ExxonMobil has filed suit against the US Department of Interior over its denial of extensions of three leases in the ultra-deepwater Walker Ridge section of the Gulf of Mexico, documents show.
The company, which has a 50% interest in the leases along with Statoil, argues in the suit that the former Minerals Management Service improperly canceled the three ten-year leases after they had expired even though wells had been drilled and Exxon was acting on a plan to produce hydrocarbons from the leases.
In the lawsuit, filed August 12, the company said the area in the Gulf's Lower Tertiary, could contain "billions of barrels of oil in place."
The lawsuit argues that MMS, now known as the Bureau of Ocean Energy Management, Regulation and Enforcement, improperly applied its regulations for lease extensions, known as "suspension of production," in the case of the three Walker Ridge leases in a find that ExxonMobil dubbed "Julia."
The company says that MMS had granted hundreds of similar requests before denying ExxonMobil's.
The Julia find consists of three leases granted by MMS in 1998 and two leases granted in 2003. The 1998 leases were granted under the Royalty Relief Act, which waived the government's right to collect royalties on oil produced from the leases until a predetermined production level was reached. The act was designed to encourage costly and risky development activities in the Gulf's deepest areas.
ExxonMobil said it drilled two wells at a cost of hundreds of millions of dollars. Since the fields were far from any existing pipelines or production facilities, ExxonMobil was negotiating with Chevron to tie the Julia wells into a facility Chevron was planning for its Jack and St. Malo finds, also in the Walker Ridge.
ExxonMobil asked for lease extensions, saying that its plans to tie back the wells to the Chevron facility qualified as a "commitment to production" required by MMS under its rules for an extension.
But the MMS denied the application, saying that ExxonMobil did not own the Chevron facility and had no control over it.
In its suit, ExxonMobil argues that Interior stands to reap billions of dollars by canceling the leases and reselling them to another company.
"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," BOEM spokeswoman Melissa Schwartz said. "We are reviewing the complaint in accordance with standard procedures."
