NEW YORK, United States (Reuters):

A U.S. appeals court cut US$2 billion off the US$4.5 billion in punitive damages owed by Exxon Mobil Corp for the Exxon Valdez oil spill, saying the earlier penalty was too harsh compared with the economic harm caused by the 1989 spill off Alaska.

The San Francisco-based U.S. 9th Circuit Court of Appeals said in its ruling on Friday that it sliced the penalty almost in half in light of U.S. Supreme Court decisions on punitive damages.

The court said the company's prompt action to clean up the oil and compensate fishermen and others for economic losses lowered the reprehensibility of Exxon's conduct.

"In addition, in considering the relationship between the size of the award and the amount of harm, we concluded in our earlier punitive damages opinion that the substantial costs that Exxon had already borne in clean-up and loss of cargo lessen the need for deterrence in the future," the court wrote.

Exxon Mobil said in a statement that while it is reviewing the ruling, it still believes the punitive damages are too high. It said the plaintiffs were compensated for damages and most were compensated within one year of the spill.

"It is our view that the U.S. Supreme Court needs to provide more definitive guidance to the lower courts on the law governing punitive damages," the company said.

The Supreme Court ruled, in April 2003, that punitive damages must be reasonable and proportionate to the harm that was suffered. In that decision, the top U.S. court struck down a US$145-million award against State Farm Mutual Automobile Insurance Company for mishandling a claim.