US Buys Rights Off Florida, Settles Destin Dome Case

In two agreements, the US Department of the Interior halted new hydrocarbon development off the coast of Florida and settled pending Destin Dome litigation with Chevron, Conoco, and Murphy Oil.
The Interior will buy the mineral rights off Florida's coast and in the state's Big Cypress National Preserve. Interior Secretary Gale Norton said this virtually ensures no new oil and gas development will occur in these areas. The Interior plans to spend $120 million, pending congressional approval, to acquire the mineral rights by giving the lease owners cash or credits that can be used for bids or royalties for other outer continental shelf sales. The primary owner of these leases is Collier Resources.
"When it comes to energy development on federal lands, each case must be evaluated individually in cooperation with the people who live in the area," Norton said. "In this case, the amount of oil available was relatively small compared to the nation's overall energy needs, the impact of development could be significant, and the government and people of Florida supported this action."
The department also agreed in principle to settle litigation with oil companies that own interests in the Destin Dome Unit, a large natural gas discovery in the Eastern Gulf of Mexico offshore Florida, thought to contain at least 700 Bcf of economically producible natural gas. Under the deal, Chevron, Conoco, and Murphy Oil will relinquish seven of nine leases in the unit that were the subject of the litigation in exchange for $115 million. The remaining two leases, to be held by Murphy, will be suspended until at least 2012. Murphy will not submit a development plan for the two remaining leases before 2012, which is when current oil and gas leasing moratoria expire. The leases cannot be developed unless both the federal government and Florida agree.
Leases in the unit held by ExxonMobil and Samedan Oil were not subject to litigation, and under the agreement, Chevron, Conoco, and Murphy have agreed to compensate ExxonMobil and Samedan in exchange for relinquishing these two leases.
In July 2000, the lessees sued the US, saying the federal government had materially breached the lease contracts or taken their value without just compensation through improper delays and other regulatory actions. This followed the February 1998 objection by the Florida state government that the development plans were not consisten with the state's Coastal Zone Management Program. An appeal to the US Secretary of Commerce is still pending.