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Oil & Gas

Alabama''s Exxon Mobil Dispute in Court

January 08, 2008
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According to the Associated Press, the legal fight between Exxon Mobil and the state of Alabama isn''t over, even though the state Supreme Court threw out most of the $3.6 billion judgment the state won against the oil company.

A Montgomery judge heard arguments recently about how much Exxon Mobil owes the state in interest stemming from the small portion of the judgment that the Supreme Court left intact.

Attorneys for the state argue that Exxon Mobil should pay $142.8 million in royalties and interest. Exxon Mobil''s attorneys figure the state is charging $20.4 million too much in interest. They say $120.4 million is due the state.

Those calculations are about how to determine interest due the state. Exxon Mobil attorney Dave Boyd said the state is trying to overcharge the company for part of the interest by doubling the interest rate. The state''s attorneys say they are simply following state laws.

Circuit Judge Tracy McCooey will listen to the arguments Tuesday and then do her own math. Her decision could prompt the losing side to appeal to the Alabama Supreme Court for more review.

McCooey presided at a 2003 trial where a Montgomery jury decided Exxon Mobil had intentionally underpaid the state for royalties due from natural gas wells the company drilled in state-owned waters along the Alabama coast.

The jury returned an $11.9 billion verdict, which was mostly punitive damages to punish the company''s conduct. McCooey cut the verdict to $3.6 billion in 2004, and Exxon Mobil appealed to the state Supreme Court.

On Nov. 1, the Alabama Supreme Court ruled there was no fraud by Exxon Mobil and threw out all punitive damages that the state had won. The court left $51.9 million in compensatory damages, but that figure was based on royalties paid before the 2003 trial.

The Supreme Court sent the case back to McCooey with instructions to calculate exactly how much is due the state in royalties and interest currently.

Talks between the two sides failed to result in an agreement, which forced McCooey to schedule a January hearing to hear arguments.

The royalty dispute is not the only disagreement Alabama government has with Exxon Mobil.

The oil company is seeking $41 million in refunds, plus interest, on oil and natural gas severance taxes it paid the state. The company maintains the way the tax was calculated was too high. An administrative law judge has ruled in the company''s favor, but the state Revenue Department is disputing it.

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