Exxon Ordered to Pay $5 Billion for Oil Spill

A jury in Alaska on Friday ordered Exxon Corp. to pay $5 billion--roughly what the company makes in a year--as punishment for its recklessness in causing the worst oil spill in U.S. history.

The 11-member federal jury in Anchorage also assessed $5,000 against Joseph Hazelwood, who was captain of the tanker Exxon Valdez when it ran aground in Alaska’s Prince William Sound on March 24, 1989, dumping 11 million gallons of crude oil into one of North America’s richest fisheries.

Although it is believed to be the largest punitive judgment ever, Friday’s award was well below the $15 billion sought by the plaintiffs--an estimated 30,000 fishermen, Alaskan natives, property owners and other residents.

While huge, the award will not seriously threaten Exxon’s financial health, investment analysts said.

“Exxon is the most profitable company on earth, the highest net income,” said J. Robinson West, president and CEO of Washington-based Petroleum Finance Co. “One should not trivialize $5 billion, but this company has the strength to survive this. Not many companies could.”

In addition, Exxon vowed to appeal. “This verdict is totally unwarranted and unfair,” Exxon Chairman Lee Raymond said in a statement Friday.

He added: “It is excessive by any legal or practical measure. We will use every legal means available to overturn this unjust verdict, which is not a final judgment. It will be reviewed and we trust it will be modified by the trial court or by appellate courts.”

Plaintiffs’ lawyer David W. Oesting said that Exxon’s appeals might last another two to three years, but he predicted that the full award would be upheld.

Friday’s judgment is believed to be the largest punitive award ever, although it is not record-setting in terms of total damages. A Texas jury in 1985 hit Texaco with a $10.53-billion judgment for interfering with Pennzoil Co.’s attempt to purchase Getty Oil Co., but only $3 billion of that was punitive.

Friday’s verdict capped a grim summer in court for Exxon. In three consecutive trials, Exxon suffered major setbacks.

In June, the Anchorage jury found Exxon and Capt. Hazelwood to have been recklessly negligent, meaning that punitive damages could be awarded on top of actual costs to plaintiffs.

In August, the jury awarded commercial fishermen $287 million for actual damages to their livelihood. This was less than a third of what the fishermen had asked for, and Exxon quickly announced that it considers that subject to adjustment, “including a reduction to reflect payments already made by Exxon to many of the plaintiffs.”

Shortly after the spill, Exxon announced a claims program in which it paid out $300 million to more than 11,000 parties, some of whom were represented in this case.

At the time of the second trial, Exxon also arrived at an independent settlement to pay 3,500 native Alaskans $20 million in place of food they would normally have caught in Alaskan waters.

Raymond, the Exxon chairman, said the company has also paid about $3.5 billion in cleanup costs, government fines and damage claims relating to the spill.

The plaintiffs’ first reaction when they were reached Friday afternoon was to speculate if the award would be enough to make Exxon squirm. In the past five years, the region has suffered poor salmon runs, shuttered fish processing plants, polluted fish farms, bankruptcies, divorce and even suicide.

“I don’t think it’s enough, but it should inflict some pain. There has to be retribution for what they did to us,” said Jim Gray, a 48-year-old fisherman who led close to 100 boats last summer in a vain effort to blockade oil tankers trying to reach the now infamous oil terminus at Valdez in Prince William Sound.

“Exxon came after the spill and said, ‘Don’t worry, we’ll make you whole.’ Then they turned around and fought us. You have a lot of resentment here.”

In the fishing village of Cordova, whose economy was hit hard by the spill, salmon fisherman Max McCarty had just spent Friday morning at the docks in pouring rain pulling the nets off his fishing boat when he heard about the verdict.

“It didn’t thrill me that much,” McCarty said. “You know Exxon is going to fight this every penny of the way.”

Chuck Totemkoff, president of Chenega Corp., an Alaskan native village corporation, was similarly restrained. “We are finally seeing some justice,” he said. “But there are some things that can never be the same again.”

With fish scarce and few ducks or sea lions to hunt since the oil spill, said Totemkoff, the natives have been prevented from practicing subsistence fishing and hunting methods that have continued for thousands of years. “There has been a break in that chain. There is a danger we won’t be able to pass on the knowledge.”

Times staff writer Leslie Helm in Seattle contributed to this story.