Exxon Valdez ruling worries environmental watchdogs

Seattle Post-Intelligencer

Oil companies say they’ll still focus on safety

Last updated July 4, 2008 11:48 p.m. PT


Will the U.S. Supreme Court decision to slash the punitive damages award in the Exxon Valdez case embolden oil companies to take shortcuts that put the environment at risk?

With the number of oil tankers entering Washington on the increase — about three a day now ply the state’s waters, serving six oil refineries — that’s what environmentalists fear.

“The effect is obvious. It just shows that companies like Exxon see it’s more effective to invest in attorneys than safe equipment,” said Seattle environmental activist Fred Felleman. “And the courts have rewarded them.”

“The lesson here is that you can cut corners as long as you have a good attorney.”

Oil companies say the aftermath of the Exxon spill has created a new culture of safety in their fleets — a sea change in attitude.

And some — though not Exxon Mobil Corp. — can point to major safety improvements in their Alaska-bound tankers in recent years. They spent hundreds of millions to rebuild their fleets to make them less liable to crash and less likely to gush as much oil if they do.

“We operate in such a totally different frame. These things — spilling oil and worrying about what courts would say — are so far removed from our operating standards of care that it is, to be totally honest, quite irrelevant,” said Anil Mathur, chief executive officer at Alaska Tanker Co., which hauls oil for BP.

“We changed the culture.”

That doesn’t mean oil companies and shippers embrace every safety requirement. Even before the court’s ruling, oil companies were arguing in Washington and Alaska in favor of lessening some safety precautions: reducing the number of tugs that escort oil tankers in Alaska, and how many tankers must hire escort tugs here.

Meanwhile, the Coast Guard recently announced that it wants to scuttle a rule-making exercise launched in the wake of the 1989 Valdez spill that is still unfinished. The rule change could have led to additional requirements for tugs to escort tankers to keep them safe if their engines or other systems fail.

Oil companies have argued that the expensive tugs aren’t needed as often as currently required.

Then came the Supreme Court’s decision last week, slashing Exxon’s punitive damages from $2.5 billion to $500 million — after punitive damages already had been cut by an appeals court from the jury’s $5 billion award.

However, the Supreme Court did not deal with a key legal issue that could have a huge impact on oil companies’ future liability, said John Paul Jones, a University of Richmond law professor involved in the case.

Here’s what happened: Justice Samuel Alito holds Exxon stock, so he removed himself from consideration of the case. In a part of the case that wasn’t well publicized, Jones said, the other eight justices deadlocked 4-4 on whether shipping companies can be held responsible for their crews’ mistakes on the water.

Over the years, different courts in different parts of the country had come down on both sides of that question. With the Supreme Court failing to decide the issue, the law of the land on this important point remains unsettled. How much liability a shipping company has depends on where its ship runs aground.

In the 9th U.S. Circuit Court of Appeals, which covers nine Western states, including Washington, the shipping company can still be held liable. For now.

So the Supreme Court’s decision technically did not relieve Exxon or other shippers of any liability.

Jones wrote a brief urging the Supreme Court to accept the case so it could settle that point. (He also served as a “sparring partner” for Exxon attorneys, even though he is critical of Exxon because the company “has not paid one dime of these punitive damages for all these years because it has stalled by appealing.”)

The Supreme Court’s decision in the Exxon case does not apply to a wide variety of types of cases, including consumer protection and even other environmental cases, Jones said. It’s only applicable in the arena of maritime law, and only in very similar circumstances.

“If the case is about a pipeline bursting or a bridge failing, or anything else that’s not covered by maritime law, this case has no power at all,” Jones said, nor is the decision binding on state courts.

Last week’s decision was not about compensating fishermen. That happened long ago, at least legally speaking, when, Exxon says, it paid out $3.4 billion for compensatory payments, cleanup payments, settlements and fines.

However, an analysis by an environmental group, The Whole Truth, claims that when tax credits, insurance payments and interest rates are cranked into the equation, Exxon’s payout was only about half that.

Exxon’s SeaRiver Maritime fleet of tankers serving Valdez and the West Coast are the oldest and probably represent the biggest safety risk among the coast’s oil tankers, said Chris Jones, maritime operations project manager for Alaska’s Regional Citizens’ Advisory Council, a citizen watchdog group set up by Congress and paid for by the oil companies.

And among the Alaskan oil tankers, only Exxon’s fleet includes a ship with just one hull, the SeaRiver Long Beach.

Exxon’s competitors, on the other hand, have within the last decade built all-new fleets of tankers with not only double hulls, but also redundant control rooms, engine rooms, rudders and other crucial parts. If something goes wrong, the crew can just switch to the alternate controls.

“If anyone’s learned their lesson, it’s BP and Conoco. (They say) ‘let’s not get burned, ourselves,’ ” Chris Jones said. “They are proactive about it.”

Even Exxon’s fleet, though, is widely recognized as safer on the whole than the wide variety of other ships entering Washington waters. That includes cargo ships, some longer than two football fields, that can carry up to 2 million gallons of fuel oil. (Oil tankers carry up to 36 million gallons.)

One lasting lesson learned by the oil companies, said Jones, the law professor, was to create separate subsidiary firms for their shipping interests, to limit their liability in case of spills.

But for Alaska Tanker’s Mathur, that kind of thinking is foreign to a stronger-than-ever safety culture. He points out that in the past six years, the company’s ships have not spilled a drop of crude oil. It mirrors improvements in much of the industry, environmental regulators say.

And Mathur said young sailors are a new breed.

This week, he was talking to a young seaman, telling him how he should take care to “protect the environment.”

“This 20-year-old, able-bodied seaman puts up his hand and says, ‘Mr. Mathur, would you mind calling it our environment instead of the environment?’ ” Mathur said.

“We changed the culture,” he said. “Societal forces are not going to allow you to operate if quarterly profits are all you pay attention to. It’s very myopic. I have a strong moral compass and we just don’t do that.”

P-I reporter Robert McClure can be reached at 206-448-8092 or robertmcclure@seattlepi.com. Read his blog on the environment at datelineearth.com.

© 1998-2008 Seattle Post-Intelligencer

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~ by fredfelleman on July 7, 2008.

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