…but track record suggests otherwise
Country Manager for ExxonMobil, Rod Henson professed to the media yesterday during a briefing that the multibillion-dollar entity does not take advantage of countries. Henson emphasised, “Our reputation is very important to us.”
His comments in this regard came on the heels of media inquiries on a damning report from the International Monetary Fund (IMF).
That report notes that the Production Sharing Agreement with ExxonMobil has several loopholes which could be abused by the oil giant.
One of the issues that the IMF report points out is in relation to ring-fencing. This provision ensures that ExxonMobil cannot transfer the expenses incurred at one well to another. The IMF said that in principle, the ring-fencing arrangement ensures that the government’s revenue from the Stabroek Block is calculated based on each field or well separately. The Fund stated, “However, this is undone by the Production Sharing Agreement framework allowing the contractor to allocate cost oil to any field within the contract area.”
Henson claimed he did not read the report, but saw media articles which suggested that the agreement is rather generous to ExxonMobil. He said that while there are headlines stating that the deal was generous to one party, it was noted in those very media reports that this was due to the “frontier nature of Guyana.”
The Country Manager said, “That is what we have said and this has even been in the McKenzie study. We don’t take advantage of countries or partners. We have been in business for over 130 years. Our reputation is very important to us. Guyana has been a positive experience…”
While ExxonMobil may claim that it is not in the practice of taking advantage of countries, its track record in some cases appears to tell a completely different story.
In 2003, ExxonMobil was found to be defrauding the state of Alabama out of royalty payments and was ordered by the courts to pay up more than US$100 million in back-pay royalties.
According to www.classaction.org., in August 2012, a Kansas judge approved a US$54 million settlement with landowners who claimed they were underpaid royalties when ExxonMobil made deductions for expenses that occurred downstream of their wells.
The settlement also ended a lawsuit filed in Kansas state court against ExxonMobil over royalties dating back to 2000.
AMERICAN INDIAN/FEDERAL LANDS
The affiliates of Mobil who merged with ExxonMobil were also caught in allegations of underpayment o royalties from American and Federal Lands.
According to the United States Department of Justice, (https://www.justice.gov/opa/pr/mobil-oil-companies-pay-us-322-million-resolve-allegations-underpayment-royalties-american) Mobil Natural Gas Inc., Mobil Exploration & Producing U.S. Inc. and their affiliates had agreed to pay the United States US$32.2 million to resolve claims that they violated the False Claims Act by knowingly underpaying royalties owed on natural gas produced from federal and American Indian leases. This was released by the Justice Department on April 5, 2010.
The Justice Department said that the Mobil companies were alleged to have systematically under reported the value of natural gas taken from the leases from March 1, 1988 to Nov. 30, 1999, and, consequently, paid fewer royalties than owed to the United States and various American Indian tribes.
The release from the Department said that the settlement with the Mobil companies came from a lawsuit filed by Harold Wright on behalf of the United States.
“The qui tam or whistleblower provisions of the False Claims Act allow private citizens to file actions on behalf of the United States and to share in any recovery. Because Mr. Wright is deceased, his heirs will receive a US$975,000 share of the settlement,” the release had said.
The Justice Department went on to state that it partially intervened against the Mobil defendants in the Wright lawsuit, and previously settled with Burlington Resources Inc. for $105.3 million, Shell Oil Co. for $56 million, Chevron Corporation, Texaco and Unocal Incorporated for $45.5 million and Dominion Exploration and Production Co. for $2 million. The Department said that the Mobil companies were merged into and became subsidiaries of ExxonMobil, the world’s largest publically traded international Oil and Gas Company in November 1999.
The Minerals Management Service (MMS) of the U.S. Department of the Interior is responsible for overseeing the collection of royalties on federal and American Indian leases, as well as federal offshore lands on the Outer Continental Shelf.
The Justice Department said that each month, companies are required to report to MMS the value of the natural gas produced from their federal and American Indian leases and to pay a percentage of the reported value as royalties.
“The United States alleged that the Mobil companies used transactions with affiliated entities to falsely reduce the reported value of gas taken from federal and American Indian leases, to claim excessive deductions for the cost of transporting that gas, and to otherwise understate the value they reported each month for their natural gas production.”
The investigation of and settlement with the Mobil Defendants was jointly handled by the U.S. Attorney for the Eastern District of Texas and the Civil Division of the Department of Justice, with the assistance of the Department of the Interior’s Office of Inspector General, Minerals Management Service, and Office of the Solicitor. (The case is U.S. ex rel. Wright v. Chevron USA, Inc. et al., 5:03-CV-264 (E.D. Tex.). (See link for more details and other related articles on ExxonMobil’s past https://www.kaieteurnewsonline.com/category/what-guyana-needs-to-know-about-exxonmobil/.)
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