreement pertaining to a well for oil, gas, or water or to a mine for a mineral is
void if it purports to indemnify a person against loss or liability for damage
that:
(i) is caused by or results from the sole or concurrent negligence of the
indemnitee, his agent or employee, or an individual contractor directly
responsible to the indemnitee; and
(ii) arises from:
(A) personal injury or death;
(B) property injury; or
(C) any other loss, damage, or expense that arises from personal injury, death,
or property injury.
Tex. Civ. Prac. & Rem. Code ' 127.003.

The 1991 amendment also deleted the word Agas" from subsection (4)(A)(i)
immediately following the terms Agathering, storing, or transporting oil." The
amendment did not remove the word Agas" from the later provision of the same
definition which provides that well or mine service includes Aotherwise
rendering services in connection with a well drilled to produce or dispose of oil,
gas, other minerals or water."

This court has never considered the definition of well or mine service under the
TOAIA. This court's decisions under the TOAIA address other provisions of
the act, such as the provision permitting certain cross-indemnity arrangements
when they are supported by insurance. See, e.g., Greene's Pressure Testing &
Rentals v. Flournoy Drilling Co., 113 F.3d 47, 51 (5th
Cir. 1997).

The Transcontinental factors include:

(1) whether the structures or facilities to which the contract applies or with
which it is associated are part of an in-field gas gathering system;
(2) what is the geographic location of the facility or system relative to the well
or wells;
(3) whether the structure in question is a pipeline or is closely involved with a
pipeline;
(4) if so, whether that line picks up gas from a single well or a single
production platform or instead carries commingled gas originating from
different wells or production facilities;
(5) whether the pipeline is a main transmission line or trunk line;
(6) what is the location of the facility or structure relative to compressors,
regulating stations, processing facilities or the like;
(7) what is the purpose or function of the facility or structure in question;
(8) what if any facilities or processes intervene between the wellhead and the
structure or facility in question, e.g., Aheater treaters," compressor facilities,
separators, gauging installations, treatment plants, etc.;
(9) who owns and operates the facility or structure in question, and who owns
and operates the well or wells that produce the gas in question;
(10) and any number of other details affecting the functional and geographic
nexus between Aa well" and the structure or facility that is the object of the
agreement under scrutiny.

10

The well choke is a valve located near the top of the wellhead which controls
the volume of gas flowing out of the well.