Exxon Mobil Hit With $3.5-Billion Verdict in Fraud Case

A jury returned a $3.5-billion verdict against Exxon Mobil Corp. on Tuesday, 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 Mobil’s annual production from 13 natural gas wells along the Alabama coast.

Exxon Mobil spokesman Tom Cirigliano said the company will appeal the verdict, adding, “We have always endeavored to comply with the requirements of our leases.”

State attorney Bob Cunningham told jurors internal company documents showed the oil company labeled Alabama officials “inexperienced” in the natural gas business and deliberately decided to underpay the state.

After the verdict, jury foreman Shae Fillingim said those documents were the deciding factor, adding that the company “pretty much knew they were doing something wrong.”

But Exxon Mobil’s lawyers argued that the company has tried to follow the state’s contradictory leases for natural gas wells in coastal waters.

Exxon and state officials have been arguing since 1995 over how much the company owes Alabama in royalties from natural gas wells drilled in state waters along the coast. Alabama consultants put the disputed royalties and unpaid interest at $87.7 million. The company contends it is much less, if anything at all.

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

Exxon Mobil contended the leases allow it to deduct its processing costs before paying royalties. It also contended the leases don’t require royalty payments on natural gas used as part of its Alabama production process.