More Penance for Exxon’s Sins : Judge chucks settlement in Alaskan spill case

Federal Judge H. Russel Holland was right to steer Exxon Corp.’s deal with Alaska and Washington onto the rocks this week. Now it’s up to the government and Exxon to come up with a settlement that comes closer to reflecting the cost of cleaning up its ecological disaster and to showing that it’s serious about preventing future disasters.

The deal was an out-of-court settlement on federal criminal charges and Alaskan damage claims arising from the ecological calamity that occurred after the tanker Exxon Valdez went aground in Prince William Sound in March, 1989.

In rejecting the deal, the judge chose the softest terms available to him in describing what made it unacceptable. Holland did not even mention $900 million in civil damages and $100 million for environmental restoration--if that were necessary after the turn of the century--but they were part of a $1.1-billion package. He did say that the $100 million in fines on four misdemeanor charges to which Exxon agreed last month to plead guilty did not “adequately achieve deterrence.”

Among its nuances, deterrence can mean intimidation, threat of retaliation, making someone think twice about doing something or putting the fear of God into someone, or into some corporation.

By whatever definition, $1.1 billion seems to fall well short of deterrence for a company whose profits were $2.24 billion in the first three months of this recession year alone.

The arithmetic is clear enough, but the judge also had Exxon’s virtual assurance that the punishment was not severe enough to send Exxon the right message.

Exxon Chairman Lawrence Rawl said when the settlement was announced last month that it would have no “significant effect on our earnings.” He said it again at a shareholders’ meeting a short time before the judge rejected the settlement.

The bargain struck among Washington, Alaska and Exxon, the judge suggested, makes it appear that paying to clean up a 700-mile long smear of oil along the Alaska coast is just “a cost of business that can be absorbed.”

A far more important cost of business would be a shake-up that would guarantee that its tankers sail in the future only with competent captains on the bridge. Harsher punishment for past oversight might just accomplish that.

Several environmental activist groups cheered the settlement when it was announced March 13, but a number of things changed between then and the judge’s decision Wednesday.

Rawl’s comments about earnings were two of them. Another was a National Oceanic and Atmospheric Administration study that found the Exxon Valdez spill--already a symbol of environmental disaster--was worse and more lasting than first appeared.

The report is still secret and the agency will not discuss its estimates of economic loss, but guesses range all the way from $3 billion to $8 billion.

It’s Exxon’s move. It can’t save the birds and seals and other wildlife that died in the spill, but Exxon can make a stronger commitment to safer passage into the future.