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Document Type

Case Note

Abstract

The Outer Continental Shelf Lands Act of 1953 (OCSLA) was enacted by Congress to establish exclusive federal jurisdiction over submerged lands on the continental shelf beyond three miles from the coastline. Pursuant to the OCSLA, the Secretary of the Interior is authorized to sell oil and gas leases on outer continental shelf (OCS) lands through a competitive bidding process. The Act was amended in 1978 to provide for the "expeditious and orderly development, subject to environmental safeguards," of resources on the OCS "consistent with the maintenance of competition and other national needs." Lessees must seek approvals from various federal and state agencies before each stage of exploration, development, andproduction. Considerable controversy can develop between the lessee and the federal and state governments. In one recent decision, Marathon Oil Co. v. United States, the United States Court of Appeals for the Federal Circuit held that the government's refusal to issue oil and gas exploration permits for the OCS to the lessee did not constitute a material breach of a lease As a result, lessees were not entitled to restitution of over $156 million in up-front contract bonuses. In ruling that the government had not breached the lease, the court upheld a means by which the federal government may withdraw federal rights based on state objections without returning the federal consideration. Moreover, the legislative policy behind the OCSLA has been undermined as OCS development under the current law will neither be "expeditious" nor "orderly" as long as the federal government does not have to operate under rules of fair dealing. Viewing the OCSLA from an equitable perspective leads to the conclusion that the process is flawed and should be changed. This Note argues that lessees do not engage in a fair process when conflicting legislation exists and judicial determinations are unable to take this into account in decision making. This Note suggests that the structure of the OCSLA provides the answer in that more discussion should be centered upon the lease sales rather than allowing state objections to effectively destroy an exploration project post-sale.

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