State attorney asks for record verdict against Exxon Mobil
By Phillip Rawls

Date: November 13, 2003 12:00 AM
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An attorney asked a jury Wednesday to find that Exxon Mobil cheated the state out of natural gas royalties and return a record $9.3 billion verdict against the oil company.

“There is one language Exxon Mobil understands and understands real well – money,” state attorney Robert Cunningham told the jury at the end of a four-week trial.

Exxon Mobil attorneys said the company had followed its leases with the state for natural gas wells in state-owned waters along the Alabama coast and owes the state nothing.

“In the end what the state is asking you to do is change the deal,” company attorney Chris King said.

Closing arguments ended late Wednesday afternoon, and jury deliberations will begin today.

The state sued Exxon Mobil in 1999, contending the company had intentionally deducted too much in expenses for operating its natural gas wells along with Alabama coast and had defrauded the state out of millions in royalties.

A Montgomery jury in 2000 returned a record verdict of $3.5 billion – six times the state’s previous record – but it was overturned by the Alabama Supreme Court, which said the jury was wrongly allowed to see an internal memo. That prompted a new trial that began Oct. 20.

Cunningham said Alabama drafted a unique lease for oil companies drilling along the coast. He said the lease required oil companies to pay royalties on gross proceeds, but Exxon Mobil deducted expenses like it would have on traditional, industry-friendly leases for processing the natural gas.

Cunningham said the state had been shorted $63.6 million in royalties and that the loss could have climbed to as much as $930 million over the 30-year life of the natural gas field in Mobile Bay. He asked the jury return a verdict 10 times the potential loss, or $9.3 billion.

State attorney Jere Beasley said anything less than $4 billion “would be a clear victory for Exxon.”

Exxon Mobil’s attorneys said its interpretation of the lease followed memos from the state Conservation Department that said the company could deduct the “reasonable direct cost of manufacture and transportation.”

“There’s not one piece of paper where they say no deduction,” King said.

TIMELINE IN NATURAL GAS DISPUTE

The development of the state government’s natural gas royalty dispute with Exxon Mobil:

1981 - Exxon wins the bidding process for seven tracts in state-owned waters along the Alabama coast and pays the state $256 million for leases.

1984 - Exxon wins the bidding for 15 more tracts and pays the state $336 million for leases.

1990 - Exxon begins drilling along the Alabama coast.

1993 - Exxon begins production from wells along the coast.

1996 - The state conservation department audits Exxon to see if it is paying the state the correct amount of royalties from 13 successful wells.

1997 - The state conservation department says Exxon isn’t paying enough and demands more money, Exxon refuses.

1999 - State files suit accusing Exxon of fraud, Exxon and Mobil merge.

2000 - Montgomery jury returns a record $3.5 billion verdict against Exxon Mobil.

2002 - Alabama Supreme Court reverses the verdict because the jury was permitted to see an Exxon Mobil Internal legal memo.

2003 - Retrial held in Montgomery County Circuit Court.

 

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