30 ELR 11104 | Environmental Law Reporter | copyright © 2000 | All rights reserved

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

Robin Kundis Craig is an Assistant Professor of Law at Western New England College School of Law. Professor Craig received her J.D. in 1996 from the Lewis & Clark School of Law, her Ph.D. in English Literature in 1993 from the University of California, and her M.A. in Writing About Science in 1986 from the Johns Hopkins University. Professor Craig can be contacted through e-mail at rcraig@llama.lnet.wnec.edu or the Internet at http://wneclaw.wnec.edu/faculty/craig/default.html.

[30 ELR 11104]

In a recent article reviewing the U.S. Supreme Court's environmental decisions over the last 30 years (1969-1999), Professor Richard Lazarus argues that "the Justices have never fully appreciated environmental law as a distinct area of law."¹

They perceive environmental law instead as merely an incidental factual context, in which environmental protection concerns are at stake, but there is nothing uniquely environmental about the legal issues being raised. The Justices, accordingly, fail to appreciate how the nature of the environmental concerns being addressed can sometimes be relevant to their resolution of those legal issues.²

In Mobil Oil Exploration & Producing Southeast, Inc. v. United States,³ the Supreme Court Justices again displayed this environmental myopia as they decided, by an 8-1 majority, that the federal government repudiated its obligations in Outer Continental Shelf Lands Act (OCSLA)⁴ lease contracts by enacting new environmental legislation, the now-repealed Outer Banks Protection Act (OBPA),⁵ that delayed oil and gas exploration and development off the coast of North Carolina until more comprehensive environmental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 they had paid for the leases, even though potential profits from the leases were highly speculative from the outset, numerous delays had already occurred, the delay imposed by the OBPA both was intended to be and actually was of limited duration, and North Carolina had independently objected to both the companies' permit application and their exploration plan in accordance with the Coastal Zone Management Act (CZMA).⁶

Mobil Oil Exploration fits neatly with the Supreme Court's recent decisions regarding federal government contracting—namely, that the federal government ordinarily bears the risk of loss from changes in federal law and that defenses based on the government's status as sovereign should be strictly limited. However, the Supreme Court raised the stakes for legislative changes that affect government contracts by allowing full restitution—an unusual remedy in contract law—for breach of a time limit in lease contracts where time was clearly not of the essence. In addition, the Court ignored North Carolina's role in the OCSLA lease process, giving no weight to the fact that the state had already effectively stalled the oil companies' exploration plan before Congress imposed its own delay. Finally, and most importantly, the Supreme Court adhered to strict contract principles without any attention to the role of environmental protection in the OCSLA or the sovereign's duty to the public trust in submerged public lands, considerations that should have at least limited the oil companies to damages and arguably excused the federal government's breach altogether.

I. Background Facts and Law

A. The Outer Continental Shelf Lands Act and Its Interaction With the Coastal Zone Management Act

In enacting the OCSLA in 1953,⁷ Congress formally asserted U.S. control over "the subsoil and sea bed of the outer Continental Shelf."⁸ Much of the outer continental shelf contains valuable minerals, natural gas, and oil, and the OCSLA promoted the orderly development of those resources.

Later amendments to the OCSLA, however, reflect a tension between the desire to encourage development of the continental shelf and the recognition that such development could have disastrous environmental results.⁹ As such, Congress explicitly recognized that "the outer Continental Shelf is a vital national resource reserve held by the Federal Government [30 ELR 11105] for the public . . . ."¹⁰ The "expeditious and orderly development" of the outer continental shelf, moreover, is "subject to environmental safeguards . . . ."¹¹ Thus, "operations in the outer Continental Shelf should be conducted in a safe manner by well-trained personnel using technology, precautions, and techniques sufficient to prevent or minimize the likelihood of . . . occurrences which may cause damage to the environment or to property, or endanger life or health."¹² Moreover, recognizing that "exploration, development, and production of the minerals of the outer Continental Shelf will have significant impacts on coastal and non-coastal areas of coastal States, "Congress ensured state participation in continental shelf development.

The Secretary of the Interior (the Secretary) regulates oil and gas development in the outer continental shelf through many stages. Initial leasing gives a particular lessee or lessees the right to explore and develop the lands covered by the lease, but that lease contract also requires further planning, evaluation, approvals, licensing, and permitting before the lessee can actually carry out any exploration or development. Leasing, moreover, occurs in accordance with a five-year leasing program, through which the Secretary awards oil and gas leases through a competitive bidding system to meet national energy needs.¹³ Bidding can take the form of any one of a number of combinations of cash bonuses, royalties, shares of the profits, and/or work commitments.¹⁴ Leases cover up to 5,760 acres of the outer continental shelf¹⁵ and initially last 5 to 10 years.¹⁶

OCSLA leases technically "entitle the lessee to explore, develop, and produce the oil and gas contained within the lease area."¹⁷ However, those rights are qualified by, and the leases are subject to, numerous other requirements, including due diligence requirements,¹⁸ the U.S. Department of the Interior's (DOI's) approval of an exploration plan,¹⁹ the DOI's approval of a development and production plan,²⁰ and the OCSLA's suspension and cancellation provisions.²¹ Leases are also subject to an antitrust review,²² and the lessee's oil exploration and development activities are subject to environmental and safety regulation and inspection.²³

In addition, numerous specific requirements apply to each phase of implementing the lease. In the exploration phase,²⁴ the lessee must submit an exploration plan to the Secretary for the Secretary's approval.²⁵ If the plan is consistent with the OCSLA, it "shall be approved"; otherwise, "the Secretary shall require such modifications of such plan as are necessary to achieve consistency."²⁶ "The Secretary shall approve such plan, as submitted or modified, within thirty days of its submission," unless the Secretary disapproves the plan because of an uncorrectable environmental or safety problem.²⁷

The Secretary's approval of the exploration plan does not end the process, however. Before actually developing and producing oil and gas in the lease area, the lessee must submit a development and production plan to the Secretary,²⁸ and the OCSLA explicitly subjects the plan approval process to the environmental evaluation requirements of the National Environmental Policy Act (NEPA).²⁹ Under NEPA, if federal approval of the oil development and production would constitute a "major federal action significantly affecting the quality of the human environment," the Secretary of the Interior and any permitting agencies must engage in the extensive process of issuing an environmental impact statement (EIS).³⁰ Plans to develop and produce natural gas must also go to the Federal Energy Regulatory Commission.³¹

Most oil and gas exploration and development plans also require federal permits. For example, lessees often must get drilling permits from the Secretary of the Interior to carry out their explorations for oil.³² In addition, exploration and development of oil fields in the outer continental shelf often requires the lessee to discharge wastes into the ocean, which in turn requires a national pollutant discharge elimination system (NPDES) permit from the U.S. Environmental Protection Agency (EPA) pursuant to the Clean Water Act (CWA).³³

The Secretary has considerable discretion in administering the oil and gas lease program, including rulemaking authority.³⁴ The statutory provisions governing that rulemaking make it clear that oil and gas leases are subject to several kinds of modifications and delays. For example, whenever the Secretary promulgates or amends rules "in order to provide for the prevention of waste and conservation of the natural resources for the outer Continental Shelf," those rules apply to leases already in existence.³⁵ The Secretary also must promulgate rules "for the suspension or temporary prohibition of any operation or activity, including production." Such suspensions can occur in two circumstances: (1) at the request of the lessee; or (2) "if there is a threat of serious, irreparable, or immediate harm or damage [30 ELR 11106] to life (including fish or aquatic life), to property, to any mineral deposits (in areas leased or not leased), or to the marine, coastal, or human environment."³⁶ Leases so suspended are extended an amount of time equal to the period of suspension, unless the suspension was the result of the lessee's gross negligence or a willful violation of the lease or the law.³⁷

The Secretary can also cancel leases because of environmental problems.³⁸ In such cases, the lease holder is entitled to compensation in the amount of the lesser of "the fair value of the canceled rights" or any amount of consideration for the lease and expenditures made in pursuing the lease developments that have not yet been made up by revenues from the lease.³⁹ However, if the lessee defaults on the lease, or fails to submit a development and production plan, the Secretary can cancel the lease without compensation.⁴⁰

Other provisions of the OCSLA also emphasize that oil and gas leases are subject to changes that can interfere with the lessee's initial expectations. For example, all leases must allow for national security suspensions during war or states of emergency,⁴¹ and the U.S. Department of Defense retains authority to restrict access to areas on the outer continental shelf.⁴² Leases for lands within such restricted areas are suspended for the duration of the restriction, then extended for that amount of time.⁴³

In addition, exploration and development pursuant to OCSLA leases are both subject to state consistency review pursuant to the CZMA. The CZMA implements a national policy "to preserve, protect, develop, and where possible, to restore or enhance the resources of the Nation's coastal zone for this and succeeding generations."⁴⁴ To encourage such protection, the CZMA provides grants to coastal states that develop management plans for their coastal zones.⁴⁵ In order for the coastal state to receive federal funding, the state management plan must include numerous provisions, including, specifically, "[a] planning process for energy facilities likely to be located in, or which may significantly affect, the coastal zone, including a process for anticipating the management of the impacts resulting from such facilities."⁴⁶ All coastal states now have approved CZMA coastal management plans.⁴⁷

Federal consistency is an important "carrot" that Congress provided to states in the CZMA to encourage them to enact coastal management plans, and the OCSLA explicitly incorporates the CZMA's consistency requirement.⁴⁸ That consistency requirement applies in two ways. First, when federal agencies themselves take actions that might affect states' coastal zones, they must structure those activities, "to the maximum extent practicable," to be consistent "with the enforceable policies of approved State management programs."⁴⁹ Second, any person applying for a federal license or permit for an activity that might affect a state's coastal zone must certify to both the affected state and the federal agency that the activity will comply with the state's coastal zone management plan.⁵⁰ The federal agency cannot issue the license or permit until the state has either affirmatively concurred in the consistency certification or become legally deemed to have concurred through a lapse of time.⁵¹

The general consistency provisions in the CZMA thus apply to all the federal licenses and permits, such as an NPDES permit for the discharge of wastes, that an OCSLA lessee might require. In addition, the CZMA explicitly applies its consistency requirement to exploration and development plans submitted pursuant to OCSLA oil and gas leases.⁵² However, the U.S. Secretary of Commerce can effectively override a state veto by finding that the oil and gas activities are consistent with the CZMA's objectives or are "otherwise necessary in the interest of national security."⁵³

The U.S. Department of Commerce, acting through the National Oceanic and Atmospheric Administration (NOAA), implements the CZMA, and under its regulations the state concurrence procedure can result in significant delays for OCSLA oil and gas lessees. If the state properly objects to the lessee's exploration or development plan and the Secretary of Commerce does not override that objection, the lessee must submit an amended or new plan and a new consistency certification to the Secretary of the Interior.⁵⁴ The affected state then has an additional three months to concur in or object to the new certification,⁵⁵ and, if it objects, repeated rounds of new or amended plans and state review ensue, unless the Secretary of Commerce intervenes.⁵⁶ No federal agency can issue permits and licenses required for actual oil and gas exploration and development, such as drilling permits or NPDES permits, until the state concurs or fails to object in time—even if the Secretary of the Interior has approved the exploration or development plan under the OCSLA.

Oil and gas leases under the OCLSA are thus subject to a number of potentially delaying provisions, and timely and [30 ELR 11107] profitable oil and gas development are far from certain at the time the lessee and the Secretary of the Interior enter the lease contract. In particular, regardless of the federal agencies' efficiency in meeting their obligations, affected coastal states can delay implementation of either exploration or development indefinitely through the CZMA consistency process.

B. Mobil Oil's and Marathon Oil's Attempts to Develop Oil and Gas Off of North Carolina

In 1981, Mobil Oil and Marathon Oil paid the United States approximately $ 158 million in upfront "bonus" payments for 2 10-year renewable OCSLA leases to explore for and develop oil off the coast of North Carolina.⁵⁷ These leases were part of Lease Sale Nos. 56, 78, and RS-2, which involved, over 3 years, the leasing of 53 tracts of the outer continental shelf off North Carolina.⁵⁸ "Some of the tracts included in these sales, including several in the 'Manteo' area of the OCS [outer continental shelf], were in deep water; technological and safety concerns had been voiced about leasing in that area."⁵⁹ At least 10 oil companies purchased the leases involved in these sales.⁶⁰

All of the leases provided that they were issued pursuant to the OCSLA and that they were subject to the OCSLA; the Department of Energy Organization Act §§ 302 and 303,⁶¹

all regulations issued pursuant to the statute and in existence upon the Effective Date of this lease; all regulations issued pursuant to the statute in the future which provide for the prevention of waste and conservation of the natural resources of the Outer Continental Shelf, and the protection of correlative rights therein; and all other applicable statutes and regulations.⁶²

The leases granted the lessees "'the exclusive right and privilege to drill for, develop, and produce oil and gas resources,'" including nonexclusive rights to conduct "'geological and geophysical explorations in accordance with applicable regulations'" and to drill water wells and "'the right to construct or erect and to maintain within the leased area artificial islands, installations, and other devices permanently or temporarily attached to the seabed and other works and structures necessary to the full enjoyment of the lease, subject to compliance with applicable laws and regulations.'"⁶³ Section 10 of the leases "required that the lessees comply with all regulations and orders relating to exploration, development and production," and § 13 allowed the United Stated to suspend or cancel the leases in accordance with the OCSLA and to pay compensation "'when required by the Act.'"⁶⁴

"The owners of twenty-one of the North Carolina leases combined their leases into a single unit, the Manteo Unit, and proposed to drill one exploratory well about forty-five miles east of Cape Hatteras."⁶⁵ A subsidiary of Mobil Oil operated the Manteo Unit.⁶⁶ From the beginning of this proposal, however, North Carolina "expressed strong objections to the proposed well,"⁶⁷ and in July 1989, the Mobil Oil subsidiary, the DOI, and North Carolina entered into a memorandum of understanding (MOU) to address the difficult process of CZMA consistency.⁶⁸ In the MOU, companies agreed to submit their draft exploration plans to North Carolina before submitting final exploration plans and CZMA certifications to the Secretary of the Interior. The Secretary agreed to issue an environmental report on the draft plans and to suspend the two leases while the companies addressed North Carolina's objections to the draft plans. The leases would then be extended to make up for the time spent negotiating the CZMA consistency requirement.⁶⁹

Toe exploration plan was not the only aspect of the Manteo Unit's operation that required North Carolina's approval, however. "The Manteo Unit also needed to obtain a NPDES permit from the EPA for the [exploration plan] . . . because the [plan] included planned discharge of wastes into the ocean."⁷⁰ Because the proposed discharge of waste could adversely affect North Carolina's coastal zone, the CZMA's consistency requirements applied.⁷¹

The companies submitted their draft exploration plan for the Manteo Unit to North Carolina in September 1989.⁷² Nothing significant occurred until the summer of 1990, when four important events occurred in rapid succession. First, in accordance with the MOU, the DOI issued its environmental review in June 1990,⁷³ concluding "that the proposed exploration would not 'significantly affect' the marine environment or 'the quality of the human environment.'"⁷⁴ Second, "on July 17, 1990, North Carolina objected to CZMA certification of Mobil's NPDES permit application."⁷⁵

[30 ELR 11108]

Third, on August 18, 1990, "as a result of enhanced environmental concerns and the successful legislative efforts of Congressman Walter Jones [(R-N.C.)], Congress enacted the [OBPA] as part of a more comprehensive oil spill legislation package . . . ."⁷⁶ In the OBPA,⁷⁷ Congress found that "the Outer Banks of North Carolina is an area of exceptional fragility and beauty" and that offshore oil and gas development could damage fishing and tourism in that region.⁷⁸ However, Congress was also explicitly aware of the proposed Manteo Unit exploration, finding that:

(6) the [EIS] prepared for Outer Continental Shelf lease sales numbered 56 (1981) and 78 (1983) contain insufficient and outdated environmental information from which to make decisions on approval of additional oil and gas leasing, exploration, and development activities;

(7) the draft environmental report, dated November 1, 1989, and the preliminary final environmental report dated June 1, 1990, prepared pursuant to a July 14, 1989, [MOU] between the State of North Carolina, the [DOI], and the Mobil Oil Company, have not allayed concerns about the adequacy of the environmental information available to determine whether to proceed with additional offshore leasing, exploration, or development offshore North Carolina . . . .⁷⁹

To address these inadequacies, the OBPA prohibited the Secretary of the Interior from conducting lease sales, issuing new leases, approving exploration plans, approving development and production plans, approving applications for drilling permits, or permitting any drilling "for oil and gas under the Outer Continental Shelf Lands Act on any lands on the Outer Continental Shelf offshore North Carolina."⁸⁰ This prohibition would last until the later of October 1, 1991, or "45 days of continuous session of Congress after" the Secretary of the Interior submitted a written report to Congress that incorporated the findings of an Environmental Sciences Review Panel and certified that the Secretary had sufficient information to carry out OCSLA leasing off North Carolina.⁸¹ At a minimum, therefore, the OBPA suspended oil and gas exploration and development off the North Carolina coast for 13 months—though Congress did not expect the delay to last any longer.⁸²

Finally, on August 20, 1990, two days after the OBPA took effect, Mobil submitted the final exploration plan and the CZMA consistency certification for the Manteo Unit to the Secretary of the Interior.⁸³ In September 1990, the Secretary of the Interior wrote to the governor of North Carolina, with a copy to Mobil Oil, announcing that Mobil's final exploration plan was fully approvable under the OCSLA but that the Secretary was precluded from approving it because of the OBPA.⁸⁴ Instead, the Secretary announced that the final plan "will remain on file until the requirements of the OBPA are met."⁸⁵ In the meantime, the Secretary granted suspensions for all OCSLA leases for the outer continental shelf off North Carolina.⁸⁶

On November 19, 1990, North Carolina objected to the companies' CZMA consistency certification for the exploration plan on the ground that "Mobil has not provided sufficient information about possible environmental impact."⁸⁷ As 1990 drew to a close, the companies appealed to the Secretary of Commerce to override North Carolina's objections.⁸⁸ "On September 2, 1994, Commerce found the proposed [exploration plan] and proposed discharges of drilling wastes to be 'neither consistent with the objectives of the CZMA nor necessary in the interests of national security,' and declined to override North Carolina's objections."⁸⁹ However, the Secretary of Commerce also "relied in large part on the fact that the new [OBPA Environmental Sciences Review] Panel had found a lack of adequate information in respect to certain environmental issues."⁹⁰

The Environmental Science Review Panel had submitted its report in January 1992,⁹¹ and in April 1992, the Secretary of the Interior "certified to Congress that he has enough information to consider the companies' Exploration Plan."⁹² "By the terms of the OBPA, the temporary moratorium imposed on secretarial action by the OBPA lifted after the next forty-five days of congressional session."⁹³ Nevertheless, the Secretary decided to delay consideration of the Manteo Unit exploration plan until he received further studies that the panel had recommended.⁹⁴ As a result, "Mobil requested additional suspensions of the Manteo Unit leases until both the additional . . . studies were completed and Mobil's appeals of North Carolina's 1990 CZMA objections were decided."⁹⁵ The Mineral Management Service (MMS) of the DOI finally "lifted the OCS [outer continental shelf] lease suspension in November 1994, after the MMS released the two recommended studies and the Secretary of Commerce had declined to override North Carolina's objections to the Manteo Unit [exploration plan] and NPDES permit applications."⁹⁶

In October 1992, Conoco Oil, one of the oil companies with OCSLA leases affected by the OBPA, filed suit against the United States in the Court of Federal Claims, asserting breach of contract. Nine other similarly situated oil companies, including Mobil and Marathon, intervened in the suit [30 ELR 11109] as third-party plaintiffs.⁹⁷ In April 1996, the Court of Federal Claims determined that by not approving the exploration plan within 30 days, as the OCSLA requires, the United States had not only breached the lease contracts but also repudiated them.⁹⁸ This repudiation, the court concluded, entitled the oil companies to damages.⁹⁹ However, in a subsequent hearing, it awarded the oil companies restitution of their upfront bonus payments.¹⁰⁰

In 1996, Congress repealed the OBPA,¹⁰¹ effectively allowing outer continental shelf development to proceed again off the North Carolina coast. Nevertheless, the government appealed the Court of Federal Claims' decision to the Federal Circuit, which reversed in 1999.¹⁰² The Federal Circuit rested its decision on North Carolina's CZMA objections to both the NPDES permit and the exploration plan, finding that because the state's objections would have prevented the oil companies from exercising their lease rights regardless, the OBPA "was not the cause of [the oil companies'] inability to obtain issuance of the required permits and approvals for [their] proposed oil exploration, and there is no evidence of a breach of contract by the United States."¹⁰³ Mobil and Marathon appealed this decision to the Supreme Court.

II. The Supreme Court's Decision in Mobil Oil Exploration

In their initial lawsuit, the oil companies sought restitution, and the government and the Supreme Court agreed "that relevant contract law entitles a contracting party to restitution if the other party 'substantially' breached a contract or communicated its intent to do so."¹⁰⁴ Nevertheless, the government made three arguments against restitution: (1) that "it did not breach its contracts or communicate its intent to do so"¹⁰⁵; that "any breach was not 'substantial'"¹⁰⁶; and that "the companies waived their rights to restitution regardless."¹⁰⁷ The Supreme Court addressed these arguments in turn.

A. The Government Breached the Lea Contracts

In responding to the "no breach," argument, the Court emphasized that the OCSLA oil and gas leases incorporated most of the Act's provisions, including the requirement that the Secretary of the Interior approve an exploration plan that meets the Act's requirements within 30 days.¹⁰⁸ Because "Interior told Mobil the companies' submitted Plan met those requirements" but also that, because of the OBPA, the DOI "would not approve the companies' submitted Plan for at least 13 months,"¹⁰⁹ the federal government appeared to be in breach. The government, however, pointed to various provisions of the lease and argued that these included "statutory provisions and regulations that . . . granted Interior the legal authority to refuse to approve the submitted Exploration Plan, while suspending the lease instead."¹¹⁰

First, the government noted that the OCSLA itself allows the Secretary to promulgate regulations for the suspension of leases. However, the Court held that this statutory provision only allowed suspensions at the lessee's request and hence was inapplicable to the facts at issue.¹¹¹

Second, the government argued that the lease incorporated 30 C.F.R. § 250.110(b)(4), which allows the Regional Supervisor to suspend OCSLA leases "'[when the] suspension is necessary for the implementation of the requirements of [NEPA] or to conduct an environmental analysis.'"¹¹² The government argued that it had suspended Mobil's and Marathon's leases in order to perform the environmental analysis that the newly enacted OBPA required.

The Court, however, discounted that argument. Because the leases were expressly made subject to certain future regulations—namely, those issued pursuant to the OCSLA and two provisions of the Department of Energy Organization Act—the Court determined that the "catchall" provision, subjecting the leases to "all other applicable regulations," could only refer to "statutes and regulations already existing at the time of the contract."¹¹³ "Hence, these provisions mean that the contracts are not subject to future regulations promulgated under other statutes, such as new statutes like OBPA."¹¹⁴ The fact that the regulation already existed at the time the parties entered the leases did not matter, because the regulation's existence was

not sufficient to produce the incorporation of future statutory requirements, which is what the Government needs to prevail. If the pre-existing regulations' words, "an environmental analysis," were to apply to analyses mandated by future statutes, that they would make the companies subject to the same unknown future requirements that the contracts' specific temporal restrictions were intended to avoid.¹¹⁵

The Court emphasized the need for such limitations on the government, because:

[30 ELR 11110]

Without some such contractual provision limiting the Government's power to impose new and different requirements, the companies would have spent $ 158 million to buy next to nothing. In any event, the Court of Claims so interpreted the lease; the Federal Circuit did not disagree with that interpretation; nor does the Government here dispute it.¹¹⁶

Third, the government argued that the OCSLA required the Secretary of the Interior to promulgate regulations to allow suspension of oil and gas leases when there are threats of serious harm to human health or the environment.¹¹⁷ Congress enacted the OBPA, the government further noted, in order to prevent a serious environmental harm.¹¹⁸ The "fatal flaw" in the government's argument, however, was the Secretary of the Interior's letter to the North Carolina Governor stating that the Exploration Plan fully complied with the current legal requirements.¹¹⁹ As a result, "insofar as that Government means to suggest that the new statute, OBPA, changed the relevant OCSLA standard (or that OBPA language and history somehow constitute findings Interior must incorporate by reference), it must mean that OBPA in effect created a new requirement."¹²⁰ For the reasons previously articulated, the Court concluded, this new requirement was not a part of the lease agreements.¹²¹

More generally, the Court noted that the Secretary of the Interior had not relied on any of these arguments when it refused to approve the Exploration Plan in the face of the OBPA.¹²² Instead, "the new statute, OBPA, required Interior to impose the contract-violating delay."¹²³ In addition, the Court emphasized:

OBPA changed pre-existing contract-incorporated requirements in several ways. It delayed approval, not only of an Exploration Plan but also of Development and Production Plans; and it delayed the issuance of drilling permits as well. It created a new type of Interior Department environmental review that had not previously existed, conducted by the newly created Environmental Sciences Review Panel; and, by insisting that the Secretary explain in detail any differences between the Secretary's findings and those of the Panel, it created a kind of presumption in favor of the new Panel's findings.¹²⁴

These changes, the Court admitted, might have been justified, but they still "were changes of a kind that the contracts did not foresee."¹²⁵ As a result, "in communicating to the companies its intent to follow OBPA, the United States was communicating its intent to violate the contracts."¹²⁶

B. The Government's Breach Was Substantial Enough to Constitute Repudiation

Having been found to have breached the leases by not approving the exploration plan within 30 days and having no excuse within the contract itself for not doing so, the government next argued that the breach could not be a substantial breach or repudiation because the 30-day approval was not the "essence" of the lease agreements.¹²⁷ The Supreme Court, however, again agreed with the Court of Federal Claims "that timely and fair consideration of a submitted Exploration Plan was a 'necessary reciprocal obligation,' indeed, that any 'contrary interpretation would render the bargain illusory.'"¹²⁸

We recognize that the lease contracts gave the companies more than rights to obtain approvals. They also gave the companies rights to explore for, and to develop, oil. But the need to obtain Government approvals so qualified the likely future enjoyment of the exploration and development rights that the contract, in practice, amounted primarily to an opportunity to try to obtain exploration and development rights in accordance with the procedures and under the standards specified in the cross-referenced statutes and regulations. Under these circumstances, if the companies did not at least buy a promise that the Government would not deviate significantly from these procedures and standards, then what did they buy?¹²⁹

Declaring that "the Government's modification of the contract-incorporated processes was not technical or insubstantial," but instead that the OBPA imposed a delay of at least 13 months, which turned out to last 4 years, the Court concluded that "under the contracts, the incorporated procedures and standards amounted to a gateway to the companies' enjoyment of all other rights. To significantly narrow that gateway violated material conditions in the contracts."¹³⁰ As a result, the government's breach of the contract was "'substantial,' depriving the companies of the benefit of their bargain."¹³¹ Moreover, the government's "communication of its intent to commit that breach amounted to a repudiation of the contracts."¹³²

C. No Waiver of Restitution by Mobil and Marathon

In addressing the government's argument that Mobil and Marathon had waived their rights to restitution, the Supreme Court began by emphasizing what the government did not argue. "It does not deny that the United States repudiated the contracts if (as we have found) OBPA's changes amounted to a substantial breach. The Government does not claim that the United States retracted its repudiation."¹³³ It cannot claim that the companies waived their rights simply by urging performance, "nor has the Government convinced us that the companies' continued actions [30 ELR 11111] under the contracts amount to anything more that this urging of performance."¹³⁴

As a result, "the Government's waiver claim must come down to a claim that the companies received at least partial performance," and accepted such performance, after the repudiation.¹³⁵ The government argued that Mobil and Marathon submitted their exploration plan to the Secretary of the Interior two days after the OBPA became law; that the companies subsequently asked the Secretary of Commerce to override North Carolina's objections to the CZMA certification; and that the oil companies received suspensions and extensions of their leases pending the OBPA requirements.¹³⁶ The Supreme Court concluded that none of these events amounted to significant post-repudiation performance. Although the companies went ahead and submitted their exploration plan, "the performance question . . . is not just about what the oil companies did or requested, but also about what they actually received from the Government. And, in respect to the exploration plan, the companies received nothing."¹³⁷ The Secretary of Commerce, in turn, "did not base his reply [to the override request] upon application of the contracts' standards, but instead relied in large part on the findings of the new, OBPA-created, Environmental Sciences Review Panel."¹³⁸ "Consequently, we cannot say that the companies received from Commerce the kind of consideration for which their contracts called."¹³⁹ Finally, the Court found that Mobil and Marathon were already entitled to suspensions under the 1989 MOU, "and the Government has provided no convincing reason why we should consider the suspensions to amount to significant performance of the lease contracts in question."¹⁴⁰

The government also argued that the oil companies were not entitled to restitution because the repudiation caused them no damage—North Carolina had refused to concur in the CZMA's consistency certification, preventing the companies from exploring for oil. The Court disagreed, pointing out that the companies sought restitution, not damages. "Because the Government repudiated the lease contracts, the law entitles the companies to that restitution whether the contracts would, or would not, ultimately have produced a financial gain or led them to obtain a definite right to explore."¹⁴¹

D. Justice Stevens' Dissent

Alone of the nine Justices, Justice Stevens dissented in Mobil Oil Exploration. Emphasizing that oil development off of North Carolina had always been particularly risky and that Mobil and Marathon "knowingly assumed" "the risk that the State of North Carolina would exercise its right to object to the completion of the project,"¹⁴² Justice Stevens nevertheless agreed with the majority that the oil companies had not assumed the risk that "Congress would enact additional legislation that would delay the completion of what would obviously be a lengthy project in any event."¹⁴³ He disagreed, however, regarding the legal effect of the government's breach: "When the entire relationship between the parties is considered, with particular reference to the impact of North Carolina's foreseeable exercise of its right to object to the project, it is clear that the remedy ordered by the Court is excessive."¹⁴⁴

Citing to the multiparty MOU as evidence that "it was clear to [Mobil and Marathon] as early as October 6, 1988 (and almost certainly before), that the State of North Carolina . . . was not going to go along readily,"¹⁴⁵ Justice Stevens emphasized that the two oil companies submitted their exploration plan to the Secretary of the Interior even though North Carolina "continued to express its dissatisfaction with the prospect of exploration and development . . . ."¹⁴⁶ Moreover, while acknowledging that the DOI's failure to approve the plan within 30 days amounted to a breach, Justice Stevens also emphasized that in his letter announcing his intent to comply with the OBPA, the Secretary of the Interior also viewed his inability to approve the exploration plan as a delay. Thus, while the statement in the letter "must also be seen as a signal of [the Government's] intent to remain in breach of the 30-day deadline requirement for the coming year," the more important question was "whether, in light of the Government's actions, petitioners are entitled to restitution rather than damages, the usual remedy for breach of contract."¹⁴⁷

After a more thorough examination of repudiation law than the majority engaged in, Justice Stevens noted that "there is only repudiation if there is an action that would amount to a total breach, and there is only such a breach if the suspect action destroys the essential object of the contract."¹⁴⁸ Moreover, "restitution is only appropriate when 'it is just in the circumstances.'"¹⁴⁹ Given the circumstances, Justice Stevens argued, the government had not repudiated the leases.

First, and most basic, the Government continued to perform under the contractual terms as best it could even after the OBPA's passage. Second, the breach-by-delay forecast in the Ake letter was not "of sufficient gravity that, if the breach had actually occurred, it would of itself give the obligee a claim for damages for total breach."¹⁵⁰

"The OBPA itself contemplated that the parties to the lease contracts would continue, after a delay, to operate under the [30 ELR 11112] OCSLA-based contractual scheme,"¹⁵¹ and both sides to the contract continued to perform as best they were able.¹⁵² As a result, neither enactment of the OBPA itself nor the Secretary of the Interior's refusal to disobey the OBPA could be viewed as a repudiation of the leases.

Moreover, in order to judge whether the resulting delay was nevertheless so substantial a breach as to justify restitution, the Court had to look at "what impact, if any, the breach had at the time the breach occurred on the successful completion of the project."¹⁵³ Because of North Carolina's foreseeable and continued objections to the CZMA's certification:

In this action the answer must be close to none. Sixty days after the Government entered into breach—from September 19, 1990, to November 19, 1990—the State of North Carolina filed its formal objection to CZMA certification with the United States . . . . While this objection remained in effect, the project could not go forward unless the objection was set aside by the Secretary of Commerce.¹⁵⁴

As a result, the government-induced delay—effectively only 60 days—did not so substantially breach the leases as to warrant restitution, especially because the oil companies themselves "waited seven years into the renewable 10-year lease term before even floating the Outer Banks proposal, and waited another two years after the OBPA was passed before filing this lawsuit."¹⁵⁵

III. Breach of Contract, Repudiation, and Restitution Under Contract Law

The Mobil Oil Exploration decision is very much in line with the Supreme Court's other recent pronouncements on government contracts and new federal statutes. Most dramatically, in its 1996 decision in United States v. Winstar Corp.,¹⁵⁶ a case involving federal banking statutes, the Supreme Court effectively imposed the risk of loss from a change in federal regulation on the federal government in all government contracts, unless the parties explicitly bargain otherwise.¹⁵⁷ At the same time, the Court severely limited four traditional contract defenses available to the federal government based on its status as sovereign.¹⁵⁸ Finally, the Winstar Court emphasized that "ordinary principles of contract construction and breach that would be applicable to any contract action between private parties" apply to contracts with the federal government,¹⁵⁹ a principle the Mobil Oil Exploration Court explicitly followed.¹⁶⁰

Nevertheless, as Justice Stevens' dissent indicates, the Mobil Oil Exploration decision can be criticized on purely contractual grounds. As Justice Stevens also points out, it is the Court's decision to allow restitution, not the fact of breach, that is the most crucial issue in Mobil Oil Exploration, because damages from these highly speculative OCSLA leases, particularly in light of North Carolina's long-term and continuing objections, were likely to be quite limited. The OCSLA's leases presented the Court with a version of the "losing contract" scenario, a controversial aspect of the Restatement (Second) of Contracts,¹⁶¹ which the Supreme Court relied on as its principal source of contract law.¹⁶² Indeed, Mobil Oil Exploration demonstrates why allowing restitution as a remedy for breach of losing contracts is so controversial: the Court awarded full restitution to sophisticated oil companies who paid for oil and gas leases with full knowledge that their upfront payments might not ever lead to profits. When the environmentaldimension of the case assumes its proper importance, Justice Stevens' objections acquire even more power, because the environmental aspects of the OCSLA require both reexamination of the Justices' view of the basis of an OCSLA lease bargain and restoration of the Federal Circuit's emphasis on North Carolina's CZMA objection to the NPDES permit certification.

A. The 30-Day Requirement, Breach, and Repudiation

In deciding that the federal government had not only breached but repudiated its promises in the OCSLA lease contracts, the Supreme Court fixated on the requirement that the Secretary of the Interior approve exploration plans within 30 days. By focusing on the 30 days, however, the Court raised timing requirements to the status of essential elements of the OCSLA's lease bargain. As Justice Stevens' dissent suggests, the majority's focus makes time of the essence in contracts where lengthy and numerous delays, both voluntary and involuntary, were clearly understood to be part of the contractual agreement. A more proper focus, therefore, is on the requirement that the government approve an exploration plan that is consistent with the OCSLA.

The OCSLA's leases incorporated the Act's requirement [30 ELR 11113] that the Secretary of the Interior approve an exploration plan within 30 days if the exploration plan is consistent with the Act. Because of the OBPA, the Secretary of the Interior was legally forbidden to approve Mobil's exploration plan from August 18, 1990, until April 1992. The Secretary then extended its non-approval another two and one-half years, until November 1994, in order to acquire certain studies that the OBPA's Environmental Sciences Review Panel has recommended. The Secretary of the Interior thus clearly breached the lease contracts through noncompliance with the 30-day time limit.

However, the effect of that breach depends on the importance of the 30-day requirement to the contract. The Restatement recognizes four categories of breach by nonperformance. First, "a breach by non-performance gives rise to a claim for damages for total breach only if it discharges the injured party's remaining duties to render such performance. . . ."¹⁶³ Second, in general, "a breach by non-performance accompanied or followed by a repudiation gives rise to a claim for damages for total breach."¹⁶⁴ However, third:

Where at the time of the breach the only remaining duties of performance are those of the party in breach and are for payment of money in installments not related to one another, his breach by non-performance as to less than the whole, whether or not accompanied or followed by a repudiation, does not give rise to a claim for damages for total breach.¹⁶⁵

Finally, in any other case:

a breach by non-performance gives rise to a claim for total breach only if it so substantially impairs the value of the contract to the injured party at the time of the breach that it is just in the circumstances to allow him to recover damages based on all his remaining rights to performance.¹⁶⁶

The Court of Federal Claims and the Supreme Court put the U.S. breach of the lease agreements into category 2, a breach by nonperformance accompanied by a repudiation.¹⁶⁷

A repudiation is: (a) a statement by the obligor to the obligee indicating that the obligor will commit a breach that would of itself give the obligee a claim for damages for total breach . . . , or (b) a voluntary affirmative act which renders the obligor unable or apparently unable to perform without such a breach.¹⁶⁸

Moreover, "in order to constitute a repudiation, a party's language must be sufficiently positive to be reasonably interpreted to mean that the party will not or cannot perform."¹⁶⁹ In judging a repudiation, therefore, the exact promise at issue and its relationship to the contract are critical: repudiation must involve a breach that would, in and of itself, give rise to a claim of total breach.

The OBPA and the Secretary's letter to the governor of North Carolina clearly indicate the federal government's intent not to approve the exploration plan within 30 days of submission. However, Justice Stevens is correct that the Secretary of the Interior never repudiated the OCSLA's leases—if the more important promise was approval of a plan that is consistent with the Act, the regulations, and the lease. In this context, it is worth examining the incorporated statutory language in detail. The OCSLA provides that:

Prior to commencing exploration pursuant to any oil and gas lease issued or maintained under this subchapter, the holder thereof shall submit an exploration plan to the Secretary for approval. Such plan . . . shall be approved by the Secretary if he finds that such plan is consistent with the provisions of this subchapter, regulations prescribed under this subchapter, . . . and the provisions of such lease. The Secretary shall require such modifications of such plan as are necessary to achieve such consistency. The Secretary shall approve such plan, as submitted or modified, within thirty days of its submission, except that the Secretary shall disapprove such plan if he determines that (A) any proposed activity under such plan would result in any condition described in section 1334(a)(2)(A)(i) of this title, and (B) such proposed activity cannot be modified to avoid such condition. If the Secretary disapproves a plan under the preceding sentence, he may, subject to section 1334(a)(2)(B) of this title, cancel such lease and the lessee shall be entitled to compensation in accordance with the regulations prescribed under section 1334(a)(2)(C)(i) or (ii) of this title.¹⁷⁰

A fair reading of this paragraph emphasizes not the 30-day requirement, but instead the requirement that the exploration plan comply with the OCSLA. The Secretary can approve exploration plans only if they are consistent with the OCSLA, its implementing regulations, and the lease itself. If the plan is inconsistent with any of these requirements, the Secretary must send it back to the lessee for modification. Approval must come within 30 days of submission or modification, and the statute immediately qualifies the 30-day requirement with a major exception. It strains the statutory language, therefore, to view the exploration plan approval requirement as primarily a timing provision that guarantees lessees speedy progress toward actual exploration of the outer continental shelf. Instead, the approval requirement ensures that the lessee's exploration plan will comply with the OCSLA and its implementing regulations. As a practical matter, moreover, such compliance ensures that the exploration plan will not cause environmental harm.¹⁷¹

[30 ELR 11114]

The last two sentences quoted above underscore emphasis on environmental compliance rather than timing. These sentences allow the Secretary to not only disapprove the exploration plan but also potentially to cancel the entire lease when, following the reference to § 1334, "continued activity pursuant to such lease . . . would probably cause serious harm or damage to life (including fish and other aquatic life), to property, to any mineral (in areas leased or not leased), to the national security or defense, or to the marine, coastal, or human environment."¹⁷² The exploration plan thus becomes an occasion for the Secretary to halt proposed outer continental shelf development that would have too great an environmental effect. Therefore, the approval requirement's essence is not to ensure lessees guaranteed speedy "gateway."

In addition, Congress understood delays to be an acceptable part of OCSLA leases when it enacted the OBPA. The Conference Committee explicitly "considered the potential for financial liability to the Federal Government as a result of this provision."¹⁷³ However, it was "confident that no financial liability arises because this provision enacts only a temporary delay in approval of activities on existing leases offshore North Carolina. . . . This delay is temporary and definite in duration."¹⁷⁴ While this post-hoc view of the OCSLA could not bind the Supreme Court, of course, it certainly suggests a view of the OCSLA that the Court should have more carefully considered.

Finally, an emphasis on compliance rather than timeliness does not render the government's promises "illusory" from the lessee's perspective. Lessees are subject to government enforcement for violations of the OCSLA, its implementing regulations, or the lease provisions¹⁷⁵—the very requirements with which the exploration plan must be consistent before the Secretary can approve the plan. Violation of those requirements, moreover, can subject the lessee to civil penalties of up to $ 20,000 per day,¹⁷⁶ criminal fines of up to $ 100,000 and/or imprisonment of up to 10 years,¹⁷⁷ injunctions of the offending activities,¹⁷⁸ and citizen suits.¹⁷⁹ The finding of consistency at the exploration plan stage thus gives the lessee a measure of protection from the consequences of violating the Act—surely not an illusory bargain, given the complexities of outer continental shelf regulation. In particular, consistency helps to ensure that lessees will not make expensive capital investments in exploration only to be shut down in later lawsuits.

Refocusing the import of the approval promise from timing to compliance and environmental protection significantly alters the Supreme Court's breach and repudiation analysis. While the OBPA and the Secretary of the Interior's letter caused the United States to breach the 30-day promise, that promise is not sufficient "of itself [to] give the obligee a claim for damages for total breach" because speedy approval was not an essential part of the bargain. On the other hand, the OBPA's provisions allow OCSLA leases to resume implementation after a statutory delay, and the Secretary's letter clearly did not repudiate the promise to approve a consistent plan, only to delay approval until the OBPA's requirements were met.

As a result, the OBPA and the Secretary's conduct did not constitute a "breach by non-performance accompanied or followed by a repudiation," the Restatement's second category of breaches by nonperformance that can give rise to a claim for total breach.¹⁸⁰ The third category, relating to installment payments,¹⁸¹ clearly does not apply. Thus, without a repudiation, the government's breach of the 30-day requirement could "give[] rise to a claim for damages for total breach only if it discharged the injured party's remaining duties to render such performance"¹⁸² or "only if it so substantially impaired the value of the contract to the injured party at the time of the breach that it is just in the circumstances to allow him to recover damages based on all his remaining rights to performance."¹⁸³

The only provision that the federal government actually breached was the 30-day time limit.¹⁸⁴ However, because the 30-day requirement was not essential, breach of that requirement alone could not have given rise to a claim for total breach. Nor could that breach be held to substantially impair the value of the contract, given North Carolina's CZMA objections. Therefore, breach of the 30-day approval requirement did not give the oil companies a claim for total breach, and without a breach by nonperformance that could give rise to a claim for total breach, Mobil and Marathon were not entitled to restitution.¹⁸⁵

B. The Effect of North Carolina's CZMA Objections

More disturbing than the Supreme Court's focus on timing requirements was the complete disappearance of North Carolina's CZMA objections from the Court's decision, despite those objections' prominence in the Federal Circuit's opinion. The Federal Circuit emphasized that "under the OCS [outer continental shelf] lease, lessees' rights to exploration, development, and production were conditioned upon obtaining the necessary federal and state approvals."¹⁸⁶ Moreover, it found North Carolina's involvement in the Manteo Unit particularly important to the breach of contract issue:

[30 ELR 11115]

In this case, North Carolina objected from the beginning to the Manteo Unit's proposed exploration as being inconsistent with its coastal zone program under the CZMA. This led to the MOU between the Manteo Unit, the DOI, and the State of North Carolina in 1989. . . . Furthermore, North Carolina registered its objections to Mobil's and Marathon's NPDES certification of consistency in July 1990, and restated its objections to their [exploration plan's] certification of consistency in November 1990; North Carolina maintained both of these objections throughout the time that the moratorium imposed by the OBPA was effective.¹⁸⁷

North Carolina objected to the oil companies' NPDES permit certification in July 1990, a month before the OBPA became effective. However, although the Supreme Court noted that OCSLA leases can involve NPDES permits,¹⁸⁸ North Carolina's objections to the NPDES permit—which Mobil needed to implement the exploration plan as submitted—played no part in the Court's decision. The Court thus appears to have considered the NPDES permit to be a side issue, not substantially related to the primary problem of the OCSLA leases and the exploration plan's approval.

By not considering the NPDES permit, however, the Supreme Court oversimplified the complexities of OCSLA exploration plans. OCSLA lessees can only explore the outer continental shelf in accordance with the exploration plan that the Secretary approves.¹⁸⁹ Mobil's exploration plan required an NPDES permit to be carried out as submitted. Without the NPDES permit, therefore, Mobil Oil could not have explored its lease territory in accordance with its exploration plan, even if the Secretary had approved that plan. Therefore, while North Carolina's CZMA objection to the NPDES permit most directly operated to prevent EPA from issuing that permit, it also effectively frustrated the oil companies' ability to implement the exploration plan at issue.

Even allowing that the government breached the leases by nonperformance and repudiated those leases, the Restatement provides that if, after such a breach, it appears that the duty that the breaching party repudiated "would have been discharged by impracticability or frustration before any breach by non-performance," the breaching party's "duty to pay damages for total breach by repudiation is discharged."¹⁹⁰ Frustration of purpose "deals with the problem that arises when a change in circumstances makes one party's performance virtually worthless to the other, frustrating his purpose in making the contract."¹⁹¹ It requires substantial frustration of a principle purpose of the contract, and "the non-occurrence of the frustrating event must have been a basic assumption on which the contract was made."¹⁹²

In Mobil Oil Exploration, North Carolina objected to Mobil Oil's NPDES permit application before Congress enacted the OBPA—that is, before any breach by Congress or the Secretary. Moreover, as discussed, once North Carolina had objected to the NPDES permit pursuant to the CZMA, EPA could not issue Mobil Oil that permit, preventing implementation of the exploration plan. Exploration for oil obviously is one of the essential purposes of an OCSLA lease. Hence, North Carolina's CZMA objection effectively frustrated the oil companies' purpose in exploring for oil in accordance with the submitted exploration plan before the federal government breached the leases by not approving the plan within 30 days.

It might be argued that North Carolina's objections were foreseeable, given the fact that the OCSLA requires CZMA consistency. However, "the fact that the event was foreseeable, or even foreseen, does not necessarily compel a conclusion that its non-occurrence was not a basic assumption" of the contract.¹⁹³ In addition, the sudden need for the 1989 MOU indicates that neither party to the lease assumed in the early 1980s, when they entered the lease, that North Carolina would fail to cooperate.

North Carolina's objections to the NPDES permit thus should have relieved the federal government of its obligations to pay damages for its breach, even if the government's breach was substantial enough to warrant damages for total breach. Restitution is an "alternative remedy for breach" to the normal remedy of damages.¹⁹⁴ Therefore, if damages were not available to the oil companies, restitution should not have been available either.

C. OCSLA Leases, Environmental Problems, and Restitution

In no small sense, the Supreme Court in Mobil Oil Exploration effectively held that Congress, in enacting the OBPA, breached the Secretary of the Interior's lease contracts for development of oil off the North Carolina coast. The federal government was, for purposes of these contracts, a single entity.

In the OBPA, Congress explicitly found that the EIS and the draft environmental report for the proposed Manteo Unit activities relied on information inadequate to ensure that the North Carolina coastal environment would be protected.¹⁹⁵ In particular, one of the primary purposes of the OBPA was to "provide adequate information and assessments to address potential oil pollution problems."¹⁹⁶ Congress thus imposed a delay on OCSLA lease exploration to effect "a legitimate and broad-based public purpose—environmental protection. This delay is imposed to provide for the collection and analysis of crucial oceanographic, ecological, and socioeconomic data, and, therefore, is a reasonable action to prevent a public harm that could result from the lack of such information."¹⁹⁷

As noted, in reviewing exploration plans, the Secretary of the Interior can cancel leases if "continued activity pursuant to such lease . . . would probably cause serious harm or damage to life (including fish and other aquatic life), to property, to any mineral (in areas leased or not leased), to the national security or defense, or to the marine, coastal, or human environment."¹⁹⁸ In the OBPA, therefore, Congress engaged in a [30 ELR 11116] type of environmental evaluation of the Manteo Unit similar to that the Secretary could have imposed on the exploration plan directly through the OCSLA. The oil companies paid for their leases knowing that such environmental evaluations could halt all lease activity permanently.

If the Secretary had canceled the leases on the grounds that the exploration plan showed a probability of serious environmental harm that could not be corrected, the oil companies would have been entitled to compensation in accordance with the Act.¹⁹⁹ The OCSLA's compensation provisions entitle the lessees of a canceled lease to:

The lesser of (i) the fair value of the canceled rights as of the date of cancellation . . . , or (ii) the excess, if any, over the lessee's revenues, from the lease . . . of all consideration paid for the lease and all direct expenditures made by the lessee after the date of issuance of such lease and in connection with exploration or development, or both, pursuant to the lease . . . .²⁰⁰

In other words, lessees are entitled to restitution of their upfront payments only to the extent that those payments and other expenditures exceed realized revenues, and only if the difference is less than the fair value of the canceled rights. In the OCSLA, therefore, Congress eliminated the "losing contract" restitution option.

Nevertheless, in Mobil Oil Exploration, the Supreme Court upheld restitution as a remedy when Congress delayed oil and gas exploration in order to protect the environment, even though the oil companies could not have claimed restitution if the Secretary had canceled their leases because their exploration probably would have harmed the environment. Viewed in a fuller environmental context, therefore, the Supreme Court awarded Mobil and Marathon a windfall rather than giving effect to their lease contract-based expectations.

IV. The Public Interest, the Public Trust, and the Government's Breach

A. The OCSLA's Public Trust

The Supreme Court treated OCSLA leases and the OBPA as a problem purely of contract law, ignoring the environmental dimensions of the case. As the above discussion indicates, this environmental dimension should have influenced even that contract analysis in the government's favor. However, OCSLA leases incorporate an entirely different aspect of environmental law that played no part in any of the federal courts' decisions: the public trust. The public trust dimension of the case, moreover, argues strongly that the federal courts should have more seriously considered the government's sovereign defenses of unmistakability and sovereign acts, even though the OBPA directly and purposefully affected individual private parties' contracts.

In the 1978 amendments to the OCSLA, Congress declared that "the outer Continental Shelf is a vital national resource reserve held by the Federal Government for the public . . . ."²⁰¹ While the joint Congress declined to use the exact word "trust" in its amendment,²⁰² the Conference Report noted that "policy statements are added to emphasize that the OCS [outer continental shelf] is held for all the people, and its resources should be made available for expeditious and orderly development subject to environmental safeguards, and with due consideration to the affected states."²⁰³ The amended OCSLA thus incorporates a "higher responsibility" to the people and to the states expressly oriented toward environmental protection. In spirit if not in name, therefore, Congress created a public trust in the outer continental shelf lands.

Public trust jurisprudence derives from two sources, common-law navigability doctrines and the Constitution's assignment of public lands management, and federal management of the outer continental shelf implicates aspects of both. The common-law²⁰⁴ public trust doctrine recognizes the title of the sovereign to navigable waters and the lands beneath them, which the sovereign holds in trust for the public. In its classic statement of the public trust doctrine, the Supreme Court emphasized both the rights and the responsibilities that sovereigns assume over these submerged lands:

Title [to these lands is] different in character from that which the state holds in lands intended for sale. . . . It is a title held in trust for the people of the state that they may enjoy the . . . waters, . . . freed from the obstruction or interference of private parties. . . . [Resigning control over these lands] is not consistent with the exercise of that trust which requires the government of the state to preserve such waters for the use of the public. The trust devolving upon the state for the public, and which can only be discharged by the management and control of property in which the public has an interest, cannot be relinquished by a transfer of the property. The control of the state for the purposes of the trust can never be lost, except as to parcels as are used in promoting the interests of the public therein, or can be disposed of without any substantial impairment of the public interest in the lands and waters remaining.²⁰⁵

As this passage indicates, in America the public trust doctrine applies primarily to states,²⁰⁶ not the federal government. Nothing in the origins of the public trust doctrine, however, prevents it from applying to the federal government, because the doctrine derives from the English monarch's national sovereignty.²⁰⁷ Moreover, the Supreme Court has long maintained that the federal government acts [30 ELR 11117] as at least temporary trustee of these lands before states are formally admitted to the Union,²⁰⁸ and a majority of the few district courts that have addressed this issue have found that the public trust doctrine applies to the United States.²⁰⁹

When applicable, the public trust doctrine prevents the sovereign from allowing private individuals to use the public trust property to the detriment of specific public interests—traditionally navigation and fishing, but in more modern times the doctrine has been extended to recreation, aesthetics, and environmental well-being.²¹⁰ The Supreme Court, moreover, has described the public trust doctrine as an "essential attribute of sovereignty."²¹¹

Complicating the common-law public trust doctrine for the OCSLA, however, is the complex history of sovereignty over lands submerged under the ocean. The public trust doctrine in the United States extends to lands under navigable inland waters,²¹² but its origin and justification is in the English sovereign's authority over the sea.

At common law, the title and dominion in lands flowed by the tide water were in the King for the benefit of the nation . . . . Upon the American Revolution, these rights, charged with a like trust, were vested in the original States within their respective borders, subject to the rights surrendered by the Constitution of the United States.²¹³

More recently, the Supreme Court specifically upheld the tidal test for the public trust doctrine, extending that doctrine to tidal flats that were not technically navigable, partially on the ground that "it is obvious that these waters are part of the sea . . . ."²¹⁴

However, states today technically have jurisdiction over submerged ocean lands not by virtue of the common-law devolution of title and the public trust, but by federal statute. In the 1940s, California and the United States disputed over which sovereign could regulate—and receive the revenues from—offshore oil and gas development. California claimed title to the offshore submerged lands through the common law, but in 1947, the Supreme Court awarded title to those lands to the United States.²¹⁵ The territorial sea of the United States then extended three miles offshore, and the Court emphasized that "not only has acquisition, as it were, of the three-mile belt, been accomplished by the national government [through diplomatic negotiations by Thomas Jefferson], but protection and control of it has been and is a function of national external sovereignty."²¹⁶

Within six years, however, Congress "restored" title to the states through companion legislation to the OCSLA, the Submerged Lands Act,²¹⁷ granting states title to and jurisdiction over a band of the ocean three miles wide.²¹⁸ One of Congress' purposes in passing the Submerged Lands Act, moreover, "was to further the Public Trust Doctrine by decentralizing management of the coastal areas, thereby fostering management more adapted to the prevailing needs of the area."²¹⁹ The coastal states have actively extended the public trust doctrine to their ocean jurisdictions.²²⁰

Nevertheless, the Supreme Court's 1947 decision casts doubt on whether the common-law public trust doctrine applies to ocean realms over which the federal government acquires or asserts jurisdiction—such as the submerged lands of the outer continental shelf. Moreover, in bringing the outer continental shelf within U.S. jurisdiction, Congress created a realm of the sea that is within the U.S. jurisdiction but outside the borders of any state, a jurisdictional expansion unknown at the time the United States became a country and thus of questionable relationship to the English common law as the United States inherited it. For purposes of the OCSLA, the outer continental shelf is "the submerged lands [30 ELR 11118] lying seaward and outside of the lands beneath navigable waters"²²¹—that is, submerged lands beyond the states' ownership and public trust responsibilities.²²² As a result, the federal government controls about 90% of the continental shelf:

Along the Atlantic coast, the maximum distance from the shore to the outer edge of the shelf is 250 miles and the average distance is about 70 miles. In the Gulf of Mexico, the maximum distance is 200 miles and the average is 93 miles. The total area of the shelf off the United States is estimated to contain about 290,000 square miles, or an area larger than New York, New Jersey, Pennsylvania, Ohio, Indiana, Illinois, and Kentucky combined. The area of shelf off Alaska is estimated to contain 600,000 square miles, an area almost as large as Alaska itself.

That part of the shelf which lies within historic State boundaries, or 3 miles in most cases, is estimated to contain about 27,000 square miles or less than 10 percent of the total area of shelf.²²³

Even if the outer continental shelf is not subject to the common-law public trust doctrine based on navigable waters, however, the outer continental shelf's status as federal public lands carries with it a public trust imposed through the federal property provisions of the Constitution. As the Supreme Court has recognized:

Article IV, § 3, cl. 2 of the Constitution vests in Congress "Power to dispose of and make all needful Rules and Regulations respecting the Territory or other Property belonging to the United States." . . . Neither the courts nor the executive agencies, could proceed contrary to an Act of Congress in this congressional area of national power.²²⁴

However, with the authority to manage the public lands comes public trust responsibility. "The public domain is held by the government as part of its trust."²²⁵ More explicitly, "the public lands . . . are held in trust for the people of the whole country," and "the government is charged with the duty and clothed with the power to protect the public domain from trespass and unlawful appropriation."²²⁶ Agents of the executive branch, like the Secretary of the Interior, can implement this trust, in which case that agent is "the guardian of the people of the United States over the public lands," charged with ensuring that "none of the public domain is wasted. . . ."²²⁷ However, it is always up to Congress to determine how the public trust in the public lands should be administered,²²⁸ and private individuals cannot assert binding private claims regarding public lands contrary to the congressional scheme.²²⁹

Concepts of the public trust do not appear in the Restatement (Second) of Contracts. Nevertheless, the states have found that public trust principles related both to lands and to navigable waters can have direct and sometimes drastic effects on contractual obligations. For example, the public trust can influence how courts will interpret various contract provisions. Courts "will not enforce an exculpatory clause if the party benefitting from the exculpation is subject to a positive duty imposed by law or is imbued with a public trust, or if exculpation of the party would adversely affect the public interest."²³⁰ One cannot thus contract away one's public trust responsibilities. Of more relevance to Mobil Oil Exploration is the rule that all contracts relating to a public trust responsibility "implicitly include a clause rendering such contract subject to any changes which may be made in the law."²³¹

The pubic trust can also operate to invalidate various transactions regarding public trust lands. In Illinois, for example, public trust principles can invalidate sales of public lands, and "'when a state holds a resource which is available for the free use of the general public, a court will look with considerable skepticism upon any governmental conduct which is calculated either to reallocate that resource to more restricted uses or to subject public uses to the self-interest of private parties.'"²³² The North Carolina Supreme Court has created a presumption that the public trust doctrine voids purported sales of submerged lands,²³³ while the Vermont Supreme Court has gone even further, calling into question the state legislature's ability to ever convey public trust lands and waters free of that trust.²³⁴ New York invalidated leases that allowed various city departments to use a public park for storage because "dedicated park areas in New York are impressed with a public trust" and no specific [30 ELR 11119] legislative act had allowed use of the park for other than park purposes.²³⁵

Several states have also extended other direct protections for the public trust. Vermont, for example, has emphasized that "the state's power to supervise trust property in perpetuity is coupled with the ineluctable duty to exercise this power."²³⁶ Recognizing a public trust in the quality of the environment, Connecticut and Michigan have enacted environmental protection acts that allow citizens to sue to enforce that trust, and the Connecticut Supreme Court has recognized that its state's act does away with traditional standing requirements for plaintiffs.²³⁷ California and Vermont agree that "'statutes purporting to abandon the public trust are to be strictly construed; the intent to abandon must be clearly expressed or necessarily implied; and if any interpretation of the statute is reasonably possible which would retain the public's interest in tidelands, the court must give the statute such an interpretation.'"²³⁸ As implemented by the states, therefore, the concept of a public trust, whether in lands or in waters, operates one way: in favor of the general public, and against private interests—even contractual interests.

B. The Public Trust Doctrine and the Federal Government's Sovereign Defenses in Mobil Oil Exploration

1. The Unmistakability and Sovereign Acts Defenses in the Court of Federal Claims

In the Court of Federal Claims, the United States asserted two defenses to the alleged breach of the North Carolina OCSLA leases: the sovereign acts doctrine and the unmistakability doctrine.²³⁹ Both of these defenses recognize that the federal government is a sovereign as well as a contracting agent and that the former role can interfere with the latter without rendering the government liable for breach of contract.

The Court of Federal Claims noted that "it is a well-settled point of law that the sovereign acts defense is included as an inherent term, whether express or implied, in every public contract."²⁴⁰ The sovereign acts defense recognizes "that the government acts in a dual capacity—as both a contractor and a sovereign—and should not be held liable in contract for acts it performs as a sovereign."²⁴¹ However, the United States cannot use its role as sovereign to abrogate its contracts with impunity.²⁴² Instead, in order to successfully assert the sovereign acts defense, "the government must demonstrate that the alleged breach constituted an act by the sovereign that was 'public and general in nature,' not private and contractual."²⁴³ "Indeed, government acts that directly or intentionally, as opposed to incidentally, impede specific contracts rather than promote the general interest are not sovereign acts within the meaning of this defense."²⁴⁴

According to the Court of Federal Claims, the unmistakability doctrine is "a corollary to the sovereign acts doctrine" and provides that "the government never surrenders its legislative or regulatory powers unless the legislation authorizing the government to enter into the contracts at issue states otherwise in unmistakable terms."²⁴⁵ Thus, "the unmistakability doctrine stands or falls with the sovereign acts doctrine."²⁴⁶

The United States argued that the OBPA was a sovereign act because in enacting that statute, "the government was acting in its sovereign capacity to safeguard the environment."²⁴⁷ The Court of Federal Claims, however, disagreed, holding that not "all of the government's actions taken to protect the environment are sovereign acts."²⁴⁸ The OBPA "was not an act of public, general applicability," and it "affected the public welfare incidentally at most."²⁴⁹ Instead, Congress "principally and primarily" enacted the OBPA to prevent the Secretary of the Interior from acting on the Manteo Unit's exploration plan. As such, "the OBPA specifically targeted plaintiffs and prevented them from exercising their lease rights."²⁵⁰ As a result, the OBPA was not a sovereign act, and neither defense shielded the government from liability.²⁵¹ These defenses then played no role at either stage of appeal.²⁵²

2. Winstar's Refinements of the Two Defenses

Exactly three months after the Court of Federal Claims rendered its decision, the Supreme Court decided Winstar and significantly redefined the sovereign acts and unmistakability doctrines. In addition, the Winstar Court emphasized the separateness of these defenses, rendering the Court of Federal Claims' decision suspect, particularly with respect to unmistakability.

After a lengthy historical review of the unmistakability doctrine, the Court summarized it as follows:

A contract with a sovereign government will not be read to include an unstated term exempting the other contracting party from the application of a subsequent sovereign act (including an Act of Congress), nor will an [30 ELR 11120] ambiguous term of a grant or contract be construed as a conveyance or surrender of sovereign power.²⁵³

While this language appears broad enough to excuse the federal government for the OBPA's effects on the OCSLA leases, the Supreme Court added a test: "The application of the doctrine . . . turns on whether enforcement of the contractual obligation would block the exercise of a sovereign power of the Government."²⁵⁴

Regarding the sovereign acts doctrine, the Court quoted as the basic rule "that 'whatever acts the government may do, be they legislative or executive, so long as they be public and general, cannot be deemed specially to alter, modify, obstruct or violate the particular contracts into which it enters with private persons.'"²⁵⁵ In effect, the sovereign acts doctrine puts the federal-government-as-contractor on an even footing with its private contracting partners, who have a defense when intervening law makes their contract performances impossible or impracticable.²⁵⁶

The Court created a two-part test to ensure that the government and the courts applied the sovereign acts doctrine properly. The first inquiry is "whether the sovereign act is properly attributable to the Government as contractor."²⁵⁷ If so, the government cannot use the defense. Conversely, "governmental action will not be held against the Government for purposes of the impossibility defense so long as the action's impact upon public contracts is . . . merely incidental to the accomplishment of a broader governmental objective."²⁵⁸ The Court emphasized, however, that the defense becomes more suspect as the government's own self-interests grow, "and where a substantial part of the impact of the Government's action rendering performance impossible falls on its own contractual obligations, the defense will be unavailable"²⁵⁹—even if the government acts to protect the public.²⁶⁰

If the act is a sovereign act, the next inquiry is "whether that act would otherwise release the government from liability under ordinary principles of contract law."²⁶¹ The test for this half of the sovereign acts doctrine comes straight from the Restatement provisions governing impossibility and requires:

The Government, like any other defending party in a contract action, [to] show that the passage of the statute rendering its performance impossible was an event contrary to the basic assumptions on which the parties agreed, and must ultimately show that the language or circumstances do not indicate that the Government should be liable in any case.²⁶²

3. The Public Trust, Sovereign Acts, and Unmistakability

A public trust perspective of the Mobil Oil Exploration case indicates that the Court of Federal Claims incorrectly characterized the OBPA for purposes of the sovereign act defense. In holding that the Act only indirectly affected the public welfare, the Court of Federal Claims displaced the very natures of both kinds of public trust. The common-law public trust doctrine protects the public's right to use navigable waterways and the lands submerged under them from the interference of private individuals. To give effect to the public trust, therefore, the federal government must act against private individuals who exceed recognized boundaries. The constitutional public trust makes Congress the ultimate arbitrator of the public's interest in public lands. The public trust that Congress announced in the OCSLA requires oil and gas exploration and development to proceed with minimal harm to the environment and in compliance with the CZMA. The OBPA ensured that the proposed Manteo Unit development observed those limitations. Thus, while the immediate targets of the OBPA were the oil companies and their exploration plan, that impact was in fact "merely incidental to the accomplishment of a broader governmental objective," as Winstar requires.

The public trust perspective thus indicates that the OBPA was a public and general act, despite its interference with private contracts, and the fact that Congress chose to suspend operation of the OCSLA's leases carries no greater significance than that Congress chose to protect the public trust prospectively, rather than voiding the leases after they had been clearly demonstrated to have damaged the public's right to a coast and continental shelf that serve more than just the oil companies. Moreover, the OBPA explicitly rendered the Secretary of the Interior's performance impossible in a way that almost certainly was not contemplated at the time the parties entered the leases. In essence, Congress acted to ensure that the Secretary of the Interior did not violate the public trust—an act that, if it had occurred and if it had violated the public trust, would have been void under most states' contract law.

The current problem with the sovereign acts defense, however, is Winstar's per se rule that the government is not entitled to the sovereign act defense when the substantial impact of the purported sovereign act is to render the government's own contractual obligations impossible. The wisdom of this rule was debated in Winstar itself,²⁶³ and its wisdom is highly debatable in any situation where the sovereign duties of one branch demand that it adjust or reevaluate U.S. contractual obligations. Nevertheless, under Winstar, the government could not have asserted a successful sovereign acts defense even if the Court took a public trust perspective—although such a sovereignty-related environmental context might have prompted the Court to reevaluate Winstar.

Regardless, the unmistakability doctrine should have been a viable defense in Mobil Oil Exploration. Application of the doctrine, as the Winstar Court emphasized, "turns on whether enforcement of the contractual obligation would block exercise of a sovereign power of the United States."²⁶⁴ [30 ELR 11121] The common-law public trust doctrine, as has been noted, is an essential attribute of sovereignty, while Congress' public trust obligations for public lands derive directly from its sovereign constitutional powers to regulate federal property. The federal government "is charged with the duty, and clothed with the power, to protect [the public domain] from trespass and unlawful appropriation,"²⁶⁵ and Congress had determined in the OCSLA that private oil companies would "unlawfully appropriate" the resources of the outer continental shelf if their oil and gas explorations and development would cause probable harm to the ocean and coastal environment or interfere with a state's coastal zone management plan.

Because protection of the public trust is a sovereign power, Congress could not contract it away, and thus public trust limitations were an inherent provision in the OCSLA's leases. Congress enacted the OBPA because it believed that the Secretary of the Interior might allow private oil companies to explore for oil and gas in the outer continental shelf in ways that would cause a "public harm."²⁶⁶ The OBPA thus stands as an explicit congressional judgment that enforcement of the Secretary of the Interior's contractual obligations to approve the exploration plan and to allow exploration to proceed would interfere with Congress' sovereign power to protect the public trust. It is worth emphasizing again that in the constitutional sphere of the public trust, the Supreme Court has acknowledged that Congress is the final arbitrator of its own public trust responsibilities with respect to public lands: "Neither the courts nor the executive agencies, could proceed contrary to an Act of Congress in this congressional area of national power."²⁶⁷ Therefore, under even the Winstar's formulation of the unmistakability doctrine, once Congress had judged that the Secreatary's approval of Mobil's and Marathon's exploration plan could cause a public harm, the federal courts had no business holding the federal government liable for full restitution for breach of the OCSLA's leases.²⁶⁸

V. Conclusion

The Supreme Court decided Mobil Oil Exploration on pure contract principles, giving improper weight to the environmental requirements of the OCSLA and ignoring the public trust acknowledged in the language of that Act. In 1978, however, Congress amended the OCSLA expressly to ensure that oil and gas development in the outer continental shelf proceeded in accordance with environmental standards, and it subjected almost the entire OCSLA lease process to state coastal zone management consistency review. Congress has declared that harm to the coastal and marine environment is too high a price for the public to pay for the oil and gas resources beneath the continental shelf. Since 1978, therefore, oil companies have paid for OCSLA leases knowing that they assume the risk that the potential for environmental harm may delay, alter, or even curtail their exploration for and development of the oil and gas resources from which the companies hope to profit.

Against this background, however, the Supreme Court nevertheless decided that two oil companies were entitled to full restitution of the upfront money they paid for their oil and gas leases because Congress statutorily imposed a delay on their exploration plans. The Court reached this decision despite the fact that the 30-day time limit was a relatively minor element of the lease contracts, that North Carolina had already effectively frustrated implementation of the exploration plan, that the oil companies had absolutely no basis for expecting restitution under the OCSLA, and that the federal government had sovereign public trust responsibilities to fulfill. As Professor Lazarus has observed more generally of the Court, "missing is any emphasis on the nature, character, and normative weightiness of environmental protection concerns and their import for judicial construction of relevant legal rules . . . ."²⁶⁹

Both the coastal and the open ocean components of the continental shelf are important resources—but not just for oil and gas companies. Fish congregate over the continental shelf, shore birds and whales feed in those waters, coral reefs grow to become habitat from an incredible diversity of life, endangered species live and reproduce, ships navigate to and from shore, and human beings recreate and enjoy the aesthetics of oil-free beaches and waters. Waters above the outer continental shelf mix with—and, when relatively pristine, refresh—the coastal waters within states' coastal zones, carrying away pollution and bringing in nutrients.

Oil and gas development in the outer continental shelf has the potential to interfere with, if not destroy, all of these other uses. Indeed, one of the events that spurred the environmental amendments to the OCSLA was a major oil spill in 1969 off the California coast near Santa Barbara, in which an oil platform owned by Union Oil "blew out," causing "an enormous amount of oil (estimates ran as high as 3 million gallons) [to spew] forth and blanket[] an area of 660 square miles, affecting over 150 miles of coastline, and killing many birds and marine life . . . ."²⁷⁰ More recent disasters like the Exxon Valdez spill, while not products of OCSLA leases, nevertheless highlight the environmental stakes involved. Without 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. It is time for the Court to recognize the public trust in the outer continental shelf.

1. Richard J. Lazarus, Restoring What's Environmental About Environmental Law in the Supreme Court, 47 UCLA L. REV. 703, 706 (2000).

2. Id.

3. 120 S. Ct. 2423, 30 ELR 20716 (2000).

4. 43 U.S.C. §§ 1331-1356.

5. Pub. L. No. 101-380, tit. VI, § 6003, 104 Stat. 555-58 (Aug. 18, 1990) (codified after enactment at 33 U.S.C. § 2753 (1994); repealed, Pub. L. No. 101-134, tit. 1, § 109, 110 Stat. 1321-177 (Apr. 26, 1996)).

6. 16 U.S.C. §§ 1451-1465, ELR STAT. CZMA §§ 302-319.

7. Act of August 7, 1953, 67 Stat. 462 (codified at 43 U.S.C. §§ 1331-1356).

8. Id. § 3(a) (codified as 43 U.S.C. § 1332(1)). The outer continental shelf includes "all submerged lands lying seaward and outside of the area of lands beneath navigable waters" but within U.S. jurisdiction. 43 U.S.C. § 1331(a) (1994).

In 1945, President Truman had proclaimed that "the natural resources of the subsoil and seabed of the continental shelf beneath the high seas but contiguous to the coasts of the United States" are subject to U.S. jurisdiction and control. Proclamation No. 2667, 59 Stat. 884 (Sept. 28, 1945), quoted in BILIANA CICIN-SAIN & ROBERT W. KNECHT, THE FUTURE OF U.S. OCEAN POLICY 33-34 (2000).

9. See CICIN-SAIN & KNECHT, supra note 8, at 84-91 (describing the reasons for and substance of the 1978 amendments to the OCSLA).

10. 43 U.S.C. § 1332(3) (1994) (as added by Pub. L. No. 95-372, § 202, 92 Stat. 634 (Sept. 18, 1978)).

11. Id.

12. Id. § 1332(4), (5), (6).

13. Id. § 1344(a).

14. Id. § 1337(a)(1).

15. Id. § 1337(b)(1).

16. Id. § 1337(b)(2)(A).

17. Id. § 1337(b)(4).

18. Id. § 1337(b)(4), (d).

19. Id. § 1340(c)(1).

20. Id. § 1337(b)(4).

21. Id. §§ 1337(b)(5) (referencing id. § 1334, which allows suspensions and cancellations of OCSLA leases); 1337(o) ("The Secretary may cancel any lease obtained by fraud or misrepresentation.").

22. Id. § 1337(c).

23. Id. § 1348(b), (c).

24. Id. § 1340(b).

25. Id. § 1340(c)(1).

26. Id.

27. Id.

28. Id. § 1351(a)(1).

29. Id. § 1351(e)-(h) (citing NEPA, 42 U.S.C. § 4321-4370d, ELR STAT. NEPA §§ 2-209). See also, e.g., Natural Resources Defense Council v. Hodel, 865 F.2d 288, 19 ELR 20386 (D.C. Cir. 1988); Tribal Village of Akutan v. Hodel, 859 F.2d 651, 657-59, 19 ELR 20071, 20074-75 (9th Cir. 1988) (both deciding NEPA challenges to OCSLA oil and gas leasing).

30. 42 U.S.C. § 4332(2)(C), ELR STAT. NEPA § 102(2)(C).

31. 43 U.S.C. § 1351(k).

32. Id. § 1340(d).

33. 33 U.S.C. §§ 1251-1387, ELR STAT. FWPCA §§ 101-607. See specifically id. §§ 1311(a), 1342(a), 1343, ELR STAT. FWPCA §§ 301(a), 402(a). 403.

34. 43 U.S.C. § 1334(a).

35. Id.

36. Id. § 1334(a)(1).

37. Id.

38. Id. § 1334(a)(2)(A).

39. Id. § 1334(a)(2)(C).

40. Id. §§ 1334(c), (d), 1351(j). Money received from the forfeiture of bonds or other securities for lease or legal violations goes first to civil penalties and actions necessary to correct any problems that the lessee caused, but any excess is refunded to the lessee. Id. § 1338a.

41. Id. § 1341(c).

42. Id. § 1341(d).

43. Id.

44. 16 U.S.C. § 1452(1), ELR STAT. CZMA § 303(1).

45. Id. §§ 1454, 1455(a), (d), 1455b, ELR STAT. CZMA §§ 305, 306(a), (d). The coastal zone is "the coastal waters (including the lands therein and thereunder) and the adjacent shorelands (including the waters therein and thereunder), strongly influenced by each other and in proximity to the shorelines of the several coastal states, . . . including islands, transitional and intertidal areas, salt marshes, wetlands, and beaches." Id. § 1453(1), ELR STAT. CZMA § 304(1).

46. Id. § 1455(d)(2)(H), ELR STAT. CZMA § 306(d)(2)(H).

47. 63 Fed. Reg. 56146 (Oct. 21, 1998).

48. 43 U.S.C. §§ 1340(c)(2) (requiring CZMA consistency certification for OCSLA exploration plans); 1351(d) (requiring CZMA consistency certification for OCSLA development plans).

49. 16 U.S.C. § 1456(c)(1), ELR STAT. CZMA § 307(c)(1).

50. Id. § 1456(c)(3)(A), ELR STAT. CZMA § 307(c)(3)(A).

51. Id.

52. Id. § 1456(c)(3)(B)(i), (ii), ELR STAT. CZMA § 307(c)(3)(B)(i), (ii). However, unlike the CZMA's general concurrence provisions, which give the state six uninterrupted months to concur with or object to the applicant's certification, id. § 1456(c)(3)(A), ELR STAT. CZMA § 307(c)(3)(A), states must respond to OCSLA proposals within three months or explain why more time is required. Id. § 1456(c)(3)(B), ELR STAT. CZMA § 307(c)(3)(B).

53. Id. § 1456(c)(3)(B)(iii), ELR STAT. CZMA § 307(c)(3)(B)(iii).

54. 15 C.F.R. § 930.83 (2000).

55. Id. § 930.84(c).

56. Id. § 930.85.

57. Mobil Oil Exploration & Producing SE, Inc. v. United States, 120 S. Ct. 2423, 2430, 2431, 30 ELR 20716, 20717 (2000). In addition to the bonus payments, Mobil and Marathon paid annual rent for these leases, and if they successfully developed oil, they would owe the federal government royalty payments. Id. at 2431, 30 ELR at 20717.

58. Conoco, Inc. v. United States, 35 Fed. Cl. 309, 316 (1996) (Conoco), rev'd sub nom. Marathon Oil Co. v. United States, 177 F.3d 1331, 29 ELR 20332 (Fed. Cir. 1999), rev'd sub nom. Mobil Oil Exploration, 120 S. Ct. at 2423, 30 ELR at 20716.

59. Id.

60. Id. at 316 n.3.

61. 42 U.S.C. §§ 7152, 7153.

62. Conoco, 35 Fed. Cl. at 317 (quoting § 1 of the leases).

63. Id. at 317-18 (quoting § 2 of the leases).

64. Id. at 318 (quoting §§ 10 and 13 of the leases). According to the Court of Federal Claims, § 13 of the leases referenced the wrong section of the OCSLA, because "section 5 of the OCSLA does not discuss lease suspensions." Id. Section 5 of the 1953 enactment, however, was codified as 43 U.S.C. § 1334 (1994), which is the section of the OCSLA that gives the Secretary of the Interior rulemaking authority over suspensions and cancellations. Act of August 7, 1953, ch. 345, § 5, 67 Stat. 464. The Court of Federal Claims, therefore, appears to have been overly technical in its reading of the lease references.

65. Conoco, 35 Fed. Cl. at 318.

66. Id.

67. Id.

68. Id.; Mobil Oil Exploration & Producing SE, Inc. v. United States, 120 S. Ct. 2423, 2431, 30 ELR 20717 (2000).

69. Mobil Oil Exploration, 120 S. Ct. at 2431, 30 ELR at 20717.

70. Marathon Oil Co. v. United States, 177 F.3d 1331, 1334, 29 ELR 20332, 20333 (Fed. Cir. 1999), rev'd sub nom. Mobil Oil Exploration, 120 S. Ct. at 2423, 30 ELR at 20716.

71. 16 U.S.C. § 1456(c)(3)(A), ELR STAT. CZMA § 307(c)(3)(A).

72. Mobil Oil Exploration, 120 S. Ct. at 2431, 30 ELR at 20717.

73. Marathon Oil, 177 F.3d at 1334, 29 ELR at 20333.

74. Mobil Oil Exploration, 120 S. Ct. at 2431, 30 ELR at 20717 (quoting MINERALS MANAGEMENT SERVICE, U.S. DOI ENVIRONMENTAL ASSESSMENT OF EXPLORATION PLAN FOR MANTEO AREA BLOCK 467 (Sept. 1990)).

75. Marathon Oil, 177 F.3d at 1335, 29 ELR at 20333.

76. Conoco, Inc. v. United States, 35 Fed. Cl. 309, 318 (1996).

77. Pub. L. No. 101-380, § 6003, 101 Stat. 555-58 (Aug. 18, 1990) (codified as 33 U.S.C. § 2753 (1988 Supp. II (1990)), repealed by Pub. L. No. 104-134, tit. I, § 109, 110 Stat. 1321-177 (Apr. 26, 1996)).

78. Id. § 6003(b)(1), (2).

79. Id. § 6003(b)(6), (7).

80. Id. § 6003(c)(1).

81. Id. § 6003(c)(3)(A), (d), (e).

82. "The Secretary has it within his authority to make certain that the prohibition will end no later than October 1, 1991 . . . ." H.R. CONF. REP. No. 101-653, at 161 (1990), reprinted in 1990 U.S.C.C.A.N. 779, 840. "This provision enacts only a temporary delay in approval of activities on existing leases offshore North Carolina." Id. at 163, reprinted in 1990 U.S.C.C.A.N. 779, 842.

83. Mobil Oil Exploration & Producing SE, Inc. v. United States, 120 S. Ct. 2423, 2431, 30 ELR 20716, 20717 (2000).

84. Id. at 2431-32, 30 ELR at 20717.

85. Id. at 2432, 30 ELR at 20717.

86. Id.

87. Id.; Marathon Oil Co. v. United States, 177 F.3d 1331, 1335, 29 ELR 20332, 20333 (Fed. Cir. 1999).

88. Mobil Oil Exploration, 120 S. Ct. at 2432, 30 ELR at 20717.

89. Marathon Oil, 177 F.3d at 1335, 29 ELR at 20333.

90. Mobil Oil Exploration, 120 S. Ct. at 2432, 30 ELR at 20717.

91. Conoco, Inc. v. United States, 35 Fed. Cl. 309, 319 (1996).

92. Mobil Oil Exploration, 120 S. Ct. at 2432, 30 ELR at 20717; Marathon Oil, 177 F.3d at 1335, 29 ELR at 20333.

93. Marathon Oil, 177 F.3d at 1335, 29 ELR at 20333.

94. Mobil Oil Exploration, 120 S. Ct. at 2432, 30 ELR at 20717.

95. Marathon Oil, 177 F.3d at 1335, 29 ELR at 20333.

96. Id.

97. Conoco, Inc. v. United States, 35 Fed. Cl. 309, 314-15 (1996).

98. Id. at 327.

99. Id. at 331.

100. Marathon Oil, 177 F.3d at 1336-47, 29 ELR at 20334.

101. Pub. L. No. 104-134, tit. I, § 109, 110 Stat. 1321-177 (Apr. 26, 1996).

102. Marathon Oil, 177 F.3d at 1340, 29 ELR at 20335.

103. Id. Asserting that "the narrow issue in this case is the impact of the OBPA on the particular leases at issue," the Federal Circuit concluded

that the lease agreement in this case has not been breached by either party. Rather, Marathon has been unable to obtain the necessary Government approvals that would allow it to go forward with exploration of the lease site, a problem for Marathon that arose in 1989, before the OBPA was enacted, and continued after the OBPA was repealed. This is not a case of a supervening act that makes performance impossible, but simply a playing out of the express provisions of the agreement.

Id.

104. Mobil Oil Exploration & Producing SE, Inc. v. United States, 120 S. Ct. 2423, 2432-33, 30 ELR 20716, 20718 (2000) (citing the RESTATEMENT (SECOND) OF CONTRACTS § 373(1) (1979); W. JAEGER, 11 WILLISTON ON CONTRACTS § 1312, at 109 (3d ed. 1968); 5 ANDREW CORBIN, CORBIN ON CONTRACTS § 1104, at 560 (1964); Ankeny v. Clark, 148 U.S. 345, 353 (1893)).

105. Id. at 2433, 30 ELR at 20718.

106. Id.

107. Id.

108. Id.

109. Id.

110. Id.

111. Id. (referring to 43 U.S.C. § 1334(a)(1)(A)).

112. Id. (quoting 30 C.F.R. § 250.110(b)(4)(2000), formerly codified as 30 C.F.R. § 250.10(b)(4) (1999)).

113. Id.

114. Id.

115. Id. at 2434, 30 ELR at 20718.

116. Id. at 2433-34, 30 ELR at 20718.

117. Id. at 2434, 30 ELR at 20718 (referring to 43 U.S.C. § 1334(a)(1)).

118. Id. (referring to H.R. CONF. REP. No. 101-653, at 163 (1990), reprinted in 1990 U.S.C.C.A.N. 722, 842).

119. Id.

120. Id.

121. Id.

122. Id. at 2434-35, 30 ELR at 20719.

123. Id. at 2435, 30 ELR at 20719.

124. Id.

125. Id.

126. Id.

127. Id. at 2435-36, 30 ELR at 20719.

128. Id. at 2436, 30 ELR at 20719 (quoting Conoco, Inc. v. United States, 35 Fed. Cl. 309, 327 (1996)).

129. Id.

130. Id.

131. Id. (citing RESTATEMENT (SECOND) OF CONTRACTS § 243 (1979)).

132. Id.

133. Id.

134. Id. (citing RESTATEMENT (SECOND) OF CONTRACTS § 257 (1979); JAEGER, supra note 104, §§ 1334, at 177-78, 1337, at 186-87; 2 E. ALLAN FARNSWORTH, CONTRACTS § 8.22, at. 544 (2d ed. 1998) (citing United Cal. Bank v. Prudential Ins. Co., 681 P.2d 390, 433-34 (Ariz. App. 1983)).

135. Id. at 2436-37, 30 ELR at 20719 (citing RESTATEMENT (SECOND) OF CONTRACTS § 373, cmt. a (1979); RESTATEMENT OF RESTITUTION, § 68, cmt. b (1936)).

136. Id. at 2437, 30 ELR at 20719.

137. Id.

138. Id.

139. Id.

140. Id.

141. Id. (citing RESTATEMENT (SECOND) OF CONTRACTS § 373 (1979)).

142. Id. at 2438, 30 ELR at 20720 (Stevens, J., dissenting).

143. Id. (Stevens, J., dissenting).

144. Id. (Stevens, J., dissenting).

145. Id. at 2438-39, 30 ELR at 20720 (Stevens, J., dissenting).

146. Id. at 2439, 30 ELR at 20720 (Stevens, J., dissenting).

147. Id. at 2440, 30 ELR at 20721 (Stevens, J., dissenting).

148. Id. at 2440-41, 30 ELR at 20721 (Stevens, J., dissenting) (relying on RESTATEMENT (SECOND) OF CONTRACTS §§ 373, 243 (1979); CORBIN, supra note 104, § 1104, at 558, 562).

149. Id. at 2441, 30 ELR at 20721 (Stevens, J., dissenting) (citing RESTATEMENT (SECOND) OF CONTRACTS § 243).

150. Id. (Stevens, J., dissenting) (quoting RESTATEMENT (SECOND) OF CONTRACTS § 250 & cmt. d and citing JAEGER, supra note 104, § 1312).

151. Id. at 2441 n.4, 30 ELR at 20721 n.4 (Stevens, J., dissenting).

152. Id. at 2441-42, 30 ELR at 20721-22 (Stevens, J., dissenting).

153. Id. at 2443, 30 ELR at 20722 (Stevens, J., dissenting) (citing 2 E. ALLAN FARNSWORTH, CONTRACTS § 8.16 (3d ed. 1999)).

154. Id. (Stevens, J., dissenting).

155. Id. at 2445, 30 ELR at 20723 (Stevens, J., dissenting).

156. 518 U.S. 839 (1996).

157. Id. at 843, 868-70. Ordinarily, changes in government regulations and orders are "event[s] the non-occurrence of which was a basic assumption on which the contract was made." RESTATEMENT (SECOND) OF CONTRACTS § 264 (1979). When the federal government is both legislator and contract participant, however, the situation grows more complex. In Winstar, the contracts in question provided that "the governing regulations . . . shall be those in effect on the Effective Date or as subsequently clarified, interpreted, or amended . . . ." Winstar Corp., 518 U.S. at 865. Instead, Congress enacted a new statute, the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 (FIRREA), 12 U.S.C. § 1437 et seq. (1994), which prevented the relevant federal agencies from recognizing their prior agreements with financial institutions regarding supervisory goodwill and amortization periods, entered during and after the savings and loan crisis. The Court determined that the agencies' promises to recognize those arrangements had to be treated "as the law of contracts has always treated promises to provide something beyond the promisor's absolute control, that is, as a promise to insure the promisee against loss arising from the promised condition's nonoccurrence." Winstar Corp., 518 U.S. at 868-69. Under this logic, any time the United States enters into a contract the performance of which might be affected by federal law, the United States assumes the risk of loss from any changes that render its performance legally impossible.

158. Winstar Corp., 518 U.S. at 860.

159. Id. at 870-71 (1996).

160. 120 S. Ct. at 2429, 30 ELR at 20716 (quoting Winstar Corp., 518 U.S. at 895, but failing to acknowledge Lynch v. United States, 292 U.S. 571, 579 (1934), as it was quoted in Winstar).

161. See RESTATEMENT (SECOND) OF CONTRACTS § 373, cmt. d (1979) ("The right of the injured party under a losing contract to a greater amount in restitution that he could have recovered in damages has engendered much controversy.").

162. 120 S. Ct. at 2429, 30 ELR at 20716.

163. RESTATEMENT (SECOND) OF CONTRACTS § 243(1) (1979).

164. Id. § 243(2).

165. Id. § 243(3).

166. Id. § 243(4).

167. 120 S. Ct. at 2429, 30 ELR at 20716.

168. RESTATEMENT (SECOND) OF CONTRACTS § 250 (1979).

169. Id. § 250 cmt. b.

170. 43 U.S.C. § 1340(c)(1).

171. Id. § 1340(c)(3); 30 C.F.R. §§ 250.106(c), 250.107(c) (2000) (requiring Best Available and Safest Technology), 250.203(b) (requiring exploration plans to contain numerous kinds of information to assess environmental effect), 250.300 (requiring pollution prevention measures). See also EP Operating Ltd. Partnership v. Placid Oil Co., 26 F.3d 563, 567 n.11 (5th Cir. 1994) ("One concern of the OCSLA is that the resources be developed in an environmentally safe manner." (citing Laredo Offshore Constructors, Inc. v. Hunt Oil Co., 754 F.2d 1223, 1227 (5th Cir. 1985) (noting that the 1978 amendments to the OCSLA promoted "dual policies of resource production and environmental protections."))); Watt v. North Slope Borough, 688 F.2d 1290, 1311-13 (D.C. Cir. 1981) (condemning the Secretary of the Interior for not considering "relative environmental sensitivity and marine productivity" in OCSLA lease sales); Conservation Law Found, of New England v. Andrus, 623 F.2d 712, 714-15, 10 ELR 20067, 20068 (1st Cir. 1979) (holding that OCSLA lease contracts automatically incorporate a requirement that the Secretary of the Interior will not violate the Endangered Species Act in connection with oil and gas exploration and development); Village of False Pass v. Watt, 565 F. Supp. 1123, 1133, 13 ELR 20905, 20907 (D. Alaska 1983) ("In short, the Secretary, before allowing any exploration to proceed, must conduct public hearings, give extensive consideration to the environmental consequences of explorations, and guarantee consistency with the coastal management program that is affected by the outer continental shelf activity.").

172. 43 U.S.C. § 1334(a)(2)(A)(i).

173. H.R. CONF. REP. NO. 101-653, at 163 (1990), reprinted in 1990 U.S.C.C.A.N. 779, 842.

174. Id.

175. 43 U.S.C. § 1350.

176. Id. § 1350(b)(1).

177. Id. § 1350(c).

178. Id. § 1350(a).

179. Id. § 1349(a).

180. RESTATEMENT (SECOND) OF CONTRACTS § 243(2) (1979).

181. Id. § 243(3).

182. Id. § 243(1).

183. Id. § 243(4).

184. The Supreme Court noted "that Interior did not approve (or disapprove) the Plan, ever." Mobil Oil Exploration & Producing SE, Inc. v. United States, 120 S. Ct. 2423, 2432, 30 ELR 20716, 20718 (2000). However, by the time the DOI deemed itself to be in full compliance with the OBPA, litigation had been in progress for over two years, with the oil companies demanding full restitution—a fairly strong statement that approval of the exploration plan was no longer important to them.

185. RESTATEMENT (SECOND) OF CONTRACTS § 373(1) (1979). Arguably, the four-year OBPA-induced delay still constituted a total breach, because even though time was not of the essence, the government had to perform, i.e., approve a consistent exploration plan, within a reasonable time. However, given the numerous lengthy delays, including the oil companies' eight-year delay in pursuing their leases, a four-year delay by the government may not have been unreasonable. In any case, the Supreme Court did not reach this issue.

186. Marathon Oil Co. v. United States, 177 F.3d 1331, 1337, 29 ELR 20333, 20334 (Fed. Cir. 1999).

187. Id. at 1338, 29 ELR at 20334 (emphasis added).

188. Mobil Oil Exploration, 120 S. Ct. at 2430, 30 ELR at 20717.

189. 43 U.S.C. § 1340(a)(2), (b), (c)(1); 30 C.F.R. § 250.200 (1999).

190. RESTATEMENT (SECOND) OF CONTRACTS § 254(2) (1979).

191. Id. § 265 cmt. a.

192. Id.

193. Id. § 261 cmt. c, expressly made applicable to § 265. Id. § 265 cmt. b.

194. Id. § 373 cmt. a.

195. Pub. L. No. 101-380, § 6003(b)(6), (7), 104 Stat. 555-56 (Aug. 18, 1990).

196. H.R. CONF. REP. NO. 101-653, at 160 (1990), reprinted in 1990 U.S.C.C.A.N. 779, 839.

197. Id. at 163, reprinted in 1990 U.S.C.C.A.N. 779, 842.

198. 43 U.S.C. §§ 1340(c)(1), 1334 (a)(2)(A)(i).

199. Id. § 1340(c)(1) (referencing § 1334(a)(2)(C)).

200. Id. § 1334(a)(2)(C) (emphasis added).

201. 43 U.S.C. § 1332(3) (1994), as added by Pub. L. No. 95-372, tit. II, § 202, 92 Stat. 634 (Sept. 18, 1978).

202. "The House amendment contains a finding that OCS [outer continental shelf] lands and resources are public property held in trust. The Senate bill contains no such provisions. The House receded to the Senate and the Conference Report contains no such provision." H.R. CONF. REP. NO. 95-1474, at 75 (1978), reprinted in 1978 U.S.C.C.A.N. 1674, 1674.

203. Id. at 80, reprinted in 1978 U.S.C.C.A.N. 1674, 1679 (emphasis added).

204. The Supreme Court has recognized a constitutional dimension to the public trust doctrine as well. Oregon ex rel. State Land Bd. v. Corvallis Sand & Gravel Co., 429 U.S. 363, 374, 7 ELR 20137, 20140 (1977) (holding that "the State's title to lands underlying navigable waters within its boundaries is conferred not by Congress but by the Constitution itself"). However, as is discussed, the public trust doctrine derives most directly from English common law, and no explicit constitutional provision directs its application.

205. Illinois Central R.R. Co. v. Illinois, 146 U.S. 387, 452-53 (1892) (emphasis added).

206. Shively v. Bowlby, 152 U.S. 1, 57 (1894); Illinois Central R.R., 146 U.S. at 452-53.

207. Shively, 152 U.S. at 57.

208. E.g., Pollard's Lessee v. Hagan, 44 U.S. 212, 220-21 (1845). See also J. Wallace Malley Jr. & Jeffrey M. Silverstein, The Public Trust Doctrine and Federal Condemnation: A Call for Recognition of a Federal Common Law, 15 VT. L. REV. 501, 509 (1991) ("the principle of the public trust as public right provides sufficient flexibility to allow the federal government, as sovereign, to assume the role of trustee of navigable waters when it acquires title to trust properties").

209. The leading case on this point is United States v. 1.58 Acres of Land, 523 F. Supp. 120 (D. Mass. 1981), where the court held that "neither the federal government nor the State may convey land below the low water mark to private individuals free of the sovereign's jus publicum," and "the federal government is as restricted as the Commonwealth in its ability to abdicate to private individuals its sovereign jus publicum in the land." Id. at 124, 125. See also United States v. Burlington N. Ry. Co., 710 F. Supp. 1286, 1287 (D. Neb. 1989) (following 1.58 Acres of Land); City of Alameda v. Todd Shipyards Corp., 635 F. Supp. 1447, 1450 (N.D. Cal. 1986) (same); In re Steuart Transp., 495 F. Supp. 38, 40, 10 ELR 20278, 20278 (E.D. Va. 1980) (allowing the federal government to assert public trust claims in waterfowl). But see United States v. 11.037 Acres of Land, 685 F. Supp. 214, 216-17 (N.D. Cal. 1988) (holding that condemnation by the United States of public trust lands extinguishes the public trust).

210. See, e.g., Weden v. San Juan County, 958 P.2d 273, 283 (Wash. 1998) (en banc) (noting that the public trust doctrine "protects 'public ownership interests in certain uses of navigable waters and underlying lands, including navigation, commerce,fisheries, recreation, and environmental quality.'" (quoting Ralph W. Johnson et al., The Public Trust Doctrine and Coastal Zone Management in Washington States, 67 WASH. L. REV. 521, 524 (1992)); Friends of Hatteras Island Nat'l Historic Maritime Forest Land Trust for Preservation v. Coastal Resources Comm'n, 452 S.E.2d 337, 348 (N.C. App. 1995) (noting that by statute, public trust rights include the "right to navigate, swim, hunt, fish, and enjoy all recreational activities" (quoting N.C. GEN. STAT. § 1-45.1 (1994))); Secretary of State v. Wiesenberg, 633 So. 2d 983, 993-94 (Miss. 1994) (noting that the state's responsibilities under the public trust doctrine include environmental protection); In re American Waste & Pollution Control Co., 633 So. 2d 188, 193 (La. App. 1993) (noting that Louisiana's statutory scheme for environmental protection is based on the public trust doctrine); Bess v. County of Humboldt, 3 Cal. App. 4th 1544, 1549 (1992) (noting that public trust rights include "navigational, fishing, recreational, and other permitted purposes").

211. Idaho v. Coeur d'Alene Tribe of Idaho, 521 U.S. 261, 283, 27 ELR 21227, 21232 (1997).

212. E.g., Phillips Petroleum Co. v. Mississippi, 484 U.S. 469, 479-80, 18 ELR 20483, 20485 (1988) (noting that "it came to be recognized as the 'settled law of this country' that the lands under navigable freshwater lakes and rivers were within the public trust given the new States upon their entry into the Union" (citing Barney v. Keokuk, 94 U.S. 324, 338 (1887))).

213. Shively v. Bowlby, 152 U.S. 1, 57 (1894).

214. Phillips Petroleum Co., 484 U.S. at 480, 18 ELR at 20485.

215. United States v. California, 332 U.S. 19, 31-34 (1947).

216. Id. at 34 (citations omitted).

217. 43 U.S.C. §§ 1311-1315 (1994) (codifying Act of May 22, 1953, ch. 65, tit. II, §§ 3, 4, 67 Stat. 30-31 (May 22, 1953)).

218. Id. §§ 1311(a), 1312. See also United States v. California, 436 U.S. 32, 37 (1978) (holding that California has title to submerged lands of the coast of coastal islands through the Submerged Lands Act).

219. Murphy v. Florida Dep't of Natural Resources, 837 F. Supp. 1217, 1221, 24 ELR 20667, 20669 (S.D. Fla. 1993).

220. E.g., Napeahi v. Wilson, 987 F. Supp. 1288, 1291-92 (D. Hawaii 1996) (holding that the submerged lands extending three miles off the coast of Hawaii are held in public trust); Darden v. Pebble Beach Realty, Inc., 860 F. Supp. 1101, 1106 (E.D.N.C. 1993) (holding that the public trust doctrine extends to the open Atlantic Ocean off the coast of North Carolina); Donnell v. United States, 834 F. Supp. 19, 26, 24 ELR 20463, 20466 (D. Maine 1993) (holding that the lands submerged beneath the ocean off the coast of Maine are subject to the public trust).

221. 43 U.S.C. § 1331(a).

222. Id. § 1301(a)(1), (2), made applicable to the OCSLA through id. § 1331(a).

223. H.R. REP. NO. 83-413, reprinted in 1953 U.S.C.C.A.N. 2177, 2178 (1953).

224. United States v. California, 332 U.S. 19, 27 (1947).

225. United States v. Beebe, 127 U.S. 338, 342 (1888).

226. Light v. United States, 220 U.S. 523, 536-37 (1911). See also California, 332 U.S. at 40. While more recent Supreme Court cases involving the public lands have emphasized the extensiveness of Congress' powers over those lands, see, e.g., Kleppe v. New Mexico, 426 U.S. 529, 539-40, 6 ELR 20545, 20547 (1976) (emphasizing that Congress' powers over the public lands are independent of the surrounding states), public trust limitations remain a legally recognized aspect of public lands management, although Congress has near plenary power to define the limits of that trust. Sea Hunt, Inc. v. Unidentified Shipwrecked Vessel or Vessels, 221 F.3d 634 (4th Cir. 2000) ("The government 'holds its interests here as elsewhere in trust for all the people' . . . ." (quoting California, 332 U.S. at 40)); United States v. Steinmetz, 973 F.2d 212, 222 (3d Cir. 1992) (quoting the public trust language from California, 332 U.S. at 40); United States v. Ruby, 588 F.2d 697, 704-05 (9th Cir. 1978) (noting that estoppel against the federal government for private citizens' claims to federal lands is rare because of "the constitutional precept that public lands are held in trust by the federal government for all of the people." (citing U.S. CONST. art. IV, § 3; California, 332 U.S. at 40)).

227. Knight v. United States Land Ass'n, 142 U.S. 161, 181 (1891).

228. Light, 220 U.S. at 537; see also Ivanhoe Irrigation Dist. v. McCracken, 357 U.S. 275, 294-95 (1958) ("this 'power over the public land thus entrusted to Congress is without limitations." And it is not for the courts to say how that trust shall be administered. That is for Congress to determine."'" (quoting United States v. City & County of San Francisco, 310 U.S. 16, 29-30 (1940); citing California, 332 U.S. at 27; Alabama v. Texas, 347 U.S. 272, 273-74 (1954))).

229. See, e.g., Ruby, 588 F.2d at 704-05 (noting that estoppel against the federal government for private citizens' claims to federal lands is rare because of "the constitutional precept that public lands are held in trust by the federal government for all of the people." (citing U.S. CONST. art. IV, § 3; California, 332 U.S. at 40)).

230. Chemical Bank of N.J. Nat'l Ass'n v. Bailey, 687 A.2d 316, 322 (N.J. Super. 1997) (citations omitted).

231. Diamant v. Mount Pleasant Westchester Cemetery Corp., 201 N.Y.S.2d 861, 867 (N.Y. App. Div. 1960).

232. Timothy Christian Schs. v. Village of Western Springs, 675 N.E.2d 168, 174 (Ill. App. 1997) (quoting People ex rel. Scott v. Chicago Park Dist., 360 N.E.2d 773 (Ill. 1976)).

233. Gwathmey v. North Carolina, 464 S.E.2d 674, 678, 683-84 (N.C. 1995).

234. Vermont v. Central Vermont Ry., 571 A.2d 1128, 1132 (Vt. 1989).

235. Ackerman v. Steisel, 480 N.Y.S.2d 556, 558 (N.Y.App. Div. 1984).

236. Central Vermont Ry., 571 A.2d at 1132.

237. Hyllen-Davey v. Plan & Zoning Comm'n of Town of Glastonbury, 749 A.2d 682, 686 (Conn. App. 2000); City of Jackson v. Thompson-McCully Co., 608 N.W.2d 532, 535 (Mich. App. 2000).

238. Central Vermont Ry., 571 A.2d at 1133 (quoting City of Berkeley v. Superior Court of Alameda County, 606 P.2d 362, 369 (Cal.), cert. denied, 449 U.S. 840 (1980)).

239. Conoco, Inc. v. United States, 35 Fed. Cl. 309, 321 (1996).

240. Id. at 334.

241. Id. at 334 (citing Jones v. United States, 1 Ct. Cl. 383, 384-85 (1865); Deming v. United States, 1 Ct. Cl. 190, 191 (1865)).

242. Id. at 335 (citing United States v. Bostwick, 94 U.S. 53, 68-69 (1876)).

243. Id. (citing Horowitz v. United States, 267 U.S. 458, 460-61 (1925); Orlando Helicopter Airways, Inc. v. Widnall, 51 F.3d 258, 262 (Fed. Cir. 1995)).

244. Id.

245. Id.

246. Id.

247. Id.

248. Id. at 336.

249. Id.

250. Id.

251. Id.

252. The Federal Circuit found no breach, and hence did not need to discuss defenses. The Supreme Court, for its part, noted that "the Court of Federal Claims rejected the application of [the sovereign acts] doctrine to this case . . . , and the government has not contested that determination here." Mobil Oil Exploration & Producing SE, Inc. v. United States, 120 S. Ct. 2423, 2435, 30 ELR 20716, 20719 (2000) (citing Conoco, Inc., 35 Fed. Cl. at 334-36).

253. United States v. Winstar Corp., 518 U.S. 839, 878 (1996).

254. Id. at 879.

255. Id at 891 (quoting Horowitz v. United States, 267 U.S. 458, 461 (1925) (quoting Jones v. United States, 1 Ct. Cl. 383, 384 (1865))).

256. Id. at 895 (citing RESTATEMENT (SECOND) OF CONTRACTS § 261 (1979); FARNSWORTH, supra note 153, § 9.6, at 551 (1990); W.R. Grace & Co. v. Rubber Workers, 461 U.S. 757, 767-68 & n.10 (1983)).

257. Id. at 896.

258. Id. at 898.

259. Id.

260. Id. at 903.

261. Id. at 896.

262. Id. at 904 (citing RESTATEMENT (SECOND) OF CONTRACTS § 261 (1979)).

263. See United States v. Winstar Corp., 518 U.S. 839, 924 (1996) (Justices Rehnquist and Ginsburg arguing in dissent that the decision "limits the sovereign acts doctrine so that it will have virtually no future application").

264. Id. at 879.

265. United States v. Beebe, 127 U.S. 338, 342 (1888).

266. H.R. CONF. REP. NO. 101-653, at 163 (1990), reprinted in 1990 U.S.C.C.A.N. 779, 842.

267. United States v. California, 332 U.S. 19, 27 (1947).

268. The fact that public trust considerations dictate one result under the unmistakability doctrine and a different result under the sovereign acts doctrine suggests again that the Winstar Court's formulation of the sovereign acts doctrine is overly narrow.

269. Lazarus, supra note 1, at 737.

270. CICIN-SAIN & KNECHT, supra note 8, at 40 (citing A.E. KIER NASH ET AL., OIL POLLUTION AND THE PUBLIC INTEREST. A STUDY OF THE SANTA BARBARA OIL SPILLS 22 (1972)).

30 ELR 11104 | Environmental Law Reporter | copyright © 2000 | All rights reserved