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Century Exploration New Orleans LLC v. United States

ELR Citation: 44 ELR 20060
Nos. 2013-5073, (Fed. Cir., 03/14/2014)

The Federal Circuit held that the U.S. government did not breach its contract with two oil and gas exploration companies when it imposed new regulatory requirements after their lease went into effect. The companies jointly leased the mineral rights to land on the Outer Continental Shelf (OCS) from the government. The terms of their lease allowed the government to change existing regulatory requirements under OCSLA. Following the Deepwater Horizon disaster, the government imposed new regulatory requirements for OCS lessees that altered the worst case discharge calculation and the bond requirement that corresponds to that calculation. As a result, the companies' bond requirements increased. They argued this change was made under OPA and that the government therefore breached their contract. But the court disagreed. Although both OCSLA and OPA worst case discharge scenario regulations are limited to OCS lessees, the government changed the companies' worst case discharge calculation pursuant to OCSLA. The new regulatory requirement identified OCSLA as its source of authority and only referenced and discussed OCSLA regulations and requirements. It simply augmented the factors lessees must consider when calculating their worst case discharge scenario for OCSLA purposes. Because government made the changes pursuant to OCSLA, not OPA, there was no breach.