ExxonMobil had presented its case for appeal to the state’s high court in April, arguing that the punitive damages awarded to the State of Alabama in December 2000 were “without merit” (see NGI, April 29).

The lawsuit sought to overturn a judgment by the Montgomery County Circuit Court in December 2000, in which the state was awarded punitive damages six times the state’s previous record of $581 million for a civil lawsuit. The jury set the damages by tripling ExxonMobil’s annual production from 13 natural gas wells located on the Alabama coast in the disputed time.

The oil giant has contended that “the issue, at best, is a difference in view over how to compute royalties under offshore gas leases offered by Alabama, leases that even the trial court found to be unclear.”

“We are pleased with the court’s decision because the original verdict was without merit,” said Terry Koonce, president of ExxonMobil Production Co. “The facts in this case and ExxonMobil’s conduct during the course of its long history in Alabama simply do not support the state’s charges or the trial court’s judgment. We conduct our business in an ethical, honest and forthright manner.”

During the oral arguments to the Alabama Supreme Court in April, ExxonMobil noted that it has paid more than $1 billion in royalty and lease payments to the state, and that the amount in dispute, which totals about $87 million with interest, is by comparison small. ExxonMobil’s attorneys also pointed out that it had fully reported all royalty information to the state and that punitive damages in the case were unjustified. It noted that the “punitive damage award rendered was nearly 40 times the compensatory damages and more than the total of all punitive damage awards affirmed by the Alabama Supreme Court in its history.”

The state brought similar lawsuits against all five oil companies that were producing natural gas from state leases in Mobile Bay. In late March, Shell Oil reached a settlement to pay the state of Alabama $27 million plus another $6.4 million in legal fees to settle accusations of underpaid royalties (see NGI, March 25). Shell denied any wrongdoing. The state was also awarded $24 million by a jury in December 2001 in its dispute with Hunt Petroleum Corp.

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