In what has been described as a surprise decision, the US Court of Appeals referred to a Supreme Court decision in 1996 that said the punitive damages - four times more than the compensatory damages - against Exxon were "close to the line" allowed by the US constitution.
In case of the Exxon Valdez, which was the worst oil spill in American history, the amount of the damages was 17 times more than the $US287 million awarded by a jury in 1994.
On March 24 1989, the Exxon Valdez supertanker ran aground on a reef in Alaska's pristine Prince William Sound, spilling more 50 million litres of oil and in the process causing enormous damage to the environment and local fishing-based economy.
ExxonMobil chairman Lee Raymond was delighted with the decision and said it confirmed the company's position.
However, the locals are less than happy with the court ruling. "I wouldn't want to be anyone from an oil company in this town today. I'll tell you that," one local leader said.
