A smaller Exxon oil tanker offloads crude from the beached Exxon Valdez which ran aground in Prince William Sound in Alaska in 1989. The U.S. Supreme Court has ruled that the petroluem giant must only pay a fifth of the punititive damages settlement awarded by a lower court in 2006. (Associated Press)

The U.S. Supreme Court has slashed the punitive damages award in the 1989 Exxon Valdez disaster by four-fifths, from $2.5 billion US to $500 million US.

In a decision announced Wednesday, the top American court ruled that victims of the worst oil spill in U.S. history may collect punitive damages from Exxon Mobil Corp., but not nearly as much as a federal Appeal Court determined in 2006.

Justice David Souter wrote for the court that punitive damages may not exceed what the company has already paid to compensate victims for economic losses, about $500 million US.

Exxon had asked the high court to reject the punitive damages settlement entirely, saying it already has spent $3.4 billion US in response to the accident that fouled 2,000 kilometres of Alaska coastline.

In 1994, a jury in Anchorage, Alaska, decided Exxon should pay $5 billion US in punitive damages.

The giant oil company launched a series of appeals against that settlement, resulting in a federal Appeal Court ruling in 2006 that cut the jury award in half.

Exxon launched its Supreme Court challenge shortly after that.

The crew of the giant tanker, Exxon’s shipping subsidiary and the U.S. Coast Guard were all apportioned blame for the accident by U.S. government investigators.

Environmentalists and tourist operators say the shoreline of Alaska’s Prince William Sound and nearby islands have still not recovered from the oil sludge that fouled beaches, killed marine life and left hundreds of thousands of sea birds dead.