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Last Updated: Friday, 14 November, 2003, 18:53 GMT
Exxon must pay $11.8bn damages
Exxon Mobil HQ, Texas, copyright Exxon Mobil
Texas-based Exxon Mobil says the damages are unjustified
A US jury has imposed damages of $11.8bn (7bn) on energy giant Exxon Mobil in a case over gas royalties.

Exxon must pay the US state of Alabama, which sued it over a claim for unpaid gas royalties for offshore drilling projects. Exxon plans to appeal against the decision.

Exxon spokesman Bob Davis described the ruling as "unjustified and excessive".

Mr Davis said that Exxon had not engaged in fraud and that the firm believed the trial had failed to establish that fraud took place.

Fired up

The case goes back to 1999, when the state of Alabama sued Exxon for fraudulent non-payment of royalties on gas projects.

In the original case, the jury awarded damages of $3.5bn, a quarter of those imposed on Friday.

However, that decision was overturned when Alabama's Supreme Court sent the case back to the lower court for a retrial.

The jury in Alabama on Friday awarded punitive damages of $11.8bn and compensatory damages of $63.6m.

"The punitive award in this case defies common sense," said Sam Franklin, Exxon's chief lawyer in the case.

Energy-sector experts expect the appeal to lead to lower damages.

Exxon posted net profits of $3.65bn on sales of $59.8bn for the July-to-September period of 2003.


In a statement, Exxon pointed out that a recent US Supreme Court ruling sets limits on the size of punitive damages awards.

It believes the punitive damages award will not be allowed to stand because it is "more than 180 times the...compensatory damages".

Exxon said it has paid more than $1bn in royalty and lease payments since 1993, and that the disputed amount represents less than 5% of that sum.

Bob Goodof, an energy analyst at Loomis & Sayles in Boston, said investors should not worry as "Exxon has been so successful at generating more reasonable verdicts on appeal".

Exxon's statement added that the firm has invested more than $3bn in Alabama and employs "more than 200 people and thousands of contactors" there.

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