WHILE YOU WERE SLEEPING - Lowering Expectations Over US's Biggest Environmental Disaster

(05/25/2010)

FROM BILLIONS TO A FEW MILLION

COMMENT By Bob Weaver

The US is likely facing its biggest environmental disaster in modern times, with millions of gallons of crude oil dispersing into the the Gulf, a solution not in sight.

The US government and BP are making magnanimous declarations regarding handling the problem, not unlike those made following Exxon's major oil spill from a tanker in Prince William Sound in 1989.

This history lesson is a follow the money story.

The Exxon Valdez spill was estimated at 11 million gallons of crude, a spill essentially caused by the drunk captain of a tanker. The spill, according to most accounts, was grossly underreported, much like the current disaster in the Gulf.

It was considered to be one of the most devastating human-caused environmental disasters ever to occur in history.

The spill covered 1,300 miles of coastline and 11,000 square miles of ocean, killing salmon, sea otters, seals and seabirds, and disrupting the ecology for years to come.

Thousands of animals died immediately, others later, including 250,000 seabirds, as well as the destruction of billions of salmon and herring eggs.

Exxon was widely criticized for its slow response to cleaning up the disaster and John Devens, the mayor of Valdez, said his community felt betrayed by Exxon's inadequate response to the crisis.

An Anchorage jury awarded $287 million for actual damages and $5 billion for punitive damages against Exxon. The punitive damages amount was equal to a single year's profit by Exxon at that time.

To protect itself in case, Exxon made a series of moves to protect itself financially.

Exxon appealed to the 9th U.S. Circuit Court of Appeals in 2002, the judge announcing that he had reduced the damages to $4 billion. In a later appeal, a judge ruled the damages be increased to $4.5 billion, with interest.

After numerous appeals up to 2006, the courts cut the damages to $2.6 billion.

Exxon appealed again in 2007, and the 9th Circuit Court of Appeals denied Exxon's request for reduction and let the $2.5 billion in punitive damages stand.

Exxon then appealed to the US Supreme Court in 2008, nearly 20 years after the disaster.

Justice Samuel Alito, who at the time, owned between $100,000 and $250,000 in Exxon stock, recused himself from the case.

Justice David Souter issued the judgment of the court, vacating the $2.5 billion award and remanding the case back to a lower court, saying that the damages were excessive.

A final judgment limited the punitive damages to the compensatory damages, calculated as $507 million.

It was a minuscule amount after the multi-billion dollar decision, certainly benefiting Exxon.

Exxon's official position is that punitive damages greater than $25 million are not justified because the spill resulted from an accident.

Exxon says they did everything they could to help the environment recover.

Exxon recovered a significant portion of clean-up and legal expenses through insurance claims.

Exxon made secret settlements with other parties damaged by the disaster.

In 2009, Exxon Valdez Captain Joseph Hazelwood somewhat belatedly offered a "heartfelt apology" to the people of Alaska, but still saying he was wrongly blamed.

This history lesson will hopefully lower your expectations while listening to the hubris being expelled by BP and the federal government.

The outcome of the Valdez disaster was resolved over many years, while you were sleeping.


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