SANTA FE, New Mexico — A lawsuit filed in New Mexico alleges major oil companies engaged in accounting fraud that could leave taxpayers responsible for hundreds of millions in environmental cleanup costs.
The complaint claims ExxonMobil and Empire Petroleum undervalued long-term liabilities tied to aging oil wells during a 2021 asset sale, potentially violating the state’s Fraud Against Taxpayers Act. At issue are hundreds of low-producing wells transferred from ExxonMobil subsidiary XTO Energy to Empire Petroleum’s New Mexico division.
Plaintiffs argue the deal significantly understated “asset retirement obligations,” or the cost of plugging and remediating wells at the end of their life cycle. The lawsuit estimates those obligations should total nearly $200 million, far exceeding the roughly $6 million reported in the transaction.
If accurate, the claims suggest the acquiring company lacked the financial capacity to cover cleanup costs, increasing the risk that wells could become “orphaned” and fall to the state to remediate. New Mexico already faces more than $200 million in orphan well liabilities, with estimates potentially reaching over $1 billion in the coming years.
The case, brought under a qui tam provision, could set precedent for how oil and gas asset transfers are evaluated, particularly regarding environmental liabilities and financial disclosures.
ExxonMobil declined to comment, and Empire Petroleum did not respond to requests.
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