Document: 530 U.S. 604120 S.Ct. 2423147 L.Ed.2d 528 NOTICE: This opinion is subject to formal revision before publication in the preliminary print of United States Reports. Readers are requested notify Reporter Decisions, Supreme Court States, Washington, D. C. 20543, any typographical or other errors, order that corrections may be made goes press.MOBIL OIL EXPLORATION & PRODUCING SOUTHEAST, INC.v.UNITED STATES No. 99-244. SUPREME COURT OF THE UNITED Argued March 22, 2000 Decided June 26, 20001 CERTIORARI TO APPEALSFOR FEDERAL CIRCUIT Syllabus Two oil companies, petitioners here, paid Government $158 million return for lease contracts giving them rights explore and develop off North Carolina coast, provided companies received exploration development permission accordance with procedures set out in, inter alia, Outer Continental Shelf Lands Act (OCSLA), Coastal Zone Management 1972 (CZMA), regulations promulgated pursuant those Acts. OCSLA, among things, requires Department Interior approve a company's Plan Exploration (Plan) within 30 days its submission if meets certain criteria. A company must also obtain an exploratory well drilling permit after certifying under CZMA consistent each affected State's coastal zone management program. If State objects, Secretary Commerce override objection certification fails. grant rules against State. While companies' was pending Interior, Banks Protection (OBPA) became law. OBPA prohibited from approving until, OBPA-created Environmental Sciences Review Panel (Panel) reported certified Congress he had sufficient information make OCSLA-required approval decisions. In no event could 13 months. told Mobil met OCSLA requirements but it would not until were met. It suspended all offshore leases. After report, requisite stated consider further studies recommended by Panel. objected certification, rejected Mobil's request. Before issued his rejection, joined breach contract lawsuit Federal Claims. That court granted summary judgment, finding broken contractual promise follow thereby repudiated contracts, repudiation entitled restitution their payments. reversing, Circuit held Government's refusal operative cause failure carry contracts' terms because have prevented exploration. Held: The broke promise, give money back. Pp. 8-19. (a) contracting party "substantially" breached communicated intent do so. Here, such intent. None provisions incorporated into legal authority refuse Plan, while suspending instead. First, does arise OSCLA provision, 43 U.S.C. § 1334(a)(1)(A), permits promulgate providing suspension operation activity only upon "the request lessee." Second, say they then-existing future Energy Organization provisions. explicit reference makes clear catchall referencing "all applicable - regulations" include statutes already existing at time contracts. Thus, statutes, as OBPA. Third, provision authorizing suspensions light threat serious harm human environment did authorize delay, explained fully complied current cited explain delay. Insofar means suggest changed relevant standard, mean effect created new requirement. Such requirement Finally, when imposing rely which now refers. required impose contract-violating delay pre-existing contract-incorporated several ways. By communicating OBPA, violate 8-14. (b) substantial, deprived benefit bargain. Under standards amounted gateway enjoyment oil. Timely fair consideration submitted material condition yet announced OBPA-required months minimum, turned least four years. modification technical insubstantial, 15-16. (c) Although acceptance once-repudiated can constitute waiver right otherwise create, none events points to-that two law, subsequently asked Carolina's leases OBPA-mandated delays-amounts significant postrepudiation performance. 16-18. (d) argument caused injury consistency misses point: seek damages initial Because law entitles whether would, not, ultimately produced financial gain led definite explore. 18-19. 177 F.3d 1331, reversed remanded. Breyer, J., delivered Court, Rehnquist, O'Connor, Scalia, Kennedy, Souter, Thomas, Ginsburg, JJ., joined. Stevens, filed dissenting opinion. Notes 1 Together 99-253, Marathon Oil Co. v. on certiorari same court. Opinion Justice Breyer Court. $156 coast. absolute, conditioned obtaining governmental permissions. claim denied elements permission-seeking opportunities promised. We agree promise; contracts; 2 * 3 description outset few basic principles this case will help reader understand significance complex factual circumstances follow. "When enters relations, duties therein governed generally between private individuals." Winstar Corp., 518 839, 895 (1996) (plurality opinion) (internal quotation marks omitted). Restatement Contracts reflects many case. As forth Contracts, specify that, one repudiates contract, "is has conferred on" repudiating "by way part performance reliance." (Second) §373 (1979) (hereinafter Restatement). explains "repudiation" "statement obligor obligee indicating commit itself total breach." Id., §250. And "total breach" "so substantially impairs value injured just allow him recover based remaining performance." §243. 4 applied case, these amount following: said break, important "substantially impair[ing] contract[s]" ibid., then (unless waived restitution) so proved financially beneficial companies. illustrates point follows: 5 "A sell tract land B $100,000. payment $20,000, wrongfully refuses transfer title. $20,000 restitution. result even market price $70,000, been disadvantageous B." §373, Comment a, Illustration 1. 6 1981, up-front "bonus" payments about (plus annual rental payments), 10-year renewable States. promised coast found (subject royalty payments) permissions various "subject." App. Pet. Cert. pp. 174a-185a. 7 regulations, necessary might easy matter. particular, 67 Stat. 462, amended, 1331 et seq. (1994 ed. Supp. III), 16 1451 seq., leaseholding wishing drill successfully complete following procedures. 8 prepare Exploration. 1340(c). unless finds, "consider[ing] available environmental information," §1346(d), proposed 9 "would probably damage life (including fish aquatic life), property, mineral , national security defense, marine, coastal, environment." §1334(a)(2)(A)(i). 10 Where warranted, act quickly-within "thirty days" Plan. §1340(c)(1). 11 permit. To so, certify (under CZMA) program 1456(c)(3). fails, overrides objection. State, §1456(c)(3)(A). 12 where waste discharge ocean waters issue, National Pollutant Discharge Elimination System Agency. 33 1311(a), 1342(a). state programs (as explained) objections. 1456. Fourth, successful, prepare, for, Development Production Plan-a describes related safeguards. 1351. Again, Interior's plans-a object, override. §1351(a)(3). C 14 issue here concern first steps process described-Interior's "consistency certification" 15 entered cash 2. 1989, memorandum understanding. memorandum, submit draft final Interior. report draft. agreed suspend (about $250,000 per year) prepared objections certifications being worked out, extended accordingly. 17 3. September Carolina. Ten later, ("informal" pre-submission) review parties concede "extensive intensive." 179 (deposition David Courtland O'Neal, former Assistant Interior) (agreeing most extensive intensive" ever "afforded outer continental shelf (OCS) program"). concluded "significantly affec[t]" marine quality 138-140 (U.S. Dept. Minerals Service, Assessment Manteo Area Block 467 (Sept. 1990)). 18 4. On August 20, 1990, both 19 5. Just earlier, 18, (OBPA), §6003, 104 555, come effect. award Secretary, decisions, session additional 45 days, next (until October 1991). §6003(c)(3). justify detail differences own conclusions Panel's recommendations. §6003(c)(3)(A)(ii)(II). 20 6. About five weeks statute, wrote letter Governor copy petitioner Mobil. deemed approvable respects." added: 21 "[W]e inconsistent environment. we complies negligible environment, authorized disapprove require modification." 194a (letter Regional Director Bruce Weetman Honorable James G. Martin, Carolina, dated Sept. 28, 1996). 22 But, noted, "Outer 1990 prohibits time." concluded, "because currently it, remain file met." meantime "suspension Carolina." Ibid. See 129-131 Lawrence H. Ake, William Whittemore, Producing Inc., 21, (notice leases, citing CFR 250.10(b)(7) (1990) basis suspensions)). 23 receiving enough He added, however, recommended. 24 7. November ground possible impact. month 25 8. 1994, request, relying large fact lack adequate respect issues. 26 9. 1996, repealed §109, 110 1321-177. D 27 1992, last-mentioned taken place, breach-of-contract brought motions OCSLA's provisions, particular requiring satisfied made. Conoco Inc. 35 Fed. Cl. 309 (1996). 28 panel Appeals reversed, judge dissenting. "operative cause" statement" exploring regardless. (CA 1999). 29 Circuit's decision. II record (1) "within thirty satisfies requirements, (2) (3) months, likely longer, (4) (or disapprove) ever. deny "pursuant to" "subject promises. concedes, must, §373(1); W. Jaeger, Williston §1312, p. 109 (3d 1968) Williston); A. Corbin, §1104, 560 (1964); see Ankeny Clark, 148 345, 353 (1893). Yet denies refund money. 31 because, view, communicate so; "substantial"; shall arguments turn. 32 "no depend "subject" regulations. Those "Sections 302 303 Act," existence effective date of" provide prevention conservation" resources, (5) regulations." 175a. says incorporate mentioned, statutory refers authorizes lessee, interest, facilitate proper lease." (Emphasis added.) emphasized show, lessee," i.e., how here. Hence, cannot provision. 34 250.110(b)(4) (1999), formerly codified 250.10(b)(4) (1997), regulation stating "[t]he Supervisor direct [when the] implementation Policy conduct analysis." permitted "necessary analysis," namely, analysis demanded "environmental analysis" referred to, need later enacted statute. §§302 Act. references regulations," supra, 9, Cl., 322-323, conclusion questioned Government. like Without some limiting power different spent buy nothing. event, Claims interpreted lease; disagree interpretation; nor dispute it. 36 Instead, question-the "an analysis"-was regulation. Rather, similar existed signed 250.12(a)(iv) (1981), and, statute exempted temporal restriction. But fact, true, produce incorporation what needs prevail. regulation's words, apply analyses mandated unknown specific restrictions intended avoid. Consequently, whatever words contexts, believe us excluding insofar excluded imposed 37 1334(a)(1), which, granting rulemaking authority, 38 "regulations there serious, irreparable, immediate deposits 39 Conference Report, OBPA-caused "related protection" "for collection crucial oceanographic, ecological, socioeconomic data," "prevent public harm." R. Conf. Rep. 101-653, 163 (1990); Brief 32. At oral argument, noted mentions "tourism" "major industry potentially disruption gas development." §6003(b)(3). From this, infers "threat harm" "human 40 fatal flaw arises Department's statement-a statement "fully complies" requirements. quoted above pertinent Supra, accuracy statement, either brief Appeals. standard language history somehow findings reference), For reasons 10, 41 note itself, lengthy relied upon, cited, regulation, 250.110(b)(7) gives comply judicial decrees prohibiting production activity." concedes decree involved 42 conclude, reasons, violated Indeed, pointed 129 ("The [OBPA] contains specifically prohibit Service Application Permit Drill, permitting 1, 1991"). therefore continue Moreover, delayed approval, Plans; issuance well. type previously existed, conducted newly Panel; insisting Secretary's Panel, kind presumption favor findings. 44 dissent argues statements contained enactment legislation typically conceived `statement' anything particular," Post, 8, n. (quoting §250). passed President obligor," difficult imagine statement. who "obligor" contract. 174a (lease, identifying America" "Lessor"). "addressed large," post, 4, "public" includes whom obligations. invoke special exception "sovereign acts" doctrine, treats laws simply conditions impossibility, Winstar, U.S., 891-899 (principal J.), 923-924 (Scalia, concurring judgment), application doctrine 334-336, contested determination circumstances, rested difference. changes unjustified. foresee. They through cross-reference. convinced actions contractually cross-referenced 46 violation significant; hence "substantial" "material" "repudiation." 30-day period "does function `essence' agreements." 37. timely reciprocal obligation," indeed, "contrary interpretation render bargain illusory." 327. agree. 47 recognize gave more than approvals. develop, approvals qualified practice, primarily opportunity try specified deviate significantly standards, buy? Cf. id., 324 (the bought exclusive "if met" (emphasis added)). 48 processes insubstantial. announce (OBPA-required) weeks, much longer. delays matter, particularly successive agency stake. Whether applicant approaches hand difference obtained earlier approval). contract-referenced ways 12-13. 49 upshot rights. narrow "substantia[l]," depriving communication 50 found) OBPA's substantial breach. retracted repudiation. §256 (retraction nullify effects done position reliance retraction communicates considers final). urging §257 change repudiator perform spite repudiation"); §1334, 177-178. Nor continued E. Farnsworth, §8.22, 544 (2d 1998) (citing Cal. Bank Prudential Ins. Co., 140 Ariz. 238, 282-283, 681 P.2d 390, 433-434 (App. 1983) (urging making "efforts fulfill conditions" thing)); cf. §1337, 186-187. Consequently down partial create. a; Restitution §68, b (1936). 51 three persuade us. question, requested, actually And, 52 overturn certification. although eventual response negative, receive reply. base reply, instead new, OBPA-created, 224, 227, 35, 232-233, 239, 244 report). called. 53 (suspending rents extending terms) delays. However, separate contract-the 1989 understanding-entitled suspensions. 2a Toni Hennike, Counsel, Ralph Melancon, Supervisor, Feb. 1995 convincing reason why should question. 54 conclude consequently find waive 55 hurt Since explored drilled) event. damage. puts "such [Exploration approval] delay," none. 43-44; F.3d, 1340. point. lottery operator fails deliver purchased ticket, purchaser get back-whether eventually won lottery. ordinary citizen, advances money, normally latter, repudiation, §373. III 56 Contract expresses view wisdom examined statute's promises contained. keeping promise. impair[ed] contract[s]." 57 judgment reversed. remand cases proceedings ordered. 58 59 1953 passage hundred sales stake today, bidders $55 billion resources leases.1 lessor, petitioners, lessees, clearly mutual interest successful exploration, development, Unit executed 1981. achieved, royalties addition Nation's energy supply. Self-interest, thus expend over course years hope seeing project realized. 60 outset, apparent succeed variety reasons. Among risk exercise object completion project. knowingly assumed. assume enact obviously I failing approve, receipt, plan submitted. describes, ante, 3-4, terms, correspondingly, sets plain language. 61 appropriate remedy full investment. When entire relationship considered, impact foreseeable project, ordered excessive. hold best resulting time. 62 nature breach, supplement Court's chronological account. began discussing miles Cape Hatteras fall 1988, (and after) proposal fraught problems. early 6, 1988 almost certainly before), whose knew (DOI), going go along readily. 61-63 Martin Ainger, Acting Manager, (MMS) (a division DOI)). explains, 3, without multiple references, DOI licensing, permitting, lessee ensue, 63 pursued multiparty negotiations proposal. negotiations, understanding Government, according agreement, (POE) 79-85. reports petitioners' POE participate meetings hearings regarding 81-82. agreement resulted preparation three-volume, 2,000-page released year. 64 thereafter express dissatisfaction prospect voicing displeasure findings, 86-95, rejecting permit, 96-97,2 nonetheless 65 terms. plan, OBPA- (either) anticipatory Petitioner 99-244, ("[I]n enacting anticipatorily obligations leases- "); placed leases"). 66 Following POE, duty, submission." 1340(c)(1). 19, criteria, approval. (Issuing "approval," course, "license described affecting use water use" zone, §1340(c)(2); actual proceed wait certification.) Despite hard deadline, came went DOI's explanation MMS's Field Operations, Ake. commenting substantive assessment Ake "specifically prohibit[s]" MMS "until 1991." 129. "Consequently," Mr. explained, "in 250.10(b)(7)," parties' agreement. One week Director, Weetman, sent elaborating receipt POE. 193a-195a. According "was 30, transmitted Agencies date. comments Coast Guard. An potential associated conducted, (EA) prepared, Finding No Significant Impact (FONSI) made." 193a. Based MMS, "approvable" "currently it." "remain file" resolution force interim. 194a. 68 my meet deadline despite form merited obligation contrary.3 1991 seen signal coming question faced, whether, actions, rather damages, usual 69 2, alternative "on non-performance rise repudiation." (1979). suspect action (which defined 2) breach," varies small degree, every major admonition. See, e.g., 558, 562 (1964) ("Restitution vital importance- . non-performance, [t]he party, maintain given defendant defendant's `essence'; duty part"). short, destroys essential assess "materiality" 70 Beyond underscore "just circumstances." look equities situation whole. satisfy foregoing presumably still breach- suffered result. 71 Given am persuaded altogether, neglect "essential" 72 reject suggestion otherwise, basic, passage.4 breach-by-delay forecast "of gravity occurred, §250, d; §1312 1968). 73 acknowledging temporary moratorium approvals, states suspension-rather cancellation recision-and existing, regulatory attempting act. took carefully considering submission; evaluated compliance agencies consideration, entities account, analyses, findings-all subsequent enactment. doubted performing extent thought legally permissible post-OBPA. 74 contention had, indeed DOI-just understood fulfilled expected them. Petitioners, moreover, accepted proffered suspensions, themselves "from 1992 forward" 250.10(b)(6) (1990), lessee's "to inordinate encountered consents, including administrative challenges appeals."5 75 (indicating believed existed), promptly sought December 1990-again contracts-to objections, 1340(c)(1), issue. explainable solely obligatory undertook evaluate has, doubt, expenditure Departments solicited evaluating issuing, "Decision Findings" declined 76 finished yet. adverse Commerce, described, 1a Oil, 1995), decisions expired terminated [pre-existing] suspensions," "[s]ince decision challenged, upheld nonappealable competent jurisdiction," 2a. District Columbia very moment appeal Commerce's denial Southeast, Daley, 95-93 SSH (filed Mar. 2000). 77 Absent, then, left possibility "total" scope above, acted ex proprio vigore ("OBPA well"); 21. amendment incorporated, considered leases; was, rather, external capable changing did, take refrain taking actions) lessees. Had chosen, haled compelled rescind requirement.6 remained reinforces 78 insufficiently material, danger rendering illusory, 15, misplaced. contest obliged prompt if, demands; procedural mechanisms established contracting. quite beside point; continuing 79 sufficiently depends impact, any, occurred §8.16 1999) determining materiality made- Most deprive justifiably expected"). answer close Sixty breach-from 1990-the 141-148. clear, "The license concurs conclusively presumed concur accompanying [overriding objection]." 1340(c)(2) added); §1351(d). effect, forward aside Commerce. effectively matters during 1990. Thereafter, precluded 80 relieve liability does, inappropriate pre-November reasonable expectation venture fruition near future. Petitioners known since concerns exploration; officially NPDES submission-a step dependent 106-111. time, investments good-faith efforts preserve arrangement, trying work. behave consistently expectation. 81 apparently recognizing substantiality spends concluding refund, single paragraph explanation, posits "did minimum longer." referring written expiration deadline. "statement" matter context repudiation; "announcement" exacerbates What said, did. possible-evaluating POE; requests (suspensions day); responding objection.7 82 asserts, support, "[w]hether approval)." implies handling tied evidence appeals "suspended, impeded, ." 187 (declaration Margo Jackson, 92-331-C (Fed. Apr. 1994) (Commerce supervisor charge appeals)). influenced is, assertion, 17, lower courts decided. Regardless, proposition precedent overcoming state-filed objection, knew, approved 83 end, central "not insubstantial" "lengthy matter." Ante, 15. general principle. action, principle face, essence" accept; waited seven term floating proposal, another filing lawsuit. accepting above-and-beyond-the-call performance, suddenly essence? magnitude, undertaking rife possibilities delays," "inordinate appeals," (1990). sure, anticipated signing onto lease. delays" appeals, were. "a rights," critical word "a"; reap gate closed completely, "narrow[ed]," 16. Any long-term complexity bound gamble. holding aces play entirely deck cards. IV 84 frustrate 1981 signed. seems me primary avoid suffering consequences enjoy windfall reprieve foolishly pass validly political constituency opposed Banks, Viewed transaction, modest recovery attributable default remedy; deems just. protracted enterprise magnitude draconian delivers. 85 Accordingly, respectfully dissent. Conoco, 309, 315, (1996); Mineral Revenues 1999, Report Receipts American Indian Leases (reporting $64 federal 1953-1999). Water Pollution Control Act, 86 816, 1251 lessees (NPDES) Agency (EPA) move discharging pollutants ocean, §§1311(a), EPA satisfaction Unless arising process, 1456(c)(3), incorrect, assert failed "timely consideration," establishes, engage evaluation heels ran afoul My rejection theory, encompasses notion constituted p.19. Repudiation, instance " `statement breach.' Except abstract sense, nature, addressed large. directed anyone directing surely contemplated continue, operate OCSLA-based scheme. confines "carry responsibilities activities subsection (c)(1) [(i.e., plans drill; drilling)]." §6003(d) 557. 170-171 Leslie Burton, Senior Counsel 23, 1992); 1995) (requesting reinstatement suspensions). proceeding enjoining actions. Ironically, expressly activity, production, (7) "). explaining 129-130. cursory discount far short. letter's detailed submitted, assertion nothing," correct. insists indispensable procedures, 15; credit "received" petitioners. suggests obligated extend separately adopted understanding; therefore, logic, perform. 17-18. exists terms), requesting 6-7. stretch crediting

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