STATE AGAIN SEEKING MULTI-BILLION DOLLAR VERDICT AGAINST EXXON
Oct 20, 2003
By PHILLIP RAWLS
Associated Press Writer
An attorney asked a jury Monday to return another record-setting multibillion-dollar
verdict against Exxon Mobil in its dispute with the state over natural
gas royalties.
A Montgomery jury in 2000 returned a record $3.5 billion verdict - 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.
The state and Exxon Mobil began a new trial Monday that is expected to
last about three weeks. Circuit Judge Tracy McCooey prohibited attorneys
from mentioning the first trial, but state attorney Robert Cunningham
made it clear in opening arguments he's hoping for a repeat.
Cunningham told the jury that Exxon Mobil cheated the state out of $102
million in natural gas royalties from wells drilled in state-owned waters
along the Alabama coast, and the cheating could have reached $1 billion
if it went undetected through the 30-year life of the wells.
He said the punishment should be severe. "We suggest to you that's
a multibillion-dollar verdict," he said.
Exxon Mobil attorney Sam Franklin said the oil company has been a good
corporate citizen, investing $2.2 billion in developing natural gas reserves
along the Alabama coast and paying more than $1 billion to the state in
leasing fees, royalties and severance taxes.
"Prestige-wise, the Mobile Bay project has been one of the best things
to happen to Alabama," he said.
Franklin accused the state of "over reaching" on its lease agreement
with the state to try to get extra money.
At issue are 13 natural gas wells that Exxon drilled along the Alabama
coast before its 1999 merger with Mobil.
The state and Exxon Mobil disagree about whether the oil company:
-should pay royalties to the state based on the natural gas as it comes
out of the wells or after it has been treated and become more valuable.
-can deduct some of the expenses of collecting and processing the natural
gas before it pays royalties.
-intentionally hid what it was doing or was open with the state.
Cunningham said the state initially believed Exxon Mobil was going to
be a good partner in the development of the state's natural gas resources,
but then learned differently when it audited the oil company's books.
"This was 10 years before Enron, WorldCom and HealthSouth. The state
thought a deal was a deal," he said.
"Don't be tricked like that. This is not a case about accounting
fraud," Franklin told the jury.
The trial is being conducted as the state goes through a financial crisis
that has resulted in more than 400 court employees being laid off, including
some in the Montgomery County Courthouse where the trial is being held.
The judge has prohibited both sides from mentioning the state's financial
situation during the proceedings.
The trial is being held in a tiny courtroom filled with high-tech equipment,
including computers and a large screen that attorneys used Monday to explain
to the inland jury how the natural gas industry operates 170 miles away
on the Alabama coast.
The jury saw pictures of natural gas platforms along Alabama's coast,
charts about how natural gas is gathered and treated, and an explanation
of how natural gas is used in industries and homes.