Helpful Spill-Payout Terms May Cut Exxon Bite in Half : Energy: Tax breaks and the fact that the $1.125 billion will be paid over 10 years will ease the ‘real-dollar’ sting, a study says.

Exxon Corp. will have to lay out less than half the $1.125 billion it agreed to pay in an out-of-court settlement with Alaska and the federal government over environmental damage from the Exxon Valdez oil spill, according to an Alaskan legislative study.

Tax benefits and the fact that Exxon will pay the bulk of the settlement--the $900-million civil portion--over 10 years are the reasons for the lower real cost, according to the study.

Questions about the settlement--approved last week by the federal judge in Anchorage who had rejected an earlier agreement that he said went too easy on Exxon--are prompting congressional hearings in Washington and proposed legislation in Alaska to require closer scrutiny of big court agreements involving public money.

The Alaska study was requested by state Rep. Max Gruenberg (D-Anchorage), majority leader of the Alaska House of Representatives, after U.S. District Judge J. Russel Holland approved the final Exxon settlement Oct. 8.

“The judge went for a deal that on its face he must have known was no better” than the first proposal, Gruenberg said Wednesday. “And he took it immediately, without waiting for public comment and analysis.”

The final settlement calls for Exxon to pay $25 million more than the proposal rejected by Holland in July.

But according to the Alaskan study--conducted by Milt Barker, a consultant to the state Legislative Research Agency--the final deal, as structured, will cost Exxon $5.5 million to $5.9 million less, in present value.

(Present value is the true worth of money that is paid out over time. It is less than the face value because delayed payments can be invested elsewhere until they must be paid out or because borrowing to make big payments can be avoided.)

Exxon declined comment. Alaska Atty. Gen. Charles Cole denied that federal and state tax benefits in the final settlement shortchanged the state.

Part of the disparity cited in Barker’s report stems from the fact that Exxon will make an initial $340-million payment seven months later than would have been the case under the settlement that was rejected.

“Most people would prefer to pay a bill later rather than sooner,” Barker noted in his analysis--”especially a $340-million one.”

Overall, the state came out with $40 million more under the final settlement and the federal government $46 million less than under the first proposal.

Oil-industry analysts generally agreed that the final settlement--with its 10-year payment plan and a provision that more of the company’s payments will be tax-deductible--was a better deal for Exxon than it appeared on its face.

“It ain’t $900 million,” said William L. Randol, senior petroleum analyst at First Boston, “and that’s a significant value to the Exxon shareholder.”

U.S. Rep. Frank J. Guarini (D-N.J.) has scheduled a hearing Oct. 31 to look into the tax benefits Exxon obtained from the settlement, the actual costs to the company and whether federal and state research into the environmental damages from the spill was considered before the final deal was reached.

In Alaska, Gruenberg plans to back new “settlement-in-the-sunshine” legislation that would require public comment and legislative approval of state legal settlements over $10 million. It would be unlikely to apply retroactively.

Meanwhile, 200 lawsuits against Exxon remain unresolved by the settlement, including suits by environmentalists and others that call for setting up a public trust to pay for restoration beyond that funded by the settlement.

Environmentalists will ask for as much as $10 billion for that fund, based on still-secret government analyses of the damage to Prince William Sound, according to Macon Cowles, an attorney with Trial Lawyers for Public Justice, a Washington, D.C.-based public-interest law firm.

Tale of Two Settlements Though described as larger than its predecessor, Exxon Corp.’s final settlement of government lawsuits over the Exxon Valdez oil spill could actually save the company money, Alaska analysts say.

Old New (millions) (millions) Criminal fine $50 $25 Restitution and civil payments $950 $1,000* Total Exxon payments $1,000 $1,025* After-tax cost to Exxon** $467.7 $462.9 Value of settlements to Alaska** $713.7 $754 Value of settlements to federal government** $52.3 $6.5 Total value of settlements to state and federal governments** $766 $760.5

* Does not include the “reopener” clause, under which Exxon could be required to pay up to $100 million more for damages not foreseen at the time of the settlement.

** Represents “present value”--the amount of money that must be set aside now to pay out the full amount owed over time.

Values are as of Oct. 8, 1991, the date the new settlement was approved in federal court.

Source: Legislative Research Agency, Alaska State Legislature.