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Exxon Agrees to $1 Billion Settlement of Oil Spill

March 14, 1991

WASHINGTON (AP) _ Exxon Corp. on Wednesday settled government claims arising from the nation’s worst oil spill by agreeing to pay a record $100 million fine for four environmental crimes and to spend an additional $900 million to finish cleaning up Alaska’s coast.

The largest settlement of an environmental damage case in U.S. history comes after Exxon has already spent $2.5 billion on the cleanup. The fine is 20 times the previous record of $5 million paid by Allied Chemical in 1976 for dumping kepone into the James River in Virginia, officials said.

The civil settlement and guilty pleas to the four misdemeanors will avert lengthy court fights over the March 24, 1989 grounding of the tanker Exxon Valdez, which spilled more than 10 million gallons of oil into Alaska’s Prince William Sound.

Attorney General Dick Thornburgh said the deal with the federal government and the state of Alaska ″represents a clear and unmistakable signal to those engaged in environmental crime that their activities are not going to go unnoticed and unprosecuted.″

The record criminal fine, involving one misdemeanor charged against Exxon and three others charged against its Exxon Shipping Co. subsidiary, shows that ″answering for environmental spoilage cannot be done simply by paying damages,″ the attorney general said.

Proceeds from the fine will be split 50-50 with the state of Alaska to help finance the cleanup. By law, the federal share must go into the general treasury.

″I think its a good settlement for the state of Alaska, it’s a good settlement for the federal government... it’s a good settlement for the environment,″ said Alaska Gov. Walter Hickel, who was also governor 23 years ago when the discovery of Alaska oil was announced on this date.

Exxon’s sales totaled more than $107 billion last year and it reported earnings of more than $5.1 billion.

Under the proposed consent decree, which must receive court approval after a 30-day public comment period, Exxon would pay $900 million over the next 10 years to a trust fund administered by federal and state officials.

The fund would be used to pay for costs of the continued cleanup by Exxon, which has already spent $2.5 billion to remove oil from the sound and its shores.

After 10 years the trustees could seek up to another $100 million for any remaining environmental damage from the oil spill, which killed countless birds, fish and mammals.

By settling now instead of going to court, the Bush administration and Alaska gets cleanup money now and avoids ″spending the next decade feathering the nests of corporate and government lawyers,″ said Thomas L. Sansonetti, the Interior Department solicitor.

The settlement means that more cleanup funds ″will be available years earlier than any recovery that could have been secured through full litigation,″ said William Reilly, head of the Environmental Protection Agency.

The settlement ″allows us to turn our full attention, finally, to the tasks of restoration,″ Reilly said.

The deal settles all civil claims against Exxon by the state of Alaska and any that the federal government might have brought. But it does not end any of the numerous private lawsuits brought by property owners, fisherman and businesses.

The settlement was reached late Tuesday after a federal judge here had lifted an order halting discussions until he received assurances that claims of five native Alaskan villages would not be compromised.

Environmental groups had mixed reactions.

″They did well on the criminal side. That’s a very hefty criminal figure. Our concern is with the civil fine,″ said Sarah Chasis, a senior attorney for the Natural Resources Defense Council.

Chasis expressed disappointment that $135 million of what Exxon will pay covers past cleanup expenses.

″You’re really diminishing the pot for long-term research and restoration,″ she said. ″We want to make sure the environment is made whole. We have serious questions as to whether this agreement would accomplish that goal.″

Others said it was hard to evaluate the settlement because scientific data on the extent of the damage has not been made public.

″On the one hand it’s the largest settlement of its kind ever,″ said Douglas Wolf, an attorney for the National Wildlife Federation. ″The down side is that we don’t know if that was an appropriate amount for this spill because it was the largest one ever.″

Rep. George Miller, D-Calif., said his House Interior water and power subcommittee, has scheduled an April 8 hearing on the deal because ″the Congress and the public will have many questions about the Exxon settlement.″

Exxon and its shipping subsidiary faced an April 10 criminal trial in federal court in Anchorage on two felony and three misdemeanor counts arising from the oil spill.

Exxon chairman L.G. Rawl, who personally signed the deal at the Justice Department, said in a statement that the oil giant was ready to contest the civil and criminal charges.

″However, we have agreed to the settlements because they are in the best interests of Exxon shareholders and all other involved parties,″ Rawl said. ″A long and costly legal confrontation would benefit no one.″

Rawl said Exxon could deduct the $900 million cleanup payments from its income taxes, but not the fine.

The two felony counts that will be dismissed alleged that Exxon ″willfully and knowingly″ failed to make sure that the Exxon Valdez was manned by mentally and physically competent pilots.

Joseph Hazelwood, the ship’s captain, was accused of drinking on shore before the tanker left the port of Valdez, but he later was acquitted of state charges that he operated the ship while intoxicated.

Thornburgh acknowledged that the felony charges the department had brought were ″a unique case which requires some innovative legal approaches, which are never without risk.″

One potential problem was trying to prove that Exxon Corp., as the parent of Exxon Shipping, was criminally liable for intentionally and knowingly allowing the Exxon Valdez to sail with an incompetent crew, said Assistant Attorney General Richard B. Stewart, head of the environment division.

The issue of parent corporate liability has not been tested much in criminal cases, he said.

Exxon agreed to plead guilty to a misdemeanor violation for the death of migratory birds killed by the oil slick.

Exxon Shipping also agreed to plead guilty as well to the Migratory Bird Treaty Act violation. The Exxon subsidiary will also plead guilty to violating the Clean Water Act and the Refuse Act by negligently dumping oil into Prince William Sound.

The plea bargain also prohibits the Justice Department from bringing additional criminal charges against Exxon or any of its officers. The government also gave up the right to prosecute Alyeska Pipeline Service Co. for allegedly failing to live up to its assurances to government authorities that it had an emergency oil spill cleanup plan.

The Justice Department reviewed evidence from the criminal investigation of Alyeska and determined that it was insufficient to warrant prosecution, said one official, who spoke on condition of anonymity.

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