Mobil Oil Exploration, Environmental Protection, and Contract Repudiation: It's Time to Recognize the Public Trust in the Outer Continental Shelf

Abstract:     
In Mobil Oil Exploration & Producing Southeast, Inc. v. United States, 120 S. Ct. 2423 (2000), the U.S. Supreme Court held, 8-1, that the United States had repudiated its obligations under Outer Continental Shelf Lands Act (OCSLA) lease contracts by enacting new environmental legislation, the since-repealed Outer Banks Protection Act (OBPA), that delayed oil and gas production off the coast of North Carolina until more comprehensive environmental studies could be completed. In addition, the Court upheld full restitution to Mobil Oil and Marathon Oil of the $158 million that they had paid for the leases, even though: (1) potential profits from the leases were highly speculative from the outset; (2) numerous delays had already occurred; (3) the delay imposed by the OBPA both was and was intended to be of limited duration; and (4) North Carolina has already objected to both companies' permit applications and exploration plans pursuant to the Coastal Zone Management Act (CZMA).

After exploring the complex interactions of these three statutes and a review of the Supreme Court's decision, this article argues that the Court's decision was wrong even under principles of contract law. In addition, the paper argues that, more importantly, the Court completely ignored principles of the public trust doctrine and the environmental protection provisions of the OCSLA in reaching its decision. Without the active integration of the OCSLA's environmental and public trust dimensions into lease interpretation, the Supreme Court risks contracting the broader public interest in the outer continental shelf into oblivion.

Number of Pages in PDF File: 18

Keywords: oil and gas exploration, Outer Continential Shelf Lands Act, public trust, OCSLA, Coastal Zone Management Act, CZMA, oil and gas leasing, outer continental shelf leasing, contract law

Accepted Paper Series