In the ongoing lawsuit filed by the state of Alabama against ExxonMobil Corp., a state circuit court judge last week reduced the $11.8 billion punitive damages award against the oil major by 75%, to $3.5 billion. The lawsuit seeks unpaid royalties on Alabama’s offshore natural gas leases.

The action by Montgomery County Circuit Judge Tracy McCooey came two weeks after the judge declined to order a new trial after hearing arguments on whether to uphold the record multi-billion-dollar verdict won by the state last year (see NGI, Nov. 17, 2003). The initial $11.8 billion award was the largest handed down by a jury in the United States last year.

Alabama filed the lawsuit in 1999 against predecessor company Exxon Corp., alleging under-payment of royalties due from gas wells drilled in state waters around Mobile Bay. Exxon has argued that the estimated royalties in dispute are only $55 million, but Alabama has put the figure closer to $102 million, including interest.

Following McCooey’s decision, ExxonMobil officials said that despite the reduction of the jury award, they would continue to fight to have the verdict overturned. The company said the remaining amount is “clearly contrary” to guidelines established by recent U.S. Supreme Court decisions on punitive damage awards.

“ExxonMobil’s conduct was absolutely proper and lawful, and we believe the appeals process will support our position,” said Stuart McGill, president of ExxonMobil Production Co.

Since production began at Mobile Bay, he said the company has paid more than $1 billion in royalty and lease payments directly to the state. “We will continue to vigorously defend ourselves against these unjust charges,” said McGill.

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