# United States **Court of Appeals**  **for the Federal Circuit**

______________________
CENTURY EXPLORATION NEW ORLEANS, LLC, Plaintiff

- Appellant,

AND

CHAMPION EXPLORATION , LLC, Third Party Plaintiff

- Appellant,

v.

UNITED STATES, Defendant

- Appellee.

______________________

2013

- 5073

______________________ Appeal from the United States Court of Federal Claims in No. 11

- CV

- 0054, Judge Lynn J. Bush.

______________________

Decided: March 14, 2 014

______________________

R ICHARD K. L EEFE , Leefe, Gibbs, Sullivan, & Dupr é , of Metairie, Louisiana, argued for plaintiff

- appellant. With him on the brief were M ICHAEL R. G ELDER and J AMES K. S TICKER , III

.

G UY E. W ALL , Wall Bullington & Cook, LLC, of New Orleans, Louisiana, argued for third party plaintiff

appellant.CENTURY EXPLORATION v. US 2

G REGG M. S CHWIND , Senior Trial Counsel, Comme rcial Litigation Branch, Civil Division, United States Department of Justice, of Washington, DC, argued for defendant -appellee. With him on the brief were S TUART F. D ELERY , Assistant Attorney General, J EANNE E. D AVIDSON , Director, and S TEVEN J. G ILLINGHAM , Assistant Director. Of counsel on the brief was M ATTHEW T. B ALLENGER , Attorney Advisor, Office of the Solicitor, United States Department of the Interior, of Washington, DC.

______________________
Before L OURIE , D YK , and W ALLACH , Circuit Judges.

D YK , Circuit Judge.
Appellants Century Exploration New Orleans, LLC (Century) and Champion Exploration, LLC (Champion) appeal f rom a judgment of the Court of Federal Claims (Claims Court ) granting summary judgment to the government on the issue of breach of contract

. Century and Champion are in the business of oil and gas exploration, development, and production . They jointly lea sed the mineral rights to land on the Outer Continental Shelf from the government. T he terms of their lease allow ed the government to change existing regulatory requirements under the Outer Con tinental Shelf Land s Act of 1953 ( OCSLA)

, 43 U.S.C. § 1331 et s eq

. T he appellants argue the govern ment breach ed the ir lease because it imposed additional regulatory requir ements pursuant to the Oil Pollution Act (OPA)

, 33 U.S.C. § 2701 et seq . We agree with the Claims Court that the government made these changes pursu ant to OCSLA, not OPA , and we affirm

.CENTURY EXPLORATION v. US 3

B ACKGROUND Appellants Century and Champion obtained an oil and gas lease from the government for a 5760

- acre tract called Block 920, Ewing Bank (EW920) located on the Outer Continental Shelf

. They made an initial bonus payment of $ 23,236,314 to acquire the lease and have paid the government additional rental payments of $9.50 per acre, per lease year

— $54,720 per year

— since that initial payment. The lease ( Lease No. OCS

– G 32293) became effective on August 1, 2008, and ha d an initial
term run ning through July 31, 2016. Section 1 of the lease provided:
This lease is issued pursuant to the Outer Cont inental Shelf Lands Act of August 7, 1953, 67 Stat. 462[,] 43 U.S.C. § 1331 et seq., as amended (92 Stat. 629), (hereinafter called the “Act ”). The lease is issued subject to the Act; all regulations issued pursuant to the Act and in existence upon the E ffective Date of this lease; all regulations issued pursuant to the statute in the fu ture which pr ovide for the prevention of waste and conservation of the natu ral resources of the Outer Continental Shelf and the p rotection of correlative rights therein; and all other applicable statutes and re gulations.

J.A. 88.

In Mobil Oil Exploration & Producing Southe a st, Inc. v. United States , t he Supreme Court interpreted a lease provision that was nearly identical to the one at issue here

. 530 U.S. 604 (2000). 1 In Mobil Oil

, the question was

1 For the lease language of Mobil Oil , see Conoco Inc. v. United States , 35 Fed. Cl. 309, 317 (1996)

, rev’d sub nom. Marathon Oil Co. v. United States , 158 F.3d 1253 (Fed. Cir. 1998)

, opin ion withdrawn and superseded onCENTURY EXPLORATION v. US 4

whether certain oil company leases were subject to a new statute, the Outer Banks Protection Act, 33 U.S.C. 2753 (1990) , 104 Stat. 555 (repealed 1996), which was enacted after the leases were signed and changed the requir ement s applicable to the lessees. Mobil Oil , 530 U.S. at 611

- 13 . T he C ourt held that the lease s were subject to all statutes and regulations in existence as of the ir effective date, but, as to future regulation s , were subject only to OCSLA regulations issued after the effective date of the leases. Id. at 615. Thus, the Court concluded that the government’s imposition of new regulatory requirements pursuant to the Outer Banks Protection Act breached the leases. Id. at 620. Here, appellants similarly claim that the government changed regulatory requirements after the effective date of their lease pursuant to OPA, not OCSLA.
On April 20, 2010, an explosion and fire on the Dee pwater Horizon oil rig

— a semi

- submersible drilling rig located in the Gulf of Mexico

— killed eleven workers and resulted in an oil spill that lasted several mo nths . Al though the rig was equipped with a blowout preventer

— a mechanism designed to stop the flow of oil in the event of a blowout

— this device failed to function after the acc ident

. By the time the drill operator finally managed to

ca p the oil well on Jul y 15, 2010, 87 days after the initial blowout, 4.9 billion barrels of crude oil had been released into the gulf

. As a result of the spill, the government imposed new regulatory requirements , which the appe llants urge increase the cost of their required bon d

. The question is whether these requirements were imposed under OCSLA or OPA.

reh’g , 177 F.3d 1331 (Fed. Cir. 1999)

, rev’d sub nom. Mobi l Oil Exploration & Producing Se., Inc. v. United States

, 530 U.S. 604 (2000), aff’d sub nom. Marathon Oil Co. v. United States , 236 F.3d 1313 (Fed. Cir. 2000)

.CENTURY EXPLORATION v. US 5

On January 25, 2011, Century filed a three

- count complaint in the Claims Court

. In its com plaint, Century asserted that, as a result of these new regulations, “the government breached its lease agreement with plaintiffs (Count I); that it effected an uncompensated taking of its private property in violation of the Fifth Amendment (Count II); and that the government’s activities may have given rise to other, unspecified causes of action (Count III).” J.A. 23

. In support of its breach claim, Century alleged that the govern ment’ s changes to the applicable regulations violated various sections of the Administr ative Procedure Act (A PA), 5 U.S.C. §§ 553, 706

, were ther efore unauthorized, and breached the lease

. O n September 12, 2011

, Champion filed a complaint against the government , adopting the allegations Century set forth in its complaint

. Since this appeal is exclusively concerned with the appellants’ breach claims , we confine our discussion to that issue

. On July 13, 2012, the government filed a motion for summary judgment on the appellants’ breach of contract claims

. The government argued that it had not breach ed the appellants’ lease . In the alternative, the government argued that even if it had breach ed the contract

, the

sover eign acts doctrine shielded it from liability. The

a ppellants filed a cross

- motion for partial summary judg ment, seeking a determination that the government was liable for breach of cont ract

. In response to these motions, t he Claims Court gran ted summary judgment to the government, holding that it did not breach any express term of the lease. The Claims Court also found that the government did not breach its implied duty of good faith an d fair dealing. With respect to the appellant s’ APA challenges, the court held that it did not possess subject matter jurisdiction to hear such claims

. In the alternative , the Claims Court held that the government was not liable under the sovereign acts doctrine

. The Claims Court entered a final judgmentCENTURY EXPLORATION v. US 6

u nder Federal Rule of Civil Procedure 54(b) in favor of the government, dismissing the appellants’ breach of contract claims with preju dice.
Century and Champion timely appeal ed , and we have jurisdiction pursuant to 28 U.S.C. § 1295(a)(3). We review the grant of summary judgment de novo. United States v. Great Am. Ins. Co. of N.Y. , 738 F.3d 1320, 1329 (Fed. Cir. 2013)

. T he interpretation of the lease is also an issue of law that we review de novo. C. Sanchez & Son, Inc. v. United States , 6 F.3d 1539, 1544 (Fed. Cir. 1993).

D ISCUSSION

I . Express Breach

The principal issue present ed in this appeal is whet her the government breached any express term of Century and Champion’s lease. As discussed above, the Supreme Court considered a nearly identical oil lease provision in Mobil Oil

. The Court held that the lease should be inte rpreted to protect the lessee s from new statutes , new non

OCSLA regulations, and changes to the text of OCSLA itself

. Mobil Oil

, 530 U.S. at 616

. But the lessees were required to comply with changes in OCSLA regulations

. As the Court explained:
[t] he lease contracts say that th ey are subject to then -existing regulations and to certain future regulations, those issued pursuant to OCS LA [and certain other statutes]

. . . . This explicit reference to future regulations makes it clear that the catchall provision that references “all other appl ica ble . . . regulations,” must include only statutes and regulations already existing at the time of the

con tract , a conclusion not questioned here by the Government.

Id. at 616 (second omission in original) (internal citation omitted)

. This court followed the Supreme Court’s inte rpretation of the lease language in Amber Resources Co. v.CENTURY EXPLORATION v. US 7

United States , 538 F.3d 1358, 1368 (Fed. Cir. 2008), and held that similar lease language only obligated compl iance with future changes to OCSLA regulations. Id. at 1362

- 63, 1368.

A
Initially, some description of OCSLA and OPA is us eful

. OCSLA provides that the U nited States

, and not the individual states

, shall have jurisdiction and control over the submerged lands of the Outer Continental Shelf

. 2 43 U.S.C. § 1332(1) ; see Barker v. Hercules Offshore, Inc. , 713 F.3d 208, 213 (5th Cir. 2013) (“OCSLA asserts exclusive federal question jurisdiction over the OCS

. ”). Congress enacted OCSLA to ensure that a “vital national resource reserve held by the Federal Government for the public” would be “made available for expeditious and orderly

2 OCSLA provides the United States with legal j urisdiction over:

the subsoil and seabed of the Outer Continental Shelf and to all artificial islands, and all install ations and other devices permanently or temporar ily attached to the seabed, which may be ere cted thereon for the purpose of exploring for, develo ping, or producing resources therefrom, or any such installation or other device (other than a ship or vessel) for the purpose of transporting such r esources, to the same extent as if the Outer Cont inent al Shelf were an area of exclusive Fede ral jurisdiction within a State[.]
43 U.S.C. § 1333(a)(1). OCSLA defines the Outer Cont inental Shelf as all submerged land that is beyond the outer limits of state jurisdiction (three nautical miles from shore) and wi thin the limits of national jurisdiction (200 nautical miles from shore). See 43 U.S.C. §§ 1301(a), 1331(a); Amber , 538 F.3d at 1362.CENTURY EXPLORATION v. US 8

development, subject to en vironmental safeguards, in a manner which is consistent with the maintenance of

compe tition and other national needs.” 43 U.S.C. § 1332 (3). In furtherance of this objective, t he Department of Interior (Interior Department ) enters into mineral leases with p rivate parties

. These mineral leases autho rize private parties, such as oil companies, to explore the Outer Continental Shelf for oil and natural gas and
extract any reserves that are discovered . Thus, the only entities entitled to conduct oil and gas expl oration, deve lopment, and production on the Outer Continental Shelf

are lessees of the federal government. See id. §§ 1333(1)

, 1334

. In enacting OCSLA, Congress was careful to stip ulate that
operations in the outer Continental Shelf should be conducted in a safe manner by well

- trained personnel using technology, precautions, and techniques sufficient to prevent or minimize the likelihood of blowouts, loss of well control, fires, spillages, phy sical obstruction to other users of the waters or subsoil and seabed, or other occurrences which may cause damage to the environment or to property, or endanger life or health

. Id. § 1332(6 ) (emphasis added).

OCSLA vest s the Secretary of the Interior ( Int erior Secretary ) with the authority to regulate exploration under the oil and gas leases

, as well as the resulting development and production activities

. Id. § 1334. Specifically, OCSLA provides that the Secretary
shall prescribe such rules and regulations as may be necessary to carry out [the provisions of OCSLA] . The Secretary may at any time prescribe and amend such rules and regulations as he d etermines to be necessary and proper in order to provide for the prevention of waste and conserv ation of the na tural resources of the outer Contine n-CENTURY EXPLORATION v. US 9

tal Shelf , and the protection of correlative rights therein, and, notwithstanding any other prov isions herein, such rules and regulations shall, as of their effective date, apply to all operations co nducted under a lease issued or maintained under the provisions of this subchapter.

Id. § 1334(a) (emphasis added)

. Thus, OCSLA “autho rize[s] the [Interior Department ], by valid regulations, to impose anywhere in the OCS all reasonable development and production conditions it deems necessary to its ste wardship of the OCS and administration of OCSLA.” Gulf Restoration Network v. Salazar , 683 F.3d 158, 169

- 70 (5th Cir. 2012) (citing 43 U.S.C. §§ 1334, 1351; H.R. Rep. 95

– 1474, at 115 (1978) (Conf. Rep .), reprinted in 1978 U.S .C.C.A.N. 1674 ). Pursuant to this authority, the Interior Secretary has promulgated regulations and orders that govern a lessee’s oil exploration, development, and production activities on the Outer Continental Shelf. See 30 C.F.R. pt. 250 (20 10 ). 3

The Oil Pollution Act , 33 U.S.C. § 2701 et seq. , is si multaneously narrower and broader in scope than OCSLA

. In 1990, Congress enacted OPA in response to “rising public concern following the Exxon Valdez oil spill.” The Oil Pollution Act Overview , United State s Environmental Protection Agency, http://www.epa.gov/oem/content/ lawsregs/ opaover.htm (last visited Feb. 10, 2014). This law expanded the federal government’s ability to respond to oil spills by imposing strict liability on parties respo n3 Unless otherwise indicated, this opinion refe rences the version of the Code of Federal Regulations (C.F.R.) that was in effect when appellants acquired their lease. The provisions of the C.F.R. governing Outer Co ntinental Shelf leasing, exploration, and development that are relevant to this opinion have been relocated from Part 250 of Title 30 to Part 550 of that title.CENTURY EXPLORATION v. US 10

sible for rele asing oil into navigable waters

. See 33 U.S.C. §§ 2701

- 2713 ; Thomas J. Wagner, The Oil Pollution Act of 1990: An Analysis , 21 J. Mar. L. & Com. 569, 574 -76 (1990) . OPA also created the national Oil Spill Liability Trust Fund, which can be used to clean up oil spills when the party responsible is unknown or refuses to pay. See 33 U.S.C. § 2712; Oil Spill Liability Trust Fund , United States Environmental Protection Agency, http:// www.epa.gov/ osweroe1/content/ learning/oilfund.htm (last visited Feb. 10

, 2014). Thus, unlike OCSLA, which covers all mineral activity on the Outer Continental Shelf pursuant to leases from the United States

, 43 U.S.C. §§ 1331

- 1356, OPA is specifically designed to govern oil spill prevention, clean up

, and

compensa tion in all Un ited States navigable waters whatever the source of the exploration, development , and production rights

. Inho Kim, Ten Years After the Enac tment of the Oil Pollution Act of 1990: a Success of a Fai lure , 26 Marine Pol’y 197, 197 (2002); Wagner, supra , at 5 69 ; Oil Pollution Act of 1990 (OPA)

, United States Coast Guard, http:// www.uscg.mil/ npfc/About_NPFC/opa.asp (last visited Feb. 11 , 2014)

. However, t he OPA regulation s involved here only apply to activities on the Outer Cont inental Shelf. See 30 C.F.R. ch . II, pt. 254, subpt. B.
Oil and gas companies leasing land on the Outer Co ntinental Shelf must comply with both OCSLA and OPA

. These statutes contain some overlapping provisions

, in particular those relating to the remediation of oils spills

. For example

, during the relevant period, both OCSLA and OPA regulations require d oil companies to submit Oil Spill Response Plan s. OCSLA regulation 30 C.F.R. § 250.219 require d all Outer Continental Shelf lessee s to provide such a plan

. See also Oil and Gas and Sulphur Operations in the Outer Continental Shelf

— Plans and Information

, 70 Fed. Reg. 51,478

- 01 (Aug. 30, 2005)

. OPA regulation 30 C.F.R. § 254. 1 require d all owners or oper ators of oil handling, storage, or transporta tion facilitiesCENTURY EXPLORATION v. US 11

“lo cated seaward of th e coast line” ( that is

, on the Outer Continental Shelf ) to submit a plan. 30 C.F.R. § 254.1. OCSLA and OPA regulations require d these plans to ensure that oil and gas companies were prepared to respond to any oil spills that might result from their activities off the United States coastline

. Even prior to the execution of the appellants’ lease, OCSLA and its implementing regulations required lessees to submit an exploration plan to the government before commencing any drilling activities. S ee 43 U.S.C. § 1340(c)(1), (e)(2); 3 0 C.F.R. § 250.201 (2010)

. Such an exploration plan detailed the lessee’s proposed exploration activities on the Outer Continental Shelf and require d government approval before the lessee commenced any exploration activity. 30 C.F.R. § 250.201 (2010)

. I mportantly, the regulations required that such an explor ation plan include an Oil Spill Response Plan that contained a calculation of the volume of oil that would result from a worst case discharge scenario. Id. § 250.219(a) (2)(iv) (2010) . A worst case d ischarge scenario

was defined as “ the daily rate of an uncontrolled flow of natural gas and oil from all producible reservoirs into the open wellbore” 4 that would result from a blowout, such as the one that triggered the Deepwater Horizon d isaster. Worst Case Discharge Determination

, Bureau of Ocean Energy Manage ment, http://www.boem.gov/Oil

- and

- Gas

Energy

- Program/Resource

- Evaluation/Worst

- Case

Discharge/Index.aspx (last visited Feb. 11, 2014). Lessees were also required to “demonstrate oil spill financial

4 The wellbore is the hole the lessee or operator has drilled for the purpose of exploring or extracting natural gas or oil from the earth . In the oil production context, reservoirs are subsurface pools of hydrocarbons, such as crude oil or natural gas, con tained in porous or fra ctured rock formations

.CENTURY EXPLORATION v. US 12

responsibility for facilities proposed in [their exploration plan]

, ” 30 C.F.R. § 250.213(e)(2) (2010), and the appe llants elected to comply by posting a bond. See 30 C.F.R. § 253.20 (2010) (des cribing the different methods of demonstrating oil spill financial responsibility)

. The appellants’ bond requirement s depended on their worst case discharge volume: the greater the worst case di scharge vol ume , the larger the bond required to cover their

po tential liability. See id. § 253.13 (2010) (setting out the correspondence between worst case discharge volume and bond requirement)

. 5
OPA did not require oil companies to submit an expl oration plan; rather, each company was required to submit an Oil Spill Response Plan

, which included a worst case discharge scenario . As with the OCSLA requirements

, this only applied to Outer Continental Shelf lessees

.

5 The appellants also argue that their increased bonding requirements breach ed Section 8 of the lease. Section 8 reads: “The Lessee shall maintain at all times the bond(s) required by regulation prior to the issuance of the lease and shall furnish such additional security as may be required by the Lessor if, after operations have be gun, the Lessor deems such additional security to be necessary.” J.A. 89. Section 8 refers to 30 C.F.R. § 250.213(e)(1)’s “appropriate bond” requirement, also known as th e performance bond requirement. As the Claims Court accurately explained, “[i] n order to demo nstrate a breach of section 8 of the lease, plaintiffs must establish that they are now required to furnish a bond that exceeds the bond required under the regulations in effect when the lease was executed. ” J.A. 40. Because the appellants’ performa nce bonding requirement has not changed, there has been no breach of Section 8 of the lease.CENTURY EXPLORATION v. US 13

The OCSLA regulations borrowed and incorporated the OPA regulation’s method of calculating worst case di scharge volume and the assumptions for that calcul ation

. Thus, Outer Continental Shelf lessees were required
to follow § 254.27’s methodology when calculating worst case discharge volume for OCSLA purposes, and all oil and gas operators were required to follow § 254.27’s methodology when calculating worst case discharge volume for OPA purposes

. Finally, § 250.103, an OCSLA regulation, enable d the government to issue Notices to Lessees and Opera tors (NTLs) that “clarify, supplement, or provide more detail about certain require ments,” id

. , of the OCSLA statute and regulations. As the Interior Department has explained, it “issues NTLs to explain and clarify its regulations. ” Oil and Gas and Sulphur Oper ations in the Outer Continental Shelf

— Plans and Info rmat ion, 70 F ed. R eg. 51
, 478

- 01 , 51,478 (Aug. 30, 2005). The OPA statute and the OPA regulations thereunder made no provision for the issuance of NTLs.
The appellants contend that the NTLs in this case are equivalent to new regulations within the meaning of t he lease provi sions. Even assuming the NTLs are new reg ulations, however, they were issued pursuant to OCSLA, and thus do not breach the lease

. B
The change at issue here concerns the worst case di scharge calculation and the bond requirement that corr esponds to that calculation. The government issued Noti ce to Lessees No. 2010

– N06 (NTL

- 06) and related documents on June 18, 2010, after the effective date of the lease. This order and the various documents explaining it required lessees to make changes to the way they calculated worst case discharge volume. See infra Slip. Op. at 14

- 16

. The only identified consequence of this alteration was to alter the lessees’ bond requirement

.CENTURY EXPLORATION v. US 14

The appellants argue that the government’s issuance of NTL

- 06 breached their lease because: (1) it changed the worst case discharge scenario, thereby imposing additio nal bonding costs, and (2) the change was made pursuant to OPA, not OCSLA. There appears to be no dispute as to the first question. At oral argument, the appellants cla rified that, in their view, NTL

- 06 resulted in four principal changes to the worst case discharge calculation , which increased their corresponding bond requirement

. 6 First, and most importantly, after the effective date of the lease, the government sent an email to Century 7 stating that under NTL

- 06, the appellants must “[i]ncrease the length of time [of] the uncontrolled blowout response from 30 to 120 days.” J .A. 1432. Prior to NTL

- 06, the OCSLA regul ations, by reference to OPA regulation 30 C.F.R. § 254.47 (a)(3) , only required oil company lessees to a ssume that oil would flow from their wells for 30 days

6 In addition to these four principal changes, NTL

06 also rescinded an older order, NTL

- 08, which had waived certain regulatory requirements for particular lesse es. A s the appellants conceded at oral argument, the rescission of NTL

- 08 is not relied on in the complaint. Therefore, we do not discuss NTL

- 08 here.

7 The government sent this email to Century direc tly, instead of both Century and Champion, because Ce nt ury was the designated lease operator. As the lease operator, Century was in charge of submitting the appe llants’ exploration plan, meeting the bond requirements, and applying for permits to drill. See 30 C.F.R. § 250.105 (2013) (“Operator means the person the lessee(s) desi gnates as having control or management of operations on the leased area or a portion thereof. An operator may be a lessee, the BSEE

- approved or BOEM

- approved designa ted agent of the lessee(s), or the holder of operating rights under a BO EM

- approved operating rights assignment.”); J.A. 88.CENTURY EXPLORATION v. US 15

during a blowout when calculating their worst case di scharge volume s

. The government email to Century e xplain ed that the appellants should revise the ir OCSLA

mandated exploration plan in light of NTL

- 06 and now assume that oil would flow from their well for 120 days when calcu lating the worst case discharge volume.
Second, prior to the issuance of NTL

- 06, lessees did not have to include all reservoirs that a drilling operator might pass through to reach its intended drilling location in the calculation of the uncontrolled flow that could result from a blowout. The parties do not specify th e

sourc e of this obligation. However, the f re quently asked

q uest ions document (FAQ document) accompanying NTL

06 apparently modified this requirement. Under NTL

- 06
, lessees must “consider all reservoirs, not just where you’re drilling to, but any thing you might pass through ” when calculating worst case discharge volume. Oral Argument 5: 57

- 6:02
, available at http:// www.cafc. uscourts.gov/ oral

- argument

recordings/ all/ century -exploration.html . More specifically, lessees must now “ determine the daily rate of an unco ntrolled flow from all producible reservoirs into the open wellbore.” J.A. 663 (emphasis added)

. Third

, NTL

- 06 changed assumptions regarding what could be treated as being in the wellbore when calculating worst case discharge volume. Previously, lessees counted
t he fact that certain equipment, such as drillpipe, logging tools, and drill bits were in the wellbore , thereby reducing total discharge volume, when they calculated worst case discharge volume. Again, the source of this requirement is unclear. However, the FAQ document explain ed that lessees “should [now] assume that the wellbore is free of drillpipe, logging tools, or other similar equipment.” J .A. 665 (emphasis added) . Thus, under NTL

- 06 , lessees “ no longer consider anything being in the wellbore.” Or al Argument 5:4 7- 5:51
, available atCENTURY EXPLORATION v. US 16

http:// www.cafc. uscourts. gov/oral

- argument

recordings/ all/ century -exploration.html.

Fourth

, NTL

- 06 prohibits lessees from including the presence of a blowout preventer (the mechanism that failed to contain the Deepwater Horizon blowout) in their worst case discharge calculation. As the appellants e xplained at oral argument, “ for years beforehand you counted the fact that you had a blowout preventer on the well when you determined worst case discharge.” Id. at 17:52

- 18:02

. Once again, the source of this requirement is not specified. However, the FAQ document state d that lessees should now assume that a blowout preventer is
not connected to the wellhead.

Prior to the issuance of NTL

- 06, the appellants’ worst case dis charge volume was 1,500 barrels and their corr esponding bond requirement amounted to $35 million. The appellants contend, and the government does not contest, that NTL

- 06 and the various documents explaining that order increased their worst case discharge volume to 142,977 barrels per day and their corresponding bond requirement to $150 million.

C
While not disputing the existence of the change s or their impact, the government urges that the changes were made pursuant to OCSLA, not OPA. The appellants argue that they were made pursuant to OPA. More precisely, appellants argue that because NTL

- 06 and related doc uments change d the assumptions lessees must follow when calculating their worst case discharge volume, and the regulation governing the worst case sce nario calculation is an OPA regulation, NTL

- 06 effectively changed an OPA regulation. In response, the government explains that the OCSLA regulation outlining what oil spill information lessees must incl ude in their exploration plans

, § 250.219 (a)(2)(iv), simply incorporates the OPA metho dology for calculating worst case discharge volume throughCENTURY EXPLORATION v. US 17

reference. The government points out that NTL

- 06 did not change the text of the OPA regulation itself. R ather, in the government’s view, it alter ed only OCSLA regul atory requirements

. We agree with the government. Initially, it is i mportant that OCSLA authorized the government to ad opt regulations concerning blow out protection and worst case discharge scenarios ; t he government did not need to act under the authority granted by OPA. Pursuant to Section 1 of the lease, the government could issue new OCSLA regulations which provide for the “ prevention of waste and conservation of the natu ral resources of the Outer Continental Shelf ” by the lessees

. J.A. 88. This lease provision can be traced directly to § 1334 of OCSLA: “T he Secretary may at any time prescribe and amend such rules and regulations as he determines to be necessary and proper in order to provide for the prevention of waste and conservation of the natural resources of the outer Continental Shelf, and the protection of correlative rights therein . . . .” 4 3 U.S.C. § 1334 (emphasis added).

The case law interpreting § 1334 give s a broad scope to the phrase “prevention of waste and conservation of the natural resources,” making clear that it extends to env ironmental protection. See , e.g. , Pauley Petroleum Inc. v. United States , 591 F.2d 1308, 132 5 (Ct. Cl. 1979) (explai ning that a new regulation imposing absolute liability on lessees for any pollution resulting from their activities would be “ lawful and reasona ble” because OCSLA pr ovides “‘[t]he Secretary may at any time prescribe and amend such rules and regulations [] in order to provide for the prevention of waste and conservation o f the nat ural resources of the outer Continental Shelf ’” (quoting 43 U.S.C. § 1334(a)(1) (1970))) ; Get Oil Out! Inc. v. Exxon Corp. , 586 F.2d 726, 729 (9th Cir. 1978); Union Oil Co. of Cal

. v. Morton , 512 F.2d 743, 749

- 50 (9th Cir. 1975) (stating that the phrase “ conservation of the natural resources of the outer Continental Shelf” “ encompasses allCENTURY EXPLORATION v. US 18

the natural resources of the shelf, not merely the min eral resources” (citations omitted)) ; Gulf Oil Corp. v. Morton

, 493 F.2d 141, 145 (9th Cir. 1973) (“[I] n au thorizing the Secretary to issue regulations, [OCSLA] speaks of ‘co nservation of the natural resources of the outer Contine ntal Shelf,’ not just of conservation of oil, gas, sulphur and other mineral resources.

. . . Its natural meaning would encompass all such resources, not just oil and gas, su lphur and other minerals. ” (quoting 43 U.S.C. § 1334(a) ) ). Thus, t he case law supports a finding that OCSLA e ndows the government with the authority necessary to regulate worst case discharge scenarios and to requir e adequate bonding

. See also 43 U.S.C. § 1337 (a)(7)(A) (authorizing the Interior Secretary to require lessee s to post a bond in accordance with the applicable regul ations ).
Nevertheless, the a ppellants point out that the mere existence of government authority to act under OCSLA does not immunize the government from liability for regulatory changes

. To avoid liability for changes, the government must also have act ed pursuant to OCSLA authority. In Mobil Oil , t he government argued that, irrespective of the statutory change at issue in that case, the government could have undertaken the exact same action pursuant to OCSLA. 530 U.S. at 615

- 16. The Supreme Court rejected this argument, recognizing that the new requirements were “created by [the Outer Banks Protection Act], a later enacted statute,” Mobil Oil

, 530 U.S. at 616, not an OCSLA regulation. The court e xplained that “[t]he fatal flaw in [the government’s] arg ument [] arises out of the Interior Department’ s own statement

— a statement made when citing the Outer Banks Protection Act to explain its approval delay.” Id. at 617

- 18. Thus, e ven though OCSLA may have permitted the government to require the exact same actions the Outer Banks Protection Act re quired , be cause the go vernment cited the Outer Banks Protection Act as theCENTURY EXPLORATION v. US 19

authority for carrying out these actions, the Court found that the government effect uat ed them pursuant to the Outer Banks Protection Act and was liable for breach . In reaching this conclusion, the Supreme Court emphasized the governm ent’s c ho sen source of authority : the gover nment cited the Outer Banks Protection Act , not OCSLA regulations. Id.

We confirmed this approach in Amber

. In Amber

, Congress amended the Coastal Zone Manage ment Act to impose new regulatory requirements. 538 F.3d at 1366. Thus, Amber turned on whether these new requirements breached the oil companies’ contract s

. Id. Relying on Mobil Oil , we reasoned that “[b] ecause the 1990 [Coastal Zone Management Act] amendments

. . . imposed significantly more burdensome re quirements for granting lease suspensions, the new statute in this case breached the lease agreements in the same way as the new statute in Mobil Oil. ” Id. at 1371. T he government argued that it could have undertaken the exact same action pursuant to the O CSLA regulations in effect at that time

. Id. at 1372. Nevertheless, because the government imposed new requirements based on the new statutory changes to the Coastal Zone Management Act , not existing OCSLA regulations

, we held that these requirements brea ched the
contract

. Id.
Here, we reach a different conclusion . Although, as discussed above, both the OCSLA and OPA worst case discharge scenario regulations are limited to OCS lessees, we conclude that the government changed the appellants’ worst case disc harge calculation pursuant to OCSLA

. First , NTL

- 06 itself identified OCSLA regulation § 250.103 as its source of authority. NTL

- 06 only refe renced and discussed OCSLA regulations and requir ements. As NTL

- 06 explains , OCSLA regulation s § 250.219 and § 250.250 required “all [OCSLA exploration] plans” to be “accompanied by information regarding oil spills, including calculations of [the lessee’s] worst case di s-CENTURY EXPLORATION v. US 20

charge scenario

. ” J.A. 657. Although OCSLA regulation § 250.219(a)(2) (iv) instructed lessees to calcu late their worst case discharge volume according to the OPA regul ation methodology , NTL

- 06 neve r mentioned the OPA regulations. NTL

- 06 simply augmented the factors lessees

mu st consider when calculating their worst case discharge scenario for OCSLA purposes

. 8
Second, there has been no showing or even suggestion that the NTL

- 06 changes applied outside the OCSLA
context. Critically, NTL

- 06 states that it only changes a lessee’s worst case discharge scenario “required by [OCSLA regulation] 30 C.F.R. § 2 50.219(a)(2)(iv).” J.A. 658. NTL

- 06 did not change the text of the relevant OPA regulation, § 254.47, and nothing suggests that NTL

- 06 altered any part of the OPA regulation. Indeed, the appe llants do not claim that NTL

- 06 changed the text of rel evant OPA regulation. NTL

- 06 merely changed the way an OCSLA regulation incorporates an OPA calculation. Moreover, for three out of the four alleged alterations to the worst case discharge calculation, it is not even clear that the original requirement was an OPA re quirement . A change to an OCSLA regulation does not breach the

expr ess terms of the lease language as interpreted by the Supreme Court in Mobil Oil and this court in Amber

. 9

8 At oral argument, the appellants also contended that the changes NTL

- 06 brought about were made pu rsuant to OPA because a later issued NTL, NTL No. 2012

- N06, altered OPA regulation § 254.47 (b) . Issued on A ugust 10, 2012, after the appellants filed their complaint and after the government moved for summary judgment, NTL No. 2012

- N06 is irrelevant to this appeal, and we decline to discuss it. The same is true of NTL 2013

- N02

. 9 The appellants suggest that in adopting OCSLA regulation 30 C.F.R. § 250.219, the Interior Department recognized that the worst case discharge calculation wasCENTURY EXPLORATION v. US 21

included in the OCSLA regulation merely as a “strea mlined” means to comply with OPA. Century’s Reply Br. 12 (quoting Oil and Gas and Sulphur Operations in t he Outer Continental Shelf

— Plans and Information, 70 F ed. R eg. at 51,486). This is not correct. The OCSLA regul ation in question states that lessees may provide , as an alternative to an individual Oil Spill Response Plan (OSRP), “[r] eference to [an] approved regional OSRP (see 30 C .F.R. 254.3 ) [that must]

. . . include: . . . [1] The calculated volume of your worst case discharge scenario (see 30 C .F.R

. 254.26(a) ), and [2] a comparison of the appropriate worst case discharge scenario in your a pproved regional OSRP with the worst case discharge scenario that could result from your prop osed explo rati on activities. ” 30 C.F.R. § 250.219(a)(2) (iv) (2010). The comment in the Federal Register on which the appellants rely was directed to the second aspect of the regulation. The Interior Department ’s summary of the comment read s : “ With respect to paragraph (a)(2)(iv), [ the Offsho re Operators Committee] inquires regarding the purpose of providing a comparison between the site speci fic worst case discharg e and that in the regional OSRP.” The Interior Department ’s response to the comment was similarly limited: “No change. .

. . MMS uses the info rmation required under paragraph (a)(2)(iv) as a strea mlined means to ensure compliance with requirements of the Oil Pollution Act of 1990 .” Oil and Gas and Sulphur Operations in the Outer Continental Shelf

— Plans and Info rmation, 70 F ed. R eg. 51
, 478

- 01 , 51,486 (Aug

. 30, 2005 ) (codified at 250.219(a)(1)(iv) (2010)). Neither the comment nor the response concern ed the requirement to provide a worst case discharge scenario. See Summary of the Offsho re Operators Committee’s Comments on Su bpart B Proposed Regulation at 35

- 40, Bureau of Safety and Environmental Enforcement (on file with Bureau of Safety and Environmental Enforcement ).CENTURY EXPLORATION v. US 22

II . Implied Breach and Administrative Procedure Act Challenges

We have considered the appellants’ other arguments and find them to be without merit. Appellants cannot rely on the implied covenant of good faith and fair dealing to change the text of their contractual obligations. As this court recently clarified in Metcalf Construction

, Inc. v. United States

, the ‘ implied duty of good faith and fair dealing cannot expand a party’s contractual duties beyond those in the express contract or create duties i nconsistent with the contract’s provisions. ’

. . . [O] ur formulation means simply that an act will not be found to violate the duty (which is implicit in the contract) if such a finding would be at odds with the terms of the original bargain, whether by altering the contract’s discernible allocation of risks and benefits or by conflicting with a contract provision. The implied duty of good faith and fair dealing is limited by the original bargain: it pr events a party’s acts or omissions that, though not proscribed by the contract expressly, are inco nsistent with the contract’s purpose and d eprive the other party of the contemplated value

. No. 2013

- 5041, Slip Op. at 10 (Fed. Cir. Feb. 11, 2014) (quoting Precision Pine & Timber, Inc. v. United States

, 596 F.3d 817, 83 1 (Fed. Cir. 2010)) ; see also Precision Pine , 596 F.3d at 829

- 31 (Fed. Cir. 2010 ) (“ The gover nment may be liable for damages when the subsequent government action is specifically designed to reappropr iate the benefits the other party expected to obtain from the transaction, th ereby abrogating the government’ s obligations under the contract. ”) ; 13 Samuel Williston & Richard A. Lord, A Treatise on the Law of Contracts § 63:22 ( 4 th ed. 2000) (“As a general principle, there can be no breach of the implied promise or covenant of good faithCENTURY EXPLORATION v. US 23

and fair dealing where the contract expressly permits the actions being challenged, and the defendant acts in a ccordance with the express terms of the contract.”) . W e hold that the government has not breached its implied duty of good faith and fair dealing because the lease

express ly authorized the government action at issue here: changes to OCSLA regulatory requirements

. We also affirm the Claims Court’s holding that it is without subject matter jurisdiction to decide the appe llants’ APA cha llenges

. See Lion Raisins, Inc. v. United States , 416 F.3d 1356, 1370 n.11 (Fed. Cir. 2005) (“ Of course, no APA review is available in the Court of Federal Claims.”). 10 Because we have found no breach in this case,

w e need not reach the government’s sovereign acts defense

. 11

AFF IR MED

10 The appellants also argue that the term “other applicable statutes ” in S ection 1 of the lease should be interpreted to incorporate the APA. Appellant Century’s Br. 8, 28. However, as the Claims Court correctly concluded, the APA is not an applicable statute in the sense of the lease language

. 11 In arguing that the gover nment breached its i mplied duty of good faith and fair dealing, the appellants mention other post

- Deepwater Horizon changes to the regulatory requirements such as two separate gover nment

- issued moratoria on drilling, a new Drilling Safety Rule, and another NTL (NTL

- 10). We do not discuss these changes because the appellants have not articulated a theory under which they for m a basis for breach liability.