Exxon Mobil filed a lawsuit against the U.S. government last week to retain expired leases for one of the largest discovered oil fields in company history. The company reports the field contains one billion barrels of oil and gas equivalent, and could be the largest discovery since BP’s Thunder Horse field in 1999.
Three of five leases for Julia Field, located 250 miles from Louisiana, expired in 2008. Exxon Mobil applied for an extension a month before the leases ran out, but the Department of the Interior denied the request in February 2009, as well as a series of subsequent appeals, citing a lack of commitment by the company to develop the field. According to government regulations a company needs to prove its commitment to producing oil in order to extend a lease.
The company applied for a suspension of production so they could tie their Julia wells to a production unit Chevron planned to build eight-miles away. Regulators denied the request because at the time Exxon and Chevron reached no formal agreement.
“The Interior decision is the first time that the Interior has determined that a ‘production facility’ will ‘facilitate development’ when the lessee owns the ‘production facility,’ but will not ‘facilitate development’ when the lessee does not own the ‘production facility,’” the complaint said.
An Interior department spokeswomen said, “Our priority remains the safe development of the nation’s offshore energy resources, which is why we continue to approve extensions that meet regulatory standards.”
Oil production in the Gulf has received more scrutiny since the Deepwater Horizon spill in 2010. An investigative report conducted by the Republic of Marshall Islands (the county Deepwater Horizon was flagged under) states a “deviation from the well abandonment plans submitted to and approved by the Minerals Management Service” contributed to the biggest oil spill in U.S. history.
If Exxon loses the court case, some officials say that the U.S. government stands to gain more royalties, which according to the Wall Street Journal could amount to almost 11 billion dollars over ten years.
In the complaint Exxon says “The interior decision is arbitrary, capricious, an abuse of discretion, or otherwise contrary to law.”
While three leases are being contested, two of the five leases for the field do not expire until 2013.
Exxon is the world’s largest publicly traded oil company, and in 2008 the company received $792.3 million in government contracts.
The court case is Exxon Mobil Corp v. Salazar et. al, U.S. District Court, Western District of Louisiana, No. 11-01474.