Exxon: Pouring Oil on Trouble Waters -- Part 3

December 15, 2008
Exxon: Pouring Oil on Troubled Waters -- Part 3
-AKA-
Being Exxon Means You Never Have To Say You're Sorry

Oil ... $$$$$$$ ... Black Gold!

The centerpiece of international politics, wars and economics. A sizable portion of the world's population believes we are at war in Iraq because of it. A song that I quite enjoyed when there was a small handful of us loudly proclaiming that we would be nuts to go to war with Iraq; one that I copied and passed out freely before George W's "shock and awe", was entitled "How Did Our Oil Get Under Their Sand?".

We have it (oil ... we're a little light on the sand). Indeed, we have so much of it we can apparently afford to dump it in the ocean.

In the minds of most people when they think of oil, they envision the stuff they pour into their car engines. And, of course they are correct. That is refined motor oil. But crude oil, the unrefined hydrocarbon gunk that is pumped out of the ground and, at one time was attributed to decayed dinosaurs, is not something you'd want in your car. Nor in your boat. Nor in your fishing pots or nets. And most certainly not in the seafood meal at the fancy restaurant.

Nor is all oil the same; not even all crude oil. The oil that Captain Hazelwood and Exxon decided to return to nature had made a remarkable journey even before it so abruptly ended.

The oil had arrived in the port of Valdez after being pumped from deep, deep wells nearly a thousand miles to the north in Alaska's North Slope Prudhoe Bay fields and travelling completely across the state (which is the most difficult, by far, of all states to travel across) via one of the world's engineering and construction marvels: the Alaska pipeline. The Port of Valdez is a deep water port, ice free (by Alaskan terms) year round, and able to handle the giant oil tankers that transported the Black Gold to the energy starved world.

Alaskan oil [somehow appropriately] is heavy, tarry stuff that requires [like many Alaskans :-)] a lot more "refining" than most. It is not the clean "sweet" oil found in backyard wells in Texas. Nor is it the stuff that Jed Clampett could find bubbling up in his backyard woodlot. Our oil is thousands of feet below the surface and for whatever reason, largely decided to locate itself in some of the most inhospitable places on earth.

Alaska's North Slope holds vast reserves of oil. As anyone who has followed the news at any time in the last few decades knows, there is a terrific and ongoing battle regarding extraction from the ANWR portion of the North Slope between the Luddites who hide behind the much cooler sounding title "environmentalists" on one side and Sarah's "drill, baby, drill" contingent on the other. This topic deserves vastly more in-depth treatment than I can give it here, but may well be a follow-on column since oil is such a "hot" topic these days in any event.

I personally am in no hurry. Even if alternative energy forms were found and oil was essentially replaced as a fuel, it has sufficient other uses that it will always remain of high value. I'd just as soon leave it in the ground as a bank account for my grandchildren. My objections however have nothing to do with environmental concerns. There are none remaining of note. That is simply a phony excuse by the Luddites. The existing oil operations in the North Slope have had no negative environmental impact. The caribou and other wildlife seems quite attracted to the spectacle (face it ... they are bored with thousands of miles of featureless tundra as their lifetime view) and it has not had any negative effects on the environment whatsoever.

No ... the only time our Alaskan crude oil has harmed the environment was when a drunk sea captain decided to see if his boat was tougher than the rocks of Bligh Reef [it wasn't].

And that harm to the environment was real. It wasn't the "pretend harm" that the greenies use to scare people into opposing drilling. This was real harm. And it not only harmed the environment dramatically (twenty years later and it still hasn't recovered ... biological processes operate much more slowly in this cold climate), but it harmed, even more dramatically, the people who made their living off that environment. And those who made their living off the people who made their living off of the environment.

For those of you just joining us, the brief synopsis is that a drunken Captain (who Exxon had put through alcoholic rehab previously and absolutely knew that he had relapsed badly; indeed he couldn't legally drive even a car - his license was suspended for his third DUI since the rehab only a few years before the accident) was given command of a massive oil tanker and, without bothering to tell anyone, apparently tried to slip through a channel where no oil tanker belonged. And then, he and his bottle went down to his stateroom to do "paperwork" while leaving control of the vessel in the hands of a third mate who was not certified to run the tanker in Prince William Sound (PWS), although he was in the open ocean. For reasons that will never be known, it didn't make it. It appears that when they first scraped the reef a drunken Hazelwood staggered into the wheelhouse and screamed "hard right". Unfortunately he was drunk (and perhaps dyslexic?). If he'd yelled "hard left" we may never have heard of the Exxon Valdez.

As it was, it (in the Captain's inimitable slurred radio report) "fetched up" on the reef and was apparently leaking some ... cargo. That "hard right" caused unfathomable destruction of wildlife and pristine habitat. The spill killed an estimated 350,000 to 390,000 seabirds, in addition to 3,500 to 5,500 sea otters, 300 harbor seals, 250 bald eagles, 22 killer whales and billions of salmon and herring eggs (along with countless other flora and fauna).

It also caused unfathomable loss and damage to those who lived there and were "married" to the land, the sea, and its abundant resources.

This happened in 1989.

No, I didn't mistype. My fingers didn't slip. I didn't get confused. It truly has taken nearly 20 years to pry any money out of them.

Let me give you a move visceral feeling for how long ago Exxon oiled us and then postponed the day of reckoning. In 1989, we had the Exxon Valdez Oil Spill. On June 3 of that year, we also had the Tiananmen Square Massacure. Seems we've had several Chinese governments and entire major philosophy changes since then! :-)

The world moves right along unless you are Exxon with your foot on the brake.

Indeed, Alaska has only been a State for 50 years! For 20 of those we've been living with the never-ending saga of the Exxon Valdez.

In 1989, on November 9 ... the Berlin Wall fell. "No", you say, "that couldn't be! That was more like half a century ago." Well, the Exxon spill was 1/5 of a century ago. But yes ... before such major changes in the world ... the Exxon Valdez had already attempted to cut a new channel through Bligh reef.

In 1989, gasoline was $1.29 a gallon. The mimimum wage was $3.35. A dozen eggs were 96 cents; a loaf of bread, 69 cents! Oh and before serious competion with the internet which should have lowered it's price (!), the cost of a first class stamp was $.25!

It seems like it was a different age, a different era. And it was! Exxon managed to delay through the passing of years, decades, a century and a millenium. It is difficult to believe that the Supreme Court of 1989 (or 1994) would have sliced and diced the exemplary damages award so viciously. [Truefully, even though I understand that this Court is the most conservative in a very long time ... I still find it difficult to believe that even they would do ... what they did!]

Exxon is so big and so powerful and so unbelievably arrogant that they were able to "leverage" that power to keep the money out of the hands of the fishermen for all this time ... and Exxon has now succeeded in keeping most of the money out of the hands of the fishermen forever.

"The check's in the mail."

Exxon claimants [as all the prevailing plaintiffs in the Exxon-Valdez lawsuit are called] have been waiting nearly 20 years to hear those words; nearly 15 years since the jury verdict awarding us, in addition to modest compensatory damages, a $5 billion punitive damage award.

But, the checks aren't for anything close to that. Actually, ignoring interest [as Exxon still hopes to be able to do] and many other variables, we are roughly a decimal point off. In other words, if your share, according to the only people legally qualified to know and therefore to decide; the jurors, was say $100,000, then your "check" would be for ~$10,000. If the jury [and convoluted formulas that were subsequently applied] said your claim was worth $10,000, then your check is for ~$1,000.

And for this we waited 20 years?

Actually, the checks aren't in the mail yet. Presumably they will be soon.

The folks that will be receiving money in this first "round" are those claimants who had no issues of any sorts attached to their claims [eg: judgments against them, IRS liens, child support liens, probate issues (since so many of our original claimants have died), assignments (so many people were so broke they were forced to sell part or all of their Exxon claim to speculators for a small percentage of its worth. Of course, they may look like geniuses now ... , or other]; and had gone through all the stacks of paperwork properly and along the way filled out the proper forms to have the Claims Administrator [the law firm of Keller Rohrback] directly deposit the funds to their bank accounts.

But given the history of this situation, that's really close to "the check's are in the mail".

In 1994 a major trial was held in federal court with approximately 32,000 plaintiffs and a jury, who by all accounts took their job very seriously. After four weeks of testimony and argument and four days of significant deliberation and balancing Exxon's claim that they didn't deserve to be punished any further, primarily because of all the money they had already spent cleaning up their mess, against the reality of what happened, the jury concluded that Exxon needed to both finish reimbursing the actual "out of pocket or never in pocket" type losses (compensatory damages) which was never much at issue. It also made the finding of primary importance that Hazelwood AND Exxon were reckless (ie: "grossly negligent"). Although this point seemed unassailable and crystal clear to everyone but Exxon, it was so dear and the attorneys had fought so long and so hard to get to that point that the lead plaintiff attorney actually had tears when the announcement was made. He had done it.

The finding meant that Exxon was liable for punitive damages and, given the size of the company it was expected that they would be "significant" [the relevant standard being focused on company size and income since the purpose is "punishment" and an award of $10,000 might punish a small mom and pop, but wouldn't be noticeable to Exxon]. Generic formulations yielded nearly absurd results because Exxon was SO huge and profitable that in order for it to "feel" the punitive damages award, the number would have to be staggering.

If one wishes to swat a two year old child for doing something he shouldn't have, it doesn't take much to accomplish that goal. If you swat an elephant with the same force and power ... it would notice you no more than it would a mosquito. In fact, it would probably be more bothered by a mosquito.

Exxon was, and Exxon-Mobil is, an elephant compared even to other elephants.

Instead of shooting for an absurd number that would actually be fitting under the circumstances, plaintiff counsel determined to ask for something that, given Exxon's size, was clearly reasonable and, therefore, presumably appeal-proof. They asked for fifteen billion. The jury gave them five. This was far less than the purpose of punitive damages would dictate as it was but a small percentage of Exxon's annual profits and a pittance compared to Exxon's overall value. It may not have been something that Exxon could pay out of the petty cash annual party fund, but neither would it have a substantive negative effect on the company. This discrepancy (between the value of the award and the value and profits of Exxon) has only increased with time.

As Brian O'Neill, the plaintiff lead attorney said shortly after the initial verdict::

"With a company as large as Exxon that thinks it is above the law, you need to take a substantial bite out of their butt before they will change their behavior. We want to change Exxon. We want to make the Exxons of the world aware that they are responsible the same way that you and I are responsible. It is really a great day. It took five years to bring it about, but we got there."

Indeed, all that was true and for the first time in five years in some of the economically devastated towns and villages, it was the first day of sunshine in half a decade. Despite all the suffering, the loss of culture, the loss of livelihood, the psychic pain that could never be healed ... it was a large enough verdict that there was sunshine and some smiles again. Even though the award was fairly small in terms of the size of award compared to size of company that would be required for "punishment", Exxon was so huge that, in absolute terms, this was a tremendous award; it would arguably be the second highest sustained jury award on record.

There was only one little problem. The award was not sustained.

In a display of corporate arrogance unmatched in modern times (well, perhaps, other than Enron giving top management huge bonuses just before closing their doors), Exxon vowed that as a matter of principle, and because it thought that people should be grateful to it (for all the work it did cleaning up the spill) instead of suing it, it would make sure the fishermen and other plaintiffs never received anything anywhere close to an award of that magnitude.

Exxon succeeded beyond its wildest dreams and beyond the wildest nightmares of the plaintiffs and their attorneys. They made certain that the lesson for all to see was NOT that "the Exxons of the world were made aware that they are responsible the same way that you and I are responsible". Instead, Exxon set out to prove, and ultimately did so with resounding success that the Exxons of the world are NOT responsible the same way that you and I are responsible. They boldly and "in your face" demonstrated that O'Neill was absolutely correct in saying that Exxon believed that were above the law ... and they successfully proved that, indeed, they were.

There is an old African proverb that says: "When elephants play, the grass gets trampled." You have to give O'Neill and his firm credit though. They stuck with us the whole time and fought tooth and nail every inch of the way. It is a tragically sad commentary on our system that even with powerful law firms on our side, that we didn't manage to rise much above the level of the grass. The elephants in the world have gotten so big that there is almost nothing able to control them. They've been paying lobbyists for so long (and as we have been discovering in Alaska, the Big Oil boys have been cutting out the middle man when convenient and paying the legislators directly) that they managed, by the back door, to pack the courts as well.

At most ... we got up off the ground by sheer brute force and transformed ourselves from grass to mosquitoes.

We buzzed around them. We even bit them. But ultimately we had about as much effect as one would expect a mosquito to have in dealings with an elephant. We were naive. All of us, including the Federal District Court Judge Holland who maintained his honor by telling the 9th circuit to shove it when they ordered him to knock the punitives down. Our hot-shot lawyers were naive. The fishermen were naive. "Oh, come on ... the United States Supreme Court is not going to take a drunk driving case!" Unless, that is, you have a Court that has been picked as they rose through the system by litmus test on such things as "tort reform", which is phony lingo for "taking away rights guaranteed by the U.S. Consitution but not admitting to it". 20 years of naivete. Even more than the money (and that is saying a fair bit), I think all of us on the side of right, truth and justice are more upset by a 20 year spanking than anything else. We are embarrassed that we actually believed our "judicial system" was in the business of dispensing justice. Even I fell for it and I had a Superior Court judge tell me once to always remember that the courts are in the business of judgments; not justice.

And that there was a huge difference between the two.

Which is something we have all now (even the most stubborn of us) finally learned.

Harken back to Brian O'Neills' statement following the verdict, above. This is what he said after the Supremes gutted it:

"I feel bad for all the claimants, that they're not going to get enough money to put together their lives again. I feel bad for all the claimants because they're not going to get the satisfaction knowing that there was a just punishment administered to Exxon. And I feel bad for all of the claimants because the judicial system has let them down. It just isn't fair."

Part 4 of This Series May be Viewed Here: