Bud's Offshore Energy (BOE)

The attached legal petition from Save LBI and Green Oceans, asserts that BOEM improperly amended OCS wind leases at the end of the previous Administration.

The amended language makes it more difficult to cancel leases by stipulating that an OCS wind lease must be suspended for 5 years before it can be cancelled, and that in the event of cancellation, the lessees must be compensated.

The sentence of concern:

Any cancellations are subject to the limitations and protections contained in subsections 5(a)(2)(B) and (C) of the Act (43 U.S.C. § 1334 (a)(2)(B) and (C)). (Those subsections are pasted at the end of this post in their entirety.)

(5(a)(2)(B) and (C) apply to the oil and gas program and neither the EPAct (Alternate Energy) Amendments to OCSLA nor the implementing BOEM regulations include the 5 year suspension provision or the compensation requirement.

Compensation could be very costly to the Federal govt (taxpayer) given the wild (irrational?) bidding for some leases and subsequent planning and development costs.

See Section 8 of this lease for an example of the amended language. Note that the lease changes are not highlighted or otherwise identified; nor was there any public notice of this change.

The petitioners are requesting that the new lease language be rescinded and that cancellation language in the lease be aligned with the regulations.

5(a)(2)(B) and (C) read as follows:

(B) that such cancellation shall not occur unless and until operations under such lease or permit shall have been under suspension, or temporary prohibition, by the Secretary, with due extension of any lease or permit term continuously for a period of five years, or for a lesser period upon request of the lessee;

(C)that such cancellation shall entitle the lessee to receive such compensation as he shows to the Secretary as being equal to the lesser of (i) the fair value of the canceled rights as of the date of cancellation, taking account of both anticipated revenues from the lease and anticipated costs, including costs of compliance with all applicable regulations and operating orders, liability for cleanup costs or damages, or both, in the case of an oilspill, and all other costs reasonably anticipated on the lease, or (ii) the excess, if any, over the lessee’s revenues, from the lease (plus interest thereon from the date of receipt to date of reimbursement) of all consideration paid for the lease and all direct expenditures made by the lessee after the date of issuance of such lease and in connection with exploration or development, or both, pursuant to the lease (plus interest on such consideration and such expenditures from date of payment to date of reimbursement), except that (I) with respect to leases issued before September 18, 1978, such compensation shall be equal to the amount specified in clause (i) of this subparagraph; and (II) in the case of joint leases which are canceled due to the failure of one or more partners to exercise due diligence, the innocent parties shall have the right to seek damages for such loss from the responsible party or parties and the right to acquire the interests of the negligent party or parties and be issued the lease in question;