Exxon Blew Rights to $50 Billion Oilfield,|Shareholders Say in Derivative Complaint

DALLAS (CN) - Shareholders say ExxonMobil's failure to develop a $50 billion oilfield for decades caused Alaska to revoke its rights to drill for 200 million barrels of oil on the North Slope. The derivative complaint claims that Alaska revoked the leases after more than four decades of "broken promises."

In a derivative complaint in Dallas County Court, Shirley Dragoone says that after decades of dithering, the Alaska Department of Natural Resources gave ExxonMobil an ultimatum: Either begin drilling under conditions acceptable to Alaska, or lose title to the land. She says ExxonMobil didn't drill and its leases were revoked.

ExxonMobil acquired leases in the oil-rich Point Thompson are on the North Slope in 1965. Exxon's competitors BP, Chevron and Conoco Philips also bought land in the area over the next two decades.

Oil leases typically run from 5 to 10 years, and the lessee agrees to develop the wells and pay the state royalties on its production, the complaint states.

"The essence of an oil and gas lease is timely production," Dragoone says. She claims that the fields at issue are believed to contain 200 million barrels of oil and 200 million barrels of "gas liquids."

"Oil and gas leases contain a commitment that the lessee will diligently explore and develop the property. When a lessee fails to fulfill this duty, the lease is forfeited," the complaint states.

In 2008, Alaska's Department of Natural Resources terminated the leases because ExxonMobil continued to keep its "stranglehold" over the land without drilling, according to the complaint.

Then-Commissioner Tom Irwin wrote in his decision, "I cannot risk the continued delays in development of this valuable state resource."

Dragoone adds, "To this day, ExxonMobil has not committed to put the PTU [Point Thompson Unit] into commercial production."

Although the company never drilled there, ExxonMobil had explored the land sufficiently to know what oil and gas resources lay beneath the sands, the complaint states.

ExxonMobil drilled its first discovery well in 1977 in the Thompson Sand Reservoir and found that in contained "approximately 8 trillion cubic feet (TCF) of gas and over 200 million barrels (MMB) of recoverable gas," according to the complaint.

"The substantial damages to ExxonMobil, including millions of dollars in penalties, loss of PTU leases ... and extraordinary litigation expenses, all could have been avoided had the individual defendants complied with the DNR's original request."

She demands damages from ExxonMobil and nine of its executives, including CEO Rex Tillerson, for breach of fiduciary duty, waste of corporate assets and false statements in press releases misrepresenting the status of their proceedings with Alaskan officials in SEC filings and public press releases.

Dragoone is represented by Jeffrey Angelovich with Nix Patterson & Roach.

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