Mobil Oil Exploration & Producing Southeast, Inc. v. United States

530 U.S. 604, 120 S. Ct. 2423, 147 L. Ed. 2d 528, 2000 U.S. LEXIS 4306
CourtSupreme Court of the United States
DecidedJune 26, 2000
Docket99-244
StatusPublished
Cited by174 cases

This text of 530 U.S. 604 (Mobil Oil Exploration & Producing Southeast, Inc. v. United States) is published on Counsel Stack Legal Research, covering Supreme Court of the United States primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Mobil Oil Exploration & Producing Southeast, Inc. v. United States, 530 U.S. 604, 120 S. Ct. 2423, 147 L. Ed. 2d 528, 2000 U.S. LEXIS 4306 (2000).

Opinions

Justice Breyer

delivered the opinion of the Court.

Two oil companies, petitioners here, seek restitution of $156 million they paid the Government in return for lease contracts giving them rights to explore for and develop oil off the North Carolina coast. The rights were not absolute, but were conditioned on the companies’ obtaining a set of further governmental permissions. The companies claim that the Government repudiated the contracts when it denied them certain elements of the permission-seeking opportunities that the contracts had promised. We agree that the Government broke its promise; it repudiated the contracts; and it must give the companies their money back.

> — i

A

A description at the outset of the few basic contract law principles applicable to this action will help the reader understand the significance of the complex factual circumstances that follow. “When the United States enters into contract relations, its rights and duties therein are governed generally by the law applicable to contracts between private individuals.” United States v. Winstar Corp., 518 U. S. 889, [608]*608895 (1996) (plurality opinion) (internal quotation marks omitted). The Restatement of Contracts reflects many of the principles of contract law that are applicable to this action. As set forth in the Restatement of Contracts, the relevant principles specify that, when one party to a contract repudiates that contract, the other party “is entitled to restitution for any benefit that he has conferred on” the repudiating party “by way of part performance or reliance.” Restatement (Second) of Contracts §378 (1979) (hereinafter Restatement). The Restatement explains that “repudiation” is a “statement by the obligor to the obligee indicating that the obligor will commit a breach that would of itself give the obligee a claim for damages for total breach.” Id.-, §250. And “total breach” is a breach that “so substantially impairs the value of the contract to the injured party at the time of the breach that it is just in the circumstances to allow him to recover damages based on all his remaining rights to performance.” Id., §248.

As applied to this action, these principles amount to the following; If the Government said it would break, or did break, an important contractual promise, thereby “substantially impairing] the value of the contract^]” to the companies, ibid., then (unless the companies waived their rights to restitution) the Government must give the companies their money back. And it must do so whether the contracts would, or would not, ultimately have proved financially beneficial to the companies. The Restatement illustrates this point as follows:

“A contracts to sell a tract of land to B for $100,000. After B has made a part payment of $20,000, A wrongfully refuses to transfer title. B can recover the $20,000 in restitution. The result is the same even if the market price of the land is only $70,000, so that performance would have been disadvantageous to B.” Id., §378, Comment a, Illustration 1.

[609]*609B

In 1981, in return for up-front “bonus” payments to the United States of about $156 million (plus annual rental payments), the companies received 10-year renewable lease contracts with the United States. In these contracts, the United States 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.” App. to Pet. for Cert, in No. 99-253, pp. 174a-185a.

The statutes and regulations, the terms of which in effect were incorporated into the contracts, made clear that obtaining the necessary permissions might not be an easy matter. In particular, the Outer Continental Shelf Lands Act (OCSLA), 67 Stat. 462, as amended, 43 U. S. C. § 1331 et seq. (1994 ed. and Supp. Ill), and the Coastal Zone Management Act of 1972 (CZMA), 86 Stat. 1280, 16 U.S.C. §1451 et seq., specify that leaseholding companies wishing to explore and drill must successfully complete the following four procedures.

First, a company must prepare and obtain Department of the Interior approval for a Plan of Exploration (Exploration Plan or Plan). 43 U. S. C. § 1340(e). Interior must approve a submitted Exploration Plan unless it finds, after “considering] available relevant environmental information,” § 1346(d), that the proposed exploration

“would probably cause serious harm or damage to life (including fish and other aquatic life), to property, to any mineral ... , to the national security or defense, or to the marine, coastal, or human environment.” § 1334(a)(2)(A)(i).

[610]*610Where approval is warranted, Interior must act quickly— within “thirty days” of the company’s submission of a proposed Plan. § 1340(e)(1).

Second, the company must obtain an exploratory well drilling permit. To do so, it must certify (under CZMA) that its Exploration Plan is consistent with the coastal zone management program of each affected State. 16 U. S. C. § 1456(c)(3). If a State objects, the certification fails,- unless the Secretary of Commerce overrides the State’s objection. If Commerce rules against the State, then Interior may grant the permit. § 1456(e)(3)(A).

Third, where waste discharge into ocean waters is at issue, the company must obtain a National Pollutant Discharge Elimination System permit from the Environmental Protection Agency. 33 U. S. C. §§ 1311(a), 1342(a). It can obtain this permit only if affected States agree that its Exploration Plan is consistent with the state coastal zone management programs or (as just explained) the Secretary of Commerce overrides the state objections. 16 U. S. C. § 1456.

Fourth, if exploration is successful, the company must prepare, and obtain Interior approval for, a Development and Production Plan — a Plan that describes the proposed drilling and related environmental safeguards. 43 U. S. C. §1351. Again, Interior’s approval is conditioned upon certification that the Plan is consistent with state coastal zone management plans — a certification to which States can object, subject to Commerce Department override. § 1351(a)(3).

C

The events at issue here concern the first two steps of the process just described — Interior’s consideration of a submitted Exploration Plan and the companies’ submission of the CZMA “consistency certification” necessary to obtain an exploratory well drilling permit. The relevant circumstances are the following:

[611]*6111.

Free access — add to your briefcase to read the full text and ask questions with AI

Related

Arizona v. Navajo Nation
599 U.S. 555 (Supreme Court, 2023)
Eby v. United States
Federal Circuit, 2020
W & T Offshore, Incorporated v. David Bernhardt, e
946 F.3d 227 (Fifth Circuit, 2019)
Haggart v. United States
943 F.3d 943 (Federal Circuit, 2019)
Eby v. United States
Federal Claims, 2019
Solenex LLC v. Zinke
District of Columbia, 2018
United States Ex Rel. McLain v. Fluor Enterprises, Inc.
681 F. App'x 355 (Fifth Circuit, 2017)
Highland Al Hujaz Co., Ltd.
Armed Services Board of Contract Appeals, 2016
Barlow & Haun, Inc. v. United States
805 F.3d 1049 (Federal Circuit, 2015)
Barlow & Haun, Inc. v. United States
118 Fed. Cl. 597 (Federal Claims, 2014)
Dobyns v. United States
118 Fed. Cl. 289 (Federal Claims, 2014)
Cardiosom, L.L.C. v. United States
58 Cont. Cas. Fed. 305,043 (Federal Claims, 2014)
Oceana v. Bureau of Ocean Energy Management
37 F. Supp. 3d 147 (District of Columbia, 2014)
Century Exploration New Orleans, LLC v. United States
745 F.3d 1168 (Federal Circuit, 2014)

Cite This Page — Counsel Stack

Bluebook (online)
530 U.S. 604, 120 S. Ct. 2423, 147 L. Ed. 2d 528, 2000 U.S. LEXIS 4306, Counsel Stack Legal Research, https://law.counselstack.com/opinion/mobil-oil-exploration-producing-southeast-inc-v-united-states-scotus-2000.