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Exxon hit with massive penalty

/ Source: The Associated Press

A state jury returned an $11.9 billion judgment against Exxon Mobil Corp. on Friday in Alabama’s suit over disputed natural gas royalties. The company plans to appeal.

The jury awarded $63.6 million in compensatory damages and $11.8 billion in punitive damages. If upheld on appeal, the money would go into the state’s coffers.

The award was more than the $9.3 billion that the state’s attorneys had asked the jury to return after a four-week trial.

“We felt Exxon thought they were going to get away with this,” said jury foreman Joe King, a Montgomery teacher. “We wanted to send a message that they were not, and that this corporation can’t get away with doing wrong.”

Jurors had to find Exxon Mobil committed fraud to return the multibillion-dollar verdict Alabama sought. They deliberated 4½ hours Thursday and about two hours Friday.

Exxon Mobil spokesman Bob Davis said the verdict was excessive and the company would appeal.

“We did not engage in fraud, pure and simple,” Davis said.

The state sued Irving, Texas-based Exxon Mobil in 1999, contending the company had violated its leases for natural gas wells in state-owned waters along the Alabama coast.

The state accused the company of cheating Alabama out of millions of dollars by intentionally deducting too much in expenses for operating the wells.

Exxon Mobil’s attorneys said the company has followed its leases with the state and owes Alabama nothing.

The case was first tried in 2000, when a Montgomery jury awarded the state $3.5 billion. The decision was overturned by the Alabama Supreme Court, which said the jury was wrongly allowed to see an internal oil company memo. That prompted a new trial that began Oct. 20.

In closing arguments Wednesday, state attorney Robert Cunningham said the state government had been shorted $63.6 million in royalties and that the loss could have climbed to as much as $930 million over the 30-year life of the natural gas field in Mobile Bay. He asked the jury to return a verdict of up to 10 times the potential loss, or $9.3 billion.

Exxon Mobil’s attorneys said Alabama used a new kind of a lease for wells along the coast rather than the standard industry lease. The oil company argued that its payments to the state were in line with memos from the state Conservation Department that said the company could deduct the “reasonable direct cost of manufacture and transportation.”