Interior Ordered to Pay Marathon, ExxonMobil $78 Million Each
A federal appeals court in Washington D.C. has ordered the
Department of Interior to repay ExxonMobil and USX-Marathon Group's
Marathon Oil Co. $78 million each for reneging on oil and gas lease
agreements the companies signed in 1981 to drill off the coast of
The U.S. Supreme Court ruled in favor of the two energy
companies last June, but remanded the case to the U.S. Court of
Appeals for the Federal Circuit to decide the issue of restitution.
On remand, Interior had argued that the amount to be repaid to
Marathon and ExxonMobil should be reduced to account for the
depressed market value of the leases stemming from lower oil and
natural gas prices at the time of the contract breach. But the
appellate court flatly rejected that argument.
Interior's position "is plainly incorrect," said the Federal
Circuit, which - unlike the D.C. Circuit Court of Appeals -
addresses narrower issues such as those dealing with government
contracts. The Supreme Court last summer ruled that the "the oil
companies gave the United States $156 million...the government must
give the companies their money back," the lower court reminded
In addition to the $156 million to be repaid, the Federal
Circuit ordered Interior to begin paying a 5% interest charge Dec.
29. Interior will not have to pay the producers out of its own
pocket, rather the money will come from a General Accounting Office
judgment fund. A spokesman for the department indicated it was
unlikely Interior would seek an appeal of the decision, given that
the Supreme Court already reviewed the case.
The case has been making its way through the courts since 1992
when the companies that purchased the lease rights filed a
breach-of-contract lawsuit against the federal government.
ExxonMobil and Marathon Oil and others were prevented from
drilling offshore North Carolina by the 1990 Outer Banks Protection
Act, which was enacted in 1990. On top of this, Interior refused to
give the companies their money back, saying that the terms of the
lease agreements permitted it to keep it.
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