The Associated Press

MONTGOMERY, Ala. –– Shell Oil has paid the state $27 million to settle pending litigation over the underpayment of natural gas royalties, the governor's office announced Tuesday.

The state sued Shell in June 1999 in Mobile County Circuit Court, accusing the company of underpaying royalties on lease contracts for natural gas drilled in Mobile Bay from 1991 to 2000.

Fifty percent of the $27 million will be deposited in the Alabama Trust Fund, as part of the state's compensatory damages claim. The other 50 percent will be deposited in the Alabama General Fund.

Shell also paid $6.5 million for attorneys' fees and court costs for the state, Siegelman officials said.

Shell spokeswoman Kelly Coone, at corporate headquarters in New Orleans, said Wednesday, "Shell is pleased that these matters have been resolved and looks forward to continuing a mutually beneficial relationship with the State of Alabama and her citizens."

Shell is the third defendant in suits brought by the state on lessees of natural gas drilling rights in state waters.

The first case, against Exxon Mobil, went to trial in Montgomery in December 2000. The case involved $87.7 million in disputed royalties and interest, but the jury decided to levy a record $3.4 billion in punitive damages on top of that.

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 has appealed the verdict to the Alabama Supreme Court.

In December, a jury awarded the state more than $24 million in its dispute with Hunt Petroleum Corp.
© 2002 The Associated Press