U.S. is told to refund oil money

$156 million to be split by 2 firms unable to drill off N.C. as promised

June 27, 2000|By Lyle Denniston | Lyle Denniston,SUN NATIONAL STAFF

WASHINGTON - The Supreme Court ordered the federal government yesterday to refund $156 million to two oil companies for breaking a promise to act on the companies' plans to drill for oil off the Outer Banks of North Carolina.

Congress, the court concluded in an 8-1 ruling, changed the law in the middle of the process, preventing the government from acting promptly on offshore exploration permits.

"The government must give the companies their money back," Justice Stephen G. Breyer wrote for the court.

The decision means that Marathon Oil Co and Mobil Oil Exploration and Producing Southeast Inc., a subsidiary of Mobil Oil Corp., will recover $78 million each - money they paid up front for the right to explore for oil 45 miles off Cape Hatteras.

Though the companies failed to obtain permits to drill in the so-called Manteo Unit of the Outer Continental Shelf, they - along with Chevron Corp. - are still seeking exploration rights.

Although their efforts are blocked by a veto from North Carolina, the U.S. commerce secretary has the authority to override that veto, and Mobil and Marathon have sued in federal court to force such an override.

Justice Breyer's opinion said that the fact that the companies never received permits, and might never have, made no difference in their right to get back their money.

They paid that money for a chance to obtain permits, the court found, and the government, by breaking its promise, cut off that chance.

Breyer likened their plight to that of a person who bought a lottery ticket for a chance to win the lottery, but was never issued a ticket and thus lost the chance to win - even if winning was unlikely.

While the government was beginning to process the drilling-rights applications of Mobil and Marathon, Congress - at the request of North Carolina officials - passed a law in 1990 imposing a moratorium on permits off that state's coast.

That change in the law, the court found yesterday, kept the government from meeting its contractual obligations to process the two companies' bids for drilling rights.

The decision does not overturn the 1990 moratorium. It simply assures the two companies that they will get their money back for breach of contract.

Justice John Paul Stevens filed a lone dissent. He said that the government did break its promise, but only partially, and that the return of the entire $156 million amounted to "a windfall" for the two companies.

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