Sometimes business deals end up going in unexpected directions. In 1996, when Torch Energy Advisors sold its leasehold rights pertaining to exploration and production of oil and gas reserves in land under the federal waters off the California coast to Nuevo Energy, the predecessor of Plains Exploration & Production Company, the regulatory environment related to a potential ban of drilling off the coast of California was still evolving.
Then, more than a decade later, the Court of Federal Claims and the U.S. Court of Appeals for the Federal Circuit determined that the federal government had repudiated the mineral leases in the federal waters off the California coast because a statute enacted several years before the conveyance had later been applied in a manner that precluded development of the leasehold interests. As a result, the purchaser’s successor in interest, Plains, was awarded restitution of the lease-bonus payments that Torch’s predecessor had paid to secure the leases.
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