Exxon sabotage may merit $1 billion fine, agency says

By Joe Carroll, Bloomberg

17 Jul, 2009

Exxon Mobil Corp., the largest U.S. oil company, may be fined more than $1 billion for “malicious” sabotage of wells to prevent other producers from tapping fields it no longer wanted, the Texas General Land Office said.

Jerry Patterson, commissioner of the land office that oversees oil leases that help fund Texas schools, asked the Texas Railroad Commission to conduct hearings into an alleged 1990s program at Exxon Mobil of plugging abandoned wells with trash, sludge, explosives and cement plugs. The barriers made it impossible for other producers to revive the wells, Patterson said in a statement he gave to Bloomberg News yesterday.

Under Railroad Commission rules, Exxon Mobil could face fines of $10,000 a day per well, Patterson said in the statement, which he plans to release on July 20. He said those penalties could add up to more than $1 billion on wells the company abandoned in 1991 after a disagreement over royalties with the owners, the O’Connor family, a Texas oil dynasty.

“The allegations paint a false and misleading picture of Exxon Mobil’s involvement in the O’Connor oil and gas leases,” said Margaret Ross, an Exxon Mobil spokeswoman. “The area in which the wells are located has a water table very close to the surface. It was critical that Exxon protect the groundwater by plugging the wells solidly and thoroughly.”

In March, the Texas Supreme Court dismissed lawsuits against Irving, Texas-based Exxon Mobil for damaging the wells, ruling that too much time had passed. O’Connor heirs and Emerald Oil & Gas Co., which took over some of the former Exxon Mobil leases, were plaintiffs in the suits.

‘Flagrant Violations’ Alleged

“Exxon committed irrefutable, intentional and flagrant violations of state rules regulating the oilfield,” Patterson said in the statement. “The senseless waste of our natural resources, the sabotage of a producing oilfield and cover-up by Exxon is a malicious act that must be dealt with by the state of Texas.”

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