Judgment Night (1993)

An Analysis of the Exxon Valdez Incident

Expertise in earth sciences is vitally important to many modern businesses, especially those involved in petroleum production or transportation, industrial manufacturing, or various industries which release waste or by products into the surrounding air or water.

The fact that massive punitive legal damages have been imposed by courts against huge corporations such as Exxon, Union Carbide, and Pacific Gas and Electric serves notice upon businesses that their very survival may well depend upon how their personnel deal with earth science related issues.

In order to emphasize the importance of the earth sciences to modern corporate business, an examination of the massive 1989 oil spill in Prince William Sound and how

it affected Exxon would be useful. The environmental damage was unprecedented, and initial public outrage against the corporation was very high, yet Exxon managed to weather the storm and continue to do business, in large part because of the efforts of its own earth sciences people.

The problems all began on March 24, 1989 at four minutes past midnight, when the giant oil super tanker Exxon Valdez struck a reef hidden under the pristine surface of Alaska’s spectacular Prince William Sound and began spilling vast amounts of crude oil into the sea. In the Alaskan darkness that spring night an environmental nightmare began that changed not only Prince William Sound itself, but the entire world, especially the business world. (Carr)

From a business perspective, despite the eventual development of a masterful but highly controversial public relations effort of unsurpassed size and scope that limited the damage to Exxon’s public image and business profits, the incident was nearly catastrophic for the corporation. The media jumped all over the story, politicians began to hold hearings, and corporations around the world watched with intense interest as Exxon struggled to survive the tidal wave of criticism. Many observers felt that the corporation’s image had been damaged beyond recovery.

In the first weeks after the disaster, upon the advice of their own earth sciences

people, who understood all too well how much environmental damage might ensue, Exxon volunteered to spend whatever money was necessary on cleanup efforts and assessments of environmental damages after the accident and before the settlement.

Over two billion dollars was ultimately spent by Exxon on these efforts, and the corporation’s public relations people spared no opportunity to publicize the amount being spent, and to repeatedly stress that it was voluntary, so the public would be aware of that fact and appreciate that Exxon was meeting its responsibilities to the public for the damage done to the environment. (Schouweiler)

Despite these efforts, nothing could stop the flood of lawsuits which resulted from

the spill. After a nightmarish thirty months of devastating negative publicity for Exxon, and extremely serious financial losses, a legal settlement agreement was finally reached

on October 8, 1991 between the plaintiffs—the State of Alaska and the federal government—and Exxon attorneys on both criminal charges and civil damage claims stemming from the incident. (Lord)

In settlement of civil charges, Exxon agreed to pay the State of Alaska and the

United States over nine-hundred million dollars over a ten year period. This money

would be used for environmental and wildlife restoration and would be administered by

six government trustees; three of them federal appointees, and the other three state appointees.

In settlement of criminal charges, it was agreed that Exxon would pay a fine of two-hundred and fifty million dollars. Two restitution funds of fifty million dollars each were established, one under state control and one under federal authority. Against strong opposition from many Alaskans, one-hundred and twenty-five million dollars of the balance was forgiven due to Exxon’s cooperation during the cleanup, and because of the upgraded and highly-publicized safety procedures Exxon earth sciences personnel had designed to prevent a reoccurrence. The remaining fifty million dollars was divided between the Victims of Crime Act account and the North American Wetlands Conservation Fund.

But another huge setback was in store for Exxon. On September 16, 1994, an angry jury in a United States Federal courtroom returned a stunning five billion dollar punitive damages verdict against the corporation. Exxon attorneys have fought this judgment in appeal after lengthy appeal over the last seven years, and on November 7, 2001 won a major victory when United States Court of Appeals justices threw out the 1994 punitive damages verdict.

But Exxon has suffered mightily since the Exxon Valdez went aground in Prince William Sound that fateful night in 1989, and it is not an exaggeration to say that the very existence of the corporation has been at stake. Any business, no matter how large or small, is at the mercy of public approval, for it needs public approval to sell its product. And in Exxon’s case, public approval has been very much dependent upon what the corporation’s earth sciences people have been able to say and do to convince the public that the environmental damage to the Alaskan coastline is nowhere near as damaging as other earth scientists have claimed.

In the twelve years since the oil spill, Exxon has relied heavily upon their own earth sciences personnel, and hired outside earth sciences experts in order to defend themselves against charges that they are liable for billions of dollars in environmental damage to the ecosystem of Prince William Sound.

For example, in April of 1991 Exxon’s public relations people unveiled twenty environmental studies and unleashed a nationwide media blitz, claiming that the recovery of Prince William Sound was well underway. Exxon earth scientists declared that the water of the sound was now clean, that fish were once again abundant and safe to eat, that wildlife along the Alaskan coast were thriving, and that the beaches had been effectively cleaned. (Carr)

Continuing the public relations campaign, in September of 1993 Exxon released a “Video for Students” and distributed it to thousands of public school districts all across the United States, except in Alaska, for obvious reasons. The video, featuring Exxon’s earth sciences people, stated Exxon’s case very effectively, and minimized the oil spill’s negative impact upon the environment of Prince William Sound and the surrounding Alaska coastline.

That same month Exxon’s earth sciences people also presented their own environmental impact findings in Atlanta, Georgia. Their findings concluded that

wildlife continued to thrive in Prince William Sound; that the recovery of the Sound had been remarkably rapid; and that there would be no long-term effects from the oil spill. Exxon also released glossy public relations material called “Myth and Fact”, in which Exxon’s earth scientists’ findings were stoutly defended as the truth and critic’s assertions were labeled as uninformed, false, or defamatory. Exxon also attacked a number of NOAA scientists, and accused them of mixing up Exxon Valdez oil with other oil in the Sound. (Keeble)

In 1994 Exxon’s earth sciences personnel once again starred in a carefully crafted media campaign that declared that the recovery of the Sound had been rapid and complete. Prominently featured in this media blitz was a report entitled Degrees of Disaster which relied heavily on Exxon’s own earth sciences data. The next year Exxon followed up on these efforts with the release of an Exxon-funded study by Christopher Wooley which concluded that Prince William Sound was better off after the spill than it had been before. (Steiner)

Finally, in March of 1998, anticipating a renewed public and media focus on the Exxon Valdez disaster as the March 24, 1999 tenth anniversary approached, Exxon and the American Petroleum Institute organized and conducted their own oil spill conference in Seattle. As with previous public relations efforts throughout the decade, Exxon pounded away on the theme that it had spent billions of dollars to clean up the ecosystem of Prince William Sound and that its earth sciences people had invested exhaustive time and effort to collect scientific data to prove the success of its voluntary efforts to restore the area to the condition it had been in before the accident.

In conclusion, protecting the environment while producing, transporting, refining

and marketing fuel is a challenge the petroleum industry must meet every day. For all

of the benefits oil has brought to modern society, risk is inherent in taking it from the Earth—in drilling wells, storing fuel for future use and transporting it from place to

place.

The crucial importance of corporate earth sciences expertise in the petroleum industry has never been demonstrated more clearly than in the case of the Exxon Valdez and the oil spill catastrophe in Alaska’s Prince William Sound. Relying upon their earth sciences people, Exxon effectively countered criticism and charges that Exxon was responsible for vast and irreversible environmental damage to the Alaskan coastline. Scientific studies, expert testimony, and frequent media blitzes citing favorable facts and interpretations were quite successful.

Exxon’s earth sciences activities saved the corporation many billions of dollars in avoided punitive damages, primarily because Exxon was perceived by the public to be fully cooperative, had a vital corporate compliance program in place, and compared favorably with rival corporations in terms of a proven history of voluntary compensation for accidents.

About the Author

H. S. – is the author for Istanbul Property Management Organization’s information section. Please visit Istanbul Real Estate Management for more information.

Scene from ”Judgment Night” (1993)

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