Court Rejects Oil Company's Claim to Payment for Denied Drill Lease

Two years after court denies oil drilling permit, 'takings' claim also thrown out


Suzanne Carrier


202.667.4500, x. 213

More than six years of litigation to prevent Coastal Petroleum Company from drilling off the coast of Florida culminated today in a state trial court ruling. In a lengthy legal challenge initiated by Earthjustice in 1996, the courts denied Coastal Petroleum’s permit for offshore drilling near St. George Island. Plaintiffs convinced the court that on balance the slim prospects of finding any recoverable oil were outweighed by the environmental risks of drilling. Today’s ruling from the bench threw out the company’s subsequent ‘takings’ claim on the grounds that Coastal Petroleum was not guaranteed a permit for drilling when they purchased the lease.

“Coastal Petroleum never really was an oil company and there never really was a prospect,” said Earthjustice attorney David Guest. “They were trying to make it look like they had a serious permit denied so that they could get serious money from the state and it didn’t work.”

The Florida Department of Environmental Protection granted Coastal Petroleum an oil-drilling permit roughly six years ago. Earthjustice represented environmental groups in a lawsuit to have the permit invalidated on the ground that it violated the relevant permitting statute. Earthjustice has consistently contended that Coastal Petroleum was seeking a permit solely for the purpose of selling it back to the state.

“Floridians want to protect their coastline from the environmentally damaging effects of oil drilling,” said Guest. “We have laws on the books to do that and taxpayers should never have to pay extra to have them enforced.”

Under the Takings Clause of the Fifth Amendment to the US Constitution, companies or individuals may claim that they deserve financial compensation if the government takes or renders useless private property. Many cases have been brought by landowners seeking payment for compliance with environmental laws, but the courts have typically rejected such claims. In the case of Coastal Petroleum, the court agreed with arguments that the denial of the permit under these circumstances did not equate with a taking.

“This case wasn’t about an oil drilling permit,” said Guest. “This case was about trying to get a permit to put forth a takings claim.”


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