THE VIRGINIAN-PILOT
Copyright (c) 1996, Landmark Communications, Inc.
DATE: Thursday, April 4, 1996 TAG: 9604040328
SECTION: LOCAL PAGE: B1 EDITION: NORTH CAROLINA
SOURCE: BY CATHERINE KOZAK, STAFF WRITER
LENGTH: Medium: 67 lines
A lawsuit triggered by a controversial proposal to drill for oil off the Outer Banks has yet to run out of fuel.
The U.S. Justice Department has asked a federal court to reconsider a recent ruling backing several oil companies' position. The decision supported the oil firms' argument that legislation passed years after contracts were signed frustrated their exploration of North Carolina oil leases.
U.S. Judge Wilkes C. Robinson agreed with third-party plaintiffs, including Mobil Oil, Chevron USA, Amerada Hess Corp, Shell Offshore Inc. and 13 more companies, that government suspension of the ``Manteo unit'' oil leases constituted breach of contract.
The court said the oil companies should be compensated for money paid in bonuses and annual rent payments related to the leases, which were purchased from the government during the 1980s.
Gail Campbell Wooley, spokeswoman for Mobil, said the company is seeking $78 million.
``As a taxpayer, I'm a little upset about it,'' said Michael McOwen, co-president of LegaSea, a grassroots Outer Banks organization opposed to local offshore oil drilling. ``I don't think my tax dollars should have to pay Mobil. They didn't buy the automatic right to drill - they bought the right to get their permit and then drill.''
The oil companies blame the 1990 Outer Banks Protection Act, which tightened coastal oil spill protection, for defeating any possibility of exploring wells about 45 miles east of Cape Hatteras. Further supporting their argument, a representative from the U.S. Department of Interior had announced about a month after passage of the law that permission to explore would have been granted to the lessees if not for prohibitions in the OBPA.
But oil companies want to have it both ways, said an environmental attorney who since the late 1980s was involved in the fight to prevent the drilling.
``They want to be reimbursed for bad investment decisions,'' said Derb Carter, a lawyer for the Southern Environmental Law Center in Chapel Hill. ``And at the same time, they want to pressure the government to allow them to drill when they shouldn't be allowed to drill. This is an extremely important fisheries area off the national seashores. It was clearly known and understood at that time that this was an environmentally sensitive area.''
McOwen said the area the oil firms wanted to explore, called ``the point,'' is at the juncture of the Gulf Stream and the Labrador Current - one of the richest fisheries in the world.
In answering the court's contention that the oil companies never would have invested in the Manteo leases if they had known about the OBPA restrictions ahead of time, the justice department argued oil drilling is always a high-stakes gamble.
``Plaintiffs are extremely sophisticated parties engaging in transactions that are extraordinarily risky,'' wrote Deputy Assistant Attorney General Stuart E. Schiffer in the March 26 appeal to the court. ``The huge sums that they invested were done so notwithstanding that the leases have not been explored. The inherent nature of these transactions includes high probabilities that the investment is for nothing.''
Mobil spokeswoman Wooley said Mobil was looking to be compensated for its expenses, but does not necessarily want to continue investigation of Outer Banks oil deposits.
``Should this case be settled,'' Wooley said, ``we will not be pursuing these leases.'' by CNB