Exxon Planning Valdez Trial but Deal Is Still Possible

Exxon Corp. said Thursday it is preparing to go to trial on criminal charges stemming from the 1989 Exxon Valdez oil spill after a judge’s rejection of a negotiated fine in the case. In the meantime, however, Exxon said it has not ruled out the possibility of trying to reach a new settlement.

Company officials were stunned Wednesday when an Alaskan federal judge threw out a $100-million criminal fine agreed to by Exxon and government lawyers in a plea-bargain arrangement.

The judge’s rejection of the criminal penalty as too small to serve as a deterrent to polluters threatens to unravel a $900-million civil settlement between Exxon and the United States and Alaska for environmental damages.

“Recognizing the substantial costs already incurred by Exxon and the additional payments in the agreements we entered into with the federal and state governments, we believe the agreements were appropriate,” Exxon said in a prepared statement. “While we are carefully considering the implications of the judge’s decision, we are continuing our preparation for trial.”

An Exxon spokesman added that while the company is considering what to do next, “every option is still open.”

Exxon and its shipping subsidiary had agreed to plead guilty to four misdemeanors in return for a fine not to exceed $100 million and the dropping of other criminal charges, some of them felonies. The company has said it spent $2.2 billion to clean up the March, 1989, spill, which fouled Prince William Sound and killed hundreds of thousands of wild animals.

U.S. Judge H. Russel Holland gave Exxon 30 days to decide whether to enter a new plea and go to trial. If Exxon does not withdraw its guilty plea, Holland will set a new fine. Exxon has until May 4 to pull out of the $900-million civil agreement, which was contingent on approval of the criminal penalty.

A U.S. Justice Department official said it is “possible” that Exxon and the government could agree on a new deal and present it to the court. In the meantime, a Justice Department spokeswoman said: “Trial is an option. We are certainly preparing for trial.”

Alaska Atty. Gen. Charles Cole said in a telephone interview that the state would not accept less than $900 million in civil damages, regardless of the criminal penalty.

“Under no circumstances would the state be prepared to accept less money for damage to its natural resources,” Cole said. “The amount of the sentence to be imposed upon Exxon for violation of federal criminal laws is wholly unrelated to the amount of money that the state and federal government should receive for damage to their natural resources.”

Federal and Alaskan state officials insist they got the best deal possible in negotiations with Exxon. Environmental groups and some congressional critics of the settlement, citing estimates of damage as high as $8 billion, had complained the governments settled for too little.

Holland agreed.

“I’m afraid these fines send the wrong message, which suggests spills are a cost of business which can be absorbed,” he said in making his ruling.

The $900-million settlement fund, to be paid by Exxon over 10 years, would be managed by three federal trustees and three state trustees from Alaska. Alaska and the federal government would draw from it to recover their cleanup costs, and the rest would be spent to restore Prince William Sound.

In a letter sent Thursday to an Alaskan state legislative committee, Exxon said it would inform state lawmakers if it decides to withdraw from the civil settlement after first alerting the other parties to the agreement.

“The next move is basically up to Exxon,” Cole said.

Ostrow reported from Washington and Dolan from Los Angeles.