A federal appeals court in Washington, D.C. last week orderedthe Department of Interior to repay ExxonMobil and USX-MarathonGroup’s Marathon Oil Co. $78 million each for reneging on leaseagreements the companies signed in 1981 to drill off the coast ofNorth Carolina.

The U.S. Supreme Court ruled in favor of the two energycompanies last June, but remanded the case to the U.S. Court ofAppeals for the Federal Circuit to decide the issue of restitution.

On remand, Interior had argued that the amount to be repaid toMarathon and ExxonMobil should be reduced to account for thedepressed market value of the leases stemming from lower oil andnatural gas prices at the time of the contract breach. But theappellate court flatly rejected that argument.

Interior’s position “is plainly incorrect,” said the FederalCircuit, which — unlike the D.C. Circuit Court — addressesnarrower issues dealing with government contracts. The SupremeCourt last summer ruled that the “the oil companies gave the UnitedStates $156 million…the government must give the companies theirmoney back,” the lower court reminded Interior.

In addition to the $156 million to be repaid, the FederalCircuit ordered Interior to begin paying a 5% interest chargebeginning Dec. 29.

The case has been making its way through the courts since 1992when the companies that purchased the lease rights filed abreach-of-contract lawsuit against the federal government.

ExxonMobil and Marathon Oil and others were prevented fromdrilling offshore North Carolina by the 1990 Outer Banks ProtectionAct, which was enacted in 1990. On top of this, Interior refused togive the companies their money back, saying that the terms of thelease agreements permitted it to keep it.

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