By Mike Cason

Montgomery Advertiser

With their effort to win a new trial apparently lost, lawyers for Exxon Mobil Corp. today will ask Montgomery County Circuit Judge Tracy McCooey to reduce or eliminate a $3.42 billion punitive damage award payable to the state of Alabama.

McCooey has indicated she would deny Exxon Mobil's request for a new trial, said Judith Glaubig, manager of special projects and public affairs for the company. Bob Merrill, administrator for the court, said McCooey has not officially ruled on the new trial motion.

On Dec. 19, a jury ordered Exxon Mobil to pay the punitive award, the largest in state history, plus $87.7 million in compensatory damages. The jury agreed with the state's claim that Exxon Mobil schemed to cheat the state out of royalties owed for natural gas wells in state waters near Dauphin Island and Fort Morgan.

At today's hearing, McCooey could let the award stand, reduce it or eliminate it. She cannot increase it. The hearing begins at 10:30 a.m. and will include testimony from witnesses.

Exxon Mobil does not have to pay while appeals are pending.

Glaubig said the company will argue that punitive damages aren't warranted in the case because it was a disagreement over contract terms and involved no fraud.

"Nowhere did the state reveal any evidence that we falsified or intentionally concealed data," Glaubig said. "We feel there is just no basis for a finding of fraud, therefore punitive damages can't stand."

Robert Cunningham, a Mobile attorney who represents the state in the case, said the jury found there was fraud.

"They had the opportunity for 21/2 weeks to convince a jury of that, and the jury didn't buy it," Cunningham said.

Cunningham said Exxon Mobil stood to make up to $6 billion from its scheme to underpay the state over the expected 30-year life of the gas wells.

Cunningham said today's hearing was not about whether Exxon Mobil committed fraud, but whether the $3.42 billion award was just. Cunningham said Exxon Mobil's size and wealth mean the award will be "like a flea biting an elephant."

Glaubig said the award was excessive.

The state has similar lawsuits pending against four other oil companies.

Exxon Mobil signed leases with the state in 1981 to pump natural gas from state-controlled waters in the Gulf of Mexico. The wells began producing in 1993.

Exxon Mobil filed suit in August 1999, asking the court to interpret the terms of the lease. The state then filed a countersuit, alleging underpayment and fraud.

The disagreement centers, in part, on whether Exxon Mobil can deduct some expenses in calculating royalties owed to the state. While the case is pending, Exxon is continuing to pay according to its interpretation of the leases.

The state hired Cunningham and other attorneys to handle the case on a contingency basis. Should they prevail, attorneys fees will be 14 percent of the award.