EXXON, BP GRAPPLE WITH OIL SPILL PROBLEMS

Exxon Corp. and BP America continue to grapple with problems associated with oil spills off Alaska and California.

A federal grand jury in Anchorage last week indicted Exxon and Exxon Shipping Co. on felony and misdemeanor charges stemming from the Mar. 24, 1989, Exxon Valdez oil spill in Prince William Sound off Alaska.

The Justice Department said if Exxon is convicted on the five count criminal indictment, the company could face fines totaling more than $700 million.

Exxon last week slashed its 1989 net income to $3.51 billion from $3.81 billion by taking a further $300 million writedown related to Exxon Valdez spill costs. New developments and assessments following its fourth quarter 1989 earnings report led to an increase in estimates of future cleanup and environmental restoration costs as well as litigation and related costs. The added provision brings the 1989 provision for the Valdez spill to $1.68 billion.

The U.S. Coast Guard last month ordered Exxon to resume cleaning Prince William Sound May 1 for an indefinite period (OGJ, Feb. 26, Newsletter).

Meantime, BP obtained approval of its plan to complete cleanup of the Feb. 7 spill of Alaskan crude off Huntington Beach, Calif.

JUSTICE'S RATIONALE

U.S. Atty. Gen. Dick Thornburgh said because of the Exxon Valdez spill's "extensive environmental damage," the government is bringing charges under the Dangerous Cargo Act (DCA) and the Ports and Waterways Safety Act (PWSA) for the first time in a case of this nature.

"The Justice Department believes that the pristine environment in Alaska has been severely damaged due to the negligence and unlawful conduct by Exxon Corp. and Exxon Shipping," he said.

"By pursuing criminal charges in this case, the federal government is sending a strong signal that environmental crimes will not be tolerated. Firms which violate the environmental laws will face tough prosecution in the federal courts. We intend to see that the environmental laws are fully and strictly enforced."

The grand jury returned the indictment after Exxon rejected a proposed plea bargain that reportedly would have dropped criminal charges but would have imposed about $200 million in fines and required Exxon to contribute as much as to $500 million to an environmental restoration fund.

Alaska, which is suing Exxon for civil damages, objected to that settlement. Thornburgh said Justice will sue Exxon to recover civil damages after assessment studies are completed. And he did not rule out the possibility Justice and Exxon may negotiate a settlement on the criminal indictments.

THE INDICTMENTS

The first three counts are misdemeanors carrying fines of as much as $200,000 each. The indictment alleges Exxon negligently discharged pollutants into U.S. waters without a permit, discharged refuse matter from a ship, and caused the death of migratory birds.

The two remaining counts are felony charges and carry maximum fines of $500,000 each if a jury decides Exxon willfully violated the law.

One indictment alleges Exxon violated the 1972 PWSA, which requires that the owner or master of a vessel to ensure that the wheelhouse is constantly manned by competent personnel. The other alleges Exxon violated the DCA by employing a crew member who was physically or mentally incapable of performing his assigned duties.

Exxon Valdez Capt. Joseph Hazelwood, accused of operating a vessel while intoxicated, is on trial in Anchorage. A deck officer reportedly lacked a required license to pilot the ship.

EXXON'S RESPONSE

Commenting on the indictments, Exxon Chairman Lawrence Rawl expressed disappointment and said the company would defend itself against the charges.

"The grounding was a tragic accident for which both corporations have apologized to the American people, especially the people of Alaska," Rawl said. "Nobody willfully grounded the ship or caused the spill. We have worked diligently to remedy the consequences of this spill, having paid out, mostly in Alaska, more than $180 million to 13,000 fishermen and other claimants and having spent over $2 billion in cleanup costs.

"Moreover, we will resume cleanup operations as needed in 1990 and as determined to be appropriate by the U.S. Coast Guard.

"We believe there is no statutory basis for the amount of the fines mentioned by the U.S. attorney general."

BP SPILL UPDATE

The Coast Guard approved BP's plan for final cleanup of the oil spill off Huntington Beach. BP estimated most cleanup work will be completed early this month.

BP reached agreement with local, state, and federal authorities to use a combination of cleaning techniques on remaining traces of oiled or crusted sand affected by the spill, which occurred apparently as a result of the American Trader tanker puncturing its hull twice with its anchor in sea swells.

BP's plan takes into consideration additional cleaning required as a result of a survey of the beach splash zone between Huntington Beach pier and Newport Beach. Studies showed a Feb. 13 storm left behind residual contamination of thin oil layers as deep as 4-6 in. above the high tide line along a 6 mile stretch of beach.

BP's plan calls for using beach sanitizer machines, which sweep up sand and shake it through a filter that separates oil traces and tar balls from the sand and redeposits the sand. It also involves using disker machines to turn the sand and expose any oil remnants to oxygen and sunlight, forming tar balls that can be picked up with rakes or shovels.

BP also continued rock cleaning with low pressure, warm seawater along the mouth of the Santa Ana River, at Bolsa Chica beach, and rock jetties at Newport Beach.

General beach cleaning continued last week from Newport Beach to Bolsa Chica with a work force of about 360 persons.

The spill response effort had a setback when high tide and surf washed out a sand dike that Orange County built at the mouth of the Talbert Channel next to the Santa Ana River, leaving behind oily scum and a light sheen in a nearby experimental wetlands area. Although the volume of oil in the wetlands area was small, BP sent vacuum trucks and a crew to the area to begin cleanup.

BP hired Med-Tox Associates Inc., an Anaheim, Calif., environmental health testing firm, to test beach samples. Its first results, finding oil traces of 14 ppm vs. an acceptable level of 100 ppm, led to the opening of beaches between Newport and Balboa piers. Later testing was expected to allow more beach openings last week and this week.

The spill's toll on wildlife as of midweek last week included 545 birds received live at the wildlife recovery center, of which 165 died and 194 were treated and released, and 288 birds received dead.

BP is conducting the cleanup as contractor/consultant for the owner of the American Trader tanker, American Trading Transportation Co. Inc., which has assumed responsibility for cleanup costs and related claims.