A U.S. appeals court on Monday affirmed a trial court's 2005 decision that the U.S. government must pay restitution of more than $1.1 billion to nearly a dozen oil and gas companies with long-held exploration and production leases off the coast of California.
The U.S. Court of Appeals for the Federal Circuit said the Court of Federal Claims was correct in deciding that holders of oil and gas leases off the coast of California were entitled to the award after the government took action that had the effect of preventing the lessees from continuing exploratory activities on the leased properties, at least temporarily.
The plaintiffs include Amber Resources Co., Delta Petroleum Corp., Total SA, Plains Exploration and Production, Noble Energy, Anadarko E&P Co. and Devon Energy Production Co.
Between 1968 and 1984, the federal government granted a number of leases to private entities to explore for and develop oil and gas resources in the outer continental shelf off the California coast. But after a series of court battles over the Coastal Zone Management Plan, the oil companies were not able to use the leases, and they ultimately expired or were suspended by the government.
The owners of the leases then filed suit in the Court of Federal Claims claiming that the government had breached the lease agreements. The Court of Federal Claims agreed with the leaseholders and held that they were entitled to a restitutionary award as damages for the breach, and awarded them restitution in the amount of the funds that had been paid for the leases at the time the leases were executed.
In the series of transactions from which this case arose, a total of 40 leases were granted off the coast of California to a number of separate operators. Thirty-five of those leases were at issue in this appeal. The leases authorized the grantees to explore and develop oil and gas resources. In consideration for their exploration and development rights, the lessees paid upfront bonuses to the government. About $1.1 billion was paid as consideration for the leases at issue in this case.
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