HOUSTON, Nov 21 (Reuters) - Exxon Mobil Corp ( XOM ),

which is facing a California lawsuit over its alleged role in

global plastic waste pollution, will expand plastics recycling

that allows it to replace fossil fuels with discarded bottles

and bags, the company said on Thursday.

The move by one of the world's largest polymer producers

comes amid growing concerns about slow-to-disintegrate plastics

filling landfills, leaching into ground water and creating

potential health hazards.

Exxon, which is championing pyrolysis techniques that

convert waste into new plastic, will spend $200 million in Texas

to expand so-called circularity operations in a global effort to

build the capacity to process 1 billion pounds (454 million

kg)of waste annually by 2027. The company calls its recycling

technology Exxtend.

California filed a lawsuit against Exxon in September,

alleging the company was deliberately misleading the public

about the limitations of recycling. Exxon rejects allegations

that it misleads the public about the limitations of plastics

recycling, or about climate change.

The company's Baytown, Texas, complex this year will process

80 million pounds of plastic waste. The expansion will allow it

and a nearby Beaumont, Texas, plant the capacity to process up

to 500 million pounds in 2026.

The products will be sold as certified recycled plastics.

"Some of our customers for plastics see real value in those,

so they want to buy those certificates along with our quality

plastic," said Karen McKee, president of Exxon Mobil Product

Solutions, which sells polymers to industrial customers.

LyondellBasell, a rival to Exxon in chemicals, also is

installing a plant in a German factory using a similar recycling

technology called MoReTec that also breaks down waste plastic.

Lyondell plans to install a large MoReTec unit in Houston

later in this decade after it permanently shuts a Houston

refinery next year.

(Reporting by Erwin Seba; Editing by Lincoln Feast.)