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Wednesday, March 26, 2008

Sue Bell Cobb Tells it Like it is on ExxonMobil

I wrote in a post yesterday that Chief Justice Sue Bell Cobb all but calls her Republican colleagues crooks in her rip-snorting dissent to the Alabama Supreme Court ruling that overturned almost all of a $3.6 billion jury verdict against ExxonMobil.

A reader asks if I could provide a link to the entire opinion, including Cobb's dissent. The answer is yes, indeed.

The opinion is available here, and I strongly encourage folks to read it. Be prepared: This is not the kind of stuff you take to the beach to read. But it's worth the effort to get through all 125 pages.

If you don't want to wade through the whole thing, be sure to read Cobb's dissent, which starts on page 100. Some things to look for:

* Cobb points out that the concurring opinion fails to follow some of the court's most basic precedents.

* Cobb points out that the majority conveniently ignores evidence that supports a finding of fraud.

* Cobb displays cojones of impressive proportions. It's nice to know at least one Democrat in Alabama has a pair.

If you really want to get into some heavy-duty reading on the ExxonMobil case, check out the Web site of the Mobile firm Cunningham & Bounds. The firm led the effort to get justice for the State of Alabama, and their Oil and Gas Litigation page is filled with interesting stuff.

One of my favorites is the jury verdict form. You can read it here. Note all of the zeroes on the final figure.

Another favorite is this story by Cathy Donelson from Business Alabama. It provides fascinating background that I have not seen elsewhere.

Particularly interesting is this section about Robert Macrory, the man who wrote the natural-gas lease that ExxonMobil so blatantly abused:

Robert Macrory, the DCNR attorney who developed the lease, is the former executive director of the Alabama Petroleum Council, a division of the American Petroleum Institute funded by ExxonMobil among others in the oil and gas industry.

At the time he was asked to craft a lease for Alabama offshore gas tracts in 1979, Macrory who later served as assistant commissioner of the Alabama Conservation Department, from 1995 to 1998-was the department's chief legal counsel.

His assignment was to develop a lease favorable to the state that would bring in the best return for the state's non-renewable offshore gas. "Most industry leases were just put on Farmer Brown's table," says Macrory, currently DCNR's deputy attorney general.

"All other forms-and those the subject of lawsuit after lawsuit across the country were lease forms prepared by the oil and gas industry to place the value at the wellhead where it is first severed from the earth," he says. "And each company had its own way of computing the value of gas at the wellhead."

After gathering leases from the federal government and from several states across the country, Macrory began reading gas and oil treatise and ran across a suggested model lease form first published in the "Nebraska Law Review,"

Macrory says he was impressed by the publisher's comments saying the lease treated the oil and gas company and the landowner fairly and equitably, basing royalty on gross proceeds.

He says the lease was recommended by an eminent University of Oklahoma oil and gas law professor who had written many books on the subject. "It had a provision that focused on gross receipts at the price received, disallowing all deductions," Macrory says.

Hmmm, "disallowing all deductions." Bet ExxonMobil didn't like that language, even though it signed the lease. So the company came up with fraudulent ways to get around it. And the Alabama Supreme Court let them get away with it.

Because of that, Alabamians are roughly $3.6 billion poorer. But hey, we've got a "conservative" court.

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