Exxon Sues Interior Department Over Canceled Gulf Leases

Exxon Mobil Corp. sued the U.S. Interior Department, asking a judge to set aside the agency’s decision to cancel offshore leases that may yield “billions of barrels of oil.”

The department overstepped its authority in a ruling on Gulf of Mexico leases for the so-called Julia Unit, Exxon Mobil said in a complaint filed Aug. 12 in federal court in Lake Charles, Louisiana. Statoil ASA, a partner of Exxon Mobil’s in the Julia fields, filed a similar lawsuit in the same court on Aug. 15.

“The Interior decision is arbitrary, capricious, an abuse of discretion, or otherwise contrary to law,” and “deprives Exxon Mobil of property without due process of law,” the Irving, Texas-based company said in its complaint.

Exxon Mobil, the world’s largest publicly traded oil company, said federal regulations allow oil producers to suspend production in their fields, partly “to facilitate proper development of a lease.” Because of drilling complexity, Exxon Mobil said, it asked for a suspension for Julia in 2008.

The Interior Department denied the request in 2009, stating that the company “had not demonstrated a commitment to production,” according to court papers. Unsuccessful appeals followed.

The Interior Department is reviewing the Exxon Mobil complaint, Melissa Schwartz, spokeswoman for the department’s Bureau of Ocean Energy Management, Regulation and Enforcement, said in an e-mailed statement.

‘Safe Development’

“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,” Schwartz said. The government must respond to the Exxon suit within 60 days of receiving the Aug. 15 summons, according to a court filing.

The lawsuits were reported earlier by the Wall Street Journal.

Analysts Fadel Gheit at Oppenheimer & Co. in New York and Brian Youngberg at Edward Jones in St. Louis said they ultimately expect Exxon Mobil to reach an agreement with the government to keep the leases. Both said they hadn’t heard of the Julia discovery before the lawsuit.

“Exxon’s not just going to walk away from it,” said Gheit, who rates the shares “outperform” and owns an undisclosed number of them.

Shares Drop

Exxon Mobil fell $3.24, or 4.4 percent, to $70.92 at 2:49 p.m. in New York Stock Exchange composite trading as crude oil slumped the most in a week after Morgan Stanley and Deutsche Bank AG cut their forecasts for global economic expansion. Statoil’s American depositary receipts, each representing one ordinary share, declined $1.68, or 7 percent, to $22.40.

Wyn Hornbuckle, a U.S. Justice Department spokesman, declined to comment on the dispute. Jonathan A. Hunter, lead attorney on the suit for Exxon, couldn’t immediately be reached for comment.

President Barack Obama stopped deep-water oil and natural-gas drilling early last year after a BP Plc well blew out off the Louisiana coast, claiming 11 lives and causing the largest U.S. oil spill. Interior Secretary Ken Salazar lifted the ban in October.

Exxon alleges that the Interior Department terminated the Julia leases to gain new leases and make more money.

“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,” Exxon said in court papers.

If the agency’s decision stands, Exxon Mobil and Statoil will “lose the enormous value of those leases and their hundreds of millions of dollars in investments,” Statoil said in its complaint.

Ola Morten Aanestad, a spokesman for Stavanger, Norway-based Statoil, had no immediate comment on the complaints.

The case is Exxon Mobil Corp. v. Kenneth Salazar, 11CV1474, U.S. District Court, Western District of Louisiana (Lake Charles).

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