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FIRM WINS THIRD STRAIGHT OIL CASE FOR STATE

Mar 20, 2002

By GARY McELROY and JEFF AMY
Staff Reporters - Mobile Register

Shell Oil Co. wired more than $27 million to the state of Alabama on Tuesday, following months of settlement negotiations over natural gas royalties the state believed it was owed.

Altogether, the package of payments sent east from Houston amounted to $35,500,000.

That money included $27,119,091.59 sent to the state and another $6,380,908.41 sent to the Dauphin Street offices of the Mobile law firm of Cunningham, Bounds, Yance, Crowder and Brown.

The firm, for a 14 percent contingency fee, has represented Alabama in its ongoing legal battles with Shell and other oil giants in recent years.

In December 2000, the firm won for the state a $3.5 billion jury award against the Exxon Mobil Corp. following a Montgomery trial. The bulk of that money -- $3.42 billion -- was meant to punish the company for knowingly deceiving the state in Exxon's offshore royalty obligations.

That award is awaiting appeal before the Alabama Supreme Court.

"This is good news for the State of Alabama in these tough financial times," Gov. Don Siegelman said of the settlement in a prepared statement Tuesday. "I am pleased to report that Shell negotiated in good faith in resolving this important matter."

Firm partners stressed that $1,690,908.41 of their paycheck will be used to replace expenses the firm spent while taking on Shell.

The settlement marks the third win in a row for the firm against oil companies on behalf of the state. A year after the Exxon case, the firm won a jury award against the Hunt Petroleum Corp. for $24.5 million.

Alabama claimed that Hunt, like other oil companies, fraudulently withheld proceeds from its Gulf Coast drilling operations owed to the state. That case, too, is on appeal.

Richard Dorman, who along with partners John Crowder and Robert Cunningham Jr. were the law firm's lead attorneys in the state's quest for just royalties, said Tuesday that negotiations with Shell extended over more than two months and ended with a handshake March 5.

Crowder said Siegelman and Attorney General Bill Pryor participated in the negotiations with Shell.

Dorman said that of the $27 million-plus that went to the state, about half was recognized as compensatory payments and half punitive.

The settlement is just over the $25.4 million the state first claimed was owed in unpaid fees by 1999. Firm attorneys said Shell owed Alabama the second-largest amount, behind Exxon.

Siegelman spokesman Rip Andrews said the money from Shell that was labeled compensatory would go into a nearly $2 billion state savings account where gas royalties usually go, called the Alabama Trust Fund. The other half, Andrews said, labeled punitive, will be available for spending on the current $1.21 billion General Fund budget.

Cunningham said similar negotiations had been attempted with Exxon officials "both before the trial and after," without success.

He compared negotiating with Exxon and then Shell to negotiating with "Saddam Hussein and (then) Mahatma Gandhi."

"Shell, unlike Exxon, had the good common sense to sit down and negotiate like reasonable people," Cunningham said. "It's why we were able to settle the case."

Siegelman said he hoped Shell's "cooperative nature will send a positive message to other companies and individuals who do business with the state that those who act in good faith with the state will be treated in good faith by the state."

No one from the Birmingham law firm of Maynard, Cooper and Gale, who represented Shell, or from the company itself, was available for comment on Tuesday.

Crowder said, however, that "Shell's position is today and always will be that they didn't owe anything and that they settled the disputed claim in the best interest of the state and Shell."

Cunningham said he and his firm went into the Shell negotiations armed with the knowledge that "we already had the Exxon verdict under our belt. But unlike Exxon, they were willing to make reasonable concessions. And we reached a point where we simply could not risk taxpayers' money in the hope that we would get more."

With three down, there are two more oil and gas companies to go.

Dorman said Tuesday the state still intends to go after Mobil Corp., which is now merged with Exxon. Amoco, now merged with BP, is also in the state's crosshairs.

Dorman said Alabama will seek about $21 million from Mobil. What figure Alabama might claim from Amoco, Dorman said, has yet to be calculated.

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