Exxon Mobil battles over gulf oil field

Aug. 19, 2011 at 9:12 AM
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WASHINGTON, Aug. 19 (UPI) -- Exxon Mobil Corp. has filed a lawsuit against the U.S. government to reverse an Interior Department decision to cancel offshore oil and gas leases in the Gulf of Mexico.

Exxon Mobil, which has headquarters in Texas, is suing to retain three leases on drilling rights in what it calls the Julia Field, The Wall Street Journal reports. The Interior Department says the leases have expired and Exxon hasn't met requirements for lease extension. Two other leases are yet to expire.

The oil company said the area in question holds an estimated 1 billion barrels of recoverable oil.

Julia, considered one of the gulf's largest oil finds, is about 250 miles southwest of New Orleans.

Exxon Mobil has a 50 percent interest in the leases along with Norway's Statoil, which has also joined in suing the Interior Department.

Exxon Mobil's lawsuit says the government has granted "thousands" of extensions over time and that the government's denial of the extension relied on legal interpretations that it "had never before applied and had never before articulated."

Exxon Mobil spokesman Patrick McGinn maintains that such extensions were traditionally granted as a matter of course.

"You state your case and you got it," he told the Journal, noting that the government's refusal "was unexpected."

The extensions are "fairly common," says Elmer P. Danenberger III, a former federal official who oversaw U.S. offshore-drilling rules until his 2009 retirement.

"I can honestly say that people who manage that program are really strict, which they need to be or it will be abused," he said to the Journal. "If you don't have a commercial discovery and a plan for moving ahead at the end of the lease term … that's it."

In its suit, Exxon Mobil says the government stands to reap millions of dollars in bonuses and royalties by signing replacement leases.

The suit comes after more rigorous regulatory scrutiny of drilling activities following the April 2010 blowout of BP's Deepwater Horizon well in the Gulf.

"Our priority remains the safe development of the nation's offshore energy resources, which is why we continue to approve extensions that meet regulatory standards," a spokeswoman for the Interior Department said. "We are reviewing the complaint in accordance with standard procedures."

Tens of billions of dollars of oil could slip through Exxon Mobil's hands because the company failed to follow federal rules for getting a lease extension while it moved forward with plans to get the oil out of the ground, the Journal says.

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