The Exxon Valdez Oil Spill

            
 
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Case Details:

Case Code : BECG045
Case Length : 17 Pages
Period : 1989-2004
Pub. Date : 2005
Teaching Note :Not Available
Organization : Exxon
Industry : Petroleum and Petrochemicals
Countries : US

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This case study was compiled from published sources, and is intended to be used as a basis for class discussion. It is not intended to illustrate either effective or ineffective handling of a management situation. Nor is it a primary information source.



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"ExxonMobil's tactics are well-known, and this is a classic case of deny, dupe, and delay. Just as it denies the science on climate change, it denies that oil from the spill is causing damage in the Prince William Sound. And on both issues it is running campaigns to dupe the public into thinking it is an environmentally and socially responsible corporation." 1

- Anita Goldsmith, Greenpeace International Campaigner.

"Exxon would meet its obligations to all those who have suffered damage from the spill." 2

- - Lawrence Rawls, Chairman, Exxon.

Introduction

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.

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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 Exxon Valdez Oil Spill - Next Page>>

1] Press Center, 'Exxon Valdez disaster - an ongoing history of lies,' www.greenpeace.org, March 24, 2004.

2] In a public letter published in newspapers days after the oil spill.

3] Based in Texas, Exxon's main businesses include exploration, production, transportation and sale of crude oil and natural gas. It is also involved in manufacturing, transporting and selling of petroleum products. In 1998, Exxon merged with Mobil Corporation to form ExxonMobil, the world's largest integrated oil company. For the fiscal year ended 2003, the net income of ExxonMobil amounted to US $21.51 bn.

4] PWS is a Sound (a large sea or an ocean inlet) in the Gulf of Alaska on the south coast of Alaska in the US. PWS is protected by two large islands that make it almost an enclosed body of water. It has numerous small islands within it.

5] Established in 1991, EVOSTC was formed to develop research, restoration and habitat conservation plans for the oil spill area with funds from the legal settlement between the State of Alaska, the Federal Government and Exxon.

6] Exxon Valdez Spill, '15 Years Later: Damage Lingers, National Geographic News,' March 22, 2004.

 

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