Exxon can contest $2.5bn oil fine

The US Supreme Court said it would hear the appeal against record damages due to victims of the Valdez oil spill.

The case has dragged on since 1994 with the US oil giant fighting to reduce the bill, which it has called excessive.

In what was one of the biggest ever oil spills, 11 million gallons of crude were released into Alaska's wilderness after the Exxon tanker hit a reef.

About 1,300 miles (2,080km) of coastline was contaminated as a result of the oil spill.

Constitutional issues

Captain of the Valdez, Joseph Hazelwood, admitted drinking vodka before boarding the vessel, but was subsequently acquitted of operating a ship while intoxicated.

"This record punitive award unquestionably raises important issues of constitutional dimension"
Walter Dellinger, Exxon lawyer

Exxon argues that it cannot be held responsible for the actions of Mr Hazelwood and says that the $2.5bn penalty is excessive under marine law and when compared with other federal rulings on punitive damages.

"This record punitive award unquestionably raises important issues of constitutional dimension," said Walter Dellinger, Exxon's lead lawyer on the case.

The world's biggest listed oil firm, Exxon added that it had already paid $3.4bn in clean-up costs and other fines related to the oil disaster and damage to the natural environment.

But lawyers for the victims dispute the charge that the award is too high and argue that the damages represent "barely more than three weeks of Exxon's net profit".

In 2006, Exxon reported the highest ever net annual profit for a US business at $39.5bn.

Repeated challenges

If the ruling is upheld by the Supreme Court the money would be split between 32,000 fishermen, natives, land owners, small businessmen and municipalities in south central Alaska.

Some of the victims had died while Exxon has repeatedly challenged court verdicts, lawyers said.

Back in 1994 a jury in Alaska ordered US giant Exxon to pay $5bn in damages, but the firm successfully appealed against the size of the award.

After a number of court cases over the intervening years, this figure was cut by federal judges until a US appeals court set the amount at $2.5bn.

The appeal will go before the Supreme Court in February or March 2008, with a ruling expected by the end of June.

Exxon shares added 1.5% to $93.61 by close of trade in New York.

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