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Jerry Patterson, commissioner of the land office that oversees oil leases that help fund Texas schools, asked the Texas Railroad Commission to conduct hearings into an alleged 1990s program at Exxon Mobil of plugging abandoned wells with trash, sludge, explosives and cement plugs. The barriers made it impossible for other producers to revive the wells, Patterson said in a statement he gave to Bloomberg News yesterday.

Under Railroad Commission rules, Exxon Mobil could face fines of $10,000 a day per well, Patterson said in the statement, which he plans to release on Monday. He said those penalties could add up to more than $1 billion on wells the company abandoned in 1991 after a disagreement over royalties with the owners, the O’Connor family, a Texas oil dynasty.

Margaret Ross, an Exxon Mobil spokeswoman, said, “The area in which the wells are located has a water table very close to the surface. It was critical that Exxon protect the groundwater by plugging the wells solidly and thoroughly.”

In March, the Texas Supreme Court dismissed lawsuits against Irving, Texas-based Exxon Mobil for damaging the wells, ruling that too much time had passed. O’Connor heirs and Emerald Oil & Gas Co., which took over some of the former Exxon Mobil leases, were plaintiffs in the suits.

‘Flagrant Violations’ Alleged

“Exxon committed irrefutable, intentional and flagrant violations of state rules regulating the oilfield,” Patterson said in the statement. “The senseless waste of our natural resources, the sabotage of a producing oilfield and cover-up by Exxon is a malicious act that must be dealt with by the state of Texas.”

The Railroad Commission in Austin hasn’t decided whether to hold hearings on the well closings, said Ramona Nye, a spokeswoman for the agency. The three commissioners are next scheduled to meet on July 21. Nye confirmed the agency has the authority to fine companies $10,000 a day for improperly plugging an old well.

The 118-year-old commission has been responsible for regulating oil production in the state since the 1930s, when rampant drilling caused a supply glut that collapsed crude prices, according to the Texas State Historical Association.

From the 1950s to the late 1980s, the O’Connors earned more than $40 million in royalties on crude and gas pumped from 121 wells that Exxon Corp., as the company was then known, and a predecessor, Humble Oil & Refining Co., drilled on the family’s land near Corpus Christi, according to court filings.

Royalty Dispute

The relationship between Exxon and the family deteriorated in the late 1980s, when the company’s request for a reduction in the 50 percent royalty rate was rebuffed, court documents showed. Exxon said the field was no longer profitable and began shutting wells, a process that concluded in August 1991, the documents showed.

Two years later, Emerald Oil, a closely held energy company based in Refugio, Texas, agreed to lease from the O’Connors one- third of the area formerly operated by Exxon. When Emerald drilled into the plugged wells to revive production, drill bits collided with cement, severed pipes and explosive charges normally used to perforate rock formations, Patterson said.

Exxon failed to accurately describe the obstacles it dumped into the wells in reports known as W-3s that it filed with the Railroad Commission, Patterson said in a July 15 letter to the Railroad Commission. Those reports gave Emerald a false picture of how difficult and costly it was going to be to resurrect crude output, he said.

“You don’t foul your own nest,” Patterson said. “And that is exactly what Exxon has done.”

Resource Issue

The 62-year-old Patterson, a former U.S. Marine Corps fighter pilot, said he’s trying to maximize royalty payments to the state’s Permanent School Fund by encouraging more petroleum production.

“This isn’t coming from a Birkenstock-wearing environmentalist,” Jim Suydman, a Patterson spokesman, said in a telephone interview. “He’s a gun-toting Republican who wants to make sure the rules are followed and the state’s natural resources are properly developed.”

Exxon Mobil, which pumps more oil than every member of the Organization of Petroleum Exporting Countries except Saudi Arabia and Iran, posted a record $45.2 billion profit in 2008, or more than $6 for every man, woman and child on the planet.

The company has been shifting its exploration and production focus for more than a decade from traditional oil provinces such as Texas and the North Sea to places such as West Africa and Brazil, where the prospective discoveries are larger.