Valdez punitive damages: letter to the editor

To the editor:

I write this letter in response to your recent editorial "Settle up: Exxon could afford to do better" (Feb. 23).

ExxonMobil's presence in Alaska is long and extensive. We've been conducting business in Alaska for 50 years and have invested billions of dollars into the state's economy. Our activities in Alaska date back to 1954, when we conducted a comprehensive study of the territory's oil and gas potential. Throughout the years, as an operator, we've drilled and participated in many wildcat wells, exploring most of the major plays in Alaska. These include the Gulf of Alaska, the St. George and Navarin basins, the Norton Sound, the Beaufort Sea and the North Slope.

We partnered with Conoco Phillips' predecessor, the Richfield Oil Corp., jointly participating in the Arco-Exxon Prudhoe Bay State #1, the January 1968 discovery well, which set in motion the development of North America's largest oil field.

As you pointed out, ExxonMobil currently owns approximately 36 percent of the Prudhoe Bay field, where significant capital investments continue to be made every year to enhance field performance and develop satellite fields. More than a third of the dollars spent at Prudhoe Bay, which pay for hundreds of Alaskans and Alaskan contractors, come from ExxonMobil.

We also own 20 percent of the Trans-Alaska Pipeline System, which supplies approximately 17 percent of U.S. domestic production. ExxonMobil also holds the largest gas resource on the North Slope and is working with the State of Alaska and the other North Slope producers to commercialize this gas, looking to spend billions more in Alaska.

In addition to the millions we spend on wages, contracts and capital investments, ExxonMobil provides millions of dollars to Alaska's civic and charitable organizations across the state, from Barrow to Sitka.

Your assertion that our presence in Alaska is "tiny" and our investment in Alaska is insignificant is just plain wrong.

With regard to the Valdez punitive damages, you also chose to overlook two key points: First, the award has twice been thrown out by the Ninth Circuit Court of Appeals, which is a strong indication that there is a sound basis to ExxonMobil's arguments that the amount of punitive damages is excessive. Second, an Alaska jury set the actual damages of the Valdez accident at $287 million, and the trial court in Anchorage commended Exxon for paying more than $300 million immediately and voluntarily to all those affected by the spill. In addition, ExxonMobil spent $2.2 billion on the spill cleanup, continuing the effort from 1989 until 1992, when both the State of Alaska and the U.S. Coast Guard declared the cleanup complete.

Ken Freeman
Alaska Public Affairs Manager
ExxonMobil Corp

Original Opinion Piece
Anchorage Daily News
Opinion
Settle up: Exxon could afford to do better
(Published: February 23, 2005)
ExxonMobil Corp. made financial-page headlines this month when it reclaimed the title as the world's largest, most profitable, publicly traded company. Its current market value leapt to $383 billion. Its sales for 2004 topped $298 billion. It cashed out $25.3 billion in profits in 2004.

If Exxon were its own country, it would have the world's 30th largest economy, right behind Belgium and ahead of Egypt. Exxon is bigger than the economies of 200 countries, according to economic rankings on the CIA's Web site.

With those kinds of numbers, Exxon doesn't have much to fear from its decade-long legal battle with Alaskans harmed by its 1989 oil spill. A federal court has awarded more than $6.75 billion in punitive damages and interest. Even if Exxon eventually has to pay every penny, the company long ago set aside enough money to cover it.

In fact, every day Exxon can delay payment, it comes out ahead. Federal law caps annual interest on the damage award at 6 percent. Exxon earns two or three times that much on money invested in its routine business operations.

While holding back billions from Alaskans, Exxon carts billions more out of state. Exxon owns 36.8 percent of the Prudhoe Bay oil field. With oil at $40 a barrel, the company grosses more than $2 billion a year from that one oil deposit. Yet Exxon's presence in Alaska is tiny. It doesn't run the Prudhoe Bay field; it just writes a check for its share of expenses. Its main activity in Alaska is moving money around. It ships money south and sends some back to cover operations and taxes and royalties it owes the state.

A good corporate citizen does more than just export billions of dollars for its shareholders. It looks for ways to strengthen a community commensurate with the benefit it derives from doing business there. A good corporate citizen doesn't leave its neighbors hanging with multibillion-dollar disputes that drag out more than a decade.

BOTTOM LINE: Exxon can easily afford to close the books on its multibillion-dollar legal dispute with Alaskans.

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ExxonMobil News Media Desk: (972) 444-1107