MOBIL OIL EXPLORATION & PRODUCING SOUTHEAST, INC. V. UNITED STATES 530 U.S. 604 (2000) CASE BRIEF

MOBIL OIL EXPLORATION & PRODUCING SOUTHEAST, INC. V. UNITED STATES

530 U.S. 604 (2000)

NATURE OF THE CASE: Mobile Oil (Ps) sought restitution of fees they paid because the United States (D) breached their contract. Ps appealed a reversal of a summary judgment given by the trial court.

FACTS: In return for up-front 'bonus' payments to D of about $156 million (plus annual rental payments), Ps received 10-year renewable lease contracts with the United States. D promised the companies, among other things, that they could explore for oil off the North Carolina coast and develop any oil that they found (subject to further royalty payments) provided that the companies received exploration and development permissions in accordance with various statutes and regulations to which the lease contracts were made 'subject.' A new law, the Outer Banks Protection Act (OBPA), came into effect. That law prohibited the Secretary of the Interior from approving any Exploration Plan or Development and Production Plan or to award any drilling permit until (a) a new OBPA-created Environmental Sciences Review Panel had reported to the Secretary, (b) the Secretary had certified to Congress that he had sufficient information to make these OCSLA-required approval decisions, and (c) Congress had been in session an additional 45 days, but (d) in no event could he issue an approval or permit for the next 13 months (until October 1991). 6003(c)(3). OBPA also required the Secretary, in his certification, to explain and justify in detail any differences between his own certified conclusions and the new Panel's recommendations. D withheld approval based on this new act and Ps joined a breach-of contract lawsuit brought in the Court of Federal Claims. On motions for summary judgment, the court found that the United States had broken its contractual promise to follow OCSLA's provisions, in particular the provision requiring Interior to approve an Exploration Plan that satisfied OCSLA's requirements within 30 days of its submission to Interior. The United States thereby repudiated the contracts. And that repudiation entitled the companies to restitution of the up-front cash 'bonus' payments they had made. A panel of the Court of Appeals for the Federal Circuit reversed. It held that D's refusal to consider the companies' final Exploration Plan was not the 'operative cause' of any failure to carry out the contracts' terms because the State's objection to the companies' CZMA 'consistency statement' would have prevented the companies from exploring regardless.

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