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Wednesday, June 12, 2024 | Back issues
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Exxon Settles Offshore Case With USA

DALLAS (CN) - ExxonMobil settled its lawsuit against the United States for the government's decision to cancel offshore leases that may yield "billions of barrels of oil."

Exxon and Uncle Sam agreed to terms on Dec. 30 and the settlement was entered Friday at Lake Charles, La., Federal Court.

Exxon sued in August after the Department of the Interior canceled three of five leases in the offshore Julia unit.

"The settlement will allow ExxonMobil to develop this very large, but technically challenging resource as quickly as possible using a phased approach," Exxon spokesman Patrick McGinn said in an e-mail.

In its complaint, Exxon said it sought a suspension of its Julia leases in 2008 because of the complexity of the drilling. It cited federal regulations that allow oil producers to suspend production in their fields to "facilitate proper development of a lease."

The Department of the Interior denied the request in 2009, saying Exxon "had not demonstrated a commitment to production," according to court records. Unsuccessful appeals followed.

Under the settlement agreement, the Interior Department granted a suspension of production for the leases from Dec. 13, 2008, to Oct. 31, 2013, and will grant a second suspension until Aug. 31, 2014, if Exxon and Statoil ASA, a partner in the Julia fields, comply with the agreement and takes certain steps toward production.

According to court documents, Exxon and Statoil agree to pay a yearly fee on the original leases of $650 per acre until 87.5 million barrels of oil are produced from the fields, with the first fee owed for 2011.

McGinn told Bloomberg News that the initial phase of the project is expected to produce more than 175 million barrels of oil through six wells.

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