The High Cost Of Catastrophe

"Out, damned spot! Out, I say!"

Like Lady Macbeth, Exxon has learned to its sorrow that some stains cannot be easily scrubbed away. Exxon said last week that it will have to spend $1.28 billion, or ten times as much as initial projections, to clean up the 11 million gal. of crude oil that the supertanker Exxon Valdez spewed into Alaska's Prince William Sound last March. The surprising estimate, which did not take into account potential penalties or lawsuit settlements, made the Alaskan disaster one of the most expensive industrial accidents ever.

To handle the cleanup, Exxon has deployed an army of 10,500 workers and a flotilla of vessels. Some 3,000 beach cleaners wield high-pressure hoses in twelve-hour shifts to scour the crude from rocky shorelines. The task must be repeated often because tides wash the oil back onto beaches that have just been cleaned.

Although the cleaning bill has slashed Exxon's second-quarter profits from $1 billion to $160 million, the world's largest oil company has so far suffered no serious financial hardship. Even so, warns Bryan Jacoboski, who follows the oil industry for PaineWebber, "I think this could be only the tip of the iceberg."

Many Alaskans were outraged last week when a leaked Exxon memo suggested that the company might walk away from the job after work halts for the winter on Sept. 15. But in testimony before a House subcommittee, W.D. Stevens, president of Exxon's U.S. operations, said the company would comply with any "reasonable request" from the Coast Guard to resume the cleanup next spring.