June 30 (Bloomberg) -- Exxon Mobil Corp., deciding not to challenge an appeals court ruling, said it will pay $470 million in interest on a $507.5 million judgment won by victims of the 1989 Valdez oil spill.

The company notified attorneys representing fishermen, small businesses and others suing the company that it will pay the money July 1, Exxon said in a court filing yesterday in the U.S. Court of Appeals in San Francisco.

The court ruled June 15 that spill victims were owed interest that began accruing in 1996, when the original damage award against Exxon was completed.

The Exxon Valdez spill dumped 11 million gallons of oil into Alaska’s Prince William Sound, devastating wildlife and local businesses. The lawsuit against Exxon accused the company of ignoring repeated warnings that the ship’s captain, Joseph Hazelwood, had a drinking problem. The 83-day trial included evidence that Hazelwood was drunk the night the vessel crashed into a reef.

The victims sued in 1989, won a $5 billion punitive damage award in 1994, and then saw the award cut after a series of appeals by Exxon over the next 14 years. A divided U.S. Supreme Court last year cut punitive damages to $507.5 million from $2.5 billion.

“We accept the court’s decision in regard to the interest,” said Tony Cudmore, an Exxon spokesman, in a phone interview.

Exxon yesterday asked a larger panel of appeals court judges to re-hear the June 15 decision that each side in the lawsuit should pay its own costs. Exxon is seeking to recoup $70 million it spent putting up a bond after the 1996 punitive damages award.

The case is In re The Exxon Valdez, 04-35182, U.S. Court of Appeals for the Ninth Circuit (San Francisco).

To contact the reporter on this story: Karen Gullo in San Francisco at kgullo@bloomberg.net.

Last Updated: June 30, 2009 00:11 EDT