Friday, October 31, 2008

Exxon Untouched in Global Financial Crisis - Oil Never Loses!

Exxon Mobil sets record with $45.2 billion profitBy John Porretto
AP Energy Writer
Posted on Friday, 01.30.2009
HOUSTON -- Exxon Mobil Corp. on Friday reported a profit of $45.2 billion for 2008, breaking its own record for a U.S. company, even as its fourth-quarter earnings fell 33 percent from a year ago.
The previous record for annual profit was $40.6 billion, which the world's largest publicly traded oil company set in 2007.
The extraordinary full-year profit wasn't a surprise given crude's triple-digit price for much of 2008, peaking near an unheard of $150 a barrel in July. Since then, however, prices have fallen roughly 70 percent amid a deepening global economic crisis.
In the fourth quarter alone crude tumbled 60 percent, prompting spending and job cuts in an industry that was reporting robust, often record, profits as recently as last summer.
With piles of cash and diversified operations, the majors like Exxon Mobil have fared better than many smaller oil and gas companies, but Friday's results show no one is completely insulated from the ongoing malaise.
Irving, Texas-based Exxon said net income slid sharply to $7.8 billion, or $1.55 a share, in the October-December period. That compared with $11.7 billion, or $2.13 a share, in the same period a year ago, when Exxon set a U.S. record for quarterly profit. It has since topped that mark twice, first in last year's second quarter and then with earnings of $14.83 billion in the third quarter.
Revenue in the most-recent quarter fell 27 percent to $84.7 billion.
Both the per-share and revenue results topped Wall Street forecasts. On average, analysts expected the company to earn $1.45 a share in the latest quarter on revenue of $69.1 billion, according to Thomson Reuters.
Shares rose $1.52, or 2 percent, to $78.52 in early trading.
The nation's second largest oil company, Chevron Corp., reported profits of $4.9 billion for the fourth quarter, though revenues slid 26 percent with oil prices in sharp decline.
It earned $2.44 per share in the three months ended Dec. 31. Like Exxon, Chevron easily beat expectations of analysts, who were looking for profits of $1.81 per share.
The industry went into retrenchment toward the end of the year with demand falling.
As expected, Exxon Mobil's bottom line took a beating from its exploration and production, or upstream, arm, where net income fell 31 percent to $5.6 billion. The culprit: lower crude prices, which the company said decreased earnings by $3.2 billion in the fourth quarter alone.
The company, which produces about 3 percent of the world's oil, said overall output fell 3 percent in the most-recent period, a troubling trend in previous quarters. Exxon, which generates more than two-thirds of its earnings from oil and gas production, said production-sharing contracts and OPEC quotas contributed to its lower output.
Results were better at its refining and marketing unit, where earnings rose 6 percent to $2.4 billion as higher margins overcame costs related to last summer's hurricanes and other factors.
The company's chemical division also took a hit, posting net income of $155 million versus $1.1 billion a year ago. Results were hurt by lower volumes and margins and hurricane-repair costs.
Exxon Mobil said it bought 119 million shares of its common stock in the quarter at a cost of $8.8 billion. Roughly $8 billion of that amount was dedicated to reducing the number of shares outstanding; the balance was used to offset shares issued as part of the company's benefit plans.
Exxon said it spent $26.1 billion on capital and exploration projects last year, up 25 percent from 2007. Its earnings release provided no information about its planned spending for 2009.
For the full year, Exxon Mobil's massive profit amounted to $8.69 a share, versus $7.28 a share a year ago.

Exxon Mobil: Biggest profit in history
The largest U.S. oil company surges past analysts' estimates with a posted net income of $14.83 billion and sets a national record for quarterly profit.
By Aaron Smith, staff writer
Last Updated: October 30, 2008: 3:28 PM ET
NEW YORK ( -- Exxon Mobil Corp. set a quarterly profit record for a U.S. company Thursday, surging past analyst estimates.
Exxon Mobil (XOM, Fortune 500), the leading U.S. oil company, said its third-quarter net profit was $14.83 billion, or $2.86 per share, up from $9.41 billion, or $1.70, a year earlier. That profit included $1.45 billion in special items.
The company's prior record was $11.68 billion in the second quarter of 2008.
The latest quarter's net income equaled $1,865.69 per second, nearly $400 a second more than the prior mark.
The company said its revenue totaled $137.7 billion in the third quarter.
Analysts had expected Exxon to report a 40% jump in earnings to $2.38 per share, or net income of $12.2 billion, and a 28% surge in revenue to $131.13 billion, according to a consensus of estimates compiled by Thomson Reuters.
The company's earnings were buoyed by oil prices, which reached record highs in the quarter before declining. Oil prices were trading at $140.97 a barrel at the beginning of the third quarter, and had fallen to $100.64 at the end.
Compare that to 2007, when prices traded at $71.09 a barrel at the beginning of the third quarter, and rose to $81.66 by the end.
Last of the big quarters
Exxon's special charges include the gain of $1.62 billion from the sale of a German natural gas company. It also includes the $170 million charge in interest related to punitive damages from the Valdez oil spill off the Alaskan coast in 1989.
The Irving, Texas-based company said it lost $50 million, before taxes, in oil revenue because of Hurricanes Gustav and Ike. The company expects damages related to these hurricanes to reduce fourth-quarter earnings by $500 million.
Exxon's stock price slipped by about 2% in afternoon trading. Bernie McGinn, Chief Executive of McGinn Investment Management and owner of 30,000 Exxon shares, said he wasn't surprised, given the recent downturn in oil prices.
"That's probably the last of the big profit quarters, at least for now," said McGinn. "You can't make the case that it's going to continue."
Despite the surge in profit, Exxon said oil production was down 8% in the third quarter, compared to the same period last year.
The company also said it is spending more money to locate new sources of oil. Exxon said it spent $6.9 billion on oil exploration in the third quarter, a jump of 26% from the same period last year. The company said it began a new program to tap natural gas offshore from Nigeria.
More investments
Exxon also has an aggressive program for buying back stock, with 109 million of its shares repurchased during the third quarter, at a cost of $8.7 billion.
In a conference call with analysts, David Rosenthal, vice president of investor relations for Exxon, said the company's "first priority" is using profits to continue investing in exploration programs for oil and other resources.
Rosenthal said the company would also consider using new-found funds to bolster its dividend, buy back more shares and to purchase other companies, but he declined to offer specific details.
Phil Weiss, analyst for Argus Research, said he doesn't expect Exxon to break any more profit records in future quarters.
"I don't expect the fourth quarter to be nearly as good as the third because of lower oil prices," said Weiss.
Analysts also said that demand for gasoline is falling, which could impact Exxon and other oil companies.
"While oil companies benefit from high oil prices in the short run, they might lose in the long run," Anas Alhajji, chief economist for NGP Energy Capital Management, wrote in an email to "Higher oil prices lead to lower demand, as we have seen in recent months."
Earlier Thursday, Europe's leading oil company, Royal Dutch Shell PLC (RDSA), reported a 22% gain in net profit for the third quarter, to $8.45 billion. The company said sales rose 45% to $132 billion.
Exxon is the second-largest company in the Fortune 500 in terms of annual sales, behind Wal-Mart Stores (WMT, Fortune 500).
Exxon's stock price has fallen about 20% so far this year, compared to the S&P 500, which has fallen about 36%.

Exxon guns for all-time profit record
Surging crude prices could help the oil giant post the biggest bottom line ever for a U.S. firm; refining margins, rising costs could get in the way.
By Steve Hargreaves, staff writer
January 23 2008: 1:29 PM EST
NEW YORK ( -- Exxon Mobil, the world's largest publicly traded oil company, is within striking distance of setting an all-time profit record - again.
Analysts are expecting the company to post solid quarterly and full-year earnings next Friday (see correction below) - and if the results top forecasts, Exxon (XOM, Fortune 500) could end up reporting the highest profit ever for a U.S. company.
With oil prices having recently crossed the $100 a barrel threshold, it comes as no surprise that Exxon is a whisker away from setting a new milestone.
"Exxon is likely to have record quarterly earnings," said Fadel Gheit, a senior energy analyst at Oppenheimer. "For every $1 [increase] in the price of oil, Exxon makes [another] $125 million for the quarter."
When asked if Exxon could top profit records, another analyst said: "That's not out of the realm of possibility."
The company is expected to earn $10.37 billion in the fourth quarter, according to earnings tracker Thomson Financial. That's about $330 million shy of Exxon's previous quarterly profit record of $10.7 billion set in the fourth quarter of 2005 - which also was a record for any U.S. corporation.
Exxon is expected to make $39.2 billion for all of 2007, just shy of its previous record of $39.5 billion in 2006, which breaks down to the company earning about $75,000 a minute.
If ConocoPhillips is any indication, Exxon should have no trouble meeting - and beating - estimates.
Conoco (COP, Fortune 500), the nation's third largest oil company, trounced profit estimates by nearly 25 percent when it reported Wednesday morning.
Number two Chevron (CVX, Fortune 500) is also expected to do well. Analysts are expecting a 30 percent increase in earnings per share when it reports next Friday.
High crude prices have been the main factor behind the massive profits at oil firms.
Crude prices averaged $90 a barrel the fourth quarter, up 50 percent from the same period in 2006. They jumped 20 percent from the third quarter of 2007.
"That's what's really driving it here," said Robert Plexman, an analyst at CIBC World Markets.
Natural gas prices have also increased compared to last year, albeit marginally.
But costs have also increased for the oil companies, and they haven't been able to make as much selling gasoline, which is why profits haven't risen as rapidly as crude prices.
Slack demand for gasoline in the latter half of last year kept gas prices from rising as much as crude prices. Big oil companies that both pump oil and refine crude into gasoline have to spend more for crude but are unable to pass on all the extra cost to consumers, which eats in to gasoline profit margins.
That was the main reason oil companies reported earnings in the third quarter of 2007 that fell from the prior year. But profit on gas sales has improved somewhat in the fourth quarter, so it shouldn't be as big of a drag on earnings.
Finding oil has also become more costly. The oil boom has led to a surge in exploration and drilling activity, which has pushed up the price for skilled workers and equipment.
Furthermore, new supplies of oil are increasingly difficult to find and generally tend to be located in harder to reach - and hence more expensive - places. The new natural gas field discovered this week by Brazil's Petrobras lies under three miles of ocean.
Analysts say the big oil companies are having a hard time finding new oil.
"The big issue everyone will be looking for is production numbers," said Wesley Ralston, an integrated oil analyst at the New Orleans-based investment bank Howard Weil. "It's tough to offset the natural decline curve."
Exxon and Cordoba: failure of justice
Ann Kristin Haldors Fontaine
Monday, November 5, 2007
Riki Ott, PhD., a community activist, former fisherm'am, has a degree in marine toxicology with a specialty in oil pollution and the author of Sound Truth and Corporate Myth$: The Legacy of the Exxon Valdez Oil Spill, writes about the continuing saga of the Exxon Valdez oil spill, the effects on Cordova Alaska, and the failure of our justice system.
The Supreme Court's recent decision to hear ExxonMobil's reasons to void the $2.5 billion punitive award in the Exxon Valdez case hit the town of Cordova, Alaska, hard. This small coastal fishing community -- my hometown -- along with the Alaska Native villages in Prince William Sound have borne the brunt of the largest crude oil spill in America's waters; a spill that took place more than 18 years ago, but one that continues to hold the region hostage.The second painful blow was the high court's decision to not even hear our reasons why the award should be restored to the full $5 billion that a jury of peers decided was necessary to punish the corporate giant back in 1994.While media pundits, lawyers, and scholars play the Supreme Court's decisions back and forth like a ping-pong ball, people in Cordova share a completely different perspective of this story. It's not about whether the Supreme Court should hear the case. To us, it's about justice and reparation -- making us whole, a promise Exxon made to the community five days after the spill. A promise that Exxon broke before the trial even started five years after the spill.To us, it's about more than an oil spill, the world's largest oil corporation, and a small fishing community in Alaska. It's about America's failed legal system that inherently cannot dispense justice in the face of corporate globalization.
Those affected by the spill offer some solutions for developing a just system that works for people.
First, post-disaster disputes could be minimized during preliminary planning and scoping of projects by negotiated, legally-binding agreements -- now that we are better informed of the ecological and human costs of disaster.Second, financial incentives and rules could be created to encourage dispute resolution through non-adversarial negotiated settlements. Such techniques have proven successful even for disasters involving toxic exposure.Third, incentives could be created to shorten litigation timelines by eliminating mechanisms that reward profits through stalling.Fourth, if punitive damages are to be effectively applied, then they must be linked with corporate profits rather than compensatory damages and they should be shared not only among victims, but also among the injured communities to rebuild areas devastated by disaster.In Cordova, we hope that it is just a matter of time before these suggestions or other similar ones are demanded by professionals, activists, and victims fed up with the American "injustice system."We know that change will have to come from each of us, as there is little hope that the Supreme Court, or any other branch of the current judicial system, will take it upon itself to keep from doing more harm to those it was designed to protect.
Chief Justice Roberts defends Exxon
Posted by Amanda Terkel, 28 February 2008
Yesterday, the Supreme Court heard oral arguments on how much money ExxonMobil should be forced to pay as damages for its Exxon Valdez oil spill 19 years ago. The Washington Post’s Dana Milbank notes that Chief Justice John Roberts appeared “bothered” that Exxon might have to pay for its destruction:
What bothered the chief justice was that Exxon was being ordered to pay $2.5 billion — roughly three weeks’ worth of profits — for destroying a long swath of the Alaska coastline in the largest oil spill in American history.
“So what can a corporation do to protect itself against punitive-damages awards such as this?” Roberts asked in court.
The lawyer arguing for the Alaska fishermen affected by the spill, Jeffrey Fisher, had an idea. “Well,” he said, “it can hire fit and competent people.”
The rare sound of laughter rippled through the august chamber. The chief justice did not look amused.
High court reduces Exxon oil spill damages
Court rules that punitive damages should roughly match cost of actual damage
Last Updated: June 25, 2008: 3:30 PM EDT
WASHINGTON (CNN) -- The Supreme Court on Wednesday reduced a $2.5 billion punitive damages award against energy giant Exxon for its role in an infamous 1989 maritime oil spill off the coast of Alaska.
The high court concluded that punitive damages should roughly match actual damages from the environmental disaster, which were about $507 million. Lower courts were asked to reassess the jury verdict, extending the years-long litigation in the case.
"The award here should be limited to an amount equal to compensatory damages," wrote Justice David Souter.
Justices Ruth Bader Ginsburg, John Paul Stevens and Stephen Breyer agreed in part and disagreed in part with the majority ruling. In such cases, it is left open to interpretation whether their dissent is strong enough to be considered a vote against the majority.
Big business wins in Exxon Valdez case
In the incident, commonly known as the Exxon Valdez spill, 11 million gallons of crude oil spilled in pristine waters off the southern end of the state when a supertanker - the Exxon Valdez - ran aground on an offshore reef. Petroleum soaked some 1,200 miles of coastline, killing countless birds and marine life.
Much of the initial blame for the accident was placed on Capt. Joseph Hazelwood, who was cited by various courts for relapsed alcoholism that contributed to mistakes, leaving his vessel helplessly stuck on Bligh Reef.
Witnesses said he had been drinking heavily before the Exxon Valdez left port that night, and had left the ship's bridge when it left the normal shipping channels to avoid ice. Both actions violated Coast Guard and company policies.
A class-action lawsuit was brought against Exxon by nearly 33,000 plaintiffs - including fishermen, landowners, local governments and Native Americans - who claimed private economic harm from the spill.
The company, now known as Exxon Mobil (XOM, Fortune 500), has already paid $3.4 billion in cleanup costs and millions in government fines and it argues it should not be forced to continue to pay for the spill.
A jury in 1994 awarded $5 billion in the class-action suit. A federal court later cut that amount in half, but it was still believed to be the largest punitive-damages judgment of its kind in U.S. courts. Punitive damages are designed to punish a wrongdoer, while compensatory damages compensate a wronged party for the loss they suffered.
The issue before the justices was whether the judgment was too high, based on past high court precedents limiting punitive awards.
Lawyers for the plaintiffs claimed the company has deep financial pockets, and noted in their appeal that even a multibillion-dollar judgment amounts only to "barely more than three weeks of Exxon's net profits."
Alaska residents who attended oral arguments in April held signs noting the Texas-based company reported an annual profit last year of $40.6 billion, a record for a U.S. firm.
Exxon Mobil claimed the federal Clean Water Act does not allow for punitive damages for oil spills and other open-water environmental incidents similar to the Exxon Valdez. And they said federal maritime law prevents company owners from being held liable for personally negligent conduct by the captain or crew.
Souter wrote, "The common sense of justice would surely bar penalties that reasonable people would think excessive for the harm caused in the circumstances."
The ruling was applauded by organizations such as the U.S. Chamber of Commerce, the world's largest business federation.
"This is good news for companies concerned about reining in excessive punitive damages," said Tom Donohue, the chamber's president and CEO, in a written statement. "For years, the chamber has argued that punitive damages are too unpredictable and unfair, and today the court agreed."
The high court has generally tried to limit punitive damages that are deemed "excessive." Last term, it threw out a $79 million award to an Oregon smoker's family who claimed tobacco giant Philip Morris contributed to his death by cancer. The justices, in their divided ruling in that case, said punitive damages almost always should match "actual," or compensatory, damages.
Justice Samuel Alito withdrew from deciding the case. Although no reason was given, financial disclosure reports indicated the newest justice had owned substantial amounts of Exxon stock.
Meanwhile, the long-running case has made it hard for residents of the community to move on, Travis Vlasoff, a native Chugach fisherman from Tatitlek, told CNN after oral arguments in the case. Vlasoff said the long legal fight has taken a financial and emotional toll among his family and friends.
"It's very difficult to advance the healing process without any sort of finality," he said. "Each turn has reopened long, deep wounds within the community and with individuals."
Exxon Valdez Oil Spill 1989
NWtravel Magazine Online
We do not inherit the earth from our ancestors, we borrow it from our children. - Native American proverb
On March 24 1989, shortly after midnight, the oil tanker Exxon Valdez struck Bligh Reef in western Prince William Sound, Alaska. The collision resulted in the spilling of between 11 and 34 million gallons of crude oil — ultimately affecting 1,181 miles of Alaska's pristine coastline, and killing thousands of marine animals.
The spill is the largest in U.S. history, and ranked 34th on a list of the world's largest oil spills in the 25 years leading up to the disaster. The Exxon Valdez tragedy came to be seen as the nation's biggest environmental disaster since Three Mile Island¹.
Southcentral Alaska Natives, fishermen, and small businesses, were eventually force-fed the oily taste of economic hard times.
The voyage
Oil tanker Exxon Valdez departed from the oil terminal in Valdez, Alaska, on March 23, 1989. On the vessel's 28th voyage, the experienced crew of 19 routinely headed south through Prince William Sound, with a full 53 million gallons of oil.
Captain Joseph Hazelwood alerted the Coast Guard station of a change of course, and moved into the northbound lane to stay clear of icebergs. Captain Hazelwood then gave third mate Gregory Cousins instructions to steer the Exxon Valdez back into the original course of the southbound lane, once he had passed Busby Island.
Busby Island was already well behind the vessel when Cousins notified the helmsman that it was time to turn the vessel back toward the traffic lanes. Lookout Maureen Jones reported to Cousins that Bligh Reef light appeared off the starboard bow. The light should have been sighted off the port side — the supertanker was proceeding through Bligh Reef's close waters.
Cousins was now in a perilous situation; he gave right rudder commands to effect the desired course change. The immediate and desperate attempts by Cousins to turn the tanker back into the much deeper traffic lanes fell short when an initial shock was felt — jolting the massive ship against the angry teeth of Bligh Reef at 12:04 a.m.
The vessel scraped and gouged to a halt, and became perched amidships on a spire of Bligh Reef. Eight of Exxon Valdez's 11 cargo tanks were punctured, and 5.8 million gallons gushed out of the tanker in the first three hours. The environmental and economic nightmare was underway.
The cleanup
Exxon Corporation mobilized huge quantities of equipment and personnel to initiate the first response to the mishap; however, their crucial first few hours and days (when containment and cleanup efforts are at a premium) were lost. Fewer than 4,000 gallons of dispersant² were all that was available in nearby Valdez, Alaska, and application equipment or aircraft were non-existent.
A trial burn was conducted during the early stages of the spill, in hopes of lifting the oil from the frigid water. Although partially successful, the burning process was abandoned because of unfavorable weather conditions. Three days after the vessel was grounded, a storm pushed large quantities of fresh oil onto the rocky shores of many beaches throughout the sound.
The Environmental Protection Agency (EPA), Alaska Department of Environmental Conservation, and the U.S. Coast Guard, gave Exxon a September 15 cleanup deadline. Valdez was the most accessible city near the spill, so Exxon quickly transported its recovery headquarters to the small community.
The 3,500 residents of Valdez tripled in size, and the price of everything, including food and clothing, reached sky-high figures.
Exxon employed many people in the Prince William Sound area to transport supplies to the villages in the sound, and to support the cleanup crews throughout the oiled areas. Many exploited the disaster for money — including media crews that were covering every angle of the spill.
Workers would wipe and spray rocks with steam hoses, only to be rewarded by the changing tide — and a new coating of oil. Environmental groups worked feverishly to save oiled seals, otters, and birds.
Midway through the summer of 1989, new techniques and technologies were initiated. Microorganisms that break down crude oil were sprayed onto some of the beaches, and new materials were used in the tedious job of wiping operations.
Exxon returned to Prince William Sound in 1990 with a much smaller work force for further cleaning. The long-term damages by the oil spill were horrendous. Even today, damage assessments are being conducted on fish, marine, and land wildlife.
The damageThree national wildlife refuges, three national parks, wilderness areas, a national forest, and extensive areas that had been inhabited for thousands of years by Alaska Natives, were an oily mess.
The spill posed threats to the delicate food chain that supports Prince William Sound's commercial fishing industry and portions of the northern Gulf of Alaska. Also in danger were 10 million migratory shore birds and waterfowl, eagles, hundreds of sea otters, dozens of such other species as harbor porpoises and sea lions, and several varieties of whales.
More marine mammals and seabirds were killed directly by the oil than in any man-made disaster ever. Direct mortality of seabirds has been estimated at 300,000 to 645,000, with an additional loss in chick production of more than 300,000 following the spill. Some colonies of murres lost 60 to 70 percent of their breeding birds.
The marine mammal death toll included at least 25 killer whales out of an area population of about 180, 3,500 to 5,500 sea otters, and around 200 harbor seals.
The 1989 season of herring, which spawned in the near shore zone just as the oil arrived, was essentially lost. Terrestrial mammals, including river otters, brown bear, deer, and mink were all affected. Much of the intertidal zone was essentially cooked by the toxic oil, and invertebrate communities were severely altered.
Economically speaking, the studies of sportfishing activity and tourism indicators — vacation planning, visitor spending, and canceled bookings — indicated decreases in activity. The contingent valuation study estimated the lost passive use value at $2.8 billion.
Congress makes a financial cleanup
On October 9 1991, the settlement among the State of Alaska, the United States government and Exxon was approved by the U.S. District Court. It resolved various criminal charges against Exxon as well as civil claims brought by the federal and state governments for recovery of natural resource damages resulting from the unforgiving oil spill.
· In settlement of civil charges, Exxon would pay the State of Alaska and the United States $900 million over a 10-year period. The money would be used for restoration and administered by six government trustees; three federal, three state.
· In settlement of criminal charges, Exxon would pay a fine of $250 million. Two restitution funds of $50 million each were established, one under state control and one under federal authority. Against strong opposition from many Alaskans, $125 million of the balance was forgiven, owing to Exxon's cooperation during the cleanup, and upgraded safety procedures to prevent a reoccurrence. The remaining $50 million was divided between the Victims of Crime Act account ($13 million) and the North American Wetlands Conservation Fund ($12 million).
On September 16, 1994, a jury in federal court returned a $5 billion punitive damages verdict against Exxon. The company appealed several times, and in November 2001, the verdict was overturned by a panel of the Ninth Circuit Court.
While the federal and state governments settled their civil and criminal litigation against Exxon in 1991, as of March 2002, claims by private parties are still being litigated and remain unresolved.
The Exxon Valdez, re-named the SeaRiver Mediterranean, is still carrying oil around the world. Although she has been barred from ever entering Alaskan waters again, Exxon applied to have that court ruling reversed. The appeal was rejected.
The futureAs a direct or indirect result of the Exxon Valdez disaster, tighter environmental regulations have been imposed on many industries.
The 1990 Oil Pollution Act is now working internationally to make tankers safer. The act has added the standard regulation of double hulls, so that if the outer layer is punctured, no oil will escape. Among other benefits, large tracts of land have been added to Kenai Fjords National Park, using funds from the Exxon fines. Major spills have dropped by two-thirds since the Oil Pollution Act.
The combined ability of skimming systems to remove oil from the water is now 10 times greater than it was in 1989, with equipment in place capable of recovering more than 300,000 barrels of oil in 72 hours.
¹ Site of America's worst ever nuclear accident near Harrisburg, Pennsylvania - March 28 1979. ² A chemical that aids in breaking up solids or liquids as fine particles or droplets into another medium.
Exxon Mobil appeals $2.5 bln Valdez oil spill award
27 February 2008
By James Vicini and Chris Baltimore
WASHINGTON (Reuters) - Exxon Mobil Corp urged the U.S. Supreme Court on Wednesday to overturn the $2.5 billion in punitive damages for the 1989 Exxon Valdez oil spill off Alaska, arguing it should not be punished for the mistakes of the ship's captain.
But the lawyer for about 33,000 commercial fishermen and others harmed by the nation's worst tanker spill replied that Exxon Mobil for three years had overlooked numerous reports that Captain Joseph Hazelwood had a drinking problem.
The 90 minutes of arguments before the high court occurred just several weeks after the huge Texas-based oil company reported the highest-ever quarterly profit for a U.S. company of $11.7 billion.
Exxon Mobil's lawyer, Walter Dellinger, told the high court the company already has paid $3.4 billion for the spill and cannot be held liable for additional punitive damages under federal maritime law.
"Exxon gained nothing by what went wrong in this case and paid dearly for it," said Dellinger, who argued that the company had no malicious intent or improper profit motive.
A key issue in the case is whether the company can be held liable for the mistakes of Hazelwood, who violated company rules when the Exxon Valdez ran aground in Alaska's Prince William Sound in March 1989, spilling about 11 million gallons of crude oil.
The spill spread oil on more than 1,200 miles of coastline, closed fisheries and killed thousands of marine mammals and hundreds of thousands of sea birds.
The justices closely questioned both sides and gave no firm indication of how they would rule -- although in past cases they generally have imposed limits on huge awards of punitive damages imposed on corporate defendants.
Dellinger argued that Exxon Mobil cannot be punished for Hazelwood's actions because he was not a managerial employee who set company policy, like a chief executive would.
But Jeffrey Fisher, representing the plaintiffs, replied that Hazelwood was in charge of an Exxon shipping business unit and that it was perfectly appropriate to make the company pay punitive damages for the reckless acts of such an individual.
Upper Management Aware of Drinking
"We showed 33 instances in the record of Exxon employees drinking with Hazelwood or learning that he drank. Up and down the corporation, ... for three years, upper management was receiving reports that this man was drinking aboard the vessel," Fisher said.
While Exxon had a policy against operating tankers while under the influence, Fisher said that the company failed to enforce it in Hazelwood's case.
Fisher said Exxon only fired one person -- Hazelwood -- and only reassigned the third mate who actually steered the tanker. But everyone else higher up in the company "received bonuses and raises," he said.
Justice Ruth Bader Ginsburg seemed supportive of Fisher's argument. "The jury could have found that Exxon knew that this captain had a severe alcohol problem; and yet they let him stay on voyage after voyage and did nothing about it," she said.
Chief Justice John Roberts appeared more supportive of the company's arguments and asked: "Where do you draw the line between the CEO (chief executive officer) and the cabin boy?"
Justice Antonin Scalia said he doubted that a captain was high enough a position to justify holding the entire company liable. "The janitor has authority over an aspect of the corporation," he said. "Surely, that can't be the test."
Justice Stephen Breyer expressed concern of a "new world for the shipping industry" if punitive damages can be assessed against the company for the failures of responsibility by the ship's captain.
Dellinger said the U.S. appeals court that upheld the award incorrectly ruled that Exxon Mobil could be held liable for the $2.5 billion simply because Hazelwood left the ship's deck shortly before the ship plowed into Bligh Reef.
A decision is expected by the end of June.
Justice Samuel Alito, who owns Exxon Mobil stock, recused himself from the case. Alito's recusal means that only eight court members heard the case. Should the justices end up being split by a 4-4 vote, then the appeals court's ruling against Exxon Mobil would be simply affirmed.
(Editing by Gerald E. McCormick and Dave Zimmerman)
Court Rewards Exxon for Valdez Oil Spill
by Greg Palast
Chicago Tribune (revised)
Listen to Shannyn Moore of KUDO 1080AM and Greg Palast on the Exxon Valdez Verdict
[Thursday, June 26, 2008] Twenty years after Exxon Valdez slimed over one thousand miles of Alaskan beaches, the company has yet to pay the $5 billion in punitive damages awarded by the jury. And now they won't have to. The Supreme Court today cut Exxon's liability by 90% to half a billion. It's so cheap, it's like a permit to spill.
Exxon knew this would happen. Right after the spill, I was brought to Alaska by the Natives whose Prince William Sound islands, livelihoods, and their food source was contaminated by Exxon crude. My assignment: to investigate oil company frauds that led to the disaster. There were plenty.
But before we brought charges, the Natives hoped to settle with the oil company, to receive just enough compensation to buy some boats and rebuild their island villages to withstand what would be a decade of trying to survive in a polluted ecological death zone.
In San Diego, I met with Exxon's US production chief, Otto Harrison, who said, "Admit it; the oil spill's the best thing to happen" to the Natives.
His company offered the Natives pennies on the dollar. The oil men added a cruel threat: take it or leave it and wait twenty years to get even the pennies. Exxon is immortal - but Natives die.
And they did. A third of the Native fishermen and seal hunters I worked with are dead. Now their families will collect one tenth of their award, two decades too late.
In today's ruling, Supreme Court Justice David Souter wrote that Exxon's recklessness was ''profitless'' - so the company shouldn't have to pay punitive damages. Profitless, Mr. Souter? Exxon and its oil shipping partners saved billions - BILLIONS - by operating for sixteen years without the oil spill safety equipment they promised, in writing, under oath and by contract.
The official story is, "Drunken Skipper Hits Reef." But don't believe it, Mr. Souter. Alaska's Native lands and coastline were destroyed by a systematic fraud motivated by profit-crazed penny-pinching.
Here's the unreported story, the one you won't get tonight on the Petroleum Broadcast System:
It begins in 1969 when big shots from Humble Oil and ARCO (now known as Exxon and British Petroleum) met with the Chugach Natives, owners of the most valuable parcel of land on the planet: Valdez Port, the only conceivable terminus for a pipeline that would handle a trillion dollars in crude oil.
These Alaskan natives ultimately agreed to sell the Exxon consortium this astronomically valuable patch of land -- for a single dollar.
The Natives refused cash. Rather, in 1969, they asked only that the oil companies promise to protect their Prince William Sound fishing and seal hunting grounds from oil.
In 1971, Exxon and partners agreed to place the Natives' specific list of safeguards into federal law. These commitments to safety reassured enough Congressmen for the oil group to win, by one vote, the right to ship oil from Valdez.
Supreme Court Saves Exxon $2 Billion
Posted by Neil Katz
Nineteen years ago the Exxon Valdez crashed into the shoreline of Alaska’s Prince William Sound spilling 11 million gallons of oil into pristine waters and ruining 1200 miles of coastline. Local residents and fisherman sued and an angry jury told Exxon to cough up $5 billion in damages. An appeals court cut that in half.
But yesterday, the Supreme Court, perhaps feeling sorry for a company that made $40 billion last year, cut Exxon’s bill down to just $500 million. With 20 years interest the real payout will be close to a billion. For Exxon, that’s about eight days worth of profits.
Even more shocking, $100 million of that money will go right back to Exxon. The company made a side deal with seven large fish processors in 1991, paying them $70 million for their share of the damages the courts would eventual deliver.
How is the rest of the money split up? According to the Anchorage Daily News, native villages will receive four percent of the take. Lawyers will get 22 percent. Forty nine percent goes to affected fishing companies who split the award based on the size of their business. By example, fisherman in Cook’s Inlet will receive $160,000 on average per permit.
Exxon claims they have already shelled out $3.4 billion in penalties, clean up costs and damages. Businesses are especially happy with this ruling because it appears to limit the amount of damages juries can award in maritime cases.
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