Offshore Drilling: Combating Regulatory Uncertainty with Contract Law Protection

Authors

Jordan M. Steele

First Page

515

Abstract

Offshore drilling accounts for billions of dollars in tax revenue every year. It is a pillar of the energy industry and is crucial to the economy. A recent flurry of deregulation, accelerating with the arrival of the Trump administration, highlights the tremendous impact politics has upon the profitability of this sector. The Secretary of the Interior, under the direction of the President, wields the power to regulate and make determinations into where, when, and how private companies can drill offshore. These private companies have contracts with the government for the opportunity to produce and develop oil or gas on the outer continental shelf. The Note will examine whether a new act or regulation may constitute a breach of contract if the act or regulation makes production unduly burdensome and thus not feasible for a drilling venture. If production becomes unduly burdensome due to government intervention, then the contract may be breached. This could cause the company to lose billions of dollars in upfront costs and significant opportunity costs, and so private companies need protection from this contentious political battle over the United States’ offshore resources. The suggested framework for this protection looks to a developing common law doctrine of offshore lease breaches and seeks to reconcile those opinions. Adopting this framework will allow parties to plan ex ante for future administration shifts and allow courts to more efficiently and predictably resolve disputes arising from newly passed legislation.

Recommended Citation

Jordan M. Steele, Offshore Drilling: Combating Regulatory Uncertainty with Contract Law Protection, 13 Brook. J. Corp. Fin. & Com. L. 515 (2019).
Available at: https://brooklynworks.brooklaw.edu/bjcfcl/vol13/iss2/8