Chevron win suit against government bad faith in California site

Fuel Fix:

Chevron Corp. is entitled to unspecified damages against the federal government in a contract dispute over oil deposits in California worth $37 billion, the U.S. Court of Claims ruled.

The Department of Energy “repeatedly and materially violated” two agreements governing determination of equity interests in oil and gas deposits located in the Elk Hills Reserve of California, Judge Susan Braden in Washington wrote in a 90-page ruling.

Chevron “is entitled to be compensated for damages, in an amount to be determined, including sanctions for DOE and the government’s ‘bad faith’ conduct and abusive discovery tactics,” Braden wrote in the ruling made public yesterday.

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The Elk Hills Field, located near Bakersfield, California, encompasses more than 47,000 acres and includes more than 1,000 wells, a 47-megawatt power plant and two units that process gas.

The government’s share in the field of about 78 percent, which is still being disputed by Chevron, is estimated to hold reserves equal to about 1 billion barrels of oil.

Occidental Petroleum bought the government’s stake in Elk Hills, one of the largest remaining oil fields outside Alaska, for $3.65 billion in 1997. That’s about $3.65 for each barrel of oil-equivalent it contains. Chevron and Occidental are not operating the oil and gas field together.

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The sanctions were for "bad faith" by the government in the document production phase of the discovery.  The case was first filed in 2004 which means it has taken them nine years to get to this point and they still will have to try the damages phase of the trial.