Century Exploration New Orleans, LLC v. United States
| Decision Date | 21 March 2013 |
| Docket Number | No. 11-54 C,11-54 C |
| Parties | CENTURY EXPLORATION NEW ORLEANS, LLC, Plaintiff, and CHAMPION EXPLORATION, LLC, Third-Party Plaintiff, v. THE UNITED STATES, Defendant. |
| Court | U.S. Claims Court |
Breach of Oil and Gas Lease;
Risk of Regulatory Change;
Sovereign Acts Doctrine;
Outer Continental Shelf Lands Act,
43 U.S.C. §§ 1331-1356 (2006);
Motion for Summary Judgment,
Richard K. Leefe, Metairie, LA, for plaintiff Century Exploration New Orleans, LLC. Michael R. Gelder and James K. Sticker, III, Metairie, LA, of counsel.
Guy E. Wall, New Orleans, LA, for plaintiff Champion Exploration, LLC.
Gregg M. Schwind, United States Department of Justice, with whom were Stuart F. Delery, Principal Deputy Assistant Attorney General, Jeanne E. Davidson, Director, and Steven J. Gillingham, Assistant Director, Washington, DC, for defendant.
Now pending before the court are the parties' cross-motions for partial summary judgment, pursuant to Rule 56 of the Rules of the United States Court of Federal Claims (RCFC), on plaintiffs' breach claim (Count I of the complaint). The motions have been fully briefed and are now ripe for a decision by the court. Because none of the government's actions in this case breached plaintiffs' lease, the government's motion for partial summary judgment is granted, and plaintiffs' cross-motion for partial summary judgment is denied.
The United States, acting through the Department of the Interior (Interior), is the defendant in this case. Interior is charged with managing many of the nation's energy resources, including resources located under the submerged lands of the Outer Continental Shelf (OCS)3 in the Gulf of Mexico and in other waters of the United States. Interior is responsible for the administration of mineral leases on the OCS, as well as the regulation of mineral exploration and production activities on the OCS. Plaintiffs Century Exploration New Orleans, LLC (Century) and Champion Exploration, LLC (Champion) are the holders of an oil and gas lease for a tract of submerged land located on the OCS in the Gulf of Mexico.4
Following a massive oil spill in 2010, the government adopted a number of new requirements for drilling operations on the OCS. In this case, plaintiffs argue that those new requirements repudiated and breached their lease and effected a taking of their property without the payment of just compensation in violation of the Fifth Amendment. Because the court has stayed proceedings on plaintiffs' takings claim, this opinion addresses only plaintiffs' breach of contract claim. Accordingly, the court's recitation of the facts in this case will be limited to those most relevant to plaintiffs' breach claim.
Under the Outer Continental Shelf Lands Act of 1953 (OCSLA), 43 U.S.C. §§ 1331-1356 (2006), the United States exercises jurisdiction and control over the submerged lands of the OCS.5 The OCS is defined to include all submerged land that is beyond the outer limits of state jurisdiction (three nautical miles from shore) and within the limits of national jurisdiction (200 nautical miles from shore). See 43 U.S.C. §§ 1301, 1331; Amber Res. Co. v. United States, 538 F.3d 1358, 1362 (Fed. Cir. 2008) (Amber Resources II).
In enacting OCSLA, Congress explained that "the [O]uter Continental Shelf is a vital national resource reserve held by the Federal Government for the public, which should be made available for expeditious and orderly development, subject to environmental safeguards, in a manner which is consistent with the maintenance of competition and other national needs." 43 U.S.C. § 1332(3). In addition, OCSLA further provides that "operations in the [O]uter Continental Shelf shouldbe conducted in a safe manner by well-trained personnel using technology, precautions, and techniques sufficient to prevent or minimize the likelihood of blowouts, loss of well control, fires, spillages, physical obstruction to other users of the waters or subsoil and seabed, or other occurrences which may cause damage to the environment or to property, or endanger life or health." Id. § 1332(6).
43 U.S.C. § 1334(a). In accordance with those directives, the Secretary has promulgated regulations pursuant to OCSLA. See 30 C.F.R. pt. 250 (2008).6
During the relevant time period, Interior issued and administered OCS leases, and regulated exploration and production activities on the submerged lands of the OCS, through the Minerals Management Service (MMS) and its successor agency, the Bureau of Ocean Energy Management, Regulation and Enforcement (BOEMRE). BOEMRE was subsequently divided into three separate agencies,each with distinct functions and authorities.7
The leases issued pursuant to OCSLA "entitle the lessee to explore, develop, and produce the oil and gas contained within the lease area, conditioned upon due diligence requirements and the approval of the development and production plan required by this subchapter." 43 U.S.C. § 1337(b)(4). However, "[t]he issuance and continuance in effect of any lease, or of any assignment or other transfer of any lease, under the provisions of this subchapter shall be conditioned upon compliance with regulations issued under this subchapter." Id. § 1334(b).
OCSLA and its implementing regulations establish a multi-stage process for issuing OCS leases and for conducting exploration and production activities under those leases. First, the Secretary develops a five-year plan for lease sales based on the nation's energy needs. Second, the leases are awarded to individual bidders based on competitive auctions. Third, the lessees conduct exploration activities on the leased area to determine whether oil and gas are present. Finally, the lessees conduct development and production activities on the site. Each of these distinct stages is governed by OCSLA and its implementing regulations. See generally Sec'y of Interior v. California, 464 U.S. 312, 337-40 (1984).
The leases are awarded to the highest responsible qualified bidder at competitive, sealed-bid auctions conducted pursuant to a five-year plan developed by the Secretary. See 43 U.S.C. §§ 1334, 1337, 1344. In developing that plan, the Secretary must "select the timing and location of leasing, to the maximum extent practical, so as to obtain a proper balance between the potential for environmental damage, the potential for the discovery of oil and gas, and the potential for adverse impact on the coastal zone." Id. § 1344(a)(3). In addition, the Secretary must consider, inter alia, "relevant environmental and predictive information for different areas of the [O]uter Continental Shelf" in developing the five-year plan.Id. § 1344(a)(2)(H).
Under OCSLA, a lessee must first submit an exploration plan (EP) to Interior for review and approval before conducting any exploration activities under its lease, see 43 U.S.C. §§ 1340(c)(1), 1340(e)(2); 30 C.F.R. § 250.201, and Interior must approve or deny the EP within thirty days of receipt, see 43 U.S.C. § 1340(c)(1). The lessee must certify that the EP is consistent with the coastal management plan of any affected state. Id. § 1340(c)(2); 30 C.F.R. §§ 250.226, 250.232, 250.235. Further, the EP must include an Oil Spill Response Plan (OSRP) for the proposed drilling facilities, or it must incorporate a previously approved regional OSRP. 30 C.F.R. § 250.219(a). Once an EP is approved by Interior, the lessee must conduct all exploration activities on the site in conformity with the approved EP. 43 U.S.C. § 1340(e)(2).
Following the approval of its EP, an OCS lessee must seek permission to conduct exploratory drilling, as described in its approved EP, by filing an Application for Permit to Drill (APD). 43 U.S.C. § 1340(d); 30 C.F.R. §§ 250.281, 250.410. If the application meets each of the requirements of the regulations, 30 C.F.R. §§ 250.411-250.418, the lessee can begin exploratory drilling on the site. During the development stage, the lessee must submit either a Development and Production Plan (DPP) or a Development Operations Coordination Document (DOCD), depending upon the location of the lease site, for review and approval by Interior.8 43 U.S.C. § 1351; 30 C.F.R. §§ 250.201, 250.241. In addition, the lessee must file an APD for any production wells it intends to drill, just as it did for its exploratory wells. 30 C.F.R. §§ 250.281, 250.410.
OCSLA directs the Secretary to promulgate regulations "for the suspension or temporary prohibition of any operation or activity, including production, pursuant to any lease or permit." 43 U.S.C. § 1334(a)(1). Under OCSLA, the Secretary may issue a suspension "at the request of a lessee, in the national interest, to facilitate proper development of a lease or to allow for the construction or negotiation for use of transportation facilities." Id. § 1334(a)(1)(A). In addition, the Secretary may issue a suspension without a request from the lessee ...
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