Exxon Goes Head-to-Head with U.S. Government

Written By Brianna Panzica

Posted August 18, 2011

Exxon Mobil Corp (NYSE: XOM) has filed a lawsuit against the U.S. government.

Exxon Mobil once held five leases for the Julia oil field, located about 250 miles southwest of New Orleans.  But the government has failed to extend three of those – the two remaining have not yet expired.

Exxon believes that billions of oil could be extracted from that field. Their partner in the project, Statoil ASA (NYSE: STO), has also brought charges against the government.

In October 2008, Exxon had requested – and was denied – a suspension of production for the field, reported The Telegraph.

As Exxon related, federal law allows these types of suspensions so that the development of a field can be sure to proceed safely.

And when the leases expired in 2009, the government rejected them, determining that the company “lacked commitment” because of the request for suspension.

This was well before the 2010 oil spill from the BP rig blowout in the Gulf.

Exxon explained that the company had plans to drill between 3 and 6 wells and to work with Chevron Corp’s (NYSE: CVX) production facility, according to the Montreal Gazette.

But if the government’s decision holds, both Exxon and Statoil could lose millions worth of investments.

The ownership would return to the government, and the Department of Interior would then have the power to create new leases.

As Exxon court papers said:

“Cancellation of the original Julia leases would give Interior the opportunity to collect millions of dollars in bonuses and royalties that it otherwise would not be entitled to collect.”

They suspect the government of ulterior motives in denying lease extensions.

Exxon closed down 4.34% on Thursday at $70.94.  Statoil was also down 6.98% to $22.40.

That’s all for now,


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