» 2014 » January

Exxon Seeks to End Oil and Gas Royalty Dispute

Exxon Mobil Corporation has filed a brief asking the Texas Supreme Court to reject a new trial for a group of oil and gas royalty owners who say that the company gave them false information regarding the performance of their wells. According to the potential plaintiffs, that information allegedly induced them to take a disadvantageous deal with another company.

The royalty owners claim that Exxon misrepresented the facts regarding the productivity of their wells in an attempt to negotiate a different royalty rate. After the royalty owners refused to accept less than a 50 percent rate, Exxon terminated the drilling contracts. Later, the owners negotiated a separate deal with a different company for a 30 percent royalty rate. The leaseholders claim that their reliance on alleged misrepresentations by Exxon led them to accept a bad deal.

Exxon’s brief to the Texas Supreme Court claims that the owners could not have relied on Exxon’s statements because they “distrusted everything” the company said. Instead, the owners conducted an investigation of their own which led them to reject Exxon’s offer of a lower royalty rate, according to the company’s brief.

The original dispute began in 1996, when the royalty owners sued Exxon, claiming the company had sabotaged Refugio County wells to create the appearance of reduced productivity in an attempt to negotiate more advantageous lease terms. The owners won a $21 million verdict on breach of contract and waste claims, but the fraud claim was dismissed before trial.

The Texas Supreme Court later reversed the breach of contract and waste verdict, but remanded the fraud claims to a lower appeals court, which found that they were improperly dismissed and granted a new trial. Exxon is now asking the high court to step in again and reverse the order for a new trial.

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