The Exxon Valdez Oil Spill  
November 17,2009


The Exxon Valdez Oil Spill
The case describes the Exxon Valdez oil spill, one of the worst ever environmental damage caused by an industrial disaster. In March 1989, the oil tanker Exxon Valdez, owned by Exxon, a leading oil exploration and production company in the world, spilled 11 million gallons of crude oil in the Prince William Sound in Alaskan region that caused major ecological and financial damage to the people of the region. The case examines the response of Exxon to deal with the disaster and the compensation paid by the company to the victims. Though Exxon claims that it had acted responsibly and had spent around $3 bn to clean the region and as damages to the victims, the largest sum paid by any corporate to mitigate the environmental damage, environmentalists believe that the company must pay more.
The case highlights the ethical issues involving the disaster and examines the response of ExxonMobil to deal with it.
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. 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. 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. 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
The Accident
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).

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...
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.

Bligh Island and Bligh Reef had been known to navigators since 1930. There was a well-established 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 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. The Alyseka Pipeline Service Company (Alyseka) 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...
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...
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. 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. In 1994, 35,000 fishermen and other disaster victims in the Alaskan region filed a lawsuit against Exxon, claiming $5 bn as punitive damages...