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SHELL REACHES SETTLEMENT IN LAWSUIT BY ALABAMA

Mar 21, 2002

Houston Chronicle
Business
Bloomberg News

Mobile, Ala. - Royal Dutch/Shell Group paid $33.5 million to settle a lawsuit filed by the state of Alabama claiming more royalties from natural gas Shell produced in state waters, a lawyer representing Alabama said Wednesday.

Shell Oil, a Houston-based Shell U.S. unit, was sued in June 1999 for underpaying royalties as far back as 1991 for gas from Mobile Bay, said Richard Dorman of Cunningham, Bounds, Yance, Crowder & Brown. Alabama got $27.1 million under the settlement. The remaining $6.4 million went for attorney fees and expenses.

"Shell and the state have been working for a number of years to resolve their differences on certain mineral lease provisions," Shell Oil said in a statement. The company denied any wrongdoing.

Shell was among five oil companies sued by Alabama over royalties for natural gas produced in the shallow waters off the state's coast. Juries ruled against Exxon Mobil Corp. and Hunt Petroleum Corp. A second case against Exxon Mobil and one against BP are still pending.

"This is good news in these tough financial times," Alabama Gov. Don Siegelman said in a statement.

Before the settlement, Shell had paid Alabama more than $170 million in royalties since 1991, the company said. Royal Dutch/Shell is the world's second-biggest publicly traded oil company behind Exxon Mobil.

An Alabama jury in December 2000 ordered Exxon Mobil to pay $3.5 billion, including damages, for underpayment of royalties from gas wells in state waters. The Irving-based company is appealing, and the case is before the Alabama Supreme Court.

Last year, an Alabama jury ordered Hunt Petroleum Corp. to pay $24.5 million for underpayment of gas royalties.

Additional lawsuits are pending against Exxon Mobil for royalties of Mobil Corp. before its purchase by Exxon and against BP for production by Amoco Corp., Dorman said.

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