This case presents the question of the back-up responsibility of a mineral lessee for longshoremen's compensation for the employee of a drilling contractor. Donald Sketoe and the Office of Workers' Compensation Programs (the Director) appeal an adverse decision of the Benefits Review Board (BRB), holding that Exxon was not obligated to pay Sketoe's compensation benefits. Because of the difference between the contractual obligation of Sketoe's employer to Exxon and Exxon's obligation to its lessor, we affirm.

The United States Government executed an oil and gas lease of a tract off the Louisiana coast to Exxon. Exxon subsequently contracted with Dolphin Titan (DT) to drill on the tract. Sketoe was an employee of DT who worked on the Exxon-tract operation. In the course and scope of his employment, Sketoe injured his hand. DT's compensation carrier, Northumberland Insurance Co., paid Sketoe's compensation benefits until it became insolvent. Following Northumberland's bankruptcy, DT assumed payment of the benefits. Approximately one year later, DT also became insolvent. Sketoe then filed a claim against Exxon for payment of the benefits, alleging that section 904(a) of the Longshore and Harbor Workers' Compensation Act (LHWCA),1 required Exxon to cover for its "subcontractor," DT.

The first administrative law Judge (ALJ) to hear the case ruled that Exxon was liable under section 904(a) and the analysis found in Director v. National Van Lines, Inc.2 On appeal, the BRB reversed, holding that Chavers v. Exxon Corp.3 better conformed to the particular facts of the dispute. On remand, a different ALJ found that the evidence did not support Exxon's liability under the test in Chavers. Following another appeal, the BRB held that substantial evidence supported the second ALJ's Conclusion, and it affirmed.

We review an appeal from the BRB de novo and will affirm if the judgment of the ALJ is "supported by substantial evidence and consistent with the law."4 The Director urges that its construction of the LHWCA is entitled to deference. Both this court and the agency must give effect to the unambiguous language of the statute.5 Furthermore, we afford no special deference to agency litigation positions that are "'unsupported by regulations, rulings, or administrative practice.'"6 Because we have been presented with no administrative regulation, ruling, or other indication that the Director's position in this case is the product of agency deliberation and judgment, we reject the Director's contention.

LHWCA section 904(a) governs Exxon's potential liability for payment of Sketoe's compensation benefits. It states:Every employer shall be liable for and shall secure the payment to his employees of the compensation payable under sections 907, 908, and 909 of this title. In the case of an employer who is a subcontractor, only if such subcontractor fails to secure the payment of compensation shall the contractor be liable for and be required to secure the payment of compensation. . . .7

The injured employee claiming the benefits of section 904(a) against a "contractor" must have been employed by a "subcontractor." The only difficulty is understanding what Congress intended by its use of the word "contractor." We apply the term's ordinary meaning, informed by the intent of the legislature as it may be divined from the design of the Act.8 The term "contractor"

is strictly applicable to any person who enters into a contract, but is commonly reserved to designate one who, for a fixed price, undertakes to procure the performance of works or services on a large scale, or the furnishing of goods in large quantities, whether for the public or a company or individual. Such are generally classified as general contractors (responsible for entire job) and sub-contractors (responsible for only portion of job; e.g., plumber, carpenter).9

In light of Congress's choice of the coordinate term, "subcontractor," construing the statute to require a "general contractor" accords with the common understanding of "contractor." It also conforms to the purposes of the provision, which is aimed at deterring "unscrupulous employers from dividing their work among a number of smaller, uninsured entities" and which encourages general employers to contract with adequately insured subcontractors.10 At the same time, it preserves the distinction between "contractors" and owners of property.11 We hold therefore that section 904(a) premises liability on a finding that the principal is subject to some contractual obligation, which it, in turn, passed in whole or in part to the subcontractor. To attach liability to Exxon for compensation benefits via the statute, therefore, Exxon must have been subject to the same contractual obligation that DT contracted with Exxon to perform. For convenience, this may be referred to as a "two contract" requirement.

The District of Columbia Circuit has considered the application of section 904(a).12 That court's interpretation of the statutory language supports our own. It formulated the required relationship between the parties as such:

A general employer will be held secondarily liable for workmen's compensation when the injured employee was engaged in work either that is a subcontracted fraction of a larger project or that is normally conducted by the general employer's own employees rather than by independent contractors.13

The essential feature is that the injured claimant must have worked pursuant to a double set of contractual obligations.14 As support, National Van Lines cited an Alaska state decision under a statute substantially identical to section 904(a), whichalso required a two contract relationship. That case provided that the relationship is satisfied only when there is "(1) the existence of a contractual obligation on the part of a person held to be a contractor, and (2) a subletting of a part of that obligation to the person held to be a subcontractor."15 Importantly, National Van Lines also acknowledged that, if the principal employer owes no contractual duty related to the services of the subcontractor, liability for benefits does not attach. In a footnote, the opinion described the paradigmatic case as one where "a property owner contracts with a contractor for services to the property."16 The National-Eureka contract was not an "owner" case because National had contracted with third-party clients and delegated its duty to perform those services to Eureka.

The BRB has long been cognizant of the distinction between owners and general contractors for purposes of section 904(a) coverage. In Dailey v. Troth,17 Dailey worked as a carpenter's helper for EHT Construction Co., which had entered into an oral agreement with Starlit to perform carpentry work on two properties Starlit owned. In the course of this employment, Dailey was shot and injured by an intruder. The ALJ held both EHT and Starlit jointly liable for compensation payments under section 904(a). Neither EHT or Starlit was insured for such liability, and Starlit appealed. The BRB reversed, noting that:

[i]n contrast to the National Van Lines situation, here Starlit had not been contractually obligated to perform the duties which claimant was executing at the time of his injury; the work performed by [EHT] and claimant thus did not constitute "a subcontracted fraction of a larger project."18

In the present case, the BRB reversed the first ALJ's determination that National Van Lines stated the appropriate test for liability under section 904(a), replacing it with the test announced in Chavers. We hold that neither case announces a "test" for application of the statute, for the language of the statute is plain as written. Whether a case fits the provision must be decided on its particular facts. Chavers was decided under Louisiana's statutory employer law, a state workers' compensation provision that is significantly different from the federal statute we consider today. In Chavers we expressly noted that "[t]he statutory language vital to the current inquiry is found in the phrase: 'part of his trade, business or occupation.'"19 Section 904(a) of the LHWCA contains no such language. The BRB erred when it held that Chavers stated an appropriate benchmark for Exxon's liability for LHWCA compensation.

The LHWCA distinguishes between employers who are owners and those who are general contractors working under contractual obligations to others. If, and only if, we determine that Exxon delegated "the performance of portions of its contractual obligations" to DT -- as was the case between National and Eureka, but not Starlit and EHT -- then the section 904(a) relationship was formed and Exxon is statutorily liable for Sketoe's workers' compensation payments.20 Otherwise, section 904(a) does not apply. Because Sketoe was the employee of a drilling contractor, the determination depends upon the nature of the drilling obligations that Exxon owed to the United States, the oil and gas lessor.

We consider this offshore oil and gas lease in light of Louisiana minerallaw.21 Louisiana's codal law differs considerably from the common law of estate and future interests that dominates the law of property ownership in most oil-producing jurisdictions.22 Louisiana presently maintains a specialized Mineral Code in addition to its Civil Code. Only if the Mineral Code does not directly or by implication resolve the issue before us may we look to the principles embodied in the Civil Code or to other cases for guidance.23

In Louisiana, ownership confers direct, immediate, and exclusive authority over a thing.24 Because Louisiana is a non-ownership in place jurisdiction, the owner of land does not own subsurface minerals outright, but only "the exclusive right to explore and develop his property for the production of such minerals and to reduce them to possession and ownership."25 That exclusive right may be conveyed to another through execution of a mineral lease.26

The Louisiana mineral lease includes features that are characteristic of both contracts and rights in property.27 For instance, we interpret the terms of the lease agreement as we would any other lease.28 Indeed, the lease itself is a "contract."29 As such, it does not create an unlimited mineral servitude, and Louisiana's liberative prescription for ten years nonuse therefore does not apply.30 On the other hand, as an "incorporeal immovable"a mineral lease carries "real rights" and is "subject to the laws of registry."31 Strictly speaking, the mineral lease creates a kind of servitude called a "limited personal servitude."32 "Limited personal servitudes are real rights that confer on a person limited advantages of use or enjoyment over an immovable[, i.e., realty,] belonging to another person."33 Because mineral leases establish real rights, the authority to create a mineral lease is limited to possessors of executive rights in the mineral property.34 Similarly, the lessor impliedly warrants title to the realty when subjecting it to a mineral lease.35

The extent to which a Louisiana mineral lease creates contractual or property rights and obligations has been the subject of long debate among the legislature, the courts, and the "oil fraternity."36 We will not disturb the current resolution; in fact, we are bound to adhere to the last authoritative word in the state. Our question, however, is not what the lease may be called or what tools we may employ to interpret its terms, but rather, whether the nature of the obligation to drill fits within the meaning and purpose of the federal statute. As to that, we agree with the commentary accompanying article 16 of the Mineral Code:

It is desirable to recognize that the combined substance of the patchwork of existing jurisprudence and statutes together with the functional realities of the mineral leasing transaction make it clear that though the mineral lease is a hybrid institution, it is a real right and should be recognized as such. . . . All things considered, the lease has the major characteristics of a real right: the mineral lessee may follow the land, regardless of transfers of ownership; the mineral lessee may assert his rights against the world just as the proprietor of any other real right; he may enjoy directly and draw from the land a part of its economic advantages by appropriating a wasting asset; he has certain rights of preference; and he holds a right that is in reality susceptible of a type of possession through exercise.37

We believe that the obligations to drill found in the present lease arrangement -- namely, express obligations in the primary term and for protection from drainage, and implied otherwise in the various obligations of prudent operation -- are best said to be correlative and incidental of the real rights transferred by it, namely, the exclusive power to prospect for, produce, and take possession of oil and gas.38 It is pertinent to this decision that the lessee may abandon its exclusive right and, thus, its duty to drill, and that the lessor's remedy for the lessee's failure to drill is cancellation of the lease.39 This is so because the duty to drill flows directly from the real rights created by the lease agreement.40We hold that such an obligation is not the kind that would make the lessee a general contractor so that the drilling contractor may be considered a "subcontractor" within the meaning of the LHWCA.

Sketoe and the Director assert that the Fifth Circuit has previously decided the question. In Nations v. Sun Oil Co. (Del.), the issue was whether Sun Oil was "a contractor and . . . Mississippi Welding a subcontractor . . . so as to make Nations a statutory employee of Sun Oil" under Mississippi's statutory employer law.41 We recognized the "two contract" nature of that statute, stating: "a subcontractor is one who enters into a contract, express or implied, for performance of an act with a person who has already contracted for its performance, or who takes a portion of a contract from the principal or prime contractor."42 We noted that the record was not developed as to Sun Oil's relationship to the property, and remanded for determination of whether Sun Oil was the lessee and whether Mississippi Welding was a subcontractor.43 Before remanding, we provided the following Discussion of the issue:

Prior to oral argument, Sun Oil asserted in this court that it was the lessee of the mineral rights at the site. If this statement is corroborated or conceded, that may be sufficient to make Mississippi Welding a subcontractor, for the lease of mineral rights carries an implied covenant that the lessee will exercise the duty of a prudent operator to develop leased minerals. If Sun Oil undertook this duty then the contract between Sun Oil and Mississippi Welding would be a subcontract in which Mississippi Welding contracted to perform a portion of the activity Sun Oil was already contractually obligated to perform.44

Nations does not control this case. The lease was not available in the record, and the statement was advisory and gratuitous. The Mississippi Supreme Court has subsequently ruled in a manner that is directly contrary to the reasoning expressed in Nations. In Nash v. Damson Oil Corp.,45 it addressed a case similar on its facts to Nations. The defendant, Damson, was the lessee of a producing oil unit.46 Damson entered into a service contract with Trigger Contractors for Trigger to perform certain work with respect to oil and gas wells, in addition to other services Damson might require until the contract was canceled.47 Nash, Trigger's employee, was injured while installing a hook up and a flow line with a check valve on a Damson oil well.48 Nash collected compensation from Trigger and its insurer, but filed a tort claim against the lessee, Damson.49 Damson raised the exclusive remedy defense, asserting that it was a statutory employer under the state statutory equivalent to LHWCA section 904(a).50 The trial court granted Damson summary judgment on that theory. The supreme court stated the issue as such: "If Damson Oil Corporation is a 'contractor' who is an 'employer' . . . , Damson wins. On the other hand, if Damson is not a 'contractor' and thus not astatutory employer, Nash is entitled to proceed further in the trial court."51 The language of the statutory employer provision is almost identical to section 904(a), especially regarding the use of the terms "contractor" and "subcontractor." The Nash court noted that in Doubleday v. Boyd Constr. Co.,52 the principal Mississippi case responsible for construing the statutory employer provision and upon which Nations relied, the general contractor "had no ownership interest in the premises. Moreover, the contractor in Doubleday occupied the position persons of common understanding would label general contractor or prime contractor."53 Thus, the defendant in Doubleday was the "kind of 'contractor' contemplated by the statute."54 Nash compared that situation with the circumstances in Falls v. Mississippi Power & Light Co.55 In Falls, MP&L was a permittee under a special use permit granted by the National Park Service allowing it to run power lines across certain public land, and the permit imposed special conditions upon MP&L.56 The plaintiff's decedent was employed by a company that MP&L had hired to cut back the pines around the power lines. The Falls court distinguished Doubleday, holding that the special use permit "did not constitute [MP&L] as a general or prime contractor for work to be done . . . along the right-of way . . . pursuant to [the] contract" between MP&L and the trimming company.57 Nash noted the difficulty of interpreting the operative language of Mississippi's statute, which, like the LHWCA, does not define "contractor" or "subcontractor."58 It then held that Damson, as an oil and gas lessee, did not satisfy the two contracts requirement:

Without question Damson is a contractor in a generic sense. Damson has a contractual relationship with the owners of the land imposing various duties and obligations upon each. Damson is also a contractor in the sense that it has a contract with Trigger imposing obligations and duties upon each. The operative point is that Damson's interest, use and activities with respect to the premises are wholly different in nature from those of one ordinarily considered a general or prime contractor--the sort of contractor we believe contemplated by Doubleday. Damson's position with respect to the premises is similar to that of [MP&L] in Falls and unlike that of [the subcontractor] in Doubleday. Damson is an operator or even in a sense an owner pro hac vice, a lessee. On the other hand, Damson lies outside the common understanding of such terms as "prime contractor" or "general contractor". Therefore, Damson is not the sort of "contractor" within the meaning and contemplation of [the MWCA].59

In a footnote immediately following this statement, the court recognized that "[i]n briefs and at argument, the parties have discussed the case of Nations v. Sun Oil Co. We trust it will be apparent that anything in Nations contrary to our decision today should be considered with care."60 In a concurrence, four Justices further clarified that the basis of Nash's distinction of Falls and Doubleday was the two contract theory and the requirement of a prime or general contractor, which was not satisfied by the obligations, implied or express, of an oil and gas lessee.61 Thisfurther bolsters our present Conclusion about the status of a Louisiana mineral lessee under the LHWCA's two contract requirement.

The holding of a previous panel will bind this panel unless the pronouncements are merely dictum or are pretermitted by "a clearly contrary subsequent holding of the highest court of the state."62 As both are true of the squib from Nations, we are not bound by it.

Our decision in Pure Oil Co. v. Snipes,63 however, provides an appropriate source for guidance. Like Exxon, Pure Oil owned and operated a drilling platform off the coast of Louisiana.64 The plaintiff, Snipes, was an employee of Loffland, an independent drilling contractor.65 Loffland had undertaken to drill two wells for Pure Oil on the platform.66 While engaged in this employment, Snipes fell from the platform and severely injured himself.67 The question before the court was what limitations period, federal or state, controlled the prescription of Snipe's negligence claim against the platform owner, Pure Oil.68 In the course of our decision, we noted that the exclusive remedy provision of the LHWCA did not apply to bar Snipe's tort suit against Pure Oil.69 The LHWCA quid pro quo mandates that section 905 will limit tort liability only for those parties subject to the application of section 904(a)'s liability for payment of compensation benefits.70 Our Conclusion that section 905 did not "operate for the benefit of anyone else and certainly not for a third party" like Pure Oil supports our determination today that Exxon is not liable for payment of compensation benefits to Sketoe under section 904(a).71

The only Louisiana case applying a two contract statutory employer provision to an oil and gas lessee is equivocal about the nature of the drilling obligation. In a tort suit brought by an injured drilling worker against the oil and gas lessee, the court of appeal held that the lessee was not a statutory employer for summary judgment purposes.72 Louisiana Land and Exploration Co. (LLEC) was the oil and gas lessee, and Burleigh was an employee of Goldrus Drilling Co., with whom LLEC had contracted to perform drilling services. At summary judgment, LLEC interposed the exclusive remedy provision of the workers' compensation statute as a defense to the injured employee's tort claim.73 The court first noted that the exclusive remedy defense applied only in the "two contracts" situation -- i.e., when "the principal has contracted to perform some work for a third party and then contracts out all or part of the work to a subcontractor-employer."74 Like the Director and Sketoe in the present appeal, LLEC argued that, "as mineral lessee, it has a contract withthe owners of the land to develop leased minerals, and in furtherance of that contract with the lessors, it subcontracted [the well] to Burleigh's employer."75 LLEC cited Nations in support of this argument. The Louisiana court of appeal disagreed, holding that "there is no summary judgment evidence of a general contract between the lessors of the mineral interests and Louisiana Land, as lessee, to perform specific work at the time Louisiana Land subcontracted with Goldrus."76 Although this state court opinion supports our view to some extent, it does not hold outright that the drilling obligation under an oil and gas lease can never be considered a "contractual" obligation in the two contracts context; rather, it merely holds that summary judgment was premature when the lease was not even in the summary judgment record.77

In sum, we conclude that Exxon is most appropriately considered as the owner of a real right, with a duty that was correlative and incidental of that real right, when it engaged the drilling services of DT. It was not a general contractor passing its own purely contractual obligation to its subcontractor. For this reason, Exxon is not liable under section 904(a).

AFFIRMED.

Convinced that Exxon is a "contractor" under §§ 904(a) and is thus liable for Sketoe's injury, I must respectfully Dissent.

I agree with the majority's framing of the issue for "two contract" liability under §§ 904--that a contractually obligated principal contracts with a subcontractor to perform all or part of the required duties. I also agree that the BRB unnecessarily muddled the statutory language by applying the Louisiana workers' compensation law found in Chavers v. Exxon Corp.1

I differ with the majority, however, in its decision that Exxon was not contractually obligated with the United States when it leased the offshore property. First, Exxon was contractually obligated to perform drilling activities under its lease with the Department of the Interior if it wished to retain the lease. Section three of the lease, entitled "Obligations of Lessees," states that Exxon is required to pay a delay rental every year to the United States prior to the production of oil or gas.2 The lease was for a period of five years, or so long as oil or gas is produced in paying quantities. Thus, the lease would be terminated if oil or gas was not produced in paying quantities during and after this five-year period.

Exxon also was contractually obligated to drill because of Louisiana Mineral Code provisions specifically requiring a mineral lessee to develop leased property as a reasonably prudent operator for the mutual benefit of both parties. Section 122 of the Louisiana Mineral Code, La. Rev. Stat. §§ 31:122, is entitled "Lessee's obligation to act as reasonably prudent operator" and reads as follows:

A mineral lessee is not under a fiduciary obligation to his lessor, but he is bound to perform the contract in good faith and to develop and operate the property leased as a reasonably prudent operator for the mutual benefit of himself and his lessor. Parties may stipulate what shall constitute reasonably prudent conduct on the part of the lessee.

The comments under this article, which are there to aid the understanding and application of the article, are particularlyhelpful in resolution of Exxon's obligation under the mineral lease at bar. These comments detail how the doctrine of implied covenants under common law is found under the Civil Code, directing one through article 2710 requiring a lessee to be a "good administrator"3 and noting the jurisprudence in the mineral field translating this into a "reasonable, prudent operator."4

The comments continue with a listing of the four obligations of a prudent operator: (1) the obligation to develop known mineral producing formations; (2) the obligation to explore and test all portions of the leased premises after discovery of minerals in paying quantities; (3) the obligation to protect the leased property against drainage by wells located on neighboring property; and (4) the obligation to produce and market minerals discovered in paying quantities. Each of the four obligations is posited in the setting of a "reasonable, prudent operator."

By relegating these duties to be mere incidents of ownership, the majority ignores both the explicit obligations under Exxon's contract, as well as the implicit obligations as a reasonably prudent operator under the Louisiana Mineral Code and interpretive jurisprudence. It is a simple fact that Exxon had contractual duties that it in turn passed on to Dolphin Titan. This is all that §§ 904(a) requires.

The majority's position also contravenes the purpose underlying contractor liability in §§ 904(a). The purpose of this section is to protect injured employees engaged in a common enterprise from the irresponsible failure of their immediate employer to insure. By imposing secondary liability on the general employer or contractor, the provision deters unscrupulous employers from dividing their work among a number of smaller, uninsured entities, and creates an incentive for the general employer to insist that his subcontractors be adequately insured.5

My Conclusion that Exxon is a "contractor" fulfills these purposes. Exxon is in a superior bargaining position to ensure that its subcontractors carry the requisite authorized insurance. Its failure to assure that Dolphin Titan had authorized insurance is at the essential core of the current dispute. The policies underlying secondary contractor liability fully warrant placement of liability upon Exxon.

Because Exxon is contractually obligated to drill and in turn contracted with Dolphin Titan to perform that drilling on its behalf, I would conclude that Exxon is a "contractor" responsible for compensation under §§ 904(a) and that the Benefits Review Board erred in denying Sketoe's claim against Exxon. Accordingly, I must respectfully Dissent.