By Pete Yost
Associated Press Writer

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 decision is likely to further roil strained relations between Alaskans and the state's oil and gas industry at a time when legislators are in special session considering natural gas pipeline issues and the state is in court trying to reclaim leases at Point Thomson field, where ExxonMobil is operator and a part-owner.

The nation's high 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.

“People have been waiting for 20 years for some kind of final judgment here and I guess they got it,” said former Alaska Gov. Steve Cowper, who was in office at the time of the spill. “It's a decision people are going to have to live with at this point, however bitter they may be. This is the end of the line. I think the various plaintiffs' attorneys who were in it all this time deserve a pat on the back. This is not a result I would have wanted, or anybody else for that matter.”

R.J. Kopchak, a Cordova fisherman and one of some 32,000 plaintiffs in the case, said the court's decision “provides big business with the formula they need to calculate any costs for their actions that destroy the environment and impact the very fabric of our society.

“Corporate lawyers and actuaries will calculate potential damages, payouts and punitive award costs for various activities. They will then calculate the costs of safety, maintenance and prevention. In many cases they will find that they will make money by taking risks and delaying maintenance, knowing that they are protected by the law.”

Kopchak said the decision is also unfair to many plaintiffs who have continued to suffer from damages of the oil spill.

“Especially hard hit are the Native communities whose hunter-gatherer traditions continue to be impacted by lingering oil, and commercial herring fishermen, who can no longer fish, and continue to wait for herring populations to recover from oil spill impacts,” he said. “Exxon and some members of the high court would contend that these losses were compensated for through litigation. This is untrue, as the degree of compensation was decided long before the full extent of the long term damage from the oil spill was understood.”

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 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.

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 spill.

Alaska Journal of Commerce reporters Tim Bradner and Margaret Bauman contributed to this report.