IN THE UNITED STATES DISTRICT COURT
IN AND FOR THE SOUTHERN DISTRICT OF
FLORIDA, MIAMI DIVISION
NO. 68-951-CA and
69-699-Div.-CA (consolidated)
COASTAL PETROLEUM COMPANY.
a Florida corporation,
Petitioner,
v.
SECRETARY OF THE ARMY OF THE UNITED STATES OF AMERICA, et al.,
Respondent.
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MEMORANDUM OF SETTLEMENT
THIS MEMORANDUM OF SETTLEMENT is made this 6th day of January, 1976, by
and between the BOARD OF TRUSTEES OF THE INTERNAL IMPROVEMENT TRUST FUND OF THE
STATE OF FLORIDA, hereinafter called the "Trustees," and COASTAL PETROLEUM
COMPANY, a corporation organized under the laws of Florida, hereinafter called
"Coastal."
WHEREAS, the Trustees and Coastal entered into modifications of Florida
State Drilling Leases 224-A, 224-B and 248 the 27th day of February, 1947. The
location of the areas contained within Drilling Leases 224-A and 224-B consist
primarily or Florida's offshore lands approximately from Naples to Apalachicola
in the Gulf of Mexico extending 10.36 statute miles from Florida's coastline,
including all bays, inlets and rivers flowing into the Gulf in this area. The
drilling area contained within Lease 248 consists of approximately two drilling
blocks consisting of all the water bottoms lying within the boundaries to Lake
Okeechobee and all the water bottoms lying within the boundaries of the
following lakes:
Istokpoga Hatchineha
Kissimmee Xxxxxx
Xxxxxx (part) Panasoffkee
Xxxxxx Xxxxx Apopka
Lochloosa St. Xxxxx River
The Leases require annual rental payments and mandatory drilling requirements.
WHEREAS, certain questions have been raised involving the legality of
said Xxxxxx and the validity of certain waivers or credits granted by Trustees,
to wit: whether Coastal has complied with the drilling requirements of the
Leases, and whether the Trustees can grant waivers of those drilling
requirements, and, as a result, litigation was commenced in the United States
District Court in and for the Southern District of Florida, by Coastal seeking a
declaration inter alia as to the validity of said Leases. On April 23, 1971, a
Final Judgment was entered declaring inter alia the above Leases to be valid and
existing. The Trustees then took an appeal to the United States Court of
Appeals, for the Fifth Circuit, from said Judgment, and said appeal is now
pending in the Florida Supreme Court as a result of a certification by the Fifth
Circuit; and
WHEREAS, the Trustees and Coastal now desire to enter into various
amendments and changes of the aforesaid Leases in such manner as amicably to
clarify the rights and responsibilities of the parties thereto, and to settle,
adjust and resolve the differences between them; and
WHEREAS, the Trustees have independently determined that said
amendments, changes and clarification will be in the best interest of the State
of Florida.
NOW, THEREFORE, the Trustees and Coastal do covenant and agree as
follows:
SECTION ONE
PURPOSE
The purpose of this agreement is a compromise between the parties for
the complete and final settlement of their claims, differences and causes of
action with respect to the dispute described below.
SECTION TWO
STATEMENT OF DISPUTE
The Trustees assert that a final judgment should be entered declaring
Florida State Drilling Lease 224-A, as modified; Florida State Drilling Lease
224-B, as modified, and Florida State Drilling Lease 248, as modified,
hereinafter referred to as The Leases, each of which leases is between the
Trustees and Coastal and dated February 27, 1947, invalid and void. An appeal
has been filed in the United States Fifth Circuit Court of Appeals by the
Trustees in the case styled Coastal Petroleum Company, a Florida Corporation,
Petitioner-Appellee, vs. Secretary of the Army of the United States of America,
et al., No. 712589, asserting such claim.
Coastal denies the invalidity and/or voidness of the said leases and
asks and asserts that the appeal should be denied.
The parties desire to reach a full and final compromise and settlement
of all matters and all causes of action arising out of the facts and claims as
set forth above.
SECTION THREE
GENERAL TERMS OF SETTLEMENT
In consideration of the mutual covenants set forth herein, the parties
agree as follows:
1. (A) Coastal agrees to reduce and surrender acreage and/or
economic interests in the said leases.
(B) Coastal agrees to have rental obligations of the said
leases continue on areas as to which it retains any interest.
(C) Coastal agrees to reduce its interest and have the areas
in which it retains any residual royalty interest released completely to the
Trustees at the end of 40 years from the date hereof. Coastal agrees to have the
areas in which it retains any right to explore and develop oil, gas and other
minerals released completely to the Trustees within 40 years from the date
hereof except that any operations producing oil, gas, or other minerals in
economically sustainable quantities at the end of such 40 years shall be
permitted to continue subject to the particular lease until such operations
cease.
(D) Coastal shall have no right to intervene in any land use
decisions within the areas leased other than as to the outermost three miles
retained by Coastal. Coastal's only rights as to areas other than the outer
three miles and Lake Okeechobee shall be the specified residual royalty on oil,
gas, and other minerals. The term "minerals," a used herein, shall not include -
among other things - sand gravel or unconsolidated seashells. Any use of
minerals other than oil or gas for a public purpose by the Trustees or any
government body so authorized by the Trustees may be made without Coastal's
approval and without payment of any compensation or royalties to Coastal.
2. (A) The parties agree that all claims, demands, rights and
causes of action that they have against each other with respect to the above-
described dispute are satisfied, discharged, and settled.
(B) The Trustees agree to terminate the pending appeal and
both parties agree to seek a consent decree based upon the terms hereof, but the
failure to obtain a consent decree shall not invalidate the effectiveness of
this settlement agreement.
(C) The parties agree that the first sentence of the first
paragraph of Article 13 of each of said leases shall be amended to read as
follows:
"The rights of either party hereunder may be assigned in whole or in part only
after written consent thereto from the Trustees is first obtained, which consent
shall not be unreasonably withheld, and the provision a hereof shall extend to
the successors and assigns of the parties hereto, but no change or division in
ownership of land rentals or royalties, however accomplished, shall operate to
enlarge or diminish the obligations or the rights of either party."
(D) The Trustees agree that drilling obligations under Leases
224-A, 224-B and 248 (as modified) shall be governed by Chapter 20680, Laws of
Florida, Acts of 1941, and that all further drilling requirements are hereby
waived.
(E) In enforcing its residual royalty rights in any leased
lands, Coastal shall not enter suit against third parties without first
notifying the Trustees and offering the Trustees the opportunity to participate
in such action. Should the Trustees decline to participate and should Coastal
nevertheless pursue litigation that results in a monetary recovery which
benefits the Trustees, the Trustees then shall share, pro rata, in the payment
of reasonable attorneys fees and court costs, but in no event shall the Trustees
be obligated for any fees and costs in excess of their monetary recovery from
such litigation.
SECTION FOUR
SPECIFIC PROVISIONS OF SURRENDER AND RELEASE
1. Coastal hereby surrenders and releases to the Trustees, pursuant to
Article 16 contained in each of said leases, an area three statute miles wide
beginning three statute miles landward from the three league Federal-State
boundary and extending the full length of leases 224-A and 224-B.
2. Coastal hereby reduces its interest in all other areas landward of
the three statute miles surrendered and released to the Trustees, and including
all inland areas except Lake Okeechobee. In these areas, Coastal shall retain
only a residual royalty of 6 1/4% on the wellhead value of oil and gas, payable
in cash or in kind at the option of Coastal; 25 cents per long ton on sulphur;
and 5% of production or of the market value of other minerals, and shall have no
other rights whatever except those of a residual royalty right owner.
3. The Trustees simultaneously hereby waive their right to any
royalties from Coastal under the terms of leases 224-A, 224-B and 248 from areas
described in Paragraph 2 above, and retain full royalty in all other areas
subject to said leases.
4. Coastal, recognizing that Lake Okeechobee presents special problems
for preservation of its integrity as a fresh water reservoir vital to southern
Florida, agrees that no exploration or development drilling or mining of any
kind whatsoever shall be conducted thereon without the prior approval of the
Trustees.
5. The current annual rental on Leases 224-A and 224-B now totals
$49,614.40. The new annual rental on Leases 224-A and 224-B shall be $39,261,
reflecting the reduction of lands leased. The annual rental requirement on Lease
248 shall remain the same, to-wit: $19,985.92.
6. Coastal shall secure permits from all appropriate State
environmental protection agencies in compliance with the then existing laws and
regulations, prior to any drilling or mining.
In all other respects, other than the amendments related herein, the
provisions of the leases remain in full force and effect.
IN WITNESS WHEREOF, the BOARD OF TRUSTEES OF THE INTERNAL IMPROVEMENT
TRUST FUND OP THE STATE OF FLORIDA, the Lessor, have hereunto subscribed their
names and have caused the seal of the State of Florida to be hereunto affixed,
and COASTAL PETROLEUM COMPANY, the Lessee, has caused this instrument to be
executed in its name by its President, and its corporate seal to be affixed,
attested by its Assistant Secretary, as of the date aforesaid.
/s/ Xxxxxx O'X Xxxxx
Governor
/s/ Xxxxx X. Xxxxxxxx
Secretary of State
/s/ Xxxxxx X. Xxxxxx
Attorney General
/s/ Xxxxxx X. Xxxxx
Comptroller
/s/ Xxxxxx X. Xxxxxx
State Treasurer
/s/ Xxxxx Xxxxxx
Commissioner of Agriculture
/s/ Xxxxx X. Xxxxxxxxxx
Commissioner of Education
ACTING AND COMPOSING THE BOARD
OF TRUSTEES OF THE INTERNAL
IMPROVEMENT TRUST FUND OF THE
STATE OF FLORIDA
LESSOR
COASTAL PETROLEUM COMPANY
By /s/ Xxxxxxxx X. Xxxxx
President
LESSEE
ATTEST:
/s/ Xxxxxx X. Xxxxxxx
Executive Director
DEPARTMENT OF NATURAL RESOURCES
ATTEST:
/s/ X. Xxxx Xxxxxxxx
Assistant Secretary
Approved as to form and legal sufficiency.
XXXXXX X. XXXXXX
ATTORNEY GENERAL
By: /s/ X. Xxxxxxxx Xxxxxx
Assistant Attorney General
