Oil and Water


In July 1977 the first barrel of oil from Prudhoe Bay flowed from the Trans-Alaska Pipeline at Valdez. By March of this year, 6.83 billion barrels of oil had been loaded onto 8,858 tankers at Valdez. Every one of them successfully exited Prince William Sound and went on its way. Then on March 14, 1989, the Exxon Valdez ran aground in the dead of night and spilled 0.000035 of that huge quantity of oil into Alaska's pristine coastal waters. It is a sobering thought that this relatively tiny amount of North Slope crude could have such widespread and long-lasting destructive effects that Exxon still has no estimate of how much the spill will cost the company.

Dead and stunted wildlife, oil-coated beaches, devastated fisheries—these environmental and economic effects are bad enough. It would be a tragedy of the worst sort if the spill also succeeded in perpetuating and augmenting unsound policies that do little to address the fundamental issues involved.

Environmental doomsayers who opposed the Alaska pipeline in the first place were wrong, and there has been far too little note of this. Before the Exxon Valdez spill, none of the predicted ill effects of Alaska drilling and the pipeline had come to pass. None. Nevertheless, oil has great potential to damage the environment, and we would wisely take pains to put in place a system where those who handle it have every incentive to do so with utmost care. Instead, various government laws and policies have served to diffuse and undercut responsibility for such disasters.

• Under the Clean Water Act of 1977, an oil company's liability for damages from a spill is limited to $100 million. Although Exxon vows to spend whatever it takes to clean up this spill and compensate injured parties, the more fundamental issue is whether a liability limit gives the appropriate incentive ahead of time to take due care.

• One of the precautions Exxon might have taken before the fact was to spend 10 percent more for double-hulled tankers. In the '70s, environmentalists urged double-hull construction to minimize the risk of holes that would actually leak oil in the event of such accidents as the Exxon Valdez's. The Coast Guard, in charge of tanker safety, declined to require double hulls, reportedly under pressure from the oil industry.

• The Coast Guard is also in charge of licensing tanker crews. If the captain of the Exxon Valdez was indeed drunk, Exxon may bear responsibility. But what about the Coast Guard: Does it monitor licenses once issued? Does licensing create the illusion of safety but drive a wedge between employer responsibility and employee conduct?

• The Coast Guard plays another crucial role: directing traffic through the sound. It seems that the Guard was tracking the Exxon Valdez on its radar screen on the fateful night. But if anyone was monitoring the radar system, why wasn't the tanker queried or warned as it headed several miles off its assigned course? Of course, the Coast Guard, unlike Exxon, will not be hauled into court and made to pay up. What are its incentives?

• In 1981, the oil industry consortium that owns the pipeline dispensed with a 20-member emergency team. The state of Alaska acquiesced. The state currently derives 85 percent of its $2.3-billion budget from oil sales and oil industry taxes. What kind of incentives does that relationship create?

Unfortunately, these are not the kinds of questions being addressed in the wake of the Alaska spill. Instead, those who already wanted to (1) raise the federal gasoline tax, (2) toughen fuel-economy standards for cars, (3) prevent exploratory drilling in northeast Alaska, and (4) block new drilling leases in any U.S. coastal waters have seized the opportunity to grab a clincher for their arguments.

Worst of all, those who bother to deal directly with the problem—preventing damage to Alaska's sensitive environment in getting oil out of Prudhoe Bay—propose a further dilution of responsibility. A New York Times editorial was typical in demanding that government establish an emergency response team funded by a per barrel tax on all oil companies and jointly controlled by industry and the governments involved. This in spite of evidence that many of the delays and snafus in responding to the Alaska spill could be laid at the feet of, in the words of one reporter, "a tangled string of state and federal agencies [that] has resulted in snarls on virtually a daily basis: equipment being sent to the wrong site, workers idled for hours while waiting for instructions, precious time squandered on official forms or permits or requests."

If the Alaska spill shows anything to inquiring minds, it subtly demonstrates the failure of government regulation—not the failure of private industry, not the failure of oil consumption, not the failure of exploiting the natural riches of the earth. Regulation is inherently ineffective because it divorces the ultimate cause of safety from the effects of unsafe activity.

Let he who fouls up, pay. It concentrates the mind marvelously.