Filed at 11:26 a.m. ET
WASHINGTON (AP) -- The Supreme Court on Wednesday slashed the $2.5 billion punitive damages award in the 1989 Exxon Valdez disaster to $500 million.
The court ruled that victims of the worst oil spill in U.S. history may collect punitive damages from Exxon Mobil Corp., but not as much as a federal appeals court determined.
Justice David Souter wrote for the court that punitive damages may not exceed what the company already paid to compensate victims for economic losses, about $500 million compensation.
Souter said a penalty should be ''reasonably predictable'' in its severity.
Exxon asked the high court to reject the punitive damages judgment, saying it already has spent $3.4 billion in response to the accident that fouled 1,200 miles of Alaska coastline.
A jury decided Exxon should pay $5 billion in punitive damages. A federal appeals court cut that verdict in half in 1994.
The Supreme Court divided on its decision, 5-3, with Justice Samuel Alito taking no part in the case because he owns Exxon stock.
Exxon has fought vigorously to reduce or erase the punitive damages verdict by a jury in Alaska four years ago for the accident that dumped 11 million gallons of oil into Prince William Sound. The environmental disaster led to the deaths of hundreds of thousands of seabirds and marine animals.
Nearly 33,000 Alaskans are in line to share in the award, about $15,000 a person. They would have collected $75,000 each under the $2.5 billion judgment.
In dissent, Justice John Paul Stevens supported the $2.5 billion figure for punitive damages, saying Congress has chosen not to impose restrictions in such circumstances.
Justice Ruth Bader Ginsburg also dissented, saying the court was engaging in ''lawmaking'' by concluding that punitive damages may not exceed what the company already paid to compensate victims for economic losses.
''The new law made by the court should have been left to Congress,'' wrote Ginsburg. Justice Stephen Breyer made a similar point, opposing a rigid 1 to 1 ratio of punitive damages to victim compensation.
Writing for the majority, Souter said that traditionally, courts have accepted primary responsibility for reviewing punitive damages and ''it is hard to see how the judiciary can wash its hands'' of the problem by pointing to Congress for a solution.
A jury decided that the company should pay $5 billion in punitive damages. A federal appeals court cut that verdict in half.
The problem for the people, businesses and governments who waged the lengthy legal fight against Exxon is that the Supreme Court in recent years has become more receptive to limiting punitive damages awards. The Exxon Valdez case differs from the others in that it involves issues peculiar to laws governing accidents on the water.
Overall, Exxon has paid $3.4 billion in fines, penalties, cleanup costs, claims and other expenses resulting from the worst oil spill in U.S. history.
The commercial fishermen, Native Alaskans, landowners, businesses and local governments involved in the lawsuit have each received about $15,000 so far ''for having their lives and livelihood destroyed and haven't received a dime of emotional-distress damages,'' their Supreme Court lawyer, Jeffrey Fisher, said when the court heard arguments in February.
Exxon Valdez oil spill
--from the encyclopedia of the earth--javaExxon shatters profit records
Oil giant makes corporate history by booking $11.7 billion in quarterly profit; earns $1,300 a second in 2007.
NEW YORK (CNNMoney.com) -- Exxon Mobil made history on Friday by reporting the highest quarterly and annual profits ever for a U.S. company, boosted in large part by soaring crude prices.
Exxon, the world's largest publicly traded oil company, said fourth-quarter net income rose 14% to $11.66 billion, or $2.13 per share. The company earned $10.25 billion, or $1.76 per share, in the year-ago period.
The profit topped Exxon's previous quarterly record of $10.7 billion, set in the fourth quarter of 2005, which also was an all-time high for a U.S. corporation.
"Exxon can put out some amazing numbers and this is one of those cases," said Jason Gammel, senior analyst at Macquarie Securities in New York.
Exxon also set an annual profit record by earning $40.61 billion last year - or nearly $1,300 per second in 2007. That exceeded its previous record of $39.5 billion in 2006.
In the fourth quarter, the company said revenue rose 29.5% from a year ago to $116.64 billion.
Analysts were looking for the company to report quarterly profit of $10.36 billion on revenue of $114.9 billion, according to earnings tracker Thomson Financial.
Despite topping Wall Street's estimates, Exxon (XOM, Fortune 500) shares slipped in afternoon trading.
The company reported strong results in its worldwide exploration and production, or "upstream," business. Profit rose 32% to $8.2 billion during the quarter, offsetting some weakness earlier in the year.
Income in Exxon's refining, or "downstream," business rose 15.7% during the quarter to $2.27 billion.
Exxon attributed its impressive results to strong performance across its divisions, but a large part of the profit surge was underpinned by climbing oil prices.
Crude prices skyrocketed nearly 60% last year. The surge helped prices break through the $100 a barrel mark for the first time ever early last month. Since crossing that milestone, prices have eased to around $90 a barrel.
Natural gas prices also jumped last year, albeit marginally. But costs have also increased for the oil companies, which is why profits haven't risen as rapidly as crude prices.
Big oil companies that both pump oil and refine crude into gasoline have to spend more for crude but are unable to pass on all the extra cost to consumers, which eats in to gasoline profit margins.
The average price for a gallon of regular gasoline hit an all-time high of $3.23 in May, according to the motorist organization AAA. The high prices were blamed on strong demand and a series of accidents that shut down refineries in the U.S. But slack demand for gasoline in the latter half of last year kept gas prices from rising as dramatically as crude prices.
Exxon's record results, which coincide with smaller rival Chevron's (CVX, Fortune 500) profit jump, drew some fire from both government officials and consumer rights groups, who have argued previously that the the oil industry is deliberately restricting supply and profiting on the back of U.S. motorists.
Sen. Charles Schumer, D-N.Y. took a swipe at the two firms, calling on fellow lawmakers to break the country's dependence on foreign oil and rollback unnecessary tax incentives for oil companies.
Judy Dugan, research director of The Foundation for Taxpayer and Consumer Rights, urged Congress to initiate some oversight into unregulated energy trading markets, which have been accused of helping to drive up the price of oil.
"Exxon is happy to take advantage of these prices," said Dugan.
But finding oil has also become more costly. The oil boom has led to a surge in exploration and drilling activity, which has pushed up the price for skilled workers and equipment.
Furthermore, new supplies of oil are increasingly difficult to find and generally tend to be located in harder to reach - and hence more expensive - places. The new natural gas field discovered this week by Brazil's Petrobras lies three miles under the ocean.
ExxonMobil representatives also stressed the cyclical nature of the business and noted that growing global demand for energy will require companies to heavily invest in future growth. The company said it estimates that global demand will grow by 30 percent by 2030.
"The challenge for all of us in the industry is how to we meet that increased demand," said Henry Hubble, vice president of investor relations.
Exxon and Chevron aren't the only two oil giants to report impressive earnings recently. Conoco (COP, Fortune 500), the nation's third-largest oil company, trounced profit estimates by nearly 25% when it reported last week. And Royal Dutch Shell PLC, Europe's largest oil company, reported a 60% increase in profits Thursday.
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