American oil companies win $1.1 billion court ruling on drilling rights

26 August 2008

Eleven oil companies are entitled to recover $1.1 billion from the federal government for breaching 35 leases they received to develop oil and gas resources off the coast of California, a federal appeals court ruled Monday.

The plaintiffs are Amber Resources Co. Aera Energy LLC, Delta Petroleum Corporation, Ogle Petroleum Inc., Olac Resources LLC, Poseidon Petroleum LLC, Total E&P USA Inc., Plains Exploration & Production Co., Noble Energy Inc. and NyCal Offshore Development Corp., Anadarko E&P and Devon Energy.

The ruling by the US Court of Appeals for the Federal Circuit upholds a Federal Court of Claims decision in 2002 in favour of the companies.

All but one of the 35 leases was awarded to the oil companies between 1979 and 1984. The one exception was a lease awarded in 1968.

In consideration for the leases, the companies paid $1.1 billion in upfront bonuses to the government. They also promised to pay annual rental payments and royalties. Because of court decisions construing a 1990 law, the government took action that block exploratory development of the sites, at least temporarily.

The oil companies then sued, claiming the government had breached the leases.