Mexican Law Won't Apply to US Oil Companies Cameron Langford - Courthouse News Service
go to original June 15, 2012

Mexico's state-owned oil company Pemex cannot file claims under its national law against the U.S. oil companies it accuses of importing stolen natural gas condensate, a federal judge ruled.

In an April 2012 complaint filed in U.S. District Court, Pemex Exploracion y Produccion claimed that 12 oil and gas companies knowingly imported stolen natural gas condensate stripped by Mexican drug cartels from the Burgos oilfield.

Since Pemex operations account for about 40 percent of the Mexican government's annual revenue, it claims the condensate thefts are siphoning money away from Mexico.

The company filed similar lawsuits in June 2010 and June 2011.

Refineries and chemical plants use natural gas condensate as a feedstock.

Cartels have run roughshod over the Burgos oilfield since 2006, stealing at least $300 million of condensate, Pemex says. Tankers are hijacked at gunpoint, company officials are kidnapped and threatened, and the cartels also build their own pipelines to steal condensate from its 52 transfer-and-delivery stations, according to the complaint.

Pemex says cartels take advantage of the expanse and isolation of the Burgos field, an Ireland-sized property that cuts across Mexico's three northeastern states, Tamaulipas, Nuevo Leon and Coahuila.

The April lawsuit alleges illegal possession and use of Mexican sovereign property under Mexican law against defendants including ConocoPhillips, FR Midstream Transport, Marathon Petroleum, Shell Chemical, Shell Trading US and Sunoco Partners Marketing & Terminals.

Pemex also sought standing to sue under Mexican law in its 2010 lawsuit, which was consolidated with the 2011 version.

U.S. District Judge Sim Lake denied Pemex's motion for foreign law standing in that case, finding Pemex "failed to carry its burden of furnishing clear proof of the relevant legal principles it asked the court to apply," and "choice-of-law principles requires the application of Texas law."

The American oil companies cited that opinion in seeking dismissal of Pemex's latest Mexican law claims. Lake obliged by dismissing the claims with prejudice Friday.

Texas law applies because Pemex alleged that the defendants had illegally possessed and used the condensate in the United States, not Mexico, and because the accused parties are either Texas companies, or have their principal business places in Houston, Lake found.

The decision does not affect other allegations in the April lawsuit for conversion, unjust enrichment, fraud, breach of warranty and breach of contract.

Other defendants to the suit include Murphy Energy, an Oklahoma corporation with an office in The Woodlands, Texas; High Sierra Crude Oil & Marketing, a Colorado company operating out of Waxahachie, Texas; Big Star Gathering, a Texas partnership owned by co-defendant St. James Energy Operating, a Utah corporation; F&M Transportation of Edinburg, Texas; and Plains Marketing, a Texas limited partnership working out of Houston.

Pemex says Superior Crude and F&M Transportation used Big Star to knowingly participate in the scheme to import and market the stolen condensate in the United States. The other defendants "appear to have been innocent and dealt in the condensate only after it was laundered," according to the complaint.

Pemex sued individually and as an assignee of AGE Refinery, Flint Hills Resources and Valero Marketing and Supply, which transferred all their claims related to their purchase of stolen Mexican condensate to Pemex.

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