In other words, the applicants would be covered only if they would have been employed by Rowan to perform services necessary to the performance of a government contract, or if Rowan performed an obligation of the prime contractor pursuant to the lease.

    Rowan argues that the plain language of section 503 precludes coverage of OCS lessees and, a fortiori, of their subcontractors because it only covers "contract[s] for the procurement of personal property and nonpersonal services for the United States." 29 U.S.C. § 793(a). Because the government does not obtain personal property or receive nonpersonal services under the OCS leases, Rowan asserts these agreements are not covered contracts under section 503. Rowan also argues that because the leases themselves do not require the lessee to drill, the drilling services provided by Rowan are not "necessary to the performance of" a government contract. 41 C.F.R. § 60-741.2. Finally, Rowan relies on a recommended decision of an administrative law judge in another section 503 case for the proposition that OFCCP had no authority to conduct a compliance review here because no individual complaint was filed. We reject the latter argument at the outset. The Assistant Secretary for Employment Standards rejected that argument, among others, in OFCCP v. American Airlines, Case No. 94-OFC-9, Ass't. Sec'y. Dec. Apr. 26, 1996, slip op. at 25, and we deny this exception for the reasons set forth in that decision.

    After careful consideration of the Outer Continental Shelf Lands Act (OCSLA), its implementing regulations and a sample lease and other related documents, we have concluded on the basis of the record made in this case that drilling was not necessary to the performance of the offshore oil lease, or any extension or modification of that lease. We also find that drilling was not an obligation of any of the government contractors, the lessees of OCS leases. We do not agree with Rowan that a lease is not a government contract; as any other agency, we are bound by the Department of Labor regulations which include leases in the definition of government contracts, 41 C.F.R. § 60-1.3. But, as the Secretary held in OFCCP v. Loffland Brothers Co., Case No. OEO 75-1, Sec'y Dec. Apr. 16, 1984, slip op. at 7, "lessees [of federal oil and gas leases] have no obligation to perform any drilling on the leased land." Specifically with respect to oil and gas leases under the OCSLA, the Supreme Court made it clear that "the purchase of a lease entitles the purchaser only to priority over other interested parties in submitting for federal approval a plan for exploration, production, or development." Secretary of the Interior v. California, 464 U.S. 312, 336 (1984). Further, the court held that "the purchase of a lease entails no right to proceed with full exploration, development, or production" Id. at 338. Concomitantly, it follows that a lessee has no obligation to conduct drilling and that drilling is not necessary to the performance of the lease contract.

    OFCCP argues that, even if the lease itself does not require drilling, other documents submitted by the leaseholders in this case constitute either a modification of the lease or a new contract which requires drilling. Before the holder of an OCS lease explores for and removes oil and gas, it must submit an exploration plan, and a development and production plan,

for approval to the Secretary of the Interior. That submission is to include, among other things, "a schedule of anticipated exploration activities," 43 U.S.C. § 1340(c)(3)(A), and the "expected rate of development and production and a time schedule for performance . . . ." 43 U.S.C. § 1351(c)(5).

    However, the primary thrust of Department of the Interior regulations implementing the OCSLA is directed at protection of the environment and, to a lesser extent, protection of the infrastructure of affected adjacent states and of archeological and cultural resources in the leased area. See 30 C.F.R. §§ 250.33 and 34. We have found nothing in the regulations indicating that the lessee has an obligation to drill. The regulations only require that if drilling is conducted, it must meet protective standards. The regulations provide that "[w]henever the lessee . . . fails to comply with an approved [development and production] plan, the lease may be canceled [in accordance with certain provisions of the OCSLA and the regulations]." 30 C.F.R. § 250.34(r). If the lessee determines that drilling for exploration and development is not economically feasible, it can abandon its plan and suffer only cancellation of the lease. This is not sufficient to find that an OCSLA leaseholder has a contractual obligation to the government to perform drilling or that drilling is necessary to the performance of the lease.

    Finally, OFCCP asserts that, under a well accepted rule of oil and gas law, a lessee of oil and gas rights has "an implied covenant to develop the tract with reasonable diligence." Sauder v. Mid-Continent Petroleum Corp., 292 U.S. 272, 278 (1934). Such development would necessarily include drilling. However, OFCCP has not directed our attention to, nor have we discovered, any cases applying that principle to federal oil and gas leases. Where a statute, the OCSLA, and regulations, 30 C.F.R. Part 250, set forth extensive requirements for development of federally owned offshore oil and gas resources without clearly establishing such an obligation on the part of leaseholders, we are reluctant to import such an obligation derived from the law of private contracts.

    Thus we cannot conclude on the basis of the record presented that the leases in question effectuate coverage under Section 503 of the Rehabilitation Act of 1973 as written before the 1992 amendments to that Act. Accordingly, the complaint in this case is DISMISSED.

    SO ORDERED.

      DAVID A. O'BRIEN
      Chair

      KARL J. SANDSTROM
      Member

      JOYCE D. MILLER
      Alternate Member