Baby Oil, Inc. v. United States
Baby Oil, Inc. v. United States
Opinion of the Court
ORDER AND REASONS
Plaintiff, Baby Oil, Inc. (“Baby Oil”), asks the Court to set aside the decision of the National Pollution Funds Center denying its claim for reimbursement. Defendant, the United States of America, asks the Court to uphold the decision. Both parties have moved for summary judgment.
I. BACKGROUND
An unidentified vessel struck Baby Oil’s wellhead #67/67D (“the well”) in Lake Bully Camp, Lafourche Parish, Louisiana on September 17, 2008.
A. THE OIL SPILL
On September 17, 2008, at approximately 5:45 p.m., an unidentified vessel struck Baby Oil’s well.
Baby Oil reported the spill to the Coast Guard National Response Center and began cleanup operations.
B. THE OIL POLLUTION ACT
The Oil Pollution Act of 1990 (“OPA”) imposes strict liability on “each responsible party for a vessel or a facility from which oil is discharged” to pay for the “removal costs and damages ... that result from such incident.” 33 U.S.C. § 2702(a). The OPA also authorizes the use of the Oil Spill Liability Trust Fund, which is administered by the NPFC.
Under the OPA, a responsible party may make claims for removal costs and damages against the Oil Spill Liability Trust Fund only if it demonstrates that it is entitled to a defense to liability under § 2703. Id. § 2708(a)(1). Section 2703 provides a responsible party with a complete defense to liability if it establishes, by a preponderance of the evidence, that the discharge was caused “solely by” an “act or omission of a third party.” Id. § 2703(a)(3). To qualify for this defense, the responsible party must establish: (1) that it “exercised due care with respect to the oil concerned, taking into consideration the characteristics of the oil and in light of all relevant facts and circumstances,” and (2) that it “took precautions against foreseeable acts or omissions of any such third party and the foreseeable consequences of those acts or omissions.” Id.
On April 1, 2009, Baby Oil filed a claim with the NPFC asserting that the spill was caused solely by a third party. Baby Oil’s insurer, St. Paul Surplus Lines Insurance
C. THE NPFC DECISION
The NPFC rejected Baby Oil and St. Paul’s claim on May 13, 2010.
11. STANDARD OF REVIEW
When reviewing agency action, “the district court sits as an appellate tribunal.” Univ. Med. Ctr. of S. Nev. v. Shalala, 173 F.3d 438, 440 n. 3 (D.C.Cir. 1999) (citing Marshall Cnty. Health Care Auth. v. Shalala, 988 F.2d 1221, 1225-26 (D.C.Cir. 1993)). Under the Administrative Procedure Act, a district court may set aside an agency’s ruling “only if it is arbitrary, capricious, an abuse of discretion, not in accordance with law, or unsupported by substantial evidence on the record taken as a whole.” Tex. Clinical Labs, Inc. v. Sebelius, 612 F.3d 771, 775 (5th Cir. 2010) (quoting Sun Towers, Inc. v. Schweiker (Sun Towers I), 694 F.2d 1036, 1038 (5th Cir. 1983)); 5 U.S.C. § 706(2). The Supreme Court recently explained that under this “ ‘narrow’ standard of review, we insist that an agency examine the relevant data and articulate a satisfactory explanation for its action.” FCC v. Fox Television Stations, Inc., 556 U.S. 502, 513-14, 129 S.Ct. 1800, 173 L.Ed.2d 738 (2009) (internal quotation marks omitted)(citing Motor Vehicle Mfrs. Ass’n of United States, Inc. v. State Farm Mut. Auto. Ins. Co., 463 U.S. 29, 43, 103 S.Ct. 2856, 77 L.Ed.2d 443 (1983)).
The reviewing court’s role “is not to weigh the evidence pro and con but to determine whether the agency decision ‘was based on a consideration of the relevant factors and whether there was a clear error of judgment.’ ” Delta Found. v. United States, 303 F.3d 551, 563 (5th Cir. 2002) (quoting Motor Vehicle Mfrs. Ass’n, 463 U.S. at 43, 103 S.Ct. 2856). The court reviews an agency’s factual findings to determine only “whether they are supported by substantial evidence.” Buffalo Marine Servs. Inc. v. United States, 663 F.3d 750,
The court “starts from ‘a presumption that the agency’s decision is valid, and the plaintiff has the burden to overcome that presumption by showing that the decision was erroneous.’” Buffalo Marine, 663 F.3d at 753 (quoting Tex. Clinical Labs, 612 F.3d at 775). As explained below, Baby Oil has not met this burden.
III. DISCUSSION
The question presented is whether it was arbitrary or capricious for the NPFC to decide that Baby Oil failed to exercise due care and failed to take precautions against the foreseeable acts of a third party under § 2703(a)(3). The NPFC based its decision on Baby Oil’s failure to equip the well with a storm choke. The NPFC also noted that the well did not have navigation-aid lights to alert vessels to its location. The Court finds that the NPFC’s decision was not arbitrary or capricious. 5 U.S.C. § 706(2). The NPFC weighed the relevant factors, and its decision is supported by the evidence in the record. Tex. Oil & Gas Ass’n v. EPA 161 F.3d 923, 933-34 (5th Cir. 1998).
A. THE NPFC DID NOT ERR IN CONCLUDING THAT DUE CARE REQUIRED BABY OIL TO EQUIP THE WELL WITH A STORM CHOKE
A storm choke, also known as a subsurface safety valve, is designed to prevent the unauthorized discharge of oil. It is undisputed that Baby Oil did not equip the well with a storm choke.
1. Louisiana regulations required Baby Oil to install a storm choke.
As the NPFC noted, Louisiana Statewide Order 29-B-a “requires storm chokes on wells where the surface pressure on the well is greater than 100 psi.”
This argument runs contrary to the words of the statute and Baby Oil’s previous representations. The regulation does not require the well to be located in a navigation channel, and Baby Oil does not argue that only navigation channels can be bodies of water that are “actively navigated.” Id. § 1103(A)(2). Nor does Baby Oil demonstrate that vessels were restricted to the channel. See, e.g., Am. Dredging Co. v. Calmar S.S. Corp., 121 F.Supp. 255, 1954 AMC 1211 (E.D.Pa. 1954) (“I know of no rule of law which limits the navigation of a vessel to a ship channel.” (citing The Oliver, 22 F. 848 (E.D.Va. 1885))). The record demonstrates that the well was located in an actively navigated body of water. Baby Oil’s own description of the well to the NPFC explained: “The wellhead was located approximately 300ft north of the local navigational channel. This channel was well traveled because it is the only available passage for larger vessels in the area.”
Baby Oil also emphasizes that two months before the accident, the LA DNR inspected the well and that the well passed inspection.
Even assuming that Baby Oil was not required by statute or regulation to install a storm choke, the NPFC’s decision that due care required Baby Oil to install a storm choke was still proper. A statute or regulation can set the minimum requirements for due care, and a party’s statutory violation may establish negligence per se. A party’s full compliance with statutes and regulations, however, does not automatically establish that it was acting with due care. In short, evidence of statutory compliance does not provide Baby Oil with a perfect shield. Instead, whether a party has exercised due care “tak[es] into consideration the characteristics of the oil” and “all relevant facts and circumstances.” 33 U.S.C. § 2703(a)(3)(A); see Tidewater Marine, Inc. v. Sanco Intern., 113 F.Supp.2d 987, 998 (E.D.La. 2000) (“A duty of care may be derived not only from statutory standards, but also from the dictates of reasonableness and prudence under the given circumstances of a case.” (citing Coumou v. United States, 107 F.3d 290, 295-96 (5th Cir. 1997), withdrawn and superseded in part on reh’g by Coumou v. United States, 114 F.3d 64 (5th Cir. 1997))).
On this point, the NPFC noted that even if Baby Oil received a waiver of the storm-choke requirement, it might still not qualify for the third-party defense.
The NPFC properly reasoned that the relevant facts and circumstances required that Baby Oil equip the well with a storm choke in order to exercise due care. The well was located 300 feet north of a “well traveled” channel that was the “only available passage for larger vessels in the area.”
Baby Oil improperly relies on Plantation Pipeline, Company v. The Oil Spill Liability Trust Fund, 1998 U.S. Dist. LEXIS 23671 (N.D.Ga. 1998), for the proposition that it is arbitrary and capricious to find that a responsible party did not exercise due care “although [the party] complied with industry standards, [but] had nonetheless failed to prevent the spill.”
The NPFC’s decision was not arbitrary or capricious because it examined the relevant data, articulated a satisfactory explanation for its action, and provided a rational connection between the facts found and the choice made. See Bean Dredging, LLC v. United States, 773 F.Supp.2d 63, 73 (D.D.C. 2011) (quoting PPL Wallingford Energy LLC v. Fed. Energy Regulatory Comm’n, 419 F.3d 1194, 1198 (D.C.Cir. 2005); Intl’ Union, United Mine Workers of Am. v. Mine Safety & Health Admin., 626 F.3d 84, 90 (D.C.Cir. 2010)).
B. THE NPFC DID NOT ERR BY CRITICIZING BABY OIL FOR NOT EQUIPPING ITS WELL WITH LIGHTS
The NPFC also noted that Baby Oil failed to equip the well with lights to warn vessels of the presence of the well.
The parties again dispute whether Baby Oil was required to provide lighting by statute or regulation. The NPFC did not claim that Baby Oil violated any statute or regulation by failing to provide the lights, but the United States now argues that federal regulations required the well to be equipped with lights. See Serigne v. Cox Operating, L.L.C., No. 06-5861, 2008 WL 4003117, at *3-4 (E.D.La. Aug. 26, 2008) (noting that “Courts have routinely held that [33 C.F.R. §§ 66-67] create[s] a statutory duty to install lights, reflective matter, and maintain private aids to navigation on the owner”). Although Baby Oil does not dispute that federal regulations required it to equip the well with lights, the
Baby Oil argues that the accident occurred during the daylight hours of September 17, 2008, and that the lights would have done nothing to prevent the incident. This argument is unpersuasive. The NPFC found that the allision occurred at approximately 5:45 p.m.,
C. THE NPFC DOES NOT REQUIRE AN IMPOSSIBLE STANDARD OF CARE
Baby Oil’s last argument is that the NPFC decision is arbitrary and capricious because even if Baby Oil had taken the precautions referenced in the Reconsideration Determination, the Reconsideration Determination suggests that such actions would not necessarily have prevented the accident. Baby Oil relies on the NPFC’s statement that “[i]f the well had been equipped with a storm choke the storm choke should have prevented the discharge of oil.”
Baby Oil’s argument does not make much sense. The OPA’s third-party defense exists because sometimes, even when the responsible party exercises due care, third parties cause spills. In these narrow circumstances, the OPA provides responsible parties with a defense to liability. If “due care” meant “fail-safe” there would be no need for a third-party defense because there would be no class of responsible parties who exercised due care and had an oil spill. Accordingly, that the NPFC stated that a storm choke should have, instead of “would have,” prevented the spill has no bearing on its determination that a storm choke was required due care.
Accordingly, the NPFC was not arbitrary or capricious when it found that Baby Oil’s failure to equip the well with a storm choke was a failure of due care under these circumstances. Its decision that Baby Oil is not entitled to a third-party defense under § 2703(a)(3) is supported by the record and is upheld.
IV. CONCLUSION
The Court concludes that the agency’s decision in this case is rationally based on the evidence in the record and was not in any way arbitrary or capricious or otherwise in violation of the Administrative Procedure Act. Baby Oil’s motion for summary judgment is DENIED. The United States’ motion for summary judgment is GRANTED. Plaintiffs’ claims are dismissed.
. R. Docs. 15, 18.
. Admin. R. 000001, 000853.
. Admin. R. 000853.
. Baby Oil filed an amended complaint on March 6, 2013, including its insurer, Saint Paul Surplus Lines Insurance Company, as an additional plaintiff in this case. R. Doc. 28.
. Admin. R. 000853. The parties are unable to pinpoint exactly when the allision occurred. Admin. R. 001008. A flyby of the well at 2:00 p.m. did not reveal a spill, Admin. R. 000998, and an expert report asserts that fishermen noticed the spill at approximately 6:00 p.m. Id. Yet, Baby Oil initially reported that the unidentified vessel struck the well at 7:30 p.m. Admin. R. 000001, 000003. Consistent with the evidence in the record, the NPFC found that the vessel struck the well at approximately 5:45 p.m.
. Admin. R. 000586.
. Admin. R. 000853.
. Admin. R. 000041.
. Admin. R. 001044.
. Admin. R. 000808.
. Admin. R. 000738-39.
. Admin. R. 000853.
. Admin. R. 000857.
. Admin. R. 000856.
. Id.
. Admin. R. 000856.
. Admin. R. 000872-73.
. Admin. R. 001005-10.
. R. Doc. 21-1 at 2-3.
. Admin. R. 001009.
. Admin. R. 001009.
. R. Doc. 15-1 at 18.
. Admin. R. 001009.
. R. Doc. 21 at 9.
. Admin. R. 000004. It is unclear how far outside the channel the well was located, and how well the channel was marked. Admin. R. 001008. The record suggests that the well was located anywhere from 100 to 300 feet outside the channel. Id.
. R. Doc. 15-3 at 2; R. Doc. 21-1 at 2.
. That the well was struck by a vessel also suggests that the waters were actively navigated.
. Admin. R. 000003.
. Admin. R. 000038-39.
. Admin. R. 000041.
. Admin. R. 001009 n. 15.
. Admin. R. 000004.
. R. Doc. 21 at 12.
. Admin. R. 000041.
. Admin. R. 000856.
. Admin. R. 001007; Admin. R. 000856 (NPFC’s original denial noting: "Failure to install a subsurface valve or storm choke device that could shut in a well in the event of a surface disaster when that well is located near a highly traveled navigation channel and in, or adjacent to, a wildlife management area does not evidence due care”).
. Admin. R. 001006-10.
. Admin. R. 000853.
. See supra note 5.
. Admin. R. 001009 (emphasis added).
Reference
- Full Case Name
- BABY OIL, INC. v. United States
- Status
- Published