House lawyer: CPA lease accord with oil companies should be investigated

The Commonwealth Ports Authority’s lease agreements with two oil companies may be unconstitutional and should be further investigated, according to the legal counsel of the House of Representatives.

House legal counsel Ian Cattlett’s opinion backed a resolution calling upon the Governor’s Office and the Office of the Attorney General to review and terminate CPA’s lease agreements with Mobil Oil Mariana Islands and Shell Marianas.

“The matter should be further investigated for a potential conflict with constitutional provisions regarding the disposition of public lands in the CNMI,” he said.

In a six-page legal opinion, Cattlett noted that there was a discrepancy between the CNMI Constitution and CPA’s enabling statute with regard to CPA’s leasing out of property.

The Constitution authorizes no other agency but the Marianas Public Land Corp.—or its successors—to dispose of public lands. It also sets a lease term limit of 25 years.

Public Law 2-48, on the other hand, allows CPA to “enter into contracts, leases, and other arrangements with person for terms not exceeding 40 years.”

Cattlett maintained that any statute that is in conflict with the Constitution is void.

He also noted that MPLC, in transferring certain public lands in the Saipan seaport area to CPA, specified that the property should be used for improving air and sea transportation. MPLC’s indenture agreement with CPA did not give the authority the right to lease to private parties such as Mobil and Shell.

“In executing the leases with Mobil and Shell, CPA may well have been acting ultra vires, i.e. beyond its legal authority, and in conflict with the CNMI Constitution,” Cattlett said.

“Perhaps the most glaring problems with CPA’s actions in entering the leases is that CPA violated the intent of the MPLC indenture which was to ‘solely’ provide for ‘sea transportation’ in the best interests of the people of the Commonwealth. Rather than promote this public purpose, CPA opted to lease the parcels to private companies engaged in private businesses in the Commonwealth,” he added.

Cattlett also said that a court could determine whether the unconstitutional terms would render the whole or only part of the lease agreements invalid.

If the court found that only portions of the agreements were invalid, then Shell would be in a slightly better position than Mobil, the House legal counsel said.

Shell’s contract has a severability clause allowing the court to strike only the part of the lease that violates the law and then preserve the remaining terms. Mobil’s lease does contain a severability clause.

“In any case, the provision of P.L. 2-48 permitting leases for up to 40 years cannot be read consistently with Article XI [of the Constitution] with regard to public lands. For all of these reasons, the validity of the leases to Mobil and Shell is in substantial doubt,” Cattlett said.

In a unanimous vote, lawmakers recently adopted House Resolution 15-35 requesting the governor and the attorney general to look into and terminate CPA’s leases with Mobil and Shell.

H.R. 15-35, authored by Reps. Arnold I. Palacios and Stanley T. Torres, states that the lease agreements violate a constitutional provision that a leasehold interest in public lands should not exceed 25 years including renewal rights. An extension of up to 15 years may be given upon the approval by three-fourths of the members of the Legislature.

Executed on Jan. 1, 1997, CPA’s lease agreement with Mobil is for a term of 25 years with an option for Mobil to unilaterally extend the lease for an additional 15 years.

Signed on May 6, 2004, Shell’s lease is for a term of 10 years with an option for Shell to unilaterally extend the lease for additional three terms of 10 years each, for a total of 40 years.