ExxonMobil Response Statement to State of Texas Lawsuit; Has Litigation Replaced Negotiation...

Business Editors

IRVING, Texas--(BUSINESS WIRE)--Jan. 4, 2001

ExxonMobil (NYSE:XOM) has not had the opportunity to do a detailed review of the lawsuit that was filed today by the State of Texas related to the Hawkins Field located in the southeastern tip of Wood County, Texas.

The facts are that ExxonMobil and the State had very brief communications back in 1996 about a possible issue related to the Hawkins Field. At that time, we fully explained our view of the applicable facts in a letter to the Attorney General's office but we did not receive any response. Today, almost five years later, we received notice that a lawsuit seeking punitive damages was being filed and that a press conference was being held this afternoon. It appears that we must now add officials of the State of Texas to the growing list of litigious public officials more interested in headlines than meaningful resolution to business matters.

In 1996 and continuing to the present time, our company has always been willing to openly discuss this matter with the State and at no time indicated otherwise.

Regarding the Attorney General's claims to unpaid royalties, the State Highway Department's policy (from 1975 through to the mid-1980s) was to refrain from any leasing of mineral interests under highway rights-of-way. In 1985, a statute was passed by the legislature authorizing the State to lease highway rights-of-way but the statute excluded all existing rights-of-way within 2,500 feet of producing wells on January 1, 1985.

In 1996, ExxonMobil examined the location of State Highway 80 relative to adjacent wells and determined that the State's rights-of-way are within 2,500 feet of producing wells and, therefore, exempt under the claims of the new statute. As we said, our position on this issue was communicated in a letter to the State at that time. No response to this communication was ever received. Furthermore, we are not aware of any producing wells that are located under the state highway tract.

While we have just received a copy of this lawsuit, it appears that the State of Texas has also chosen to bring a suit over the unitization of the Hawkins Field with regard to facts that were apparent to the State 25 years ago.

The Hawkins Field was discovered in 1940. The State of Texas approved the plan of unitization effective in 1975 to increase oil production through secondary recovery operations. This increased production brought substantial additional revenue to the State. The unit map filed during the unitization clearly showed Highway 80 traversing the Hawkins Field Unit. It was apparent in 1975 to anyone driving on Highway 80 near Hawkins that the highway was in the middle of an oil field. For the State of Texas to claim 25 years later that it was not aware of the unitization is unfathomable; the State approved it. To ask for punitive damages, while apparently fashionable, is ridiculous and illogical.

ExxonMobil will vigorously defend this matter because we believe the State's claims are groundless.