Texas Supreme Court Agrees to Rehear Exxon Abandoned Wells Case

November 23, 2009

The Texas Supreme Court says it will again hear arguments in the nearly 15-year legal battle over accusations that Exxon Mobil Corp. loaded abandoned wells with junk, sludge and even explosives to keep other companies from drilling there.

A small drilling company that tried to enter the wells near Corpus Christi, and the land owners, accused the world’s largest publicly traded oil company of intentionally wrecking the wells.

The plaintiffs won at trial in 1999, but the Texas Supreme Court reversed the finding in March. That ruling from the state’s highest civil court sparked a campaign to rehear the case led by the Texas land commissioner and state comptroller.

“At least I think that the Supreme Court recognized that they probably didn’t rule the way they should’ve,” said Glenn Lynch, former Emerald Oil & Gas president who says his company has lost millions fighting Exxon. “What I’d like to see them do is make it right. That’s all we really ever asked them.”

Irving-based Exxon Mobil says it plugged the wells properly to protect the groundwater supply.

“We look forward to restating our arguments to the court,” spokesman David Eglinton said in an e-mailed statement.

Osler McCarthy, a spokesman for the Texas Supreme Court, said no date has been set for a hearing. A deadline next week would have made the March ruling for Exxon final.

The fight began in the late 1980s after the well-known O’Connor family of South Texas and Exxon failed to renegotiate royalty rates for decreasingly productive wells. After Exxon plugged the wells and left, Emerald tried to re-enter several in 1994. Smaller drilling companies routinely reopen plugged wells after signing new leases with the landowners.

But in Emerald’s case, the company says, efforts to re-enter more than 30 wells were blocked by numerous obstructions. Among them were a tool known used to break up well casings that still was loaded with explosives, upside down drill bits and steel debris, according to lawyers and court records.

There are strict state requirements for plugging the wells. Land Commissioner Jerry Patterson has asked the Texas Railroad Commission, which regulates the oil and gas industry, to levy fines on Exxon Mobil that could reach well into the millions of dollars for improper procedures. A spokeswoman for the commission said no decision has been made on his request.

In defending its plugging procedures, Exxon Mobil alleged the real problem was Emerald’s inexperience in re-entering wells.

Both Patterson and Comptroller Susan Combs have said important future state revenue could be endangered if companies fear wells are allowed to be damaged in Texas. Royalties for drilling on public lands go to the permanent fund, which funds programs at the Texas A&M and the University of Texas systems.

In the state supreme court’s ruling this year, justices said Emerald did not have proper legal standing because the original lease was between Exxon and the land owners. The court also said the statute of limitations had expired.

William Joseph, an attorney for Emerald and some landowners, says a rehearing is crucial because the case could set a troubling precedent for oil companies.

“That gives me some optimism that they’ll agree to reconsider some of the errors of law out there,” Joseph said. “If, by the way, my clients happen to come out of this with something other than bruises, that’ll be an extra bonus.”

The fight pits Exxon against the state that benefits greatly from the massive company’s Texas presence. Exxon 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.

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