The Exxon Valdez Oil Spill

Information based on "The Wreck of the Exxon Valdez," from Ferrell and Fraedrich, Business Ethics: Ethical Decision Making and Cases, Third Edition (Boston: Houghton Mifflin, 1997).

The Exxon Valdez, a tanker loaded with oil from the shipping terminal in Valdez, Alaska, ran aground on Bligh Reef in Prince William Sound (in the Gulf of Alaska) at 12:04am, on the 24th of March 1989. At the helm was of Gregory Cousins, Third Mate, who was not licensed to pilot the ship through Prince William Sound, whose waters were considered treach-erous. Joseph Hazelwood, the captain of the ship, was apparently asleep below deck. Third Mate Cousins had tried to dodge floating ice, performing a series of unusual right turns. When the ship hit Bligh Reef, its hull ruptured and much of the cargo spilled. In the next few days, the oil spread rapidly, causing the deaths of thousands of sea birds, sea otters, and other wildlife. It covered the coastline with oil. As a result of the wreck and resulting contamination of marine life, the fishing season in the sound was halted for several years.

11 million gallons of crude oil were spilled. Eventually the oil covered 2600 square miles of water in the Sound and the Gulf of Alaska.

The major economic institutions involved were Exxon Corporation and Alyeska Pipeline Service Company. In fact, the Exxon Valdez was Exxon's largest tanker. Alyeska is a consortium of eight firms that operates the Trans-Alaska pipeline and the Valdez shipping terminal.

Transcripts of radio conversations between Hazelwood and the Coast Guard right after the accident show that the captain tried for an hour to rock the vessel loose from the reef. Coast Guard officials state that this action might have sunk the tanker and spilled more oil. According to them, Hazelwood paid no attention to their admonitions that what he was doing might make the oil spill many times worse than what it had been.

Coast Guard officials boarded the tanker at 3:30am. Already 138,000 gallons had been spilled.

When the Valdez terminal had begun operations, an oil spill contingency plan had been filed by Alyeska. According to this plan, crews from Alyeska should have already arrived at the tanker with containment equipment, but they were not there.

When Alyeska was notified, it sent an observation tug to the spot and began to gather its oil-spill containment equipment. Apparently much of this equipment was unready for its tasks. Alyeska loaded equipment, including emergency pumps, onto a damage barge, but because the Coast Guard decided the barge would be too slow, Alyeska crews had to reload it onto a tug, losing more time.

Not realizing that the tanker itself was equipped with an alcohol testing kit, Coast Guard officials tested Hazelwood for alcohol nine hours after the wreck. The test showed that he had a .061 blood-alcohol content. Coast Guard regulations require that persons operating a ship not have a level over .04. Four other crewmen, including the third mate, tested negative for alcohol. Exxon officials later confessed that they were aware that Hazelwood had gone through a program for alcohol detoxification. Still they had given him command of the Exxon Valdez.

Some Alyeska containment equipment first arrived at 2:30pm. The rest of it did not arrive at the spot until the next morning. Neither Alyeska nor Exxon had containment booms and chemical dispersants in sufficient quantity. 18 hours after the spill they were ready to test the dispersants, which they did by tossing the chemicals out the door of a helicopter. The chopper's rotor dispersed the chemicals and they missed the target altogether. Skimmer boats, whose job was to scoop oil from the water, kept breaking down and clogging. The skimmers filled up quickly and were taken out of action for long periods as the crude oil was emptied from them. Communi-cation breakdowns between coordinators on shore and crews at the scene undermined cleanup efforts. Local fishermen had to help the corporations relay messages since the latter were apparently at a loss to do so themselves. The corporations failed to make use of a fleet of private fishing boats whose owners were prepared to assist with containment and cleanup.

36 hours after the accident, the tanker was fully surrounded by containment booms. But at that point the oil spill covered 12 square miles. Because the seas were too calm, Exxon could not use chemical dispersants, whose effectiveness requires wave action. Finally, on Sunday after-noon, about 60 hours after the accident, Exxon was given Coast Guard permission to use chem-ical dispersants. Sunday night a 73 mph storm drove the oil slick 37 miles into a section of the sound. The weather halted cleanup operations until Monday afternoon. Although Exxon eventually applied more than 5000 gallons of dispersants, the oil had become too emulsified and the dispersants could not work properly. Within a few days, it had spread to impact 2600 miles of coastline and sea.

The disaster was not entirely unanticipated. From the early 1970's on Alaskan government officials and fishermen had stated concern that a significant oil spill would happen sooner or later. In 1972 Alyeska, along with its oil company owners and federal government officials, had promised that safety features like double hulls and protective ballast tanks would be included in tankers operating from Valdez. But Alyeska had by 1977 convinced the Coast Guard that the safety features were not necessary. The Exxon Valdez, like most of the tankers, did not possess them.

According to the contingency plan filed by Alyeska, emergency crews were to surround any spill with containment booms within five hours--yet it took them a day and a half in the case of the Exxon Valdez. The plan had affirmed that a 15-person emergency crew would be on alert around the clock, but the company had difficulty rounding up the team. (It was the beginning of the Easter holiday weekend.) Exxon's oil spill expert staff had been reduced since 1985. At least nine oil spill managers had left or retired and had not been replaced. They included Exxon's chief environmental officer.

A state inquiry showed that Alyeska's equipment was unprepared for the spill. Three tugboats and 13 oil skimmers were to have been ready, but there were only two of the former and seven of the latter. Alyeska was to have 21,000 feet of boom for containment but it had only 14,000. The barge to carry the booms and store the skimmed oil was out of commission, having been damaged in a storm. But even the required equipment would have been insufficient, given the size of the Exxon Valdez (1000 feet long with a capacity of 1.2 million barrels). A replacement barge had been ordered. En route from Texas, it was in Seattle on March 24!

Alyeska had performed regular "spill drills" in the period prior to the disaster, but state officials said that drills had been mishandled and were deemed unsuccessful. Crew members fre-quently were unaware how to operate the equipment assigned to them and Alyeska's equipment and responses were not satisfactory.

Lawrence Rawl, the chairman of Exxon, made a public apology for the spill, using full-page advertisements in newspapers and a letter to holders of Exxon stock. Liability for the spill and responsibility for clean-up was "accepted" by the company. When summer arrived, the com-pany employed 10,000 people, and used 1000 vessels, 38 oil skimmers, and 72 aircraft trying to clean up the beaches and wildlife. It wanted to finish the work before mid-September, since winter weather makes such efforts difficult.

Exxon says it saved $22 million by having the Exxon Valdez built without a second hull, but, by March 22, 1990, the firm had spent $2 billion to clean up the spill, while insurance companies agreed to pay only $400 million. The firm was able to take an after-tax charge of $1.7 billion to defray legal bills and clean-up costs. In August 1989 Alaska filed suit against Exxon and the largest remaining firm involved in Alyeska for their deficient management in responding to the spill. The state demanded compensatory and punitive damages possibly in excess of $1 billion. Hazelwood was fired by Exxon soon after the accident but he was found guilty in March 1990 for the misdemeanor of negligent discharge of oil. He was acquitted on the charge of drunk driving.

The public, along with state and federal officials, criticized Exxon for inadequate clean-up efforts. A Coast Guard representative said, "The concept of being clean makes you think no oil is there. The oil is there, but it may be three feet or two feet beneath the surface." Exxon's President Lee Raymond commented, "Assuming that we can have people working till mid-September, we have a good shot at having all the beaches treated. But not clean like Mr. Clean who shows up in your kitchen. Our objective is to make sure the ecosystems are back in shape." Quite a few Alaskans and environmentalists had doubts whether the company's idea of "clean" was sufficient. By 25 July 1989, 600 miles of shoreline had been "treated" while another 200 miles had not yet been done. Meanwhile, incoming tides brough new oil slicks to cover just-treated beaches.

It had been almost six days after the spill before Exxon chairman Rawl publicly com-mented on it. When he spoke, he did so from New York. Harry Nicolay, a Boston "crisis management" consultant, said, "When the most senior person in the company comes forward, it's telling the world that we take this as a most serious concern." Crisis management specialists think Rawl's delay and his failure to go to the scene angered the public despite the firm's efforts to clean up after the spill.

One company executive told reporters that consumers would pay for the cleanup in the form of higher gas prices. This was perhaps true, but it was not welcomed by the public. Exxon officials' efforts to blame cleanup delays on Coast Guard and Alaskan officials were met with public skepticism. Gerald C. Meyers, a specialist in corporate crisis management, described Exxon's newspaper apology as "absolutely insincere." To say that it had sent "several hundred people" in a company of more than 100,000 employees was, he said, ill-advised. Exxon stated it would cease shore cleanup on September 15, 1989, regardless of how much remained to be cleaned. Public protest convinced Exxon to announce that it would return in the Spring if the Coast Guard decided that more cleanup was justified.

So dissatisfied was the public with Exxon's reaction to the crisis that national consumer groups urged the public to boycott all the firm's products. Dissatisfaction with cleanup efforts was also expressed by 20,000 Exxon credit card holders who cut their cards up and returned them to Exxon.

In the courts, fishermen and fisheries were awarded $286 million as compensatory damanges for losses incurred as a result of not being able to fish in the area of the spill. But a group of 14,000 fishermen and citizens in the region sought punitive damages of $15 billion. In Sept. 1994 Exxon was ordered to pay $5.3 billion, with $4 billion for environmental costs and $1 billion as retribution for insensitivity. But Exxon appealed both damage awards. As of 1996, thanks to the appeal, Exxon has avoided paying both the damages and any interest on them. Steve Schroer, attorney for the Alaskan fishermen and citizens, says: "Exxon has made it clear that it is going to appeal this to the end of the earth." Exxon is also in litigation with insurance providers, including Lloyd's of London, which refuse to pay Exxon for its cleanup efforts. These providers claim they do not legally have to pay since (1) the law did not require the cleanup efforts, (2) the efforts themselves were substandard, (3) Exxon's liability coverage level was below the expenses sought and (4) the spill arose from "intentional misconduct." In effect, the insurance companies implied that Exxon's cleanup efforts were public relations ploys merely aimed at making Exxon appear ethically and socially responsible.

UPDATE (4/99). A little over ten years ago, the Exxon Valdez ran aground on a reef in Alaska's Prince William Sound, spilling 11.2 million gallons of crude oil. To mark this disaster's anniversary, consider the following facts (source: the Sierra Club and the National Wildlife Federation):

  • Studies show that populations of at least eight species of wildlife in and around Prince William Sound (including sea otters, killer whales, murreletes and herring) have not recovered from the Exxon Valdez oil spill.

  • For generations to come, the young of herring and Alaskan pink salmon, both of which spawn in the intertidal zone, will be killed or stunted by tiny amounts of toxic compounds found in weathered lumps and buried pockets of oil near the water's edge.

  • Large oil spills (measuring more than ten thousand gallons) from sources such as tankers and pipelines dumped an average of 104.4 million gallons (or almost ten Valdez' worth) a year into marine and inland environments worldwide from 1989 to 1997. For all types of ships, bilge cleaning and other operations release twelve or thirteen Valdez' worth of oil each year.

  • While it's not agreed when the world will run out of oil, several studies forecast that demand will start to exceed production in the near future, between 2005 and 2020. The world's oil wells effectively could run dry by about 2100.

  • Almost 80% of US drivers who change their own oil report that they recycle it, but others improperly discard between 51 million and 67 million gallons (five to six Valdez' worth) of used oil every year--- trying such things as spreading it on the pavement or putting it in the trash. Worldwide, the amount of used engine oil released into the environment from road runoff and oil changes is about THIRTY THREE Valdez' worth. (The amount of oil from a single oil change is enough to kill fish in a million gallons of water.)

  • In 1997, American drivers used about ten thousand million more gallons of gasoline than they did in 1989. (That's not the amount they used in 1997; it's the increase in the amount they used, over 900 Valdez' worth.) Worldwide, hydrocarbon emissions from cars and industry come to eight or nine Valdez' worth, most of it as vapour.