ICMR Case Collection

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ICFAI Center for Management Research

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BECG 045

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The Exxon Valdez Oil Spill

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This case was written by Jaya D. Sangtani, under the direction of Vivek Gupta, ICFAI Center for
Management Research (ICMR). It was compiled from published sources, and is intended to be used as a basis for class discussion rather than to illustrate either effective or ineffective handling of a management situation.  2005, ICFAI Center for Management Research. All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, used in a spreadsheet, or transmitted in any form or by any means- electronic or mechanical, without permission.
To order copies, call 0091-40-2343-0462/63/64 or write to ICFAI Center for Management Research, Plot # 49,
Nagarjuna Hills, Hyderabad 500 082, India or email icmr@icfai.org. Website: www.icmrindia.org

BECG/045

THE EXXON VALDEZ OIL SPILL
“ExxonMobil’s tactics are well-known, and this is a classic case of deny, dupe, and delay. Just as it denies the science on climate change, it denies that oil from the spill is causing damage in the
Prince William Sound. And on both issues it is running campaigns to dupe the public into thinking it is an environmentally and socially responsible corporation.”1
- Anita Goldsmith, Greenpeace International Campaigner.
“Exxon would meet its obligations to all those who have suffered damage from the spill.”2

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INTRODUCTION

Lawrence Rawls, Chairman, Exxon.

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On March 24, 1989, one of the worst ever environmental disasters occurred in the US. Exxon3 owned oil tanker – Exxon Valdez (EV) spilled 11 mn gallons of crude oil into Prince William
Sound (PWS).4 The oil spilled over 1500 miles of the Alaska coastline and affected many islands in PWS (Refer Exhibit I for the map of the disaster site). It was the beginning of a terrible nightmare for the wildlife and the people of Alaska. Several thousands of marine mammals, tens of thousands of birds and countless fish and other marine animals were killed. The spill had an adverse impact on the income of the fishermen residing in the Alaskan region.

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Since the US government was not prepared to deal with an oil spill of such magnitude, the initial response to the disaster and the clean-up efforts were slow. Explaining the situation, Gail Phillips, executive director of the Exxon Valdez Oil Spill Trustee Council (EVOSTC)5 said, “At the time, we didn’t have the spill-response depots. We didn’t have skimmer vessels. We didn’t have the amount of boom [floating barriers used to contain spills] for a ship that large, there were so many things we were not prepared for. People didn’t pay attention to what it meant to transport that much oil in pristine water. Nobody dreamed that this could ever happen.”6 The entire damage was assessed at $9 bn.
1

Press Center, ‘Exxon Valdez disaster – an ongoing history of lies,’ www.greenpeace.org, March 24, 2004.

2

In a public letter published in newspapers days after the oil spill.

3

Based in Texas, Exxon’s main businesses include exploration, production, transportation and sale of crude oil and natural gas. It is also involved in manufacturing, transporting and selling of petroleum products. In
1998, Exxon merged with Mobil Corporation to form ExxonMobil, the world’s largest integrated oil company. For the fiscal year ended 2003, the net income of ExxonMobil amounted to US $21.51 bn.

4

PWS is a Sound (a large sea or an ocean inlet) in the Gulf of Alaska on the south coast of Alaska in the
US. PWS is protected by two large islands that make it almost an enclosed body of water. It has numerous small islands within it.

5

Established in 1991, EVOSTC was formed to develop research, restoration and habitat conservation plans for the oil spill area with funds from the legal settlement between the State of Alaska, the Federal
Government and Exxon.

6

Exxon Valdez Spill, ‘15 Years Later: Damage Lingers, National Geographic News,’ March 22, 2004.

The Exxon Valdez Oil Spill

The disaster prompted the US Congress to pass the Oil Pollution Act in 1990 (Refer Exhibit II for details on the Oil Pollution Act). The Act addressed a wide variety of issues associated with preventing, responding to, and paying for oil pollution. Soon after the disaster, Exxon paid $300 mn voluntarily to more than 11,000 Alaskans and businesses affected by the Valdez spill. Besides, it had to pay $1 bn in a settlement with the state and federal governments in October 1991. Exxon also claimed that it had spent $2 bn in clean-up costs between 1989 and 1992 and another $900 mn till 1994 to cover direct damages.

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However, Exxon appealed against a jury verdict that directed it to pay $5 bn as punitive damages to fishermen. According to Exxon spokesman, Ed Burwell, “We recognize that it was a tragic accident that we deeply regret. We did voluntarily compensate about 11,000 who were directly damaged by the spill in 1989. Exxon has paid $300 mn to fishermen for losses they suffered in
1989 when they were not able to fish, then it spent $2 bn cleaning up after the spill and then it paid
$1 bn to settle state and federal claims. The company has also made a number of changes in its operating procedures to prevent an accident from happening again. For these reasons we do not believe punitive damages are warranted in this case.”7

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THE ACCIDENT

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Exxon marketed a wide range of petroleum products globally. The company’s other businesses included mining of coal and minerals, and manufacture of electronic motors and electrical equipment. Over the years, the company continued to perform well (Refer Exhibit III for
ExxonMobil’s Financial Performance for the fiscal 1999-2003).

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On March 23, 1989, the EV left the Alaska terminal at around 9:12 pm (Alaska Standard Time) to its next destination – Long Beach, California. It was loaded with 53,094,510 gallons of crude oil.
The crew comprising 19 persons, included Capt. Joseph Hazelwood (Hazelwood), Second Mate
Lloyd LeCain (LeCain), Third Mate Gregory Cousins (Cousins), Chief Mate James R. Kunkel
(Kunkel), marine pilot William Murphy (Murphy), chief engineer Jerry Glowacki (Glowacki), radio officer Joel Roberson (Roberson), and lookout Maureen Jones (Jones). Cousins carried out the required navigational, safety and maintenance tests and found all the systems in working condition. At 11:25 pm, Hazelwood informed the Valdez Vessel Traffic Center (VVTC)8 that the ship was accelerating at sea speed and that the EV would probably divert from the traffic separation scheme
(TSS)9 and move to the inbound lane if there was no conflicting traffic. As growlers10 from nearby
Columbia Glacier occasionally entered the traffic lanes, Hazelwood had the choice of either slowing down to push through them safely or of deviating from their lanes if traffic permitted. To avoid the growlers, Hazelwood decided to change the course of EV from the western, outbound lane, by crossing the separation zone and entering the eastern, inbound lane.
7

Phillips, Natalie, ‘Years later spill’s toll still rising,’ www.adn.com, May 13, 1999.

8

VVTC collects, verifies and disseminates information relating to the safe navigation of vessels in PWS.

9

The TSS allows separation of incoming and outgoing tankers in Prince William Sound in order to keep them in clear, deep waters during their transit. It consists of inbound and outbound lanes, with a half-milewide separation zone between them.

10

Growlers are chunks of ice from glaciers that make growling sound when they knock against ship’s hull.
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The Exxon Valdez Oil Spill

At 11:30 pm, Hazelwood informed the VVTC that he was turning the ship towards the east by 200 degrees at a speed of 12 knots11. This meant that a left turn would bring the ship into the inbound lane. Hazelwood told VVTC that he would call after the ship had cleared its way through the separation zone. He spoke with to Cousins, who was piloting the vessel, on how to avoid the growlers. At 11:40 pm, Hazelwood changed the course of the ship further to 180 degrees.
However, he did not inform the VVTC that he had changed the course further east. At 11:52 pm,
Hazelwood ordered the ship’s engine to be on ‘load program up.’12
After instructing Cousins about where and how to return the ship to its designated traffic lane once it passed the Busby Island, Hazelwood left for his cabin at around 11:55 pm. By that time, Cousins had been on duty for six hours and was due to be replaced by LeCain. However, since LeCain had worked long hours in the morning to get the oil loaded on the ship, Cousins did not wake him up and remained on duty himself. Cousins plotted the ship’s fix indicating it was time to turn the vessel back toward the traffic lanes. He phoned Hazelwood and informed him that the EV was turning back toward the traffic lanes and in the process, it would be encountering an iceberg.

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At the same time, Jones reported that the Bligh Reef light appeared off the starboard bow13 at an angle of about 45 degrees. The light should have actually been seen at the left side of the ship, facing forward. The light’s position at the starboard side meant great danger for EV. It meant that it was out of its lanes and accelerating through waters filled with icebergs. Cousins immediately gave right rudder commands to effect the desired course change and took the ship steering from automatic pilot14 on its own. When EV did not turn swiftly enough, Cousins hurriedly ordered further right rudder. Realizing that the ship was in serious trouble, Cousins called Hazelwood again to report the danger and by the end of the conversation, felt the first major shock on the ship.
At about 12:04 am, EV rammed into the Bligh Reef. Six major shocks were experienced and the ship was grounded.

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Hazelwood rushed towards the bridge and informed VVTC that the ship had been grounded and oil had started leaking from its holds. EV had been moving at a speed of 12 miles per hour when it struck the rocks of Bligh Reef in PWS. The underwater rocks caused huge holes in 8 of the 13 cargo holds, releasing a flood of crude oil into the sea (Refer Exhibit IV for a note on the EV and the damage done to the ship). Within five hours of the crash, more than 11 mn gallons of crude oil had been released into the sea. And within seven hours, the oil spill stretched 1000 feet wide and four miles long, marking the beginning of the worst environmental disaster in US history.

THE CAUSES

The National Transportation Safety Board (NTSB), which investigated the accident, found that there had been several causes that led to the crash of The EV. These included Hazelwood’s failure to provide proper navigation instructions for the EV, Cousins’ failure to steer the ship safely,
Exxon’s failure to supervise Hazelwood and provide sufficient crew for the EV, the US Coast
Guard’s failure to provide an effective vessel traffic system and the lack of effective pilot and escort services.
11

Knot is a unit of speed, where one nautical (a division on a log line used to measure the speed of a ship) mile per hour is approximately 1.85 kilometers (1.15 statute miles) per hour.

12

A computer program that would increase the engine speed of the ship from 55 RPM to speed of 78.7 RPM over a span of 43 minutes.

13

A sailing term, which means the right-hand side of a ship as one faces forward.

14

A navigational device that automatically keeps ships or planes or spacecraft on a steady course.
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The Exxon Valdez Oil Spill

Bligh Island and Bligh Reef had been known to navigators since 1930. There was a wellestablished sea lane that took ships to the west of the Bligh Reef, but Hazelwood took the vessel east of the shipping lanes to avoid the growlers. After being outside the sea lane, the EV’s course was directed toward Bligh Reef. However, it would not have been too difficult to avoid the collision with Bligh Reef. The ship was supposed to sail west until the time it could see the navigation light at Busby Island, which was clearly visible at night, some distance north of the reef. The space between the ice in the water, visible at night only on radar, and the Bligh Reef was less than a mile. The NTSB15 in its report stated that an experienced ship captain was required to sail the ship through this critical turn considering the ice in the water, the darkness of the night, the significance of turning away from Bligh Reef before colliding with it, and the huge size of the oil tanker which was three times bigger than a football field.

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The report also stated that a special license was required under Coast Guard laws to navigate the oil tanker in that part of PWS and Hazelwood was the only person on the ship who had the license.
It pointed out that Captains were not supposed to leave the bridge during critical maneuvers such as this one. Moreover, before leaving, Hazelwood had put the ship on autopilot, which was not usually done when a vessel was out of the shipping lanes since the autopilot increased the speed of the vessel. This mistake led to the EV approaching the reef faster, thus reducing the time in which the error could have been rectified.

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The Coast Guard investigators, who boarded the EV several hours after the disaster occurred, reported that Hazelwood had smelled of alcohol. The tests conducted later revealed that he had consumed at least eight Vodka doubles and his blood alcohol level stood at 0.241 – more than six times the permissible level as per the law. It was also found that Hazelwood was an alcoholic who had been treated medically, in a 28 day residential program, and that he had dropped out of this program. Industry experts criticized Exxon’s top executives for allowing Hazelwood to take charge of the EV in spite of knowing that he had an alcohol problem and had been treated for it earlier. Later, Exxon’s Chairman accepted that putting Hazelwood in charge of the EV was a big mistake. D

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Reportedly, there were other lapses that led to the disaster. For instance, there had to be at least two officers on the bridge, but after Hazelwood left, there was only one. Thus, Hazelwood by leaving the bridge had violated federal pilotage regulations. Though Cousins had three years of experience he was not certified to navigate the EV out of PWS. Moreover, he had remained on duty beyond the limits specified by federal fatigue laws. The bridge was left to Cousins who was assisted by helmsman, Robert Kagan (Kagan). Cousins and Kagan thought that they had taken the turn properly, but unfortunately they had not. When Cousins realized that the EV was not turning, he directed an emergency maneuver16 that did not work.
Experts also felt that there should have been more crew members on board. According to Arthur
McKenzie of the Tanker Advisory Center in New York, tankers carried a crew of 40 to 42 to manage about 6.3 mn gallons of oil in the 1950s. On the other hand, the EV carried a crew of 19 to transport 53 mn gallons of oil. Though Exxon argued that modem automated vessel technology
15

NTSB is an independent federal agency that investigates every civil aviation accident in the US and significant accidents in the other modes of transportation such as railroad, highway, marine and pipeline and issues safety recommendations aimed at preventing future accidents.

16

A controlled change in movement or direction of a moving vessel.

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The Exxon Valdez Oil Spill

allowed reduction of manpower without compromising on safety, experts17 said automation did not replace humans with systems. Rather, it put the human beings in a more demanding role by reducing manual workload but increasing mental workload.
It was also found that Exxon had been regularly violating federal fatigue laws and its loaded tankers had frequently departed from Valdez at night in dangerous icy conditions, just to save money. The longer it took the crew to deliver the oil, the more it cost Exxon. Exxon’s tankers therefore sailed through the night steaming the tankers at a near full speed.
The failure by the Coast Guards to track the EV by radar in PWS came in for criticism too. This monitoring might have resulted in an alert that could have kept the EV off the reef. The Coast
Guards blamed faulty equipment and a change of shift for their monitoring lapses.

THE RESCUE EFFORTS

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The oil spill from the EV led to a major environmental disaster that threatened the survival of the food chain that supported PWS’ commercial fishing industry. The lives of ten million migratory shore birds and waterfowls, hundreds of sea otters, dozens of other species such as harbor porpoises and sea lions, and several varieties of whales were in danger. Such a huge amount of oil had never been spilled over the northern coastal region and biologists were unsure of the implications and how to respond. The location of the spill was remote and it was accessible only by helicopter and boat. Since the spill site was located two hours by boat from the port of Valdez every task was time consuming and equipment had to be delivered by boat or by air. The most important task was to prevent further oil spill as the EV was in an unstable position; the next move was to clean the spill up as quickly as possible.

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The Alyseka Pipeline Service Company (Alyseka)18 was chosen to shoulder the responsibility of cleaning up the spill. Soon, Alyseka opened an emergency communications center in Valdez and an operations center in Anchorage, Alaska. However, shortage of required equipment slowed down the response efforts. For instance, Alyeska did not have enough skimmers19 and brooms to cleanup the huge oil spill of 11 mn gallons. To make matters worse, the brooms and skimmers that were available could not be sent to the site as Alyeska’s response barge20 was not in order. It took time to repair and load the barge and it was 12 hours before it reached the EV. Alyeska’s response to the disaster was extremely slow and inadequate and the company failed to fulfill its obligations.
Finally, Exxon took up the responsibility of cleaning up the spill at its own expense. The company’s emergency center in Houston, Texas, sent equipment to stabilize the ship. It then sent its oil tanker ‘Exxon Batan Rouge’ to remove the oil left in the EV. The company also opened a refueling station for helicopters, which played a key role in the clean-up process. More than 274 tons of equipment including brooms, skimmers, and dispersants had arrived at the disaster site by the fourth day.
17

‘SPILL: The wreck of the Exxon Valdez, Final Report,’ Alaska Oil Spill Commission, State of Alaska,
February 1990.

18

Alyeska operates the Trans Alaska Pipeline System (TAPS) and the shipping terminal at Valdez. Exxon and other oil companies that operate in Alaska, each own a stake in this company. Alyeska is also responsible for carrying out plans for oil spill emergencies in these areas.

19

Skimmers are boats with boom that collect oil, and a large tank or barge for holding the oil, and a sucker.

20

A long, large, usually flat bottom boat for transporting freight.
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The Exxon Valdez Oil Spill

Exxon established a communication network to provide the latest information on the spill and the progress of the clean-up exercise. The company installed four weather stations around PWS in cooperation with the Coast Guard since weather was a key factor in planning activities related to the cleaning up of the spill. Several hundreds of people were involved full-time in the clean-up operations. More than 1000 Coast Guard personnel, along with employees from the National
Oceanic and Atmospheric Administration, the US Fish and Wildlife Service and Environmental
Protection Agency, helped in the disaster response activities. Specialists from the Hubbs Marine
Institute of San Diego, California, established a facility to clean the oil off the sea otters and The
International Bird Research Center, California, established a facility to clean and rehabilitate oiled waterfowl. Sensitive ecological environments were identified based on the degree of damage occurred and were taken up first for the purpose of cleaning. Special techniques were adopted for cleaning the areas. Even as the cleaning exercise was continuing, a huge storm broke over PWS. The storm compounded the problem, pushing the oil 40 miles further into the Sound. The oil spread to several beaches. C

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In spite of the measures taken by Exxon, many birds and mammals died since adequate resources did not reach the disaster site quickly enough. Media reports repeatedly alleged that the efforts to clean up were neither quick enough nor adequate. The oil spill took three years to clean up. And even then, it was not possible to completely clean up all the beaches. At its peak, the clean-up effort included 10,000 workers, 1,000 boats and 100 airplanes/helicopters. Exxon claimed to have spent about $2.1 bn on the clean-up effort (Refer Exhibit V for a detailed list of clean-up methods adopted by Exxon).

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THE DAMAGE DONE

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The crude oil contaminated 1300 miles of the coastline causing severe damage to the environment.
The spilled oil and the subsequent clean- up efforts had a severe negative impact on birds and sea animals. According to the EVOSTC, more than 35,000 birds with their feathers soaked in oil were found dead within a couple of days after the spill. The spill killed an estimated 2,50,000 seabirds,
2,800 sea otters, 300 harbor seals, 250 bald eagles, 22 Orca or killer whales and billions of salmon and herring eggs (Refer Exhibit VI for a detailed list of the species affected and Exhibit VII for photographs of the disaster).
The fisherman and other people living in the region were badly affected as well. The spill severely impacted the South Central Alaska fisheries, which provided the means of livelihood for the region’s small communities. Fishermen suffered heavy economic losses as the fisheries were shut down in 1989. The spill had severe psychological and social consequences too for the area’s human population as unemployment, alcoholism, drug and suicide rates increased.
The oil spill also affected the tourism industry in the region. PWS was a popular tourist destination mainly for its beaches and picturesque scenery, and sea otters were the main attraction for the tourists. After the spill, the number of tourists visiting the Sound decreased significantly.
In December 2003, the results of a study21 conducted by the University of North Carolina at
Chapel Hill was published in the Journal Science. The study stated that the oil’s negative effects had lasted much longer than expected. It said large quantities of the oil still remained in many parts of the Sound in subsurface reservoirs. The oil laid in conditions where weathering by wave action,
21

Peterson CH, ‘Long-term Ecosystem Response to the Exxon Valdez Oil Spill,’ Science Magazine,
December 19, 2003.

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The Exxon Valdez Oil Spill

light and bacteria was inhibited and toxicity remained there for more than a decade. This had long-term effects on many species. For example, continuous exposure to the oil pushed up mortality among incubating pink salmon eggs for four years after the spill. Marine mammals and sea ducks suffered high mortality for years after the disaster struck mainly because they ate invertebrates contaminated by oil and also came into direct contact with oil while digging for prey.
Where the human population was concerned, the study stated that even 15 years after the disaster, many residents still suffered from depression and post-traumatic stress syndrome.

THE AFTERMATH
In 1991, after a civil suit was filed against Exxon, the US Federal court approved establishing of
$900 mn restoration fund (payable over a period of 10 years), the largest settlement on record for damage done to natural resources. An EV Oil Spill Trustee Council (EVOSTC) was appointed to oversee and coordinate the restoration efforts.

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On October 09, 1991, a US district court resolved various criminal charges against Exxon as well as civil claims brought by the federal and state governments for recovery of natural resource damages resulting from the oil spill. The settlement had three distinct parts. Exxon was fined $150 mn, the largest fine ever imposed for an environmental crime. Exxon was also asked to pay $100 mn for the injuries caused to wildlife.

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In 1994, 35,000 fishermen and other disaster victims in the Alaskan region filed a lawsuit against
Exxon, claiming $5 bn as punitive damages. The federal jury ruled that it was Exxon’s recklessness that had caused the disaster since the management had been well aware that
Hazelwood was an alcoholic. The judgement was given in favor of the fishermen and other victims and Exxon was asked to pay $5 bn as punitive damages. However, Exxon claimed that it had already spent $2 bn on clean-up activities; it had paid $300 mn in 1989 to fishermen for the losses they suffered, and $1 bn to settle state and federal claims. The company stated that this was the largest sum paid by any corporate to mitigate the environmental damage caused by an industrial disaster. Describing it as ‘unjust and excessive,’ Ed Burwell, Exxon Spokesperson, said, “For these reasons we do not believe punitive damages are warranted in this case.”22

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Critics claimed that Exxon should have paid the punitive damages years ago and enhanced its image. Yet the company continued to appeal against the verdict. Mentioning the reason for delaying the payment of damages, Lee R. Raymond, National Association of Attorneys General, stated in a letter dated March 25, 1999, to Exxon’s CEO, “Each year Exxon delays payment of its obligation it earns an estimated $400 million from the difference between the statutory interest rate on judgments of 6 percent and the company's internal rate of return of about 14 percent.”23
A survey24 funded by EVOSTC in 2001 indicated that a total area of approximately 20 acres of shoreline in PWS had been contaminated with oil. Oil was found at 58 percent of the 91 sites assessed and was estimated to have the linear equivalent of 5.8 km of contaminated shoreline.
On January 29, 2004, a federal judge asked ExxonMobil (after the merger with Mobil Corporation in 1998) to pay $6.75 bn ($4.5 bn in punitive damages and about $2.25 bn in interest) to Alaskans affected by the EV spill. However, Exxon planned to appeal against the decision again.
22

Phillips’ Netalie, ‘Years Later Spill’s toll rising, Anchorage Daily News,’ May 13, 1999.

23

Nader, Ralph, ‘Justice, Delayed is Justice Denied,’ www.commondreams.org, October 09, 2000.

24

The survey was conducted by the National Oceanic and Atmospheric Administration (NOAA).

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The Exxon Valdez Oil Spill

In an article25 published on its website, Exxon claimed that PWS was ‘healthy, robust and thriving.’ It also disagreed with EVOSTC’s claims that only six species had recovered completely.
Exxon stated that these conclusions about species recovery created an erroneous impression of the true conditions in PWS. It also said that it had retained some top scientists after the spill to assess the impact of the oil spill on PWS ecosystem.
Exxon rejected the claims of EVOSTC that oil remained in large proportions on the beaches of
PWS. The company argued that though the oil spill had devastating effects in the short term, its role in affecting the ecosystem and wildlife was not very evident in the long term. As time passed, it was difficult to differentiate between natural changes and the changes caused due to the oil spill.
In line with Exxon’s argument, Jerry Neff26, a scientist who once worked for Exxon said, “Spilled oil takes a long time to dissipate in many cases, the so-called long-term effects are really due to natural changes in the environment. Trying to dig up the spilled oil would do more harm than good, it would cause a lot of disturbances and set the recovery back several years.”27

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Exxon further stated, “As a part of our commitment to sound science and to the people of Alaska, we have continued over the years to monitor PWS ecosystem. Oil remnants are only being found where they were known to have existed at the conclusion of the clean-up and where the Coast
Guard concluded there was no net environmental benefit associated with further clean-up eleven years ago. The abundance of biology in close association with the remnant oil remaining today refutes the notion that this oil residue has any significant biological effect. The vast majority of the effected shorelines have no visible oil remnants on the surface or sub-surface.”28

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However, environmentalists felt that the oil that still remained in PWS was slowly poisoning sea life. They claimed that Exxon had been funding those studies that stated all was well in PWS but the real picture was very different. They alleged that Exxon had funded research in legal and academic journals, which supported its argument that juries were not competent to rule in punitive damage cases like the EV spill.29According to Professor Rick Steiner, “Exxon Mobil has constructed its own reality of the spill - minimal impacts and rapid recovery.”30
ExxonMobil Statement, The condition of Prince William Sound, www.exxon.com.

26

A marine biologist and ecologist with the Massachusetts-based Battelle.

27

Yereth, Rosen, ‘Exxon penalties could rise as Valdez oil lingers,’ www.forest.org, March 24, 2004.

28

ExxonMobil Statement, ‘The condition of Prince William Sound,’ www.exxon.com.

29

Zarembo, Alex, ‘Exxon Funded Research into Jury Awards, Washington Post,’ December 26, 2003.

30

Yereth, Rosen, ‘Exxon penalties could rise as Valdez oil lingers,’ March 24, 2004, www.forest.org.

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EXHIBIT I

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MAP OF THE EXXON VALDEZ OIL SPILL

Source: www.evostc.state.ak.us.

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The Exxon Valdez Oil Spill

EXHIBIT II
THE OIL POLLUTION ACT (1990)
The Oil Pollution Act (OPA) of 1990 streamlined and strengthened EPA’s ability to prevent and respond to catastrophic oil spills. A trust fund financed by a tax on oil is available to clean up spills when the responsible party is incapable or unwilling to do so. The OPA requires oil storage facilities and vessels to submit to the Federal government plans detailing how they will respond to large discharges. EPA has published regulations for aboveground storage facilities; the Coast Guard has done so for oil tankers. The OPA also requires the development of Area
Contingency Plans to prepare and plan for oil spill response on a regional scale.
The OPA among its key provisions,
1. Required double hulls for newly constructed tankers operating in U.S. waters, and the phase- out or retrofit of existing single hull vessels by 2015.

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2. Established area committees of federal, state and local officials, and charged them with developing comprehensive oil spill contingency plans. Vessel response plans and facility response plans also required.

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3. Significantly expanded Coast Guard response capabilities, including creation of a National
Strike Force Center in Elizabeth City, North Carolina, providing specialized equipment, data, and personnel to support three national strike forces in New Jersey, Alabama and
California.
4. Created a billion-dollar Oil Spill Liability Trust Fund to assure adequate federal funding for quick response.

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5. Raised the limits of liability for those that spill oil and broadened the scope of damages that claimants could recover. Before OPA90, most non-federal claimants were forced to seek redress directly from the negligent party. Compensable damages were narrowly defined, and existing case law stipulated that in order to claim damage, one had to be physically impacted or touched by the oil.

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Source: www.baysurrondings.com, www.madcon.com.

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EXHIBIT III
EXXONMOBIL – CONSOLIDATED STATEMENT OF INCOME (1999-2003)
(In mn $)
2001

2000

1999

173,173
24,515
13,989
5,164
216,841
20,190
23
237,054
4,373
5,311
246,738

149,526
20,406
10,315
4,269
184,516
16,408
25
200,949
2,066
1,491
204,506

153,335
22,423
12,292
4,702
192,752
15,9943
20
208,715
2,174
1,896
212,785

164,510
29,532
11,472
4,558
210,072
17,501
23
227,596
2,434
1,816
231,846

134,846
20,252
7,969
4,843
167,910
13,777
72
181,759
1,646
1,348
184,753

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Revenues and Other Income
Sales and other operating revenue
Petroleum and natural gas
Petroleum products, including excise taxes
Crude oil
Natural gas
Other
Total petroleum and natural gas
Chemical products(1)
Other
Sales and other operating revenue (2)
Income from equity affiliates
Other income
Total revenues and other income

2002

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2003

Chemical products supplied to petroleum subsidiaries not included above

(2)

Excise taxes included in sales and other operating revenue

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(1)

Source: www.exxonmobil.com.

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EXXONMOBIL – FINANCIAL HIGHLIGHTS (1999-2003)

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Sales and other operating revenue
Net income
Cash flow from operations and asset sales
Capital and exploration expenditures
Cash dividends to ExxonMobil shareholders
Research and development costs
Cash and cash equivalents at year end
Total assets at year end
Total debt at year end
Shareholders’ equity at year end
Average capital employed (5)
Market valuation at year end

(In mn $)

2003

2002

2001

2000

1999

237,054
21,510
30,788
15,525
6,515
618
10,626
174,278
9,545
89,915
95,373
269,294

200,949
11,460
24,061
13,955
6,217
631
7,229
152,644
10,748
74,597
88,342
234,101

208,715
15,320
23,967
12,311
6,254
603
6,547
143,174
10,802
73,161
88,000
267,577

227,596
17,720
28,707
11,168
6,123
564
7,080
149,000
13,441
70,757
87,463
301,239

181,759
7,910
15,985
13,307
5,872
630
1,688
144,521
18,972
63,466
83,836
280,150

Source: www.exxonmobil.com.

12

The Exxon Valdez Oil Spill

EXHIBIT IV

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y

A NOTE ON EXXON VALDEZ

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o

N

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C

Vessel Information: The EV was a typical modern tank ship of all welded steel construction. It was delivered to Exxon on December 11, 1986, and was the largest ship ever built on the West Coast of the
United States. It was the first of two Alaska-class tank ships designed and built for the Exxon Shipping
Company by the National Steel and Shipbuilding Company in its San Diego shipyard. The vessel was designed to meet standards of the International Convention for the Prevention of Pollution from ships of
1978. These standards provided for protectively located ballast tanks, maximum tank compartment length, and damage stability. The EV was certified by the US Coast Guard for the transportation of crude oil products and combustible liquids Grade B or lower. It was 987 feet long, 166 feet wide, and 88 feet deep from the main deck to the flat keel. The tank ship had a maximum draft (loaded draft) of 64.5 feet. At maximum draft, the ship could transport about 1.48 million barrels (25238.1 gallons) of crude oil per voyage. The ship was propelled by an eight-cylinder, reversible, slow-speed Sulzer marine diesel engine.
The main engine was rated at 31,650 brake horsepower, which sustained a sea speed of 16.25 knots (18.7 mph) at the engine’s maximum continuous rating of 79 rpm. The main engine was designed to operate on
No. 2 diesel oil or heavy fuel oil. The main engine crankshaft was directly coupled to the propeller shaft, driving a single, five-bladed propeller (NTSB Marine Accident Report).
Vessel Damage: An inspection of the vessel in dry-dock at the National Steel and Shipbuilding Company shipyard in San Diego was conducted on August 29, 30, and 31, and September 1 of 1989. The inspection revealed that there were major holes in the forepeak tank and that center cargo tanks 1, 2, 3, and 4 had been ripped open over almost their entire lengths. Although it had holes, center cargo tank 5 sustained the least damage. Starboard tanks 1, 3, and 5 were also severely damaged, as was starboard ballast tank 2. Starboard ballast tank 4 sustained minor damage, resulting in a small opening at the bottom of the forward bulkhead.
The double bottom below the starboard slop tank was also ripped open. (see diagram). Most of the loss of cargo from the EV occurred during the first eight hours. Initial measurements by the chief mate (James
Kunkel) about 30 minutes after the grounding indicated that 115,000 barrels of the 1,263,000 barrels loaded had been lost. These calculations were based on the gauge readings made in the cargo control room. By
0600, gauge readings indicated about 215,000 barrels had been lost. (NTSB Marine Accident Report)
Current Status: The Exxon Shipping Company was renamed Sea River Shipping Company. The EV was repaired and renamed the Sea River Mediterranean, and today hauls oil across the Atlantic. The tanker is prohibited by law from ever returning to Prince William Sound.
Source: www.library.thinkquest.com.

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The Exxon Valdez Oil Spill

EXHIBIT V
CLEAN-UP METHODS ADOPTED BY EXXON
Burning oil is a very effective way of reducing the amount of oil on the water. When a burn is conducted, like the test burn carried out by Exxon on tens of thousands of gallons of oil can be reduced into tarry residue. This residue is then easily recovered by hand or scooping devices.
However, burning has massive detrimental effects associated with it.
Boom is designed to work both on the water's surface, and just below. It is used as a barrier, deflector and/or corral for collected oil. It is also used as an absorbent, and in conjunction with other techniques. The boom is the backbone of most clean-up operations. It is stored in large rolls or accordion style to make for easy deployment off the side or stern of a ship. One of the drawbacks of the boom is its need for constant attention. It quickly gets weighted down with oil and must be retrieved and cleaned.
Hot water treatment was popular until it was determined that the treatment could cause more damage than the oil itself. Small organisms were being cooked by the hot water.

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High pressure cold water treatment and hot water treatment involved dozens of people holding fire hoses and spraying the beaches. The water, with floating oil, would trickle down to the shore.
The oil would be trapped within several layers of boom and either be scooped up, sucked up or absorbed using special oil-absorbent materials.

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Mechanical treatment is the use of machines to remove oil from beaches. Front-end loaders, backhoes, tractors, and other mechanical units were used in 1990 and a limited amount in 1991.

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ot

Dispersants are used to disperse oil from the surface of water into the lower layers of the water column allowing it to spread through a greater amount of water. However, many experts agreed that sending the oil into the water column had negative effects on fish, plants, and small animals that use or live in the water. Though dispersants do a good job of keeping the oil off the beaches if all the steps are properly executed and conditions are adequate, their use remains a topic of debate for environmentalists

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Skimming is a system involving boats with boom that collect oil, a boat with a large tank or barge for holding the oil, and an actual sucker. For a skimming operation to be successful it must have good maintenance, high storage capacity, fast transfer of oil to and from the temporary holding (the tank or barge), and a good method of containing oil so it can be collected (boats with boom). Equipment and its current state are important, but the condition under which the skimming system has to operate is also important. The conditions were perfect for skimming the first few days after the spill. Unfortunately though, the equipment was lacking.
Bioremediation is the application of fertilizers to increase the number of oil - eating microbes.
The applied fertilizers are not designed to target oil-eating microbes but the entire microbe population, thus maintaining a relative balance. The microbes that break up the oil do so by using the carbon found in the oil for various natural causes. Without the carbon, the oil breaks up because of its loss of the molecular bond. However, this method too did not prove to be the answer everyone was looking for as it was not without its ill-effects.
Chemical cleaners were Exxon's first attempt at overcoming the problems of hot-water washing.
A chemical produced by Exxon called Corexit 9580M2 was used. Corexit is essentially kerosene with the most toxic components (the aromatics) taken out. Unfortunately, the hopes of the cleanup officials were not fulfilled because, as with many other treatments, Corexit was not effective enough considering its environmental effects, to move beyond the testing stages. One of the reasons why Corexit did not succeed was that there was a lack of scientific information regarding its toxicity as well as its short-term and long-term effects.
Source: The Exxon Valdez Oil Spill, Final Report, State of Alaska Response, 1993.

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The Exxon Valdez Oil Spill

EXHIBIT VI
RECOVERY STATUS IN PWS (2002)
Recovery Unknown

Not Recovering

Recovering

Recovered

Cutthroat Trout
Dolly Varden
Kittlitz's Murrelet

Common Loon
Cormorants
Harbor Seal
Harlequin Duck
Pacific Herring
Pigeon Guillemot

Clams
Killer Whales
Sea otter
Mussels
Sediments
Marbled murrelet
Wilderness Areas*

Pink Salmon
River Otter
Bald Eagle
Sockeye Salmon
Common Murre
Black Oystercatcher
Archaeological
resources*

Rockfish

o

Human Uses

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•

Wilderness Areas: The oil spill delivered oil in varying quantities to the waters and tidelands adjoining eight areas designated as wilderness areas by Congress or the Alaska State
Legislature.
Intertidal Communities: Portions of 1,400 miles of coastline were oiled by the spill in Prince
William Sound. The oil and intensive cleanup activities had significant impacts on the flora and fauna of the intertidal zone. Intertidal communities are intrinsically important and are resources for subsistence users, sea and river otters, and a variety of birds, including black oystercatchers, harlequin ducks, and pigeon guillemots.
Archaeological Resources: The oil spill area is believed to contain more than 3,000 sites of archaeological and historical significance. Twenty-four archaeological sites on public lands are known to have been adversely effected by cleanup activities or looting and vandalism linked to the oil spill. Damage assessment studies are limited to these public lands.

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Intertidal
Communities*

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Human services which depend on natural resources were also injured by the oil spill. The services below are each categorized as "recovering" until the resources they depend on are fully recovered. These include;
Commercial Fishing
Recreation and Tourism
Passive Use: It encompasses nonuse values, such as the appreciation of the aesthetic and intrinsic values of undisturbed areas and the value derived from simply knowing that a resource exists. Subsistence: Fifteen predominantly Alaskan Native communities (with a total population of about 2,200 people) in the oil spill area rely heavily on harvests of subsistence resources, such as fish, shellfish, seals, deer, and waterfowl.
Source: Exxon Valdez Oil Spill Trustee Council (www.evostc.ak.state.us).

15

The Exxon Valdez Oil Spill

EXHIBIT VII
IMAGES FROM THE EVOS

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Exxon Valdez tanker circled with containment boom.

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Oiled sea otter on shore.

A line of clean-up workers hose down a rocky shore with hot water.

Dead oiled sea otter on the shore.
Source: Exxon Valdez Oil Spill Trustee Council.

16

The Exxon Valdez Oil Spill

ADDITIONAL READINGS AND REFERENCES:

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22.
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24.
25.
26.
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11.

Inside the Empire of Exxon the Unloved, The Economist, March 05, 1994.
O' Driscoll, Patrick, Ten years later, Case is Hardly Closed, USA Today,1999.
After Valdez, The Economist, 1999.
Watson, Traci, The End of an Arctic Paradise, USA Today, 1999.
Mcnatt, Robert, A Gusher from Valdez Funds, BusinessWeek, March 15, 1999.
Stains that Remain, The Economist, March 20, 1999.
Ten years after the Valdez Spill, Newsweek, March 29, 1999.
Raeburn, Paul, Its Time to put Valdez Behind us, BusinessWeek, March 29, 1999.
Phillips Natalie, Years Later Spill's Toll still Rising, www.adn.com, May 13, 1999.
Exxon Valdez disaster was 10 years ago, but how much has changed, The Guardian, July
12, 1999.
Nader, Ralph, Justice Delayed is Justice Denied, www.commondreams.org, October 07,
2000.
Erb, George, Exxon Valdez Case still twisting through Courts, www.bizjournals.com,
November 03, 2000.
Zarembo, Alex, Exxon Funded Research into Jury Awards, The Washington Post,
December 26, 2003.
Exxon Valdez Oil Spill Impacts Lasting Far Longer than Expected, Scientists Say, www.sciencedaily.com, December 23, 2003.
D’oro, Rachael, Judge Orders Exxon Mobil to pay nearly $7 Billion in Spill Damages, www.forest.org, January 29, 2004.
Exxon Hit with $6.75bn Spill Bill, www.news.co.uk, January 29, 2004.
Exxon Valdez disaster- an Ongoing History of Lies, www.greenpeace.org, March 11, 2004.
Lovgren, Stefan, Exxon Valdez Spill 15 Years Later the Damage still Lingers, National
Geographic News, March 15, 2004.
Rosen, Yereth, Exxon Penalties could Rise as Valdez Oil Lingers, www.forest.org, March
24, 2004.
Exxon Valdez, www.eightiesclub.tripoid.com.
Prince William Sound: Paradise Lost, www.thinkquest.org.
Introduction to Exxon Valdez Litigation, www.exxonvaldez.org.
America’s Largest Spill, www.boisestate.edu.
The Exxon Valdez Oil Spill, www.looking-glass.co.uk. www.nrdc.org. www.evostc.state.ak.us. www.library.thinkquest.org. D

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