Petition — Pauley Petroleum, Inc. v. United States

Supreme Court brief1979

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IN THE

Supreme Court of the United States

Octosprrk TrRM, 1979

No. -¢-Q = ] Qa

PavULEY PrTroLEeuM INno., CoLornapDo Om AND Gas CORPORATION,

Mesa Petrroteum Co., McCuniocH Om CorPporaTION oF CALI-

FORNIA, Husky Om Company or DELAWARE and MacpoNnaLp

‘ Om CoRPoRATION,

Petitioners,

—against—

THE UniTep States or America, J. M. Huser CorPoRATION,

Mipwest Om Corporation, ASHLAND Om & ReFinine Com-

PANY, KewaNkE Or Company and Forrest On. Company,

Respondents.

ON A PETITION FOR A WRIT OF CERTIORARI TO

THE UNITED STATES COURT OF CLAIMS

PETITION FOR A WRIT OF CERTIORARI TO

THE UNITED STATES COURT OF CLAIMS

Joun P. OnL

H. RicHarp SCHUMACHER

80 Pine Street

New York, New York 10005

(212) 825-0100

Attorneys for Petitioners

Of Counsel:

Caniut Gorpon & REINDEL

Lewis A. SHAFFER

Joun C. Koutsos

80 Pine Street

New York, New York 10005

Epwarp K.iiewer, JR.

2210 Mercantile Bank Building

Dallas, Texas 75201

July 3, 1979

2 SU

TABLE OF CONTENTS

PAGE

Table of Authorities iii

Note on Citational Conventions ix

Opinions Below 2

Jurisdiction 3

Questions Presented 3

Statutes Involved 4

Statement of the Case 5

A. The Legal Context

B. The Lease Sale and Blow Out 13

C. The Government’s Arbitrary Response ................ 17

1. The Enforced Suspension of Drilling ............ 18

2. The Imposition of Absolute Liability .............. 22

D. Litigation and the Government’s Proferred Ex-

planations 25

1. The Petitioners’ Case 25

2. The Secret “Clearance Procedure” 27

3. The Attempt to Scuttle the Liability Reg-

ulation 30

BE. Post-Trial Developments and the Rulings Below.. 33

1. Further Drilling Suspensions 33

2. The Proceedings in This Case 35

PAGE

Reasons For GRANTING THE WRIT . ~ ee

I. The Opinion Below Undermines the Publication

Requirement of the APA and Does So in a Way

That Conflicts With Decisions of This Court

and of Courts of Appeals ............-....-..22..0....s..00-<-. 37

Il. The Unresolved Question of the Effect of a

Conflict Between Secretarial Regulations and

“Adopted” State Law on the OCS Warrants

aka Ces AACA oni icc ccti pci en 46

el sc cacanpaiesnnsiieiimidansmallonate 51

Exuisir A—

One of Petitioners’ Leases With Respect to Their

Parcels at Santa Barbara in 1968 ...............................- E-1

Exuisir B—

Explanation of Map Depicting Clearance Status of

Leases in Mid-Channel Area Seaward of the City

of Santa Barbara (and Map) ................---.--..-:s-s+-s+-00-++ K-19

SEPARATELY BOUND APPENDICES

Petitioners’ APPENDIX OF DECISIONS

Petitioners’ Statutory APPENDIX

iii

TaBLE oF AUTHORITIES

Cases: PAGE

A.L.A. Schechter Poultry Corp. v. United States, 295

U.S. 495 (1935) 36n

Anderson v. Butz, 550 F.2d 459 (9th Cir. 1977) ........ 41n, 44

Appalachian Power Co. v. Train, 566 F.2d 451 (4th

2 RS: } See ink SEE CTNS Ween ee Pee Py MEE Me 43, 45

Armstrong v. Chambers & Kennedy, 340 F.Supp. 1220

(S.D. Tex. 1972), modified on other grounds, 499

F.2d 263 (5th Cir. 1974), cert. dismissed, 423 U.S.

Re, Sa ae Cle SOE IE ERR ED TASER Ee 32-33, 49

Boston Edison Co. v. FPC, 557 F.2d 845 (D.C. Cir.),

cert. dented, 434 U.S. 956 (1977) ...................ceccccseceeeeeee 29n

Bourg v. Texaco Oil Co., 578 F.2d 1117 (5th Cir. 1978) 49

Boyd v. White, 128 Cal. App.2d 641, 276 P.2d 92 (1st

Dist. 1954) ideiiaatas aadbeadeacaiecmied a ametaeaini tibiae 31n

Burlington Truck Lines, Inc. v. United States, 371 U.S.

Bg REIS IMRT SII oc A 29n

Chevron Oil Co. v. Huson, 404 U.S. 97 (1971) 0000200... 49

County of Santa Barbara v. Hickel, 426 F.2d 164 (9th

Cir. 1970), cert. denied, 400 U.S. 999 (1971) 00... 21n

County of Santa Barbara v. Malley, 396 U.S. 950

(1969) 21n

Duke Power Co. v. Carolina Environmental Study

Group, Inc., 488.08. 59 (1978) nn cccceoee.ancnnncencen even 24n

Environmental Protection Agency v. Mink, 410 U.S. 73

(1973) . ...... 39n

George A. Fuller Co, v. United States, 108 Ct. Cl. 70,

94, 69 F. Supp. 409, 415 (1947) 16

Green v. General Petroleum Corp., 205 Cal. 328, 270

P, 952 (1928) 31n

PAGE

Gulf Oil Corp. v. Morton, 345 F. Supp. 685 (C.D. Cal.

1972), remanded for entry of judgment for plaintiff's,

493 F.2d 141 (9th Cir. 1974) ........ 20, 21, 33, 33n, 34, 40, 45

Laugharn v. Bolsa Chica Oil Corp., No. 456167, Cal.

Super. Ct., Los Angeles County (1941) 31-32n

Lewis v. Weinberger, 415 F. Supp. 652 (D.N.M. 1976)... 41n

Luthringer v. Moore, 31 Cal.2d 489, 190 P.2d 1 (1948) .. 31n

Morton v. Ruiz, 415 U.S. 199 (1974) -..0000... 3A, 38, 42-43

Northern California Power Agency v. Morton, 396 F.

Supp. 1187 (D.D.C. 1975), affd w/o opinion, 539

F.2d 243 (D.C. Cir. 1976) ......... 43-44

Olsen v. Shell Oil Co., 561 F.2d 1178 (5th Cir. 1977) .... 49

Postal Telegraph-Cable Co. v. Pacific Gas & Electric

Co., 202 Cal. 382, 260 P. 1101 (1927) 32n

Public Service Co. v. FERC, 584 F.2d 1084 (D.C. Cir.

1978) 29n

Reynolds Metals Co. v. Rumsfeld, 564 F.2d 663 (4th

Cir. 1977), cert. denied, 435 U.S. 995 (1978) ............ 41n

Rodrigue v. Aetna Casualty Co., 395 U.S. 352 (1969) .. 49

St. Elizabeth Hospital v. United States, 214 Ct. Cl. 322,

558 F.2d 8 (1977) 41n

Sannon v. United States, 460 F. Supp. 458 (S.D.Fla.

1978) 4in

SEC v. Chenery Corp., 318 U.S. 80 (1943) snapeiidilitinesii 29n

Smith v. Lockheed Propulsion Co., 247 Cal. App.2d

774, 56 Cal. Rptr. 128 (4th Dist. 1967) 3in

Sun Oil Co. v. United States 215 Ct. Cl. 716, 572 F.2d

786 (1978) 21n, 34-35, 45

PAGE

Union Oil Co. v. Morton, 512 F.2d 743 (9th Cir. 1975)

35, 40, 45, 48

United States v. California, 332 U.S. 19 (1947) ............ 7

United States v. California, 381 U.S. 139 (1965) ............ 13

Wah Chang Corp. v. United States, 151 Ct. Cl. 41, 49,

UD Be Fis I COD pac acecetcsecgeseqengerer eens 16

Way of Life Television Network, Inc. v. FCC, 593 F.2d

1356 (D.C. Cir, 1979) ............ 44

W. G. Cosby Transfer & Storage Core. v. Froehlke, 480

i is anenctlbnltncninnaningins 44

Williams v. Pacific Coast Aggregates, Inc., 128 Cal.

App. 2d 777, 276 P.2d 28 (ist Dist. 1954) 00... 31n

Statutes:

Administrative Procedure Act, 5 U.S.C. §§ 551-59

(1976)

ee eee 10n, 16n, 41

5 U.S.C. § 552(a)(1) (1976) ................ 3, 4, 36, 37, 38, 39n,

41, 42, 43-44, 45

S een eee Ate oh ra)

5 U.S.C. §553(c) (1976) —....0........... 22

5 U.S.C. §555(e) (1976) vecsecccoccccccccseceeee 4,16n, 26n, 29n

5 U.S.C. §558(0) (1976) nnn eeeeeeeceeeeeeee 4, 16n, 26n

Atomic Energy Act, 42 U.S.C. § 2210 (1976) ................ 24n

Jadicial Code |

SP rte RUG CIOTB) ces sccsasscsccsiscrccstseconcbeslbiccees 3

28 U.S.C. § 1491, (1976), as amended, Act of Nov. 1,

1978, Pub. L. No. 95-563, § 14(i), 92 Stat. 2391 ........ 5

PAGE

Outer Continental Shelf Lands Act of 1953, 67 Stat. 462,

codified at 43 U.S.C. §§ 1331-43 (1976) -......0.0.2.......... 2,7

§ 4(a) (2), 43 U.S.C. §¢ 1333(a)(2) (1976) ........ 3, 4, 6, 7, 8,

47, 48-49

§ 4(b), 43 U.S.C. § 1333(b) (1976) 23

§4(c), 43 U.S.C. § 1333(¢) (1976) —

§5(a)(1), 43 U.S.C. §1334a(1) (1976) .............. 3, 4, 7, 8,

33, 37, 48

§ 8, 43 U.S.C. § 1337 (1976) 7, 9,11

Submerged Lands Act of 1953, 67 Stat. 29, codified at

43 U.S.C. §§ 1301-15 (1976) .. 7,13

Act of Nov. 21, 1974, Pub. L. No. 93-502, § 1(b) (2),

88 Stat. 1561 .... 39n

Cal. Pub. Res. § 6871.2 (West 1977) ..n..........eecceceeceseseee 13

Regulations:

43 C.F.R. § 3305a.4 (1978) 10

30 C.F.R. Part 250 (as in force in February 1968)

§ 250.12 10, 18, 18n

§:250.80 .............. 10-11

§ 250.40 .... 10

§ 250.42 11

§ 250.44 11

§ 250.45 11

§ 250.91 10, 10n

Vii

PAGE

30 C.F.R. Part 250 (as amended in 1969)

§ 250.30 .... i 32, 32n

A SENET, ~ «-ncrvotsiassensienentsensingetevaeninespeemenniendptiabapiaaasmnin 31

BT seckcilenedpapeeictetcsieisciensomnntanaieals 22-23, 30, 31, 46

0 SE. nicicsivetainabiveiienieentinacebiehtinncintiisianilliigubaimeguaaine 31

6 II eo iirreh a sescednncsencccepicepeplthoninsbihetbbseietngspehiiee 32

GOD 2 cissiissnicascsseticiinisiinssnebctcitcicictniaatimla AS 32

Pacific Regional OCS Orders

PINS, Dis HID. snasccnethcrdichinnoniganadinimendttiaisigetiitiinsidlpsnnamaaiiabitil 14n

CE I BO seiineetsstintt eviicenhaeaiotaaaane 29n

Administrative Notices and Announcemenis:

Dep’t of Interior, Statement of Basis and Purpose for

Amendment to 30 C.F.R. § 250.42, 34 Fed. Reg. 2503

COPD | ncrsniibseniccsniseinlotsinmaiiiiigtatigtiadapuniipilinaidansaloiaaees 22

Dep’t of Interior, Notice of Oil & Gas Lease Sale, 32

TU BE GED hitercletnscsepiiinisabininhibateatibeincies 14

Dep’t of Interior, Revised Oil & Gas Lease Form for

Outer Continental Shelf, 34 Fed. Reg. 17779 (1969) 11

Treatises:

K. Davis, Administrative Law of the Seventies (1976) 44

WH. Bremen, Tere: COG OG. TED i scttienesceacncntnset 32n

Restatement (Second) of Torts § 520 (1976) ............ 31-32n

PAGE

Other Authorities:

Attorney General’s Memorandum on Public Informa-

tion Section of Administrative Procedure Act

(1967) 38-39n

Executive Proclamation No. 2667, 3 C.F.R. 67 (1943-48

Comp.) ‘as |

L. Johnson, Public Papers of the President 1966

(1967) 38-39

R. Nixon, Public Papers of the President 1973 (1975) .. 34

S. Rep. No. 572, 79th Cong., Ist Sess. (1945), reprinted

in S. Doc. No. 248, 79th Cong., 2d Sess. 206 (1946) .. 16n

U.S. Dep’t of Interior, News Release (June 8, 1979) .... 47n

U.S. Dep’t of Interior, Outer Contmental Shelf Sta-

tistics (1978) 11n, 47n

Note on Citational Conventions

The following citational conventions are used in the

Petition:

”

“A-——” refers to pages in the separately bound Ap-

pendix of Decisions below.

“Stat. App. ——” refers to pages in the separately bound

Statutory Appendix.

“Pz ” and “Dx ” refer to plaintiffs’ and defen-

dant’s trial exhibits, respectively.

“{Name] Tr. ——” refers to pages of trial transcript

and to the witness testifying.

In THE

Supreme Court of the United States

Octoper Term, 1979

Ns ehanieiaiee

Pavutey Petrroteum Inc., Cotorapo Om anp Gas Corpora-

tion, Mesa Perrroteum Co., McCunttocn Om Corpo-

RATION oF CatiForN1A, Husky Or. Company or DELAWARE

and MacponaLtp Or Corporation,

Petitioners,

—against—

Tue Untrep States or America, J. M. Huser Corporation,

Mipwest Or. Corporation, AsHLAND Or & Rerrnina

Company, Kewanee On. Company and Forest On. Com-

PANY,

Respondents.

ON A PETITION FOR A WRIT OF CERTIORARI TO

THE UNITED STATES COURT OF CLAIMS

PETITION FOR A WRIT OF CERTIORARI TO

THE UNITED STATES COURT OF CLAIMS

Petitioners Pauley Petroleum Inc. (“Pauley”), Derby

Refining Company( formerly “Colorado Oil and Gas Cor-

poration”), Mesa Petroleum Co., McCulloch Oil Corpora-

tion (formerly “McCulloch Oil Corporation of California”),

Husky Oil Company (formerly “Husky Oil Company of

Delaware”), and Adobe Oil & Gas Corporation (successor

by merger to Macdonald Oil Corporation) pray that a

writ of certiorari issue to review a judgment of the United

States Court of Claims dismissing, after trial, the claims

of petitioners and of the other non-governmental parties

to this action.

All of the non-governmental parties are co-lessees of

either or both of two oil and gas leases issued by the De-

partment of the Interior pursuant to the Outer Continental

Shelf Lands Act of 1953, 67 Stat. 462 (1953), as amended,

43 U.S.C. §§ 1331-43 (1976), with respect to parcels under

the waters of the Santa Barbara Channel off the coast of

California, and all of them were arrayed against the

United States in the court below.

The judgment of the Court of Claims was entered on

January 24, 1979. That court denied a timely motion for

rehearing by Order dated, and filed on, April 6, 1979.

Opinions Below

The Opinion of the Court of Claims providing for the

judgment of dismissal of which review is sought is re-

ported sib nom. Pauley Petroleum Inc. v. United States

at 219 Ct. Cl. ——, 591 F.2d 1308 (1979), and is repro-

duced as Item A (at pp. A-1-35) of the separately bound

Appendix of Opinions Below (“App.”) being filed with this

petition.* .

The court filed contemporaneously with its Opinion an

Order modifying a very few of its Trial Judge’s findings

of fact; that Order appears at App. Item B (at pp. A-37-

40). Thereafter, the court denied petitioners’ motion for

rehearing by a further Order dated April 6, 1979 which

appears at App. Item C (at p. A-41).

The Court of Claims entered its Opinion on review of

a Report of Trial Judge Roald A. Hogenson. The latter ~

° ae of the Appendix of Opinions Below are identified herein

as “A—”,

was filed on March 19, 1976, some five years after the close

of trial, and was limited, by a sua sponte Order of the

court dated November 10, 1975, only to findings of fact.

The Report is reproduced at App. Item D (at pp. A-43-

334), and the Order curtailing the Trial Judge’s reference

at App. Item E (at p. A-335).

Jurisdiction

The judgment of the Court of Claims was entered on

January 24, 1979, and a duly and timely filed motion for

rehearing was denied on April 6, 1979. This Court has

jurisdiction to review the judgment of the Court of Claims

pursuant to 28 U.S.C, § 1255(1) (1976).

Questions Presented

1. Whether the Department of the Interior, having de-

clined, for an indefinite and unreasonable period and for

undisclosed reasons, to act upon petitioners’ request for

the permit required to drill under their OCS oil and gas

leases, can, consistently with the publication requirements

of 5 U.S.C. § 552(a)(1) (1976), defeat a suit for breach of

contract by alleging, at trial, almost two years after the

fact, petitioners’ non-compliance with an unpublished, un-

disclosed, unwritten, and standardless licensing program

known as the “clearance procedure” ?

2. Whether, under Section 4{a)(2) of the Outer Conti-

nental Shelf Lands Act, a regulation promulgated by the

Secretary of the Interior pursuant to the rule-making au-

thority conferred by Section 5(a)(1) of that Act, which

regulation purports to make the Government’s OCS oil

and gas lessees absolutely liable for the reparation of all

damages, to whomsoever accruing, resulting from oil spills,

or the law of California, which OCSL Act § 4(a)(2) adopts

as federal law for some purposes on the OCS, governs

a lessee’s responsibility in tort for harms comprehended

by the regulation?

Statutes Involved

This petition involves the publication section of the

Freedom of Information amendments to the Administrative

Procedure Act (“APA”), 5 U.S.C. §552(a)(1) (1976);

other provisions of the APA governing federal agencies’

treatment of applications for licenses required by law,

5 U.S.C. §§ 555(e), 558(c) (1976) ; provisions of the Outer

Continental Shelf Lands Act (“OCSL Act”), 67 Stat. 462

(1953), as amended, most notably Sections 4(a)(2), 43

U.S.C. § 1333(a)(2) (1976), and 5(a)(1), 43 U.S.C. § 1334

(a)(1) (1976); and regulations and orders issued by the

Department of the Interior pursuant to the OCSL Act.

The relevant statutory and regulatory provisions are re-

produced in a separately bound statutory appendix (“Stat.

App.”) being submitted with this petition.

Of particular salience here is the publication section of

the APA, 5 U.S.C. §552(a)(1) (1976), first enacted in

1966, which provides, in pertinent part, that agencies

“shall separately state and currently publish in the Fed-

eral Register” their “rules of procedure”, “substantive

rules of general applicability”, “statements of . .. the na-

ture and requirements of all formal and informal pro-

cedures available”, and other matters, and that:

“Except to the extent that a person has actual and

timely notice of the terms thereof, a person may not

m any manner be required to resort to, or be adversely

affected by, a matter required to be published in the

Federal Register and not so published.” *

* Emphasis supplied here and elsewhere throughout unless other-

wise indicated.

Statement of the Case

This is an action, filed in the Court of Claims under 28

U.S.C. $1491 (1976), for, inter alia, the breach or “frus-

tration”, in 1969 and thereafter, of contracts with the

federal Government, viz., two oil and gas leases issued by

the Department of the Interior to petitioners and their co-

lessees pursuant to the OCSL Act and covering contig-

uous parcels on the seabed of the Outer Continental Shelf

(“OCS”) of the Santa Barbara Channel. The Government

had granted these leases in early 1968, for five-year pri-

mary terms, in consideration of advance payments totalling

$73,854,594 and the promise of future annual rentals and

of royalties from the production of hydrocarbons on the

leased parcels. (A-70)

Despite the case’s commercial, and thus seemingly rou-

tine, character, it raises, for this Court’s consideration,

important issues concerning the application of the Admin-

istrative Procedure Act. They concern the Government’s

claimed power, recognized by the court below, to indefi-

nitely deny, and thus destroy, by means of an unpublished,

undisclosed, and standardless licensing authority, the right

to drill which it had conferred by contracts of limited term.

The annulled right to drill gave those contracts their sole

value. On a broader level the case poses a fundamental

question of a free polity—whether the mandate of open

government ordained by the APA must prevail even when

the Government’s political executives undertake to reg.’-te

substantial interests of property, the use of which has

attracted large, and hostile, public attention.

The present action also frames for decision by this Court

significant issues about the power of the Secretary of the

Interior to create, by regulation, law applicable to the

Government’s lessees’ activities on the Outer Continental

Shelf, thereby displacing the law of the on-shore States

which OCSL Act §4(a)(2), 67 Stat. 462 (1953), as

amended, 43 U.S.C. § 1333(a)(2) (1976), otherwise adopts

as federal law on the OCS. The issues arise in the context

of the Government’s effort to repudiate, in the privacy of

the courtroom, regulations published by the Secretary in

the Federal Register in February 1969 and relied upon

by petitioners, which established a regime of “absolute”

and unlimited lessee liability, regardless of fault or cause,

for any spill from oil wells on the OCS. This promulga-

tion had a crippling and, we submit, legally frustrating

effect on petitioners’ capacity to carry out their lease

contracts.

The case posing these questions is part of the legal after-

math of a celebrated oil well “blow out” on the OCS of the

Santa Barbara Channel on January 28, 1969. (A-285)

This unfortunate mishap did not involve petitioners or

their co-lessees in any way. But it did spill some 10,000

barrels of oil into the sea (A-285-86), provoke a popular

uproar (A-287), and create, on the morrow of its arrival

in Washington, a continuing public relations “hot potato”

for the then-new Nixon Administration.

In the wake of this episode, the Interior Department’s

executives tuok steps, without any attempt at compensa-

tion, which effectively revoked petitioners’ contractual and

dearly bought right to drill at Santa Barbara and which

brought the petitioners, first to the Court of Claims and

now to this Court. The Government seeks to justify this

course by reference to petitioners’ alleged failure to com-

ply with, and to pass, secret and undocumented “regula-

tory” requirements, the existence of which was disclosed

for the first time, not in the Federal Register when they ©

ostensibly took effect, but by the testimony of defense

witnesses at the trial of this case, some two years after the

events in question.

A. The Legal Context

Congress enacted in 1953 the OCSL Act and a companion

measure, the Submerged Lands Act of 1953, 67 Stat. 29

(1953), 43 U.S.C. §§ 1301-15 (1976), to resolve the so-called

“tidelands oil” controversy precipitated by this Court’s de-

cision in United States v. California, 332 U.S. 19 (1947)

(holding the federal Government had paramount rights in

the seabed beyond the tidal low-water line). Broadly speak-

ing, the Submerged Lands Act conveyed to the seaboard

States the submerged lands out to the three-mile limit; the

OCSL confirmed a prior Presidential assertion of national

jurisdiction and control over the seabed and subsoil of the

continental shelf beyond that line, see Executive Proclama-

tion No. 2667, 3 C.F.R. 67, 68 (1943-48 Comp.), and estab-

lished a regime for the orderly development of the zone’s

petroleum and other mineral resources under the aegis of

the Secretary of the Interior.

Of particular significance to the present case are OCSL

Act §§ 8(a), (b), 5(a)(1), and 4(a)(2). Sections 8(a), (b),

43 U.S.C. §§ 1337(a), (b) (1976), provide for the Govern-

ment’s grant of oil and gas leases on the OCS as follows:

“(a) In order to meet the urgent need for further

exploration and development of tne oil and gas de-

posits of the submerged lands of the outer Continental

Shelf, the Secretary is authorized to grant to the high-

est responsible qualified bidder by competitive bidding

under regulations promulgated in advance, oil and gas

leases on submerged lands of the outer Continental

Shelf .... The bidding shall be (1) by sealed bids,

and (2) at the discretion of the Secretary, on the basis

of a cash bonus with a royalty fixed by the Secretary

of not less than 121% per centum in amount or value

of the production saved, removed or sold....

“(b) An oil and gas lease issued by the Secretary

pursuant to this section shall (1) cover a compact

area not exceeding five thousand seven hundred and

sixty acres, as the Secretary may determine, (2) be

for a period of five years and as long thereafter as oil

or gas may be produced from the area in paying quan-

tities, or drilling or well reworking operations as ap-

proved by the Secretary are conducted thereon .. .

[and] contain such rental provisions and such other

terms and provisions as the Secretary may prescribe

at the time of offering the area for lease.”

Section 5(a)(1), 43 U.S.C. § 1334(a)(1) (1976), granted

rule-making authority to the Secretary of the Interior in

these expansive terms:

“The Secretary may at any time prescribe and amend

such rules and regulations as he determines to be nec-

essary and proper in order to provide for the pre-

vention of waste and conservation of the natural

resources of the outer Continental Shelf, and the pro-

tection of correlative rights therein, and, notwithstand-

ing any other provision herein, such rules and regula-

tions shall apply to all operations conducted under a

lease issued or maintained under the provisions of this

subchapter.”

Section 4(a) (2), 43 U.S.C. § 1333(a)(2) (1976), provided

as follows for the qualified adoption of State law as federal

law on the OCS:

“To the extent that they are applicable and not

inconsistent with this subchapter or with other Fed-

eral laws and regulations of the Secretary now in eff ect

or hereafter adopted, the civil and criminal laws of

each adjacent State, now in effect or hereafter adopted,

amended, or repealed[*] are declared to be the law of

the United States for that portion of the subsoil and

seabed of the outer Continental Shelf, and artificial

islands and fixed structures erected thereon, which

would be within the area of the State if its boundaries

were extended seaward to the outer margin of the

outer Continental Shelf.... State taxation laws shall

not apply to the outer Continental Shelf.”

The Secretary implemented his rule-making authority in

1954 by promulgating, after extensive consultation with

the oil industry and other affected interests (Armstrong

Tr. 60-61),** regulations, to be administered by the United

States Geological Survey, governing the operations of

lessees on the OCS; regulations, to be administered by the

Department’s Bureau of Land Management, providing for

the conduct of leasing on the OCS; and a standard lease

form to be used to evidence oil and gas leases issued by

the Department pursuant to OCSL Act § 8.

The operating regulations are codified in Part 250 of

Title 30 of the Code of Federal Regulations. Although the

Department periodically reviewed them (Moore Tr. 4748-

49; see Pecora Tr. 4214, 4254),*** it found no occasion to

change them, in any material way, between their initial

* This section was amended in 1975, Pub.L. No. 93-627, § 19(f),

88 Stat. 2146, to substitute the “now in effect” clause for words “as

of the effective date of this Act”, i.e., August 7, 1953. In 1969, the

time of primary significance to this case, the statute adopted the

law of on-shore States as frozen in 1953.

** Judge Reuel Armstrong, of Wyoming, was Associate Solicitor,

and later Solicitor, of the Department of the Interior during the

early years of the Eisenhower Administration and was the princi-

pal actor for the Government in the drafting and adopting of the

reguiations and OCS lease form.

*** The late Dr. William Pecora was Director of the Geological

Survey when he testified. Cordell Moore was the former Assistant

Secretary of the Interior for Mineral Resources.

promulgation and the time in 1969 when this action arose.

Throughout this 15-year period, including early 1968 when

petitioners and their co-lessees acquired their Santa Bar-

bara Channel leases in suit for advance bonus payments

of $73,854,594, the regulations included a provision, 30

C.F.R. § 250.91 (Stat. App. 44-47) ; it conditioned the drill-

ing of each well by a lessee upon the receipt of a permit

to be issued by the Geological Survey’s Regional Super-

visor for Oil and Gas or, at the latter’s discretion, his dele-

gate, the District Engineer.*

The Regional Supervisor also was authorized, by 30

C.F.R. § 250.12(b) (Stat. App. 36-37), to impose “emer-

gency suspensions” as follows:

“The supervisor is authorized to require a lessee by

written notice to suspend any operation or method of

operation which endangers life or threatens immedi-

ate, serious, or irreparable damage to the leased de-

posits or other valuable mineral deposits.”

Such a suspension carried with it a corresponding exten-

sion of the lease’s primary term. 43 C.F.R. § 3305a.4.

The regulations also undertook to provide for the safety

of the lessees’ operations on the OCS. 30 C.F.R. § 250.30

(Stat. App. 38-39) specified, in pertinent part:

*The permits required by Section 250.91 are, of course, “i-

censes’”’ within the meaning of the APA and proceedings to obtain

them are “agency proceedings.’’ See 5 U.S.C. § 551(8), (9), (12)

1976).

The Regional Supervisor relevant to this case was the Pacific

Regional Supervisor for Oil and Gas with offices in Los Angeles.

(A-287-88) Under the organizational charts of the Geological

Survey prevailing throughout the period significant to this action,

he was three rungs below the Director, serving under the Chief

of the Survey’s Conservation Division and the Chief of the Divi-

sion’s Oil and Gas Branch. (A-287-88)

“The lessee shall take all reasonable precautions to

prevent damage or waste of any natural resource or

injury to life or property or the aquatic life of the

seas.”

30 C.F.R. § 250.40(b) (Stat. App. 42-43) indicated that:

“The lessee shall take all reasonable precautions to

prevent any well from blowing open and shall take

immediate steps and exercise due diligence to bring

under control any such well. Storm chokes or similar

safety devices shall be installed in any well capable

of flowing oil or gas... .”

Other provisions required the lessee to “carry on all opera-

tions . . . in a safe and workmanlike manner”, 30 O.F.R.

§ 250.45; to take “all reasonable precautions” against ac-

cidents and fires and to control wells, 30 C.F.R. §4 250.40

(a), 250.44, and not to discharge wastes into the sea or

underground formations, 30 C.F.R. § 250.42. (See Stat.

App. 42-44)

The Interior Department’s 1954 promulgations also in-

cluded a standard oil and gas lease form which, thereafter,

was used, without material change* (admitted Answer

117), to evidence every oil and gas lease—some 1,380**—

issued by the Government under OCSL Act 48 between the

form’s adoption and its replacement, subsequent to the

Santa Barbara spill, by a significantly revised form pre-

scribed by the Department in October 1969, 34 Fed. Reg.

17,779 (1969). A copy of one of the two leases signed by

* The form was modified, from time to time after 1954, to in-

corporate equal employment opportunity clauses required by later-

enacted statutes and Executive Orders designed to protect the

civil rights of all Americans.

** See U.S. Dep’t of the Interior, Outer Continental Shelf

Statistics 13-14 (1978).

petitioners with respect to their parcels at Santa Barbara

in 1968 is included, by way of illustration, as Exhibit A to

this petition. Relevant quotations from this document also

appear in the Trial Judge’s Report at A-294-98.

Such standard lease forms granted to the lessee(s) the

“exclusive right and privilege to drill for .. . and dispose of

all oil and gas deposits” for a primary term of “five years

and as long thereafter as oil or gas may be produced from

the leased area in paying quantities. ...” (See Lease 41)

The leases also included a “diligence” provision (§ 2(i))

obligating the lessee:

“To exercise reasonable diligence in drilling and pro-

ducing the wells herein provided for; to carry on all

operations in accordance with approved methods and

practices including those provided in the operating and

conservation regulations for the Outer Continental

Shelf; .... Provided, That the Lessee shall not be held

responsible for delays or casualties occasioned by

causes beyond the Lessee’s control.”

We invite attention to the “wasting” character of the

Government’s oil and gas leases. Those agreements con-

template a limited primary term in which the lessee can

probe the parcel with exploratory wells drilled, as a rule,

from floating barges. If production is established, a further

period, which may well last more than 20 years (cf. A-295-

96), is provided to deplete the reservoirs. In the marine

setting of the OCS, such production conventionally is con-

ducted from specially constructed and extraordinarily

expensive (about $10,000,000 each at 1969 prices (Px 825))

“platforms” erected on the seabed. Such platforms serve as

the drilling sites for many wells and, in petroleum industry

practice, are sited on a parcel after the economically opti-

mal locations have been identified by the earlier explora-

tory drilling from barges.

B. The Lease Sale and Blow Out

In the years following the “tidelands” legislation of 1953,

the State of California leased for oil and gas development

(to petitioner Pauley, among others) many Santa Barbara

Channel parcels in the strip, within three miles of the

shore, which clearly had been conveyed to the State by the

Submerged Lands Act.* (A-56) But California, by statute,

see Ca. Pub. Res. § 6871.2 (West 1977), excluded from lease

a so-called “sanctuary” occupying the three-mile wide strip

for a distance of sixteen miles in the mid-Channel area

immediately seaward of the City of Santa Barbara and its

environs.

The State also laid claim to the rest of the Channel sea-

bed, contending that all of the Channel, which is bounded

by a chain of off-shore islands (A-54), constituted “inland

waters” covered by the federal conveyance contained in

the Submerged Lands Act. This Court decided that claim

against California in 1965. See United States v. California,

381 U.S. 139 (1965).

Promptly thereafter the Department of Interior set about

developing a program to lease parcels on the Channel OCS

for oil and gas development. Former Assistant Secretary

of the Interior Cordell Moore, the Department’s principal

actor in these matters, testified below to many meetings

with representatives of local government and other in-

terests at Santa Barbara in which some quarters urged

that the federal Government act to extend the “sanctuary”

all the way across the Channel to the seaward islands.

(A-65; Moore Tr. 4723-33) In late 1966, the Department

offered for bid at a so-called “drainage sale”, and leased

to Phillips Petroleum and others, a single parcel including

* Annexed hereto as Exhibit B is a map, derived from Govern-

ment charts and publications in the trial record, which depicts,

among other things, the principal geographic features and lease

locations noted in the course of this discussion.

an oil field which overlapped the State-federal boundary

and which already was being produced by lessees on the

State side. Phillips rapidiy installed a platform to begin

production from the federal side of the field. (A-56)

Late in 1967 the Department announced in the Federal

Los Angeles on February 6, 1968, at which 110 parcels would

be offered for bid, 32 Fed. Reg. 20884 (1967). The Depart-

ment, in framing its plans for this sale, had accommodated,

in part, the local objections by excluding from the areas

offered for lease a so-called “buffer zone” extending for

some two miles into the mid-Channel seaward of the State

“sanctuary”.* (A-38, A-66)

At the “general sale” the Government received and ac-

cepted high bids, and issued leases for, 71 parcels, collect-

ing advance bonus payments aggregating $602,716,621.°°

(A-69) Petitioners and their co-lessees were the successful

bidders for two contiguous tracts of nine square miles each,

* The local objections had focused on what was thought to be

aesthetic undesirability of off-shore platforms and other industrial

development which accompanies oil production. (A-65) The De-

partment attempted to meet this view, not only by creating the

“buffer zone”, but by causing the Pacific Regional Supervisor to

issue an OCS Order No. 9 which required subsequent Channel

lessees to plan for relatively few, but large and camouflaged, piat-

forms. (A67-68) See also A-291.

** The Trial Judge’s Report notes:

“Following the sale, Secretary Udall issued a press release,

extolling the investment by the petroleum industry of its

money and talent in the development of the domestic resource

base in a period of concern over the balance of payments

posture of the United States, stating that undoubtedly much

of the competition in the sale stemmed from a realization that

new domestic supplies were needed for a burgeoning domestic

energy market, particularly significant in the erude deficit

region of the Pacifie Coast, and commenting that the Santa

Barbara Channel area had been under intensive geologic in-

vestigation for several years... .” (A-69)

for which they made bonus payments of $43,503,147 and

$30,351,447, respectively. (A-70) The leases, known as

OCS-P-0218 and OCS-P-0226, issued to take effect on March

1, 1968.* (A-46)

Petitioners’ parcels, and about two-dozen others leased

at the general sale, are located contiguously in the mid-

Channel area seaward of the “buffer zone” and State “sanc-

tuary” (Exhibit B, infra); another large cluster of leased

tracts is strung out along the State-federal boundary line

in the western end of the Channel; others are located at

the Channel’s easterly end and at other scattered sites

(A-54-55; Px 546 (map)).

Petitioners and their co-lessees set about exploring their

parcels. By early January 1969, they had drilled seven wells

in the southerly of their two parcels and one on the north-

erly tract.** The Trial Judge later commented with respect

to this drilling that the single well on the northerly parcel

represented “very limited drilling of a large area” and that,

despite the greater effort on the southerly parcel, “substan-

tial areas of the structure remain to be probed.” Never-

theless, the “presence of hydrocarbons was logged in va-

rious formations of seven of [the eight wells], indicating

the possibility of reservoirs in the tracts.” (A-92-93)

Administratively this drilling was uneventful. The Geo-

logical Survey’s regional officials had acted promptly,

usually in a day or so, on each of the permit applications

filed with respect to petitioners’ exploratory wells and had

* The private parties’ ratable interests in the leases in suit vary

in size and from one lease to the other. The details as to their shares

may be found at A-47-50. The private parties to this action col-

lectively hold 100% of the interests in each of the two leases.

** This exploratory effort entailed expenditures of $3,925,296.

This was in addition to $1,490,474 expended by Pauley and other

group members on seismic surveys, geological studies, and the like

in the period before the general sale took place. (A-91-92)

immediately taken up with petitioners, and cleared up, the

infrequent questions they had about such applications.

(A-116-17) This practice reflects, it seems to us, the Gov-

ernment’s contractual obligation of good faith, e.g., George

A, Fuller Co. v. United States, 108 Ct.Cl. 70, 94, 69 F. Supp.

409, 415 (1947); Wah Chang Corp. v. United States, 151

Ct.Cl. 41, 49, 282 F.2d 728, 733-34 (1960), and, even more

importantly here, the express requirements of the Adminis-

trative Procedure Act.*

On January 23, 1969, representatives of petitioners’

lessee group held an “operating committee” meeting in Los

Angeles to reach agreement on the location for a second

exploratory well on their northerly parcel, meant to test

an anticlinal structure (7.e., a subsurface geological feature

appropriate as a site for an oil field) underlying both of

petitioners’ parcels. (A-119) Pauley, the group’s executive

* The permit which the Department required as a condition of

drilling is a “license”, and a proceeding to obtain it is an “agency

proceeding” within the meaning of the APA. See 5 U.S.C.

$8 551(8), (9), (12) (1976). 5 U.S.C. 555(e) (1976) provides

at:

“Prompt notice shall be given of the denial in whole or in

_ part of a written application, petition, or other request of an

interested person made in connection with any agency pro-

ceedings. Except in affirming a prior denial or when the

denial is self-explanatory, the notice shall be accompanied

by a brief statement of the grounds for denial.”

5 U.S.C. § 558(e) also states:

“When application is made for a license required by law,

the agency, with due regard for the rights and privileges of

all the interested parties or adversely affected persons and

within a reasonable time, shall set and complete proceedings

. required by law and ‘shall make its decision.”

With wiban to Section 555(e), the legislative history states:

“This subsection affords the parties in any agency proceed-

ing, whether or not formal or upon hearing, the right to

prompt action upon their requests, immediate notice of such

action, and a statement of the actual grounds therefor.” S.Rep.

No. 572, 79th Cong., Ist Sess. (1945), reprinted in S. Doe. No.

248, 79th Cong., 2d Sess. 187, 206 (1946).

agent (“operator”) for the exploratory program, immedi-

ately set about to lease a drilling barge, procure helicopter

service, buy necessary items of drilling equipment, and de-

velop detailed plans for a well with a projected cost, over

several months of drilling, of $1,463,000. (A-119-20; Px 513)

Shortly thereafter an event occurred which, in the words

of the court below, “gave rise to a ‘whole new ball game’ ”.

(A-25 n.24) Union Oil and others had made, at the “general

sale” of early 1968, the highest winning bid of all (over

$60,000,000 (Dx 121)) for the lease (OCS-P-0241) on a

parcel immediately adjacent to the “buffer zone”. (Exhibit

B, infra) After quickly delineating a so-called “Dos Cuad-

ros Field”, which underlay that parcel and a tract immedi-

ately to the east which the Government leased at the sale

to Sun Oil and others, Union installed two production plat-

forms on its parcel. On January 28, 1969 a development

well being drilled from one of these platforms blew out.

Before the spill was contained about ten days later, 10,000

barrels of oil escaped into the sea. (A-285-86)

C. The Government’s Arbitrary Response

When the Union well blew out five other wells were then

being drilled on the Channel OCS. Interior Secretary Wal-

ter J. Hickel flew to Santa Barbara on February 2, held a

press conference, and obtained the consent of those drilling

to a voluntary suspension of their operations while a team

of departmental experts reviewed those operations for

safety . (A-289-90) The team did so, concluding that an

episode, like that at the Union platform, was unlikely to

recur and that such further precautionary measures as

seemed indicated could be and would be easily made. The

Department lifted its voluntary suspension, and the Sec- -

retary announced this action and the conclusions of his

expert team in press releases issued on February 4 and 6,

1969. (A-290)

Local government officials reacted, denouncing the re-

sumption and Secretary Hickel at a well-publicized Senate

subcommittee hearing in Washington on February 5.*

(A-290)

1. The Enforced Suspension of Drilling

On Friday, February 7 the Secretary sent telegrams to

the companies which had been voluntarily suspended, in-

voking 30 C.F.R. § 250.12 and commanding them to, again,

shut down their operations.** (A-291-92) He announced

this action in a contemporaneous press release. When this

case was tried in the winter of 1970-71, it also was dis-

closed that the Secretary, without any public notice, or any

private notice to petitioners, had orally revoked, on Feb-

ruary 7, the published authority of the Pacific Regional

Supervisor in Los Angeles and his aides to function on

drilling permit applications. (A-293)

On February 10 Pauley dispatched to the Regional Su-

pervisor, in the usual way and form, its application for

the permit needed to drill its second well on its northerly

parcel; it is undisputed that the application fully complied

with all requirements then existing. (A-286) In the light

of the Secretary’s announced actions on the 7th, Pauley

also wired him in Washington, pointing out that it had

* The subcommittee chairman, Senator Edmund Muskie of

Maine, then being mentioned as a potential candidate for President

in 1972, announced his intention to fly to Santa Barbara and to

summon the Secretary to testify at a later date. (A-290) The

State of California also responded by filing, with the Depart-

ment of Interior, a $500,000,000 tort claim which, in due course,

eventuated in a suit under the Federal Tort Claims Act. (Px 689)

** Only the day before the Secretary had publicly announced

the findings of his technical team that the factual predicate for the

invocation of 30 C.F.R. § 250.12 (Stat. App. 36-37) did not exist.

What additional facts, if any, came to the Roaretaty’s attention on

this subject between the 6th and 7th is not disclosed in this record

or in any published source of which we are aware.

a drilling barge standing by and requesting advice as to

“our position with regard to your regulation with respect

to drilling commencement.” (A-5 n.4; Px 539)

The telegram, though received by the Secretary and re-

ferred by him to the Director of the Geological Survey, was

never answered. (A-5 n.4) There also was no response of

any kind to the permit application filed in Los Angeles.

(A-121, A-288) At trial the Government’s witnesses testified

that the application had been duly received on February 11,

had passed across the desks of the Acting Regional Super-

visor and several of his aides, (A-288), and had then been

forwarded to the Santa Barbara District Engineer who,

in his words, deposited it in a file “with all the notices re-

ceived” and “held [it] in abeyance.” * (Px 537; Cypher Tr.

912)

Meanwhile, the Secretary was making public statements

which the Trial Judge summarized as follows:

“Tn his testimony as a witness in this case in December

1970, shortly after he had resigned [sic] as Secretary

of the Interior, Mr. Hickel testified that he sent the

telegrams shutting down operations to enable him to

have time to evaluate the situation in the channel and

*In a memorandum to the Regional Supervisor, prepared in the

immediate wake of a visit of Government trial counsel to California

for discovery sessions at Pauley’s offices in August 1969, the Dis-

trict Engineer wrote:

“The office was opened in Santa Barbara on February 17,

1969 and Application to drill was stamped as received in the

Santa Barbara office on February 19, 1969. All the notices

received were placed in a folder and held in abeyance.

“The notice of intention to drill Well OCS-P-0226 No. 2

was reported on the morning of August 15, 1969, when Mr.

Maurice Adams called on the telephone and inquired if it was

in our files. It was in the file with the rest of the notices that

are being held in abeyance. There was not any difficulty in

locating it.” (Px 537)

to permit a review of the OCS regulations and orders,

and that he considered the shutdown to be temporary.

That that was his intention is accepted as credible.

However, the ‘temporary’ shutdown became extended

with concurrently mounting political pressures, and

Secretary Hickel announced on March .21, 1969, that

drilling and production would remain shut down in the

Santa Barbara Channel indefinitely until he was sat-

isfied that development of natural resources could be

managed without endangering natural resources, and

on April 1, that he was maintaining a shutdown on

OCS lands in the channel, and as late in his tenure

as September 15, 1970, that channel lessees had not

drilled because they had not been granted permits.” *

(A-292-93)

No exploratory drilling, by anyone, took place on any of

the mid-Channel leases seaward of the City of Santa Bar-

bara from February 7, 1969 through the end of the trial

in this case in April 1971—or, indeed, until at least the

winter of 1974-75, see Gulf Oud Corp. v. Morton, 493 F.2d

141 (9th Cir. 1974)—when the written primary terms of

petitioners’ leases had expired. The Trial Judge found, on

the basis of reluctant concessions in the testimony of Gov-

ernment witnesses, that the Department had held in abey-

* The announcement of March 21, 1969, to which the Court’s

Opinion also alludes at A-7, refers to a statement made by the

Secretary at a press conference which he held that date in the

hearing rooms of the Committee on the Interior and Insular Af-

fairs of the House of Representatives (Px 873). The reference of

April 1, 1969 is to a press release from the “Office of the Secretary”

which began:

“Interior Secretary Walter J. Hickel today said that he is

maintaining a shutdown order on 67 leases on federal lands

veg _ Barbara Channel off the coast of California” ;

and that of September 15, 1970 to testimony at a public hearing of

a House subcommittee (Px 959 at p. 108).

ance, not only petitioners’ permit application, but at least

two others, filed by Mobil and Texaco, with respect to par-

cels which adjoined or abutted the northerly of petitioners’

tracts. (A-150-51, A-156) See also Culf Oil Corp. v. Morton,

345 F.Supp. 685, 687 (C.D. Cal. 1972), remanded, on re-

hearing, for entry of judgment for plaintiffs, 493 F.2d 141

(9th Cir. 1974), which indicates that perhaps a dozen other

applications were receiving the same “stonewall”, being

neither granted nor denied for stated reasons, during the

period when this case was on trial.*

The Government’s proffered justification for this per-

formance—one which flouts the APA’s publication section

as interpreted by this Court and several courts of appeal,

but which the Court of Claims has sustained—is described

at pp. 27-30, infra.

* We did not contend below, as the Court of Claims, but not its

Trial Judge, mistakenly suggests that no drilling was ever allowed

anywhere in the Channel for many years after February 7, 1969.

(A-26) At various times during 1969, as we acknowledged and

indeed showed, the Government did allow Union and Phillips to

resume production operations from their existing platforms and

Sun Oil Company to install a platform to drain its portion of the

Dos Cuadros Field on which the blowout had occurred. A presiden-

tial study panel, the DuBridge Committee, had publicly recom-

mended this on the ground that such drilling reduced the likeli-

hood of a further mishap on Dos Cuadros. (Px 987; 1023 at p.9;

see Sun Oil Co. v. United States, 215 Ct.Cl. 716, 572 F.2d 786,

797-98 (1978) )

Although the Government offered no proof on the matter, it ap-

parently also permitted, after February 1969, some limited ex-

ploratory drilling on leases in the remote western and southeastern

extremities of the Channel, far from the City of Santa Barbara.

(Px 609) When the Secretary so acted, the County and City of

Santa Barbara responded with a suit against the Secretary and

others for injunctive relief and a declaration of the unconstitution-

ality of the OCSL Act. While this action eventually was dismissed

on the pleadings, it twice reached this Court on the plaintiffs’ un-

successful petitions for certiorari, County of Santa Barbara v.

Malley, 396 U.S. 950 (1969) ; County of Santa Barbara v. Hickel,

426 F.2d 164 (9th Cir. 1970), cert. denied, 400 U.S. 999 (1971),

and dampened whatever enthusiasm the Secretary may have enter-

tained with respect to further drilling in the Channel.

2. The Imposition of Absolute Liability

On February 17, 1969 Secretary Hickel made a second

response to the Santa Barbara spill. Invoking the emer-

gency publication provisions of the APA, 5 U.S.C. § 553(b)

(1976), the Secretary adopted, without prior notice or op-

portunity for comment, announced with a press fanfare

(A-306-07), and caused to be published in the Federal

an amendment to his Department’s OCS operating regula-

tions, designated 30 C.F.R. § 250.42(b) (Stat. App. 51).

The new rule, together with its published statement of

basis and purpose, see 5 U.S.C. § 553(c) (1976), reads, in

pertinent part, as follows: ‘

“The purpose of this amendment is to set forth in

greater detail the responsibility of lessees for the cost

of cleanup and for damages from oil pollution result-

ing from operations under the Outer Continental Shelf

Lands Act. The amendment is found to be necessary

and proper in order to provide for the conservation of

the natural resources of the Outer Continental Shelf.

“Present § 250.42 is designated as 250.42(a) and a

new paragraph (b) is added to read as follows:

“§ 250.42 Pollution.

-_ s e

“(b) If the waters of the high seas are polluted by

the drilling or production operations of the lessee, and

such pollution damages or threatens to damage aquatic

life, wildlife, or public or private property, the control

and removal of the pollutant and the reparation of any

damage, to whomsoever occurring, proximately result-

ing therefrom shall be at the expense of the lessee,

and on failure of the lessee to control and remove the

pollutant the Supervisor, in cooperation with other

appropriate agencies of the Federal, State, and local

governments, or in cooperation with the lessee, or both,

shall have the right to accomplish the control and re-

moval of the pollutant at the cost of the lessee, but

such action shall not relieve the lessee of responsibility

for reparation of damages as provided herein.”

(Quoted at A-306-07)

This regulation imposed upon lessees a standard of ab-

solute and unlimited third-party liability for the escape

of oil which went far beyond anything that existed before,

whether the prior standard derived, as we contend, from

the pre-existing regulations (Stat. App. 33) or, as the Gov-

ernment contended below, from the law of California

“adopted” on the OCS by OCSL Act $4(b), 43 U.S.C.

1333(b) (1976). In the Channel, an area prone to large

earthquakes, heavily traversed by shipping, and sur-

rounded by a populous and well-developed littoral (A-58-

60), this promulgation placed a harsh, new and unforsee-

able burden on drilling—a condition which was aggravated

by the almost immediate collapse of the market for liability

insurance for marine oil spills.* (A-333-34)

Pauley promptly protested, hand delivering a letter to

Secretary Hickel’s office on February 20. (A-303) Ke-

wanee, another member of petitioner’s group, wired a

protest of its own. (Px 1000) The latter was ignored, the

former answered with a form letter of “thanks” for

Pauley’s interest. (Px 542) Both protests were unavailing.

* The record of this case shows, without contradiction, that dam-

age actions seeking, in the aggregate, more than $1,000,000,000

were filed against Union and its co-lessees following their spill.

(Waters Tr. 1555; Px 693-95) These actions were undecided when

the trial record in this case closed, and while the ad damna were

no doubt inflated, it is plain that the potential recoveries, in the

ease of a large spill, are far beyond the reasonable capability of

uninsured small companies such as petitioners.

On February 28, 1969 Secretary Hickel and several aides

appeared before Senator Muskie’s subcommittee. In his

prepared statement, the Secretary said:

“Another action that I have taken requires absolute

and unlimited liability with respect to all drilling

operations on the Outer Continental Shelf. This

requirement is effective now and will continue to be in

effect in the future.” (Px 620 at p. 944)

In later colloquy, the Secretary commented on the extra-

ordinary scope of his promulgation:

“Secretary Hickel: Mr. Chairman, if I might just

comment on our interpretation of existing regulations

that we just issued on Outer Continental Shelf and

oil spillage, we don’t exclude act of God. [Px 620 at

p. 952]

a * e

“Senator Cranston: This [the new regulation] goes

far and away beyond the cost of cleanup, though. It

applies to liability for damage done to property.

“Secretary Hickel: That is right.” (Px 620 at p.

968)*

* At the trial of this case, the Secretary testified further, that

the lessee also would be subject to the liabilities of his regulation

with respect to oil spills occasioned by the acts of human third

parties, offering as an illustrative hypothetical the case of a plat-

form or anchored drilling barge run down by a passing aircraft

earrier of the United States Navy. (Hickel Tr. 4399-4400) By in-

cluding Acts of God and third-parties in its sweep, the Secretary’s

regulation goes far beyond the concept of “strict liability” which

the common law recognizes in a very limited class of cases, The

closest model in law of which we are aware is the treatment which

the Price-Anderson amendments to the Atomic Energy Act afford

the “extraordinary nuclear occurrence”. There unlimited licensee

responsibility is accompanied by a limitation of total liability and a

substantial Government indemnity. See generally Duke Power

Co. v. Carolina Environmental Study Group, Inc., 488 U.S. 59

(i976) and 71 Stat. 576 (1957), as amended, 42 U.S.C. § 2210

a ee ee

Other statements to the same effect were made at a press

conference (A-292) and other congressional hearings. (Dx

238 at p. 176; Px 619 at pp. 41-42)

D. Litigation and the Government’s Proffered Explanations

1. The Petitioners’ Case

On April 9, 1969 Pauley, Colorado Oil, Mesa, Husky,

McCulloch and Huber filed their Petition with the Court

of Claims.* (A-44) They alleged that the Government, by

denying them, without explantion, the right to drill and by

imposing, in the setting of the earthquake-prone, shipping-

traversed, deep-water Channel,** the burden of absolute

and unlimited liability for possible spills, had either frus-

trated or breached plaintiffs’ lease contracts,***

The plaintiffs asked for restitution of their ratable

shares of lessees’ bonus payments of $73,854,594 and an-

nual rentals**** or for their ratable shares of contract

*The Opinion below views petitioners’ resort to the court as

quick (A-19-20), but the disclosed conduct of the Government

had, by April 9, created causes of action or, at the very least, the

reasonable perception of them. Nothing that the Government did

thereafter “cured” the conduct (refusal to act on the drilling

request and the imposition of an onerous new liability standard)

which, in petitioners’ view, entitled them to a remedy.

** The water depth on petitioners’ parcels ranges from about

220 to about 750 feet. (A-61) While drilling has since been

accomplished in much deeper waters—about 4,000 feet in a very

recent experimental probe off West Africa—petitioners were op-

erating, in 1969, at very close to the practical limit of available

technology. Much shallower waters generally prevail in those areas

of the Gulf of Mexico where most oil and gas activity on America’s

OCS has thus far taken place. (A-62)

*** Petitioners also alleged alternative pleading theories of “tak-

ing” and mutual mistake. (A-20-22, A-30-32) The present petition

raises no question about their rejection by the court below.

**#** The leases required, prior to the establishment of produc-

tion for which royalties would be due, payment of an annual

rental of $3/acre (or $17,280/per lease) per year. The lessees on

damages for the breached leases, which they estimated, for

the totality of the two leases, at $230,000,000.

The Government answered with, in substance, a general

denial and an affirmative defense which alleged the absence

of indispensable parties, viz., the plaintiffs’ five other co-

lessees. There was no mention of the “clearance procedure”

of which so much was heard at trial. The Trial Judge

entered an Order directing the other lessees to appear,

and they did so, asserting claims to their ratable shares of

the recoveries sought. (A-45-46)

At a pre-trial conference on September 4, 1969 plaintiffs

proposed, the Government opposed, and the Trial Judge

declined to order a bifurcation of the case so as to provide

separate trials of liability and then, if liability be found,

of damages.* The case went to trial on October 12, 1970

and continued, through 89 hearing days, until April 15,

1971. The proofs of the trial record, and the Trial Judge’s

Report, which eventuated five years later on March 19,

1976, are largely devoted to issues of damages not relevant

at this stage of the action.

At trial petitioners and their co-plaintiffs showed their

preparations in January and early February 1969 to drill

a second well on their northerly parcel (A-119-21); their

submission of, and the Government’s inaction on,** their

the parcels in suit had paid, at the time of suit, two annual

rentals, and they continued to pay, and the Government to accept,

annual rentals through the five-year primary terms provided by

the leases. (A-9; see also A-70-71) The total rental amount

involved is, thus, $172,280.

* The Trial Judge also denied, on August 6, 1969, a motion of

the American Civil Liberties Union, filed on or about July 11,

1969, for leave to submit an amicus brief supporting the proposi-

tion that plaintiffs were the victims of a “taking”.

** Despite the mandates of 5 U.S.C. §§555(e), 558 1976

quoted at p. 16, supra) the Government neither aeend nu

permit application (A-121, A-288); the Secretary’s dis-

regard for their telegraphic request for illumination (A-5)

and his many contemporaneous public statements about

“shutdown orders” and “indefinite” suspensions (A-292-

93, A-305); the total cessation of exploratory activity in

the mid-Channel area seaward of the City of Santa Bar-

bara (A-150-51, A-156; Exh. B, infra); the promulgations

of Secretary Hickel’s absolute liability regulation on Feb-

ruary 17, 1969 (A-306-10); and the consequence of this

regulation in terms of earthquake hazards (see A-58-59),

loss of liability insurance (A-333-34), the scope of the po-

tential damage exposure (Px 693-95), and other relevant

matters.

2. The Secret “Clearance Procedure”

For its part, the Government, at trial, responded to the

challenge to its inaction on plaintiffs’ permit request by

pointing to a telegram which Secretary Hickel had sent

to all Santa Barbara Channel lessees on March 1, 1969

and to a subsequent exchange of correspondence between

Pauley, as operator for petitioners’ lessee group, and the

Regional Supervisor later that month and in early April

1969. The Secretary’s telegraph spoke of a “review of the

factors affecting the safety of drilling operations” and

called for the Department’s “access to all available geo-

logical, geophysical and structural information.” (A-312)

Pauley, after writing to the Regional Supervisor for

an explication of this Delphic request, forwarded to him on

April 4, 1969 what it thought was desired under cover of a

application nor denied it for a stated reason (whether legally

sound or not). Any stated reason, if not a categorical indefinite

ban on drilling in mid-Channel area would have been a de facto

public announcement by the Department that the Department was

prepared in principle to countenance early drilling in the area, of

high public salience, where none, in fact, was allowed to occur for

well over five years after February 7, 1969. (See pp. 20-21, supra.)

ae 7

letter which said “[i]f at any time you need any other in-

formation or would like to discuss the Geology of our

leases, please give us a call and we will arrange a satisfac-

tory meeting.” * (A-326) There was no subsequent response

by the Government of any kind. (A-9; A-326-27)

The Government represented through the oral testimony

of the Director and several regional officials of the Geo-

logical Survey that the telegram of March 1, 1969 and

subsequent correspondence were steps in a program they

called the “clearance procedure”. According to this view

the Secretary had established, shortly before March 1, a

program whereby leases in the Channel were to be re-

viewed by a group set up in the Survey’s Los Angeles

office under the style of “Task Force II” and these studies

were to be reviewed by the Geological Survey’s Conserva-

tion Division in Washington, by the Survey Director, and,

finally, by the Secretary. Only if all approved with respect

to a lease would the published authority of the regional

officials to function on drilling permit applications with that

lease be restored. (A-313)

Notwithstanding Pauley’s letter of April 4 and its accom-

panying data, the vast mass of drilling logs, paleontologi-

cal materials, and other data which Pauley had routinely

filed with the Regional Supervisor, pursuant to regulation,

after completion of each of the wells it had previously

drilled (A-116; see generally Px 1-103) and Pauley’s un-

grudging response in 1969 and early 1970 to the Govern-

ment’s vacuum-cieaner requests for pre-trial discovery of

“underground” data relevant to damage issues,** plaintiffs’

* Representations of the lessees’ desire to cooperate with what-

ever the Department had in mind also were included in an earlier

letter by Pauley to the Regional Supervisor (A-323-24) and by

on by Kewanee to the Secretary on March 31, 1969. (Dx

** The principal member of Task Force II, a Survey geologist

by the name of Keith Yenne (A-313-14), also was the path acm

tp TC ———_

parcels were never considered for “clearance” ; the data on

hand, the witnesses said, was insufficient. Thus, authority

to act on petitioners’ permit application had never been

restored to the regional officials* and that application, in

the words of the District Engineer’s memorandum of Au-

gust 1969 remained “in the file with the rest of the notices

that are being held in abeyance.” (Px 537)

The establishment, existence, and terms, whether of prac-

tice or substance, of this “procedure” never were published

in the Federal Register or otherwise publicly disclosed.**

principal expert witness at trial as to the “underground” aspects

of petitioners’ parcels. (A-313) He devoted, it would seem, about

six months of 1970 to his litigation preparations. At trial he testi-

fied for five days and never referred to any conditions on peti-

tioners’ parcels which made them inappropriate sites for drilling.

*One of the Government’s witnesses from the regional offices

also testified, without, however, pointing out why, that the applica-

tion did not, in his view, comply (A-317; Cypher Tr. 5882; Px 537)

with an OCS Order No. 10 (Stat. App. 77) which had been prom-

ulgated six weeks after the application had been filed (A-305) ;

but see Boston Edison Co. v. FPC, 557 F.2d 845 (D.C. Cir.), cert:

denied, 434 U.S. 956 (1977); Public Service Co. v. FERC, 584

F.2d 1084 (D.C.Cir. 1978) (refusing to retroactively apply new

filing standards to previously filed applications). As the Opinion

of the Court of Claims notes, Order No. 10 stated “that no drilling

would be allowed until all pipelines used to transport oil to shore

facilities were inspected by the Geological Survey,” (A-7), but it is

undisputed and indisputable that pipelines to shore have no role

in exploratory drilling from floating barges (see A-117-20). Lines

come, if at all, at a later stage when platforms for full-scale pro-

duction are installed. (Oil may also be removed from a platform,

as it is from an exploratory site, by vessel.) In any case, the wit-

ness’ conclusion, whether or not correct, concededly had never

been reached administratively, or communicated to Pauley or any

of the co-lessees (A-287; Cypher Tr. 5882; see 5 U.S.C. § 555(e)

(1976)), by reason of the Secretary’s undisclosed suspension of

the regional officials’ authority on February 7, 1969. Thus, this

objection is irrelevant here. See Burlington Truck Lines, Inc. v.

United States, 371 U.S. 156 (1962); SEC v. Chenery Corp., 318

U.S. 80 (1943).

** The Government has never identified, in any brief before the

Trial Judge or Court of Claims, a documentary “source” for the

“procedure”, whether in the trial record or otherwise.

(Pecora Tr. 4979-80) Indeed, according to the witnesses,

there was no written description, even in the iiles of the

Department of the Interior, of the mechanisms and the

“procedure” and, perhaps even more important, of its sub-

stantive standards—the criteria which distinguished a

lease that was deemed “clearable” from one that was not.

(A-314; Fackler Tr. 5966; Yenne Tr. 7455) Witnesses from

the regional offices said they orally briefed some lessees

at Santa Barbara about the procedure, but they conced-

edly did not so communicate with the petitioners or their

co-lessees. (A-315) The latter were “stonewalled” with

silence.

In response to this testimony, plaintiffs served sub-

poenas which produced, in the later stages of the trial, a

list of leases “cleared” and “uncleared”. As of mid-Janu-

ary 1971, a date two years after the “blow-out”, the De-

partment had not “cleared” for exploratory drilling any of

20 parcels, including petitioners’, in the mid-Channel area

seaward of the City of Santa Barbara.* (See the map and

accompanying explanatory text, Exhibit B, infra, for the

details. )

3. The Attempt to Scuttle the Liability Regulation

As to the liability regulation, the Government argued,

contrary to the text of the 30 C.F.R. 250.42(b), its state-

ment of basis and purpose, and the Secretary’s explicit

representations to a Senate subcommittee concerning its

scope, that the promulgation of February 17, 1969 was not

*In most of these cases, the regional officials testified they had

forwarded recommendations for “clearance” to the Washington

echelons of the procedure where the recommendations simply

gathered dust for periods of up to a year without any expression

of dissatisfaction, or requests for further data, to the field. (Px

999 (list of dates prepared by Survey in response to trial sub-

poena) ; Tr. 6356-59)

meant to impose upon lessees liability to third parties with

respect to spills; it merely “clarified” an existing lessee

obligation to clean up a spill. Liability to others was gov-

erned by the law of the on-shore States, and in the case of

Santa Barbara, that was the law of California which, the

Government said, imposed an absolute liability on Channel

lessees.* (A-14 n. 12)

The Government also pointed to a further revision of

the OCS operating regulations, promulgated by the Inte-

rior Department in August 1969, well after the present suit

began. In these amendments 30 C.F.R. § 250.42 was re-

numbered as 30 C.F.R. § 250.43, and the third-party liabil-

ity “for pollution” which had been imposed by Section

250.42(b) was referred, by a new 30 C.F.R. § 250.43(c), to

“applicable law”, as follows:

“(c) The lessee’s liability to third parties, other than

for cleaning up the pollutant in accordance with para-

graph (b) of this section shall be governed by appli-

cable law.” (Stat. App. 66)

* The premise for this theory was California’s acceptance of the

tort doctrine of the “ultra hazardous” or “abnormally dangerous”

activity, see Restatement (Second) of Torts §520 (1976), and

its application, in one reported case 50 years ago, to a blow-out

of an oil well being drilled into a known high pressure zone in the

middle of a built-up urban community, see Green v. General Petro-

leum Corp., 205 Cal. 328, 270 Pac. 952 (1928). The Government’s

theory that California treats all, rather than, at most, a tiny frac-

tion of abnormal] wells, as “ultrahazardous” is unsupported by any

case citation, and is contradicted by a host of cases which show that

the courts of California, like the courts of most jurisdictions, apply

the “ultrahazardous” concept situationally rather than categorically.

See, ¢.g., Luthringer v. Moore, 81 Cal. 2d 489, 190 P.2d 1, 8 (1948) ;

Boyd v. White, 128 Cal.App.2d 641, 276 P.2d 92, 100 (1st Dist.

1954) ; Smith v. Lockheed Propulsion Co., 247 Cal.App.2d 774, 56

Cal.Rptr. 128, 188 (4th Dist. 1967); Williams v. Pacific Coast

Aggregates, Inc., 128 Cal.App.2d 777, 276 P.2d 28, 33 (1st Dist.

1954) ; Laugharn v. Bolsa Chica Oil Corp., No. 456167, Cal.Super.

At the same time, however, the Department also modi-

fied portions of the “applicable law”—+.e., the Department’s

operating regulations—to make absolute the prohibition

against well blow-outs, fires, and other mishaps which

might give rise to large spills. See, as amended in August

1969, 30 C.F.R. §§ 250.30, 250.41, 250.45, 250.46* (texts at

Stat. App. 59, 62-65, 66-67). These changes have subse-

quently been held to make a lessee absolutely liable for

non-negligent injuries resulting from a violation of these

regulations, notwithstanding the contrary law of the on-

shore State, see Armstrong v. Chambers & Kennedy, 340

F.Supp. 1220, 1233-34 (S.D.Tex. 1972), modified on other

Ct., Los Angeles County, July 21, 1941 (copy of opinion supplied

to Court of Claims) (oil drilling not “ultrahazardous”).

Oil well drilling is an activity of high social importance which

gives rise to no more than the risk of occasional mishaps which

attends any industrial undertaking. Under accepted doctrine, its

conduct, under affirmative governmental encouragement, indeed

sponsorship, in such an entirely appropriate setting as the OCS,

where it is not “out of place”, is not “ultrahazardous”. See Postal

Telegraph-Cable Co. v. Pacific Gas & Elec. Co., 202 Cal. 382, 260

P. 1101, 1102-03 (1927); Restatement (Second) of Torts § 520

(1976) ; W. Prosser, Torts § 79, at 524-25 (4th ed. 1971).

Significantly, the Government’s purported reliance on State law

to govern liability arising from spills on the OCS in violation of

its regulation has not been disclosed, so far as we know, in any

public announcement of the Department of the Interior or other

document apart from briefs filed in this case.

* The Secretary issued in August 1969 a contemporaneous press

release calling attention to these amendments as one of the “high-

lights of changes strengthening operating regulations (30 C.F.R.

Part 250)”, commenting as follows:

“4. Change in provision so that the lessee must take all

“necessary precautions” to protect natural resources, life, prop-

erty and aquatic life rather than merely “all reasonable precau-

tions” as formerly required. (Compare new Section 250.30

with previous Section 250.30).” (Px 1173 at p. 4)

As a trial witness sixteen months later, Mr. Hickel was asked the

reason for the switch from “reasonable” to “necessary” in these

sections, and he replied, “No, I can’t tell you exactly why it was

changed from ‘reasonable’ to ‘necessary’. It might be some legal

reason why it was done.” (Hickel Tr. 4454)

grounds, 499 F.2d 263 (5th Cir. 1974), cert. dismissed, 423

U.S. 886 (1975).

E. Post-Trial Developments and the Rulings Below

1. Further Drilling Suspensions

On April 21, 1971, a few days after the end of the trial

in this case, the Geological Survey’s Pacific Regional Su-

pervisor, acting at the explicit direction of Interior Secre-

tary Rogers C. B. Morton, Mr. Hickel’s successor, issued

formal orders suspending exploratory operations on 35

Channel parcels through the life of the ninety-second Con-

gress (until January 3, 1973) and correspondingly extend-

ing the primary terms of the affected leases. The orders

did not extend to petitioners’ parcels, but covered, inter

alia, the others in the mid-Channel, including two immedi-

ately to the west of the petitioners’ which shared, according

to the testimony of the experts for both sides (A-107,

A-148-49; Px 546), the same underground anticlinal struc-

tures as petitioners’. The orders cited as justification the

Secretary’s asserted power to suspend in the interest of

“the conservation of the natural resources of the outer

Continental shelf,” OCSL Act §5(a)(1), 43 U.S.C. § 1334

(a)(1) (1976) (Stat. App. 25), while Congress considered

a proposal by Mr. Morton that it cancel the affected leases

and provide for appropriate compensation.*

Gulf Oil and others affected by the orders filed suit in

the United States District Court for the Central District

of California which set them aside as unlawful. Gulf Oil

Corp. v. Morton, 345 F.Supp. 685 (C.D. Cal. 1972). The Gov-

* The implementing bills were not made the subject of hearing

and never left committee. The account in the above paragraph

of text is, in substance, a precis of the findings of the courts in

the litigation which ensued. See Gulf Oi Corp. v. Morton, 345

F.Supp. 685 (C.D.Cal.1972), remanded, on rehearing, for entry

of judgment for plaintiffs, 493 F.2d 141 (9th Cir. 1974).

ernment obtained a stay and appealed. While the appeal

was pending in the Ninth Circuit, the orders of April 1971

expired in accordance with their terms and were replaced by

new orders suspending operations on, and extending the

term of the leases with respect to, the same 35 parcels for

the life of the ninety-third Congress, which also received

and took no action on a second cancellation proposal from

Mr. Morton. On September 10, 1973 President Nixon ad-

dressed to the Congress a “Special Message on National

Legislative Goals”, which, imter alia, renewed the call for

legislation to terminate Channel leases. See R. Nixon,

Public Papers of the President 1973 pp. 770-71 (1975). On

November 13, 1973, in the wake of the “Yom Kippur War”

of October 1973 in the Middle East and the resulting Arab

oil embargo, the Department withdrew its request for ter-

mination legislation in favor of further studies. Gulf Oil

Corp. v. Morton, 493 F.2d 141, 150 (9th Cir. 1974).

The Ninth Circuit ruled for the Gulf plaintiffs, but on

grounds different from those of the District Court. The

Court of Appeals held that the initial formal suspension

had been for a purpose authorized by the OCSL Act and

thus was initially proper, but that the power to suspend

for the purpose of legislative consideration expired when

the ninety-second Congress adjourned sime die in late 1972.

(493 F.2d at 149)

In September 1971, five months after the close of the

trial in this case, Secretary Morton also issued orders

revoking a permit granted to Union Oil in late 1968, and

suspended in February 1969, to install a third platform on

another portion of the “blow out” parcel and denying an

application, filed by Sun Oil in early 1970, for authority to

install a second production platform on its adjacent parcel. ~

The order as to Sun was held a breach of contract, after a

trial limited to liability issues, in Sun Oil Co. v. United

States, 215 Ct.Cl. 716, 572 F.2d 786 (1978), and the order

as to Union was set aside in Union Oil Co. v. Morton, 512

F.2d 743 (9th Cir. 1975).

2. The Proceedings in this Case

Meanwhile, petitioners’ case was sub judice, and the

written primary terms of their unsuspended leases expired

in early 1973 (several months before the “Yom Kippur

War” and oil embargo) without any action ever having

been taken by the Department, one way or the other, on

their application for a permit and “clearance”.

Although the parties had exhaustively briefed the case

to the Trial Judge on both the facts and the law, the Court

of Claims entered, sua sponte, on November 10, 1975 an

Order limiting his reference to a Report on the facts.

(A-335) His Report (A-41-334), so truncated, was filed

on March 19, 1976.

Without the benefit of recommendations as to law by the

hearing officer familiar with what was, inevitably, a large

and nuanced record, the court rejected plaintiffs’ claims,

holding that

“we cannot give plaintiffs any relief because they had

no legal rights, vindicable here, when they brought

suit, and have not acquired any in the course of the

litigation.” (A-34)

As to the Government’s refusal even to act on petitioners’

drilling permit application, the Court held that the Govern-

ment’s refusal to do so between the application’s filing on

February 11 and April 9, 1969, although not contemporane-

ously explained or accompanied by a suspension of the

running of petitioners’ lease terms, was reasonable in the

circumstances, (A-24-25) The inaction thereafter was justi-

fied by petitioners’ failure to “pass” the “clearance proce-

dure”. (A-25-27) “If plaintiffs”, the court said, “had gone

through the required procedure for clearance and still not

been allowed to drill, we might have a different case.”

(A-27 n. 26)

The court brushed aside our protest that petitioners could

not be expected, or required, in the light of 5 U.S.C. § 552

(a)(1) (1976), to resort to, or be “adversely affected”, by

this unpublished and undocumented procedure. This secret

program, we urged, was a nullity which could not justify

the Government’s denial of petitioners’ contract rights by

refusing to act on their application within a “reasonable”

time—a time, which if it had not expired on April 9, 1969,

surely had done so before the start of trial in late 1970.

“It is unclear’, the court said without explanation,

“whether the clearance procedure should have been pub-

lished” (A-27-28 n. 27), and, in any case, “the Pauley group

was [not] unable to obtain the necessary information if it

had really wanted to”. (A-27)

Our further contention that an unpublished, unwritten

“procedure”, without any defined standard for “clearance”

beyond the whim of the Secretary, was inherently arbitrary

(and had, in fact, been applied arbitrarily in the mid-

Channel area) was dismissed as a “failure to present clear

and convincing proof of government deceit”. (A-26) In de-

fining the issue as one of, in effect, fraud vel non, the Court

of Claims did not even allude to, let alone attempt to dis-

tinguish, this Court’s decision in Morton v. Ruiz, 415 U.S.

199 (1974), or any of the other appellate cases holding in-

effective, under 5 U.S.C. §552(a)(1) (1976), the use of

unpublished standards to control the grant of benefits other-

wise within an agency’s discretion.*

*In one guise or another, the question of standards to guide

agency action has been a central issue of administrative law at

least since the days of A.L.A. Schechter Poultry Corp. v. United

States, 295 U.S. 495 (1935).

As to petitioners’ claim that their leases had been frus-

trated by Secretary Hickel’s promulgation of new liability

standards on February 17, 1969, the court simply refused

to decide it. Pointing to the parties’ disagreements about

the applicable liability standards and to a 20-year old law

review comment by Judge Skelly Wright which noted the

difficulty of choice-of-law questions on the OCS (A-15) and

omitting to mention any of the authorities, in this Court

and elsewhere, which have dealt with the matter since, the

court disposed of the matter by saying “the standard of

liability was uncertain and ambiguous” both before and

after the Secretary’s actions. (A-14) It even erected a

“doubt” which the Government never had suggested in ten

years of litigation, which the Secretary of the Interior had

explicitly disavowed in 1969, and which OCSL Act § 5(a) (1),

43 U.S.C. § 1334(a)(1) (1976) (Stat. App. 24), rebuts, viz.,

that the regulation of February 17, 1969, whatever its pre-

cise effect, would not apply to leases in existence at the

time of the regulation’s issuance. (A-17)

Reasons for Granting the Writ

The Opinion Below Undermines the Publication Re-

quirement of the APA and Does So in a Way That Con-

flicts With Decisions of This Court and of Courts of

Appeals.

Despite the burden of necessary exposition, the Opinion

of the court below and the record plainly pose an impor-

tant question concerning the application of the publication

section of the Freedom of Information amendments to the

APA, 5 U.S.C. §552(a)(1), which warrants this Court’s

attention. May the Department of the Interior (and, in-

ferentially, the many other federal agencies which contract

with citizens) invoke an unpublished, undisclosed, unwrit-

ten, and standardless licensing program (here the so-called

“clearance procedure”) to justify conduct which otherwise

would constitute breach of contract?

We submit that the proper answer is “no”, and that the

Court of Claims, in ruling otherwise and giving effect to

Interior Department’s clandestine “clearance procedure”,

has placed itself in conflict with the implications of the

Court’s holding in Morton v. Ruiz, 415 U.S. 199 (1974),

and, as well, with decisions of several courts of appeals.

The Congress and President plainly thought, when they

first enacted 5 U.S.C. § 552(a)(1)(1976) and the other

Freedom of Information amendments in 1966, that they

were providing legislation of fundamental importance to

the health of our free society in an era of inevitably “big”

government,

President Johnson commented when he signed the 1966

enactment into law:

“This legislation springs from one of our most es-

sential principles: a democracy works best when the

people have all the information that the security of

the Nation permits. No one should be able to pull

curtains of secrecy around decisions which can be re-

vealed without injury to the public interest.” * L, John-

*The Attorney General, in a memorandum which commented

on the statute for the guidance of the Executive Branch and was

published as a booklet for public sale by the Government Printing

Office in June, 1967, remarked in a foreword:

“[T] his statute imposes on the executive branch an affirmative

obligation to adopt new standards and practices for publica-

tion and availability of information. It leaves no doubt that.

disclosure is a transcendent goal, yielding only to such com-

pelling considerations as those provided for in the exemptions

of the act.’”’ Attorney General’s Memorandum on the Public

son, Public Papers of the President 1966 at p. 699

(1967).

The Court should seize the present opportunity to au-

thoritatively construe 5 U.S.C. §552(a)(1)(1976) and to

confirm the beneficient effect for our polity that it was

intended to have.*

The question in the present case is not, as the Court

of Claims seemed to think, whether the Secretary of the

Interior has the power, in the abstract, to suspend or defer,

for a time, operations on an OCS lease in response to an

event which he viewed, or chose to perceive, as an “emer-

gency”. (A-25) The Court of Appeals for the Ninth Circuit

has recognized that the Secretary does have such a power,

if it is properly exercised, and petitioners have not con-

tended otherwise.

Information Section of the Administrative Procedure Act at

p. iii (1967). .

With respect to the statutory section involved here, he wrote:

“The subsection [§ 552(a)(1)(B)] requires agencies to dis-

close, in general terms designed to be realistically informative

to the public, the manner in which matters for which it is

responsible are initiated, processed, channeled, and deter-

mined.” (p. 8)

* The effectiveness of the “disclosure” requirements through which

the Congress has sought to condition and to control the vast and

potentially arbitrary powers of the federal Executive has been a

matter of continuing legislative concern. The present case arose

during a period of our national life when, as a painful history now

teaches, the concept of open government often was subverted.

the Congress learned, through this Court’s authoritative construc-

tion of other FOIA sections, that its 1966 efforts had not opened

the doors wide enough, it amended the statute. Compare Environ-

mental Protection 1 Ye: v. Mink, 410 U.S. 73 (1973), with Pub.L.

No. 93-502, § 1(b) (2) (1974). For analogous reasons, the doubt,

generated by divided views in lower courts, as to what Congress

os gy by enacting 5 U.S.C. § 552(a)(1)(1976) should be

cleared up,

Thus in Gulf Oil Corp, v. Morton, 493 F.2d 141 (9th Cir.

1974), involving the formal suspension (and correspond-

ing lease-term extension) of many mid-Channel leases

imposed by Secretary Morton after the trial of the present

case, the Ninth Circuit affirmed the Secretary’s right to

do so, for a time, when he acted for a declared and dis-

closed purpose which was consistent with the interests

entrusted to his supervision by the OCSL Act, But, as the

court also then said, “the statutes involved do not give

the Secretary carte blanche to continue suspending the

leases until he finds a Congress that will accept his pro-

posal,” (493 F.2d at 149)

In the later case of Union Oil Co. v, Morton, 512 F.2d

743 (9th Cir. 1975), overruling the Department’s formal

revocation, on an administrative record, of an application

by Union Oil to install a third platform on the “blow out”

parcel at Santa Barbara, the court held that even his

formal suspension of power is limited, “An open-ended

suspension of the right granted to install a drilling plat-

form would be a pro tanto cancellation of its lease.” A

valid suspension must be “conditioned by the occurrence

of certain future events.” (512 F.2d at 751)

The events apparent to petitioners and to the world in

1969, following the Union Oil spill, brought petitioners’

case within the ambit of the latter ruling. The Secretary,

in response to what the Trial Judge termed “mounting

political pressure” (A-292), repeatedly referred, in public

forums, to “shutdown orders” and “indefinite suspensions”

of drilling. (A-292) Meanwhile the Department did not

formally suspend petitioners’ operations for a finite period

for disclosed reasons which it deemed consistent with the

OCSL Act while, at the same time, affording them a cor-

responding extension of their lease terms. Rather it ig-

nored Pauley’s telegraphed request for information (A-5)

and simply deposited its permit application in a file drawer

to hold “in abeyance”, (A-25; Px 587) Although the appli-

cation was one for a “license” within the meaning of the

APA, 5 U.S.C, $551(8), (9), (12) (1976), it never was

approved or rejected for a stated reason in a reasonable

time or at any time. It simply was not acted upon.

This unexplained, and therefore arbitrary, refusal to

permit petitioners to drill was a repudiation of the ob-

ligations the Government had incurred by contract, a

year before, in return for advance payments of $73,854,594.

Standing alone, this would be and, we submit, should have

been found to be, a breach of petitioners’ contracts. The

Government has thus far been able to justify its course by

saying that there was, after the spill, a new condition to

consideration of a lessee’s application at Santa Barbara,

vie., the lessee’s successful negotiation of the “clearance

procedure”.* But, we submit, APA $5 U.S.C. § 5652(a) (1)

(1976), and the cases construing it, make it plain that peti-

tioners could “not in any manner be required to resort to,

* The “procedure” described by the Government's witnesses and

the Report (A-311-17) applied to the entire Channel and was one

of general a. within the teaching of the see Rey-

Metals Co. v. Rumsfeld, 564 F.2d (4th Cir. ), cert.

denied, 435 U.S. 995 (1978); St. Elieabeth Hospital v. United

States, 214 Ct.Cl, 822, 558 F.2d 8 (1977); Anderson vy. Bute, 550

F.2d 459 (9th Cir. 1977); Sannon v. United States, 460 F.Supp.

458 (8.D.F la, 1978) ; Lewis v. Weinberger, 415 F.Supp. 652 (D.NM.

1976). Then 7 " was, as well, a “license” within the

definitions of the APA. Petitioners although not aware of the exist-

eet, Oe ecm mee pe on

e t no for drilling

pedi hye whenery "

or to be adversely affected by”, such an unpublished “pro-

cedure”,

The Court of Claims says petitioners “could have ob-

tained the information if they had wished to press” (A-28,

n.27). But the statute mandates that the Government pub-

lish, not that the citizen “press”. And, in any case, this

comment can refer, at most, to the procedural dimensions

of the licensing mechanism. Those were described at trial,

but there is nothing to indicate what substantive criteria,

if any, were employed by the Department to distinguish

a “clearable” from an “unclearable” lease. They are not

described in the Report; they are not mentioned in the

Opinion; they are not disclosed in the record despite the

testimony of virtually everyone, from the Secretary of the

Interior down, who had any significant role in the con-

duct of the “procedure.” The criterion could have been, for

all one knows, the editorial temperature of The Los An-

geles Times, Thus, the process was, not only unpublished,

but without standards when applied in camera.

The Court of Claims’ endorsement of this performance

is incompatible, we submit, with the holdings of other

courts and with the implications of this Court’s one prior

address to 5 U.S.C. § 552(a)(1) (1976).

In Morton v. Ruiz, 415 U.S. 199 (1974), this Court in-

validated, under 5 U.S.C. § 552(a)(1) (1976), a refusal by

the Department of the Interior to award certain benefits

to Indians on the basis of a policy which was within the

Secretary’s discretion to adopt, but which had been pub-

lished only in the Department’s Indian Affairs Manual,

uot in the Federal Register. It then said:

“(T)jhe agency must, at a minimum, let the standard

be generally known so as to assure that it is being

applied consistently and so as to avoid both the reality

and the appearance of arbitrary denial of benefits to

potential beneficiaries.” (Jd. at 231)

and went on to say:

“The Administrative Procedure Act was adopted to

provide, inter alia, that administrative policies affect-

ing individual rights and obligations be promulgated

pursuant to certain stated procedures so as to avoid

the inherently arbitrary nature of unpublished ad hoc

determinations. See generally S. Rep. No. 752, 79th

Cong., 1st Sess., 12-13 (1945) ; H.R. Rep. No. 1980, 79th

Cong., 2d Sess., 21-23 (1946).” (Id. at 232)

In Appalachian Power Co. v. Tram, 566 F.2d 451 (4th

Cir. 1977), the court denied enforcement to a published

regulation of the Environmental Protection Agency which

referred its standards, in part, to a “Development Docu-

ment” which had not been published in, or incorporated

into, the Federal Register, but which was available for in-

spection at EPA offices and had been distributed by the

EPA in booklet form. Although the agency urged that such

availability, which went far beyond anything on display in

the present case, was enough, the court disagreed, saying:

“The Administrative Procedure Act sharply distin-

guishes between the concepts of actual notice and rea-

sonable availability. ‘The former is in a sense a

substitute for publication; one who has actual notice

of an unpublished regulation is bound by it even

though the regulation was required to be published.

[citation omitted] But reasonable availability is not a

substitute for publication. .. .” (Id. at 456)

Similarly, in Northern California Power Agency v. Mor-

ton, 396 F.Supp. 1187 (D.D.C. 1975), aff'd w/o opinion, 539

F.2d 243 (D.C. Cir. 1976), the court invalidated, under 5

U.S.C. $552(a)(1) (1976), a rate-making for California’s

Central Valley Project which the Bureau of Reclamation

had conducted in accordance with unpublished procedures

in which the plaintiff had extensively participated. Re-

sponding to the Government’s argument that plaintiff had

adequate notice, the court said:

“The Court rejects this position. ... Where ‘timely’

notice of ‘rules of procedure’ is required, the statute

cannot be satisfied by actual notice of the Depart-

ment’s improvised decisions as each new problem

arises. What is contemplated is a reasonably complete

code of procedures set out in advance by which actions

can be guided and strategies planned. This simply was

not provided.

* . »

“The Department must be more precise, timely and

informative before it can take refuge in the exemption.

This is particularly apparent when one considers the

present proceeding was the first of its kind in many

years, and involved complicated technical facts, large

sums of money, and multiple parties. Congress wisely

recognized after years of experience that such pro-

ceedings require the discipline which a published set

of rules drawn up in advance can provide. The De-

partment’s desire to avoid red tape cannot override

the statute.” (396 F.Supp. at 1191-92)

See, as well, Anderson v. Bute, 550 F.2d 459, 463 (9th

Oir.. 1977); W.G. Cosby Transfer & Storage Corp. v.

Froehlke, 480 F.2d 498 (4th Cir. 1973) ; K. Davis, Adminis-

trative Law of the Seventies § 3A.7, at 75 (1976); cf. Way

of Life Television Network, Inc. v. FCC, 593 F.2d 1356

(D.C. Cir. 1979).

~ The Court of Claims has, in this case, turned its back on

these authorities, suggesting that an agency can free itself

from the publication requirements of 5 U.S.C. § 552(a) (1)

(1976) if it can convince a court, long after the fact, that

the citizen might have found out what the agency wanted,

but preferred not to publicly disclose. The court, moreover,

has done so not in a case such as Appalachian Power Co.

v. Train, supra, where there may have been innocent un-

certainty about just how much data had to be published

in the Federal Register. Rather it has done so in a situa-

tion where secrecy was the necessary means by which the

Department enforced a standardless, and altogether capri-

cious, discretion over its lessees’ right to drill—a discre-

tion which, in this case, was exercised to destroy an in-

vestment of $74,000,000.

The willingness of the Court of Claims to sustain the

Government’s secret procedure, as a justification for

its denial of petitioner’s right to drill with the consequent

loss of their leases, is especially disturbing when the re-

sult of the present case is contrasted with the result of

the three other major litigations involving the Depart-

ment’s interdiction, over many years, of normal operations

in the Santa Barbara Channel. In Gulf Oil Corp. v. Morton,

493 F.2d 141 (9th Cir. 1974) ; Union Oil Co. v. Morton, 512

F.2d 743 (9th Cir. 1975), and, indeed, Sun Oil Corp. v.

United States, 215 Ct.Cl. 716, 572 F.2d 786 (1978), lessees

which challenged overt bans by the Department won their

cases, retained their leases, and achieved other appropriate

remedies because the Department could not, on open

records, justify its actions. Here, by way of contrast, the

Court of Claims has found warrant for a directly oppo-

site result in the Department’s undisclosed and still-undocu-

mented procedure.

What 5 U.S.C. § 552(a)(1) (1976) means is a matter of

public importance which affects every citizen who deals

with the government and every agency which deais with the

public. It goes to the heart of the people’s confidence in

the integrity of their Government. If so respected a tribunal

as the Court of Claims can find in that section a continuing

sanction for the clandestine governance displayed in this

record, there is, we submit, a dangerous misapprehension

abroad in the land—one which the Opinion below will serve

to foster and spread. This Court should make this case its

vehicle for eliminating that error.

Il.

The Unresolved Question of the Effect of a Conflict

Between Secretarial Regulations and “Adopted” State

Law on the OCS Warrants This Court’s Attention.

Plaintiffs’ alternative claim of contractual “frustration”

focused on the contention that Secretary Hickel’s regulatory

promulgation of February 17, 1979, which imposed on OCS

oil and gas lessees the duty to make “reparation of any

damage, to whomsoever occuring, proximately resulting”

from “the waters of the high seas being polluted by the

drilling or production operations of the lessee”, 30 O.F.R.

§ 250.42(b) (Stat. App. 51), placed a heavy, unforeseeable

and, in the context of the Channel, unconscionable burden

on petitioners’ drilling.

If petitioners’ operations were to be struck in the future

by an earthquake (A-58), a ship (A-59), an errant missile

from the test range at the nearby Vandenberg AFB (A-68-

69), or any eventuality beyond their reasonable control, they

would be left defenseless, in the setting of the highly de-

veloped Channel (A-60), against claims which could easily

range up to a billion dollars. (Px 680-95)

The Secretary’s absolutist regulation represented, in our

view, a sharp, and harshly adverse, departure from the

standard of care existing with respect to such spill episodes

when the leases issued—whether that pre-existing standard

came, as we urge, from the defendant’s earlier operating

regulations or, as the Government contended, from the

tort law of California, as of August 7, 1953, which, it said,

was adopted as federal law for the Channel OCS by OCSL

Act §4(a)(2), 43 U.S.C. §1333(a)(2) (Stat. App. 21-22).

The latter argued that the Secretary’s regulations, neither

those of 1954-1968 nor Mr. Hickel’s enactment of February

17, 1969, displaced the “adopted” law of California so that

no “frustrating” change of tort standards was imposed on

petitioners on February 17, 1969 (A-14 n. 12).

Thus the present action poses a choice-of-law issue im-

portant to the administration of the on-going and expand-

ing activities on the Outer Continental Shelf and the vast

number of Americans likely to be affected by them*—

whether a Secretarial regulation which seeks, explicitly, to

regulate a lessee’s responsibility to third parties for drill-

ing misadventures on the OCS displaces the otherwise

“adopted” laws of the upland states.

The Court of Claims refused to face that issue below.

It noted only that the choice-of-law questions on the OCS

are conceptually difficult (A-16-17) and that “both before

and after the amendment of February 21, 1969 [its Federal

uncertain and ambiguous”. (A-17) In pursuit of “cncer-

tainty”, the court even suggested (although never urged by

* As of December 31, 1977 there were 2,146 oil and gas leases

in effect on the OCS, covering over 10,000,000 acres. See U.S. Dep't

of the Interior, Outer Continental Shelf Statistics 26 (1978).

These included parcels off the shores of Alabama, Alaska, California,

Florida, Louisiana, Mississippi, and Texas and 93 parcels which the

Department classified as “Mid-Atlantic”. (Ibid.) Implementing

President Carter’s energy message of April 5, 1979, the Department

announced on June 8, 1979 a schedule for future OCS leasing

which ealls for 30 sales, involving areas off the East, West, Gulf,

and Alaskan coasts, from 1980 through 1985. U.S. Dep’t of the

Interior, News Release, June 8, 1979.

the Government to do so) that a departmental regulation

of this character might have no effect upon leases in exist-

ence at the time of its promulgation. (A-28) The court,

by such rulings, has added to the uncertainty of a difficult,

but important, area of the law which this Court now should

undertake to clarify.

The suggestion of the Court of Claims that a Secretary

cannot make effective, as to existing OCS leases, significant

amendments to his Department’s operating regulations

seems to us flatly inconsistent with the language of OCSL

Act § 5(a)(1), 43 U.S.C. §1334(a)(1) (1976)* (Stat. App.

25). It is in conflict, as well, with the decision of the Court

of Appeals for the Ninth Circuit in Union Oil Co. v. Morton,

512 F.2d 793 (9th Cir. 1975), where the court upheld the

Secretary’s right to apply amended regulations (short of

those which had the effect of a “taking”) to pre-existing

leases, saying:

“The Secretary’s authority to issue conservation reg-

ulations binding previously executed leases is clearly

expressed in the [OCSL] Act, 43 U.S.C. § 1334(a) (1).

...” (512 F.2d at 748)

Assuming the applicability of the Secretary’s amendment

of February 1969 to then-existing leases, including peti-

tioners’, there remains the question of the amendment’s

effect vis-a-vis the substantive tort law of California, which

otherwise would be “adopted” as federal law by OCSL

* The section provides, inter alia, that

“such rules and regulations shall apply to all operations con-

ducted under a lease issued or maintained under the provi-

sions of this subchapter. . . .”

The implementation of such amendments may, on occasion, give

rise to a non ifie remedy on behalf of the lessee, but that is

very different from the Court of Claims’ suggestion that a lessee

need not comply with them because the Secretary cannot make his

regulatory will effective with respect to existing leases.

Act §4(a)(2) and applied to damaging episodes compre-

hended by the regulation. The Court of Claims’ finesse of

this question has introduced, we submit, further uncer-

tainty into an area of the law which now warrants clarifi-

cation at the highest level. The need has become increas-

ingly urgent by reason of the recent extension of OCS oil

and gas activities to the offshore waters of many additional

Atlantic coast states and of the wide gap which now exists

between so many of the Secretary’s absolutist regulations,

adopted in February and August 1969, and “normal” tort

law.

This Court has twice addressed the meaning of OCSL

Act §4(a)(2) in the context of cases involving injured

workmen—but only to resolve conflicts between “adopted”

State law and other federal] standards said to have their

roots in statutory, admiralty or common law sources out-

side the OCSL Act. See Chevron Oil Co. v. Huson, 404

U.S. 97 (1971); Rodrique v. Aetna Casualty Co., 395 U.S.

352 (1969). In both cases this Court recognized a wide

role for “adopted” State law, but in neither instance did

it face, or consider, an asserted conflict between regulations

of the Secretary of the Interior promulgated under the

OCSL Act itself and “adopted” State law.

More recently, the question of such conflict has become

a lively and important issue. In Armstrong v. Chambers

dé Kennedy, 340 F.Supp. 1220 (S.D. Tex. 1972), modified on

other grounds, 499 F.2d 263 (5th Cir. 1974), cert. dismissed,

423 U.S. 886 (1975), the court resorted to the Secretary’s

regulations, as amended in 1969, to impose upon an OCS

lessee a tort liability in favor of an independent contrac-

tor’s workman which the court held the otherwise “adopted”

law of Texas would not have allowed. In Bourg v. Texaco

Oil Co., Inc., 578 F.2d 1117 (5th Cir. 1978), and Olsen v.

Shell Oil Co., 561 F.2d 1178 (5th Cir. 1977), the court

rejected this view, holding that, since OCSL Act § 4(c),

43 U.S.C. § 1333(c) (1976) (Stat. App, 22-23), extends the

Longshoremen’s and Harbor Workers’ Compensation Act

to workmen on the OCS and “adopts” potential state rem-

-edies, private rights of action in favor of workmen should

not be derived from the OCSL Act through general regu-

lations issued thereunder by the Secretary.

Here, however, we deal with a “pollution” regulation

which expressly purported to protect, and was repeatedly

depicted by the Secretary as seeking to protect, in a specific

and precisely defined way a broad range of third-party in-

terests. These may be affected, and severely, by activities

under the OCSL Act. And, unlike the interests of work-

men, they can have, under the Act, the benefit of no fed-

erally designed standards for their protection unless such

standards are supplied through regulations of the Sec-

retary.* The question, much debated, of the extent and

effect of the Secretary’s undoubted power to regulate

broadly with respect to activities on the OCS is clearly

posed by the action, and it should, we submit, be addressed

here.

*OCS activities are conducted off the shores of an increasing

number of States, are activities which the United States affirma-

tively administers and in which it has a proprietary interest, and

take place on Government lands in a marine environment where

State law, as such, has never run. Such activities may warrant uni-—

form and novel legal responses—Secretary Hickel certainly thought

they did in 1969—and it would be anomalous if the Secretary did

not have the competence to supply them.

CONCLUSION

Petitioners were victimized—the investment by their

lessee group of $74,000,000 in lease bonus payments to the

United States was destroyed—by the Department of the

Interior’s harsh and arbitrary response to the spill of

January 28, 1968 at Santa Barbara.

The Court of Claims, when rejecting petitioners’ claims,

erred by its refusal to apply, in petitioners’ behalf, the

publication provisions of the Administrative Procedure

Act and by its refusal to address important issues as to

choice-of-law under the OCSL Act.

The petition prayed should issue.

Respectfully submitted,

Joun P. Onn

H. Ricnarp ScHUMACHER

80 Pine Street

New York, New York 10005

(212) 825-0100

Attorneys for Petitioners

Of Counsel:

Canim, Gorvon & Rernpe.

Lewis A, SHarrer

Joun C. Kovrsos

80 Pine Street

New York, New York 10005

Epwarp Kuewer, JR. “a

2210 Mercantile Bank Building

Dallas, Texas 75201

July 3, 1979

EXHIBIT A

;

Exhibit A

E-1

Text of Lease OCS-P-0218 for Tract 375

Form 3380—1 Office

(February 1966) Los Angeles, Calif.

(formerly 4—1255) Serial Number

OCS-P 0218

BUREAU OF LAND MANAGEMENT $43,503,147.00

—

On Gas Lasse or Susmencep Lax acre

Unpmr mnt Comm Conumanels Sumy Lemme Ace Wiakser Eapalty Rate

epereee | i/o

This indenture of lease entered into and effective as of

MAR 1 1968, by and between the United States of Amer-

ica, hereinafter called the Lessor, by the Director, Bureau

of Land Management, and

Pauley Petroleum Inc

Ashland Oil & Refining Company

25.341 %

12.273 %

Colorado Oil and Gas Corporation 15.340%

J. M. Huber Corporation

Husky Oil Company

Midwest Oil Corporation

Kewanee Oil Company

12.5%

12.278%

12.273 %

10%

E-2 Exhibit A

hereinafter called the Lessee, under, pursuant, and subject

to the terms and provisions of the Outer Continental Shelf

Lands Act of August 7, 1953 (67 Stat. 462; 43 U.S.C., Sec.

1331, et seq.), hereinafter referred to as the Act, and to all

lawful and reasonable regulations of the Secretary of the

Interior (hereinafter referred to as the Secretary) when

not inconsistent with any express and specific provisions

herein, which are made a part hereof:

WItTnNeEsssta :

Sec. 1. Rights of Lessee. That the Lessor, in considera-

tion of a cash bonus and of the rents and royalties to be

paid, and the conditions and covenants to be observed as

herein set forth, does hereby grant and lease to the Lessee

the exclusive right and privilege to drill for, mine, extract,

remove and dispose of all oil and gas deposits except helium

gas in or under the following-described area of the Outer

Continental Shelf (as that term is defined in the Act):

All Block 48N 63W Official Leasing Map, Channel Islands

Area Map No. 6B.

containing 5,760 acres, more or less (hereinafter referred

to as the leased area), together with:

(a) the nonexclusive right to conduct within the leased

area geological and geophysical explorations which are not

unduly harmful to aquatic life;

(b) the right to drill water wells within the leased area

and use free of cost, and to dispose of, water produced

from such wells; and

within the leased area all artificial islands, platforms, fixed

or floating structures, sea walls, docks, dredged channels

and spaces, buildings, plants, telegraph or telephone lines

and cables, pipelines, reservoirs, tanks, pumping stations,

and other works and structures necessary or convenient to

Exhibit A E-3

the full enjoyment of the rights granted by this lease, for

a period of 5 years and as long thereafter as oil or gas

may be produced from the leased area in paying quanti-

ties, or drilling or well reworking operations, as approved

by the Secretary, are conducted thereon; subject to any

unitization or pooling agreement heretofore or hereafter

approved by the Secretary which affects the leased area

or any part thereof, the provisions of such agreements to

govern the leased area or part thereof subject thereto

where inconsistent with the terms of this lease.

Sec. 2. Obligations of Lessee. In consideration of the

foregoing, the Lessee agrees:

(a) Rentals and royalties. (1) To pay rentals and royal-

ties as follows:

Rentals. To pay the Lessor on or before the first

day of each lease year commencing prior to a discovery

of oil or gas on the leased area, a rental of $3.00 per acre

or fraction thereof.

Minimum royalty. To pay the Lessor in lieu of

rental at the expiration of each lease year commencing

after. discovery a minimum royalty of $3.00 per acre or

fraction thereof or, if there is production, the difference

between the actual royalty paid during the year and the

prescribed minimum royalty, if the actual royalty paid is

less than the minimum royalty.

Royalty on production. To pay the Lessor a royalty

of 16% percent in amount or value of production saved,

removed, or sold from leased area. Gas of all kinds (except

helium and gas used for purposes of production from and

operations upon the leased area or unavoidably lost) is

subject to royalty.

E-4 Exhibit A

(2) It is expressly agreed that the Secretary may estab-

lish reasonable minimum values for purposes of computing

royalty on products obtained from this lease, due consid-

eration being given to the highest price paid for a part or

for a majority of production of like quality in the same

field, or area, to the price received by the Lessee, to posted

prices, and to other relevant matters. Each such determi-

nation shall be made only after due notice to the Lessee and

a reasonable opportunity has been afforded the Lessee

to be heard.

(3) When paid in value, such royalties on production

shall be due and payable monthly on the last day of the

month next following the month in which the production is

obtained. When paid in production, such royalties shall be

delivered at pipeline connections or in tanks provided by

the Lessee. Such deliveries shall be made at reasonable

times and intervals and, at the Lessee’s option, shall be

effected either (i) on or immediately adjacent to the leased

area, without cost to the Lessor, or (ii) at a more conve-

nient point closer to shore or onshore, in which event the

Lessee shall be entitled to reimbursement for the reason-

able cost of transporting the royalty substance to such

delivery point. The Lessee shall not be required to provide

storage for royalty taken in kind in excess of tankage re-

quired when royalty is paid in value. When payments are

made in production the Lessee shall not be held liable for

the loss or destruction of royalty oil or other liquid prod-

ucts in storage from causes over which the Lessee has no

control.

(4) Rentals or minimum royalties may be reduced and

royalties on the entire leasehold or any deposit, tract, or

portion thereof segregated for royalty purposes may be

reduced if the Secretary finds that, for the purpose of in-

creasing the ultimate recovery of oil or gas and in the in-

terest of conservation of natural resources, it is necessary,

Exhibit A E-5

in his judgment, to do so in order to promote develop-

ment, or because the lease cannot be successfully operated

under the terms fixed herein.

(6) Bonds. To maintain at all times the bond required

prior to the issuance of this lease and to furnish such ad-

ditional security as may be required by the Lessor if, after

operations or production have begun, the Lessor deems

such additional security to be necessary.

mand, to subscribe to and to operate under such reason-

able cooperative or unit plan for the development and

operation of the area, field, or pool, or part thereof, em-

bracing lands included herein as the Secretary may deter-

mine to be practicable and necessary or advisable in the

interest of conservation which plan shall adequately pro-

tect the rights of all parties in interest, including the

United States.

(d) Wells. (1) To drill and produce such wells as are

necessary to protect the Lessor from loss by reason of

production on other properties or, in lieu thereof, with

the consent of the oil and gas supervisor, to pay a sum

determined by the supervisor as adequate to compensate

the Lessor for failure to drill and produce any such well.

In the event that this lease is not being maintained in

force by other production of oil or gas in paying quanti-

ties or by other approved drilling or reworking opera-

tions, such payments shall be considered as the equivalent

of production in paying quantities for all purposes of

this lease.

(2) After due notice in writing, to drill and produce

such other wells as the Secretary may reasonably require

in order that the leased area or any part thereof may be

properly and timely developed and produced in accordance

with good operating practice.

E64 Exhibit A

(3) At the election of the Lessee, to drill and produce

other wells in conformity with any system of well spacing

or production allotments affecting the area, field, or pool

in which the leased area or any part thereof is situated,

which is authorized or sanctioned by applicable law or

by the Secretary.

(e) Payments. To make all payments to the Lessor by

check, bank draft or money order payable as indicated

herein unless otherwise provided by regulations or by di-

rection of the Secretary. Rental, royalties, and other pay-

ments shall be made payable to the United States Geological

Survey and tendered to the Oil and Gas Supervisor, except

that filing charges, bonuses, and first year’s rental shall

be made payable to the Bureau of Land Management and

remitted to the Manager of the appropriate field office of

that Bureau.

(f) Contracts for disposal of products. To file with the

Oil and Gas Supervisor, Geological Survey, not later than

30 days after the effective date thereof, copies of all con-

tracts for the disposal of lease products; provided that

the Supervisor may relieve the Lessee of this requirement,

in which event the contracts shall be made available for

inspection by the Supervisor upon his request. Nothing in

any such contract or in any approval thereof by the Super-

visor shall be construed or accepted as modifying any of

the provisions of this lease, including, but not limited to,

provisions relating to gas waste, taking royalty in kind,

and the method of computing royalties due as based on a

minimum valuation and in accordance with the regulations

applicable to this lease.

(g) Statements, plats, and reports. At such times and

in such form as the Lessor may prescribe, to furnish de-

tailed statements and reports showing the amounts and

quality of all products saved, removed, and sold from the

Ezhibit A E-7

leased area, the proceeds therefrom, and the amount used

for production purposes or unavoidably lost; also a plat

showing development work and improvements on or with

regard to the leased area.

(h) Inspection. To keep open at all reasonable times for

the inspection of any duly authorized representative of the

Lessor, the leased area and all wells, improvements, ma-

chinery and fixtures thereon and all books, accounts, and

records relative to operations and surveys or investiga-

tions on or with regard to the leased area or under the

lease.

(4) Diligence. To exercise reasonable diligence in drill-

ing and producing the wells herein provided for; to carry

on all operations in accordance with approved methods

and practices including those provided in the operating

and conservation regulations for the Outer Continental

Shelf; to remove all structures when no longer required

for operations under the lease to sufficient depth beneath

the surface of the waters to prevent them from being a

hazard to navigation; to carry out at expense of the Les-

see all lawful and reasonable orders of the Lessor relative

to the matters in this paragraph, and that on failure of

the Lessee so to do the Lessor shall have the right to

enter on the property and to accomplish the purpose of

such orders at the Lessee’s cost: Provided, That the Les-

see shall not be held responsible for delays or casualties

occasioned by causes beyond the Lessee’s control.

(j) Freedom of purchase, To accord all workmen and

employees directly engaged in any of the operations under

this lease complete freedom of purchase.

(k) Equal Opportunity clause. During the performance

of this contract the lessee agrees as follows:

- (1) The lessee will not discriminate against any em-

ployee or applicant for employment because of race, creed,

E-8 Exhibit A

color, or national origin. The lessee will take affirmative

action to ensure that applicants are employed, and that

employees are treated during employment, without regard

to their race, creed, color, or national origin. Such action

shall include, but not be limited to the following: employ-

ment, upgrading, demotion, or transfer; recruitment or

recruitment advertising; layoff or termination; rates of

pay or other forms of compensation; and selection for

training, including apprenticeship. The lessee agrees to

post in conspicuous places, available to employees and

applicants for employment, notices to be provided by the

contracting officer setting forth the provisions of this non-

discrimination clause.

(2) The lessee will, in all solicitations or advertisements

for employees placed by or on behalf of the lessee, state

that all qualified applicants will receive consideration for

employment without regard to race, creed, color, or na-

tional origin.

(3) The lessee will send to each labor union or repre-

sentative of workers with which he has a collective bar-

gaining agreement or other contract or understanding, a

notice, to be provided by the agency contracting officer,

advising the labor union or workers’ representative of the

lessee’s commitments under Section 202 of Executive Order

No. 11246 of September 24, 1965, and shall post copies of

the notice in conspicuous places available to employees

and applicants for employment.

(4) The lessee will comply with all provisions of Execu-

tive Order No. 11246 of September 24, 1965, and of the

rules, regulations, and relevant orders of the Secretary of

Labor.

(5) The lessee will furnish all information and reports

required by Executive Order No. 11246 of September 24,

Exhibit A E-9

1965, and by the rules, regulations, and orders of the Sec-

retary of Labor, or pursuant thereto, and will permit

access to his books, records, and accounts by the contract-

ing agency and the Secretary of Labor for purposes of

investigation to ascertain compliance with such rales, regu-

lations, and orders.

(6) In the event of the lessee’s noncompliance with the

nondiscrimination clauses of this contract or with any of

such rules, regulations, or orders, this contract may be

cancelled, terminated or suspended in whole or in part

and the lessee may be declared ineligible for further Gov-

ernment contracts in accordance with procedures authorized

in Executive Order No. 11246 of September 24, 1965, and

such other sanctions may be imposed and remedies involved

as provided in Executive Order No. 11246 of September

24, 1965, or by rule, regulation, or order of the Secretary

of Labor, or as otherwise provided by law.

(7) The lessee will include the provisions of Paragraphs

(1) through (7) in every subcontract or purchase order

unless exempted by rules, regulations, or orders of the

Secretary of Labor issued pursuant to Section 204 of Ex-

ecutive Order No. 11246 of September 24, 1965, so that such

provisions will be binding upon each subcontractor or ven-

dor. The lessee will take such action with respect to any

subcontract or purchase order as the contracting agency

may direct as a means of enforcing such provisions includ-

ing sanctions for noncompliance: Provided, however, That

in the event the lessee becomes involved in, or is threatened

with, litigation with a subcontractor or vendor as a result

of such direction by the contracting agency, the lessee may

request the United States to enter into such litigation to

protect the interests of the United States.

(Ll) Assignment of lease. To file for approval with the

Bureau of Land Management, within 90 days from the date

B-10 Exhibit A

of final execution, any instrument of transfer of this lease,

or any interest therein, including assignments of record

title, operating agreements, and subleases. Carried work-

ing interests, overriding royalty interests, or payments out

of production, may be created or transferred without re-

quirement for filing or approval. Instruments required to

be filed shall take effect upon approval as of the first day

of the lease month following the date of filing unless at the

request of the parties an earlier date is specified in such

approval.

Sec. 3. Reservations to Lessor. The Lessor reserves:

(a) Geological and geophysical exploration; rights-of-

way. The right to authorize the conduct of geological and

geophysical exploration in the leased area which does not

interfere with or endanger actual operations under this

lease, and the right to grant such easements or rights-of-

way upon, through, or in the leased area as may be neces-

sary or appropriate to the working of other lands contain-

ing the deposits described in the Act, and to the treatment

and shipment of products thereof by or under authority of

the United States, its Lessees or Permittees, and for other

public purposes, subject to the provisions of Section 5(c)

of the Act where they are applicable and to all lawful and

reasonable regulations and conditions prescribed by the

Secretary thereunder.

(b) Leases of sulfur and other mineral. The right to

grant sulfur leases and leases of any mineral other than

oil, gas, and sulfur within the leased area or any part

thereof, subject to the provisions of Section 8(c), 8(d), and

8(e) of the Act and all lawful and reasonable regulations

prescribed by the Secretary thereunder; Provided, That no

such sulfur lease or lease of other mineral shall authorize

or permit the Lessee thereunder unreasonably to interfere

with or endanger operations under this lease.

Exhibit A E-11

the President of the United States shall so prescribe, the

right of first refusal to purchase at the market price all or

any portion of the oil or gas produced from the leased

area, as provided in Section 12(b) of the Act.

(d) Taking of royalties. All rights, pursuant to clause

(3) of Section 8(b) of the Act, to take royalties in the

amount or value of production.

(e) Fissionable materials. All uranium, thorium, and

all other materials determined pursuant to paragraph (1)

of subsection (b) of Section 5 of the Atomic Energy Act

of 1946, as amended, to be peculiarly essential to the

production of fissionable materials, contained, in whatever

concentration, in deposits in the subsoil or seabed of the

leased area or any part thereof, as provided in Section

12(e) of the Act.

(f) Heliwm. Pursuant to Section 12(f) of the Act, the

ownership and the right to extract helium from all gas

produced under this lease, subject to such rules and regu-

lations as shall be prescribed by the Secretary.

(g) Suspension of operations during war or national

emergency. Upon recommendation of the Secretary of

Defense, during a state of war or national emergency

declared by the Congress or President of the United States

after August 7, 1953, the authority of the Secretary to

suspend any or all operations under this lease, as provided

in Section 12(c) of the Act: Provided, That just com-

pensation shall be paid by the Lessor to the Lessee.

(h) Restriction of exploration and operations. The right,

as provided in Section 12(d) of the Act, to restrict from

exploration and operations the leased area or any part

thereof which may be designated by and through the

Secretary of Defense, with the approval of the President,

E-12 Exhibit A

as, or as part of, an area of the Outer Continental Shelf

needed for national defense; and so long as such designa-

tion remains in effect no exploration or operations may

be conducted on the surface of the leased area or the part

thereof included within the designation except with the

concurrence of the Secretary of Defense; and if opera-

tions or production under this lease within any such re-

stricted area shall be suspended, any payments of rentals,

minimum royalty, and royalty prescribed by this lease

likewise shall be suspended during such period of suspen-

sion of operations and production, and the term of this

lease shall be extended by adding thereto any such sus-

pension period, and the Lessor shall be liable to the Lessee

for such compensation as is required to be paid under

the Constitution of the United States.

Sec. 4. Directional drilling. This lease may be main-

tained in force by directional wells drilled under the leased

area from surface locations on adjacent or adjoining lands

not covered by this lease. In such circumstances, drilling

shall be considered to have been commenced on the leased

area when drilling is commenced on the adjacent or ad-

joining land for the purpose of directionally drilling under

the leased area, and production of oil or gas from the

leased area through any directional well surfaced on ad-

jacent or adjoining land or drilling or reworking of any

such directional well shall be considered production or

drilling or reworking operations (as the case may be) on

the leased area for all purposes of this lease. Nothing

contained in this paragraph is intended or shall be con-

strued as granting to the Lessee any leasehold interests,

licenses, easements, or other rights in or with respect to

any such adjacent or adjoining land in addition to any

such leasehold interests, licenses, easements, or other

rights which the Lessee may have lawfully acquired under

the Act or from the Lessor or others.

Exhibit A E-13

Sec. 5. Surrender and termination of lease. The Lessee

may surrender this entire lease or any officially designated

subdivision of the leased area by filing with the Bureau

of Land Management, a written relinquishment, in

triplicate, which shall be effective as of the date of filing,

subject to the continued obligation of the Lessee and his

surety to make payment of all accrued rentals and royalties

and to abandon all wells on the area to be relinquished to

the satisfaction of the Oil and Gas Supervisor.

Sec. 6. Removal of property on termination of lease.

Upon the expiration of this lease, or the earlier termination

thereof as herein provided, the Lessee shall within a period

of 1 year thereafter remove from the premises all struc-

tures, machinery, equipment, tools, and materials other than

improvements needed for producing wells or for drilling or

producing on other leases and other property permitted by

the Lessor to be maintained on the area.

Sec. 7. Remedies in case of default. (a) Whenever the

Lessee fails to comply with any of the provisions of the Act

or this lease or the applicable regulations in force and effect

on the date of issuance of this lease, the lease shall be sub-

ject to cancellation as follows:

(1) Cancellation of nonproducing lease. If, at the time of

such default, =< well is producing, or is capable of produc-

ing, oil or gas in paying quantities from the leased area,

whether such well be drilled from a surface location within

the leased area or be directionally drilled from a surface

location on adjacent or adjoining lands, this lease may be

cancelled by the Secretary (subject to the right of judicial

review as provided in Section 8(j) of the Act) if such de-

fault continues for the period of 30 days after mailing of

notice by registered letter to the Lessee at the Lessec’s

record post office address,

E14 Exhibit A

(2) Cancellation of producing lease. If, at the time of

such default, any well is producing, or is capable of pro-

ducing, oil or gas in paying quantities from the leased area,

whether such weil be drilled from a surface location within

the leased area or be directionally drilled from a surface

location on adjacent or adjoining lands, this lease may be

cancelled by an appropriate proceeding in any United States

district court having jurisdiction under the provisions of

Section 4(b) of the Act if such default continues for the

period of 30 days after mailing of notice by registered

letter to the Lessee at the Lessee’s record post office address.

(b) Other remedies. If any such default continues for

the period of 30 days after mailing of notice by registered

letter to the Lessee at the Lessee’s record post office address,

the Lessor may then exercise any legal or equitable remedy

which the Lessor may have; however, the remedy of cancel-

lation of this lease may be exercised oniy under the condi-

tions and subject to the limitations se* out above in para-

graph (a) of this Section, or pursuant to Section 8(i) of

the Act.

ticular default shall not prevent the cancellation of this

lease or the exercise of any other remedy the Lessor may

have by reason of any other cause or for the same cause

occurring at any other time.

Sec. 8. Heirs and successors in interest. Each obliga-

tion hereunder shall extend to and be binding upon, and

every benefit hereof shall inure to, the heirs, executors,

See eT Te ee

Sec. 9. Unlawful interest. No Member of, or Delegate

to, Congress, or Resident Commissioner, after his election

or appointment, or either before or after he has qualified,

Eahibit A E-15

and during his continuance in office, and no officer, agent,

or employee of the Department of the Interior, except as

provided in 43 CFR 7.4(a)(1), shall be admitted to any

share or part in this lease or derive any benefit that may

arise therefrom; and the provisions of Section 3741 of the

Revised Statutes (41 U.S.C. Sec. 22), as amended, and Sec-

tions 431, 432 and 433 of Title 18 of the United States Code,

relating to contracts made or entered into, or accepted by

or on behalf of the United States, form a part of this lease

so far as the same may be applicable.

Tae Unsrrep States or America

By Wut E. Grant /s/

(Authorized Officer)

Mahager,

Bureau of Land Management

Los Angeles Office

(Title)

Maz 8, 1968

(Date)

LEssEeEs :

Pavey Perrotzum Iwo.

By Wuisam R. Pacer /s/

William R. Pagen,

President

ATTEST:

Craups L. Cameron /s/

Claude L. Cameron, Secretary

Asuianp Or & Reriyine

Company

By Rosert D. Gorvon, Jn. /s/

Robert D. Gordon, Jr.,

Vice-President

E-16 Exhibit A

ATTEst :

illegible /s/

Asst. Secy.

Cotorapo On. anp Gas

Corporation

By J. R. Cotzman /s/

J. R. Coleman,

Vice-President

ATTEST:

C.E.Trrvs /s/

C.E. Titus Assistant Secretary

J. M. Hussn Corporation

By Lae I. Maapor /s/

Lee I. Meador,

Vice-President

Arrzst:

Taomas O. Moxcery /s/

Thomas 0. Moxcey

Assistant Secretary

Husky On. Company

By Guwz FE. Roark /s/

Gene E. Roark, President

Arrest:

Dowatw H. Fiona /8/

Donald H. Flora Secretary

Mrpwest On. Corporation

By D. R. Muneny /s/

D. R. Murphy, President

Eahibit A E-17

ATTEST :

M. I. Norpstrom /s/

M. I. Nordstrom, Secretary

Kewanee Or Company

By J. M. Hansson /s/

J. M. Harbison, President

ATTEST:

Cartes R. Feiiows /s/

Charles R. Fellows

EXHIBIT B

Exhibit B E-19

Explanation of Map Depicting “Clearance” Status of

Leases in Mid-Channel Area Seaward of the City of

Santa Barbara.

Px 546 is a “Map Showing Oil and Gas Fields, Leased

Areas, and Seeps in the Santa Barbara Channel Region”

published by the Department of the Interior in the fall of

1969.* It shows, inter alia, the locations, by lease number,

of all oil and gas leases issued by the Department in the

Channel.

The map following the text of this Appendix was pre-

pared by tracing (without change in scale) the principal

geographical features in tie mid-Channel portion of Px

546 and by annotating the tracing in the manner hereafter

described. /

The sea areas identified by the words “three-mile limit”

and adjacent to land areas which are bounded by yellow

highlighting are the areas released to the State of Califor-

nia by the Submerged Lands Act of 1953, 43 U.S.C. §§ 1301

et seq. (1976). The areas bounded by blue highlighting

represent the Federal Outer Continental Shelf.

The OCS areas are coded in one of three ways. Areas

shown on Px 546 as unleased are indicated in white. Areas

shown on Px 546 as leased are coded either as “uncleared”

(by hatching) or as “cleared” (by cross-hatching). The

status of a lease as “cleared” or “uncleared” was deter-

mined by reference to Px 999, a list of lease clearance

dates produced by the Government on or about January 26,

* Px 546 is Plate 2 of Geological Survey Professional Paper 679,

“Geology, Petroleum Development, and Seismicity of the Santa

Barbara Channel Region, California”, published in October 1969.

Pursuant to motion made at or about the time plaintiffs filed their

principal brief on the Report of the Trial Ju in December

1976, plaintiffs were granted leave to file below (and have filed with

the Clerk) additional copies of Px 546 for distribution to members

of the panel.

E-20 Exhibit B

1971 (Tr. 6355), and read into the record (Tr. 6356-59), in

response to a trial subpoena on or about January 11, 1971

(Tr. 5517). The map thus depicts the “clearance” status

of leases at a date late in the trial of this case and two

years after the Union Oil spill of January 28, 1969.

Certain leased parcels are identified on the map by num-

ber as follows:

(1)—OCS-P-0218 (Tract 375), one of the two tracts

leased to plaintiffs.

(2) —OCS-P-0226 (Tract 384), the other tract leased

to plaintiffs.

(3)—OCS-P-0227 (Track 385), a tract leased to Mo-

bil Oil Corporation and others. Defendant’s refusal

to act on a drilling permit request filed with respect

to this parcel in the fall of 1970 is described at A-150-

51. This tract also is one of the 35 parcels formally

suspended by the administrative orders of April 21,

1971 challenged in Gulf Oil Corp. v. Morton, 345

F.Supp. 685 (C.D. Calif. 1972), remanded for entry of

judgment for plaintiffs, 493 F.2d 141 (9th Cir. 1974).

(4)—OCS-P-0234 (Tract 394), a tract leased to Tex-

aco, Inc, and others. According to Px 999 it was

cleared on August 1, 1969. Regional officials were

directed, however, not to act on an application to drill

a third well which Texaco filed with respect to this

parcel in early September 1970. (See A-156.) This

*An identical list, stating whether particular leases were

“cleared” or not, but not giving dates, appears in Dx 1023 at pp.

28-29. Dx 1023 is a draft environmental statement issued by the

cal Survey on February 23, 1971. The statement also con-

. task forces and other elements of the “procedure” described

Government’s witnesses in the trial of this case some weeks

(at p. 10) what appears to be the first published reference -

Exhibit B E-21

lease also was one of those involved in Gulf v. Morton,

supra.

(5)—OCS-P-0241 (Tract 402), the “blowout” parcel

leased to Union Oil Company and others. Defendant’s

efforts to block the installation of Platform C on this

tract were the subject of Union Oil Co. v. Morton, 512

F.2d 743 (9th Cir. 1975).

(6)—OCS-P-0240 (Tract 401), a tract leased to Sun

Oil Company and others. Defendant’s efforts to block

the installation of Platform Henry on this tract were

the subject of Sun Oil Co. v. United States, 215 Ct. Cl.

716, 572 F.2d 786 (1978).

(7)—OCS-P-0166, a tract leased to Phillips Petro-

leum Company and others at the so-called “drainage”

sale of December 1966 (A-55-56). Platforms were in-

stalled and production begun on this lease prior to

Union Oil’s mishap on January 28, 1969.

The leases identified as (5), (6) and (7) are shown on

our map as “cleared” because they are so described in

Px 999 and Px 1023. The testimony in this case of the

Director of the Geological Survey indicates, however, that

they were not studied pursuant to the Task Force II “pro-

cedure” described in this record and in the Report, but

by other groups identified by Dr. Pecora as Tasks Force I

and III. (Pecora Tr. 4119-21)

An examination of Px 546 wil! show that other parcels

were leased in the eastern and western sections of the

Channel not depicted on our map. According to Px 999

and 1023, most, but not all, of these other leases were

“cleared.” Actual drilling in these areas, post-blowout,

was, however, limited. (Px 927)

GISVI7 LON SLovyL S00 O Ww

OFYVITIINN S49OvVyL S30 4

OFvvVI7ID SLVVYL SOO BB i

This is a copy of a public record, reproduced as it was published. It is not legal advice, and it may not be the version a court would rely on. Check the official source before you cite it.