Future Forum: Guilt, Innocence, and the Death Penalty 
Below the Surface
Since 1996, a legal battle has raged between ExxonMobil and a powerful South Texas ranching clan that believes the oil company sabotaged wells on the family property. Even after a ruling by the state Supreme Court earlier this year, the bitter feud shows no signs of letting up. Maybe that’s because it’s about something far more important than money.
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So even though the Supreme Court concluded in its opinion that “Exxon does not dispute that it plugged the wells using nonstandard plugging procedures,” which might “delay completion of the well and increase reentry expenses,” and even though the court further recognized that “Exxon knew the royalty owners had a continuing interest in further developing the O’Connor lease,” in March of this year, it found unanimously for Exxon—citing the statutes of limitations issue.
According to the court, the O’Connors’ September 1990 letter and Lynch’s June 1994 drilling report “unequivocally and conclusively establish that the royalty owners and Emerald knew or suspected there was damage to their interests in the O’Connor Lease in 1990 and 1994.” As small consolation, it agreed with the court of appeals that Emerald deserved a new trial on its fraud claims. “As soon as we got in there, it was clear they were going to rule for Exxon,” Morgan O’Connor said. “It was just a question of how they were going to do it.”
Emerald and the O’Connors were left with few options. Their attorneys filed motions for a rehearing, which, in a departure from the norm, used strong language as a last-ditch effort to shame the court into reconsidering its conclusion. (The motion said the opinion was “riddled with legal and factual errors and inconsistencies” and did not “embody the careful scholarship typical of the Court’s writings.”) In particular, the motions stressed that in order to follow the Supreme Court’s logic, one would have to believe that the royalty owners’ September 1990 letter was proof that they had “actual knowledge” that Exxon had damaged their wells. But Exxon didn’t even begin plugging the wells in question until weeks later. The court’s conclusion that the 1994 letter proves knowledge of damage is equally weak: This document is actually a short drilling report that does not indicate any concern about the condition of the wells. In its opinion, the court quoted this report as saying, “Exxon dumped junk in the wells.” In fact, the report simply states that the plaintiffs had “encountered junk in hole” on one particular well. In a field of 120 wells, such a discovery would be neither unusual nor a telltale sign of sabotage.
The court was also accused of ignoring its own precedent, particularly when it failed to acknowledge that under Texas law there is both physical and economic waste, “momentously yet silently upending a fundamental pillar of Texas oil-and-gas law,” as the motion for rehearing put it. In view of the statute of limitations issue, the court also ignored the terms of the lease. “Imagine the Lessors’ disbelief when the Court deprived them of the ‘stringent’ terms they had the remarkable judgment to negotiate,” noted the motion. But even if the court agreed to rehear the case, something it rarely did, it was unlikely to change its mind.
The case might have ended there if Jerry Patterson, the state land commissioner, hadn’t joined the fray. He had learned about the case when attorneys Hankinson and O’Neill had paid him a call and explained the broader implications of a ruling for Exxon. Such an outcome would have a profound impact on operators who wanted to reenter older wells, they told him. If oil companies could get away with filing false forms with the Railroad Commission, then potential operators wouldn’t be able to rely on public documents to determine the condition of old wells. In such a situation, why would anyone risk the investment? And if they wouldn’t risk the investment, the Texas treasury would lose revenue for the endowment funds, including those for public schools and the state’s two flagship universities.
Patterson decided that if the Supreme Court wouldn’t stand up to Exxon, the state should seek to fine the company through the Railroad Commission. There was a lot of cockeyed optimism in that idea: The Railroad Commission is a notoriously understaffed, overwhelmed, and inefficient state agency whose elected commissioners are traditionally sympathetic to the industry they are supposed to regulate. They are skittish about getting involved in controversies, particularly ones involving energy companies, their main source of campaign funds.
Nevertheless, in July Patterson asked the commission to hold “show cause” hearings so that Exxon could demonstrate why it “should not be penalized for irrefutable, intentional and flagrant violations of the Commission’s rules” in connection with its plugging of the O’Connors’ wells. “The Texas Supreme Court has, so far, given Exxon a ‘get out of jail free’ card,” he wrote. “The Railroad Commission should not be so generous.” By his calculations, according to commission rules, Exxon could be fined $10,000 a day for failing to properly plug a well and $1,000 a day for filing forms improperly. Adding up the number of wells and the number of forms, he determined that Exxon could theoretically owe the State of Texas about $1 billion, or 2.2 percent of its net income last year. “This is a big hickey,” Patterson told me, sounding very happy with himself.
A few weeks later Timothy George, who had been part of the legal team that had represented Exxon in the original trial in Refugio, responded to Patterson’s letter with a seven-page, single-spaced missive of his own that was basically a rehash of the arguments brought up at trial and in the appeal. He claimed that Patterson’s letter was “rife with false statements, exaggerations, misrepresentations about court actions in the referenced lawsuits and baseless allegations contradicted by the evidence.” He also suggested, as Exxon’s lawyers had at trial, that the wells had been plugged with cut casing left in the hole to better preserve the freshwater sands. Given the company’s previous environmental record in general, and on the O’Connors’ land specifically, this explanation was at best debatable.
Patterson shot back a response, stating, “The selected anthology of Exxon’s trial evidence provided with Mr. George’s letter is a far cry from the jury’s findings.” He further warned that if Exxon wasn’t held accountable, “the oil and gas industry in Texas will be on notice that the Railroad Commission’s rules and forms are . . . meaningless.” The commission did convene to consider holding a hearing, but nothing has yet come of it.
On a YouTube video of the session, Ratliff calls Patterson “a front man or shill” for the parties in the lawsuit and urges the commission to ignore the “grandstand play by an interloper who has no interest.” Ratliff disputes every one of Patterson’s allegations and argues that he is mischaracterizing the findings of the courts. In particular, he points out that the trial court did not specify in its finding that Exxon had filed fraudulent W3 forms with the commission. This is true, but the appeals court in its opinion stated that “Exxon made material misrepresentations on its W-3 reports regarding many of the wells at issue in this proceeding.”
And that is where we are today, more than eighteen years after Exxon abandoned Aunt Helen’s lease: The plaintiffs are waiting to hear if the Supreme Court will rehear the case, and Patterson is pushing to have the Railroad Commission hold hearings. Meanwhile, there’s still the fraud claim, which Lynch would have to take back to the initial trial court and start all over. If he has the stomach.
We may never know exactly what happened out on the Mary Ellen O’Connor field. It is entirely possible that a few disgruntled workers sabotaged the wells without any knowledge or assistance from their superiors at Exxon, and it’s also possible that the way the W3 forms were filled out had more to do with bureaucratic arrogance than nefarious intent. It’s also possible that, as the plaintiffs’ attorneys allege, Exxon knew that it could just move its operations to an adjacent field and drill into whatever oil remained from a common reservoir.
But if we cannot know the details, what we can know is that the public institutions that are supposed to protect Texans from the abuses of large corporations aren’t doing a very good job of it. Despite the supposed oversight of the state’s highest court and the responsible regulatory agency, the Railroad Commission, giant companies are now allowed to operate in parts of Texas the same way they have operated in some Third World countries: exploiting the resources and moving on, without looking back.
But T. Michael O’Connor is sanguine. With all his money, he could travel anywhere in the world but prefers to stay close to home, on the ranch his family has occupied for 175 years, riding his horses with the sun on his face and the roseate spoonbills and Mexican eagles flying overhead. At dusk the deer and the coyotes trot through the brush, as they have done on this land for millennia. T. Michael was elected sheriff of Victoria County in 2004, and these days he spends much of his time organizing South Texas’ sheriffs to fight the drug cartels, when he isn’t busy fighting the drought. Compared with those challenges, Exxon looks almost puny, which is one reason his family is going to keep pursuing their motion for a rehearing and joining Emerald’s fraud claim. Time and history, T. Michael hopes, will be on his side. “At least we can tell our children we weren’t quitters,” he said. “I’ll continue to champion what’s right. Exxon comes and goes, but the O’Connors are here to stay.”
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