Shell Oil has will pay the state of Alabama $27 million plus another $6.4 million in legal fees to settle accusations the company underpaid natural gas royalties for drilling in state waters. Shell denied any wrongdoing.

Alabama sued Shell in 1999, accusing it of underpaying royalties on lease contracts for natural gas drilled in Mobile Bay from 1991 to 2000.

“Shell and the state have been working for a number of years to resolve their differences regarding interpretation of certain mineral lease provisions. Even before the settlement, Shell already had paid the state over $170 million in royalties since 1991,” Shell said.

The State of Alabama alleged $25.4 million in actual damages through the end of 1999. The settlement covered those claims as well as the additional two-plus years through March 2002.

Shell is the third defendant in lawsuits brought by the state over natural gas drilling rights in state waters. In the first case, against Exxon Mobil, a jury awarded the state a record $3.4 billion in punitive damages on top of $87.7 million in disputed royalties and interest. Exxon has appealed the verdict to the Alabama Supreme Court. In December, a jury awarded the state more than $24 million in its dispute with Hunt Petroleum Corp.

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