After months of heated bargaining, Exxon Corp., Alaska, and the Justice Dept. at last struck a deal to settle the oil giant's culpability in the 1989 Valdez oil spill. Announced in March, the sweeping pact called for Exxon to pay at least $900 million to settle civil suits. Exxon also pleaded guilty to four environmental crimes and agreed to pay $100 million in fines. But U. S. District Court Judge H. Russel Holland nixed it. "I am afraid," he said, "that the criminal fines send the wrong message, suggesting that spills are a cost of business that can be absorbed."
Lobbing the ball into Exxon's court, Holland gave the oil giant until May 24 to withdraw its guilty plea and stand trial for environmental crimes or come back with a new deal. Exxon may well be tempted to fight. Indeed, soon after Holland's veto, it scotched the proposed civil settlement. But a pact that repays all economic losses now and restores Prince William Sound would best serve the parties. And, by ensuring that Exxon takes steps to guard the environment, the pact would offer the company a chance to restore its public standing.
ANGER. Holland has made it clear that the company must pay a big fine. But there probably is no reasonable fine that is big enough to cause pain to a company the size of Exxon. Indeed, the very day the judge vetoed the fine, Exxon posted a record first-quarter profit of $2.24 billion. To be truly effective, the pact must go beyond what Representative George Miller (D-Calif.) calls "checkbook justice." It should make Exxon into the model of an environmental citizen.
Further legal battles are not going to defuse the public anger over the spill and Exxon's apparent slowness to respond to it. Executives insist they have acted responsibly, and even Judge Holland agrees that Exxon has negotiated in "complete good faith." Having spent much more than $2 billion on the cleanup and $300 million to settle claims, Exxon may now want to slug it out in court. In a narrow sense, it might win. But Exxon and its antagonists should put aside emotion and dash back to the negotiating table, where they've got lots to settle, including a new criminal fine and civil liabilities.
Holland wants to see Exxon pay far more than $100 million in criminal fines. But he may be demanding too much. As in every criminal action, the fines should reflect the seriousness of the offenses and the culpability of the offender. When Exxon pleaded guilty, it admitted violations of the Clean Water Act, the Refuse Act, and the Migratory Bird Treaty Act. While grave, the offenses either lack intent or involve negligence, not the more blameworthy charges of intentional, knowing, or reckless misconduct. Rather than levy too big a criminal fine, a more just solution would emphasize putting right what Exxon has done wrong. At a minimum, a new civil settlement should take care of all the affected parties, including Alaskan natives, environmentalists, and others with damage suits against the oil company. As suggested by Alaskan lawmakers, the oil giant should fund a trust fund large enough to cover damages to nature, now and in the future.
A settlement should also require Exxon to take some aggressive preventive measures. One way would be to mimic rival Conoco Inc., which now directly ties part of its managers' compensation to meeting environmental goals. Or, as the National Audubon Society has suggested, the company could undergo regular environmental checks by a court-appointed auditor to make sure that safeguards are in place to prevent other oil spills.
IMAGE. Such steps make good sense. Despite early apologies, Exxon can blame itself for its public image as arrogant and insensitive. When the plea bargain was unveiled, Chairman Lawrence G. Rawl said: "The settlement will have no noticeable effect on our financial results." Presumably, the chairman was seeking to reassure investors, but he wound up further infuriating the public with his apparent lack of remorse.
Rawl isn't commenting on how he would like to resolve Exxon's dilemma. Yet by agreeing to a public rehabilitation, he can help repair Exxon's image and set a new standard for industry's care of the environment. No testimony could be more compelling than Exxon's that protecting nature, even when no one is looking, makes good business sense.