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Producers to Be Compensated for Undeveloped Leases Offshore California

A group of independent producers is set to receive more than $1 billion in recovered costs after the federal government last week declined to appeal a court's order to pay the costs for some offshore California leases that were never developed.

The U.S. Court of Appeals for the Federal Circuit last year upheld a 2005 ruling by the U.S. Court of Federal Claims, which ruled that the government owed the producers the bonuses they had paid for 35 Outer Continental Shelf leases granted between 1979 and 1984 (see Daily GPI, Aug. 27, 2008). The leaseholds were located offshore Ventura, Santa Barbara and San Luis Obispo counties. The Department of Justice had until Monday to file an appeal.

The original plaintiffs in Amber Resources Co. vs. United States included Amber Resources Co., Aera Energy LLC, Delta Petroleum Corp., Ogle Petroleum Inc., Olac Resources LLC, Poseidon Petroleum LLC, Total SA, Plains Exploration and Production Co. (PXP), Noble Energy, Anadarko Corp., Devon Energy Corp. and NYCAL Offshore Development Corp.

Following a series of legal battles with state officials over California's Coastal Zone Management Plan, the producers claimed they couldn't develop the leases, which ultimately expired or were suspended by the U.S. Minerals Management Service. California has resisted attempts to expand offshore drilling, and a federal judge in 2005 upheld the state's position (see NGI, Aug. 22, 2005).

Santa Barbara officials were debating whether to allow offshore drilling to resume, but even if they eventually were to approve it, state officials would have the final say. In February the State Lands Commission rejected a request by PXP to resume offshore drilling at a lease it still holds offshore Santa Barbara (see NGI, Feb. 2).

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