SJR 18-EXXON VALDEZ DAMAGE CLAIMS Number 073 CHAIRMAN WHITAKER announced that the first order of business would be CS FOR SENATE JOINT RESOLUTION NO. 18(RLS), requesting Exxon Corporation to pay claimants for court-ordered damages resulting from the Exxon Valdez oil spill. He introduced Senator Georgianna Lincoln, prime sponsor for SJR 18. SENATOR GEORGIANNA LINCOLN, Alaska State Legislature, began her testimony by reminding the committee of the devastation caused by the Exxon Valdez oil spill of March 24, 1989. Much has been done in the 11 years since then, she said, citing new technologies, radar monitoring, prepared-response teams, double hulls, tanker escort vessels, and more stringent marine pilot licensing. However, court-ordered damages remain unpaid. SENATOR LINCOLN said SJR 18 requests that the Exxon Mobil Corporation (Exxon) pay court-ordered damage claims resulting from the spill. Six years ago, an Alaskan jury in federal District Court returned a damage judgment of more than $5 billion against Exxon. More than 40,000 claimants have waited while Exxon has filed motions and appeals to overturn the verdict. Thus SJR 18 is urging Exxon to pay immediately the court-ordered compensatory damages and, if the punitive damages are affirmed by the Ninth Circuit Court of Appeals, to pay the punitive damages without further delay or appeal. SENATOR LINCOLN called committee members' attention to their packet contents, including an 11-year time line of the Exxon Valdez litigation and the public process that has taken place. Also enclosed was a technical amendment to SJR 18 that was needed because Exxon Corporation recently merged with Mobil Corporation and the corporate name was changed to Exxon Mobil Corporation. A letter from the Legislative Affairs Agency, Legal and Research Service Division, advises that making the name change throughout the text of SJR 18 is a minor technical change that fits within the parameters of Rule 35, so there is no need to suspend the rules to correct the title to reflect the new name of the corporation. Number 0600 REPRESENTATIVE DYSON said he had been told that Exxon has paid all of the compensatory damages, and that the punitive damages are the only ones unpaid. SENATOR LINCOLN said that is not the case; still unpaid are compensatory damages that total about $50 million, including interest. Number 0663 MATT JAMIN, Attorney for plaintiffs in Exxon Valdez oil spill damage claims, testified by teleconference from Kodiak. He confirmed that the amount of the unpaid compensatory damages is about $20 million (and with interest, approximately $50 million). REPRESENTATIVE DYSON asked if it those damages remain unpaid because Exxon challenges the validity of those claims. MR. JAMIN said Exxon has challenged both the compensatory and punitive damage verdicts returned by the United States District Court, and that the challenge is now with the Ninth Circuit Court of Appeals. REPRESENTATIVE DYSON asked if $50 million was the total amount of the compensatory damages or just the unpaid portion. MR. JAMIN said it is the unpaid portion of compensatory judgments ordered by the U.S. District Court. There is, in addition, outstanding litigation at the state court level regarding additional compensatory damages, and for which there will be trials later this year. REPRESENTATIVE DYSON asked if some of the $50 million in damages are still undecided or contended. MR. JAMIN said Exxon argues that the U.S. District Court jury was wrong to find that those compensatory and punitive damages were appropriate. REPRESENTATIVE DYSON asked about claimants for compensatory damages who were not directly damaged, but who felt the reputation of Alaskan fish was denigrated [by the oil spill] and therefore they were not paid as much for their fish. He wondered if that group of claimants had its day in court and if that issue had been adjudicated. MR. JAMIN explained that the claims described were among those that federal District Judge Holland had ruled "not cognizable," that is, inappropriate to bring before the court based on the decision in a case known as Robin's Drydock, which has to do with how close one was to the oil spilled. The issue of whether or not those claims are legitimate is among issues now before the U.S. Ninth Circuit Court of Appeals. Number 0849 REPRESENTATIVE DYSON said punitive damages are intended to teach the perpetrator not to do something again. He asked Senator Lincoln if she thinks Exxon needs to be further impressed not to expose Alaskan waters and wildlife and fish to this sort of thing again. SENATOR LINCOLN emphasized that SJR 18 is urging Exxon to promptly pay compensatory claims already ordered by the court. Regarding the punitive damages, once the May 3 decision is reached, if the judges determine that those punitive damages also should be paid, SJR 18 urges Exxon to pay them [the punitive damages] as a good corporate citizen rather than to go through another appeal. It is 11 years since the spill, and it is time to put this all to rest. REPRESENTATIVE DYSON asked whether, in the May 3 court proceedings, the question of the appropriateness of the punitive damages will be before the court again. SENATOR LINCOLN explained that it was May 3 of last year, 1999, when the court [heard the arguments about] both the punitive and the compensatory damages. REPRESENTATIVE DYSON asked whether the appeals court had revisited the punitive damages and said that Exxon needs to pay those to be further reminded to not do such a thing in the future. SENATOR LINCOLN clarified that on May 3, 1999, the issue of the compensatory and punitive damages went to the Ninth Circuit Court of Appeals; those judges have not yet given their decision. [Senate] Joint Resolution 18 is saying that Exxon should pay the compensatory damages immediately, and if the appeals court upholds the punitive damages, should pay those, too, and not appeal again. Number 1079 CHAIRMAN WHITAKER asked whether interest is currently accruing on the unpaid compensatory damages as well as on the punitive damages. MR. JAMIN said the federal judgment is accruing interest at the statutory rate of 5.9 percent; that interest rate, set by the court at the time the judgment was entered, does not change over the course of the appeal time. CHAIRMAN WHITAKER asked Mr. Jamin if he had calculated what the total amount [due] would be today. MR. JAMIN said the amount of the judgment is now approximately $6.3 billion. Number 1096 REPRESENTATIVE GREEN wanted to know how the state would benefit from the punitive damages if they are upheld. MR. JAMIN explained that Judge Holland has approved a plan for distribution of any subsequent compensatory or punitive damage awards. The money would be distributed among 51 various groups of litigants, the majority of whom are commercial fishermen from all around the state affected by price depression in 1989-90. Other groups that would receive portions of the money include businesses, processors, Alaska Natives whose subsistence was affected, cities, boroughs, aquaculture associations, land owners and commercial fish processing employees. REPRESENTATIVE GREEN wanted to know if that group includes people who have not yet received any compensatory damages. MR. JAMIN said yes, and that any individuals who had already received compensation would have that amount deducted from the total that Judge Holland has ruled would be their fair share. Number 1217 REPRESENTATIVE HARRIS asked if there was someone representing Exxon available to answer a question. CHAIRMAN WHITAKER reported that Exxon had chosen not to be present. REPRESENTATIVE HARRIS then asked Mr. Jamin about the $5 billion damage award, saying that at today's interest rates, the money surely is earning interest above the 5.9 percent owed to plaintiffs. He wondered how long it would takes that money to accrue enough interest to pay the $5 billion plus the interest. MR. JAMIN said Representative Harris had raised a point that also had occurred to plaintiffs, that Exxon must be making substantially more from the $5 million than the 5.9 percent they have been ordered to pay. He surmised that the current rate of return would be in the range 12 to 18 percent, so it is possible that a substantial amount of the principal has been earned since the judgment was entered. Number 1384 REPRESENTATIVE DYSON said it had become apparent to him that he has a conflict of interest regarding SJR 18. He said he is included in the class action suit brought on behalf of salmon fishers who say they suffered from price depression in 1989-90, years when he was fishing. He asked to be excused from the vote in the committee, but said he wished to stay and listen. CHAIRMAN WHITAKER deemed the conflict of interest to be a valid one and excused Representative Dyson from voting on SJR 18. REPRESENTATIVE SMALLEY then asked about a potential conflict of interest in his own case. He had fished in 1989, was listed among crew members, and consequently was named on the list of claimants. He had since asked to be deleted from the list, and had received no further mailings about the claim, so he assumed that he was no longer considered a claimant. CHAIRMAN WHITAKER told him to let his conscience be his guide. REPRESENTATIVE SMALLEY stated that he did not feel there was any reason why he should not vote on SJR 18. He then inquired about the origin of a document in committee packets, "Exxon Mobil response to SJR 18." CHAIRMAN WHITAKER said it had been received the preceding day from Brian Dunphy, a lobbyist for Exxon Mobil Corporation. Number 1552 PATIENCE ANDERSON FAULKNER testified by teleconference from Cordova. She told members that she had learned much about the sorrows of those affected by the 1989 Exxon Valdez oil spill as she helped many people - commercial fishermen, cannery workers, and Alaska Natives dependent on subsistence - to get in touch with those who could protect their interests. She spoke of the invasion of privacy associated with documenting those claims. She said she had interviewed most of the Prince William Sound area residents who needed help with the paperwork. Some were overwhelmed by it, and many "were pretty frustrated." She said they still ask her when all of this "oil spill stuff" will be settled. Number 1638 MS. FAULKNER expressed frustration that in 1989, Exxon was able to purchase a Canadian oil company, but didn't have enough money to pay the damages owed. Those who live on Prince William Sound are now going into their twelfth [fishing] season since the spill, and there will be no herring fishing again this year. She stated, "Where the people are going to have money to make their boat payments, to just survive, I don't know." Since the spill, 500 of the claimants have died, she noted, leaving "a paperwork nightmare" for the survivors. She would like to see the claims settled and paid, she added, and to move on into a brighter future. Number 1704 REPRESENTATIVE GREEN asked Ms. Faulkner if there would be no herring fishing this year because of the oil spill. MS. FAULKNER said this year's herring fishery had been closed by the Alaska Department of Fish and Game (ADF&G). She said the last time she was able to get herring roe on kelp was probably in 1993, and it was not edible. Number 1810 REPRESENTATIVE HARRIS recalled that the herring fishery was closed in 1989 because of the oil spill. In subsequent years, it had been closed because the return was very poor. The ADF&G reopened the fishery once a few years ago, but the juvenile fish coming back were too small, so the department closed the fishery again. REPRESENTATIVE HARRIS asked Ms. Faulkner to explain some of the problems fishermen and others are having because of compensatory damages that have not been paid. MS. FAULKNER said that more than half of the fleet of commercial fishing boats is gone because the fishermen could not make their boat payments. The remaining boats are not well maintained for lack of money. She described fishermen trying to figure out how to repair their own marine electronics and how to make other repairs normally entrusted to technical experts. She said they were compromising their safety trying to maintain the boats well enough to make a living with them. MS. FAULKNER said many commercial fishing permits have left the area because they are either not worth anything or because that was one of several assets that had to be sold off so that people could have money to survive. "Everything in our boat harbor is mortgaged," she added, noting that people have been forced to go through their assets and decide what to keep in order to survive. REPRESENTATIVE HARRIS asked if those were examples of the compensatory claims still being disputed. MS. FAULKNER replied yes, specifying the value of boats, the value of permits, and the prices received for fish. Number 1941 ROSS MULLINS, Director, Cordova District Fishermen United, testified by teleconference from Cordova. He said he had been a leader of the Prince William Sound fishermen's fight against locating the oil pipeline terminus at Valdez. He said fishermen had feared that oil shipment by supertankers through Prince William Sound would damage the fishery. The fishermen favored an overland pipeline through Canada to markets in the United States. Mr. Mullins said they lobbied hard to try to get baseline surveys done for Prince William Sound resources and the marine ecosystem, as part of the required environmental impact statement. He stated, "We argued that without adequate baseline studies, any future changes or damages to the resources caused by inevitable oil spills could not be properly measured and assessed. We found few sympathetic ears." He said one of Alaska's U.S. senators had assured them that "not one drop of oil will touch the waters of Prince William Sound." MR. MULLINS said the Exxon Valdez Oil Spill Trustee Council should buy up the distressed fishermen's boats and permits and "put the poor beggars out of their misery." The Prince William Sound salmon resources have been severely damaged. The facts are undeniable. The current fisheries collapse is indisputable. MR. MULLINS said the only difference between the adjacent fishing areas - where runs are abundant and robust - and Prince William Sound is that it was the epicenter of the spill. Last year, information developed by National Marine Fisheries Service scientists at the Auke Bay Laboratory had reported that the low levels of oil still remaining in Prince William Sound were having ongoing genetic impacts on salmon in the oiled stream habitats. MR. MULLINS commented on the question of how the state would benefit from dollars distributed to the plaintiffs, saying he thought the infusion of that much (more than $5 billion) cash into the state's economy would trigger a significant economic boom. There are more than 40,000 plaintiffs, roughly 7 percent of the population of Alaska. Taking into account the multiplier factor, the damage payments could have a long-term, beneficial impact on the finances of the state and its populace. Number 2240 MR. MULLINS said the compensatory damages awarded by the jury came to slightly more than $300 million. In 1994, when the jury was considering the amount, it was based on a model of price diminishment. Now, ten years later, there is evidence that the spill had more far-reaching effects. For example, there is strong evidence that the environmental stress created by the oil spill has contributed to disease outbreaks that have kept herring in Prince William Sound from reaching a recruitment biomass adequate to allow fishing. The compensatory damages, as determined by the jury, were significantly less than have actually occurred. If the plaintiffs request a new trial, there now is scientific data to support a higher damage award. TAPE 00-15A, SIDE B Number 2357 CHRIS BERNS testified by teleconference from Kodiak. He said Judge Holland, who presided over the U.S. District Court case, had been named by the [Anchorage] Daily News last year as one of Alaska's leading citizens since statehood. Judge Holland was very thorough in the trial. The jury that awarded the $5 million punitive damages was made up of Alaska residents. About 30,000 Alaskans received benefits from this settlement. MR. BERNS said he finds it hard to believe that SJR 18 would have resistance in passing out of the legislature, based on the public process that it went through, the scrutiny it received, and the benefits that Alaska will receive if this settlement is paid out, both financially and emotionally, as the people in Cordova have stressed. He concluded, "Exxon has not responded as a good corporate citizen of the state. A lot of people in Alaska have been damaged, and I would urge the passing of this resolution out." Number 2242 WALLACE FIELDS testified via teleconference from Kodiak. He informed members that he grew up in Kodiak, commercial fishing and salmon fishing in the summer at his family's setnet site, and he had participating in all of the herring fisheries in the Gulf of Alaska and Bristol Bay. He spent 120 days in 1989 cleaning up beaches around the setnet site and two villages. He encouraged the committee to support SJR 18. MR. FIELDS said that since 1989, he has witnessed changes for the worse in affected coastal communities. Many of his peers and others with whom he worked have left. The whole fishing community has been restructured as a result of the Exxon oil spill. The people have not received compensation. He asked the committee to put whatever pressure it can on Exxon to settle this so that area residents can go on with their lives. He concluded: My father will be 84 years old this year. He was one of the permit holders who was damaged, ... and I would sure like for him to be able to see the end of this while he is still living. I would just like to encourage you to do whatever you can to get this settled and bring those dollars back into this community where they belong, to help fishermen survive the loss of permit values and boat values, and all those things that have already been mentioned. Number 2151 LARRY MALLOY, Director, Kodiak Regional Aquaculture Association, testified on behalf of that association. A Kodiak resident for nearly 34 years, he said the aquaculture association - made up of approximately 618 commercial salmon permit holders in the Kodiak area - is a major entity responsible for salmon enhancement work there. The association funds a cooperative agreement with the ADF&G to accomplish important salmon enhancement projects throughout the area. As a claimant aquaculture association, it is in strong support of SJR 18. Mr. Malloy stated: We feel, that as is accurately stated in the sponsor statement, that there needs to be closure to the Exxon Valdez oil spill, and also, as this resolution urges, that the court-ordered compensatory damages be awarded and that if court-affirmed, the punitive damages be paid. Number 2086 REPRESENTATIVE DYSON asked Mr. Malloy if he could document any ongoing damage to the fish stocks. MR. MALLOY said that before the oil spill, their hatchery pink production was dominant in odd-numbered years, and had a higher cost/benefit ratio for fishermen because of that dominance. Following the oil spill, however, that dominance shifted. Also, the association has noted that wild chum production from nearby mainland management areas remains depressed. He said the association is continuing to monitor and follow certain things that might have some relation to that event [the spill]. REPRESENTATIVE DYSON said he had heard something about petroleum- caused damage to herring larvae. He asked if there had been anything similar documented for salmon. MR. MALLOY said the Exxon Valdez Oil Spill Trustee Council has a series of studies that document the damage to both salmon and herring. Number 2008 JIM SYKES, Spokesman, Alaska Public Interest Research Group, told the committee he was testifying on behalf of about 3,000 Alaskans in the public interest, and in support of the resolution. He wished to associate his remarks with those of the previous speakers and say that the victims have not been paid and Prince William Sound has not recovered. He said it is worth noting that Exxon has not built any double-hulled tankers since the Exxon Valdez oil spill, which is the greatest safety measure that could be taken - "over the escorts and the improved vessel tracking" - for the safe transport of oil. In that same time period, he noted, the Continental Oil Company (CONOCO) has "double-hulled" its entire fleet of both inland waterway tankers and ocean-going tankers. He said he believes this resolution is extremely appropriate. Number 1906 CHAIRMAN WHITAKER asked whether anyone else wished to testify; there was no response. He brought attention to the amendment discussed previously. REPRESENTATIVE SMALLEY made a motion to adopt the technical amendment to CSSJR 18(RLS). There being no objection, the amendment was adopted. REPRESENTATIVE HARRIS made a motion to move CSSJR 18(RLS), as amended, out of committee with individual recommendations. REPRESENTATIVE GREEN and REPRESENTATIVE PORTER objected. Upon a roll call vote, Representatives Harris, Kemplen and Smalley voted in favor of moving CSSJR 18(RLS), as amended, out of committee; Representatives Green and Porter voted against it; and Representatives Whitaker and Dyson abstained. (Representatives Phillips and Brice were absent.) Therefore, there was a vote of 3-2 in favor of moving the resolution from committee. [On tape, it was announced that HCS CSSJR 18(O&G) had moved out of the House Special Committee on Oil and Gas. However, during a subsequent five-minute at-ease, it was determined that under Rule 24A of the Uniform Rules, the 3-2 vote was insufficient to move the resolution out of committee. Therefore, HCS CSSJR 18(O&G) failed to move out of committee.]