Exxon Valdez and Prince William Sound Case
Keller Graduate School of Management – Online AC573
Anthony Mucheru
Instructor – Frank Pidgeon
November 2011

Shortly after midnight on March 24, 1989, the oil tanker Exxon Valdez ran aground on Bligh Reef in Alaska’s Prince William Sound, spilling 11 million gallons of crude oil. At the time of the grounding, the vessel had departed from normal shipping lanes to avoid ice in the water and had failed to make a corrective turn in time to avoid the submerged reef. The ship was piloted by third mate Gregory Cousins, who did not hold a required license; the captain, Joseph Hazelwood, was in his quarters. Hazelwood, whose driver’s license was at the time suspended for driving while intoxicated, later failed a sobriety test. At the time, the pipeline was opened and strict traffic lanes were established in the Sound to guarantee safe tanker passage. But, in recent years, disintegration of the Columbia Glacier had filled the lanes with ice. To avoid slowing down to dodge icebergs—thereby delaying the oil’s delivery to market—tanker captains routinely moved out of the shipping lanes (Brooks, L. J., 2010 p. 505).
On shore, no one was keeping watch. Although the Coast Guard was charged with monitoring vessels through Prince William Sound, in fact, its outdated radar system did not reliably track vessels as far out as Bligh Reef. An earlier proposal to upgrade the radar system had been rejected as too expensive. And the Coast Guard’s oversight, to say the least, was lax: at the time of the Valdez grounding, the only radar man on duty had stepped out for a cup of coffee. Other corners had also been cut. The Coast Guard had reduced the use of specially trained harbor pilots to guide tankers out the sound and had withdrawn a proposal for tugboat escorts. Rules, such as those governing the number of crew members on the bridge, were not enforced (Brooks, L. J., 2010 p. 505).
Joe Hazelwood, captain of the doomed oil tanker Exxon Valdez, offered "a very heartfelt apology" to Alaskans for the disastrous 1989 oil spill in Prince William Sound. The apology comes at the end of a new, 288-page book commemorating the 20th anniversary of the spill. The book features 62 "personal stories" from people involved with the spill, from people aboard the tanker to Alaska politicians to cleanup workers to U.S. Coast Guard officers to reporters who covered one of the state's biggest stories. The piece de resistance is an interview with Hazelwood, a largely reclusive figure since the shipwreck that sank his career as a tanker captain. Sharon Bushell, a Homer writer known for collecting oral histories, traveled to New York City in February 2008 to record the Hazelwood interview after he agreed to take part in the book project, said Stan Jones, spokesman for the Valdez-based oil industry watchdog group that commissioned the book. In "The Spill: Personal Stories from the Exxon Valdez Disaster," Hazelwood says he now works as an investigator and technical consultant with a maritime law firm in New York (adn.com, 2009).
Chugach Alaska Corporation (CAC) was one of the most successful local companies in Alaska. CAC invested in the local resource industries (fishing and timber). Nearly 85 percent of CAC's profit-making operations were in the area. The spill ground commercial fishing activity to a halt and jeopardized the company's three canneries in the area. After disastrous fiscal performance in 1990, when the company posted net losses of $25.3 million on revenue of $46.9 million, CAC entered bankruptcy proceedings in 1991. It has since recovered (Fundinguniverse.com, 2011).
The Exxon Valdez spill resulted in profound physiological effects to fish and wildlife. These included reproductive failure, genetic damage, curved spines, lowered growth and body weights, altered feeding habits, reduced egg volume, liver damage, eye tumors, and debilitating brain lesions. Subsistence harvests of fish and wildlife substantially declined by Alaska Native communities after the spill and continue to be affected. 20 communities were in the oil's path where it caused major social and psychological impact like depression and Post-Traumatic Stress Disorder. These injuries continue in places like Cordova today. In 1989, 1,811 workers filed compensation claims, primarily for respiratory system damage, according to National Institute of Occupational Safety and Health (Miller, P. A., 1999).
The Exxon Valdez calamity also incurred significant cleanup costs and a legal maelstrom. All told, the company says in a statement about the notorious anniversary that it has paid "over $3.8 billion as a result of the accident, including compensatory payments, cleanup payments, settlements and fines," and that "the 1989 Valdez accident was one of the lowest points in ExxonMobil's 125 year history." (Hadhazy, A., 2009).
In the aftermath of the Exxon Valdez incident, Congress passed the Oil Pollution Act of 1990, which required the Coast Guard to strengthen its regulations on oil tank vessels and oil tank owners and operators. Today, tank hulls provide better protection against spills resulting from a similar accident, and communications between vessel captains and vessel traffic centers have improved to make for safer sailing (EPA.gov, 2012).
The damage to the fishing industry and to native subsistence hunting has lasted for years. In 1994 a federal jury valued the case similarly to the survey respondents, although entirely independently, penalizing Exxon $5 billion. But Exxon fought that verdict through a series of appeals that concluded 19 years after the spill with the U.S. Supreme Court arbitrarily reducing the amount to $507 million—nothing to Exxon, the most profitable company in history, which had paid its CEO, Lee Raymond , $683 million over the 14 years the case was on appeal. As is wont President James Madison intended when he created the constitutional system, the justices acted as supreme sovereigns to protect the private property of the wealthy against the democratic will of the majority, in this case making new law on their own authority to do so (Wohlforth, C. 2010).
There are several preventive and detective controls that can be put in place to prevent this from happening again:
Risk Reduction includes a wide range of actions which reduce the risk of a release of a maritime hazardous cargo. Activities which reduce the risk of ship casualties include the siting of port facilities, the configuration and marking of harbor channels, the control of vessel traffic and the establishment and enforcement of personnel standards. The risk of a cargo release resulting from a ship casualty can be reduced through cargo loading, handling, storage and ship design and construction standards.
Contingency Planning includes those actions which insure that an adequate response can be mounted to a maritime casualty involving a hazardous cargo. Contingency planning includes the development of accident scenarios, the gaming of the possible consequences of these scenarios, and the identification and creation of the organizational, financial, and physical resources required to minimize the impact of these incidents.
Incident Response includes a series of related actions intended to minimize the impact of an incident once it occurs. They include the countermeasure actions taken to salvage the ship and cargo. (The National Academy terms marine salvage as lithe middle ground between preventing casualties and cleaning up after them"). Response activities may include the evacuation of populations (if the threat of toxic exposure or fire exists) and will include all actions taken to "clean up" after the spill. As the Exxon Valdez incident shows, these actions are constrained by the resources and organizations created through the contingency planning process (Harrald, J., et. al., 1998).

References
Brooks, L.J. & Dunn, P. (2010). Business and Professional Ethics for Directors, Executives, and Accountants, 5th Edition. South-Western Educational Publishing.
Loy, W. (2009). Hazelwood offers 'heartfelt apology' for oil spill. 20TH ANNIVERSARY: Captain of Exxon Valdez included in book. Retrieved November 11, 2011 from

http://www.adn.com/2009/03/04/711385/hazelwood-offers-heartfelt-apology.html
Fundinguniverse.com. Chugach Alaska Corporation. Retrieved November 11, 2011 from http://www.fundinguniverse.com/company-histories/Chugach-Alaska-Corporation-company- History.html
Miller, P. A. (1999). Exxon Valdez: Ten Years Later. Retrieved November 11, 2011 from http://arcticcircle.uconn.edu/SEEJ/Alaska/miller2.htm
Hadhazy, A. (2009). 20 Years After the Exxon Valdez: Preventing--and Preparing for—The Next Oil Spill Disaster. Retrieved November 11, 2011 from http://www.scientificamerican.com/article.cfm?id=exxon-valdez-20-years-later-oil-spill-prevention

Harrald, J., Marucs, H., Wallace, W. A. (1989). The Management Of A Maritime Crisis: The Integration Of Planning, Prevention, And Response. Retrieved November 11, 2011 from http://cospl.coalliance.org/fez/eserv/co:5425/ucb6571534internet.pdf
Emergency Management. Exxon Valdez. Retrieved November 12, 2011 from http://www.epa.gov/osweroe1/content/learning/exxon.htm
Wohlforth, C. (2010). Costs and values: The legacy of the Exxon Valdez disaster Retrieved November 12, 2011 from http://blogs.scientificamerican.com/guest-blog/2010/07/30/costs-and-values-the-legacy-of-the- exxon-valdez-disaster/