A Year Later, Exxon Is Still Reeling From Alaska Oil Spill

Refinery worker Walter Blusewicz has noticed a change in Exxon Corp.’s attitude in the year since one of its tankers disgorged 10.9 million gallons of crude oil into the waters off Alaska.

From the highest corporate levels to the smallest detail, Exxon is scrutinizing every operation with an eye toward improving its environmental and safety record to prevent additional accidents, he said.

“In the past, if we had a lighting problem in a unit, they would give us lip service and say they’d take care of it, but we’d have to bring it up two or three times before they would fix it,” said Blusewicz, president of the union representing 650 workers at Exxon’s Bayway refinery in Linden, N.J. “Now, we bring it up once, and someone’s working on it.”

The more things change at Exxon, however, the more they have stayed the same.

On Saturday, it will be a year since the Exxon Valdez ran aground in the nation’s worst oil spill ever, and negative publicity continues to swirl around the company like the gooey oil in Prince William Sound. Just this week, an Alaska environmental official embarrassed Exxon officials by dumping the oily carcass of a bald eagle in front of them during a public meeting.

More ominously, Exxon continues to spill oil and suffer other accidents, most recently at facilities on a waterway between New York and New Jersey. It is not clear whether the accidents are unique to Exxon or merely the result of bad luck and bad timing.

But that hasn’t stopped environmentalists, shareholders and others from raising new questions about Exxon’s preparedness, staff levels and commitment to preventing future mishaps.

“One would have thought that, following the Exxon Valdez oil spill, there would have been a real shaking up within the company,” said Sarah Chasis, senior attorney with the Natural Resources Defense Council in New York, one of several environmental groups suing Exxon. “(But) we do not think there have been sufficient safety measures adopted since the spill to mitigate the chances of other similar spills occurring.”

With some frustration, Exxon officials argue that the company has turned much of its attention in the last year toward improving safety.

“We’re really not apologetic at all for Exxon’s long-term record of dealing with environmental issues all around the world,” Exxon President Lee R. Raymond said in an interview Thursday. “We spend $1 billion a year on environmental things. That doesn’t mean, however, that we can’t do better, and we’re going to try to do better,” he added.

One thing seems certain for the oil giant created by John D. Rockefeller, said William L. Randol, an oil industry analyst at First Boston Corp. in New York: “Things will never be the same.”

Some things that have changed as a result of the spill:

Because of cleanup costs, the company is poorer--by about $2 billion so far, and still counting. The final tab could be as high as $4 billion or $5 billion, lawyers and analysts said.

Exxon and the rest of the oil industry face a new political climate that favors strict new controls on the production and movement of oil.

Exxon’s actions and public statements seem to acknowledge the importance of environmental and safety concerns.

Exxon’s travails began last March 24, when the tanker Exxon Valdez ran aground on Bligh Reef, gashing the hull and dumping crude oil into the pristine waters off Valdez, Alaska.

A spill of monumental proportions, it fouled more than 1,000 miles of shoreline, drew a cleanup army of 12,000 workers, killed 90,000 to 270,000 birds and generated more than 170 lawsuits. Last week, Exxon unveiled a tentative plan for cleanup work to be resumed later in the spring.

The most immediate effect on Exxon was financial. In 1989, the company set aside $1.68 billion to cover costs from the spill, reducing net income to $3.5 billion. The company won’t speculate on how much more it will have to pay in connection with the spill, but adding the costs of further cleanup, liability from civil litigation and fines from a federal criminal indictment, the total figure could approach $5 billion, lawyers and analysts said.

Surprisingly, the company does not believe that the total cost will adversely affect its long-term financial situation, a testament to Exxon’s immensity. “I shudder to think what if this had happened to a smaller company,” said Frank P. Knuettel, an analyst with Prudential-Bache Securities Inc. in New York.

Still, the spill had a major influence on Exxon’s stock, whose performance has lagged that of competitors. While most oil stocks were going up as much as 30%, Exxon’s remains only slightly above its level before the spill, analysts said.

The financial troubles have led to no fewer than six shareholder-sponsored proposals, aimed at improving Exxon’s environmental record, in the proxy statement for the company’s April 25 annual meeting.

Meanwhile, pension fund managers in New York, California and Massachusetts are demanding a meeting with Exxon Chairman Lawrence G. Rawl and other officers to air their concerns that the accidents are hurting the company’s financial performance. After initially turning down the request, Rawl agreed to a meeting in a letter mailed Thursday.

For its part, the company says it is moving to address the problems.

Raymond was reluctant to talk in detail about the spills, citing incomplete internal investigations and pending litigation. But, he added: “We have been concerned about whether or not there’s a systemic problem. We don’t think there has been, but on the other hand, we don’t want to be portrayed as (saying) . . . these are all random, isolated events and that it’s bad luck and we’re not going to worry about it, because that’s too cavalier. . . . We’re going back to make sure it’s not systemic.”

Exxon’s actions have included an October meeting of all divisional managers, at which Rawl stressed the importance of “operational excellence,” Raymond said.

Last August, Exxon named marine scientist John H. Steele to its board of directors, fulfilling a promise to investors. More recently--in the wake of spills in the New Jersey waterway--Exxon appointed engineer Edwin J. Hess to the new job of corporate vice president in charge of environment and safety.

The company has also said it is spending millions of dollars on organizational changes, operating procedures, specialized training, accelerated inspection schedules and equipment upgrades. Every operating organization is conducting a review of its facilities and procedures, and the company is also studying its oil spill response capability around the world. In light of charges that drinking contributed to the Valdez disaster, the company has also tightened its policy on alcohol and drug abuse.

(The captain of the tanker was found not guilty Thursday on three of the four charges against him, including operating a ship while intoxicated. He was found guilty only of negligent discharge of oil.)

The actions have failed to win universal praise. Steele, who was virtually unknown among mainstream environmental groups, received mixed reviews from critics who had favored a stronger advocate. Hess’s appointment was too little, too late, critics said.

And despite the efforts, Exxon has failed to keep its environmental record clean since Valdez.

On Christmas Eve, a massive explosion rocked Exxon’s Baton Rouge, La., refinery, killing two workers, burning millions of gallons of volatile fuel and damaging buildings miles away.

On Jan. 1, a pipeline from Exxon’s Bayway Refinery in Linden, N.J., ruptured, spilling 563,000 gallons of heating oil into the Arthur Kill waterway between New Jersey and New York’s Staten Island. Exxon traced the source of the spill to a crack of undetermined origin in the pipeline that connects Bayway with a marine terminal at Bayonne, N.J.

On Feb. 28, about 30,000 gallons of oil leaked from a barge anchored at Exxon’s Bayonne terminal. The barge was not owned by Exxon.

The next day, 3,500 gallons of heavy crude oil sloshed from a coupling that leaked as a Texaco Inc. barge was offloading oil to the Bayway refinery.

On March 2, Exxon suspended all marine operations at the Linden and Bayonne plants while the company dispatched a team to investigate procedures and equipment.

But the accidents have raised new questions about the adequacy of Exxon’s safety procedures.

In the Bayway spill, an operator shut down an automatic alarm system three times, thinking the alarms were false, before the spill was ultimately discovered--an error attributed in part to a faulty toggle switch, an Exxon official told New Jersey legislators this week.

He added that the entire system had been prone to false alarms since its installation 12 years ago, though its ability to detect leaks was never in question.

Meanwhile, Exxon is proceeding with a plan that could reduce the size of bridge crews on some of its tankers.

The “integrated bridge” concept would include installation of a sophisticated computerized information system that would aid navigation and concentrate information in one console rather than at different points around the bridge, a spokesman said. On some foreign tankers employing the system, bridge crews have been reduced.

Exxon hasn’t made a final decision on whether it will actually reduce the crews, but the new system should make tankers safer, said Thomas Gillette, a spokesman for Exxon’s shipping company. Any change in minimum staffing levels would require Coast Guard approval, he added.

Raymond denied in the interview that a 1986 corporate restructuring stretched staffing levels too thin. “Between 1984 and 1986, we reduced the total number of employees by 30% or something like that, but that’s totally misleading. A good share of that reduction was associated with operations we sold and had nothing to do at all with the oil and gas business.”

Asked about the effects on Exxon’s oil and gas business, he added: “What that restructuring was all about was eliminating or reducing layers of middle management, not about changing the number of people who are on the ground, the first-line operators. . . . I’d argue that from the standpoint of communications and knowing what’s going on in the business, by taking out layers of middle management, we have tighter communications than we ever have.”

But he admitted: “One thing we find, which is always the case: The biggest risk you have and biggest problem you have to deal with is the human factor.”

As a result of the Valdez spill and subsequent accidents, Exxon and the rest of the oil industry face a raft of proposed new regulations and legislation.

The House passed a bill that would require tankers to have double hulls and grant the states the power to draft strict spill-liability laws. The Senate has passed a weaker version of the bill.

A bill is also moving through the California Assembly that would restrict tanker traffic along the coast and assess a 50-cent-per-barrel tax on crude oil brought into the state, which would create a $500-million cleanup fund. Other states are considering a variety of bills to prevent spills.

Meanwhile, Exxon was indicted in February on five federal charges in connection with the Valdez spill after talks broke down on a plea bargain settlement. Since then, there’s been no word of further negotiations on a settlement, although Justice Department officials have been quoted as saying they had doubts about the strength of their case. Raymond declined to say whether Exxon is continuing settlement talks.

Amid all of this, Exxon is fighting to reverse the public relations lambasting that some specialists argue was exacerbated by its own ineptness at handling the press in the early going.

Chairman Rawl and President Raymond, perhaps mindful of Exxon’s lackluster stock performance since the accident, met informally with Wall Street analysts recently in an unusual display of openness.

Rawl also admitted previously that he regrets his decision not to fly to Alaska at first word of the accident. Raymond has also been making himself more available to the press than he was before the spill.

“There’s no question that things could have been done differently, and I suspect in some areas, better,” he said Thursday. “Overall, I still feel that . . . the only way effectively to deal with that is to get the beaches in Alaska to the point where the Coast Guard and the people in charge say that continuing to do things would result in more harm than good. Until then, it will be difficult to be in a position to tell our story.”

VERDICT REACHED--The captain of the Exxon Valdez was acquitted on three major counts but found guilty of a misdemeanor. A1