The Painful Effects of Oil Dependency: Exxon’s Human Toll

Kenyon Fields is a Bellingham-educated rainforest naturalist and writer living in Cordova, Alaska. Comments on this complex and touchy subject gratefully received at kenyon@gmx.net.

March 24, 1989 will forever remain the day that the Prince William Sound fishing town of Cordova lost its innocence, much as September 11 will haunt proud New York indefinitely. For on that day the inconceivable became a black, toxic, lingering reality called the Exxon Valdez Oil Spill. Like a scarlet letter, Exxon wears the mark of deceit and criminal negligence. What follows is a broad taste of the complex web of financial, legal, and emotional impacts the spill has brought to one Alaskan town over twelve years.

In blood-red letters, painted next to the evening’s specials across a local fish and chips bar’s window, is the local mantra: EXXON SUCKS. Bumper stickers adorn the town’s storm-beaten pickups: EXXON–PAY UP! The message in this town of 2,500, nestled between the Gulf of Alaska and Prince William Sound, is clear. Exxon owes the Alaskan fishing industry and support services at least five billion dollars, and Cordovans have been awaiting their share since a court ruling seven years ago.

The facts are familiar by now. Courtesy of a drunk captain leaving the ship’s bridge and a variety of other systemic problems, stemming from industry budget cuts and government complacency, the Exxon Valdez struck a reef that’s been charted since Capt. Vancouver’s voyage of 1794. The spill wreaked ecological havoc and ruined the socio-economic health of several thriving and tight-knit communities.

Twelve thousand folks are now plaintiffs in a 12-year suit to gain compensation for spill-related losses. While many claim that the disaster created “spillionaires,” the picture on the ground here is quite different. Residents of Cordova are concerned that the “Lower 48” believes the waters are clean again, fish and wildlife have fully recovered, and everyone has been compensated. This is simply not the case.

Buck Meloy, one of several Bellingham-based fishers with long ties to Cordova, expressed that “[Exxon has] done everything in their power to avoid satisfying the legal judgment against them…it really offends me that they continue to lie to the world and to their stockholders about compensation for damages. Some were paid to some fishermen in 1989, but I’ve yet to see one cent from Exxon for damages. The same is true for most fishermen I know.”

In 1994, plaintiffs were awarded $5 billion in punitive damages, plus $300 million in compensatory damages for what was actually lost in fishing time and opportunity from 1989-92. At the 6 percent rate of interest, Exxon now owes $6.3 billion, of which it has paid only some $250 million of compensatory damages through an advance claims process and other settlements. Exxon challenged the jury’s decisions to award punitive damages at all, and challenged the size of the punitive award, while stalling the award in a train of appeals.

A recent 9th Circuit Court of Appeals panel ruled that, at 17 times the compensatory damages, the $5 billion punitive award was too high and must be remanded to a lower court for reconsideration, perhaps to only four times the compensatory.

This decision contradicted a decision, allowing punitive damages of 28 times the compensatory, two weeks previously in the same court by a different panel of judges on a separate case. Citing this, the plaintiffs have filed a petition for rehearing, asking the entire 11-member 9th Circuit Court to review the case. If granted and ruled in the plaintiffs’ favor, Exxon will surely appeal to the Supreme Court.1

The worst-case scenario for plaintiffs is if the 4:1 ratio of punitive to compensatory damages is applied, reducing $5 billion to between $1.2 and $1.6. Dividing this reduced sum by the 12,000 plaintiffs leaves far less than most would accept as fair compensation for their sufferings. The recent decision “knocked the wind out of a lot of Cordova fisherman,” wrote Cordova Times editor Jon Holland.2

Cordovans have become legal and financial experts, rolling monetary figures, whose sizes remain incomprehensible to most of us, easily off their tongues. They are counting on their share of the $6.3 billion to bail them out of losses accrued since the spill and to rebuild the community. Yet they share with other affected communities the debilitating insecurity of not knowing when this money will come, or how much it will be. Yet there are other concerns as well.

A major problem facing claimants is that punitive damages are now taxable like regular income and the anticipated payment will push individuals into the highest income tax bracket in the year of payment, making the IRS the largest recipient of the punitive damage award. Riki Ott, a marine toxicologist and spill expert from Cordova, is spearheading an effort to capture tax dollars through charitable giving to the new “Oiled Regions of Alaska Foundation,”—a nonprofit organized to invest in and rebuild oiled communities through grant-based programs. By contributing to the foundation, award money can be redistributed for community projects. This will help mitigate the emotional sting of the award, which threatens to create “haves” and “have-nots,” as occurred during the 1989 oil spill cleanup.

Another concern is that long-term spill-related damages have made fishers unable to keep up with boat and permit loan payments. After attorney fees of 22 percent and federal taxes of nearly 40 percent, a mere 32 percent of the punitive award will be left for the plaintiffs. Many are concerned that their individual share will be too small to pay their outstanding debts. For some the award might actually push them further into debt as they will be unable to pay taxes after the state collects on liens for salmon permit debts.

Sad stories abound here. One couple bought a seine permit two months before the spill at the standard whopping price of $300,000. Permit prices are roughly set to the expected yearly gross income the said fishery will provide. Following the spill, the market value of these permits dropped because of uncertainty of the fisheries’ future. When the couple was finally able to sell three years later, their permit went for $43,000, leaving them with a huge debt on the original price tag—for a permit that never provided more than a few meals.

The topic of permit devaluation was thrown out in the initial trial, and yet this has become an issue posing perhaps the greatest economic harm to fishers. The debts acquired from such devalued permits keep fishers locked into a Catch 22—at today’s less productive salmon fisheries, they can’t pay off their debts and no one wants to buy their permits. “People whine about this new recession around the country,” said one fisherwoman. “Hell, I’ve been in a recession since the spill!”

Alaska Native Patience Faulkner feels the recent court opinion has made some people want to give up. “It’s been 13 fishing seasons of depression gone by now. When you’ve spent your child’s college fund you can’t make [financial] mistakes—not even over five bucks.” But there’s one major ongoing problem beyond economics. “It’s post traumatic stress syndrome, like New York feels… the result of an unanticipated ice bath,” Faulkner said.

Sociologist Steve Picou found “pervasive and debilitating stress, and chronic social and psychosocial impacts” amongst Cordovans affected by the spill. Picou observed that “Cordova was deeply affected because Cordovans have a strong sense of place.” He compared the “pervasive depression and related social illnesses” to effects on survivors of Bhopal, Chernobyl, or other such disasters.3

Of the 22 towns impacted by the spill, Cordova sustained the most long-term economic damage. The city has found that 75 cents of every dollar passing through hands here is related to the local fishing industry.4 That’s a strong figure illuminating a fish dependency this city is proud of. But as we learn in ecosystem or economic theory, healthy systems rely on diversity, and the Exxon Valdez disaster demonstrates just why.

Pre-spill, the seine fishery based here was the largest producer of pink salmon. Yet three of five fish processors in Cordova went bankrupt within two years of the spill, causing local economic chaos. Hundreds of non-Exxon funded studies have since found that oil is much more toxic than previously thought—levels of 1 to 10 parts per billion of polycyclic aromatic hydrocarbons (from oil) cause reproductive sterility in a wide variety of fish and wildlife.5 It’s no wonder then that populations of both pink salmon and herring crashed in 1992 and 1993 as a result of spill-related long-term damages, and have failed to recover since.

Prior to the spill roughly 50 percent of the city’s revenue came from a raw fish tax. This plummeted post-spill from a reduced influx of fish. To make up for budget shortfalls, the city hiked property and sales taxes. Ott notes that these additional taxes on fisherman equated to “trying to squeeze money from a stone,” and created what sociologists call, “a secondary spill disaster.” Even in a bad season, fishers still buy supplies and hire help locally. But with fishery closures and reduced fishing time, the shrunken flow of fish dollars wrenched the town’s economy, paralyzing the community to a near standstill. The state government twice rejected the city’s plea for economic disaster relief.

The depressed economy, coupled with the extreme horror of witnessing black death befall Cordova’s beloved marine backyard, induced a sharp rise over the years following the spill in domestic and substance abuse, depression, and divorce. Inevitable infighting arose from the maze of values for different fisheries and districts, and over who deserved what share of any eventual settlement, splitting the community with animosity. And nobody knows yet just how many spill cleanup workers have suffered the long-term health effects of overexposure to oil. Twelve years later, still awaiting payment, depression and animosity remain in the hearts of many townspeople.

Unanticipated long-term damage to the Sound ecosystem is but another sad angle to this picture. A recent study found far more remaining oil than expected, and according to the Exxon Valdez Oil Spill Trustee Council, only two species are listed as “recovered.” 6 By unanimous local opinion, Cordovans are not on that list. No one can begin to guess how long it will take for the ecosystem, the people, and the town to fully recover from the 1989 spill, but Cordovans agree that receipt of the long-awaited jury award will at least bring closure on this sorry chapter of local history.

“The public needs to know that Exxon has powder puffed America into thinking it’s all over and done. They certainly have not ‘made us whole’ as promised”, says Cordovan fisherman and boat builder Bill Webber Jr. Another fisherman said, “what we need is counseling for the fact that our lives have been on hold for years now.” Unanimous pessimism and depressed disbelief that anyone would ever see their rightful payments was expressed last week by every caller into the Sound’s talk show, Coffee Break. “Wake up and smell the coffee—we’ve waited twelve years and seen nothing yet,” one caller said. Of the original plaintiffs, 576 have died in these 12 years, adding a sense of urgency.7

Whatever Exxon pays, Buck Meloy remains adamant that “My share wouldn’t be enough to give them a good pelting with!”

Looking forward, Riki Ott stressed that “We need to find leverage points here, like the Trans-Alaska Pipeline System permit being up for renewal. This must be refused, amongst other reasons, until Exxon pays up and proves it is socially accountable.” The courts or state should also demand that Exxon pay before continuing to drill elsewhere, like in the Arctic National Wildlife Refuge. “A pipeline rupture would hurt people again – potentially many of the same people who still have not been compensated for the Exxon Valdez oil spill.”

Unfortunately, Alaska earns 85 percent of its income from oil and gas. While it’s easy to point a finger of blame at a drunk Capt. Hazelwood for the heinous results of the spill, we also need to remind ourselves that, as a country, we are drunk on oil.

Unless cited, quoted statements come from personal communication, December 2001, Cordova. My greatest appreciation and respect to Riki Ott for who she is, and for her tremendous help on this article.