Ankor Energy, LLC et al v. Merit Management Partners I, L.P. et al

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF LOUISIANA
ANKOR ENERGY, LLC ET AL. 	CIVIL ACTION
VERSUS 	NO. 24-1953
MERIT MANAGEMENT PARTNERS
I, L.P. ET AL.
SECTION “R” (3)
ORDER AND REASONS
Before the Court is the motion of defendants Merit Management
Partners I, L.P., Merit Energy Partners III, L.P., and Merit Energy Partners
D-III, L.P. (collectively Merit) for summary judgment on plaintiffs’ claims
for decommissioning expenses;1 the motion of plaintiffs Ankor Energy, LLC
and ANKOR E&P Holdings Corporation’s (collectively ANKOR) for partial
summary judgment on defendants’ liability for decommissioning expenses;2
and 	ANKOR’s 	motion 	for 	partial 	summary 	judgment 	on 	quantum 	of
decommissioning expenses.3 Each motion is opposed.4 The Court grants in
part and denies in part ANKOR’s motion for partial summary judgment on
liability, grants ANKOR’s motion for partial summary judgment on quantum
1 	R. Doc. 27.
2 	R. Doc. 32.
3 	R. Doc. 35.
4 	R. Docs. 40, 38, 39.
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of decommissioning expenses, and denies Merit’s motion for summary
judgment.
I. 	BACKGROUND
The Court has reviewed the record and determines the undisputed
facts are as follows. This suit arises from the decommissioning of two federal
offshore oil and gas leases: South Pelto 8 (OCS F03587) and South Pelto 13
(OCS G03171).5 	Both leases are in the Gulf of Mexico on the Outer
Continental Shelf, adjacent to Louisiana.6 The operations on the South Pelto
8 lease were conducted under the Operating Agreement Block 8, South Pelto
Area Offshore Louisiana, dated August 1, 1977 (the “PL 8 OA”).7 	The
operations on the South Pelto 13 lease were conducted under the Operating
Agreement Block 13, South Pelto Area Offshore Louisiana, dated July 1, 1975
(the “PL 13 OA”).8
In 2002, Merit acquired record title and operating rights interests in
the South Pelto 8 and South Pelto 13 leases.9 Merit later assigned its interests
in the Leases to Black Elk Energy Offshore Operations, LLC (“Black Elk”),
5 	R. Doc. 27-2 at ¶ 1; R. Doc. 40-2 at ¶ 1.
6 	R. Doc. 27-2 at ¶ 2; R. Doc. 40-2 at ¶ 2.
7 	R. Doc. 27-2 at ¶ 4; R. Doc. 40-2 at ¶ 4.
8 	R. Doc. 27-2 at ¶ 5; R. Doc. 40-2 at ¶ 5.
9 	R. Doc. 27-2 at ¶ 3; R. Doc. 40-2 at ¶ 3.
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effective on January 1, 2011.10 	Black Elk later assigned its interests in the
Leases to Northstar Offshore Group, LLC (“Northstar”), effective as of
December 	31, 	2014.11 	Black 	Elk 	and 	Northstar 	have 	since 	filed 	for
bankruptcy.12
On October 1, 2011, ANKOR E&P Holdings Corporation (“AEPH”)
acquired its interests in the Leases.13 	ANKOR Energy LLC (“ANKOR
Energy”), which was not a working interest owner in the Leases, later became
the operator of the Leases.14 The Leases terminated in 2018.15 As part of its
responsibilities as Operator, ANKOR Energy performed decommissioning
operations.16 	In connection with the decommissioning efforts, ANKOR
incurred over $7 million in decommissioning expenses.17 Both Black Elk and
Northstar 	failed 	to 	pay 	for 	the 	share 	of 	decommissioning 	expenses
attributable to their interest in the Leases.18
On December 3, 2021, Brandt Prat, a land manager for ANKOR
Energy, sent Christopher Hagge at Merit a letter by email and overnight
10 	R. Doc. 1 at ¶ 6; R. Doc. 24 at ¶ 6.
11 	Id.
12 	R. Doc. 1 at ¶ 7; R. Doc. 24 at ¶ 7.
13 	R. Doc. 27-2 at ¶ 8; R. Doc. 40-2 at ¶ 8.
14 	R. Doc. 27-2 at ¶ 8; R. Doc. 40-2 at ¶ 8.
15 	R. Doc. 32-5 at ¶ 10.
16 	Id.
17 	Id.
18 	Id. at 12.
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mail.19 	The letter stated that ANKOR undertook the decommissioning
obligations for the South Pelto 8 and South Pelto 13 Leases; that, due to their
insolvency, Northstar and Black Elk, have not contributed; and that ANKOR
sought contribution from Merit, as predecessor in interest.20 The letter also
included the Authorizations for Expenditures (“AFEs”) associated with
completing the decommissioning operations, and previous correspondence
from ANKOR to Merit from December 12, 2018 transmitting AFEs for
abandonment operations on the leases.21 	On July 11, 2022, Myoung Joon
Kim, ANKOR Energy CFO, wrote Christopher Hagge at Merit that ANKOR
had completed the decommissioning operations on the South Pelto 8 and 13
Leases and asserted that Merit was obligated to pay its proportionate share.22
The 	correspondence 	attached 	invoices 	setting 	forth 	the 	costs 	of 	the
operations.23 	The invoices calculated the Merit entities’ share of costs as
$3,052,559.12,24 with Merit Energy Partners D-III, L.P. responsible for
19 	R. Doc. 32-8.
20 	Id.
21 	Id.
22 	R. Doc. 32-9.
23 	Id.
24 	R. Doc. 35-9 at 3.
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$106,839.71,25 Merit Energy Partners III, L.P. responsible for $76,314.35,26
and Merit Management Partners I, L.P. responsible for $2,869,405.06.27
On 	August 	6, 	2024, 	ANKOR 	sued 	Merit 	in 	this 	Court 	seeking
contribution for decommissioning expenses.28 ANKOR claims that Merit, as
predecessor-in-interest to Northstar and Black Elk, remains liable for the
share of decommissioning expenses attributable to the Northstar/Black
Elk/Merit interests.29 Merit now moves for summary judgment arguing that
it is not liable for the expenses, as it assigned its interests to Black Elk, which
later assigned those interests to Northstar.30 	ANKOR opposes31 Merit’s
motion and seeks partial summary judgment on (1) Merit’s liability for
decommissioning expenses;32 and (2) the quantum of decommissioning
expenses.33 Merit opposes both ANKOR motions.34
The Court considers the motions below.
25 	Id. at 4, 7.
26 	Id. at 5, 9.
27 	Id. at 6, 8.
28 	R. Doc. 1.
29 	See generally id.
30 	R. Doc. 27.
31 	R. Doc. 40.
32 	R. Doc. 32.
33 	R. Doc. 35.
34 	R. Docs. 38, 39.
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II. 	LEGAL STANDARD
Summary judgment is warranted when “the movant shows that there
is no genuine dispute as to any material fact and the movant is entitled to
judgment as a matter of law.” Fed. R. Civ. P. 56(a); see also Celotex Corp. v.
Catrett, 477 U.S. 317, 322-23 (1986); Little v. Liquid Air Corp., 37 F.3d 1069,
1075 (5th Cir. 1994) (en banc) (per curiam). 	“When assessing whether a
dispute to any material fact exists, [the Court] consider[s] all of the evidence
in the record but refrain[s] from making credibility determinations or
weighing the evidence.” Delta & Pine Land Co. v. Nationwide Agribusiness
Ins., 530 F.3d 395, 398-99 (5th Cir. 2008) (citing Reeves v. Sanderson
Plumbing Prods., Inc., 530 U.S. 133, 150 (2000); and Matsushita Elec.
Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587 (1986)). All reasonable
inferences are drawn in favor of the nonmoving party, but “unsupported
allegations or affidavits setting forth ‘ultimate or conclusory facts and
conclusions of law’ are insufficient to either support or defeat a motion for
summary judgment.” 	Galindo v. Precision Am. Corp., 754 F.2d 1212, 1216
(5th Cir. 1985) (quoting 10A Charles Alan Wright & Arthur R. Miller, Federal
Practice and Procedure § 2738 (2d ed. 1983)); see also Little, 37 F.3d at 1075
(noting 	that 	the 	moving 	party’s 	“burden 	is 	not 	satisfied 	with 	‘some
metaphysical doubt as to the material facts,’ by ‘conclusory allegations,’ by
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‘unsubstantiated assertions,’ or by only a ‘scintilla’ of evidence” (citations
omitted)). “No genuine dispute of fact exists if the record taken as a whole
could not lead a rational trier of fact to find for the non-moving party.” EEOC
v. Simbaki, Ltd., 767 F.3d 475, 481 (5th Cir. 2014).
If the dispositive issue is one on which the moving party will bear the
burden of proof at trial, the moving party must put forth evidence that would
“entitle it to a directed verdict if the evidence went uncontroverted at trial.”
Int’l Shortstop, Inc. v. Rally’s Inc., 939 F.2d 1257, 1264-65 (5th Cir. 1991)
(quoting Golden Rule Ins. v. Lease, 755 F. Supp. 948, 951 (D. Colo. 1991)
(internal quotation marks omitted)). “[T]he nonmoving party can defeat the
motion” by either countering with evidence sufficient to demonstrate the
“existence of a genuine dispute of material fact,” or by “showing that the
moving party’s evidence is so sheer that it may not persuade the reasonable
fact-finder to return a verdict in favor of the moving party.” Id. at 1265.
If the dispositive issue is one on which the nonmoving party will bear
the burden of proof at trial, the moving party may satisfy its burden by
pointing out that the evidence in the record is insufficient with respect to an
essential element of the nonmoving party’s claim. 	See Celotex, 477 U.S. at
325. 	The burden then shifts to the nonmoving party, who must, by
submitting or referring to evidence, set out specific facts showing that a
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genuine issue exists. See id. at 324. The nonmovant may not rest upon the
pleadings but must identify specific facts that establish a genuine issue for
resolution. See, e.g., id.; Little, 37 F.3d at 1075 (“Rule 56 ‘mandates the entry
of summary judgment, after adequate time for discovery and upon motion,
against a party who fails to make a showing sufficient to establish the
existence of an element essential to that party’s case, and on which that party
will bear the burden of proof at trial.’” (quoting Celotex, 477 U.S. at 322)).
At this stage, an affirmative defense will defeat summary judgment for
plaintiff “if the defendant supports each element of the defense with
summary judgment evidence.” 	Occidental Petroleum Corp. v. Wells Fargo
Bank, N.A., 117 F.4th 628, 643 (5th Cir. 2024). The burden of proof is on the
party pleading the affirmative defense. See id.
III. 	DISCUSSION
The Leases, South Pelto Blocks 8 and 13, are located on the Outer
Continental Shelf off the coast of Louisiana. 	Under the Outer Continental
Shelf Lands Act (“OCSLA”), 43 U.S.C. § 1331, et seq., which sets out the
governing framework for this case, the Court applies the law of the state that
is adjacent to the area of the Outer Continental Shelf upon which the leases
are located, 43 U.S.C. § 1333(a)(1)-(2). Here, that is Louisiana law.
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A. Breach of Contract
ANKOR argues that Merit has breached the Operating Agreements by
refusing to pay its share of the decommissioning expenses.35 	Merit argues
that it owes no decommissioning expenses because, when it assigned its
interest in the Leases to Black Elk, it became a non-party to the Operating
Agreements.36 Merit also raises various affirmative defenses, each of which
this Court addresses below.37
Louisiana law dictates that contracts must be read in a common-sense
fashion, according to the common and usual meaning of the words, to lead
to logical conclusions and give effect to the parties’ obvious intentions.
Lambert v. Maryland Cas. Co., 418 So. 2d 553, 559 (La. 1982); see also La.
Civ. Code art. 2047 (“words of a contract must be given their generally
prevailing meaning”). 	Under Louisiana law, the “essential elements of a
breach of contract claim are the existence of a contract, the party’s breach
thereof, and resulting damages.” 	Carollo v. Tulane Univ., 414 So. 3d 610,
616 (La. Ct. App. 4 Cir. 2025) (quoting 1100 South Jefferson Davis Parkway,
LLC v. Williams, 165 So. 3d 1211, 1216 (La. Ct. App. 4 Cir. 2015)).
35 	R. Docs. 32, 40.
36 	R. Docs. 27, 38.
37 	R. Doc. 38.
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1. 	The Operating Agreements
The Operating Agreements for South Pelto 8 and South Pelto 13 control
here 	and 	determine 	whether, 	under 	their 	terms, 	Merit 	is 	liable 	for
decommissioning. 	Under Louisiana law, an assignor remains solidarily
liable with its assignee to a third party unless that third party releases the
assignor. 	La. Civ. Code art. 1821; see also Chieftain Int’l (U.S.) Inc. v.
Southeast Offshore, Inc., 553 F.3d 817, 819 (5th Cir. 2008). 	Upon Merit’s
assignment to Black Elk, Merit’s rights in the Operating Agreements were
extinguished. 	Lusher v. Kilcrease, 384 So. 2d 589, 591 (La. Ct. App. 4 Cir.
1980) (“The effect of an assignment is to transfer the assignor’s rights in the
original agreement in favor of the assignee.”); Restatement (Second) of
Contracts § 317 (1981). But Merit’s obligations were not extinguished unless
“expressly done so by the obligee.” Bradford v. Onshore Pipeline Const. Co.,
Inc., 853 So. 2d 756, 767 (La. Ct. App. 2d Cir. 2003) (noting that defendant
“is not relieved from its obligations under the gas purchase contract with
[p]laintiffs just because it made an assignment to [a third party]”). 	The
parties have presented no summary judgment evidence of a release by the
obligee. 	At issue is thus whether the Operating Agreements themselves
contain express language releasing assignors from accrued obligations upon
assignment, 	or 	express 	language 	modifying 	the 	time 	at 	which
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decommissioning 	obligations 	accrue, 	such 	that 	Merit 	never 	accrued
decommissioning obligations.
Merit argues that the Operating Agreements do not contemplate
continuing obligations post-assignment.38 In support, Merit points to Total
E&P USA, Inc. v. Marubeni Oil & Gas (USA) Inc., in which the Fifth Circuit
interpreted the language of different Operating Agreements to determine
liability for decommissioning expenses post-assignment. 	824 F. App’x 197
(5th Cir. 2020).39 ANKOR argues that Total E&P in fact supports a finding
that Merit’s obligations were not extinguished.40
In Total E&P, the Fifth Circuit held that an assignor was not liable for
decommissioning expenses post-assignment when the operating agreement
explicitly stated that costs were to be shared based on interests at the time of
abandonment, but that same assignor was liable for decommissioning
expenses post-assignment under another operating agreement that did not
contain that clear language. 	Id. 	In reaching its decision, the Fifth Circuit
evaluated Articles 11.3 and 14.1 of the “CEPS Operating Agreement,” and
Articles 18.4 and 21.1.4 of the “MC 305 Operating Agreement.” 	Id. 	Article
38 	See R. Docs. 27, 38.
39 	Total E&P was decided under Texas law.
40 	See R. Doc. 32, 40.
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11.3 of the CEPS Operating Agreement, which pertained to abandonment
operations, provided:
Abandonment Operations Required by Governmental Authority. The
Operator shall conduct the abandonment of the Common System as
required 	by 	law 	and 	any 	governmental 	authority 	and 	the
Abandonment Costs, risks and net proceeds will be shared by the
Common System Owners based on the Common System Owner’s
Equity Interest at the time of abandonment.
Id. at 200 (emphasis added). 	And Article 14.1 of that agreement, which
discussed assignment of interests, provided:
Assignment. . . . No Common System Owner assigning all or a part of
its 	Equity 	Interest 	in 	the 	Common 	System 	is 	released 	from 	its
obligations and liabilities created under this Agreement attributable to
the period prior to the date of execution of the assignment (which
obligations include liability for abandonment of the Common System,
or that portion of the Common System in existence as of the date of
execution of the assignment.)
Id.
Article 18.4 of the MC 305 Operating Agreement, which covered
abandonment operations, provided:
Abandonment Operations Required by Governmental Authority. The
Operator shall conduct the abandonment and removal of any well,
Production System or Facilities required by a governmental authority,
and 	the 	Costs, 	risks 	and 	net 	proceeds 	will 	be 	shared 	by 	the
Participating Parties in such well, Production System or Facilities
according to their Participating Interest Share.
Id. Notably, unlike its counterpart in the CEPS Operating Agreement, Article
18.4 of the MC 305 Operating Agreement did not state that “[c]osts, risks,
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and net proceeds” will be shared based on the interest “at the time of
abandonment.” 	Id. 	Finally, Article 24.1.4 of the MC 305 Operating
Agreement, pertaining to assignments, provided:
Form of Assignments: . . . No Party assigning all or part of its Working
Interest [“the record title leaseholder interest or, where applicable, the
operating rights of each party in and to each lease”] is released from its
obligations and liabilities created under this Agreement prior to the
effective date of the Assignment.
Id. at 200-01.
The Fifth Circuit, after evaluating the Operating Agreements, held that
Total, the previous interest holder, was jointly and severally liable for the MC
305 abandonment costs, but not the CEPS abandonment costs.
For the CEPS Agreement, the Fifth Circuit looked to the language “by
the Common System Owners based on the Common System Owner’s Equity
Interest at the time of abandonment” to find that Article 11.3 limited Total’s
liability to zero percent. 	Id. at 205. The Court reasoned that because Total
had no Equity Interest in CEPS at the time of abandonment, Total had no
liability for the abandonment costs. 	Id. 	The Court held that Article 14.1,
which “makes clear that obligations ‘created under’ the CEPS Agreement
‘attributable to the period prior to the date of execution of the assignment’
include ‘liability for abandonment,’” did not change this result. 	Id. at 204-
05. 	The Fifth Circuit reasoned that Article 14.1 did not address when
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decommissioning obligations accrued, indicating that Article 11.3 of the
CEPS Agreement modified the point at which decommissioning obligations
accrued. 	Id. 	Moreover, 	the 	Fifth 	Circuit 	held 	that 	“even 	if 	the
decommissioning obligations did arise before Total’s assignment, Article 11.3
still 	limits 	Total’s 	liability 	to 	its 	‘Equity 	Interest 	at 	the 	time 	of
abandonment.’” 	Id. 	Thus, regardless of whether Article 11.3 operated to
modify 	when 	decommissioning 	obligations 	accrued, 	it 	was 	clear 	that
decommissioning 	obligations 	were 	to 	be 	assessed 	at 	the 	time 	of
abandonment, which was after Total assigned away its interest in the lease.
For the MC 305 Agreement, the Fifth Circuit noted that, unlike the
CEPS Agreement, it did not “limit an assignor’s liability for abandonment
costs to its ownership interest at the time of abandonment.” 	Id. at 205.
Instead, the Agreement stated that abandonment “[c]osts, risks and net
proceeds will be shared by the Participating Parties . . . according to their
Participating 	Interest 	Share.” 	Id. 	Absent 	language 	providing 	when
abandonment obligations were created, the Court looked to 30 C.F.R. §§
250.1701(c), 	250.1702, 	which 	provide 	that 	“obligations 	accrue 	when
operators, among other things, ‘drill a well’ or ‘[i]nstall a platform, pipeline,
or other facility.’” Id. at 206 (citing 30 C.F.R. §§ 250.1701(c), 250.1702). The
Fifth Circuit thus found that the obligations arose not when the government
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ordered decommissioning but when the wells were drilled. 	Id. 	The Fifth
Circuit 	concluded 	that, 	because 	the 	obligations 	arose 	prior 	to 	Total’s
assigning its interest, and the Operating Agreement did not extinguish those
obligations, Total was liable for its share of the MC 305 abandonment costs.
Id.
Merit argues that the South Pelto 8 and South Pelto 13 Operating
Agreements are more akin to the CEPS Agreement than the MC 305
Agreement. 	Specifically, Merit relies on a provision that automatically
amends the percentage interests in the Operating Agreements if such
interests change. 	Merit asserts that its interest has been 0% since the
assignment. This argument misses the point.
The South Pelto 8 and South Pelto 13 Operating Agreements are
substantially similar. 	The key provisions, which are the same41 in both
agreements, are Articles IV and V. Article IV states:
Except as hereinafter provided, all costs and expenses incurred
hereunder shall be shared, all equipment installed on the Joint Lease
shall be owned, and all Oil and Gas produced and saved hereunder
shall be owned by the Parties in the following percentages:
[Original Parties to the Agreement and Percentage Interests Listed]
Each Party shall have a “Voting Interest” equal to its Percentage
Interest as shown above. 	Should the Percentage Interest change at
41 	The original parties and associated percentage interests, omitted from
the recitation of the Article, are not the same.
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any time this Article IV shall automatically be amended to reflect such
change. 	Except as otherwise provided herein, all matters shall be
decided by an affirmative vote of at least three (3) Parties jointly
owning 	at 	least 	51% 	Voting 	Interest; 	provided, 	however, 	that
amendment of the Agreement shall require mutual consent of the
Parties.42
And Article V states:
Except as hereinafter provided, Operator shall advance, pay and
discharge all costs and expenses incurred hereunder and shall charge
each of the 	Parties 	the 	same percentage 	thereof as said Party’s
Percentage Interest stated in Article IV.43
Merit argues that the language “shall automatically be amended” means that
upon assignment to Black Elk, Merit’s percentage interest was amended to
0%, so the decommissioning costs assessed post-assignment are 0%. Merit
is extrapolating too much from this language. 	While true that upon
assignment Merit’s percentage interest was amended to 0%, this would be
true even absent the “shall automatically be amended” language. 	The
language is simply a recitation of the effects of assignment and signals that
the original parties and percentages explicitly listed in Article IV would
change as assignments occurred. 	It is not an explicit release of accrued
obligations. 	Merit’s proffered reading would mean that any assignment
releases the assignor of accrued obligations. 	This is contrary to Louisiana
42 	R. Doc. 27-4 at 5-6, 98-99 (emphasis added).
43 	R. Doc. 27-4 at 6, 99.
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law, which is clear that assignment alone does not relieve the assigning party
from its accrued obligations. La. Civ. Code art. 1821; see also Chieftain Int’l,
553 F.3d at 819. Without explicit language extinguishing the obligation, the
Court does not find that Merit has been relieved of obligations accrued pre-
assignment.
Further, the Operating Agreements do not spell out as of when
abandonment costs are to be assessed, as did the CEPS Agreement. 	The
language the Fifth Circuit relied on in Total E&P to find that Total was not
liable for decommissioning expenses under the CEPS Agreement was far
more specific than the language here. There, the CEPS Agreement explicitly
defined a time as of which abandonment costs were to be assessed, and that
time was at abandonment, which was after the assignment. 	Here, the
Operating Agreements are silent as to the time as of which costs are to be
assessed. 	Article V states only that the costs are to be assessed based on
percentage interests. 	Such a provision does not, on its own, release an
assignor from decommissioning obligations. See LLOG Expl. Offshore, LLC
v. Newfield Expl. & Prod. Co., 2016 WL 98618, at *6-7 (E.D. La. Jan. 8,
2016); Total E&P, 824 F. App’x at 204-06; Seagull Energy E&P, Inc. v.
Eland Energy, Inc., 207 S.W. 3d 342, 345-47 (Tex. 2006). Nor does it modify
either when obligations accrue, nor when they are assessed, as was the case
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in the CEPS Agreement. 	Absent such specific language, this Court will not
find that the Operating Agreements set a time, post-assignment for the
accrual or assessment of decommissioning expenses.
As the Operating Agreements do not contain clear language modifying
the time at which the decommissioning obligations accrue, nor releasing
assignors of accrued obligations, the Court must determine whether Merit
had decommissioning obligations pre-assignment. 	Absent clear language
defining the accrual date of decommissioning obligations, the Court looks to
the 	Federal 	Regulations 	for 	guidance. 	Per 	Federal 	Regulations,
decommissioning obligations accrue when a party does any of the following:
(a) Drill a well;
(b) Install a platform, pipeline, or other facility;
(c) Create an obstruction to other users of the OCS;
(d) Are or become a lessee or the owner of operating rights of a lease
on which there is a well that has not been permanently plugged
according to this subpart, a platform, a lease term pipeline, or other
facility, or an obstruction . . .
30 C.F.R. § 250.1702; see also Total E&P, 824 F. App’x at 205-06 (looking to
the Federal Regulations to determine the time as of which decommissioning
obligations accrue when the operating agreement is silent as to the same).
Thus, Merit accrued decommissioning obligations upon becoming a Lessee
of the South Pelto 8 and 13 Leases. 	These obligations remained post-
assignment. The automatic amendment language does not alter this result,
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as it is not a specific release of the decommissioning obligations. 	Without
language clearly and expressly relieving Merit of accrued obligations, this
Court will not deviate from basic principles that, in Louisiana, assignment
alone does not relieve an assignor of third-party obligations. 	See La. Civ.
Code art. 1821; Chieftain Int’l, 553 F.3d at 819; LLOG Expl. Offshore, 2016
WL 98618, at *6-7; Nippon Oil Expl. v. Murphy Expl. & Prod. Co., 2011 WL
2456358 at *4 (E.D. La. Jun. 15, 2011); see also Seagull Energy E&P, 207
S.W. 3d at 345-47 (when contract provided that costs for abandonment
would be shared according to owner’s participating interest but contained no
explicit release of obligations following assignment, found that the general
rule applied and the assignor remained liable unless released by other parties
to the contract) (Texas law).
None of the other sections of the Operating Agreement cited by Merit
provide a release from the decommissioning obligations. Specifically, Merit
points to Articles XXVI and XV. Neither article clearly and explicitly change
the accrual and assessment of obligations as would be necessary to preclude
Merit’s liability. 	See Bradford, 853 So. 2d at 767 (explaining that a release
or discharge of the original obligor must be express). Article XXVI does not
release Merit from decommissioning obligations. Article XXVI, in relevant
part, states:
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All or part of any Party’s interest in the Joint Lease may be conveyed
to a party or third party; however, because of the mutuality of interest
required to successfully carry out the intent and purposes of this
Agreement, any such conveyance to a party or third party must be
approved by Parties representing 51.0% in interest hereunder, which
approval cannot be unreasonably withheld. 	Before such conveyance
shall become effective as to the other Parties, all payments due by the
conveying Party under this Agreement to the Operator shall have been
paid or settlement otherwise made. . . .44
This language pertains to costs assessed prior to assignment; it is silent as to
costs assessed post-assignment for obligations that accrued pre-assignment.
Accordingly, to read this as an express release of an assignor’s obligations
would be a step too far.
Finally, Article XV does not apply here. It states:
[N]o well which is producing or has once produced under the
terms hereof shall be abandoned without the mutual consent of the
Parties who own an interest in that well. If any of the Parties desire to
abandon such well, it or they shall so notify the other Parties in writing
and request their consent to the abandonment thereof. 	If such other
Parties do not consent to the abandonment of said well, such other
Parties shall take over such well and they shall pay to the other Party
or Parties desiring to abandon same, in cash, the value of their
respective interests in the salvage of the material and equipment in and
on such well, less the estimated cost of salvaging same . . .
In the event of such transfer and assignment as herein provided,
the 	Party 	or 	Parties 	so 	assigning 	after 	discharging 	its 	or 	their
proportion of all obligations which have accrued hereunder up to the
effective date of such assignment shall be relieved from any and all
further liability under this agreement, insofar as said well is concerned;
provided, however, that any such assignment shall neither affect nor
change the participation of the Parties in and to the Oil and Gas
produced from any other portion of the Joint Lease nor in the
44 	R. Doc. 27-4 at 62-63, 149-50.
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ownership in any other property and equipment owned hereunder by
the Parties.45
The Article pertains to situations in which some parties desire to abandon a
well that “is producing or has once produced.”46 	In short, it applies to
situations in which some or all parties desire to abandon a well prior to the
expiration of the Leases. At issue here is abandonment obligations following
termination of the Leases.
For 	the 	foregoing 	reasons, 	the 	Court 	finds 	that 	Merit 	accrued
decommissioning obligations pre-assignment, and it has not been relieved of
those obligations. 	Accordingly, Merit remains obligated to contribute to
decommissioning costs.
2. Breach
The 	Operating 	Agreements 	contemplate 	that expenses 	are 	to be
shared. Both Operating Agreements provide that “[n]o Party may refuse to
pay . . . its share of the cost of . . . abandoning any well which is required to
be drilled on the Joint Lease, or the cost of any other action or operation
which may be ordered or required by the final order of an authorized
representative of the United States.”47 	Merit argues that this provision is
45 	R. Doc. 27-4 at 50, 140-41
46 	Id.
47 	R. Doc. 27-4 at 46-47, 138-39.
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inapplicable because the subsection is titled “Wells Ordered by the United
States.” 	The Operating Agreements plainly state that the headings used in
the 	Operating 	Agreements 	are 	“for 	convenience 	only 	and 	shall 	be
disregarded in construing” the Agreements.48 Merit’s reliance on the header
is therefore misplaced.
Moreover, the wells and platforms were required by the United States
to be decommissioned within one year of the lease terminations. 30 C.F.R.
§250.1710 (“You must permanently plug all wells on a lease within 1 year
after the lease terminates.”); 30 C.F.R. §250.1725 (“You must remove all
platforms and other facilities within 1 year after the lease . . .”). 	The
decommissioning costs here fall within the purview of Article XIV(F) of the
Operating Agreements. 	Accordingly, by not paying its share, Merit is in
breach of the Operating Agreements.
3. Damages
ANKOR has provided, and Merit has pointed to no summary judgment
evidence 	disputing, 	that the breach has resulted in financial 	damage.
Accordingly, the final requirement for a breach of contract claim is met.
48 	R. Doc. 27-4 at 64, 154.
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4. Privity
Merit argues that there is no “direct privity” between it and plaintiffs,
and therefore ANKOR’s breach of contract claim fails. Merit cites only one
case 	in 	support 	of 	this 	argument. 	The 	case, 	Quality 	Environmental
Processes, Inc. v. Energy Development Corp., does not stand for the position
Merit asserts. 	835 So. 2d 642 (La. Ct. App. 1 Cir. 2002). 	Quality
Environmental involved a dispute over royalties under an onshore mineral
lease, not a dispute over whether an Operating Agreement released an
assignor of obligations concerning an offshore oil and gas lease. Id. And, the
issue 	before 	Louisiana’s 	First 	Circuit 	Court 	of 	Appeal 	in 	Quality
Environmental 	was 	whether 	plaintiffs’ 	claim 	for 	unpaid 	royalties 	was
prescribed. 	See id. 	That court did not announce a requirement for direct
privity of parties to enforce decommissioning obligations under oil and gas
lease operating agreements.
Moreover, such a requirement would run contrary to the holdings of
other courts. 	For example, in Nippon, the Eastern District of Louisiana
found that the defendant remained liable to plaintiff, which had become
operator of the lease years after defendant assigned its interest, for its share
of decommissioning expenses. 	Nippon, 2011 WL 2456358, at *1. 	As in
Nippon, the question of whether obligations remain here turns on the terms
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of 	the 	operating 	agreements, 	not 	whether 	the 	disputing 	parties 	held
leasehold interests at the same time.
5. Prescription of the Breach of Contract Claim
Merit additionally argues that ANKOR’s claims are prescribed because
ANKOR began to accrue decommissioning expenses in May of 2014, and
Black Elk defaulted on its obligation to pay at that time.49 	ANKOR argues
that Merit’s start date for determining prescription is incorrect.50 	ANKOR
argues that the start date is actually 30 days after Merit received the bills for
decommissioning expenses.51
In Louisiana, the prescriptive period for a personal action, such as an
action for breach of a contract, is ten years. 	La. Civ. Code art. 3499. 	The
prescriptive period begins to run on the date that the cause of action arose.
Corbello v. Iowa Prod., 850 So. 2d 686, 705 (La. 2003). Here, the cause of
action is breach of contract. Per the contracts, non-Operators were required
to pay their “proportion of all other bills within thirty (30) days after
receipt.”52 	ANKOR issued a bill to Merit on July 11, 2022. 	Assuming
49 	R. Doc. 38 at 12.
50 	R. Doc. 42 at 6.
51 	Id.
52 	R. Doc. 32-6 at 75, 32-7 at 66.
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arguendo,53 that Merit received the bill the same day, Merit was in breach of
the contracts on August 10, 2022. ANKOR filed this suit in 2024, less than
ten years after the cause of action arose. 	Therefore, ANKOR’s breach of
contract claim against Merit is not prescribed.
6. Waiver and Equitable Estoppel
Merit next argues that actions ANKOR took in attempting to recover
from Northstar and Black Elk constitute waiver and/or provide a basis for
equitably estopping ANKOR from pursuing Merit for the decommissioning
expenses. 	On summary judgment, a defendant relying upon affirmative
defenses “must establish beyond peradventure all of the essential elements”
of the affirmative defense. Access Mediquip L.L.C. v. UnitedHealthcare Ins.
Co., 662 F.3d 376, 378 (5th Cir. 2011). A plaintiff is not required to “negate
each element of an affirmative defense to succeed at the summary judgment
stage.” 	Occidental Petroleum Corp. v. Wells Fargo Bank, N.A., 117 F.4th
628, 643 (5th Cir. 2024) (internal citation omitted). Here, as to both waiver
and equitable estoppel, Merit fails to meet that bar.
53 	In Merit’s July 19, 2022, email to ANKOR, Merit’s representative Mr.
Hagge acknowledged receipt of the ANKOR bill. The specific date
between July 11 and 19 is unimportant because any of those days is
certainly less than 10-years from the date at which ANKOR filed suit.
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“Waiver occurs when there is an existing right, a knowledge of its
existence and an actual intention to relinquish it or conduct so inconsistent
with the intent to enforce the right as to induce a reasonable belief that it has
been relinquished.” Steptore v. Masco Const. Co., 643 So. 2d 1213, 1216 (La.
1994). 	The party claiming waiver must establish reliable proof of waiver.
FDIC v. Duffy, 47 F.3d 146, 150 (5th Cir. 1995) (citing Tate v. Charles
Aquillard Ins. & Real Est., Inc., 508 So. 2d 1371, 1375 (La. 1987)).
Merit argues that ANKOR’s pursuit of Black Elk and Northstar for the
decommissioning expenses for multiple years before seeking payment from
Merit constitutes waiver.54 Merit additionally argues that ANKOR’s pursuit,
and ultimate release, of Black Elk and Northstar impaired Merit’s ability to
protect its own rights.55 	ANKOR argues that its prior failed attempts to
recover from Black Elk and Northstar were consistent with its right to pursue
any solidary obligor for the debt.56 ANKOR further argues that this conduct
is not “so inconsistent with the intent to enforce” its rights as to induce a
reasonable belief it had waived them.57 	ANKOR is correct. 	Pursuing one
obligor for a debt is not “so inconsistent” with the intent to pursue another
54 	R. Doc. 38 at 13-14.
55 	Id.
56 	R. Doc. 43 at 4.
57 	Id.
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obligor for the very same debt, that it should induce a reasonable belief that
the obligee had waived that right. 	Cf. Amsouth Bank v. Sessions, 34 So. 3d
342, 344 (La. Ct. App. 5 Cir. 2010) (“Unless the obligation is extinguished,
an obligee may institute action against any of his solidary obligors even after
institution of action against another solidary obligor.”). Merit has failed to
provide any evidence showing that ANKOR intentionally relinquished its
right against Merit or that it acted so inconsistently with the intent to enforce
its right against Merit that it indeed relinquished that right. 	See Steptore,
643 So. 2d at 1216. Therefore, Merit’s defense must fail.
The doctrine of equitable estoppel is designed to prevent injustice by
barring a party from taking a position contrary to its prior acts, admissions,
representations, or silence. Bellsouth Advert. & Pub. Corp. v. Gassenberger,
565 So. 2d 1093, 1095 (La. Ct. App. 4 Cir. 1990). The elements of equitable
estoppel are: (1) representation by words or conduct; (2) justifiable reliance;
and (3) a change in position to one’s detriment because of such reliance.
Wilkinson v. Wilkinson, 323 So. 2d 120, 126 (La. 1975). 	Estoppel is not
favored.
Merit 	relies 	upon 	the 	same 	actions 	by 	ANKOR 	for 	its 	estoppel
argument as it does for waiver. 	As with waiver, Merit has not put forth
summary judgment evidence of a representation by ANKOR that it would not
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pursue Merit for decommissioning costs. Nor has Merit put forth summary
judgment evidence of how Merit “justifiably relied” on any such statement.
Because Merit has failed to offer such evidence, Merit’s defense must fail.
7. Substantial Breach by ANKOR
Finally, Merit next argues that ANKOR cannot recover for breach of
contract because ANKOR itself breached the contracts.58 	Here too Merit’s
arguments lack merit. Merit has confounded rights with obligations. Upon
assignment 	of 	its 	lease 	interests, 	Merit’s 	rights 	under 	the 	Operating
Agreements were extinguished. 	Lusher, 384 So. 2d at 591; Restatement
(Second) of Contracts § 317 (1981). Thus, ANKOR was not required to submit
Authority for Expenditures to Merit as outlined by Article V, seek or obtain
Merit’s approval for decommissioning AFEs, consult with Merit on matters,
or provide monthly billing to Merit, as Merit claims. 	These are all rights
provided in the Operating Agreements, not obligations. 	Those rights were
held by Merit’s assignees, not by Merit.
Moreover, for a breach by one party to justify the non-performance of
the other, it must be substantial. See LAD Servs. Of La., L.L.C. v. Superior
Derrick Servs., L.L.C., 167 So. 3d 746, 755-56 (La. Ct. App. 1 Cir. 2014)
(explaining 	that 	“not 	every 	breach 	excuses 	the 	other 	party 	from 	the
58 	R. Doc. 38 at 17-20.
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contract”). “A breach is substantial if it is an actual cause of the other party’s
‘failure to comply with its obligations.’” Alonso v. Westcoast Corp., 920 F.3d
878, 884 (5th Cir. 2019) (quoting LAD Servs., 167 So. 3d at 756-57). Merit
has provided no summary judgment evidence that if only it had received
monthly AFE and billing statements it would have paid its portion of the
decommissioning 	expenses. 	Merit’s 	argument 	that 	ANKOR 	first
substantially breached the Operating Agreements is therefore unsupported
and does not provide a bar to ANKOR’s own breach of contract claim.
***
Accordingly, because there is no genuine dispute of material fact as to
the 	satisfaction 	of 	all 	elements 	of 	the 	breach 	of 	contract 	claim, 	and
defendants have not produced summary judgment evidence on each element
on any affirmative defenses, the Court grants summary judgment for
plaintiffs and denies summary judgment for defendants on this claim.
B. Subrogation, 	Contribution, 	and 	Unjust 	Enrichment
Claims
It 	is 	not 	necessary 	to 	reach 	ANKOR’s 	claims 	for 	subrogation,
contribution, and unjust enrichment because the Court’s conclusion that
plaintiffs prevail on the breach of contract claim justifies the same relief to
plaintiffs.
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C. Quantum of Decommissioning Expenses Owed
ANKOR seeks a finding that the statements ANKOR issued to Merit
setting forth Merit’s share of decommissioning expenses are correct and
establish the amount owed by each Merit entity.59 	ANKOR points out that
the Operating Agreements provide two-years from the end of the calendar
year the bill was sent to make any objections, and that Merit made no such
objections.60 Therefore, ANKOR argues, the amounts allotted to each Merit
entity should be deemed “true and correct.”61
In support, ANKOR submits a declaration, along with supporting
documentation, that ANKOR sent written notice to Merit of Merit’s share of
the decommissioning expenses.62 	The declaration also states that Merit
never filed a written exception to the expenses identified and that the 24-
month period for Merit to contest the expenses has expired.63 	ANKOR
additionally submits the COPAS Accounting Procedure of the Operating
Agreements, which supports ANKOR’s assertion that Merit had 24-months
59 	See generally R. Doc. 35.
60 	Id.
61 	Id.
62 	R. Doc. 35-5 at ¶¶ 13-15; R. Doc. 35-8; R. Doc. 35-9.
63 	R. Doc. 35-5 at ¶ 19.
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to take written exception to the statements of expenses before they would
conclusively be presumed true and correct.64
ANKOR has satisfied its burden on summary judgment here. Exhibit
A to the Operating Agreements state:
[A]ll bills and statements rendered to Non-Operators by Operator
during any calendar year shall conclusively be presumed to be true and
correct after twenty-four (24) months following the end of any such
calendar year, unless within the said twenty-four (24) month period a
Non-Operator takes written exception thereto and makes claim on
Operator for adjustment.65
And ANKOR submits correspondence supporting its uncontested series of
events related to the Statements. 	Specifically, ANKOR issued the bills to
Merit on July 11, 2022.66 	Merit received the bills no later than July 19,
2022.67 Merit therefore had until December 31, 2024, to properly challenge
the expenses. 	Although Merit initially sought to audit the charges,68 Merit
abandoned the audit and never submitted a written exception. The time to
properly challenge the Statements has thus passed, and the Statements are
now deemed “true and correct.”
64 	R. Doc. 35-6 at 75; R. Doc. 35-7 at 66.
65 	R. Doc. 35-6 at 75; R. Doc. 35-7 at 66.
66 	R. Doc. 35-9.
67 	R. Doc. 35-10.
68 	Id.
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Merit does not address ANKOR’s showing that the Statements are now
“true and correct”; instead, Merit filed the same response to both motions
for partial summary judgment.69 Merit makes no attempt to dispute that (1)
ANKOR issued the Statements to Merit on July 11, 2022; (2) Merit received
the Statements; (3) Merit never “[took] written exception” to the Statements
or made a “claim on [ANKOR] for adjustment” before the end of the two-year
allotted period to do so; or (4) per the Operating Agreements, Merit had two
years from the end of 2022 to challenge the Statements before they “shall
conclusively be presumed to be true and correct.”70
Accordingly, the Court grants plaintiffs’ motion for partial summary
judgment as to the quantum of decommissioning expenses owed. 	Each
defendant’s share of expenses is correctly set forth in the Statements as
follows: 	$2,869,405.06 	attributable 	to 	Merit 	Management 	Partners;
$76,314.35 attributable to Merit Energy Partners III, L.P.; and $106,839.71
attributable to Merit Energy Partners D-III, L.P.
69 	Compare R. Doc. 39 with R. Doc. 38.
70 	R. Doc. 35-6 at 75; R. Doc. 35-7 at 66.
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IV. 	CONCLUSION
For the foregoing reasons the Court GRANTS IN PART plaintiffs’
partial motions for summary judgment and DENIES defendants’ motion for
summary judgment.
The Court GRANTS IN PART and DENIES IN PART plaintiffs’ partial
motion for summary judgment on liability. Plaintiffs’ motion is granted as
to the breach of contract claim. Because the Court need not reach plaintiffs’
claims for subrogation, contribution, and unjust enrichment, the Court
DISMISSES those claims WITHOUT PREJUDICE.
The Court GRANTS plaintiffs’ partial motion for summary judgment
on quantum of decommissioning expenses.
The Court DENIES defendants’ motion for summary judgment.
New Orleans, Louisiana, this 21st day of November, 2025.
_____________________
SARAH S. VANCE
UNITED STATES DISTRICT JUDGE
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