STATE ATTORNEY ASKS FOR $9.5 BILLION IN ROYALTY CASE
Nov 12, 2003
PHILLIP RAWLS
Associated Press
MONTGOMERY, Ala. - A state attorney asked a jury Wednesday to find that
Exxon Mobil Corp. cheated the state out of natural gas royalties and order
the oil company to pay $9.5 billion.
"There is one language Exxon Mobil understands and understands real
well - money," state attorney Robert Cunningham told the state court
jury at the end of a four-week trial.
Irving, Texas-based 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.
The state sued Exxon Mobil in 1999, contending the company had intentionally
deducted too much in expenses for operating its natural gas wells along
the Alabama coast and had defrauded the state out of millions in royalties.
A Montgomery jury in 2000 awarded the state $3.5 billion 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 $950 million over the
30-year life of the natural gas field in Mobile Bay. He asked the jury
to award the state 10 times the potential loss, or $9.5 billion.
Exxon'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.