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Marathon Oil Co. v. United States

May 13, 1999

MARATHON OIL COMPANY AND MOBIL OIL EXPLORATION & PRODUCING SOUTHEAST, INC., PLAINTIFFS-APPELLEES,
v.
UNITED STATES, DEFENDANT-APPELLANT.



Appealed from: United States Court of Federal Claims Judge James T. Turner

ORDER

A combined petition for rehearing and suggestion for rehearing in banc having been filed by appellees, and a response thereto having been invited by the court and filed by the appellant*,

Upon consideration thereof, it is

ORDERED that the petition for rehearing be granted for the limited purpose of clarifying this court's opinion.

IT IS FURTHER ORDERED that the previous opinion of the court in this appeal is withdrawn. The new opinion accompanies this order.

IT IS FURTHER ORDERED that the suggestion for rehearing in banc is declined.

The mandate of the court will issue on May 20, 1999.

Circuit Judge NEWMAN Dissents in a separate opinion.

Circuit Judge RICH, Circuit Judge MICHEL, Circuit Judge CLEVENGER, Circuit Judge SCHALL, and Circuit Judge BRYSON did not participate in the vote.

FOR THE COURT,

Dated: May 13, 1999

Jan Horbaly, Clerk

cc: Mark A. Melnick, Esq.

A. Edward Bruce, Esq.

J. Berry St. John, Jr., Esq.

United States Court of Appeals for the Federal Circuit

97-5146

MARATHON OIL COMPANY and MOBIL OIL EXPLORATION & PRODUCING SOUTHEAST, INC., Plaintiffs-Appellees, v. UNITED STATES, Defendant-Appellant.

REVISED OPINION ISSUED: May 13, 1999

Before NEWMAN, PLAGER, and RADER, Circuit Judges.*

Opinion for the court filed by Circuit Judge PLAGER. Dissenting opinion filed by Circuit Judge NEWMAN.

This is a contract dispute between a lessor, the United States ("Government"), and lessees, Marathon Oil and Mobil Oil (collectively "Marathon"), involving Outer Continental Shelf ("OCS") oil and gas leases on submerged lands off the coast of North Carolina. The dispute centers over the denial by the Government of the permits necessary before Marathon could engage in oil exploration, and the effect of legislation enacted subsequent to the parties entering the leases. The legislation imposed a temporary moratorium on oil exploration in the lease areas. Marathon initially pursued administrative appeals of its permit denials, then sued in the Court of Federal Claims to recover its lease rental and up-front cash bonus payments. Marathon claimed that the legislation effected a material breach of the OCS leases. The Government denied the breach and presented a number of defenses. The Court of Federal Claims agreed with Marathon, finding that the Government had materially breached the leases. See Conoco Inc. v. United States, 35 Fed. Cl. 309 (1996). In a subsequent proceeding, the court awarded both Marathon and Mobil restitution of their up-front payments, in total over $156 million. See Marathon Oil Co. & Mobil Oil Exploration & Producing Southeast, Inc. v. United States, No. 92-331C (Fed. Cl. July 24, 1997). Because the moratorium legislation was not the operative cause of Marathon's failure to obtain the required permits, the judgment of the Court of Federal Claims is reversed.

BACKGROUND

This case has a rather complicated legal and factual background. We summarize the salient law and the history of the case; for the full details see the exhaustive Court of Federal Claims opinion in Conoco Inc. v. United States, 35 Fed. Cl. 309, 314-19 (1996).

A.

The Outer Continental Shelf Lands Act of 1953 ("OCSLA"), 67 Stat. 462, as amended, 92 Stat. 629 (codified at 43 U.S.C. ยงยง 1331-1343 (1970)), establishes federal jurisdiction over submerged lands on the continental shelf beyond three miles from the coastline. (Submerged lands within the three mile limit fall within the ...


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