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DOJ explains Exxon Valdez ‘reopener’ lag Lawyers say government won’t sue to collect $92 million until studies on how to rid Prince William Sound of lingering oil are done Wesley Loy For Petroleum News
U.S. Department of Justice lawyers suggest the government might sue ExxonMobil Corp. for tens of millions more dollars for the 1989 Exxon Valdez oil spill, but not before studies are completed to determine how to deal with lingering oil on Alaska shores.
Details on these studies are contained in court papers the government filed Sept. 9 in the Alaska federal court.
In the papers, the Justice Department argues against an ExxonMobil motion seeking to block the government’s collection of further clean-up payments from the company.
The lawyers outline the status of various studies to determine what additional restoration work can be done and refine the dollar amount the government ultimately might seek from ExxonMobil.
The reopener clause The federal and state governments, in 2006, made an initial demand of the company for $92.2 million for a habitat restoration plan.
They did so under the “reopener” clause of a 1991 civil settlement between the governments and the company for the oil spill. Exxon paid $900 million under the settlement, but the reopener provision allowed the governments to request up to $100 million more to deal with unanticipated injury to habitats or species.
To date, ExxonMobil hasn’t paid the $92 million, and the governments have not sued to force the company to pay.
In December, oil industry critic Rick Steiner went to the federal court to try to compel the company to pay.
His bid was unsuccessful. But Steiner did inspire U.S. District Judge H. Russel Holland to ask the governments and ExxonMobil to provide him with a status report on the reopener issue by mid-September.
That’s the context in which ExxonMobil on Aug. 9 filed its motion to bar the $92 million demand, and the Justice Department on Sept. 9 filed its opposition to the motion.
Studies remain incomplete The DOJ lawyers argue ExxonMobil’s motion is premature, as the governments haven’t yet sued for the money — and won’t, pending completion of certain studies.
The basis for the 2006 demand was the emergence of new information that “relatively unweathered oil remained in the subsurface of beaches in Prince William Sound and the Gulf of Alaska,” the DOJ filing says.
This lingering oil had been degrading at a far slower rate than was anticipated at the time of the 1991 settlement, and remained toxic to animals such as sea otters and harlequin ducks using intertidal habitats, the filing says.
Since 2006, several studies were commissioned to answer certain questions and finalize the restoration plan, the DOJ lawyers write.
“These questions included the locations and extent of lingering oil, factors limiting the natural degradation of oil, and whether technologies could be developed to effectively accelerate the natural processes of degradation and dispersal of lingering oil,” the Sept. 9 filing says.
The DOJ says some but not all of the studies are complete.
“Various studies have been conducted regarding the effects of lingering oil on wildlife; some of these studies are complete and others are ongoing,” the court papers say. “Studies that help to more accurately predict the extent and locations of lingering oil are complete. A pilot study to determine the feasibility of a new bioremediation technique, which is designed to deploy nutrients and oxygen below the surface of the beaches to better reach lingering oil and more effectively accelerate degradation, is ongoing. The development of the pilot study required completion of several initial studies, including a study to identify the factors limiting natural degradation. The field work for the bioremediation pilot study is expected to be complete in mid-September of this year, and an analysis of the findings of the study is expected by spring, 2012.”
Claim could shrink Once the studies are completed, the governments “will then determine the next steps to make final decisions regarding whether, and what types of, actions are feasible and appropriate to restore the injured habitats,” the Justice Department says.
If an effective treatment technology is identified, the governments will consider the environmental benefit, the costs and public input, the DOJ lawyers write.
It’s possible, they add, that the governments might actually file for a smaller claim than the $92 million demanded in 2006, based on the outcome of the studies. Also, the governments will try to reach an out-of-court resolution with ExxonMobil.
The pilot testing of bioremediation technologies on lingering oil is “expected to provide valuable information about the type and feasibility of bioremediation that is called for,” the DOJ filing says.
Accordingly, the testing results might impact the final habitat restoration plan, including its scope, and thus the amount of money the governments might sue for under the reopener, the filing says.
As Petroleum News went to press, Judge Holland had not rendered any order with respect to the court filings from ExxonMobil and the Justice Department.
‘Ludicrous’ situation Steiner, a former University of Alaska professor, told Petroleum News on Sept. 12 he’s frustrated with the reopener situation.
“Exxon says they owe nothing more, and the government says that, while it demanded $92 million over five years ago for a specific restoration plan, they still haven’t decided what, if anything, should be done. This is ludicrous,” Steiner said.
He continued: “The government should have sued years ago, but they obviously lack confidence in their claim. The loser here is the injured environment and the public’s confidence in government restoration initiatives.”
Steiner believes the Exxon Valdez case offers a good lesson for how to structure any reopener in connection with the Deepwater Horizon oil spill in the Gulf of Mexico.
He suggests the reopener be set at a third of the settlement value — which in the case of Exxon Valdez would have been $300 million. He also suggests that if the government submits a reopener claim, the spiller “must either pay the demand in full within one year, or the issue should go before the court which would then resolve the dispute.”
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