By Sara-Ashley Hernandez

The case of Exxon Corp. v. Emerald Oil & Gas Company presents a new concern that current excavators of oil may encounter when attempting to discontinue operations at well sites. Royalty owners entered into a lease agreement with Exxon (petitioner) in the 1950s whereby Exxon would pay a royalty of fifty percent to the royalty owners in return for drilling opportunities. In the 1970s, Exxon attempted to renegotiate the terms of the lease agreement, specifically the royalty provision, as Exxon believed that the oil had become scarce and the productivity of certain wells was decreasing. After refusal of the new royalty agreement by the royalty holders, Exxon informed the lessors that it would proceed to plug up the wells and discontinue the lease agreement. Because the royalty owners were determined to continue drilling, they sought out different companies that would be willing to commence drilling on the plugged wells and subsequently entered into a lease agreement with Emerald (respondents). Emerald encountered problems when attempting to reenter the wells plugged by Exxon and this suit commenced on the allegation that Exxon failed to properly plug the wells which led to waste. View full article »