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The Exxon Valdez Oil Spill - Short Analysis

On March 24, 1989, the Exxon Valdez super tanker ran aground in Alaska’s beautiful and biologically rich Prince William Sound. The United States had become complacent about the risks of a major oil spill, but the sight of oiled seabirds in this spectacular setting shocked the nation into action.  Approximately 11 million gallons (257,000 barrels) of oil spilled into Prince William Sound, and approximately 1,300 miles of shoreline were impacted.

 ExxonValdezOilSpillImpact

 

Facts

  1. Supertanker Exxon Valdez, second newest in fleet, 984-feet, 24 Mar 1989, 9:12 p.m. ran aground on Bligh Reef in Prince William Sound, Alaska.
  2. Tere were calm seas, and they had clearly marked maps
  3. Uncertified 3rd mate Gregory Cousins was at the helm of the ship
  4. Captain Joseph Hazlewood had been drinking heavily and was resting in his cabin
  5. 11 million gallons of crude oil spilled - Still the second largest oil spill in US history (the other being the BP Golf of Mexico disaster)
  6. Wind & current carried spill to 1,500 miles of shoreline
  7. It killed: 500,000 birds (90 species), including 150 bald eagles, 4,500 sea otters, 14 killer whales, Salmon, herring, clams, mussels, seaweed
  8. No human life lost, though 4 deaths were associated with cleanup operations
  9. Took an immeasurable toll on tourism and on the local fishing industry

How Exxon Managed their Public Relations Situation: Crisis Management

During Stage 1: Continuing environmental crisis as oil spill spreads amid public scrutiny
During Stage 2: Ongoing corporate challenge from legal problems, still amid world scrutiny

Analysis of Issue

  • •    Problem of international scope
  • •    Intense scrutiny
  • •    Exxon culpability re: alcoholism problem of Hazlewood
  • •    Consequences on Exxon's visibility, reputation, legal future, financial base

Analysis of Organization

  • •    Exxon visible multinational corporation; largest oil company
  • •    CEO Lawrence Rawl uncomfortable with public role
  • •    Always a low-profile company
  • •    Corporate suspicion of media
  • •    Rigid & hierarchical internal structure
  • •    Public environment included industry criticism on size & safety of supertankers
  • •    General degradation of safety & oversight practices

Analysis of Reactions

  • •    Government and government agencies: Wanted investigation, regulation, restitution, cleanup, potential punishment
  • •    Oil industry: Wanted to save face and to not jeopardize operations
  • •    Exxon stareholders: Wanted continued financial profitability
  • •    Media: Demanded immediate information, full disclosure, culpability
  • •    Environmental activists: Angry, seek restitution, participate in cleanup

What was Exxon Strategy?

  • •    Minimize criticism
  • •    Maximize profits
  • •    Minimize legal & financial consequences

What did Exxon do?

Overview

  • •    Decided to handle response with no outside public relations consultants
  • •    Ignored criticism
  • •    Dismissed interest/involvement of environmental activists
  • •    Refused to acknowledge extent of problem (abiding by legal advice)
  • •    Refused assistance from local residents and environmental volunteers to help with cleanup
  • •    Fear appeal: predicting increase in gasoline prices because of cleanup cost
  • •    Shifted blame: Accused Alaska and Coast Guard of causing delay in cleanup

Exxon Communication Strategy

  • •    No designated spokesperson
  • •    Refusal to communicate openly

Tactics Used

  • •    Two-week delay (in calm weather) before clean-up started (then in rough weather)
  • •    CEO refuses to be interviewed; no time for such things
  • •    Amid media clamor, Director of Exxon Shipping, Frank Iarossi flew to Valdez for news conference
  • •    Mayor of Valdez John Devens said town was "betrayed" by Exxon's inadequate response to the spill
  • •    After 6 days, Rawl made statement to media. Eventually went on TV; unfamiliar with latest Exxon cleanup plans; claimed that, as CEO, it was not his responsibility to read such reports; blamed media for making a big deal of the spill
  • •    After 2+ weeks, Rawl finally visited site of oil spill
  • •    Corporate claims contradicted by eyewitness accounts
  • •    Paid $1.8 million for full-page ad in 166 newspapers; apology but no acceptance of responsibility
  • •    Response publicity, such as Exxon news release "Exxon-Supported Otter Center Highly Successful" (issued one day before Wall Street Journal article about "otter slaughter" 


Result of Exxon Strategy

  • •    Criminal Restitution (clean-up): $100 million; eventually $2.2-3.2 billion
  • •    Criminal Plea Agreement: $150 million fine (largest ever for environmental crime) (later reduced to $25 million with half allocated to North Am Wetlands Conservation Fund and half to Victims of Crime Fund; $300 million in lost wages for fishermen
  • •    Civil Settlement: $900 million over 10 years to restore environmental resources
  • •    Punitive Damages: $5.3 billion (largest punitive fines ever for corporate irresponsibility); vacated and reinstated; Dec 2006 reduced to $2.5 billion (now $4.5 billion with interest); Exxon appealled in Jan 2007
  • •    Reputational Outcome: Exxon lost market share, stock dropped $3 billion; slipped from largest to third-largest oil company; target of consumer boycott. Exxon Valdez is now synonymous with corporate arrogance and shirking responsibility (2004). Called the "most anti-environmental company in the world." Alaska Bishop: Exxon threatens "the web of life." Greenpeace: "Classic case of deny, dupe & delay."(2006) Britain science academy: Stop funding groups that misrepresent climate science. Canada: Exxon-Mobil spending millions to discredit science that fossil fuels accelerates global warming.
  • •    Corporate Outcome: Merger with Mobil Oil; $36 billion profits in 2005 (largest ever for any US company)
  • •    Legal Spin-off: In 2000, Alabama jury assessed Exxon $2.5 billion for defrauding state on gas royalties; verdict set aside; jury in 2003 re-trial assessed Exxon $11.9 billion; reduced to $3.6 billion. In 2006: Texas investigate Exxon-Mobil for delaying in reporting Gulf oil spill. In 2007: NYS AG threatens legal action for $58+-billion delay in cleaning oil seepage in Brooklyn
  • •    Dismissal of Hazelwood: immediately fired; tried and convicted of misdemeanor for negligent discharge of oil; worked as SUNY Maritime instructor, lobster fisherman, boat transporter, claims adjustor for his lawyer, 1,000 hours of community service in Alaska
  • •    Rawl resigned in 1993, still earning $1.3 million salary (plus benefits)
  • •    Iarossi quit a year later to become president of American Bureau of Shipping
  • •    Exxon Valdez repaired for 11 months, $30 million; renamed Sea River Mediterranean; legally barred from Alaskan waters
  • •    Regulatory Outcome: 1990 Oil Pollution Act requires double-hull tankers, escort tugs, other safety measures; includes financial/civil/criminal provisions, including fines and prison terms; created national Oil Spill Liability Trust Fund
  • •    Environmental Outcome: continuing environmental monitoring; only 2 of 28 species affected "fully recovered" (bald eagle & river otter)


Bottom line

  1. Exxon showed lack of leadership;
  2. Exxon failed to show concern;
  3. Exxon failed to involve media;
  4. Exxon failed to respond to activists;
  5. Exxon found crisis is difficult to deal with internally;
  6. The appropriate response went against organizational mindset;
  7. Exxon expected the public to forgive accidents;
  8. Lack of willingness to accept unpreparedness by a show of arrogance;
  9. Exxon focus on "Short-term gain" is off-set by long-term financial, legal and reputational pressures;
  10. Protests against Exxon continue till this day.

 

 

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