Spill Going On

By Jeremy Caplan

By any measure, the $36 billion in profits that ExxonMobil earned last year is staggering. While corporate critics cavil, shareholders see a company simply doing what companies are supposed to do--earning money. Given Exxon's riches, though, the 32,677 claimants in a 17-year-old suit pursuing a $4.5 billion damage award from Exxon for its 1989 Valdez oil spill are puzzled: Why doesn't the world's largest and most profitable oil company just pay the victims and move on? Exxon recently argued its third appeal of the award handed out by a jury in 1994 as punishment for the Valdez spill, the largest in U.S. history, which dumped more than 11 million gal. of oil into Alaskan waters. Exxon says it has already paid out more than $3 billion and owes nothing else. The oil giant has spent an estimated $400 million fighting in court. "The company took immediate responsibility for the spill, cleaned it up and voluntarily compensated those who claimed direct damages," says Mark Boudreaux, an Exxon spokesman.

But many of the fishermen living in Cordova, Alaska, near the spill's epicenter say the initial compensation has hardly made a dent in their long-term losses, estimated by plaintiffs' lawyers at $700 million. R.J. Kopchak, 58, a commercial fisherman in Cordova for 32 years, says he has suffered about $660,000 in forgone income since the spill, as a result of lost sales and the devaluation of his herring-fishing permits. "I've struggled to make a dime, let alone a profit, and these guys are making billions of bucks," says Kopchak. He and many other fishermen say 11 of the past 13 herring seasons were ruined by damage from the spill. Exxon disputes local fishermen's assertion that the spill has done extraordinary environmental damage to the region. But numerous reports, including an independent scientific review of studies--published in Science in 2003--have demonstrated the spill's extensive and long-term impact.

Experts say Exxon is appealing the punitive portion of the case in part to curtail open-ended payouts for future spills. Says Boudreaux: "It is [a question of] whether punitive damages are warranted in this case." To that question, U.S. District Court Judge H. Russel Holland has twice answered yes. Both times, after an appeals court sent it back for review, he agreed with the jury's decision awarding the plaintiffs $4.5 billion, noting that Exxon "demonstrated reckless disregard for a broad range of legitimate Alaska concerns."

Kopchak and others say only punitive damages will give Exxon the incentive to prevent future oil spills. "The industry's perception is that all they have to worry about is the immediate out-of-pocket costs and they can just pollute and pay," says the plaintiffs' lead attorney, Dave Oesting.

The punitive-damages case may not be Exxon's last legal tussle over the spill. In 1991 Exxon agreed to pay $900 million to settle a civil lawsuit brought by the State of Alaska and the Federal Government for natural-resource damages. The settlement allowed the governments to seek an additional $100 million if there was evidence of long-term, unanticipated injuries to the natural habitat or species. The Exxon Valdez Oil Spill Trustee Council's current report notes that less than 20% of the species the council recognized as having been injured by the 1989 spill have fully recovered. As a result, a coalition of environmental groups is pushing for a reopening of the 1991 settlement. They are girding for a long fight. Exxon's profits, it seems, are exceeded only by its patience.