The Alabama Supreme Court has thrown out nearly all of a record $3.6 billion verdict that the state government won against Exxon Mobil in a dispute over natural gas royalties.

In an 8-to-1 decision, the state’s highest court awarded Alabama nearly $52 million in compensatory damages. The court ruled there was no fraud by the oil company and it threw out all punitive damages, which made up most of the original verdict. The verdict set a state record when it was issued in 2003.

The state conservation department had sued Exxon Mobil, saying it had intentionally underpaid the state for royalties due from natural gas wells the company drilled in state-owned waters along the Alabama coast. The company argued that no fraud was involved, and the case was an ordinary contract dispute. Company attorney Dave Boyd says the decision affirms the company’s position that this was never a fraud case.

One of the state’s attorneys, Jere Beasley, calls it a truly sad day for Alabama. He says the state will likely ask the Supreme Court to reconsider the decision.

The Supreme Court split along party lines in issuing the decision. Republican Justice Tom Parker wrote the majority decision and the court’s other Republicans agreed. The court’s lone Democrat, Chief Justice Sue Bell Cobb, dissented.

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