A Wyoming oil exploration company may not avail itself to Texas law to evade liability for injuries to one of its contractor’s employees, a panel of the US 5th Circuit Court of Appeals decided.
Cannon Oil and Gas Well Services’ lease agreement with KLX Energy Services required each company to indemnify the other if any employees were injured by the drilling equipment that KLX rented to Cannon, regardless of fault. But Wyoming law forbids oilfield indemnity agreements because of concern that they remove an incentive for drillers to be mindful of workplace safety.
The 5th Circuit ruled Friday that because Cannon operates solely in Wyoming, the provision in its contract with KLX that says Texas law governs is not valid.
“The underlying state court proceeding—in which a Wyoming resident was injured in Wyoming by the alleged negligence of a Wyoming oil company—implicates Wyoming’s policy with precision,” the opinion says. “Enforcing the indemnity provision would discourage what Wyoming hopes to encourage—Cannon’s taking steps to avoid injuries in its oilfield operations.”
The contract dispute stems from a December 2017 accident that injured KLX employee Joshua Batchelor while he was conducting a pressure test on an oil well owned by Cannon in Carbon County, Wyoming. Bactchelor and his wife filed a lawsuit against Cannon in Wyoming state court.
Cannon, relying on its contract with KLX, called on the Houston-based company to indemnify it. The two companies had both purchased at...
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