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.

A month or so later, Lynch called the O’Connors for the meeting at 2J’s.

On July 15, 1996, Emerald Oil and Gas filed suit against Exxon under the state’s Natural Resources Code, which provides, “[A] party who owns an interest in property or production that may be damaged by another party violating the provisions of this chapter … or another law of this state prohibiting waste or a valid rule or order of the [Railroad] commission may sue for and recover damages and have any other relief to which he may be entitled …” By September the royalty owners had joined in. T. Michael and his sisters were the last to go along. He wanted to see the evidence for himself; at one point Lonnie Vickery had shone a light down a wellbore to show him what looked like an
upside-down drill bit. “We all agreed that the facts were there and we had to make it right,” T. Michael said. “Here was an unjust situation. We had to make it just.”

The trial started three years later, in October 1999, at the two-story, sand-colored courthouse in Refugio. It lasted three weeks. There was a great deal of coma-inducing testimony about the economic analysis of oil wells and the benefits and drawbacks of perforating versus cutting the casing when plugging. If the plaintiffs’ attorneys were concerned that the locals might have been prejudiced against the O’Connors for whatever reason—they did still own much of the town, for instance—they needn’t have worried. As the first witness, T. Michael made it clear that he was one of them; he sounded like them (like many residents of South Texas, T. Michael speaks English with a Tex-Mex lilt) and, except for the mustache, looked like them. The Exxon witnesses, in contrast, failed to keep their condescension in check, and some of the gambits to win over the locals fell flat. One of Exxon’s experts managed to mispronounce “Refugio.”

Except for three members of the O’Connor family, Glenn Lynch, and their experts, just about every witness for the plaintiffs was a current or former Exxon employee or contractor. Their testimony was devastating. Along with Vickery’s story of sabotage, the employee who did the economic analysis that led Exxon to plug the field revealed that the company had failed to exploit two specific zones, as specified by the lease. (This supported a breach of contract claim that was subsequently added to the lawsuit.) The same witness also revealed—and an Exxon attorney confirmed—that even at the time of trial, Exxon had not provided the O’Connors with all the documents they had requested, documents that the plaintiffs owned, according to the lease. A former Exxon contractor confessed to plugging a flowing gas well because, “When you worked for Exxon, you did as you were told.”

It seemed to the plaintiffs as if Exxon had fudged the numbers to make the field look more played out than it really was so that it could start plugging and get the hell out of there. An Exxon clerk admitted that though she had sworn to the truth of the W3 forms, she actually had no idea whether they were true or not. Though the evidence was skimpy, the plaintiffs’ lawyers suggested that Exxon had had enough of the Mary Ellen O’Connor royalty owners and simply planned to drain whatever oil and gas remained in the field from the wells they shared with Quintana on the Tom O’Connor lease next door.

Exxon countered that it had sabotaged no wells, nor had it lied to the Railroad Commission. It claimed to have plugged the wells properly, with its main concern being the protection of the groundwater, not the preservation of the wells. Exxon further argued that Lynch and the O’Connors had waited too long to file suit. The company’s lawyers pointed out that the statute of limitations, which would have begun to run when the O’Connors claimed to have acquired “actual knowledge” that their wells had been damaged, had expired by the time the suit was filed, in July 1996.

Thus, the case began to hinge on the question of when the O’Connors learned about the possible malfeasance. Exxon’s attorneys presented the letter of September 1990, in which the O’Connors had threatened to sue Exxon for waste. The plaintiffs argued that that letter had not involved Emerald and so was unrelated. Exxon also introduced a drilling status report Lynch had sent in June 1994, saying that in one of the wells he had found “junk in hole.” The plaintiffs countered that at that time, neither Emerald nor the O’Connors understood that the wells had been damaged.

The jury deliberated for just a day and a half before returning its verdict: The plaintiffs were within the statute of limitations; Exxon had acted with malice; its actions were “carried out … with flagrant disregard for the rights of Plaintiff-Intervenors and with actual awareness on the part of Exxon that [its actions would], in reasonable probability, result in … property damage.” Exxon was also found to have violated Texas law by committing waste and fraud: It had not fully developed the wells according to the terms of the lease, and then it had covered up that fact. The jury held Exxon liable for $18.6 million in actual, exemplary, and compensatory damages.

T. Michael knew this was just the beginning. In a move that surprised no one, Exxon appealed. The case moved to the Thirteenth Court of Appeals, in Corpus Christi, which in 2005 affirmed the trial court’s verdict and issued a blistering opinion, writing that Exxon’s “duty to avoid waste was grounded in prohibitions against waste so fundamental that they were enshrined in the Texas Constitution.” It also reinstated Emerald’s case against Exxon, which had been dismissed by the trial court on a technicality. The ruling was a total victory for Lynch and the royalty owners. But Exxon appealed again, and the case went to the Texas Supreme Court.

In the past two decades, the state’s

More Texas Monthly

Loading, please wait...

Most Read

  • Viewed
  • Past:
  • 1 week