[Senate Hearing 111-874]
[From the U.S. Government Publishing Office]
S. Hrg. 111-874
EXXON VALDEZ TO DEEPWATER HORIZON: PROTECTING VICTIMS OF MAJOR OIL
SPILLS
=======================================================================
HEARING
before the
COMMITTEE ON THE JUDICIARY
UNITED STATES SENATE
ONE HUNDRED ELEVENTH CONGRESS
SECOND SESSION
__________
JULY 27, 2010
__________
Serial No. J-111-102
__________
Printed for the use of the Committee on the Judiciary
U.S. GOVERNMENT PRINTING OFFICE
64-403 WASHINGTON : 2011
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COMMITTEE ON THE JUDICIARY
PATRICK J. LEAHY, Vermont, Chairman
HERB KOHL, Wisconsin JEFF SESSIONS, Alabama
DIANNE FEINSTEIN, California ORRIN G. HATCH, Utah
RUSSELL D. FEINGOLD, Wisconsin CHARLES E. GRASSLEY, Iowa
ARLEN SPECTER, Pennsylvania JON KYL, Arizona
CHARLES E. SCHUMER, New York LINDSEY GRAHAM, South Carolina
RICHARD J. DURBIN, Illinois JOHN CORNYN, Texas
BENJAMIN L. CARDIN, Maryland TOM COBURN, Oklahoma
SHELDON WHITEHOUSE, Rhode Island
AMY KLOBUCHAR, Minnesota
EDWARD E. KAUFMAN, Delaware
AL FRANKEN, Minnesota
Bruce A. Cohen, Chief Counsel and Staff Director
Brian A. Benzcowski, Republican Staff Director
C O N T E N T S
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STATEMENTS OF COMMITTEE MEMBERS
Page
Klobuchar, Hon. Amy, a U.S. Senator from the State of Minnesota.. 1
Leahy, Hon. Patrick J., a U.S. Senator from the State of Vermont,
prepared statement............................................. 33
Sessions, Hon. Jeff, a U.S. Senator from the State of Alabama.... 3
WITNESSES
Banta, Joe, Project Manager, Prince William Sound Regional
Citizens' Advisory Council, Anchorage, Alaska.................. 7
Begich, Hon. Mark, a U.S. Senator from the State of Alaska....... 11
McInerney, Thomas G., retired Lt. General, U.S. Air Force,
Clifton, Virginia.............................................. 9
O'Neill, Brian, Partner, Faegre & Benson LLP, Minneapolis,
Minnesota...................................................... 6
SUBMISSIONS FOR THE RECORD
Banta, Joe, Project Manager, Prince William Sound Regional
Citizens' Advisory Council, Anchorage, Alaska, statement....... 26
McInerney, Thomas G., retired Lt. General, U.S. Air Force,
Clifton, Virginia.............................................. 35
O'Neill, Brian, Partner, Faegre & Benson LLP, Minneapolis,
Minnesota...................................................... 40
Primary Recommendation, May 27, 2010, report..................... 48
EXXON VALDEZ TO DEEPWATER HORIZON: PROTECTING VICTIMS OF MAJOR OIL
SPILLS
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TUESDAY, JULY 27, 2010
U.S. Senate,
Committee on the Judiciary,
Washington, D.C.
The Committee met, pursuant to notice, at 2:40 p.m., in
room SD-226, Dirksen Senate Office Building, Hon. Amy
Klobuchar, presiding.
Present: Senators Klobuchar, Franken, and Sessions.
OPENING STATEMENT OF HON. AMY KLOBUCHAR, A U.S. SENATOR FROM
THE STATE OF MINNESOTA
Senator Klobuchar. I call the hearing to order. Thank you,
everyone, for being here. Good afternoon.
Tomorrow will mark 100 days from the time the BP oil spill
began with the tragic explosion on the Deepwater Horizon.
Eleven men lost their lives, and until recently, oil continued
to spill into the Gulf of Mexico.
Unfortunately for our country and for the world, this is
not the first oil spill that we have seen, and we have got a
great panel of witnesses here today who are going to help tell
us some of the lessons from the last massive oil spill in our
country. That would be the Exxon Valdez disaster in 1989.
We will probably have to recess this hearing about 3 p.m.,
and in the meantime, to keep things going, Senator Sessions and
I will offer our opening remarks, and we will turn to the
witnesses for testimony. I know Senator Begich, who wants to be
here, is presiding over the Senate, and we hope that he will
join us at some point as well.
Now, today we are going to be hearing from a group of
witnesses who are very familiar with the disaster that occurred
in Alaska 21 years ago, and I am hopeful that we will learn
from their experiences so we know how to better help the
victims of this latest oil spill.
As we all know, on April 20th, tragedy struck in the Gulf
of Mexico. An explosion aboard the Deepwater Horizon led to the
largest oil spill in American history. Three months later,
things are finally starting to turn a corner in the gulf.
Officials are cautiously optimistic that the well has been
plugged, and BP scientists believe that they may have a
permanent fix when they put in the secondary well.
That day cannot come soon enough. When the oil gusher in
the gulf is permanently sealed, the first chapter of this
environmental tragedy will finally come to a close. But it is
only the first chapter.
Right now, the slick from the spill covers approximately
2,500 square miles. Oil has washed up on shores from Texas to
Florida. The gulf region's beaches, marshes, and wildlife are
imperiled. We have seen the pictures of the oil-soaked pelicans
hobbling on the beaches, and we have watched as sea turtles and
dolphins struggle to survive in water that has been polluted by
oil. It is frustrating. It makes people very angry. It makes
all of us very angry.
The livelihood of countless Americans are also in danger.
Businesses that depend on commercial fishing, deepwater
drilling, and tourism industries are all in jeopardy. And while
the Gulf States closest to the spill will bear the brunt of the
environmental harm, the fallout from this kind of environmental
disaster goes well beyond the gulf. Ecosystems and economies
across the country will suffer.
One example: Minnesota is the home of half a million ducks
and the largest loon population in the continental United
States. Every winter, those birds from Minnesota as well as
12.5 million other birds, 13 million birds make that long trek
from the Midwestern States to the marshes along the gulf coast.
The oil spill has spread to those marshes, and this year, when
the migratory birds get to the gulf, there is a big risk that
they will be ensnared by oil from the Deepwater Horizon spill.
No one can just hold up a sign that says, ``Hey, go to Texas
instead.'' No one can put a big net up, and the birds do not
really have the kind of instinct that would lead them to go
somewhere else.
That is only one example of the many ways this oil spill is
going to affect the health of entire ecosystems, even outside
of the Gulf of Mexico.
History might be our best teacher. Twenty-one years ago,
the Exxon Valdez oil tanker struck Bligh Reef in Prince William
Sound, Alaska; 11 million gallons of oil spilled into the
ocean. Despite a large-scale cleanup, there are still lingering
effects on the environment. An estimated 80,000 liters of oil
in the form of lumps of oil and tar are still said to pollute
the coast of Alaska. The Exxon Valdez oil spill is ingrained in
the memories of many Americans as one of the greatest
environmental catastrophes of the 20th century. Exxon Valdez
stands out in my mind not just as an environmental disaster,
but also as a grave injustice.
A Minneapolis law firm, Faegre & Benson, represented 32,000
Alaskan fishermen, natives, and cities in their lawsuit against
Exxon. An Anchorage jury awarded $287 million in actual damages
and leveled $5 billion in punitive damages against Exxon. In
2008, after nearly 20 years of legal wrangling, the Supreme
Court reduced the fine to around $500 million. They went from
$5 billion to $500 million.
Exxon used every legal trick in the book to prevent the
victims of the oil spill from getting compensation. After 20
years of court fights, 8,000 of the fishermen who sued Exxon
died and were never paid. Other fishermen received less than
they deserved, and they got their money 20 years too late.
While BP's executives sound outraged and contrite now, who
is to say that will not change in 2 to 3 years. In the
immediate aftermath of Exxon Valdez, Exxon's top executives
were publicly repentant, but once they were behind the
courtroom doors, they sang a very different tune.
As David Lebedoff, a Minneapolis attorney and author who
wrote the book ``Cleaning Up,'' one of the most definitive
books on the post-Exxon Valdez litigation, as he put it, ``A
company's public relations goals just after a disaster are very
different from its litigation needs 5 years later.''
I think we have made some steps in the right direction. BP
executives, after meeting with President Obama and after a lot
of pressure from Congress, agreed to create a $20 billion spill
response fund. That is something we did not have in Exxon.
Kenneth Feinberg will administer the fund, and I believe that
Mr. Feinberg will work hard to make sure that those funds are
distributed quickly and fairly. But the fund is only a first
step, not a silver-bullet solution.
I brought this panel together today to discuss how the
lessons of Exxon Valdez can be applied to the tragedy in the
gulf. How was Exxon able to keep the oil spill litigation
gummed up in the courts for two decades? What compensation did
victims in the Exxon Valdez tragedy get? And what challenges
continue to plague their communities 21 years later? We need to
have a clearer understanding of the financial, biological,
sociological problems of the Alaskan communities, the ones they
still face, in order to better understand the scope of the
disaster in the gulf and to ensure that BP, not the taxpayers,
are paying the bill for years to come.
Senator Sessions is now going to give his opening
statement, and then we will hope to get the witness testimony
in before the vote starts.
Thank you, Senator Sessions.
STATEMENT OF HON. JEFF SESSIONS, A U.S. SENATOR FROM THE STATE
OF ALABAMA
Senator Sessions. Thank you very much.
This is an important hearing, and it is not easy to deal
with the losses of this kind of oil spill. I spent Saturday
morning with Mr. Feinberg, meeting with local people who had
suffered financial loss, perhaps not direct loss but very, very
real loss to their financial ability to survive, and maybe it
is not in normal terms a direct financial loss, but it is a
very real financial loss. I do not envy the difficulties he has
in deciding who gets paid and who does not, where you draw the
line, and where you have got to, as a matter of equity,
compensate people. He insists that he is prepared to pay far
more than what these individuals would get if they were to go
to court because for many of them they just would not meet the
facial requirements, the elements of a lawsuit and would not be
able to be compensated. That, as he acknowledges, remains to be
seen, but that is his view.
So this is a challenge, and $20 billion is a lot of money
to distribute. How you do that fairly and objectively so people
do not rip off the fund is a challenge? And you have got to
determine who is in crisis now and needs the money immediately,
which is a big problem that I believe is occurring on the gulf
coast.
I do not believe this accident should have happened. I
believe good, tight, tough management and oversight somehow or
some way would never have allowed this disaster to occur. I am
inclined to believe--and maybe as time goes by we will learn--
that other rigs being operated more carefully with more control
and more determination would have avoided this. So I am not at
all defensive. I said within days of the disaster that, as far
as I was concerned, BP was not too big to fail, that they were
going to pay what they were obligated to pay, and if they
cannot succeed, well, so be it. A lot of companies all over
America fail every day as a result of actions that they take
that get them in financial trouble, and nobody bails them out.
So I do not think they need to be bailed out. I think they need
to pay what they are lawfully required to pay. But being a
person of the law, I think they can be encouraged to go beyond
strict rules of law, but at some point every corporation is
entitled to the protection of the law.
I think the Exxon Valdez situation is a good learning
point. I do believe the Oil Pollution Act that arose out of
that has proven in many ways to be helpful to us today. We have
seen some things, I think, that need to be changed in it, but
it is a lot better than not having it, I believe at this point.
Those who in reaction to that spill passed the Oil Pollution
Act I think did some good work, and there is nothing wrong with
us in reaction to this circumstance figuring out how to improve
the act.
We want to be sure that we do not eliminate 200,000 jobs
and eliminate the economic benefit that we get from offshore
oil and gas production through whatever it is that we decide to
do about this. That worries me. A lot of people are not as
attuned to it, I think, as I am. Having been involved in
studying the economics of it for a number of years, it is a
big, big deal for America.
So I think we need to see how we can proceed. Can we create
a circumstance that puts great pressure on the responsible
party? They have to be deeply financially committed to the
safety of the rig. And maybe also we can create some pressure
on the entire industry to support one another in ensuring that
there is safety in oil drilling.
I was impressed that Exxon, Chevron, Conoco, and Shell have
come together with building permanent response equipment the
likes of which just now is being successful after 90 days. They
are going to start now to spend $1 billion to develop a more
effective capping procedure, which should have been done
before, in my opinion. One of the great disappointments I have
had about the oil industry is that though they have assured us
repeatedly that they had everything under control, I have been
disappointed they did not have this kind of equipment ready,
because even though the chances for such a blowout were small,
it was always possible. It would have been a few pennies in the
scheme of the overall size of this industry to have had
equipment sitting on the dock ready to respond within hours of
this disaster.
So, Madam Chairman, thank you for hosting the hearing. I
look forward to hearing our witnesses and wrestling effectively
with how to compensate victims and how to create a legal
process that is fair and just.
Senator Klobuchar. Well, thank you very much, Senator
Sessions. Thank you for your words of willingness to look at
this bill and make some improvements and changes to the
existing law. I really appreciate that.
I think we will swear in our witnesses now. Do you affirm
that the testimony you are about to give before the Committee
will be the truth, the whole truth, and nothing but the truth,
so help you God?
Mr. O'Neill. I do.
Mr. Banta. I do.
General McInerney. I do.
Senator Klobuchar. Thank you. So let me introduce all three
witnesses at once.
First we have Brian O'Neill. He is a friend and colleague
from Minnesota. He has extensive experience in oil spill
litigation, and he has dedicated a large part of professional
career--probably larger than he imagined when he first started
doing this that it would last 20-some years--but a large part
of his professional career fighting on behalf of the victims in
the Exxon Valdez oil spill. He was the lead trial counsel for
the 32,000 fishermen, natives, and cities in the Exxon Valdez
litigation, and in 1994, the National Law Journal named him one
of the Ten Best Lawyers in America for his work in Alaska. He
graduated from the U.S. Military Academy at West Point and the
University of Michigan Law School. He is a partner in the
litigation group at Faegre & Benson, which is a law firm
headquartered in Minneapolis, Minnesota.
I know Senator Franken is here, and I do not know if you
want to add a few words for hometown lawyer who is appearing
before our Committee.
Senator Franken. Well, we are very proud. Thank you, Madam
Chair, and we are very proud of you, Mr. O'Neill, for the work
you did on the Exxon Valdez case and look forward to your
testimony. We met this morning and a pretty harrowing story
about what happened to the folks that you represented, how long
this took, how such a high percentage of them died before
seeing any money or restitution. And we just have an interest
that the people who have been victimized in so many different
ways by this oil spill in the gulf are not victimized twice,
and I look forward to your testimony. Thank you for being here,
as I thank all the witnesses.
Senator Klobuchar. I also note that your son is there
behind you. Is that right? So ready in case you need
representation. All right. Good.
We will also hear from Joe Banta, who has flown all the way
from Alaska. Senator Sessions, he took the red-eye--so I guess
we should be nice to him--to be here with us. Joe grew up in
Cordova in a commercial fishing family and was fishing in
Prince William Sound by the age of 10. He was a herring
fisherman before the Exxon Valdez oil spill and now is a
project manager with the Prince William Sound Regional
Citizens' Advisory Council, which focuses on oil spill
prevention and response. Thank you for being here, Mr. Banta.
Finally, we will hear from Lieutenant General Thomas
McInerney of the United States Air Force. He currently runs his
own consulting firm, Government Reform Through Technology,
GRTT, since retiring from the military. However, 21 years ago,
he was in charge of the Alaskan Air Command and basically
coordinated the Department of Defense's efforts on the oil
spill cleanup during the time of the Exxon oil spill. He also
graduated from West Point--wow, you are surrounded, Mr. Banta--
and has a master's degree in international relations from
George Washington University, and we are glad to hear his
unique perspective today.
We will start with Mr. O'Neill.
STATEMENT OF BRIAN O'NEILL, PARTNER, FAEGRE & BENSON LLP,
MINNEAPOLIS, MINNESOTA
Mr. O'Neill. Thank you, Senator. I spent the last 21 years
of my life working on a drunk-driving case, and I have some
observations as a result of that endeavor.
In 1994, I did try for half a year the punitive damage case
against Exxon, and leading up to that, we took testimony from
over 1,000 people. We looked at 10 million documents, and since
the trial, we have argued over 20 appeals and tried to
distribute recoveries to fishermen and natives, and we have
recovered about $1.3 billion during that period of time.
A fisherman is essentially a significant small business and
may have as much as $1 million in capital invested in his
business. But the capital is illiquid in that it is in the form
of boats and fishing permits. And when a fisherman cannot fish,
he cannot feed his family, he cannot make his boat payments;
and if it is a fishery that has permits, it cannot make fishery
permit payments. So if there is an oil spill, a fisherman has
immediately a need for an infusion of cash to last through the
year so he does not go into bankruptcy.
Now, at some time later, he also needs the opportunity for
a full assessment as to what his damages are because oil spills
are very unpredictable.
In the early 1970s, the citizens of Cordova objected to the
Trans-Alaska Pipeline, and they did so because they predicted--
and they predicted to Senate Committees--that if you allow the
transport of oil through Prince William Sound, there would be a
catastrophic spill, and it would destroy the fishery. And in
1989, that prediction came true, and the Valdez ran aground,
and there was a massive amount of litigation that ensued.
The litigation with the Government was criminal and civil,
and after 2 years into the litigation, both the State of Alaska
and the Federal Government settled early. And when the
settlement was approved, they explained to the district court
judge in Anchorage that they were settling relatively
inexpensively-$900 million for the civil damages to natural
resources and $100 million in restitution under the criminal
laws. They were settling rather cheaply because they needed the
money immediately for remediation in the sound; and, two--and
it was a stated reason--they did not feel that they could
litigate against Exxon Corporation effectively over a number of
years because of financial reasons and, again, the need for
money.
Our case was the civil case, and we did go to war with
Exxon. And as everyone knows, we were at war with them for 21
years, and we estimate that they spent in defense of our case
$400 million.
We learned some things. One of the things we learned was
that part of the extraction of oil and the transportation of
oil is going to be spills. Some spills are inevitable, and so
you better have a system in place to deal with those hurt by
the spill. It makes sound economics and it makes sound justice
to have people hurt by an oil spill fully compensated and have
the price of their hurt reflected in the price of oil at the
pump.
We also learned that maritime law, old-fashioned maritime
law, was ill-equipped to take care of victims of a spill, and
OPA 90 tried to address that, and it made some steps forward.
But somebody needs to take a look at OPA 90 so that we know who
gets paid and for what they get paid, because both in the
Valdez case and I think today, there is a great deal of
uncertainty about what the proximate cause doctrines are with
regard to oil spills.
A hotel with oil on its beach can recover. The hotel next
door that has no oil on its beach, who knows? The hotel across
the street, again, who knows? So fishers in part are protected,
but they are not fully protected, and area businesses are--it
is unclear.
Oil spills drastically impact the financial lives of
fishermen, but they also destroy communities. An oil spill,
unlike a natural disaster, results in a city like Cordova,
Alaska, or a gulf city in higher suicide rates, depression,
divorces, bankruptcies, people getting behind on their taxes.
So as you look at this whole thing, people do have to be made
whole financially, but remember, when you make them whole
financially, you are helping to make their communities whole
and in many cases helping to make their communities survive
That is my 5 minutes.
[The prepared statement of Mr. O'Neill follows:]
Senator Klobuchar. Thank you. That was very helpful.
Mr. Banta.
STATEMENT OF JOE BANTA, PROJECT MANAGER, PRINCE WILLIAM SOUND
REGIONAL CITIZENS' ADVISORY COUNCIL, ANCHORAGE, ALASKA
Mr. Banta. Thank you, Madam Chair. I appreciate the
opportunity to come before the Committee and provide you with
information about the profound impact that the Exxon Valdez oil
spill had on me, my family, and my hometown, a small rural
fishing town in Prince William Sound.
I grew up in that town in a commercial fishing family. I
began fishing at the age of 10. I was a third-generation
fisherman. My Grandpa Bob came up to Alaska after World War I,
drawn by the lure of a fishery.
In 1989, at the time of the spill, I was preparing for the
herring fishery in Prince William Sound. Unfortunately, within
a few weeks, I instead was doing wildlife rescue, a very tragic
situation, sad and frustrating, and I will leave it at that.
The following year there were significant biological
effects starting to show. Herring showed signs of stress,
lesions from viral and fungal infections. Within a few years,
the fishery was closed entirely because the previously robust
biomass of 150,000 tons of herring had been reduced by an order
of magnitude down to 15,000 to 20,000 tons. The herring
fisheries in the Sound have been closed for 15 of the 21 years
since the spill. This was an immense impact biologically as
well as financially. The herring that were the basic part of
the food chain, sea birds, whales, seals, sea lions, other fish
fed upon, was all quite almost literally gone.
There were also significant financial impacts from the loss
of the herring fisheries that were multi-generational and
multi-layered in effect from individuals up to entire
communities. It rippled through all businesses like grocery
stores, net mending, on up the chain. Those herring fisheries,
again, are gone. My father's fishery is gone. My friends'
fisheries are gone. Mine is gone. My permit, valued at
$100,000, is now worth nothing. That income has evaporated from
that fishery permanently. My sons, Wade, Tore, and Jonas, will
no longer have the opportunity to participate in this unique
Alaskan way of life, not unlike people that ranch or farm and
make their living off the land.
So 21 years after the spill, here we are and there is no
indication that this way of life is ever coming back. My family
no longer fishes commercially in any way at all.
So the class action lawsuit ended in 1994, we have heard,
before the herring fishery had entirely ended, though, so we
were compensated only for the initial years of those financial
losses, and not for the following past two decades. So the
families and the fishermen have not been compensated for that
loss with the end result being a significant uncompensated loss
for each and every one of the people involved in the herring
fishery.
Twenty-one years out, and the financial compensation,
modest, that has been awarded from the lawsuit still has not
had its final payments made. We are actually still waiting for
final payments. A sociologist actually came up with a term he
called ``litigation stress'' to define what goes on and the
stresses that were added just by the litigation itself, not to
mention the other stresses on up to suicide that we have dealt
with.
In reality, this has only been compounded by the manner in
which the Supreme Court intervened really at the end of the
whole process and used this old maritime commercial law from
the 1800s, essentially developed to deal with pirates to cut
our jury award down to one-tenth the original what our peers
had awarded us.
You have heard it before, and I am going to say it again.
You should know that in the 21 years since the spill, a third
of the 32,000 plaintiffs have passed away prior to the
litigation's final settlement and payment. That is a third. So
in this instance, justice delayed is truly justice denied.
Communities themselves lost money that had gone directly
into the city's tax coffers from a raw fish tax gathered by the
communities for herring processed in or near the area. I have
been told that my hometown of Cordova lost approximately
$20,000,000 over the last few years in raw fish tax revenue
specifically into their coffers.
This year, in May, I was invited to travel to the gulf
coast by folks down there, and I had the opportunity to meet
with residents and share lessons learned from the Exxon Valdez
oil spill that my organization, the Prince William Sound
Regional Citizens' Advisory Council, has developed. Our hearts
sure go out to the people down there affected by that massive
spill. We can definitely relate to that, unfortunately.
So these ``Lessons Learned'' documents that we brought down
for folks down there, developed by my organization, I think are
a valuable resource for them and for the Committee, and I will
leave you these copies.
Thank you.
[The prepared statement of Mr. Banta appears as a
submission for the record.]
Senator Klobuchar. Well, thank you very much. I appreciate
that, Mr. Banta. Also we can put those on the record if you
would like to.
Mr. Banta. Okay.
Senator Klobuchar. All right. We will do that. Thank you.
Lieutenant General.
STATEMENT OF THOMAS G. MCINERNEY, LT. GEN. USAF (RET), CLIFTON,
VIRGINIA
General McInerney. Madam Chairman and members of the Senate
Committee on the Judiciary, it is a privilege to appear before
you today and testify about DOD lessons learned as the DOD
coordinated during the Exxon Valdez oil spill from 24 March to
15 September 1989 in Prince William Sound while I was the
commander of Alaskan Command. My comments of lessons learned
hopefully will impact how we protect victims of current and
future major oil spills.
The U.S. Government has reorganized significantly with the
creation of the Department of Homeland Security and the
creation of Northern Command within DOD. These changes are all
positive with respect to my comments today.
A quick refresh for the Committee on the DOD assets
provided may be useful. Our initial support was an improvised
command-and-control system called OASIS that provided the on-
scene Coast Guard coordinator, Vice Admiral Clyde Robbins, and
the Exxon coordinator with the visual digital map display of
the oil spill location, beaches, and other oil-covered areas,
sensitive environment and wildlife areas. In addition, the U.S.
Navy provided two amphibious ships for use as boatels to house
the 11,000 workers who eventually worked in the area until
Exxon could provide specially constructed barges to house them.
What we did not provide was manpower to clean up the
beaches, which became a very contentious issue with Senators
Stevens and Murkowski who felt the 6th ID should help. I was
strongly opposed when President Bush made the final decision
with support from Secretary of Defense Cheney to not use
soldiers for the cleanup operations. Instead, Exxon hired local
workers--the unemployment at that time was 8 percent in
Alaska--which proved to be very successful and I believe a
precedent for future cleanup operations. The military should
not do what the private sector can do equally as well or
better. I sense that this has not been the guidance in the gulf
today.
I will now outline what I think were the most important
lessons learned for the military support to protect victims to
oil spill cleanup operations on this experience. DOD should be
part of any initial task force established by DHS, States,
local counties, and the oil company responsible. Rapid
formation is critical to success. A joint force commander
should be assigned to support the on-scene Coast Guard
coordinator immediately. He and his staff should have the
knowledge to provide systems and technology appropriate to
support him such as imagery from satellites or unmanned aerial
vehicles or manned aerial reconnaissance surveillance such as
the U-2 with its unique spectral imagery.
These new technologies should be immediately deployed to
give the national command authorities and all appropriate
agencies involved the situational awareness that will enable
swift identification of common cleanup objectives. I cannot
emphasize this enough.
The dominant responsibility of the oil companies versus the
U.S. Government was established for cleanup. I am troubled by
the moratorium on continued drilling in the gulf as it runs
counter to the guidance we used in Prince William Sound in
keeping the tankers flowing out of Prince William Sound.
Continued safe oil production operations are vital to our
National security.
I mentioned earlier the OASIS command-and-control system
was immediately established for cleanup operations. This was
adapted from my joint command-and-control system and gave all
players an excellent tool, such as the Secretary of
Transportation Sam Skinner, Coast Guard Commandant Admiral
Yost, near-real-time knowledge on how operations were going
from their offices in Washington. Everybody knew where the
primary slicks were, what beaches and sensitive areas were
fouled with oil, how many ships and crews were working the
beaches, et cetera.
This was of great value for all, especially the Exxon on-
scene commander, along with his Coast Guard counterpart.
However, once the Exxon lawyers discovered that Exxon was
funding this near-real-time information, they terminated this
valuable tool for fear that the U.S. Government would have too
much information for later legal battles. We should not have
let this happen, but this advanced command-and-control
capability was not well understood at the time. There were too
many other windmills to attack.
With reference to the current oil spill in the gulf and the
relevancy of the Exxon Valdez experience, I would only say the
laws and protocols were changed and are in force today which
has enabled Secretary Napolitano and Admiral Allen to work very
effectively with British Petroleum. I would suggest that we
have not used all our latest imagery assets, such as UAVs like
Global Hawk and U-2 aircraft. I would do a test immediately to
demonstrate the value of continuous digital radar, infrared,
and electro-optical displays that will show the coordinators
the exact positioning of the oil slicks, location of the over
1,000 ships supporting them, fouled beaches and sensitive
areas, et cetera. This real-time digital picture will be of
immense value to protect the victims in future crises like
this. I believe it should be considered for use by the DHS in
all future disaster areas.
In summary, Madam Chairman, I believe many of the lessons
learned from DOD's experience in the Exxon Valdez disaster have
been incorporated in the gulf today with the exception of near-
real-time imagery for command and control from modern UAVs and
the moratorium on oil production, which has been very
deleterious to our National security.
Thank you.
[The prepared statement of General McInerney appears as a
submission for the record.]
Senator Klobuchar. Thank you very much, and thank you to
all three of you. I know Senator Begich is on his way, but I am
going to get started with a few questions, and when he comes,
we will have him speak and officially introduce you, Mr. Banta.
I wanted to talk just a minute about the Exxon Valdez
litigation, Mr. O'Neill, and I know that the jury awarded the
plaintiffs $287 million as well as $5 billion in punitives.
That was in 1994. Fourteen years of appellate litigation
followed. It was then reduced to $500 million. It is just hard
for me to believe these 8,000--is this true that 8,000
fishermen actually died before they were able to even get their
award?
Mr. O'Neill. The statement is correct. Most of the
fishermen at the time could have been anywhere from 18 years
old to 70 years old, so just actuarially you lose an awful lot
of people over 21 years. So these people did not get to see
their justice, and their families sit there now knowing that
they did not get to see their justice. And it hurts
institutions--in this case, the court system--to have a process
like that that goes on for 21 years. It is a nightmare for
Cordovans. It is a nightmare for all the people in Alaska.
Senator Klobuchar. So I take it you are glad that we were
able to get at least $20 billion in the fund up front BP.
Mr. O'Neill. I think the $20 billion that BP has agreed to
administer is a huge, huge step forward. I have a couple of
concerns about it, but that is real money, and it is a lot of
real money. It takes care of the cap in OPA 90, and if it is
run well, it will provide fishermen and other area business
owners with immediate money so that you will not run into
questions like bankruptcy. And if it is run well, in the end
people will be fully compensated.
Senator Klobuchar. Very good.
We have been joined by Senator Begich, and I am going to
let you go. I know not all new Members of the Senate get that
kind of deference, but only when you have a new Member of the
Senate chairing the Committee do you get that. So I am going to
have him speak for a little bit. Mr. Banta did a great job in
his opening statement, Senator Begich, and he came on a red-eye
to join us, so we are very impressed with that. And I know you
wanted to say a few words about him and the subject, so thank
you.
STATEMENT OF HON. MARK BEGICH, A U.S. SENATOR FROM THE STATE OF
ALASKA
Senator Begich. Madam Chair, thank you very much, and I
know you know our votes have been delayed for about 15 minutes,
so there is some more discussion on the floor. You have a
Committee here. I have another Committee to go to. But I want
to commend you for devoting your efforts to this important
topic of protecting victims of oil spills.
As you know, Alaska has lived through the worst oil spill
in our Nation's history until the Deepwater Horizon spill a few
months ago. From the Easter weekend of 1989, when the
supertanker ran aground on a well-marked reef, to the insulting
Supreme Court decision last year, the Exxon Valdez disaster has
been a nightmare for thousands of Alaskans. Eleven million
gallons, enough oil to stretch from Cape Cod to North
Carolina's Outer Banks, gushed into one of Alaska's most
spectacular and sensitive areas. For months, night after night
on the national news, the world was gripped by images of
pristine shorelines awash in oil, birds and sea otters
blackened to death.
Now, 21 years later, scars to Alaska's environment and
Alaska's people remain. Thousands of Alaskans, sadly fewer and
fewer each year, were only recently compensated for damage.
Their livelihoods and ways of life are forever different.
As we assess the lessons learned two decades later, one
truth rises above all others. We must be committed to paying
the price of vigilance because the price of complacency is too
high. That is why I commend your Committee's initiative today
to ensure that the victims of the Deepwater Horizon do not
suffer many of the same injustices experienced by Alaskans.
Madam Chair, you have an excellent witness in front of you,
Joe Banta, who I know, as you said, already testified, to help
guide you through your process. Joe grew up in an Alaskan
fishing family, at the age of 10 began fishing the waters of
Prince William Sound, which were affected by the Exxon Valdez.
At the time of the spill, Joe was getting ready to fish the
spring herring fishery. But when the Exxon Valdez ran aground,
he joined the wildlife rescue crews to help care for the oiled
birds and animals.
For more than 20 years, Joe has worked for the Prince
William Sound Regional Citizens' Advisory Council, which was
created in the aftermath of the spill to give citizens more of
a voice in development decisions. The RCAC has become a model
for other parts of the Nation, including the gulf, and I have
to tell you, Madam Chair, there is--people wonder how these
committees operate. I know Joe probably has told you, but they
are very, very independent. They speak their mind. When they
see the industry not doing what they need to be doing, they
speak up.
You will find Joe is a leading expert in oil spill
recovery. By that, I just do not mean the science of picking up
spilled oil, but how to deal with the social, psychological,
and economic impacts of a giant oil spill.
Madam Chair, thank you very much for the opportunity to say
a few words, and thank you for having Joe here. Alaska is
better off because of these commissions and how they work and
the citizens that are engaged in them, not just for a short
period of time but for a long period of time, proven by Joe's
service.
Thank you, Madam Chair.
[The prepared statement of Senator Begich appears as a
submission for the record.]
Senator Klobuchar. Well, thank you very much, Senator
Begich, and I think the characterization of Joe that you gave
as someone who is independent and speaks his mind would also
apply to you, Senator Begich. So thank you for being here. I
was just asking Mr. O'Neill about some of the issues coming out
of the actual litigation with the delays in time for the
fishermen, the 8,000 people, fishermen, who actually died
without getting their damages when they were alive.
And then I know one other things you mentioned, Mr.
O'Neill, was just your frustration with the Government settling
so quickly after 2 years where they fully--Alaska and the
United States saying that they did not have the money to pursue
the litigation. So I wanted to ask you about that, what you
think they could have done better, and how that applies to
today's situation, as well as you also mentioned that the
settlement with Exxon had a re-opener clause in it for future
damages up to $100 million, but all this clause did, in your
words, was create more litigation.
Is there a way to make sure clauses are ironclad and a way
to ensure that future harms, like the later damage we found to
herring and other fish that people did not expect, could be
accounted for? That is a two-part question: first about the
Government settling earlier, and then the re-opener clause.
Senator Begich. If I could interrupt, Madam Chair, if I can
be excused, only because two amendments that are waiting for
markup outside the floor are about RCACs and making sure they
are----
Senator Klobuchar. Well, we want you to do your job instead
of just talking about it.
Senator Begich. Thank you very much
Senator Klobuchar. Thank you.
Mr. O'Neill. Inherent in an oil spill is the fact that once
the oil is spilled, you really cannot clean it up. Exxon spent
$2 billion to clean up 8 percent. You do not know where it is
going to go. You do not know how long it is going to be there.
And, last, you do not know what creatures or ecosystems it
hurts. Salmon can swim through oil. Herring cannot swim through
oil. And you do not find out about those things for 5, 6, 7, 10
years after the spill.
When Alaska and the Federal Government settled their
trustee claims, their natural resource trustee claims, for
about $1 billion and agreed to three minor misdemeanor pleas,
no one knew what the extent of the harm was going to be. And
they did it for cost reasons, and they did it because they
wanted money as quickly as they could get it. But in the end,
the citizens of Alaska and the citizens of the United States
paid.
The inability to know what the impacts of a spill are
inherent in oil spills. In the gulf, I know Mr. Feinberg hopes
to tie up his fund payments in 3 or 4 years, but assuming he
can do it logistically--which I doubt--in 3 or 4 years you are
still not going to know what the full impact of the spill is.
In Alaska, when the Government did its deal in 1991, it
included a re-opener provision, and the re-opener provision was
limited to $100 million, the thought being if there was
significant harm that we did not know was going to occur, we
will re-open the whole proceeding up to $100 million, and we
will see if we can settle it. Now, all that has done is result
in litigation.
I do not think you can finally settle oil spill claims in
year 3 or year 4 after the spill. So if you are going to set up
a system, a compensation system, the compensation system needs
to deal with the fisher in the first year. But the compensation
system needs to wait for 3 or 4 or 5 years until you get a good
handle on what the extent of the damages are going to be. And
they can be odd. Nobody had any idea that herring would be
genetically decimated the way they were in Prince William
Sound, but they were.
You know, the Mississippi Delta is one of the great
treasures of the world, and the impact of a massive amount of
oil on that delta is a crapshoot. And once you get it in there,
you are not going to get it out. You cannot send out people
with steam cleaners into the delta and have them clean it. So
you need to wait 3, 4, 5, 6, 7 years until you feel you have a
handle on what the damages are and then move the money to the
State and Federal Governments.
Senator Klobuchar. Okay. That was helpful.
I think I am going to turn it over to Senator Sessions here
so he can get some questions in before the vote, as well as
hopefully Senator Franken. Then I will come back.
Senator Sessions. Thank you, Madam Chairman.
Well, I think that is good advice, Mr. O'Neill, in a lot of
ways. Mr. Feinberg said to the local people Saturday. He met
with some fishermen early Saturday morning. He had meetings
with real estate people, and he had meetings with local mayors
and made some promises, admitted maybe he promised some things
he has not been able to deliver as quick as he thought he
could.
So this is not an easy matter. That is one of the things
that came across to me clearly. How do you decide this? Some of
these things may well take 2 to 3 years. He has decided that he
will provide people up to 6 months of benefits now if they can
show their loss so they do not have to come back every month,
and it would reduce paperwork and allow him to focus on other
claims. And at some point, he will seek to bring the whole
matter to a conclusion by making an offer for a final
settlement. The initial payments will not require a release of
any kind. So whether that will work or not, I do not know, but
I am certain it will not go as smoothly as a lot of people
would like it to.
General McInerney, I appreciate your comments about the
moratorium. I would offer for the record a letter from a group
of energy experts from the National Academy of Engineering who
were quoted as saying that they favored a moratorium, but who
wrote a very strong letter saying they never opposed that. I do
not know if the Interior Department has acknowledged that they
misquoted them yet, but at any rate, there are complications of
significance in this whole process, and we want to do it right.
With regard to the Supreme Court decision, Mr. O'Neill, the
jury awarded $287 million in compensatory damages to some of
the plaintiffs and some got $22 million by settlement. The
total compensatory damages, as I understand, against Exxon was
$507 million. Was there any dispute about that? Or was it a
case-by-case dispute as to what the exact fund amounts were?
Was it that or the claim for punitive damages that really
carried this case so long?
Mr. O'Neill. In the end, there was agreement that the
amount of money that Exxon paid to claimants was $507 million.
That is the answer to the first question.
Exxon appealed significant portions of the compensatory
award, and those appeals were not resolved until 2001 or 2002.
The litigation after 2002 dealt solely with the punitive damage
award.
Senator Sessions. Now, the maritime law has different rules
than normal civil procedure. I always was told if you got hurt
on a ship, you claim that the ship was unseaworthy, and most
anything was unseaworthy. But there seemed to be limits on the
amount of damages that do not apply to injuries sustained on
land. That is a long time--not just something that came up
lately by the Supreme Court, but that part of it has been long
established.
To what extent do maritime lawsuits limit or prohibit
punitive damages? I understand it is more difficult to gain a
judgment for punitive damages in a maritime case than in a non-
maritime case.
Mr. O'Neill. There have been fewer punitive damage
judgments in maritime cases, but they are well established and
they go back to about the creation of the Republic. I would
guess from 1776 until the present day, there may have been 30
or 35 punitive damage awards in maritime cases.
However, they were well established, and the maritime law,
at least with regard to punitive damages, was essentially the
common law of the Republic. So up to the time of Exxon v.
Baker., which was the Supreme Court decision that limits
punitive damages, they were established and there was no
arbitrary limit on the size of the award.
Senator Sessions. Why has it been more difficult to gain
punitive damages? What kind of proof burdens do you have in a
maritime case? Why wouldn't you have more than 35--you probably
have 35 a week on the land or 35 a day.
Mr. O'Neill. I am not so sure that is true, Senator. The
answer is I do not know, and I have not seen any writing on why
it is. I do know that the law was well established that you
were entitled to them if you could prove a reckless disregard
for the rights of others, and I do know that the law was well
established that there was no one-to-one limit. In fact, there
is no one-to-one limit in any other area of the law with regard
to punitive damages.
Senator Franken. [presiding]. Senator Sessions, I am
terribly sorry about this, but I got to go vote, and I was
wondering, Could you go vote? But I know how you are going to
vote, so you do not have to go vote.
[Laughter.]
Senator Franken. Unless you want to continue. You are
senior to me----
Senator Sessions. I am over my time, so that is correct.
Senator Franken. Okay. Can I just ask a few, and then
either----
Senator Sessions. Has the vote started?
Senator Franken. I guess they have, yes, and we have----
Senator Sessions. Yes, I guess they have. Let me go vote,
and thank you, Senator Franken.
Senator Franken. Okay. Then Senator Klobuchar will be back,
and if you want to come back, you can.
You were talking about the one-to-one punitive. Let me ask
you about that decision. It was as 2008 decision by the Roberts
Court. Am I correct?
Mr. O'Neill. Yes, sir.
Senator Franken. Okay. And that was decided suddenly--
because Exxon was charged--I mean, ruled that they would have
to pay $5 billion, right?
Mr. O'Neill. That is correct.
Senator Franken. And they changed it to $1 billion?
Mr. O'Neill. The Supreme Court reduced the total amount to
$500 million, which included--in addition, they had to pay $500
million in interest because we had been at it for so many
years.
Senator Franken. Oh, Okay. Now, would you say that the--
what reasoning was there? Was this anything backed by the--was
there a constitutional reason for this?
Mr. O'Neill. There was no constitutional reason.
Senator Franken. So this was an activist conservative
decision on behalf of Exxon.
Mr. O'Neill. If you look at the case, the Exxon v. Baker
case, it is unique in American law. You know, you go all the
way back to the Bible, and you find punitive damages in ratios
of 3:1, and other Supreme Court cases have talked, well, maybe
there is a constitutional limit and a ratio of 10:1. But you
find no scholarly writing, you find no cases, you find nothing
in the Constitution, you find nothing in the statutes of the
Congress that would suggest that there would ever be a one-to-
one limit.
So if you read the case Exxon v. Baker, you come to the
conclusion that they pulled it out of their bottoms.
Senator Franken. Pulled it out--Okay. I got you.
You know, I guess they said that it would help be
predictive--it would help be predictive or something like that,
right?
Mr. O'Neill. That is correct.
Senator Franken. But don't you want punitive damages to
prevent things like this from happening again? Isn't that the
whole point? And didn't we just see it happen?
Mr. O'Neill. The point is for punishment and to deter other
people from doing bad things.
Senator Franken. Boy, I really have to go to vote, and what
I am going to do is, I guess, we will stand in recess until
after the vote. Okay?
Mr. O'Neill. Yes, sir.
Senator Franken. Okay, good.
[Recess at 3:33 p.m. to 3:43 p.m.]
Senator Klobuchar. Thank you. We are going to open the
hearing again, and thank you for waiting. We sort of voted in
groups so we could maximize the time we were here.
I want to start with you, Mr. Banta, and Mr. O'Neill talked
about how you did not find out about certain damages until
later, that at first certain fish seemed like they were hurt by
the oil, and then later fish were hurt by the oil. And, of
course, that is going to shape how we look at how we do damages
in this case and if we have to make changes to the law so we
account for those kinds of things.
Could you talk about the experience in Alaska?
Mr. Banta. Yes, thank you. I think that these effects that
we saw were probably--scientists probably call it something
like sub-lethal chronic effects, and those just do not come
out. You see acute things when a creature like a sea lion or
something floats to the surface. But when the herring come back
year after year and spawn at these beaches where oil still
continues to leach out of sediments or substrates and things
like that, then it really is a multi-year process, and the
consideration of that I think is critical to actually
determining what truly is biologically damaged.
Senator Klobuchar. And your testimony also recounted the
harms that the oil spill caused to lots of people's jobs that
were dependent on fishing, a wide variety of support
occupations like vessel electronics, boat repair, fish
processing. How does a local economy that is organized almost
entirely around one network of jobs recover from the spill?
Mr. Banta. I think in that instance it just took time. I
mean, it really did take Cordova probably 15 or more years to
kind of come around economically. The impacts, of course, on
herring have been discussed in great detail here, but the
impacts were on salmon as well, which is probably the key
fishery. And that was for several years, and prices were
reduced, and incomes. So you have all these multi-year
processes going on for all these different species and then
herring never really coming back.
So I think you just have to dig a little deeper, my
friends. They did mechanicking when they were not fishing. One
worked on the garbage truck hauling waste. You find what you
can. You do not travel, and you cut back. It is just the
unfortunate reality. And the schools do not get as much money,
and it just kind of percolates all the way through the
community at every level, from services down to the individual
families' budgets.
Senator Klobuchar. Okay. I wanted to explore with Mr.
O'Neill, as we look at the actual language of the current law,
how we could better capture some of these damages. Let us go
through what some of them are.
First of all, I remember you mentioning the hotel beach and
how for certain maybe a hotel that had oil on its shores would
be covered, but maybe not a hotel that lost the same amount of
customers but did not have oil on its shore because it did not
have a shore. So how could you change the law to account for
that?
Mr. O'Neill. The answer is I do not know, but let me state
to you the full extent of the problem.
Under traditional maritime law, hotels could not recover at
all, anyway. The only people that could recover were actually
oil individuals, oil boats, or fishermen. You could do it--the
ideas that have come to me, you could do it by zone. If I was
the administrator of the $20 billion fund, I would do it by
zone. I do not know how you write that into legislation. But it
is who gets to recover and what do they get to recover, two
questions: Fishermen, fish processors, fish tenderers, people
who support the fishing business, people on the shoreline,
maybe people in other zones. OPA 90 talks about people who
suffered damage as a result of the oil spill. That is about as
narrow as it gets. But that provides no guidance because what
happens is the courts then decide who is not going to get it,
and that is what they decide. The history of the courts in
dealing with oil spills is quite simply meant to keep people
from recovering. So you need to spell it out in the bill in
much more precision than is in OPA 90.
Senator Klobuchar. Okay. Now, some examples. You mentioned
how much of a fisherman's assets are tied up in the worth of
the boats and the entry permits--illiquid assets, in other
words, and assets whose value can plummet after an oil spill.
Did victims of the Exxon Valdez ever recover for those costs?
Mr. O'Neill. No. The victims of the Valdez recovered for 1
year of fish price loss, for the most part 1 year of catch.
They were unable to recover for their devaluation in the boat
and the devaluation in the permit. And for these guys, the boat
and the permit values are their asset base, and they are also
their retirements. OPA 90 does not allow recovery for the
permits or the boats.
Senator Klobuchar. Yes. But with the $20 billion that is
set aside--again, maybe this is not for you to ask, but for me
to ask Mr. Feinberg. Will he be able to look at those kinds of
losses just because it is a set amount of money that has been
put out there?
Mr. O'Neill. I think Mr. Feinberg, as I understand his
charge, can do whatever he wants. I will say that we had a $100
million fund in Exxon that was supposed to help fishermen, and
the administrator of that fund only paid out $37 million. There
is an inclination on the part of people who run these funds to
view that money as their own and to pay it out slowly or not
pay it out at all. So there is some institutional concern about
that.
Senator Klobuchar. Given Mr. Feinberg's experience with the
9/11 victims, hopefully that will not happen in this case. But
I think that is relevant to know what happened there.
Another example of a damage, you and Mr. Banta both
mentioned that the herring population has not recovered in
Alaska to the pre-spill levels. Salmon was impacted for a
comparatively small number of years, but herring may never be
the same. Was it possible for the litigation to recover those
costs, the costs that--Mr. Banta is not going to be able to be
a herring fishermen or his kids cannot.
Mr. O'Neill. I think the herring fishery aspect of this is
the biggest tragedy other than the impact on communities in the
whole deal. It was not clear to us that the herring fishery was
permanently impacted until 1996, 1997, 1998, and by then we had
tried the case and a bunch of associated cases, and everything
was up on appeal. And we never went back and revisited the
herring fishery. To some extent, there was a view that the
statute of limitations had run.
Senator Klobuchar. Because that damage was found later?
Mr. O'Neill. That is correct. But the incident was Good
Friday of 1989.
Senator Klobuchar. You also mentioned that under the Oil
Pollution Act cities can recover only the net costs of the
spill response, not the total of all diverted public service or
lost taxes. Do you want to say more about the limits of our
current compensation scheme on what State and local governments
can recover?
Mr. O'Neill. Yes, this is one that is very, very
troublesome. A city who is besieged by an oil spill takes all
of its employees and its buildings and such and diverts them
from doing what they normally do for citizens to helping people
with the spill, to cleaning up the spill, to housing oil
workers, to providing police services to oil worker villages.
So nobody in town gets the use of the library, the use of the
police, the use of the fire station because they are all
diverted.
The cities ought to be paid for that. Under OPA 90, the
cities can only be paid if they bring on extra people in
addition to their regular staff. So their regular staff and
their regular buildings are never reimbursed by the spiller or
by a fund or by anybody, and that is wrong.
Senator Klobuchar. In the book I mentioned earlier--and I
think you know about that book; you are kind of the star of it,
David Lebedoff's ``Cleaning Up''--there is a quote that I want
to read about the damage that is done to communities long after
the oil has technically stopped flowing. It says, ``One of the
things that soon became clearer than ever before was the extent
of suffering that the fishermen had endured because of the
spill. The files were records of heartbreak. The years of
lowered or absent income had wrought hundreds of tales of
personal tragedy. Destitution, bankruptcy, drunkenness, and
divorce were all too common. Some fishermen had suffered
strokes. In one case, a multiple sclerosis condition had been
badly aggravated by the stress of the spill resulting in
permanent disability.''
So my question is simple: Do you think the laws as they
currently stand take into account these human costs?
Mr. O'Neill. The human costs are a result of two things.
First, they are a result of the fact that people cannot deal
with manmade disasters the same way they deal with natural
disasters. People can get through natural disasters some years
after it, but with regard to a manmade disaster, they need
their full measure of justice to move on. So one way to deal
with this is quite simply to give them their full measure of
justice and to allow them to get as whole as they can from
money as quickly as they can after the spill.
The second aspect is litigation. Twenty-one years of
litigation without an end in sight or, not that it is ending,
without any justice received during those 21 years makes
people--makes them very angry. So a combination of the impact
on jobs and the impact of the justice system does not allow
people to come to closure with an oil spill. And if you go into
a bar in Cordova or Kenai or Kodiak or a coffee house or a book
shop where people are sitting around having coffee, it is as if
the spill happened yesterday.
Senator Klobuchar. Is that also your experience, Mr. Banta?
Mr. Banta. Oh, definitely. Even just talking about the gulf
spill, people in Cordova do not want to hear it. It is so
frustrating. But it just comes up. It is just kind of natural,
unfortunately.
Senator Klobuchar. And along the lines of what Mr. O'Neill
was talking about, some of these damages that were not
accounted for in the way the current law works, we talked about
the herring population, we talked about the value of the
license and the value of the boat and things that were illiquid
assets. And then we also talked about tax revenue to the city,
and your hometown of Cordova lost an estimated $20 million in
raw fish tax revenues because of the lack of herring fisheries
after the spill.
Did the oil spill affect the ability of the local
government to deliver services? And do you feel that the costs
for the local government of just basically having all of its
tax base eroded were adequately accounted for in the
compensation?
Mr. Banta. I think that we have seen specifically with
those raw fish taxes that there was not any good mechanism to
account for replacement of that revenue. I think that revenue
has been lost forever to Cordova and any other communities that
actually have herring processing from the sound, for instance,
Valdez and probably Whittier.
I think that is pretty much all I can say about the tax
issue, and your other question was about replacing income----
Senator Klobuchar. I know that those were not included, the
assets of the license and the boats.
Just one last question, and then I will turn it over to
Senator Sessions. I know he has a few more questions.
In 2001 and subsequent years, researchers in Alaska dug
over 12,000 pits--I really did not know this; they researched
this--at dozens of beach sites that had been covered in oil
back in 1989. The team found black oily liquid in over half of
the holes dug in 2001 when they went back to look.
How long after the spill did the cleanup crews go away? And
are your beaches back to normal?
Mr. Banta. Well, I guess the reality is once that oil gets
under some of the armor and the larger rocks that cover some of
the beaches and gets down into the sediment, it is pretty much
there. I think the cleanup ends at some point when it is
determined that you have gotten out as much as you can get out,
and that is made by the government and the responsible party.
And, unfortunately, there are those beaches--you can go there
today and find oiled beaches. The question is whether or not
that does get mixed back into the environment. If an otter goes
and digs for clams, that can loosen the substrate and release
that oil. If there is a significant winter storm, something
like that can happen again. Sea birds feeding for mussels, like
the pigeon guillemot, that is still a threatened species, the
harlequin duck, those kinds of things that feed like that maybe
can still activate that oil. But it is out there in the
environment, and that is just the reality that we are dealing
with.
Senator Klobuchar. Okay. Before I turn it over to Senator
Sessions, Senator Sessions, you wanted this in the record, the
primary recommendation in the May 27, 2010, report, ``Increased
Safety Measures for Energy Development on the Outer Continental
Shelf,'' given by Secretary Salazar to the President
misrepresents our position, but this is a recommendation. You
want it on the record?
Senator Sessions. Please, yes.
Senator Klobuchar. Okay. I will include it in the record.
[The recommendation appears as a submission for the
record.]
Senator Klobuchar. Senator Sessions.
Senator Sessions. Well, under the OPA, as I understand it,
BP is the responsible party, and they have, as I understand it,
they could seek compensation from anyone that they contracted
with who failed in their duty to them to do the business. But
essentially they are the ones that the Federal Government looks
to to be the responsible party, that they have responsibility
for total cleanup, no matter how much it costs, even to the
extent the company economically fails. I would say for those
who think it would be such a disaster if they fail, I am sure
somebody would buy their oil rigs and continue to operate them
and buy their oil lands and produce from them. It is not going
to end production. So they have that total responsibility.
Then they had a $75 million additional responsibility,
which I assume is to go to compensate people who may have
suffered losses outside of cleanup. And then there is a $1
billion or so trust fund that is available for compensation
there.
So I have to acknowledge that based on that act, it looks
like they are indeed willing to pay more than this act strictly
requires them to pay. But is that your basic understanding of
the framework of the act as far as what this responsible party
is required to pay?
Mr. O'Neill. I think that was a very careful reading of the
act, Senator.
Senator Sessions. Thank you. Well, so that leaves us what
we should do in the future. Now, I have supported legislation
that would increase the compensation requirements beyond that
act, in particular the $75 million limit, trying to tie it to
the size of the producing company and their profits so that it
would not completely prohibit a smaller company from being able
to compete with some of the big oil companies. I just hate to
create a situation so only the big four or five can drill in
the gulf. But I find that difficult to word, actually.
Mr. O'Neill. Well, I have a couple of observations on that,
and I have thought about that. It seems to me that no matter
who the producer is, the price of oil ought to reflect what the
actual costs of its production are, and that includes a spill.
And if the spill is by a smaller operator or a larger operator,
economically neither one should get a step up on the other.
My second concern--and you also see this in the area of
supertankers--is I would much prefer--as much as I dislike
ExxonMobil, I would much prefer ExxonMobil to run its own
supertankers rather than ship them out, to have small Liberian
shipping companies run them. And that relates to the issue of
these platforms. I feel safer having BP drill a platform than I
do having a small Mom-and-Pop drilling operation run a
platform. So I would be concerned about subsidizing the smaller
operations. It just strikes me both economically and out of a
sense of fairness that if you hurt people, you ought to pay for
it.
Senator Sessions. Well, that is a pretty good analysis.
Maybe you have about convinced me that our little plan was not
so clever for several reasons, the points you made there.
I had originally thought that if you create a trust fund,
much larger than a $1 billion trust fund, that might relieve
the intensity of interest on the oil company not to have a
spill. Is there a balance we could strike by raising the
requirement on the oil companies and creating a trust fund that
could perhaps keep the liability level at an amount that
insurance at least could be obtained?
Mr. O'Neill. I have thought about that, and I have an
observation on that, too. The great thing about a trust fund is
you know that if people are hurt, they will get paid. And,
historically, that has been my interest in the whole thing.
But you are right, at the same time the creation of a trust
fund may result in lax practices out in the oil patch in the
long run or people cutting corners in the long run.
But that may be something you actually do a compromise on
because when you do not pay people the full amount of their
damages, it hurts American society. It hurts the Congress; it
hurts the courts; it hurts American business; it hurts the
legal profession.
So getting people compensated has always been No. 1 in my
mind, but that is an interesting paradigm that you have
created.
Senator Sessions. You know, I talked to a restaurant owner.
They had done $430,000 in business last June. This June, this
restaurant in Gulf Shores, they were down to $260,000. That
would say to me somebody did this, I did not cause this,
somebody was responsible for this. And I think they should be
prepared to compensate me for the loss. And it is not right on
the beach so no oil touched their restaurant, but the number of
people who were coming to the beach dropped significantly.
General McInerney, one of the things that surprised me is
after we have created this fabulous Homeland Security
Department, this huge Department, virtually every county, I
think, in America has a homeland security emergency response
office under the State Government, but fundamentally funded by
the Federal Government in large part. This was not activated in
this system, so we had the Coast Guard, a military-type
organization, that now has got to respond to an emergency, and
we find that people from Port St. Joe to New Orleans, all over
Louisiana, do not feel like they are getting personal
attention. And, of course, the emergency management, when a
hurricane hits, all these guys go up. All these entities are
working. They have communications systems, everybody's cell
phone and commitments. It just seemed to me odd that we could
not utilize this structure, even to the point of asking people
from Iowa or wherever who are maybe not busy in their emergency
offices to come down----
Senator Klobuchar. You have never been in Iowa, is that
what you are saying?
Senator Sessions. Yes. They do not----
Senator Klobuchar. Do not tell Senator Grassley.
Senator Sessions. They have a few floods, I guess, and
snowstorms.
Senator Klobuchar. They had some big floods.
Senator Sessions. It is odd. They say the Stafford Act has
to be activated, and that makes the Federal Government liable,
and they did not want to utilize this whole machinery because
it could remove liability from BP and shift it to the
Government, which I guess makes some sense. But isn't it true
that we should be able to call on these personnel that are
being trained and prepared to deal with all kinds of
emergencies? They should be available to be utilized relatively
easily without shifting the burden of financial payment to the
Government, I would think. Do you have any thoughts about that?
General McInerney. I have got a lot of thoughts on it,
Senator, and I think you are spot on. You are getting on
something. It is an archaic way of thinking, and the fact is we
designed Homeland Security, we designed Northern Command to
support when we have any kind of incident, whether it is a
natural disaster or manmade disaster, whatever you want. And so
in the particular case you are talking about--and I am not that
familiar with the Stafford Act, but it seems to me that
Homeland Security and all those people that are out there that
are designed for this are in a supporting role. They are
supporting in this particular case BP. As I was supporting
Exxon Valdez in Alaska, they were technically in charge in
funding with the responsibility, and then they would go to
different people. And I think that the law should be changed so
when we have disasters like this that you can minimize the
impact. And that is why, I think, when you look at the laws
that you look at rewriting as a result of this, because, again,
Homeland Security came after Exxon Valdez, but that does need
to be changed. I think you are on to something.
In addition, I think that, for instance, we ought to have
like a Global Hawk, an unmanned aerial vehicle that, when you
have a natural disaster like this, it could be on alert and
launched. You would go from Homeland Security to Northern
Command, and they would launch the aircraft so the national
command leadership get a visual picture of what is going on
rather than relying on the television and other means, because
we all know that it is the visuals that enable you to make
decisions, see the gravity of a situation.
So I think we have to use this disaster as a tool to help
rewrite our laws so that the assets we have as the U.S.
Government can come and support it.
Now, why is it important, for instance, that you are able
to see with the new technology that we have of infrared and
radar where that oil flow is going? Because it enables you to
position people so you can minimize the impact on the beach.
You are talking about people on the beach, but how about the
gas station owner or someone in 50 miles? Because, as you
pointed out, the restaurant owner, the people just do not come,
and so they should be compensated. So if we can minimize the
impact on the beaches and in the fishing areas, then I think
that is very important to minimize the victims in this
particular case and continue the normal flow of business.
So I think it is very important. There are a number of
things that you mentioned that I think you look at in totality
that we should be doing.
Senator Sessions. Thank you, Madam Chairman. I would just
say to Mr. Banta, we have an excellent biological environmental
center called the Dauphin Island Sea Lab, and it does strike me
that this is a long-term problem. I am told that the warm gulf
waters are a little better than the cold Alaskan waters in that
the microbes that can eat and deteriorate oil are more active
in the warmer waters. But we think there is going to be some
permanent long-term damage, and I guess you would agree that we
should invest in the science to identify as soon as possible
what those long-term environmental consequences are likely to
be.
Mr. Banta. Yes, Mr. Senator, I had the opportunity when I
traveled to the gulf to go to the Dauphin Island Research
Center and meet with some of the researchers there. That is
just the kind of place that you would want to have doing
research if you are looking at trying to do the best job on
addressing impacts and effects in looking at these long-term
acute effects that really will need to be researched and
tracked over many years.
Up in Alaska, we are obviously looking at generations, then
a facility like that, we have some in Alaska that were put
together, the Alaska Sea Life Center, the Oil Spill Recovery
Institute, the Prince William Sound Science Center, that have
been funded to deal with these kind of longer-term research
questions, whether it is biological or technological.
Senator Sessions. Well, thank you. George Crozier, who runs
that lab, was telling me that you never know about certain
things. They use the dispersant underwater that seemed to have
been very helpful. But compounds and products like benzene that
would normally rise to the surface and dissipate in the air, he
does not know now if they made it to the surface, and it is a
more hazardous substance than basic oil, apparently, and it
might still be in the water in concentrations that you do not
know about. So I do think continual research analysis and
prompt evaluation of the testing, which, you know, you hear
that it takes 10 days to get a test result, you wonder: Can't
we speed this up a little bit?
I am really proud of the people, proud of the Coast Guard.
They are giving their best effort. A lot of errors have been
made. The skimmers have proven that they can identify an oil
glob out there and go and get it. We did not have enough
skimmers. They were far too late arriving. A lot of things that
did happen like that. But if this well stays capped, I am
hopeful that our area of the gulf may be avoiding more serious
spills, although it has taken some, and it does appear that the
latest glob is heading toward Louisiana, and I hate it for
them, where a lot of the estuaries exist.
Thank you all for your testimony. It has been very helpful.
Senator Klobuchar. Well, thank you very much, Senator
Sessions, and I truly appreciate your willingness to hear out
these witnesses, and I think we all know, as you talked about
some of the errors made in the reaction to the spill, I think
we all know that we can also make errors here, and we want to
make sure that whatever we do in response to the spill with
looking at the liability statutes, there clearly improvements
that need to be made, that we do the right thing and we take
care of the people not only in the gulf but in this country. I
just look at it from a fiscal standpoint. We do not want the
taxpayers on the hook. I look at it from a fairness standpoint
for people who are affected by this. And I think one of the
things I will take away from this hearing and others is that,
you know, some of these things we are going to have to--we will
not know for sure the effect on dolphins off the coast or the
effect on birds in Minnesota when they go down there,
especially if some of the oil, as we know, is moving up into
those marshes and things like that.
So I want to thank the witnesses. It has been really an
actually informative hearing and positive hearing, and I thank
my colleague Senator Sessions as well for his good questions,
Senator Franken for coming, and I know that there are staff
from some of the other Senators and people interested in this,
so we will take all three of your lessons that you have given
us to learn from Exxon Valdez and take them to heart and use
them as we go forward in our work that we are doing in response
to this horrific spill.
Thank you very much. We will keep the record open for 1
week--we try to have limits here--have the record open for 1
week for anyone that wants to put anything on the record, and
with that, the hearing is adjourned. Thank you.
[Whereupon, at 4:15 p.m., the Committee was adjourned.]
[Submissions for the record follow.]
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