The Decatur Daily News

By Phillip Rawls, AP Writer

A jury returned a $3.5 billion verdict against Exxon today, finding the oil company defrauded Alabama on royalties from natural gas wells in state waters.

The verdict by the circuit court jury was six times Alabama's previous record of $581 million in a civil damages case.

The jury's verdict awarded Alabama $87.7 million in compensatory damages and $3.42 billion in punitive damages.

The jury arrived at the punitive damages by tripling Exxon's annual production from 13 natural gas wells along the Alabama coast. The jury of eight women and four men deliberated two hours.

Jury foreman Shae Fillingim of Montgomery said the deciding factor was Exxon documents showing the oil company knew it was probably underpaying the state but that the company decided to risk it anyway.

"They pretty much knew they were doing something wrong," Fillingim said.

Attorneys for the state had asked for a record-setting verdict to punish Exxon for what they contended was persistent cheating on natural gas royalties due the state.

Exxon's lawyers argued the company has tried to follow the state's contradictory leases for natural gas wells in coastal waters and the simple contract dispute with the state didn't warrant a huge punitive damage verdict.

"The huge numbers of Exxon are right," defense attorney Joe Espy said in closing arguments Monday.

Exxon and state officials have been arguing since 1995 over how much the company owes Alabama in royalties from natural gas well drilled in state waters along the coast. Alabama consultants put the disputed royalties and unpaid interest at $87.8 million.

The state's attorneys contend Alabama's leases with Exxon require it to pay the royalties on the gross proceeds from its natural gas wells along the coast.