Exxon beat the case once before, but they’re going to have to fight it all over again:
By JOHN McFARLAND, Associated Press Writer
DALLAS (AP) — A pair of elected officials in Texas is going after Exxon Mobil, a name synonymous with the state, for allegedly stuffing abandoned oil wells with piles of junk, sludge and tools so other companies could not drill in the same places.
The Texas Supreme Court recently reversed a jury’s finding that the world’s largest publicly traded oil company intentionally wrecked the wells nearly 20 years ago.
The state land commissioner and comptroller, however, don’t want Texas to drop the case.
“They sabotaged the wells,” said Land Commissioner Jerry Patterson, who began a campaign against Exxon in July. “If they’re allowed to get away with that, that puts the world on notice: They can do what they want. It’s bad public policy.”
State Comptroller Susan Combs filed a brief asking the supreme court to rehear the case.
Texas is a huge beneficiary of Exxon’s success in the oil patch. The company says it paid nearly $900 million in taxes and royalties to the state in 2008 and has more than 38,000 employees and retirees living in Texas.
But Combs says future revenue from other energy companies could be endangered if they fear wells are being damaged.
Irving-based Exxon Mobil said it followed standard procedures and denies any sabotage at sites outside of Corpus Christi.
“The allegations are groundless and paint a false and misleading picture,” Exxon Mobil spokeswoman Margaret Ross said.
The Texas Railroad Commission, which regulates the oil and gas industry, said it’s reviewing Patterson’s request and will rule soon.
According to state laws governing oilfield procedures, Patterson said, fines against Exxon could reach into the millions of dollars.
The case stems from a dispute between Exxon and land owners over royalties paid for decreasingly productive wells, according to court documents. Negotiations broke down in 1989, and two years later Exxon had plugged the last of the wells.
Smaller drilling companies routinely follow major producers and reopen oil wells that have been plugged after signing new leases with the land owners.
Usually the metal casings near the surface are removed when a well is abandoned. Cement plugs are then inserted to close off the hole.
But when workers with the much smaller company Emerald Oil & Gas tried to re-enter sites in 1994, they found numerous obstructions, including a tool known used to break up well casings that was still loaded with explosives, upside down drill bits, other random tools, steel debris and the gooey remnants of oil tank bottoms, according to lawyers and court records.
“There’s only one reason to do that, and that’s to make it hard if not impossible to re-enter the well,” Patterson said.
Emerald and the landowners sued, and jurors found Exxon guilty in 1999 of waste, negligence, misrepresentation, breach of lease and fraud. Exxon was ordered to pay $18.6 million. An appeals court agreed, but the supreme court overturned all but the fraud charges in March, finding that, not only did Emerald not have proper legal standing in the case because the original lease was between Exxon and the land owners, but the statute of limitations had expired.
The fraud case relating to documents that show how the wells were plugged has been sent back to a lower court.
Some energy experts have a hard time believing that a company like Exxon would maliciously damage wells.
“The public relations damage would cost more than to buy the whole well or the whole land,” said Fadel Gheit, an analyst with Oppenheimer & Co. “To me it doesn’t make any sense. I’m not saying Exxon’s perfect, but they have a procedure. You can’t just abandon a well in the middle of the night and run away.”
Exxon Mobil said the problem was Emerald’s inexperience in re-entering wells.
William Joseph, an attorney for Emerald and some land owners, said he’s never seen such extensive damage at a well in more than 30 years of energy law. He said the only possible reason a well would be plugged in such a way was to intentionally damage it.
Emerald tried to re-enter more than 30 wells, but many had to be abandoned, Joseph said.
“There was some production that occurred, but it was far less than was anticipated,” he said.
Both Patterson and Exxon have fired off terse letters to the Railroad Commission as the case progresses.
In one letter, Exxon said Patterson was “gravely misinformed” and said his comments before the commission were “rife with false statements, exaggerations, misrepresentations about court actions.”
This month, an Exxon attorney accused Patterson of grandstanding.
And Ross points out Exxon’s economic contributions to the state.
“Exxon Mobil’s investments in Texas contribute to the economic growth of the state and have a positive effect on local and state revenues,” Ross said.
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