Windfall will come from gas

Published 12:00 am Wednesday, July 28, 2004

Exxon-Mobil Corporation, the world’s largest oil conglomerate, could be the savior of our tragic state financial problems. The long running lawsuit that Alabama has against Exxon will probably finally be settled by the U.S. Supreme Court as the amount of money is the dispute is staggering.

The case stems from 16 natural gas wells that Exxon drilled along theAlabama coast. Royalties from the wells go to the state because the wells are in Alabama waters. The state contends it was intentionally cheated on royalties and the fraud could amount to $1 billion in actual losses over the life of the natural gas wells.

Alabama jurors agreed with the state. In the first trial in December 2000, a jury decided Exxon intentionally defrauded the state and returned a verdict against the oil company for $87.7 million in compensatory damages and $3.5 billion in punitive damages.

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The $3.5 billion punitive verdict was by far the largest verdict inAlabama history. In fact, it was more than six times larger than the second largest and we have had some whoppers in Alabama.

However, our state’s Supreme Court reversed the verdict and remanded it back to the same Montgomery Circuit Court on the grounds that the circuit judge erred by letting the jurors know of the state’s financial problems as well as the oil company’s enormous wealth.

The second trial began and ended in the Fall of 2003 withMontgomery jurors returning an even larger verdict. In fact in the latest jury decision the amount awarded the state is three times greater than the gigantic windfall awarded to the state three years ago.

It was appealed and in late March of this year the Montgomery Circuit Judge reduced the $12 billion punitive verdict to $3.6 billion, basically what the original 2000 jury had awarded.

The Judge’s reduction ruling was in keeping with the U.S. Supreme Court guidelines on punitive damage limits and may stand up under federal court appeals. Exxon attorneys instantly stated that they would appeal.

The Alabama Supreme Court has recently ordered Exxon Mobil and the state to sit down to mediation and try to resolve the $3.6 billion jury verdict.

Exxon attorney’s claim that the award in the case defies common sense and they argue that the company did nothing wrong. However, the Circuit Judge stated,”This Court is thoroughly convinced, as was the jury, that Exxon intentionally and deliberately took actions from the moment leases were signed to commit fraud upon the state.”

The $12 billion decision was reached byAlabama jurors while the state was canceling textbook purchases, cutting social services, and sending layoff notices to about 800 state workers.

Some of the court workers who dealt with the jury were due to lose their jobs the next week. The judge had cautioned and prohibited everyone involved in the case from mentioning the state’s financial problems or Exxon-Mobil’s financial condition.

Despite no mention of these financial facts to a jury, a juror interviewed after the verdict said Exxon’s size and the state’s problems were a factor in the decision to award more than even the state’s attorney had sought. The juror said, “A billion dollars to them is chump change.”

The final adjudication of this case could have a huge impact on the state’s present and future finances. The state is in the throes of the worst financial problems since the Great Depression.

Governor Riley stated after the verdict against Exxon that it will be years before the appeals are completed, and any money the state realizes will not have any impact on the state’s current layoffs and 18 percent budget cuts for many agencies. The Governor is right, it will be years before all of Exxon’s appeals are exhausted. There will be a windfall one day.

There is something to hope for in the future, but it will not help us this year.

See you next week.

Steve Flowers writes a weekly syndicated column onAlabama politics. He served 16 years in the Alabama House of Representatives. Steve may be reached at