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SHELL SETTLES WITH ALABAMA

Mar 22, 2002

Platts Oilgram News
Vol. 80, No. 56
Beth Evans

Shell Oil said Mar 21 it reached an "amicable" $33.5-mil settlement with the state of Alabama over royalties on natural gas produced in Mobile Bay.

Shell said in a statement it will pay the state $27.12-mil. The company, denying any wrongdoing, will also pay some $6.38-mil in fees and costs to Alabama's outside counsel.

Alabama had alleged $25.4-mil in actual damages through the end of 1999. The settlement covered those claims as well as the additional two-plus years through March 2002.

"Shell and the state have been working for a number of years to resolve their differences regarding interpretation of certain mineral lease provisions. Even before the settlement, Shell already had paid the state over $170-mil in royalties since 1991," Shell said.

The win against Shell is the latest in a string of oil company royalty wranglings for lawyers at Cunningham, Bounds, Yance, Crowder & Brown.

The firm, representing Alabama, still has two royalty lawsuits pending against pre-merger Mobil and pre-merger Amoco, according to partner Richard Dorman. Mobil damages are estimated at $21-mil. There was no estimate for Amoco damages. The suits could be settled over the next year, said Dorman.

The firm represented Alabama two years ago when a jury found Exxon owed the state a whopping $87.7-mil in compensatory damages and $3.42-bil in punitive damages (ON 12/20/00). The case is on appeal before the Alabama Supreme Court.

The next case tried, against Hunt Oil, resulted in a December 2001 jury verdict in favor of the state for $3.4-mil in compensatory damages and $20-mil in punitive damages.

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