Exxon sues government over control of major Gulf of Mexico oil discovery

Exxon Mobil Corp. and the federal government are fighting over one of the largest oil discoveries in the Gulf of Mexico, which could yield billions of dollars of crude in coming years, according to a report in The Wall Street Journal. The Julia oil field, about 250 miles southwest of New Orleans, may hold more than 700 million barrels of oil and gas equivalent. Exxon, which announced the discovery in June, wants to tap that field. But the Interior Department says Exxon’s leases have expired and the company hasn’t met requirements for an extension. Exxon and part-owner Statoil have filed separate lawsuits in a Louisiana federal court to preserve the leases. Exxon spokesman Patrick McGinn told the Journal the government traditionally grants extensions as a matter of course. The government’s refusal “was unexpected,” he says. Tens of billions of dollars are at stake. The oil could revert back to the federal government if Exxon and Statoil don’t win in court. And if the Interior Department takes back those leases, it would delay the development of those fields and hold up the tax royalties that come with them. At current prices, potential royalties paid to the government over the lifetime of a 1 billion-barrel field would be about $10.95 billion, the Journal said. The dispute over the Julia field began in October 2008, when Exxon applied to extend its lease. By February 2009 the government denied Exxon’s request, saying that the company didn’t present a specific plan to produce the oil.