The U.S. Supreme Court agreed Monday to hear appeals byUSX-Marathon and Mobil regarding the drilling ban on leasesoffshore North Carolina. The two producers spent $156 million in1981 on leases that became subject to a drilling ban in 1990 whenCongress adopted the Outer Banks Protection Act.

The act required the Department of the Interior to conductperiodic environmental analysis before allowing drilling near theOuter Banks and the Bush and Clinton administrations havemaintained the ban over the past nine years.

The producers charged, however, that the law prohibited thegovernment from fulfilling its contractual obligations under theleases. As a result they filed a breach-of-contract lawsuit. Afederal trial court ruled for the oil companies, awarding themrestitution of their initial lease payments. But a U.S. appellatecourt reversed the judgment, saying the companies had been unableto obtain all the necessary state government approvals forexploration before the law had been adopted. Several otherproducers also paid for leases – a total of 18 – but since havesettled with the government.

The Supreme Court will hear arguments in the case in March orApril, with a decision due by the end of June.

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