The Alabama Supreme Court has again ruled in favor of Exxon Mobil Corp. in the latest appeal in the state’s ongoing dispute with the oil giant. The latest dispute involved $23 million which the state considered a penalty on the failure by Exxon to pay royalties to the state. We have been battling on behalf of the state against the oil company since 1999 over how much Exxon Mobil should pay Alabama in royalties from wells the company drilled in state-owned waters. I won’t rehash the facts of the actual case against the company except to say it was one of the strongest cases of liability – documented by internal company documents – that I have ever seen.
In 2003, the state won a jury verdict, reduced by the trial judge to $3.6 billion. But the Alabama Supreme Court threw out most of that award in 2007. In January, Exxon Mobil had to pay Alabama more than $121 million in royalties plus the statutory interest on the judgment. We believed that Exxon Mobil should have paid the state an additional $23 million in what even Exxon had once described as a penalty and not interest. Exxon had taken the position before the jury verdict that it would be adequately punished by the “penalty” that the law imposed for its failure to pay royalties to the state. On appeal, however, the oil giant took the position the $23 million was actually “interest,” and not a “penalty.” In any event, the latest Supreme Court ruling should bring this litigation to a close.
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