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Exxon Corporation

Exxon Corporation

5959 Las Colinas Boulevard
Irving, Texas 75039-2298
U.S.A.
Telephone: (972) 444-1000
Toll Free: (800) 252-1800
Fax: (972) 444-1348
Web site: http://www.exxon.com

Public Company
Incorporated: 1882 as Standard Oil Company of New Jersey
Employees: 79,000
Sales: $117.77 billion (1998)
Stock Exchanges: New York Boston Cincinnati Midwest Philadelphia Basel Dusseldorf Frankfurt Geneva Hamburg Paris Zurich
Ticker Symbol: XON
NAIC: 211111 Crude Petroleum & Natural Gas Extraction; 324110 Petroleum Refineries; 324191 Petroleum Lubricating Oil & Grease Manufacturing; 325110 Petrochemical Manufacturing; 447100 Gasoline Stations; 486110 Pipeline Transportation of Crude Oil; 486910 Pipeline Transportation of Refined Petroleum Products; 212110 Coal Mining; 212234 Copper Ore & Nickel Ore Mining; 212299 All Other Metal Ore Mining; 221112 Fossil Fuel Electric Power Generation

As the earliest example of the trend toward gigantic size and power, Exxon Corporation and its Standard Oil forebears have earned vast amounts of money in the petroleum business. The brainchild of John D. Rockefeller, Standard Oil enjoyed the blessings and handicaps of overwhelming poweron the one hand, an early control of the oil business so complete that even its creators could not deny its monopolistic status; on the other, an unending series of journalistic and legal attacks upon its business ethics, profits, and very existence. Exxon became the object of much resentment during the 1970s for the huge profits it made from the OPEC-induced oil shocks. The uproar over the Exxon Valdez oil tanker spill in 1989 put the corporation once more in the position of embattled giant, as the largest U.S. oil company struggled to justify its actions before the public. At the end of the 1990s Exxon stood as the second largest of the worlds integrated petroleum powerhousestrailing only the Royal Dutch/Shell Group. In addition to its oil and gas exploration, production, manufacturing, distribution, and marketing operations, Exxon was a leading producer and seller of petrochemicals and was involved in electric power generation and the mining of coal, copper, and other minerals. Exxon was also once again making history, through a proposed merger with Mobil Corporation, to create the largest petroleum firm in the world in one of the biggest mergers everand to reunite two of the offspring of the Standard Oil behemoth.

Prehistory of Standard Oil

The individual most responsible for the creation of Standard Oil, John D. Rockefeller, was born in 1839 to a family of modest means living in the Finger Lakes region of New York State. His father, William A. Rockefeller, was a sporadically successful merchant and part-time hawker of medicinal remedies. William Rockefeller moved his family to Cleveland, Ohio, when John D. Rockefeller was in his early teens, and it was there that the young man finished his schooling and began work as a bookkeeper in 1855. From a very young age John D. Rockefeller developed an interest in business. Before getting his first job with the merchant firm of Hewitt & Tuttle, Rockefeller had already demonstrated an innate affinity for business, later honed by a few months at business school.

Rockefeller worked at Hewitt & Tuttle for four years, studying large-scale trading in the United States. In 1859 the 19-year-old Rockefeller set himself up in a similar ventureClark & Rockefeller, merchants handling the purchase and resale of grain, meat, farm implements, salt, and other basic commodities. Although still very young, Rockefeller had already impressed Maurice Clark and his other business associates as an unusually capable, cautious, and meticulous businessman. He was a reserved, undemonstrative individual, never allowing emotion to cloud his thinking. Bankers found that they could trust John D. Rockefeller, and his associates in the merchant business began looking to him for judgment and leadership.

Clark & Rockefellers already healthy business was given a boost by the Civil War economy, and by 1863 the firms two partners had put away a substantial amount of capital and were looking for new ventures. The most obvious and exciting candidate was oil. A few years before, the nations first oil well had been drilled at Titusville, in western Pennsylvania, and by 1863 Cleveland had become the refining and shipping center for a trail of newly opened oil fields in the so-called Oil Region. Activity in the oil fields, however, was extremely chaotic, a scene of unpredictable wildcatting, and John D. Rockefeller was a man who prized above all else the maintenance of order. He and Clark, therefore, decided to avoid drilling and instead go into the refining of oil, and in 1863 they formed Andrews, Clark & Company with an oil specialist named Samuel Andrews. Rockefeller, never given to publicity, was the Company.

With excellent railroad connections as well as the Great Lakes to draw upon for transportation, the city of Cleveland and the firm of Andrews, Clark & Company both did well. The discovery of oil wrought a revolution in U.S. methods of illumination. Kerosene soon replaced animal fat as the source of light across the country, and by 1865 Rockefeller was fully convinced that oil refining would be his lifes work. Unhappy with his Clark-family partners, Rockefeller bought them out for $72,000 in 1865 and created the new firm of Rockefeller & Andrews, already Clevelands largest oil refiners. It was a typically bold move by Rockefeller, who although innately conservative and methodical was never afraid to make difficult decisions. He thus found himself, at the age of 25, co-owner of one of the worlds leading oil concerns.

Talent, capital, and good timing combined to bless Rockefeller & Andrews. Cleveland handled the lions share of Pennsylvania crude and, as the demand for oil continued to explode, Rockefeller & Andrews soon dominated the Cleveland scene. By 1867, when a young man of exceptional talent named Henry Flagler became a third partner, the firm was already operating the worlds number one oil refinery; there was as yet little oil produced outside the United States. The year before, John Rockefellers brother, William Rockefeller, had opened a New York office to encourage the rapidly growing export of kerosene and oil byproducts, and it was not long before foreign sales became an important part of Rockefeller strength. In 1869 the young firm allocated $60,000 for plant improvementsan enormous sum of money for that day.

Creation of the Standard Oil Monopoly: 187092

The early years of the oil business were marked by tremendous swings in the production and price of both crude and refined oil. With a flood of newcomers entering the field every day, size and efficiency already had become critically important for survival. As the biggest refiner, Rockefeller was in a better position than anyone to weather the price storms. Rockefeller and Henry Flagler, with whom Rockefeller enjoyed a long and harmonious business relationship, decided to incorporate their firm to raise the capital needed to enlarge the company further. On January 10, 1870, the Standard Oil Company was formed, with the two Rockefellers, Flagler, and Andrews owning the great majority of stock, valued at $1 million. The new company was not only capable of refining approximately ten percent of the entire countrys oil, it also owned a barrel-making plant, dock facilities, a fleet of railroad tank cars, New York warehouses, and forest land for the cutting of lumber used to produce barrel staves. At a time when the term was yet unknown, Standard Oil had become a vertically integrated company.

One of the single advantages of Standard Oils size was the leverage it gave the company in railroad negotiations. Most of the oil refined at Standard made its way to New York and the Eastern Seaboard. Because of Standards great volume60 carloads a day by 1869it was able to win lucrative rebates from the warring railroads. In 1871 the various railroads concocted a plan whereby the nations oil refiners and railroads would agree to set and maintain prohibitively high freight rates while awarding large rebates and other special benefits to those refiners who were part of the scheme. The railroads would avoid disastrous price wars while the large refiners forced out of business those smaller companies who refused to join the cartel, known as the South Improvement Company.

Company Perspectives:

Ours is a long-term business, with todays accomplishments a reflection of well-executed plans set in motion years ago. Likewise, Exxons success at building shareholder value in the future is dependent on plans we develop and implement today.

The following strategies have and will continue to guide Exxon as we strive to meet shareholder and customer expectations: identifying and implementing quality investment opportunities at a timely and appropriate pace, while maintaining a selective and disciplined approach; being the most efficient competitor in every aspect of our business; maintaining a high-quality portfolio of productive assets; developing and employing the best technology; ensuring safe, environmentally sound operations; continually improving an already high-quality work force; maintaining a strong financial position and ensuring that financial resources are employed wisely.

The plan was denounced immediately by Oil Region producers and many independent refiners, with near-riots breaking out in the oil fields. After a bitter war of words and a flood of press coverage, the oil refiners and the railroads abandoned their plan and announced the adoption of public, inflexible transport rates. In the meantime, however, Rockefeller and Flagler were already far advanced on a plan to combat the problems of excess capacity and dropping prices in the oil industry. To Rockefeller the remedy was obvious, though unprecedented: the eventual unification of all oil refiners in the United States into a single company. Rockefeller approached the Cleveland refiners and a number of important firms in New York and elsewhere with an offer of Standard Oil stock or cash in exchange for their often-ailing plants. By the end of 1872, all 34 refiners in the area had agreed to sellsome freely and for profit, and some, competitors alleged, under coercion. Because of Standards great size and the industrys overbuilt capacity, Rockefeller and Flagler were in a position to make their competitors irresistible offers. All indications are that Standard regularly paid top dollar for viable companies.

By 1873 Standard Oil was refining more oil10,000 barrels per daythan any other region of the country, employing 1,600 workers, and netting around $500,000 per year. With great confidence, Rockefeller proceeded to duplicate his Cleveland success throughout the rest of the country. By the end of 1874 he had absorbed the next three largest refiners in the nation, located in New York, Philadelphia, and Pittsburgh. Rockefeller also began moving into the field of distribution with the purchase of several of the new pipelines then being laid across the country. With each new acquisition it became more difficult for Rockefellers next target to refuse his cash. Standard interests rapidly grew so large that the threat of monopoly was clear. The years 1875 to 1879 saw Rockefeller push through his plan to its logical conclusion. In 1878, a mere six years after beginning its annexation campaign, Standard Oil controlled $33 million of the countrys $35 million annual refining capacity, as well as a significant proportion of the nations pipelines and oil tankers. At the age of 39, Rockefeller was one of the five wealthiest men in the country.

Standards involvement in the aborted South Improvement Company, however, had earned it lasting criticism. The companys subsequent absorption of the refining industry did not mend its image among the few remaining independents and the mass of oil producers who found in Standard a natural target for their wrath when the price of crude dropped precipitously in the late 1870s. Although the causes of producers tailing fortunes are unclear, it is evident that given Standards extraordinary position in the oil industry it was fated to become the target of dissatisfactions. In 1879 nine Standard Oil officials were indicted by a Pennsylvania grand jury for violating state antimonopoly laws. Although the case was not pursued, it indicated the depth of feeling against Standard Oil, and was only the first in a long line of legal battles waged to curb the companys power.

In 1882 Rockefeller and his associates reorganized their dominions, creating the first trust in U.S. business history. This move overcame state laws restricting the activity of a corporation to its home state. Henceforth the Standard Oil Trust, domiciled in New York City, held in trust all assets of the various Standard Oil companies. Of the Standard Oil Trusts nine trustees, John D. Rockefeller held the largest number of shares. Together the trusts 30 companies controlled 80 percent of the refineries and 90 percent of the oil pipelines in the United States, constituting the leading industrial organization in the world. The trusts first years combined net earnings were $11.2 million, of which some $7 million was immediately plowed back into the companies for expansion. Almost lost in the flurry of big numbers was the 1882 creation of Standard Oil Company of New Jersey, one of the many regional corporations created to handle the trusts activities in surrounding states. Barely worth mentioning at the time, Standard Oil Company of New Jersey, or Jersey as it came to be called, would soon become the dominant Standard company and, much later, rename itself Exxon.

Key Dates:

1870:
John D. Rockefeller and Henry Flagler incorporate the Standard Oil Company.
1878:
Standard controls $33 million of the countrys $35 million annual refining capacity.
1882:
Rockefeller reorganizes Standard Oil into a trust, creating Standard Oil Company of New Jersey as one of many regional corporations controlled by the trust.
1888:
Standard founds its first foreign affiliate, Anglo-American Oil Company, Limited.
1890:
The Sherman Antitrust Act is passed, in large part, in response to Standards oil monopoly.
1891:
The trust has secured a quarter of the total oil field production in the United States.
1892:
Lawsuit leads to dissolving of the trust; the renamed Standard Oil Company (New Jersey) becomes main vessel of the Standard holdings.
1899:
Jersey becomes the sole holding company for all of the Standard interests.
1906:
Federal government files suit against Jersey under the Sherman Antitrust Act, charging it with running a monopoly.
1911:
U.S. Supreme Court upholds lower court conviction of the company and orders that it be separated into 34 unrelated companies, one of which continues to be called Standard Oil Company (New Jersey).
1926:
The Esso brand is used for the first time on the companys refined products.
1946:
A 30 percent interest in Arabian American Oil Company, and its vast Saudi Arabian oil concessions, is acquired.
1954:
Company gains seven percent stake in Iranian oil production consortium.
1972:
Standard Oil Company (New Jersey) changes its name to Exxon Corporation.
1973:
OPEC cuts off oil supplies to the United States.
1980:
Revenues exceed $100 billion because of the rapid increase in oil prices.
1989:
The crash of the Exxon Valdez in Prince William Sound off the port of Valdez, Alaska, releases about 260,000 barrels of crude oil.
1990:
Headquarters are moved from Rockefeller Center in New York City to Irving, Texas.
1994:
A federal jury in an Exxon Valdez civil action finds the company guilty of recklessness and orders it to pay $286.8 million in compensatory damages and $5 billion in punitive damages.
1997:
Company appeals the $5 billion punitive damage award; it reports profits of $8.46 billion on revenues of $120.28 billion for the year.
1998:
Company agrees to buy Mobil in one of the largest mergers in U.S. history, which would create the largest oil company in the world, Exxon Mobil Corporation.

The 1880s were a period of exponential growth for Standard. The trust not only maintained its lock on refining and distribution but also seriously entered the field of production. By 1891 the trust had secured a quarter of the country s total output, most of it in the new regions of Indiana and Illinois. Standards overseas business was also expanding rapidly, and in 1888 it founded its first foreign affiliate, London-based Anglo-American Oil Company, Limited (later known as Esso Petroleum Company, Limited). The overseas trade in kerosene was especially important to Jersey, which derived as much as threefourths of its sales from the export trade. Jerseys Bayonne, New Jersey refinery was soon the third largest in the Standard family, putting out 10,000 to 12,000 barrels per day by 1886. In addition to producing and refining capacity, Standard also was extending gradually its distribution system from pipelines and bulk wholesalers toward the retailer and eventual end user of kerosene, the private consumer.

Jersey at Head of Standard Oil Empire: 18921911

The 1890 Sherman Antitrust Act, passed in large part in response to Standards oil monopoly, laid the groundwork for a second major legal assault against the company, an 1892 Ohio Supreme Court order forbidding the trust to operate Standard of Ohio. As a result, the trust was promptly dissolved, but taking advantage of newly liberalized state law in New Jersey, the Standard directors made Jersey the main vessel of their holdings. Standard Oil Company of New Jersey became Standard Oil Company (New Jersey) at this time. The new Standard Oil structure now consisted of only 20 much-enlarged companies, but effective control of the interests remained in the same few hands as before. Jersey added a number of important manufacturing plants to its already impressive refining capacity and was the leading Standard unit. It was not until 1899, however, that Jersey became the sole holding company for all of the Standard interests. At that time the entire organizations assets were valued at about $300 million and it employed 35,000 people. John D. Rockefeller continued as nominal president, but the most powerful active member of Jerseys board was probably John D. Archbold.

Rockefeller had retired from daily participation in Standard Oil in 1896 at the age of 56. Once Standards consolidation was complete Rockefeller spent his time reversing the process of accumulation, seeing to it that his staggering fortuneestimated at $900 million in 1913was redistributed as efficiently as it had been made.

The general public was only dimly aware of Rockefellers philanthropy, however. More obvious were the frankly monopolistic policies of the company he had built. With its immense size and complete vertical integration, Standard Oil piled up huge profits ($830 million in the 12 years from 1899 to 1911). In relative terms, however, its domination of the U.S. industry was steadily decreasing. By 1911 its percentage of total refining was down to 66 percent from the 90 percent of a generation before, but in absolute terms Standard Oil had grown to monstrous proportions. Therefore, it was not surprising that in 1905 a U.S. congressman from Kansas launched an investigation of Standard Oils role in the falling price of crude in his state. The commissioner of the Bureau of Corporations, James R. Garfield, decided to widen the investigation into a study of the national oil industryin effect, Standard Oil.

Garfields critical report prompted a barrage of state lawsuits against Standard Oil (New Jersey) and, in November 1906, a federal suit was filed charging the company, John D. Rockefeller, and others with running a monopoly. In 1911, after years of litigation, the U.S. Supreme Court upheld a lower courts conviction of Standard Oil for monopoly and restraint of trade under the Sherman Antitrust Act. The Court ordered the separation from Standard Oil Company (New Jersey) of 33 of the major Standard Oil subsidiaries, including those that subsequently kept the Standard name.

Independent Growth into a Major: 191172

Standard Oil Company (New Jersey) retained an equal number of smaller companies spread around the United States and overseas, representing $285 million of the former Jerseys net value of $600 million. Notable among the remaining holdings were a group of large refineries, four medium-sized producing companies, and extensive foreign marketing affiliates. Absent were the pipelines needed to move oil from well to refinery, much of the former tanker fleet, and access to a number of important foreign markets, including Great Britain and the Far East.

John D. Archbold, a longtime intimate of the elder Rockefeller and whose Standard service had begun in 1879, remained president of Standard Oil (New Jersey). Archbolds first problem was to secure sufficient supplies of crude oil for Jerseys extensive refining and marketing capacity. Jerseys former subsidiaries were more than happy to continue selling crude to Jersey; the dissolution decree had little immediate effect on the coordinated workings of the former Standard Oil group, but Jersey set about finding its own sources of crude. The companys first halting steps toward foreign production met with little success; ventures in Romania, Peru, Mexico, and Canada suffered political or geological setbacks and were of no help. In 1919, however, Jersey made a domestic purchase that would prove to be of great long-term value. For $17 million Jersey acquired 50 percent of the Humble Oil & Refining Company of Houston, Texas, a young but rapidly growing network of Texas producers that immediately assumed first place among Jerseys domestic suppliers. Although only the fifth leading producer in Texas at the time of its purchase, Humble would soon become the dominant drilling company in the United States and eventually was wholly purchased by Jersey. Humble, later known as Exxon Company U.S.A., remained one of the leading U.S. producers of crude oil and natural gas through the end of the century.

Despite initial disappointments in overseas production, Jersey remained a company oriented to foreign markets and supply sources. On the supply side, Jersey secured a number of valuable Latin American producing companies in the 1920s, especially several Venezuelan interests consolidated in 1943 into Creole Petroleum Corporation. By that time Creole was the largest and most profitable crude producer in the Jersey group. In 1946 Creole produced an average of 451,000 barrels per day, far more than the 309,000 by Humble and almost equal to all other Jersey drilling companies combined. Four years later, Creole generated $157 million of the Jersey groups total net income of $408 million and did so on sales of only $517 million. Also in 1950, Jerseys British affiliates showed sales of $283 million but a bottom line of about $2 million. In contrast to the industrys early days, oil profits now lay in the production of crude, and the bulk of Jerseys crude came from Latin America. The companys growing Middle Eastern affiliates did not become significant resources until the early 1950s. Jerseys Far East holdings, from 1933 to 1961 owned jointly with Socony-Vacuum Oil Companyformerly Standard Oil Company of New York and now Mobil Corporationnever provided sizable amounts of crude oil.

In marketing, Jerseys income showed a similar preponderance of foreign sales. Jerseys domestic market had been limited by the dissolution decree to a handful of mid-Atlantic states, whereas the companys overseas affiliates were well entrenched and highly profitable. Jerseys Canadian affiliate, Imperial Oil Ltd., had a monopolistic hold on that countrys market, while in Latin America and the Caribbean the West India Oil Company performed superbly during the second and third decades of the 20th century. Jersey had also incorporated eight major marketing companies in Europe by 1927, and these, too, sold a significant amount of refined productsmost of them under the Esso brand name introduced the previous year (the name was derived from the initials for Standard Oil). Esso became Jerseys best known and most widely used retail name both at home and abroad.

Jerseys mix of refined products changed considerably over the years. As the use of kerosene for illumination gave way to electricity and the automobile continued to grow in popularity, Jerseys sales reflected a shift away from kerosene and toward gasoline. Even as late as 1950, however, gasoline had not yet become the leading seller among Jersey products. That honor went to the group of residual fuel oils used as a substitute for coal to power ships and industrial plants. Distillates used for home heating and diesel engines were also strong performers. Even in 1991, when Exxon distributed its gasoline through a network of 12,000 U.S. and 26,000 international service stations, the earnings of all marketing and refining activities were barely one-third of those derived from the production of crude. In 1950 that proportion was about the same, indicating that regardless of the end products into which oil was refined, it was the production of crude that yielded the big profits.

Indeed, by mid-century the international oil business had become, in large part, a question of controlling crude oil at its source. With Standard Oil Company (New Jersey) and its multinational competitors having built fully vertically integrated organizations, the only leverage remained control of the oil as it came out of the ground. Although it was not yet widely known in the United States, production of crude was shifting rapidly from the United States and Latin America to the Middle East. As early as 1908 oil had been verified in present-day Iran, but it was not until 1928 that Jersey and Socony-Vacuum, prodded by chronic shortages of crude, joined three European companies in forming Iraq Petroleum Company. Also in 1928, Jersey, Shell, and Anglo-Persian secretly agreed to limit each companys share of world production to their present relative amounts, attempting, by means of this As Is agreement, to limit competition and keep prices at comfortably high levels. As with Rockefellers similar tactics 50 years before, it was not clear in 1928 that the agreement was illegal, because its participants were located in a number of different countries each with its own set of trade laws. Already in 1928, Jersey and the other oil giants were stretching the very concept of nationality beyond any simple application.

Following World War II, Jersey was again in need of crude to supply the resurgent economies of Europe. Already the worlds largest producer, the company became interested in the vast oil concessions in Saudi Arabia recently won by Texaco and Socal. The latter companies, in need of both capital for expansion and world markets for exploitation, sold 30 percent of the newly formed Arabian American Oil Company (Aramco) to Jersey and ten percent to Socony-Vacuum in 1946. Eight years later, after Irans nationalization of Anglo-Persians holdings was squelched by a combination of CIA assistance and an effective worldwide boycott of Iranian oil by competitors, Jersey was able to take seven percent of the consortium formed to drill in that oil-rich country. With a number of significant tax advantages attached to foreign crude production, Jersey drew an increasing percentage of its oil from its holdings in all three of the major Middle Eastern fieldsIraq, Iran, and Saudi Arabiaand helped propel the 20-year postwar economic boom in the West. With oil prices exceptionally low, the United States and Europe busily shifted their economies to complete dependence on the automobile and on oil as the primary industrial fuel.

Exxon, Oil Shocks, and Diversification: 197289

Despite the growing strength of newcomers to the international market, such as Getty and Conoco, the big companies continued to exercise decisive control over the world oil supply and thus over the destinies of the Middle East producing countries. Growing nationalism and an increased awareness of the extraordinary power of the large oil companies led to the 1960 formation of the Organization of Petroleum Exporting Countries (OPEC). Later, a series of increasingly bitter confrontations erupted between countries and companies concerned about control over the oil upon which the world had come to depend. The growing power of OPEC and the concomitant nationalization of oil assets by various producing countries prompted Jersey to seek alternative sources of crude. Exploration resulted in discoveries in Alaskas Prudhoe Bay and the North Sea in the late 1960s. The Middle Eastern sources remained paramount, however, and when OPEC cut off oil supplies to the United States in 1973in response to U.S. sponsorship of Israelthe resulting 400 percent price increase induced a prolonged recession and permanently changed the industrial worlds attitude to oil. Control of oil was, in large part, taken out of the hands of the oil companies, who began exploring new sources of energy and business opportunities in other fields.

For Standard Oil Company (New Jersey), which had changed its name to Exxon in 1972, the oil embargo had several major effects. Most obviously it increased corporate sales; the expensive oil allowed Exxon to double its 1972 revenue of $20 billion in only two years and then pushed that figure over the $100 billion mark by 1980. After a year of windfall profits made possible by the sale of inventoried oil bought at much lower prices, Exxon was able to make use of its extensive North Sea and Alaskan holdings to keep profits at a steady level. The company had suffered a strong blow to its confidence, however, and soon was investigating a number of diversification measures that eventually included office equipment, a purchase of Reliance Electric Company (the fifth largest holdings of coal in the United States), and an early 1980s venture into shale oil. With the partial exception of coal, all of these were expensive failures, costing Exxon approximately $6 billion to $7 billion.

By the early 1980s the world oil picture had eased considerably and Exxon felt less urgency about diversification. With the price of oil peaking around 1981 and then tumbling for most of the decade, Exxons sales dropped sharply. The companys confidence rose, however, as OPECs grip on the marketplace proved to be weaker than advertised. Having abandoned its forays into other areas, Exxon refocused on the oil and gas business, cutting its assets and workforce substantially to accommodate the drop in revenue without losing profitability. In 1986 the company consolidated its oil and gas operations outside North America, which had been handled by several separate subsidiaries, into a new division called Exxon Company, International, with headquarters in New Jersey. Exxon Company, U.S.A. and Imperial Oil Ltd. continued to handle the companys oil and gas operations in the United States and Canada, respectively.

Exxon also bought back a sizable number of its own shares to bolster per-share earnings, which reached excellent levels and won the approval of Wall Street. The stock buyback was partially in response to Exxons embarrassing failure to invest its excess billions profitablythe company was somewhat at a loss as to what to do with its money. It could not expand further into the oil business without running into antitrust difficulties at home, and investments outside of oil would have had to be mammoth to warrant the time and energy required.

The Exxon Valdez: 198998

In 1989 Exxon was no longer the worlds largest company, and soon it would not even be the largest oil group (Royal Dutch/Shell would take over that position in 1990), but with the help of the March 24, 1989, Exxon Valdez disaster the company heightened its notoriety. The crash of the Exxon Valdez in Prince William Sound off the port of Valdez, Alaska, released about 260,000 barrels, or 11.2 million gallons, of crude oil. The disaster cost Exxon $1.7 billion in 1989 alone, and the company and its subsidiaries were faced with more than 170 civil and criminal lawsuits brought by state and federal governments and individuals.

By late 1991 Exxon had paid $2.2 billion to clean up Prince William Sound and had reached a tentative settlement of civil and criminal charges that levied a $125 million criminal fine against the oil conglomerate. Fully $100 million of the fine was forgiven and the remaining amount was split between the North American Wetlands Conservation Fund (which received $12 million) and the U.S. Treasury (which received $13 million). Exxon and a subsidiary, Exxon Shipping Co., also were required to pay an additional $1 billion to restore the spill area.

Although the Valdez disaster was a costly public relations nightmarea nightmare made worse by the companys slow response to the disaster and by CEO Lawrence G. Rawls failure to visit the site in personExxons financial performance actually improved in the opening years of the last decade in the 20th century. The company enjoyed record profits in 1991, netting $5.6 billion and earning a special place in the Fortune 500. Of the annual lists top ten companies, Exxon was the only one to post a profit increase over 1990. Business Weeks ranking of companies according to market value also found Exxon at the top of the list.

The companys performance was especially dramatic when compared with the rest of the fuel industry: as a group the 44 fuel companies covered by Business Weeks survey lost $35 billion in value, or 11 percent, in 1991. That year, Exxon also scrambled to the top of the profits heap, according to Forbes magazine. With a profit increase of 12 percent over 1990, Exxons $5.6 billion in net income enabled the company to unseat IBM as the United States most profitable company. At 16.5 percent, Exxons return on equity was also higher than any other oil company. The company also significantly boosted the value of its stock through its long-term and massive stock buyback program, through which it spent about $15.5 billion to repurchase 518 million sharesor 30 percent of its outstanding sharesbetween 1983 and 1991.

Like many of its competitors, Exxon was forced to trim expenses to maintain such outstanding profitability. One of the favorite methods was to cut jobs. Citing the globally depressed economy and the need to streamline operations, Exxon eliminated 5,000 employees from its payrolls between 1990 and 1992. With oil prices in a decade-long slide, Exxon also cut spending on exploration from $1.7 billion in 1985 to $900 million in 1992. The companys exploration budget constituted less than one percent of revenues and played a large part in Exxons good financial performance. Meantime, Exxon in 1990 abandoned its fancy headquarters at Rockefeller Center in New York City to reestablish its base in the heart of oil territory, in the Dallas suburb of Irving, Texas. In 1991 the company established a new Houston-based division, Exxon Exploration Company, to handle the companys exploration operations everywhere in the world except for Canada.

At the end of 1993 Lee R. Raymond took over as CEO from the retiring Rawl. Raymond continued Exxons focus on cost-cutting, with the workforce falling to 79,000 employees by 1996, the lowest level since the breakup of Standard Oil in 1911. Other savings were wrung out by reengineering production, transportation, and marketing processes. Over a five-year period ending in 1996, Exxon had managed to reduce its operating costs by $1.3 billion annually. The result was increasing levels of profits. In 1996 the company reported net income of $7.51 billion, more than any other company on the Fortune 500. The following year it made $8.46 billion on revenues of $120.28 billion, a seven percent profit margin. The huge profits enabled Exxon in the middle to late 1990s to take some gambles, and it risked tens of billion of dollars on massive new oil and gas fields in Russia, Indonesia, and Africa. In addition, Exxon and Royal Dutch/Shell joined forces in a worldwide petroleum additives joint venture in 1996.

Exxon was unablesome said unwillingto shake itself free of its Exxon Valdez legacy. Having already spent some $1.1 billion to settle state and federal criminal charges related to the spill, Exxon faced a civil trial in which the plaintiffs sought compensatory and punitive damages amounting to $16.5 billion. The 14,000 plaintiffs in the civil suit included fishermen, Alaskan natives, and others claiming harm from the spill. In June 1994 a federal jury found that the huge oil spill had been caused by recklessness on the part of Exxon. Two months later the same jury ruled that the company should pay $286.8 million in compensatory damages; then in August the panel ordered Exxon to pay $5 billion in punitive damages. Although Wall Street reacted positively to what could have been much larger damage amounts and Exxons huge profits placed it in a position to reach a final settlement and perhaps put the Exxon Valdez nightmare in its past, the company chose to continue to take a hard line. It vowed to exhaust all its legal avenues to having the verdict overturnedincluding seeking a mistrial and a new trial and filing appeals. In June 1997, in fact, Exxon formally appealed the $5 billion verdict. Exxon seemed to make another PR gaffe in the late 1990s when it attempted to reverse a federal ban on the return to Alaskan waters of the Exxon Valdez, which had by then been renamed the Sea-River Mediterranean. Environmentalists continued to berate the company for its refusal to operate double-hulled tankers, a ship design that may have prevented the oil spill in the first place. In addition, in an unrelated but equally embarrassing development, Exxon in 1997 reached a settlement with the Federal Trade Commission in which it agreed to run advertisements that refuted earlier ads claiming that its high-octane gasoline reduced automobile maintenance costs.

Nearing the Turn of the Century: Exxon Mobil

In December 1998 Exxon agreed to buy Mobil for about $75 billion in what promised to be one of the largest takeovers ever. The megamerger was one of a spate of petroleum industry deals brought about by an oil glut that forced down the price of a barrel of crude by late 1998 to about $11the cheapest price in history with inflation factored in. Just one year earlier, the price had been about $23. The oil glut was caused by a number of factors, principally the Asian economic crisis and the sharp decline in oil consumption engendered by it, and the virtual collapse of OPEC, which was unable to curb production by its own members. In such an environment, pressure to cut costs was again exerted, and Exxon and Mobil cited projected savings of $2.8 billion per year as a prime factor behind the merger.

Based on 1998 results, the proposed Exxon Mobil Corporation would have combined revenues of $168.8 billion, making it the largest oil company in the world, and $8.1 billion in profits. Raymond would serve as chairman, CEO, and president of the Irving, Texas-based goliath, with the head of Mobil, Lucio A. Noto, acting as vice-chairman. Shareholders of both Exxon and Mobil approved the merger in May 1999. In September of that year the European Commission granted antitrust approval to the deal with the only major stipulation being that Mobil divest its share of a joint venture with BP Amoco p.l.c. in European refining and marketing. Approval from the Federal Trade Commission proved more difficult to come by, as the agency was concerned about major overlap between the two companies operations in the Northeast and Mid-Atlantic region. The FTC was likely to force the companies to sell more than 1,000 gas stations in those regions as well as accede to other changes to gain U.S. antitrust approval.

Principal Subsidiaries

Ancon Insurance Company, Inc.; Esso Australia Resources Ltd.; Esso Eastern Inc.; Esso Hong Kong Limited; Esso Malaysia Berhad (65%); Esso Production Malaysia Inc.; Esso Sekiyu Kabushiki Kaisha (Japan); Esso Singapore Private Limited; Esso (Thailand) Public Company Limited (87.5%); Exxon Energy Limited (Hong Kong); Exxon Yemen Inc.; General Sekiyu K.K. (Japan; 50.1%); Esso Exploration and Production Chad Inc.; Esso Italiana S.p.A. (Italy); Esso Standard (Inter-America) Inc.; Esso Standard Oil S.A. Limited (Bahamas); Exxon Asset Management Company (75.5%); Exxon Capital Holdings Corporation; Exxon Chemical Asset Management Partnership; Exxon Chemical Eastern Inc.; Exxon Chemical HDPE Inc.; Exxon Chemical Interamerica Inc.; Exxon Credit Corporation; Exxon Holding Latin America Limited (Bahamas); Exxon International Holdings, Inc.; Esso Aktiengesellschaft (Germany); Esso Austria Aktiengesellschaft; Esso Exploration and Production Norway AS; Esso Holding Company Holland Inc.; Exxon Chemical Antwerp Ethylene N.V. (Belgium); Esso Nederland B.V. (Netherlands); Exxon Chemical Holland Inc.; Exxon Funding B.V. (Netherlands); Esso Holding Company U.K. Inc.; Esso UK pic; Esso Exploration and Production UK Limited; Esso Petroleum Company, Limited (U.K.); Exxon Chemical Limited (U.K.); Exxon Chemical Olefins Inc.; Esso Norge AS (Norway); Esso Sociedad Anonima Petrolera Argentina; Esso Societe Anonyme Francaise (France; 81.54%); Esso (Switzerland); Exxon Minerals International Inc.; Compania Minera Disputada de Las Condes Limitada (Chile); Exxon Overseas Corporation; Exxon Chemical Arabia Inc.; Exxon Equity Holding Company; Exxon Overseas Investment Corporation; Exxon Financial Services Company Limited (Bahamas); Exxon Ventures Inc.; Exxon Azerbaijan Limited (Bahamas); Mediterranean Standard Oil Co.; Esso Trading Company of Abu Dhabi; Exxon Pipeline Holdings, Inc.; Exxon Pipeline Company; Exxon Rio Holding Inc.; Esso Brasileira de Petroleo Limitada (Brazil); Exxon Sao Paulo Holding Inc.; Exxon Worldwide Trading Company; Imperial Oil Limited (Canada; 69.6%); International Colombia Resources Corporation; SeaRiver Maritime Financial Holdings, Inc.; SeaRiver Maritime, Inc.; Societe Francaise EXXON CHEMICAL (France; 99.35%); Exxon Chemical France; Exxon Chemical Poly meres SNC (France).

Principal Divisions

Exxon Company, U.S.A.; Exxon Company, International; Exxon Coal and Minerals Company; Exxon Chemical Company; Exxon Exploration Company.

Principal Competitors

7-Eleven, Inc.; Amerada Hess Corporation; Ashland Inc.; Atlantic Richfield Co.; BP Amoco p.l.c.; Caltex Corporation; Chevron Corporation; Conoco Inc.; Elf Aquitaine; ENI S.p.A.; Mobil Corporation; Norsk Hydro ASA; Occidental Petroleum Corporation; Pennzoil Company; Petroleo Brasileiro S.A.; Petroleos de Venezuela S.A.; Petróleos Mexicanos; Phillips Petroleum Company; RaceTrac Petroleum, Inc.; Repsol-YPF, S.A.; Royal Dutch/Shell Group; Saudi Arabian Oil Company; Sunoco, Inc.; Texaco Inc.; Tosco Corporation; TOTAL FINA S.A.; Ultramar Diamond Shamrock Corporation; Unocal Corporation; USX-Marathon Group; YPF Sociedad Anonima.

Further Reading

Akin, Edward N., Flagler: Rockefeller Partner and Florida Baron, Kent, Ohio: Kent State University Press, 1988.

Beatty, Sally, Exxon-Mobil Is Marketing Dilemma, Wall Street Journal, December 3, 1998, p. B11.

Byrne, Harlan S., Well-Oiled: Exxon Has Shaped Itself into a Nimbleand Even More FormidableGiant, Barrons, May 20, 1996, pp. 1718.

Caragata, Warren, Union of Giants: Exxon and Mobil Create a Colossus, Macleans, December 14, 1998, pp. 4446.

Chernow, Ron, Titan: The Life of John D. Rockefeller Sr. , New York: Random House, 1998.

Cooper, Christopher, Fears Linger on 10th Anniversary of Exxon Valdez Spill, Wall Street Journal, March 23, 1999, p. B4.

Cooper, Christopher, and Steve Liesman, Exxon Agrees to Buy Mobil for $75.3 Billion, Wall Street Journal, December 2, 1998, p. A3.

Cropper, Carol M., et al., The Forbes 500s Annual Directory, Forbes, April 27, 1992.

Exxon-Mobil, Total-Petrofina Mergers Slated, Oil & Gas Journal, December 7, 1998, pp. 3738, 4041.

Finch, Peter, The Business Week 1000, Business Week, special issue, 1992.

Gibb, George Sweet, and Evelyn H. Knowlton, History of Standard Oil Company (New Jersey): The Resurgent Years, 19111927, New York: Harper & Brothers, 1956.

Grabarek, Brooke H., Exxon: Forget the Valdez, Financial World, September 27, 1994, p. 14.

Hedges, Stephen J., The Cost of Cleaning Up, U.S. News & World Report, August 30/September 6, 1993, pp. 2628, 30.

Hidy, Ralph W., and Murrel E. Hidy, History of Standard Oil Company (New Jersey): Pioneering in Big Business, 18821911, New York: Harper & Brothers, 1955.

Inside the Empire of Exxon the Unloved, Economist, March 5, 1994, p. 69.

Larson, Henrietta M., Evelyn H. Knowlton, and Charles S. Popple, History of Standard Oil Company (New Jersey): New Horizons, 19271950, New York: Harper & Row, 1971.

Liesman, Steve, Exxon Suspends Exploration in Russia, Wall Street Journal, August 19, 1999, p. A2.

Liesman, Steve, and John R. Wilke, Exxon and Mobil Get Antitrust Approval in Europe for Their Planned Merger, Wall Street Journal, September 30, 1999, p. A4.

Longman, Phillip J., and Jack Egan, Why Big Oil Is Getting a Lot Bigger, U.S. News & World Report, December 14, 1998, pp. 2628.

Mack, Toni, The Tiger Is on the Prowl, Forbes, April 21, 1997, p. 42.

McCoy, Charles, Exxons Secret Valdez Deals Anger Judge, Wall Street Journal, June 13, 1996, p. A3.

Nevins, Allan, Study in Power: John D. RockefellerIndustrialist and Philanthropist, 2 vols., New York: Charles Scribners Sons, 1953.

Norman, James R., A Tale of Two Strategies, Forbes, August 17, 1992, p. 48.

Oil Majors Make Tough Decisions on Jobs, Assets, Chemical Marketing Reporter, July 13, 1992.

Raeburn, Paul, Its Time to Put the Valdez Behind Us, Business Week, March 29, 1999, p. 90.

Richards, Bill, Exxon Is Battling a Ban on an Infamous Tanker, Wall Street Journal, July 29, 1998, p. B1.

Rogers, Alison, The Fortune 500: It Was the Worst of Years, Fortune, April 20, 1992.

Sampson, Anthony, The Seven Sisters: The Great Oil Companies and the World They Made, New York: Viking, 1975; New York: Bantam, 1991.

Solomon, Caleb, Exxon Is Told to Pay $5 Billion for Valdez Spill, Wall Street Journal, September 19, 1994, p. A3.

, Exxon Verdict Comes Amid Problems of Old Oil Fields, Few New Prospects, Wall Street Journal, September 19, 1994, p. A3.

, Jury Decides Exxon Must Pay $286.8 Million, Wall Street Journal, August 12, 1994, p. A3.

, Jury Finds Exxon Reckless in Oil Spill, Wall Street Journal, June 14, 1994, p. A3.

Sullivan, Allanna, Exxon and Mobil Are Already Devising Their New Brand, Wall Street Journal, April 6, 1999, p. B4.

Tarbell, Ida M., The History of the Standard Oil Company, New York: Harper & Row, 1966.

Teitelbaum, Richard, Exxon: Pumping Up Profits, Fortune, April 28, 1997, pp. 13436, 14042.

Wall, Bennett H., Growth in a Changing Environment: A History of Standard Oil Company (New Jersey), New York: McGraw-Hill, 1988.

Wilke, John R., and Steve Liesman, Exxon, Mobil May Be Forced into Divestitures, Wall Street Journal, January 20, 1999, p. A3.

Jonathan Martin and April Dougal

updated by David E. Salamie

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Exxon Corporation

Exxon Corporation

225 East John Carpenter Freeway
Irving, Texas 75062
U.S.A.
(214) 444-1000
Fax: (214) 444-1348

Public Company
Incorporated: 1882 as Standard Oil Company of New Jersey
Employees: 101,000
Sales: $116.49 billion
Stock Exchanges: New York
SICs: 2911 Petroleum Refining; 1311 Crude Petroleum & Natural Gas; 1094 Uranium, Radium & Vanadium Ores

As the earliest example of the trend toward gigantic size and power, Exxon Corporation and its Standard Oil forebears have earned vast amounts of money in the petroleum business. The brainchild of John D. Rockefeller, Standard Oil enjoyed the blessings and handicaps of overwhelming poweron the one hand, an early control of the oil business so complete that even its creators could not deny its monopolistic status; on the other, an unending series of journalistic and legal attacks upon its business ethics, profits, and very existence. The uproar over the Exxon Valdez oil tanker spill in 1989 put the corporation once more in the position of embattled giant, as Americas largest oil company struggled to justify its actions before the public.

The individual most responsible for the creation of Standard Oil, John D. Rockefeller, was born in 1839 to a family of modest means living in the Finger Lakes region of New York State. His father, William A. Rockefeller, was a sporadically successful merchant and part-time hawker of medicinal remedies. William Rockefeller moved his family to Cleveland, Ohio, when John D. Rockefeller was in his early teens, and it was there that the young man finished his schooling and began work as a bookkeeper in 1855. From a very young age John D. Rockefeller developed an interest in business. Before getting his first job with the merchant firm of Hewitt & Tuttle, Rockefeller had already demonstrated an innate affinity for business, later honed by a few months at business school.

Rockefeller worked at Hewitt & Tuttle for four years, studying large-scale trading in the United States. In 1859 the 19-year-old Rockefeller set himself up in a similar ventureClark & Rockefeller, merchants handling the purchase and resale of grain, meat, farm implements, salt, and other basic commodities. Although still very young, Rockefeller had already impressed Maurice Clark and his other business associates as an unusually capable, cautious, and meticulous businessman. He was a reserved, undemonstrative individual, never allowing emotion to cloud his thinking. Bankers found that they could trust John D. Rockefeller, and his associates in the merchant business began looking to him for judgment and leadership.

Clark & Rockefellers already healthy business was given a boost by the Civil War economy, and by 1863 the firms two partners had put away a substantial amount of capital and were looking for new ventures. The most obvious and exciting candidate was oil. A few years before, the nations first oil well had been drilled at Titusville, in western Pennsylvania, and by 1863 Cleveland had become the refining and shipping center for a rail of newly opened oil fields in the so-called Oil Region. Activity in the oil fields, however, was extremely chaotic, a scene of unpredictable wildcatting, and John D. Rockefeller was a man who prized above all else the maintenance of order. He and Clark therefore decided to avoid drilling and instead go into the refining of oil, and in 1863 they formed Andrews, Clark & Company with an oil specialist named Samuel Andrews. Rockefeller, never given to publicity, was the Company.

With excellent railroad connections as well as the Great Lakes to draw upon for transportation, the city of Cleveland and the firm of Andrews, Clark & Company both did well. The discovery of oil wrought a revolution in U.S. methods of illumination. Kerosene soon replaced animal fat as the source of light across the country, and by 1865 Rockefeller was fully convinced that oil refining would be his lifes work. Unhappy with his Clark-family partners, Rockefeller bought them out for $72,000 in 1865 and created the new firm of Rockefeller & Andrews, already Clevelands largest oil refiners. It was a typically bold move by Rockefeller, who although innately conservative and methodical was never afraid to make difficult decisions. He thus found himself, at the age of 25, co-owner of one of the worlds leading oil concerns.

Talent, capital, and good timing combined to bless Rockefeller & Andrews. Cleveland handled the lions share of Pennsylvania crude and, as the demand for oil continued to explode, Rockefeller & Andrews soon dominated the Cleveland scene. By 1867, when a young man of exceptional talent named Henry Flagler became a third partner, the firm was already operating the worlds number-one oil refinery; there was as yet little oil produced outside the United States. The year before, John Rockefellers brother, William Rockefeller, had opened a New York office to encourage the rapidly growing export of kerosene and oil by-products, and it was not long before foreign sales became an important part of Rockefeller strength. In 1869 the young firm allocated $60,000 for plant improvementsan enormous sum of money for that day.

The early years of the oil business were marked by tremendous swings in the production and price of both crude and refined oil. With a flood of newcomers entering the field every day, size and efficiency had already become critically important for survival. As the biggest refiner, Rockefeller was in a better position than anyone to weather the price storms. Rockefeller and Henry Flagler, with whom he enjoyed a long and harmonious business relationship, decided to incorporate their firm to raise the capital needed to enlarge the company further. On January 10, 1870, the Standard Oil Company was formed, with the two Rockefellers, Flagler, and Andrews owning the great majority of stock, valued at $1 million. The new company was not only capable of refining approximately ten percent of the entire countrys oil, it also owned a barrel-making plant, dock facilities, a fleet of railroad tank cars, New York warehouses, and forest land for the cutting of lumber used to produce barrel staves. At a time when the term was yet unknown, Standard Oil had become a vertically integrated company.

One of the signal advantages of Standard Oils size was the leverage it gave the company in railroad negotiations. Most of the oil refined at Standard made its way to New York and the eastern seaboard. Because of Standards great volume60 carloads a day by 1869it was able to win lucrative rebates from the warring railroads. In 1871 the various railroads concocted a plan whereby the nations oil refiners and railroads would agree to set and maintain prohibitively high freight rates while awarding large rebates and other special benefits to those refiners who were part of the scheme. The railroads would avoid disastrous price wars while the large refiners forced out of business those smaller companies who refused to join the cartel, known as the South Improvement Company.

The plan was immediately denounced by Oil Region producers and many independent refiners, near-riots breaking out in the oil fields. After a bitter war of words and a flood of press coverage, the oil refiners and the railroads abandoned their plan and announced the adoption of public, inflexible transport rates. In the meantime, however, Rockefeller and Flagler were already far advanced on a plan to combat the problems of excess capacity and dropping prices in the oil industry. To Rockefeller the remedy was obvious, though unprecedented: the eventual unification of all oil refiners in the United States into a single company. Rockefeller approached the Cleveland refiners and a number of important firms in New York and elsewhere with an offer of Standard Oil stock or cash in exchange for their often-ailing plants. By the end of 1872, all 34 refiners in the area had agreed to sellsome freely and for profit, and some, competitors alleged, under coercion. Due to Standards great size and the industrys over-built capacity, Rockefeller and Flagler were in a position to make their competitors irresistible offers. All indications are that Standard regularly paid top dollar for viable companies.

By 1873 Standard Oil was refining more oil10,000 barrels per daythan any other region of the country, employing 1,600 workers, and netting around $500,000 per year. With great confidence, Rockefeller proceeded to duplicate his Cleveland success throughout the rest of the country. By the end of 1874 he had absorbed the next three largest refiners in the nation, located in New York, Philadelphia, and Pittsburgh. Rockefeller also began moving into the field of distribution with the purchase of several of the new pipelines then being laid across the country. With each new acquisition it became more difficult for Rockefellers next target to refuse his cash. Standard interests rapidly grew so large that the threat of monopoly was clear. The years 1875 to 1879 saw Rockefeller push through his plan to its logical conclusion. In 1878, a mere six years after beginning its annexation campaign, Standard Oil controlled $33 million of the countrys $35 million annual refining capacity, as well as a significant proportion of the nations pipelines and oil tankers. At the age of 39, Rockefeller was one of the five wealthiest men in the country.

Standards involvement in the aborted South Improvement Company, however, had earned it lasting criticism. The companys subsequent absorption of the refining industry did not mend its image among the few remaining independents and the mass of oil producers who found in Standard a natural target for their wrath when the price of crude dropped precipitously in the late 1870s. Although the causes of producers tailing fortunes are unclear, it is evident that given Standards extraordinary position in the oil industry it was fated to become the target of dissatisfactions. In 1879 nine Standard Oil officials were indicted by a Pennsylvania grand jury for violating state anti-monopoly laws. Though the case was not pursued, it indicated the depth of feeling against Standard Oil, and was only the first in a long line of legal battles waged to curb the companys power.

In 1882 Rockefeller and his associates reorganized their dominions, creating the first trust in U.S. business history. This move overcame state laws restricting the activity of a corporation to its home state. Henceforth the Standard Oil Trust, domiciled in New York City, held in trust all assets of the various Standard Oil companies. Of the Standard Oil Trusts nine trustees, John D. Rockefeller held the largest number of shares. Together the trusts 30 companies controlled 80 percent of the refineries and 90 percent of the oil pipelines in the United States, constituting the leading industrial organization in the world. The trusts first years combined net earnings were $11.2 million, of which some $7 million was immediately plowed back into the companies for expansion. Almost lost in the flurry of big numbers was the 1882 creation of Standard Oil Company of New Jersey, one of the many regional corporations created to handle the trusts activities in surrounding states. Barely worth mentioning at the time, Standard Oil Company of New Jersey, or Jersey as it came to be called, would soon become the dominant Standard company and, much later, rename itself Exxon.

The 1880s were a period of exponential growth for Standard. The trust not only maintained its lock on refining and distribution but also seriously entered the field of production. By 1891 the trust had secured a quarter of the countrys total output, most of it in the new regions of Indiana and Illinois. Standards overseas business was also expanding rapidly, and in 1888 it founded its first foreign affiliate, Anglo-American Oil Company Limited of London. The overseas trade in kerosene was especially important to Jersey, which derived as much as three-fourths of its sales from the export trade. Jerseys Bayonne, New Jersey, refinery was soon the third largest in the Standard family, putting out 10,000 to 12,000 barrels per day by 1886. In addition to producing and refining capacity, Standard also was extending gradually its distribution system from pipelines and bulk wholesalers toward the retailer and eventual end user of kerosene, the private consumer.

The 1890 Sherman Antitrust Act, passed largely in response to Standards oil monopoly, laid the groundwork for a second major legal assault against the company, an 1892 Ohio Supreme Court order forbidding the trust to operate Standard of Ohio. As a result, the trust was promptly dissolved, but taking advantage of newly liberalized state law in New Jersey, the Standard directors made Jersey the main vessel of their holdings. Standard Oil Company of New Jersey became Standard Oil Company (New Jersey) at this time. The new Standard Oil structure now consisted of only 20 much-enlarged companies, but effective control of the interests remained in the same few hands as before. Jersey added a number of important manufacturing plants to its already impressive refining capacity and was the leading Standard unit. It was not until 1899, however, that Jersey became the sole holding company for all of the Standard interests. At that time the entire organizations assets were valued at about $300 million and it employed 35,000 people. John D. Rockefeller continued as nominal president, but the most powerful active member of Jerseys board was probably John D. Archbold.

Rockefeller had retired from daily participation in Standard Oil in 1896 at the age of 56. Once Standards consolidation was complete Rockefeller spent his time reversing the process of accumulation, seeing to it that his staggering fortuneestimated at $900 million in 1913was redistributed as efficiently as it had been made.

The general public was only dimly aware of Rockefellers philanthropy, however. More obvious were the frankly monopolistic policies of the company he had built. With its immense size and complete vertical integration, Standard Oil piled up huge profits ($830 million in the 12 years from 1899 to 1911). In relative terms, however, its domination of the U.S. industry was steadily decreasing. By 1911 its percentage of total refining was down to 66 percent from the 90 percent of a generation before, but in absolute terms Standard Oil had grown to monstrous proportions. Therefore it was not surprising that in 1905 a U.S. congressman from Kansas launched an investigation of Standard Oils role in the falling price of crude in his state. The commissioner of the Bureau of Corporations, James R. Garfield, decided to widen the investigation into a study of the national oil industryin effect Standard Oil.

Garfields critical report prompted a barrage of state lawsuits against Standard Oil (New Jersey) and, in November of 1906, a federal suit was filed charging the company, John D. Rockefeller, and others with running a monopoly. In 1911, after years of litigation, the U.S. Supreme Court upheld a lower courts conviction of Standard Oil for monopoly and restraint of trade under the Sherman Antitrust Act. The Court ordered the separation from Standard Oil Company (New Jersey) of 33 of the major Standard Oil subsidiaries, including those which subsequently kept the Standard name.

Standard Oil Company (New Jersey) retained an equal number of smaller companies spread around the United States and overseas, representing $285 million of the former Jerseys net value of $600 million. Notable among the remaining holdings were a group of large refineries, four medium-sized producing companies, and extensive foreign marketing affiliates. Absent were the pipelines needed to move oil from well to refinery, much of the former tanker fleet, and access to a number of important foreign markets, including Great Britain and the Far East.

John D. Archbold, a long-time intimate of the elder Rockefeller and whose Standard service had begun in 1879, remained president of Standard Oil (New Jersey). Archbolds first problem was to secure sufficient supplies of crude oil for Jerseys extensive refining and marketing capacity. Jerseys former subsidiaries were more than happy to continue selling crude to Jersey; the dissolution decree had little immediate effect on the coordinated workings of the former Standard Oil group, but Jersey set about finding its own sources of crude. The companys first halting steps toward foreign production met with little success; ventures in Romania, Peru, Mexico, and Canada suffered political or geological setbacks and were of no help. In 1919, however, Jersey made a domestic purchase that would prove to be of great long-term value. For $17 million Jersey acquired 50 percent of the Humble Oil & Refining Company of Houston, Texas, a young but rapidly growing network of Texas producers which immediately assumed first place among Jerseys domestic suppliers. Although only the fifth-leading producer in Texas at the time of its purchase, Humble would soon become the dominant drilling company in the United States and was eventually wholly purchased by Jersey. Humble, now known as Exxon Company USA, remained one of the leading U.S. producers of crude oil and natural gas, with drilling rigs in 19 states including Alaskas Prudhoe Bay, in 1991.

Despite initial disappointments in overseas production, Jersey remained a company oriented to foreign markets and supply sources. On the supply side, Jersey secured a number of valuable Latin American producing companies in the 1920s, especially several Venezuelan interests consolidated in 1943 into Creole Petroleum Corporation. By that time Creole was the largest and most profitable crude producer in the Jersey group. In 1946 Creole produced an average of 451,000 barrels per day, far more than the 309,000 by Humble and almost equal to all other Jersey drilling companies combined. Four years later, Creole generated $157 million of the Jersey groups total net income of $408 million and did so on sales of only $517 million. Also in 1950, Jerseys British affiliates showed sales of $283 million but a bottom line of about $2 million. In contrast to the industrys early days, oil profits now lay in the production of crude, and the bulk of Jerseys crude came from Latin America. The companys growing Middle Eastern affiliates did not become significant resources until the early 1950s. Jerseys Far East holdings, from 1933 to 1961 owned jointly with Socony-Vacuum Oil Companyformerly Standard Oil Company of New York and now Mobil Corporationnever provided sizable amounts of crude oil.

In marketing, Jerseys income showed a similar preponderance of foreign sales. Jerseys domestic market had been limited by the dissolution decree to a handful of mid-Atlantic states, whereas the companys overseas affiliates were well entrenched and highly profitable. Jerseys Canadian affiliate, Imperial Oil Ltd., had a monopolistic hold on that countrys market, while in Latin America and the Caribbean the West India Oil Company performed superbly during the second and third decades of the 20th century. Jersey had also incorporated eight major marketing companies in Europe by 1927, and these too sold a significant amount of refined productsmost of them under the Esso brand name introduced the previous year. Esso became Jerseys best known and most widely used retail name both at home and abroad.

Jerseys mix of refined products changed considerably over the years. As the use of kerosene for illumination gave way to electricity and the automobile continued to grow in popularity, Jerseys sales reflected a shift away from kerosene and toward gasoline. Even as late as 1950, however, gasoline had not yet become the leading seller among Jersey products. That honor went to the group of residual fuel oils used as a substitute for coal to power ships and industrial plants. Distillates used for home heating and diesel engines were also strong performers. Even in 1991, when Exxon distributed its gasoline through a network of 12,000 U.S. and 26,000 international service stations, the earnings of all marketing and refining activities were barely one-third of those derived from the production of crude. In 1950 that proportion was about the same, indicating that regardless of the end products into which oil is refined, it is the production of crude that yields the big profits.

Indeed, by mid-century the international oil business had largely become a question of controlling crude oil at its source. With Standard Oil Company and its multinational competitors having built fully vertically integrated organizations, the only leverage remained control of the oil as it came out of the ground. Though it was not yet widely known in the United States, production of crude was shifting rapidly from the United States and Latin America to the Middle East. As early as 1908 oil had been verified in present-day Iran, but it was not until 1928 that Jersey and Socony-Vacuum, prodded by chronic shortages of crude, joined three European companies in forming Iraq Petroleum Company. Also in 1928, Jersey, Shell, and Anglo-Persian secretly agreed to limit each companys share of world production to their present relative amounts, attempting, by means of this As Is agreement, to limit competition and keep prices at comfortably high levels. As with Rockefellers similar tactics 50 years before, it was not clear in 1928 that the agreement was illegal, because its participants were located in a number of different countries each with its own set of trade laws. Already in 1928, Jersey and the other oil giants were stretching the very concept of nationality beyond any simple application.

Following World War II, Standard Oil was again in need of crude to supply the resurgent economies of Europe. Already the worlds largest producer, Standard Oil became interested in the vast oil concessions in Saudi Arabia recently won by Texaco and Socal. The latter companies, in need of both capital for expansion and world markets for exploitation, sold 30 percent of the newly formed Arabian American Oil Company (Aramco) to Standard Oil and ten percent to Socony-Vacuum in 1946. A few years later, after Irans nationalization of Anglo-Persians holdings was squelched by a combination of CIA assistance and an effective worldwide boycott of Iranian oil by competitors, Jersey was able to take seven percent of the consortium formed to drill in that oil-rich country. With a number of significant tax advantages attached to foreign crude production, Jersey drew an increasing percentage of its oil from its holdings in all three of the major middle-eastern fieldsIraq, Iran, and Saudi Arabiaand helped propel the 20-year postwar economic boom in the West. With oil prices exceptionally low, the United States and Europe busily shifted their economies to complete dependence on the automobile and on oil as the primary industrial fuel.

Despite the growing strength of newcomers to the international market such as Getty and Conoco, the big companies continued to exercise decisive control over the world oil supply and thus over the destinies of the Middle East producing countries. Growing nationalism and an increased awareness of the extraordinary power of the large oil companies led to the 1960 formation of the Organization of Petroleum Exporting Countries (OPEC). Later, a series of increasingly bitter confrontations erupted between countries and companies concerned about control over the oil upon which the world had come to depend. The growing power of OPEC prompted Jersey to seek alternative sources of crude. Exploration resulted in discoveries in Alaskas Prudhoe Bay and the North Sea in the late 1960s. The Middle Eastern sources remained paramount, however, and when OPEC cut off oil supplies to the United States in 1973in response to U.S. sponsorship of Israelthe resulting 400 percent price increase induced a prolonged recession and permanently changed the industrial worlds attitude to oil. Control of oil was largely taken out of the hands of the oil companies, who began exploring new sources of energy and business opportunities in other fields.

For Standard Oil Company (New Jersey), which had changed its name to Exxon in 1972, the oil embargo had several major effects. Most obviously it increased corporate sales; the expensive oil allowed Exxon to double its 1972 revenue of $20 billion in only two years and then pushed that figure over the $100 billion mark by 1980. After a year of windfall profits made possible by the sale of inventoried oil bought at much lower prices, Exxon was able to make use of its extensive North Sea and Alaskan holdings to keep profits at a steady level. The company had suffered a strong blow to its confidence, however, and was soon investigating a number of diversification measures which eventually included office equipment, a purchase of Reliance Electric Company (the fifth-largest holdings of coal in the United States), and an early-1980s venture into shale oil. With the partial exception of coal, all of these were expensive failures, costing Exxon approximately $6 billion to $7 billion.

By the early 1980s the world oil picture had eased considerably and Exxon felt less urgency about diversification. With the price of oil peaking around 1981 and then tumbling for most of the decade, Exxons sales dropped sharply. The companys confidence rose, however, as OPECs grip on the marketplace proved to be weaker than advertised. Having abandoned its forays into other areas, Exxon refocused on the oil and gas business, cutting its assets and work force substantially to accommodate the drop in revenue without losing profitability.

Exxon also bought back a sizable number of its own shares to bolster per-share earnings, which reached excellent levels and won the approval of Wall Street. The stock buy-back was partially in response to Exxons embarrassing failure to invest its excess billions profitablythe company was somewhat at a loss as to what to do with its money. It could not expand further into the oil business without running into antitrust difficulties at home, and investments outside of oil would have to be mammoth to warrant the time and energy required.

Exxon is no longer the worlds largest company, nor even the largest oil groupRoyal Dutch/Shell took over that position in the 1990but with the help of the March 24, 1989 Exxon Valdez disaster it has heightened its notoriety. The crash of the Exxon Valdez in Prince William Sound off the port of Valdez, Alaska, released about 260,000 barrels of crude oil. The disaster cost Exxon $1.7 billion in 1989 alone, and the company and its subsidiaries were faced with more than 170 civil and criminal lawsuits brought by state and federal governments and individuals.

By late 1991 Exxon had paid $2.2 billion to clean up Prince William Sound and had reached a tentative settlement of civil and criminal charges that levied a $125 million criminal fine against the oil conglomerate. One hundred million dollars of the fine was forgiven and the remaining amount was split between the North American Wetlands Conservation Fund (which received $12 million) and the United States Treasury (which received $13 million). Exxon and a subsidiary, Exxon Shipping Co., were also required to pay an additional $1 billion to restore the spill area.

Since the accident, Exxon has worked to bring environmental issues to the front of its marketing schemes through cleaner burning gasolines, oil recycling programs, and other product improvements.

Although the Valdez disaster was a costly public relations nightmare, Exxons financial performance actually improved in the opening years of the last decade in the twentieth century. The company enjoyed record profits in 1991, netting $5.6 billion and earning a special place in the Fortune 500. Of the annual lists top ten companies, Exxon was the only one to post a profit increase over 1990. Business Weeks ranking of companies according to market value also found Exxon at the top of the list, with a value of $69 million.

The companys performance was especially dramatic when compared to the rest of the fuel industry: as a group the 44 fuel companies covered by Business Weeks survey lost $35 billion in value, or 11 percent, in 1991. That year, Exxon also scrambled to the top of the profits heap, according to Forbes magazine. With a profit increase of 12 percent over 1990, Exxons $5.6 billion in net income enabled the company to unseat IBM as the United States most profitable company. At 16.5 percent, Exxons return on equity was also higher than any other oil company.

Like many of its competitors, Exxon has been forced to trim expenses in order to maintain such outstanding profitability. One of the favorite methods in recent years has been to cut jobs. Citing the globally depressed economy and the need to streamline operations, Exxon eliminated 5,000 employees from its payrolls between 1990 and 1992.

With oil prices in a decade-long slide, Exxon also cut spending on exploration from $1.7 billion in 1985 to $900 million in 1992. The companys exploration budget constituted less than one percent of revenues, and played a large part in Exxons good financial performance. But some fuel industry observers warn that such drastic cuts overlook the competitions search for new oil reserves. Royal Dutch/Shell spent almost twice as much as Exxon on exploration over the same period. In the event of an international crisis that cut off oil supplies, would Exxon be prepared to fill the gap? With ten percent of the United States petroleum reserves, Exxon is confident of its future.

Principal Subsidiaries

Esso Aktiengesellschaft (Germany); Esso Eastern Inc.; Esso Australia Resources Ltd.; Esso Exploration and Production Norway Inc.; Esso Holding Company Holland Inc.; Esso Holding Company U.K. Inc.; Esso Italiana S.P.A. (Italy); Esso Norge a.s. (Norway); Esso Sociedad Anónima Petrolera Argentina; Esso Société Anonyme Francaise (France; 81.548%) Esso Standard Oil S.A. Limited (Bahamas); Exxon Capital Holdings Corporation; Exxon Insurance Holdings, Inc.; Exxon Overseas Corporation; Exxon Rio Holding Inc.; Exxon San Joaquin Production Company; Exxon Yemen Inc.; Imperial Oil Limited (Canada, 69.56%); International Colombia Resources Corporation (100%); Societe Francaise Exxon Chemical (France, 98.64%); Exxon Engergy Ltd.; Esso Production Malaysia Inc.; Esso Sekiyu Kabushiki Kaisha; Esso Singapore Private Ltd.; Exxon Chemical Trading Inc.; Friends-wood Development Co.

Further Reading

Nevins, Allan, Study in Power: John D. Rockefeller Industrialist and Philanthropist, 2 vols., New York, Charles Scribners Sons, 1953; Hidy, Ralph W., and Murrel E. Hidy, History of Standard Oil Company (New Jersey): Pioneering in Big Business, 1882-1911, New York, Harper & Brothers, 1955; Gibb, George Sweet, and Evelyn H. Knowlton, History of Standard Oil Company (New Jersey): The Resurgent Years, 1911-1927, New York, Harper & Brothers, 1956; Larson, Henrietta M., Evelyn H. Knowlton, and Charles S. Popple, History of Standard Oil Company (New Jersey): New Horizons, 1927-1950, New York, Harper & Row, 1971; Sampson, Anthony, The Seven Sisters: The Great Oil Companies and the World They Made, New York, The Viking Press, 1975; Wall, Bennett H., Growth in a Changing Environment: A History of Standard Oil Company (New Jersey), New York, McGraw-Hill, 1988; Rogers, Alison, The Fortune 500: It Was the Worst of Years, Fortune, April 20, 1992; Cropper, Carol M. et al., The Forbes 500s Annual Directory, Forbes, April 27, 1992; Finch, Peter, The Business Week 1000, Business Week, special issue, 1992; Oil Majors Make Tough Decisions on Jobs, Assets, Chemical Marketing Reporter, July 13, 1992; Norman, James R., A Tale of Two Strategies, Forbes, August 17, 1992.

Jonathan Martin

updated by April Dougal

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Exxon Corporation

Exxon Corporation

225 East John Carpenter Freeway
Irving, Texas 75062
U.S.A.
(214) 444-1000
Fax: (214) 444-1348

Public Company
Incorporated:
1882 as Standard Oil Company of New Jersey
Employees: 104,000
Sales: $116.94 billion
Stock Exchange: New York

As the earliest example of that trend toward gigantic size and power, Exxon Corporation and its Standard Oil forebears have earned vast amounts of money. The child of John D. Rockefeller, Standard Oil enjoyed the blessings and handicaps of overwhelming poweron the one hand, an early control of the oil business so complete that even its creators could not deny its monopolistic status; on the other, an unending series of journalistic and legal attacks upon its business ethics, profits, and very existence. The uproar over the Exxon Valdez in 1989 put the corporation once more in the position of embattled giant, as Americas third-largest company struggled to justify its actions before the public.

The individual most responsible for the creation of Standard Oil, John D. Rockefeller, was born in 1839 to a family of modest means living in the Finger Lakes region of New York State. His father, William A. Rockefeller, was a sporadically successful merchant and part-time hawker of medicinal remedies. William Rockefeller moved his family to Cleveland, Ohio, when John D. Rockefeller was in his early teens, and it was there that the young man finished his schooling and began work as a bookkeeper in 1855. From a very young age John D. Rockefeller seems to have developed an interest in business. Before getting his first job with the merchant firm of Hewitt & Tuttle, Rockefeller had already demonstrated an innate affinity for business, later honed by a few months at business school.

Rockefeller worked at Hewitt & Tuttle for four years, studying large-scale trading in the United States. In 1859 the 19-year-old Rockefeller set himself up in a venture similar to Hewitt & Tuittle, Clark & Rockefeller, merchants handling the purchase and resale of grain, meat, farm implements, salt, and other basic commodities. Although still very young, Rockefeller had already impressed Maurice Clark and his other business associates as an unusually capable, cautious, and meticulous businessman. He was a reserved, undemonstrative individual, never allowing emotion to cloud his thinking. Bankers found that they could trust John D. Rockefeller, and his associates in the merchant business began looking to him for judgment and leadership.

Clark & Rockefellers already healthy business was given a boost by the Civil War economy, and by 1863 the firms two partners had put away a substantial amount of capital and were looking for new ventures. The most obvious and exciting candidate was oil. A few years before, the nations first oil well had been drilled at Titusville, in western Pennsylvania, and by 1863 Cleveland had become the refining and shipping center for a raft of newly opened oil fields in the so-called Oil Region. Activity in the oil fields, however, was extremely chaotic, a scene of unpredictable wildcatting, and John D. Rockefeller was a man who prized above all else the maintenance of order. He and Clark therefore decided to avoid drilling and instead go into the refining of oil, and in 1863 they formed Andrews, Clark & Company with an oil specialist named Samuel Andrews. Rockefeller, never given to publicity, was the Company.

With excellent railroad connections as well as the Great Lakes to draw upon for transportation, the city of Cleveland and the firm of Andrews, Clark & Company both did well. The discovery of oil wrought a revolution in U.S.methods of illumination, kerosene soon replacing animal fat as the source of light across the country, and by 1865 Rockefeller was fully convinced that oil refining would be his lifes work. Unhappy with his Clark-family partners, in 1865 Rockefeller bought them out for $72,000 and created the new firm of Rockefeller & Andrews, already Clevelands largest oil refiners. It was a typically bold move by Rockefeller, who although innately conservative and methodical was never afraid to make difficult decisions. He thus found himself, at the age of 25, co-owner of one of the worlds leading oil concerns.

Talent, capital, and good timing combined to bless Rockefeller & Andrews. The demand for oil continued to explode, Cleveland handled the lions share of Pennsylvania crude, and Rockefeller & Andrews soon dominated the Cleveland scene. By 1867, when a young man of exceptional talent named Henry Flagler became a third partner, the firm was already operating the worlds number-one oil refinery; there was as yet little oil produced outside the United States. The year before, John Rockefellers brother, William, had opened a New York office to encourage the rapidly growing export of kerosene and oil by-products, and it was not long before foreign sales became an important part of Rockefeller strength. As an indication of the latter, in 1869 the young firm allocated $60,000 for plant improvements alonean enormous sum of money for that day.

The early years of the oil business were marked by tremendous swings in the production, and hence the price, of both crude and refined oil. With a flood of newcomers entering the field every day, size and efficiency had already become critically important for survival, and as the biggest refiner, Rockefeller was in a better position than anyone to weather the price storms. Rockefeller and Henry Flagler, with whom he enjoyed a long and harmonious business relationship, decided to incorporate their firm as a means to raise the capital needed to enlarge it still further. On January 10, 1870, the Standard Oil Company was formed, with the two Rockefellers, Flagler, and Andrews owning the great majority of stock, valued at $1 million. The new company was not only capable of refining approximately 10% of the entire countrys oil, it also owned a barrel-making plant, dock facilities, a fleet of railroad tank cars, New York warehouses, and forest land for the cutting of lumber used to produce barrel staves. At a time when the term was yet unknown, Standard Oil had become a vertically integrated company.

One of the signal advantages of Standard Oils size was the leverage it gave the company in railroad negotiations. Most of the oil refined at Standard made its way to New York and the eastern seaboard, and because of Standards great volume60 carloads a day by 1869it was able to win lucrative rebates from the warring railroads. In 1871 the various railroads concocted a plan whereby the nations oil refiners and railroads would agree to set and maintain prohibitively high freight rates while awarding large rebates and other special benefits to those refiners who were part of the scheme. The railroads would avoid disastrous price wars while the large refiners forced out of business those smaller companies who refused to join the cartel, known as the South Improvement Company.

The plan was immediately denounced by Oil Region producers and many independent refiners, near-riots breaking out in the oil fields. After a bitter war of words and a flood of press coverage, the oil refiners and the railroads abandoned their plan and announced the adoption of public, inflexible transport rates. In the meantime, however, Rockefeller and Flagler were already far advanced on a plan of their own, its aim a solution to the problems of excess capacity and dropping prices in the oil industry. To Rockefeller the remedy was obvious, though unprecedented: the eventual unification of all oil refiners in the United States into a single company. Rockefeller approached one after another of the Cleveland refiners, and a number of important firms in New York and elsewhere as well with an offer of Standard Oil stock or cash in exchange for their often-ailing plants. By the end of 1872 all 34 other refiners in the area had agreed to sell, some freely and for profit, and some, competitors alleged, under coercion. Due to Standards great size and the industrys overbuilt capacity, Rockefeller and Flagler were in a position to make their competitors offers they could not refuse. All indications are that Standard regularly paid top dollar for viable companies.

By 1873 Standard Oil was refining more oil10,000 barrels per daythan any other region of the country, employing 1,600 workers, and netting around $500,000 per year. With great confidence, Rockefeller proceeded to duplicate his Cleveland success throughout the rest of the country. By the end of 1874 he had absorbed the next three largest refiners in the nation, located in New York, Philadelphia, and Pittsburgh, and had begun moving into the field of distribution with the purchase of several of the new pipelines then being laid across the country. With each new acquisition it became that much harder for Rockefellers next target to refuse his cash, for the Standard interests rapidly grew so large that the threat of monopoly was clear. The years 1875 to 1879 saw Rockefeller push through his plan to its logical conclusion. In 1878, a mere six years after beginning its annexation campaign, Standard Oil controlled $33 million of the countrys $35 million annual refining capacity, as well as a significant proportion of the nations pipelines and oil tankers. At the age of 39, Rockefeller was one of the five wealthiest men in the country.

Standards involvement in the aborted South Improvement Company, however, had earned it lasting criticism, and its subsequent absorption of the refining industry was not calculated to mend its image among the few remaining independents and the mass of oil producers. The latter, still unable to curb excess drilling, found in Standard a natural target for their wrath when the price of crude dropped precipitously in the late 1870s. From the welter of conflicting testimony it is difficult to determine the causes of producers failing fortunes, but it is clear that given Standards extraordinary position in the oil industry it was feted to become the target of any and all dissatisfactions. In 1879 nine Standard Oil officials were indicted by a Pennsylvania grand jury for violating state antimonopoly laws. Though the case was not pursued, it indicated the depth of feeling against Standard Oil, and was only the first in a long line of legal battles waged to curb its power.

In 1882 Rockefeller and his associates reorganized their dominions, creating the first trust in U.S. business history. This move overcame state laws restricting the activity of a corporation to its home state. Henceforth the Standard Oil Trust, domiciled in New York City, held in trust all assets of the various Standard Oil companies. Of the Standard Oil Trusts nine trustees, John D. Rockefeller held easily the largest number of shares. Together the trusts 30 companies controlled 80% of the refineries and 90% of the oil pipelines in the United States and constituted the leading industrial organization in the world. The trusts first years combined net earnings were $11.2 million, of which some $7 million was immediately plowed back into the companies for expansion. Almost lost in the flurry of big numbers was the 1882 creation of Standard Oil Company of New Jersey, one of the many regional corporations created to handle the trusts activities in surrounding states. Barely worth mentioning at the time, Standard Oil Company of New Jersey, or Jersey as it came to be called, would soon become the dominant Standard company and, much later, rename itself Exxon.

The 1880s were a period of exponential growth for Standard. The trust not only maintained its lock on refining and distribution but also seriously entered the field of production, by 1891 securing a quarter of the countrys total output, most of it in the new regions of Indiana and Dlinois. Standards overseas business was also expanding rapidly, and in 1888 it founded its first foreign affiliate, Anglo-American Oil Company Limited of London. The overseas trade in kerosene was especially important to Jersey, which derived as much as three-fourths of its sales from the export trade. Jerseys Bayonne, New Jersey, refinery was soon the third largest in the Standard family, putting out 10,000 to 12,000 barrels per day by 1886. In addition to producing and refining capacity, Standard also was extending gradually its distribution system from pipelines and bulk wholesalers toward the retailer and eventual end user of kerosene, the private consumer.

The 1890 Sherman Antitrust Act, passed largely in response to Standards oil monopoly, laid the groundwork for a second major legal assault against the company, an 1892 Ohio Supreme Court order forbidding the trust to operate Standard of Ohio. As a result, the trust was promptly dissolved, but taking advantage of newly liberalized state law in New Jersey the Standard directors made Jersey the main vessel of their holdings. Standard Oil Company of New Jersey became Standard Oil Company (New Jersey) at this time. The new Standard Oil structure now consisted of only 20 much-enlarged companies, but effective control of the interests remained in the same few hands as before. Jersey added a number of important manufacturing plants to its already impressive refining capacity and was by any measure the leading Standard unit, but it was not until 1899 that it became the sole holding company for all of the Standard interests. At that time the entire organizations assets were valued at about $300 million and it employed 35,000 people. John D. Rockefeller continued as nominal president, but the most powerful active member of Jerseys board was probably John D. Archbold.

Rockefeller, in fact, had retired from daily participation in Standard Oil in 1896 at the age of 56. Once Standards consolidation was complete Rockefeller spent his time reversing the process of accumulation, seeing to it that his staggering fortuneestimated at $900 million in 1913was redistributed as efficiently as it had been made.

The general public was only dimly aware of Rockefellers philanthropy, however. More obvious were the frankly monopolistic policies of the company he had built. With its immense size and complete vertical integration from oil well to housewife, including housewives as far away as Romania, Standard Oil piled up huge profits$830 million in the 12 years from 1899 to 1911. In relative terms, its domination of the U.S. industry was steadily decreasing, by 1911 its percentage of total refining was down to 66% from the 90% of a generation before; but in absolute terms Standard Oil had grown to monstrous proportions. It was therefore not surprising that in 1905 a U.S. congressman from Kansas launched an investigation of Standard Oils role in the falling price of crude in his state. The commissioner of the Bureau of Corporations, James R. Garfield, decided to widen the investigation into a study of the national oil industryin effect Standard Oil.

Garfields critical report prompted a barrage of state lawsuits against Standard Oil (New Jersey) and, in November 1906, a federal suit was filed charging the company, John D. Rockefeller, and others with running a monopoly. In 1911, after years of litigation the U.S. Supreme Court upheld a lower courts conviction of Standard Oil for monopoly and restraint of trade under the Sherman Antitrust Act. The Court ordered the separation from Standard Oil Company (New Jersey) of 33 of the major Standard Oil subsidiaries, including those which subsequently kept the Standard name.

To Standard Oil Company (New Jersey) remained an equal number of smaller companies spread around the United States and overseas which, taken together, represented $285 million of the former Jerseys net value of $600 million. Notable among the remaining holdings were a group of large refineries, four medium-sized producing companies, and extensive foreign marketing affiliates. Notably absent were the pipelines needed to move oil from well to refinery, much of the former tanker fleet, and access to a number of important foreign markets, including Great Britain and the Far East.

President of Standard Oil (New Jersey) remained John D. Archbold, a long-time intimate of the elder Rockefeller, whose Standard service had begun in 1879. Archbolds first problem was to secure sufficient supplies of crude oil for Jerseys extensive refining and marketing capacity. Jerseys former subsidiaries were more than happy to continue selling crude to Jersey, and in reality the dissolution decree had little immediate effect on the coordinated workings of the former Standard Oil group, but Jersey set about finding its own sources of crude. The companys first halting steps toward foreign production met with little successventures in Romania, Peru, Mexico, and Canada suffered political or geological setbacks and were of no help. In 1919, however, Jersey made a domestic purchase that would prove to be of great long-term value. For $17 million Jersey acquired 50% of the Humble Oil & Refining Company of Houston, Texas, a young but rapidly growing network of Texas producers which immediately assumed first place among Jerseys domestic suppliers. Although only the fifth-leading producer in Texas at the time of its purchase, Humble would soon become the dominant drilling company in all of the United States, and was eventually wholly purchased by Jersey. Humble, now known as Exxon Company USA, remained one of the leading U.S. producers of crude oil and natural gas, with drilling rigs in 19 states including Alaskas PrudhoeBay, in 1991.

Despite initial disappointments in overseas production, Jersey remained a company oriented to foreign markets and supply sources. On the supply side, Jersey secured a number of valuable Latin American producing companies in the 1920s, especially several Venezuelan interests consolidated in 1943 into Creole Petroleum Corporation. By that time Creole was easily the largest crude producer in the Jersey group, and also the most profitable Jersey company of any kind. In 1946, for example, Creole produced an average of 451,000 barrels per day, far more than the 309,000 by Humble and almost equal to all other Jersey drilling companies combined. Four years later, Creole alone generated $157 million of the Jersey groups total net income of $408 million, and did so on sales of only $517 million. Also in 1950, Jerseys British affiliates, mainly marketers, showed substantial sales of $283 million but seta bottom line of about $2 million. In contrast to the industrys early days, oil profits now lay in the production of crude, and the bulk of Jerseys crude came from Latin America. The companys growing Middle Eastern affiliates did not become significant resources until the early 1950s; and Jerseys Far East holdings, from 1933 to 1961 owned jointly with Socony-Vacuum Oil Companyformerly Standard Oil Company of New York and now Mobil Corporationnever provided sizable amounts of crude oil.

In marketing, Jerseys income showed a similar preponderance of foreign sales. Jerseys domestic market had been limited by the dissolution decree, largely to a handful of mid-Atlantic states and such others as Jersey could later gain access to, whereas the companys overseas affiliates were well entrenched and highly profitable. Jerseys Canadian affiliate, Imperial Oil Ltd. had a monopolistic hold on that countrys market, while in Latin America and the Caribbean the West India Oil Company performed superbly during the second and third decades of the 20th century. Jersey had also incorporated eight major marketing companies in Europe by 1927 and these too sold a significant amount of refined products, most of them under the Esso brand name introduced the previous year. Esso became Jerseys best known and most widely used retail name both at home and abroad.

Jerseys mix of refined products changed considerably over the years. As the use of kerosene for illumination gave way to electricity and the automobile continued to grow in popularity, Jerseys sales reflected a shift away from kerosene and toward gasoline. Even as late as 1950, however, gasoline had not yet become the leading seller among Jersey products. That honor went to the group of residual fuel oils used to power ships and industrial plants and as a substitute for coal. Distillates used for home heating and diesel engines were also strong performers. Even in 1991, when Exxon distributed its gasoline through a network of 12,000 U.S. and 26,000 international service stations, the earnings of all marketing and refining activities were barely one-third of those derived from the production of crude. In 1950 that proportion was about the same, indicating once again that, regardless of the end products into which oil is refined, it is the production of crude that yields the big profits.

Indeed, by mid-century the international oil business had largely become a question of controlling crude oil at its source. With Standard Oil Company and its multinational competitors having built fully vertically integrated organizations, the only leverage remained control of the oil as it came out of the ground. Though it was not yet widely known in the United States, production of crude was shifting rapidly from the United States and Latin America to the Middle East. As early as 1908 oil had been verified in present-day Iran, but it was not until 1928 that Jersey and Socony-Vacuum, prodded by chronic shortages of crude, joined three European companies in forming Iraq Petroleum Company. Also in 1928, Jersey, Shell, and Anglo-Persian secretly agreed to limit each companys share of world production to their present relative amounts, attempting, by means of this As Is agreement, to limit competition and keep prices at comfortably high levels. As with Rockefellers similar tactics 50 years before, it was not clear in 1928 that the agreement was illegal, because its participants were located in a number of different countries each with its own set of trade laws. Already in 1928, Jersey and the other oil giants were stretching the very concept of nationality beyond any simple application.

Following World War II, Standard Oil was again in need of crude to supply the resurgent economies of Europe. Already the worlds largest producer, Standard Oil became interested in the vast oil concessions in Saudi Arabia recently won by Texaco and Socal. The latter companies were in need of both capital for expansion and world markets for exploitation, and in 1946 they sold 30% of the newly formed Arabian American Oil Company (Aramco) to Standard Oil and 10% to Socony-Vacuum. A few years later, after Irans nationalization of Anglo-Persians holdings was squelched by a combination of CIA assistance and an effective worldwide boycott of Iranian oil by competitors, Jersey was able to take 7% of the consortium formed to drill in that oil-rich country. With a number of significant tax advantages attached to foreign crude production, Jersey drew an increasing percentage of its oil from its holdings in all three of the major middle eastern fields: Iraq, Iran, and Saudi Arabia, and helped propel the 20-year postwar economic boom in the West. With oil prices exceptionally low, the United States and Europe busily shifted their economies to complete dependence on the automobile and on oil as the primary industrial fuel.

Despite the growing strength of newcomers to the international market such as Getty and Conoco, the big companies continued to exercise decisive control over the world oil supply and thus over the destinies of the Middle East producing countries. Growing nationalism and an increased awareness of the extraordinary power of the large oil companies led to the 1960 formation of the Organization of Petroleum Exporting Countries (OPEC) and a series of increasingly bitter confrontations between countries and companies over who should control the oil upon which the world had come to depend. The growing power of OPEC prompted Jersey to seek alternative sources of crude, resulting in discoveries in Alaskas Prudhoe Bay and the North Sea in the late 1960s. The Middle Eastern sources remained paramount, however, and when OPEC cut off oil supplies to the United States in 1973 in response to U.S. sponsorship of Israel, the resulting 400% price increase permanently changed the industrial worlds attitude to oil, as well as inducing a prolonged recession. Control of the oil was largely taken out of the hands of the oil companies, which began exploring new sources of energy and business opportunities in other fields.

For Standard Oil Company (New Jersey), which had changed it name to Exxon in 1972, the oil embargo had several major effects. Most obviously it increased corporate sales, the expensive oil allowing Exxon to double its 1972 revenue of $20 billion in only two years and then pushing that figure over the $100 billion mark by 1980. After a year of windfall profits made possible by the sale of inventoried oil bought at much lower prices, Exxon was able to make use of its extensive North Sea and Alaskan holdings to keep profits at a steady level. The company had suffered a strong blow to its confidence, however, and was soon investigating a number of diversification measures which eventually included office equipment, a purchase of Reliance Electric Company, the fifth-largest holdings of coal in the United States, and an early-1980s venture into shale oil. With the partial exception of coal, all of these were expensive failures, costing Exxon an estimated $6 billion to $7 billion and no end of frustration.

By the early 1980s the world oil picture had eased considerably and Exxon felt less urgency about diversification. With the price of oil peaking around 1981 and then tumbling for most of the decade, Exxons sales dropped sharply but its confidence rose as OPECs grip on the marketplace proved to be weaker than advertised. Having abandoned its forays into other areas Exxon refocused on the oil and gas business, cutting its assets and work force substantially to accommodate the drop in revenue without losing profitability.

It also bought back a sizable number of its own shares to bolster per-share earnings, which reached excellent levels and won the approval of Wall Street. The stock buy-back was partially in response to Exxons embarrassing failure to invest its excess billions profitably, at which point the company was somewhat at a loss as to what to do with its money. It could not expand further into the oil business without running into antitrust difficulties at home, and investments outside oil would have to truly be mammoth to warrant the time and energy required.

Exxon is no longer the worlds largest company, nor even the largest oil groupRoyal Dutch/Shell took over that position in the 1980sbut with the help of the 1989 Exxon Valdez disaster it has heightened its notoriety. The crash of the Exxon Valdez on March 24, 1989, in Prince William Sound off the port of Valdez, Alaska, released about 260,000 barrels of crude oil into the sound. The disaster cost Exxon $1.7 billion in 1989 alone, and the company and its subsidiaries were faced with more than 170 civil and criminal lawsuits brought by state and federal governments and individuals. In the long run, however, it is likely that Exxon will view the Valdez disaster as a small blemish on its muscular balance sheet.

Principal Subsidiaries

Esso Aktiengesellschaft (Germany); Esso Eastern Inc.; Esso Australia Resources Ltd.; Esso Exploration and Production Norway Inc.; Esso Holding Company Holland Inc.; Esso Holding Company U.K. Inc.; Esso Italiana S.P.A. (Italy); Esso Norge a.s. (Norway); Esso Sociedad Anonima Petrolera Argentina; Esso Societe Anonyme Francaise (France; 81.548%) Esso Standard Oil S.A. Limited (Bahamas); Exxon Capital Holdings Corporation; Exxon Gas System, Inc.; Exxon Insurance Holdings, Inc.; Exxon Overseas Corporation; Exxon Rio Holding Inc.; Exxon San Joaquin Production Company; Exxon Trading Company International; Exxon Yemen Inc.; Imperial Oil Limited (Canada, 69.56%); International Colombia Resources Corporation (100%); Societe Francaise Exxon Chemical (France, 98.64%).

Further Reading

Nevins, Allan, Study in Power: John D. RockefellerIndustrialist and Philanthropist, 2 vols., New York, Charles Scribners Sons, 1953; Hidy, Ralph W., and Murrel E. Hidy, History of Standard Oil Company (New Jersey): Pioneering in Big Business, 1882-1911, New York, Harper & Brothers, 1955; Gibb, George Sweet, and Evelyn H. Knowlton, History of Standard Oil Company (New Jersey): The Resurgent Years, 1911-1927, New York, Harper & Brothers, 1956; Larson, Henrietta M., Evelyn H. Knowlton, and Charles S. Popple, History of Standard Oil Company (New Jersey): New Horizons, 1927-1950, New York, Harper & Row, 1971; Sampson, Anthony, The Seven Sisters: The Great Oil Companies and the World They Made, New York, The Viking Press, 1975; Wall, Bennett H., Growth in a Changing Environment: A History of Standard Oil Company (New Jersey), New York, McGraw-Hill, 1988.

Jonathan Martin

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Oil Spills: Impact on the Ocean

Oil Spills: Impact on the Ocean

Oil wastes that enter the ocean come from many sources, some being accidental spills or leaks, and some being the results of chronic and careless habits in the use of oil and oil products. Most waste oil in the ocean consists of oily stormwater drainage from cities and farms, untreated waste disposal from factories and industrial facilities, and unregulated recreational boating.

It is estimated that approximately 706 million gallons of waste oil enter the ocean every year, with over half coming from land drainage and waste disposal; for example, from the improper disposal of used motor oil. Offshore drilling and production operations and spills or leaks from ships or tankers typically contribute less than 8 percent of the total. The remainder comes from routine maintenance of ships (nearly 20 percent), hydrocarbon particles from onshore air pollution (about 13 percent), and natural seepage from the seafloor (over 8 percent).

Prevalence during Drilling versus Transportation

Offshore oil spills or leaks may occur during various stages of well drilling or workover and repair operations. These stages can occur while oil is being produced from offshore wells, handled, and temporarily stored; or when oil is being transported offshore, either by flowline, underwater pipeline, or tanker. Of the approximately 706 million gallons of waste oil in the ocean each year, offshore drilling operations contribute about 2.1 percent, and transportation accidents (both ships and tankers) account for another 5.2 percent. The amount of oil spilled or leaked during offshore production operations is relatively insignificant.

Oil waste from offshore drilling operations may come from disposal of oil-based drilling fluid wastes, deck runoff water, flowline and pipeline leaks, or well failures or blowouts. Disposal of offshore production waste can also pollute the ocean, as can deck runoff water, leaking storage tanks, flowline and pipeline leaks, and the wells themselves. Oil spilled from ships and tankers includes the transportation fuel used by the vessels themselves or their cargos, such as crude oil, fuel oil, or heating oil.

Oil Spill Behavior

When oil is spilled in the ocean, it initially spreads in the water (primarily on the surface), depending on its relative density and composition. The oil slick formed may remain cohesive, or may break up in the case of rough seas. Waves, water currents, and wind force the oil slick to drift over large areas, impacting the open ocean, coastal areas, and marine and terrestrial habitats in the path of the drift.

Oil that contains volatile organic compounds partially evaporates, losing between 20 and 40 percent of its mass and becoming denser and more viscous (i.e., more resistant to flow). A small percentage of oil may dissolve in the water. The oil residue also can disperse almost invisibly in the water or form a thick mousse with the water. Part of the oil waste may sink with suspended particulate matter, and the remainder eventually congeals into sticky tar balls. Over time, oil waste weathers (deteriorates) and disintegrates by means of photolysis (decomposition by sunlight) and biodegradation (decomposition due to microorganisms). The rate of biodegradation depends on the availability of nutrients, oxygen, and microorganisms, as well as temperature.

Oil Spill Interaction with Shoreline.

If oil waste reaches the shoreline or coast, it interacts with sediments such as beach sand and gravel, rocks and boulders, vegetation, and terrestrial habitats of both wildlife and humans, causing erosion as well as contamination . Waves, water currents, and wind move the oil onto shore with the surf and tide.

Beach sand and gravel saturated with oil may be unable to protect and nurture normal vegetation and populations of the substrate biomass . Rocks and boulders coated with sticky residue interfere with recreational uses of the shoreline and can be toxic to coastal wildlife.

Examples of Large Spills.

The largest accidental oil spill on record (Persian Gulf, 1991) put 240 million gallons of oil into the ocean near Kuwait and Saudi Arabia when several tankers, port facilities, and storage tanks were destroyed during war operations. The blowout of the Ixtoc I exploratory well offshore Mexico in 1979, the second largest accidental oil spill, gushed 140 million gallons of oil into the Gulf of Mexico. By comparison, the wreck of the Exxon Valdez tanker in 1989 spilled 11 million gallons of oil into Prince William Sound offshore Alaska, and ranks fifty-third on the list of oil spills involving more than 10 million gallons.

The number of large spills (over 206,500 gallons) averaged 24.1 per year from 1970 to 1979, but decreased to 6.9 per year from 1990 through 2000.

Damage to Fisheries, Wildlife, and Recreation

Oil spills present the potential for enormous harm to deep ocean and coastal fishing and fisheries. The immediate effects of toxic and smothering oil waste may be mass mortality and contamination of fish and other food species, but long-term ecological effects may be worse. Oil waste poisons the sensitive marine and coastal organic substrate, interrupting the food chain on which fish and sea creatures depend, and on which their reproductive success is based. Commercial fishing enterprises may be affected permanently.

Wildlife other than fish and sea creatures, including mammals, reptiles, amphibians, and birds that live in or near the ocean, are also poisoned by oil waste. The hazards for wildlife include toxic effects of exposure or ingestion, injuries such as smothering and deterioration of thermal insulation, and damage to their reproductive systems and behaviors. Long-term ecological effects that contaminate or destroy the marine organic substrate and thereby interrupt the food chain are also harmful to the wildlife, so species populations may change or disappear.

Coastal areas are usually thickly populated and attract many recreational activities and related facilities that have been developed for fishing, boating, snorkeling and scuba diving, swimming, nature parks and preserves, beaches, and other resident and tourist attractions. Oil waste that invades and pollutes these areas and negatively affects human activities can have devastating and long-term effects on the local economy and society. Property values for housing tend to decrease, regional business activity declines, and future investment is risky.

Long-term Fate of Oil on Shore

The fate of oil residues on shore depends on the spilled oil's composition and properties, the volume of oil that reaches the shore, the types of beach and coastal sediments and rocks contacted by the oil, the impact of the oil on sensitive habitats and wildlife, weather events, and seasonal and climatic conditions. Some oils evaporate, disperse, emulsify, weather, and decompose more easily than others. The weather and seasonal and climatic conditions may accelerate or delay these processes.

Oil waste that coalesces into a tar-like substance or that saturates sediments above the surf and tide level is especially persistent. Efforts to remove the oil and clean, decontaminate, and remediate an oil-impacted shoreline may make the area more visibly attractive, but may be more harmful than helpful in terms of actual recovery.

Cleanup and Recovery

The techniques used to clean up an oil spill depend on oil characteristics and the type of environment involved; for example, open ocean, coastal, or wetland . Pollution-control measures include containment and removal of the oil (either by skimming, filtering, or in situ combustion), dispersing it into smaller droplets to limit immediate surficial and wildlife damage, biodegradation (either natural or assisted), and normal weathering processes. Individuals of large-sized wildlife species are sometimes rescued and cleaned, but micro-sized species are usually ignored.

Oil spill countermeasures to clean up and remove the oil are selected and applied on the basis of many interrelated factors, including ecological protection, socioeconomic effects, and health risk. It is important to have contingency plans in place in order to deploy pollution control personnel and equipment efficiently.

Environmental Recovery Rates.

The rate of recovery of the environment when an oil spill occurs depends on factors such as oil composition and properties and the characteristics of the area impacted, as well as the results of intervention and remediation. Physical removal of oil waste and the cleaning and decontaminating of the area assist large-scale recovery of the environment, but may be harmful to the substrate biomass. Bioremediation effortsadding microorganisms, nutrients, and oxygen to the environmentcan usually boost the rate of biodegradation.

Because of the type of oil spilled and the Arctic environment in which it spilled, it is estimated that the residue of the Exxon Valdez oil spill will be visible on the Alaskan coast for 30 years.

Costs and Prevention

The costs of an oil spill are both quantitative and qualitative. Quantitative costs include loss of the oil, repair of physical facilities, payment for cleaning up the spill and remediating the environment, penalties assessed by regulatory agencies, and money paid in insurance and legal claims. Qualitative costs of an oil spill include the loss of pristine habitat and communities, as well as unknown wildlife and human health effects from exposure to water and soil pollution.

Prevention of oil spills has become a major priority; and of equal importance, efforts to contain and remove oil that has spilled are considered to be prevention of secondary spills. The costs associated with oil spills and regulations governing offshore facilities and operations have encouraged the development of improved technology for spill prevention. The Oil Pollution Act of 1990 was enacted by the U.S. Congress to strengthen oil spill prevention, planning, response, and restoration efforts. Under its provisions, the Oil Spill Liability Trust Fund provides cleanup funds for oil pollution incidents.

Responsibility for the prevention of oil spills falls upon individuals as well as on governments and industries. Because the sources of oil waste in the ocean are generally careless, rather than accidental, truly effective prevention of oil spills involves everyone.

see also Beaches; Coastal Waters Management; Corals and Coral Reefs; Energy from the Ocean; Fisheries, Marine; Marine Mammals; Ocean Health, Assessing; Petroleum from the Ocean.

Carolyn Embach

Bibliography

American Petroleum Institute. Fate of Spilled Oil in Marine Waters. Publication Number 4691. Washington, D.C.: American Petroleum Institute, 1999.

Carls, Mark G. et al. "Persistence of Oiling in Mussel Beds after the Exxon Valdez Oil Spill." Marine Environmental Research 51, no. 2 (2001):167190.

Raloff, Janet. "Valdez Spill Leaves Lasting Impacts." Science News no. 143 (February 13, 1993):102.

U.S. Environmental Protection Agency. Understanding Oil Spills and Oil Spill Response. Publication Number 9200.5105. Washington, D.C.: U.S. Environmental Protection Agency, 1993.

RECOVERING FROM THE EXXON VALDEZ OIL SPILL

A large quantity of crude oil was deposited on beaches in Prince William Sound and along the shoreline of the Gulf of Alaska after the Exxon Valdez tanker wrecked in 1989. The oil waste has been closely monitored to determine its status and its effects in the ocean and along the coast.

Initial efforts to remove the oil from intertidal areas included flushing them with hot water applied with high pressure, which proved fatal for much of the marine life involved. Natural rates of biodegradation and recovery have been slower than anticipated, and visible residue may persist for up to 30 years.

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Exxon Corporation

EXXON CORPORATION


The Exxon Corporation grew out of another oil company giant, Standard Oil Company, founded by John D. Rockefeller (18391937) in 1870. Standard Oil's monopoly over the oil business in the early twentieth century led to a series of attacks on that company from journalists and politicians. Likewise, Exxon's reputation in the late twentieth century has been damaged by the environmental havoc created by a massive oil spill in Alaska from the tanker Exxon Valdez in 1989. Still, Exxon remains the third largest company in the United States and the seventh largest in the world.

In the 1860s Rockefeller foresaw the potential of refining Pennsylvania crude oil. Though internal combustion engines were not yet developed, kerosene oil could be used, among other things, to fuel lanterns. When Standard Oil was formed, it integrated all of the docks, railroad cars, warehouses, lumber resources, and other facilities it needed into its operations. Because of its size it was able to make lucrative deals with railroads. The result was to drive smaller refiners out of business.

Standard Oil became the foremost monopoly in the country. It was so big that it more or less dictated to the railroads what it would pay in freight rates. Although this practice was abandoned because of public pressure, by 1878 Rockefeller and partner Henry Flagler (18301913) were in control of most of the nation's oil refining business. Rockefeller's business successes had made him one of the five wealthiest men in the country. Those same monopolistic business practices that gave him such monetary success were also a source of criticism from many quarters in industry and government.

In 1882 Rockefeller and his associates established the first trust in the United States, which consolidated all of Standard Oil Company's assets in the states under the New York Company, in which Rockefeller was the major shareholder.

In the 1880s Standard Oil began producing as well as refining and distributing oil. It also began an overseas trade, particularly in kerosene to Great Britain. The trust encountered difficulties with the Sherman Antitrust Act of 1890, followed by an 1892 Ohio Supreme Court decision which forbade the trust to operate Standard of Ohio. The company then moved its base of its operations to New Jersey, which in 1899 became home to Standard Oil of New Jersey, or Jersey Standard, the sole holding company for all of Standard's interests. Jersey Standard later became Exxon Corporation. In the first decades of the twentieth century Jersey Standard was banned from holdings in several states. Instead, it acquired companies in Latin America in the 1920s, particularly in Venezuela, and also expanded its marketing companies abroad.

As the supply of crude oil began shifting from the United States and Latin America to the Middle East in the 1920s, Jersey Standard and other companies effectively used the same monopolistic practices that John D. Rockefeller had used 50 years before to establish a foothold in the region. Middle East production was stepped up following World War II (19391945) and Standard Oil exploited its rich resources in Iraq, Iran, and Saudi Arabia. Oil prices stayed low and the United States and Europe became extremely dependent on oil fuels for industry and automobiles.

During the 1960s growing nationalism in the Middle East brought much resentment against the western companies dominating Middle Eastern oil. The Organization of Petroleum Exporting Countries (OPEC) was formed to protect the interests of the producing countries. As OPEC became more assertive, Jersey Standard sought other sources of crude oil. The company discovered oil fields in Alaska's Prudhoe Bay and in the North Sea. Around the same time, in 1972, Standard Oil of New Jersey officially changed its name to Exxon Corporation.

Financial difficulties beset the company in the 1970s, as the OPEC-induced oil shortage depleted much of Exxon's reserves. Long lines formed at gas stations in 1973 and again in 1979, lights were turned out across the nation (even at the White House), and low and moderate income families struggled to heat their homes in the winter. The oil crisis even helped to derail President Jimmy Carter's (19771981) bid for a second term in office in 1980.

In 1989 the company was shaken by the Exxon Valdez disaster. A drunk Captain of the oil tanker Exxon Valdez ran aground in Alaska's Prince William Sound, doing immeasurable damage to the wildlife and to the company's public image. Eleven million gallons of oil spilled in the Alaskan harbor. The state of Alaska conducted public hearings and Exxon was deemed to have been "reckless" by an Alaskan Grand Jury. Exxon lost a share of the world oil market to its competitor, Royal Dutch/Shell in 1990. Still, teamed up with Pertamina, the Indonesian state oil company, Exxon in the 1990s developed the Natuna gas field. Exxon also agreed to a $15 billion development of three oil wells in Russia. A large oil discovery in 1996 in the Gulf of Mexico also allowed Exxon to court expansion plans far into the future.

Thus, neither the oil crisis nor the oil spill destroyed the company's profitability. While ordinary people worried, Exxon continued to reap major profits, reaching the $800 billion mark by 1980. Two hundred sixty thousand barrels of crude oil were spilled in Alaskan waters by the Exxon-Valdez ship, costing Exxon billions of dollars to clean up Prince William Sound and spawning hundreds of lawsuits from individuals and state and local governments. But, although the spill caused a public relations debacle, Exxon actually improved its financial status in the early 1990s, when other oil companies were losing money. To enhance profitability, the company engaged in cost-cutting, eliminating thousands of jobs and cutting spending for exploration. In 1997 the company's gross profit was $43 billion. By 1998, when oil prices had again sunk to record low levels, Exxon reported a resource base of 1.2 billion barrels of newly discovered resources.

Since the Exxon Valdez incident, Exxon has attempted to improve its image by emphasizing its efforts to produce environmentally sound products and contribute to environmental causes. Still, the outcries from the residents of Prince William Sound continued to be heard through the end of the 1990s. The 1994 federal jury verdict held Exxon liable for $5.2 billion in punitive damagesa verdict Exxon is still working to overturn.

Though Exxon began as an American company, it participates in a worldwide market. As a result, the company also has a successful European affiliate, Esso. Operating from its base in Germany, where it is the third largest oil and gas company, Esso manages over 1,500 gas stations in Germany. It also has interests in the Czech Republic, Hungary, Poland, and Slovakia. Esso, like Exxon, explores, produces, and manufactures gasoline, other fuels, chemicals, and lubricants.

See also: Kerosene, Monopoly, OPEC Oil Embargo, Petroleum Industry, John D. Rockefeller, Sherman Anti-Trust Act, Standard Oil Company

FURTHER READING

Clarke, Jim. "Exxon to Appeal $5 Billion Oil Spill Judgment." San Diego Daily, February 13, 1997.

Nevins, Allan. Study in Power: John D. Rockefeller Industrialist and Philanthropist. 2 vols. New York: Charles Scribner's Sons, 1953.

Sampson, Anthony. The Seven Sisters: The Great Oil Companies and the World They Made. New York: Viking, 1975.

Strauss, Gary. "10 Years Later, Case Is Hardly Closed: Exxon's PR Mess Still Isn't Cleaned Up." USA Today, March 4, 1999.


"Pumping Up Profits for Years." Fortune, April 28, 1997.

Wall, Bennett H. Growth in a Changing Environment: A History of Standard Oil Company (New Jersey). New York: McGraw-Hill, 1988.

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Oil Spills

Oil spills

Crude oil or petroleum is an important fossil fuel. Fossil fuels were formed millions of years ago, when much of Earth was covered by water containing billions of tiny plants and animals. After these organisms died they accumulated on ocean floors, where, over the ages, sand and mud also drifted down to cover them. As these layers piled up over millions of years, their weight created pressure and heat that changed the decaying organic material into oil and gas.

Since petroleum is often extracted in places that are far away from areas where it is refined and eventually used, it must be transported in

large quantities by ocean tankers, inland-water barges, or overland pipelines. Accidental oil spills can occur at any time during the loading, transportation, and unloading of oil. Some oil spills have been spectacular in magnitude and have caused untold environmental damage.

Bioremediation

Bioremediation is the use of bacteria and other living microorganisms to help clean up hazardous waste in soil and water. These microorganisms work by decomposing or breaking down toxic chemicals into simpler, less-poisonous compounds. Petroleum can be consumed by microorganisms, transforming it into compounds such as carbon dioxide and water.

Unfortunately, the technique of adding bacteria to a hazardous waste spill in order to increase the rate of decomposition has yielded limited success. If a community of bacteria present in an area where a spill occurs can consume that hazardous waste, the bacteria grow rapidly. Adding further microorganisms does not seem to increase the overall rate of decomposition. More important, areas where spills take place often do not have optimum conditions under which the bacteria can function. Oxygen and certain nutrients such as nitrate and phosphate that the bacteria need are often limited.

However, in the case of the Exxon Valdez oil spill in Alaska in 1989, nitrogen- and phosphorus-containing fertilizer was applied to about 75 miles (120 kilometers) of oiled beach. The fertilizer adhered to the petroleum residues. With these added nutrients, the naturally occurring community of bacteria broke down the oil at a 50 percent faster rate.

Characteristics of petroleum

Petroleum is a thick, flammable, yellow-to-black colored liquid containing a mixture of organic chemicals, most of which are hydrocarbons (organic compounds containing only hydrogen and carbon atoms). Since petroleum is a natural material, it can be diluted or decomposed by bacteria and other natural agents. The most toxic or poisonous components of petroleum are the volatile components (those compounds that evaporate at low temperatures) and the components that are water-soluble (able to be dissolved in water).

The products refined from petroleum (gasoline, kerosene, asphalt, fuel oil, and petroleum-based chemical), however, are not natural. Because of this, few natural agents like bacteria exist to decompose or break them down.

Oil pollution

Since crude oil floats, oil spilled on the open ocean most severely affects seabirds. The oil coats their bodies, preventing them from fluffing their feathers to keep warm. Animals and plants below the surface of the water are largely unaffected by the oil spill. Naturally present bacteria in the water begin to break down the petroleum, using it as a nutrient. Eventually, the oil slick is broken down into a hard, tarlike substance, which is almost completely harmless to seagoing life of all kind. Wave action then breaks the pieces of tar into progressively smaller and smaller pieces. These small pieces, often invisible to the naked eye, remain floating in the water indefinitely.

When an oil spill occurs near a coastline, however, the damaging effect is much greater. Waves wash the oil on shore where it covers everythingrocks, plants, animals, and sand. If the wave action is high, bacteria present in the water are able to break down the oil fairly rapidly. In areas where wave action is low, such as in a bay or estuary, plants and animals quickly suffocate or are killed by toxic reactions to the oil, which remains for a considerable time. Since many small bays serve as nesting sites for aquatic birds and animals, spills in these areas are especially deadly.

Incidents of oil spills

Accidental oil spills from tankers and offshore rigs are estimated to total about 250 million gallons (950 million liters) per year. In 1967, off the coast of southern England, the Torrey Canyon ran aground, spilling about 32 million gallons (120 million liters) of crude oil. In 1978, the Amoco Cadiz went aground in the English Channel, spilling over 63 million gallons (240 million liters) of crude oil. In 1979, the offshore exploration rig IXTOC-I had an uncontrollable blowout that spilled more than 137 million gallons (520 million liters) of crude oil into the Gulf of Mexico.

The most damaging oil spill ever to occur in North American waters was the Exxon Valdez accident of 1989. The 11 million gallons (42 million liters) of spilled oil affected about 1,180 miles (1,900 kilometers) of shoreline of Prince William Sound and its surroundings in Alaska. The coastal habitats of many animals and birds were destroyed. Large numbers of sea mammals and birds were also affected in offshore waters. Of the estimated 5,000 to 10,000 sea otters that lived in Prince William Sound, at least 1,000 were killed by oiling. About 36,000 dead seabirds of various species were collected from beaches and other places. The actual number of killed birds, however, was probably in the range of 100,000 to 300,000. At least 153 bald eagles died from poisoning when they ate the remains of oiled seabirds.

Large quantities of crude oil have also been spilled during warfare. The largest-ever spill of petroleum into a body of water occurred during the Persian Gulf War in 199192. Iraqi forces deliberately released an estimated 500 million gallons (1,900 million liters) of petroleum into the Persian Gulf from several tankers and an offshore taker-loading facility. Iraqi forces also sabotaged and set fire to over 500 oil wells in Kuwait. Before the fires were extinguished and the wells capped, an estimated 10 to 30 billion gallons (35 to 115 billion liters) of crude oil had been spilled. Much of the oil burned, releasing toxic petroleum vapors into the atmosphere.

A potential ecological disaster arose in January 2001 when a tanker carrying 234,000 gallons (885,690 liters) of diesel and bunker (a heavy mixed fuel used by tourist boats) spilled the bulk of its load after it ran aground near the Galápagos Islands. The islands are located in the Pacific Ocean about 600 miles (1,000 kilometers) west of the country of Ecuador, of which they are a province. In fact, the islands are Ecuador's main tourist attraction. The islands are an ecosystem populated by species found nowhere else in the world. With their rare species of birds, reptiles, and marine life, the islands were an inspiration for English naturalist Charles Darwin's (18091882) theory of evolution.

The tanker hit bottom 550 yards (503 meters) off San Cristóbol, the easternmost island in the Galápagos. Luckily for the islands and their species, strong ocean currents washed almost all of the fuel out to sea, where most of it evaporated. Only two pelicans were found dead on the islands, while dozens were soiled, along with several sea lions and pups and exotic blue-footed booby birds. According to experts, the contamination was minimal. They also felt there would be no long-term damage to the islands from the spill.

[See also Petroleum; Pollution ]

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Oil Spills

OIL SPILLS

Oil is one of the world's main sources of energy, but because it is unevenly distributed it must be transported by ship across oceans and by pipelines across land. This results in accidents when transferring oil to vessels, when transporting oil, and when pipelines break, as well as when drilling for oil. While massive and catastrophic oil spills receive most of the attention, smaller and chronic oil spills and seeps occur regularly. These spills contaminate coasts and estuaries, and they can cause human health problems.

Oil is a mixture of hydrocarbon compounds, which are the decayed remains of marine animals and plants that lived in shallow inland seas, died, and drifted to the bottom. For the past 600 million years, under intense pressure and temperatures, these remains changed into the complicated hydrocarbons called petroleum. Crude oil is a mixture of gas, naphtha, kerosene, light gas, and residuals, which have different health effects.

Overall production of petroleum products rose from about 500 million tons in 1950 to over 2,500 million tons by the mid-1990s, resulting in massive transport and associated oil spills. By far the greatest oil reserves are in the Middle East, and major transportation routes emanate from there. The number of oil spills, both major and minor, has been increasing with the increasing rate of oil transport and the aging of oil tankers, as well as an increase in the size of oil tankers. Oil accounts for over half the tonnage of all sea cargo.

Since the 1960s there have been about twenty oil spills of more than 20 million gallons. Major oil spills have occurred off the coast of Mexico, the Middle East, off South Africa, in the North Pacific, and in Alaska, as well as in the pipeline in Usink, Russia. The largest oil spill to date resulted from the Gulf War in 1991, when over 240 million gallons of oil poured into the Persian Gulf, most of it deliberately. The next largest oil spill, from the Ixtox-1 well off Mexico, involved a blowout of 140 million gallons.

The largest spills do not necessarily receive the most media coverage, either because of their location, the lack of human health or ecological effects, the lack of documentation of these effects, or a lack of media interest. For example the 1980 Nowruz field spill in Arabia (80 million gallons) and the 1992 Fergana Valley spill in Uzbekistan (80 million gallons) barely received any attention. In contrast, two smaller spills received enormous media attention: the oil tanker Amoco Cadiz released 68.7 million gallons off the coast of France in 1978, and the tanker Exxon Valdez spilled 11 million gallons into Prince William Sound in Alaska in 1989.

Short-term public health impacts from oil spills include accidents suffered by those on damaged tankers or those involved in the cleanup, and illnesses caused by toxic fumes or by eating contaminated fish or shellfish. However, there are other less obvious public health impacts, including losses and disruptions of commercial and recreational fisheries, seaweed harvesting, boating, and a variety of other uses of affected water. There are also emotional, aesthetic, and economic losses, such as when Native Americans and others are denied subsistence or recreational uses. In both the case of the Exxon Valdez and the Amoco Cadiz there were permanent changes to the social and cultural communities residing in the region, which had permanent public health consequences, including chronic psychological stress.

Joanna Burger

(see also: Ambient Water Quality; Ocean Dumping; Pollution )

Bibliography

Burger, J. (1997). Oil Spills. New Brunswick, NJ: Rutgers University Press.

Cahill, R. A. (1990). Disasters at Sea: Titanic to Exxon Valdez. San Antonio, TX: Nautical Books.

Cutter Information Corporation (1995). International Oil Spill Statistics. Arlington, MA: Cutter Information.

Picot, J. C., and Gill, D. A. (1996). "The Exxon Valdez Oil Spill and Chronic Psychological Stress." In Proceedings of the Exxon Valdez Oil Spill Symposium, eds. F. Rice, R. Spies, D. Wolfe, and B. Wright. Bethesda, MD: American Fisheries Society.

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Oil Pollution Acts

Oil Pollution Acts

Arthur Holst

The Oil Pollution Act of 1990 (OPA) (P.L. 101-380 104 Stat. 484) established liabilities for polluters and recovery methods for areas affected by oil spills. It was preceded by the Oil Pollution Act of 1924 (43 Stat. 604) and the Oil Pollution Act of 1961 (P.L. 87-167). The 1924 act prohibited the discharge of oil into U.S. coastal waters and was regulated by the U.S. Coast Guard. The 1961 act forbade the discharge of oil in any waters within fifty miles of the U.S. coast, extending the area regulated by the previous legislation.

In 1980 the Oil Pollution Act of 1961 was superceded by the Act to Prevent Pollution from Ships of 1980 (P.L. 96-478), which forced ships in U.S. waters, or U.S. ships anywhere, to follow the pollution prevention guidelines established by the International Convention for the Prevention of Pollution from Ships of 1973. This convention, a reaction to the environmental damage caused by the oil spill off the ship Torrey Canyon in the English Channel in 1967, set guidelines that regulated oil, chemical, sewage, and garbage discharges into the sea.

Oil pollution prevention legislation was further strengthened by OPA, signed into law on August 18, 1990. The new legislation was enacted soon after the Exxon Valdez ran aground on Bligh Reef in the Prince William Sound of Alaska in March of 1989, spilling over eleven million gallons of oil. Although Congress was in favor of the legislation, opposition came from the oil industry executives who were concerned about the costs of implementing the OPA's stricter requirements. The act enabled the Environmental Protection Agency (EPA) to better regulate, prevent, and respond to devastating oil spills. The purpose of the OPA was to "amend [section] 311 of the Clean Water Act to clarify federal response authority for oil spills, increase penalties for spills, require tank vessel and facility response plans, and provide for contingency planning in designated areas."

Under the OPA, liability for oil spills is placed on the owner or operator of the ship. The responsible party must pay the costs of environment recovery, repair of damage to natural resources, and compensation to people affected by the spill. In addition, parties that use oil tankers or have certain facilities that could pose a threat to the local environment must create acceptable contingency plans (plans to cover possible spills). These plans must be approved by the EPA. The OPA establishes the Oil Spill Liability Trust Fund, which can provide up to $1 billion for oil spill recovery efforts and is financed primarily by a per barrel tax on oil.

Other important provisions of the OPA include revoking a mariner's registries and licenses on the grounds of alcohol and drug abuse, the maintenance of U.S. Coast Guard units specialized in oil spill cleanup, the establishment of a study on tanker navigation and tanker safety, and the requirement of double-hulled tank vessels. Assessments of the legislation have shown that many oil companies have yet to convert to double-hulled oil tankers. The Department of Justice has used the OPA to prosecute oil spills, including the New Carissa spill in Coos Bay, Oregon, in 1999, the Scandia and North Cape spill at Moonstone Beach, Rhode Island, in 1999, and the cruise ship line Royal Caribbean for illegal oil dumping from 1990 to 1994.

BIBLIOGRAPHY

National Research Council. Double-Hull Tanker Legislation: An Assessment of the Oil Pollution Act of 1990. Washington, DC: National Academy Press, 1998.

"Oil Pollution Act of 1990: Summary Overview." Cook Inlet RCAC. <http://www.circac.org>.

"Prevention of Pollution by Oil." International Maritime Organization. <http://www.imo.org/environment>.

INTERNET RESOURCES

Environmental Protection Agency. <http://www.epa.gov>.

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Exxon Corporation

Exxon Corporation

founded: 1882



Contact Information:

headquarters: 5959 las colinas blvd. irving, tx 75039-2298 phone: (972)444-1000 fax: (972)444-1882 url: http://www.exxon.com

OVERVIEW

Exxon stands as the number three company in the United States after General Motors and Ford, according to Fortune 500, and the number two oil and gas producer in the world. It owns 4 U.S. refineries and 8,500 gas stations. It also runs 31 refineries in 17 countries and is involved in selling and producing petrochemicals, and mining coal and other minerals.

The 1989 "Exxon Valdez" oil tanker spill in Prince William Sound, Alaska, caused the company financial headaches after being levied a punitive damages fine of $5 billion. Recovering from that disaster, the company has been looking to expand its power generation business in China. It also has been sinking massive funds into its refining and retail businesses in the Asia/Pacific region, while expanding operations in Japan, Malaysia, Singapore, and Thailand.




COMPANY FINANCES

Exxon had over $135 billion in sales as of fiscal year end 1997 (December). Gross profit was $43 billion for 1997, up from just under $41 billion in 1996 and $40 billion in 1995. The gross profit margin was 35.8 percent in 1997, 35.1 percent in 1996, and 37.2 percent in 1995. Total net income was $8.46 billion for 1997, up from $7.51 billion in 1996, and $6.47 billion in 1995. Sales of $135.0 billion in 1997 compare with $131.5 billion in 1996, $121.8 billion in 1995, $112.0 billion in 1994, and $109.5 billion in 1993. High price per share averaged $67.25 for fiscal year 1997, while the average low price for the same period was $48.25. This compares with an average high price of $48.25 per share for 1996 and an average low of $38.81. As of June 8, 1998, the stock closed at $71.19. There were 642,466 holders of record of Exxon common stock as of January 31, 1998.




ANALYSTS' OPINIONS

In 1997 analysts predicted that Exxon would increase dividends at a faster rate than the annual 2 percent forecast for S&P (Standard & Poors) companies over the next three years. In fact, Exxon exceeded the return on the S&P 500 with a total return of 26 percent in 1996 and 74 percent over two years. Analyst Paul Ting of Salomon Brothers noted, "These are the kinds of returns other companies have been targeting for years." Analyst John Hervey of Donaldson, Lufkin, & Jenrette said, "The company offers one of the best and most consistent return records in the oil industry." Exxon's U.S. refining operation earned $57 million in 1997, gaining 43 percent and exceeding the S&P 500, which was 29 percent. Analyst Paul Ting said he believed the company's stock would reach an all-time high, perhaps reaching into the high $60 range. That prediction has already come true, as Exxon stock reached over $70 per share in June 1998. According to Zack's, brokers recommended buying or holding Exxon stock.

Much of the controversy surrounding the Exxon Corporation has not been its financial condition, but rather its handling of the Exxon Valdez oil spill. The 1989 mishap resulted in a $5-billion fine. The National Transportation Safety Board found that the cause of the spill was neglect of the third mate to appropriately manipulate the ship due to extreme exhaustion and his heavy workload. The cause was also due to the intoxication of the master on board. The controversy surrounding the case has largely been due to the company's attempts to compensate seafood processors in Alaska with $70 million. Publicly announcing its good faith gesture, Exxon was later rebuked by U.S. District Judge H. Russel Holland when it was discovered the company required the Alaskan businesspeople to give back any compensation they might win in court. He ruled that Exxon would not be allowed to receive any of the punitive damages funds, which meant Exxon would lose a total of $700 million. Due to an appeal announced in February 1997 by Exxon, no damage funds have been paid as of mid-1998.




HISTORY

After forming the Standard Oil company in 1870, John D. Rockefeller created the Standard Oil Trust, which enabled the firm to establish new, independent companies in various states by dissolving existing Standard Oil associates. The Supreme Court, however, ordered these companies to be split into 34 entities since the Trust owned 90 percent of the petroleum industry. One of the split companies was New Jersey's Standard Oil (Jersey Standard). When Walter Teagle was president of Jersey Standard in 1917, he quietly bought half of Humble Oil of Texas and moved operations into South America. The company also participated in the Red Line Agreement in 1928, which designated most Middle East oil to selected companies. Other overseas ventures included the 1948 purchase of a 30-percent ownership in Arabian American Oil Company along with a 7-percent interest of Iranian production purchased in 1954. These two moves deemed Jersey Standard the biggest oil company in the world. When oil companies still using the Standard Oil name protested Jersey Standard's use of the name Esso, the company became Exxon in 1972. This change cost the company $100 million.

Other financial difficulties hit Exxon after the oil crisis of the 1970s, which quickly reduced its oil reserves. Exxon was hit hard again in 1989 when the Valdez oil tanker spilled 11 million gallons of oil into Alaskan waters. Shoveling out billions in cleanup costs, the company was called "reckless" by a federal jury in Alaska. The 1990s were characterized mostly by expansion for the Exxon Corporation. The Natuna gas field was developed after Exxon and Pertamina, the Indonesia state oil company, agreed to terms. The company also agreed to a $15-billion development of three oil and natural gas fields near Sakhalin Island in Russia, and was able to entertain further expansion plans after it announced a large oil discovery in the Gulf of Mexico in 1996.



STRATEGY

In 1997 Exxon's chairman, Lee Raymond, referred to the company's strategy in Forbes as "the relentless pursuit of efficiency." Reducing operating costs and focusing on return on capital have been core strategies for the company. Exxon's exploration and production businesses have revolved around the following strategies as well: to make existing oil and gas production sites as profitable as possible, to invest only in projects that produce returns, and to profit from strengthening natural gas markets.

Exxon's refining and marketing businesses have had strategies of their own. One ingredient has been the expansion in profitable, growing markets, like Asia-Pacific, eastern Europe, and Latin America. A second strategy involved the company's restrictions on refining investments in markets that do not produce high growth. A third element has been the company's constant efforts to lower operating expenses and to refine production. Lastly, Exxon has aimed to remain focused on research investment activities.



INFLUENCES

Although Exxon has filed an appeal to $5 billion in damages assessed against it for the Valdez oil spill, the company has stored away that amount in case the appeal is lost. Additionally, falling oil prices may cause Exxon to cut its prices, which should eventually result in lower profits. Energy demand is decreasing, partially because of the unusually mild winters, while at the same time, oil supplies are increasing. Exxon estimates that crude oil use in Asia is going to increase dramatically, perhaps to exceed the combined use of crude oil in the United States and Europe; as a result, the company is pursuing expansion efforts in the Asian market, including developing a $2-billion petrochemical facility in Singapore. The facility is expected to be operable by 2000.

FAST FACTS: About Exxon Corporation


Ownership: Exxon Corporation is a publicly owned company traded on the New York Stock Exchange.

Ticker symbol: XON

Officers: Lee R. Raymond, Chmn., Pres. & CEO, 59, $3,250,000; Robert E. Wilhelm, Sr. VP, 57, $1,307,001; Harry J. Longwell, Sr. VP, 56, $1,280,001

Employees: 80,000 (1997)

Principal Subsidiary Companies: Exxon's chief subsidiaries include: Natuna gas field (50–percent ownership); Exxon China, Inc.; Exxon Coal and Minerals Company; Exxon Company, International; Exxon Company, U.S.A.; Exxon Computing Services Company; Exxon Exploration Company; Exxon Production Research Company; Exxon Research and Engineering Company; Exxon Upstream Technical Computing Company; Exxon Upstream Development Company; Exxon Ventures Inc. (CIS); Exxon Chemical Company; Imperial Oil Limited; SeaRiver Maritime Financial Holdings

Chief Competitors: Some of Exxon's primary competitors are: Amerada Hess; Amoco; Ashland; ARCO; British Petroleum; Broken Hill; Caltex Petroleum; Chevron; Dow Chemical; Eastman Chemical; Elf Aquitaine; FINA; Huntsman; Imperial Oil; Koch; Mobil; Norsk Hydro; Occidental; PDVSA; PEMEX; Pennzoil; Petrobras; Phillips Petroleum; Royal Dutch/Shell; Sun; Texaco; Tosco; Total; and Union Carbide.




CURRENT TRENDS

Formerly, Exxon stayed away from large investments in liquefied natural gas (LNG). As of 1997, however, the company began pursuing LNG projects in Yemen and Indonesia. It also developed natural gas fields in Russia. Still recovering from a marred reputation after the Valdez disaster, the company launched a request to be allowed back into the same Alaskan waters it polluted in 1989, Prince William Sound. The ship, now renamed the SeaRiver Mediterranean, was prohibited from entering the waters after the spill by the Oil Pollution Act. The company's motivation for such a request stemmed from the fact that it was losing money operating the ship in Europe and Egypt, where less expensive ships are readily available.

Another strategic move by Exxon has been the introduction of its Tiger Express retail stores. The first store was opened in Houston, where Tiger Express offers customers a one-stop gas station shopping experience. Employees wear khaki pants and specially designed polo shirts. Other conveniences include a Taco Bell Express drive-thru, a Check Express check-cashing service, a service that allows customers to pay at the pumps, indoor bathroom facilities, diaper changing tables in men's and women's restrooms, and recorded music playing at the pumps and inside the store.




PRODUCTS

Exxon's primary products are oil and gas, however, its chemical division also manufactures and sells plastics, synthetic rubbers, performance fluids, plasticizers, basic chemical building blocks, and lubricant and fuel additives.




CORPORATE CITIZENSHIP

Exxon Corporation has launched several efforts in aiding the community and its environment. One such effort has been the financial contributions aimed at preventing the tiger, the company's symbol, from becoming extinct. It planned to donate approximately $5 million to support breeding efforts and zoo information displays and tiger projects in Siberia and Sumatra. Controversy surrounding Exxon's efforts has stemmed from accusations that the company has not addressed the real threats facing the extinction of tigers: poaching, illegal trade in tiger parts, and annihilation of the animals' prey by hunters. Some have said the company has no plans to enter anti-poaching efforts since such activities have been touchy in Asia, a large market for Exxon. Critics have said that without attention to the real dangers, the company's contributions will be of little value.

Other efforts to incorporate community involvement have included Exxon's efforts in education. Through the Exxon Education Foundation, it has offered $13.5 million in grants to 885 colleges and universities. Under the Foundation's Educational Matching Gift Program, all employees' donations would be matched by Exxon 3-to-1, the largest matching gift program in the nation.

Exxon has also provided assistance in the Ambassador Franklin Williams Scholarship Program from the Stevens Institute of Technology. Exxon gave $1.5 million in grants within an eight-year period to award scholarships for minority students.

CHRONOLOGY: Key Dates for Exxon Corporation


1882:

Incorporates as the Standard Oil Company of New Jersey

1899:

Standard Oil (New Jersey) becomes the sole holding company for all Standard Oil interests

1911:

The Supreme Court orders Standard Oil (New Jersey) to separate from its subsidiaries

1919:

Standard (Jersey) purchases 50 percent of Humble Oil & Refining, the biggest of Standard's suppliers

1926:

Standard (Jersey) introduces the Esso brand name

1943:

Several Venezuelan interests are consolidated into the Creole Petroleum Corporation

1948:

Purchases 30 percent ownership of Arabian American Oil Company

1954:

Purchases a 7 percent interest of Iranian production, making Standard (New Jersey) the largest oil company in the world

1972:

Exxon Corporation becomes the official name of the company

1989:

The Exxon Valdez crashes off the coast of Alaska spilling 260,000 barrels of crude oil

1996:

Exxon announces a huge oil discovery in the Gulf of Mexico




GLOBAL PRESENCE

Exxon operates in more than 100 countries. Exxon China Inc. is headquartered in Beijing. Activities there include exploration, refining, and marketing. Chemical and electric power businesses have been established there as well. Exxon's Coal and Minerals Company is located in Colombia, the United States, and Australia. Also accountable for electrical generation capabilities in Hong Kong, the company conducts business in power generation and coal and mineral exploration. Europe, offshore Malaysia, and Australia serve as oil and gas production cites for Exxon. Exxon Company International and its associates produce gas and oil in 12 countries. This makes up over half of the company's petroleum liquids production and two-thirds of its gas production. One subsidiary, Exxon Ventures Inc., manages exploration and production activities in the former Soviet Union. The company runs offices in Baku, Azerbaijan; Almaty, Kazakstan; and Moscow, Yuzhno-Sakhalinsk, and Arkhangelsk, Russia. Another subsidiary, Imperial Oil Limited, stands as a leading member of the Canadian petroleum business. It has been Canada's largest crude oil producer and the biggest refiner and marketer of petroleum products.



EMPLOYMENT

Statistics show that Exxon makes efforts to hire, retain, and promote minorities and women. In 1997 Exxon hired a total of 1,073 employees in the United States. Women comprised 36 percent of that total, and minorities another 26 percent. Forty-five percent of co-op assignments and internships were given to women out of a total of 289 participating students; another 38 percent were minorities. Exxon allies itself with the National Action Council for Minorities in Engineering (NACME), the Texas Alliance for Minorities in Engineering (TAME), and the National Society of Black Engineers. Exxon also participates in university programs, scholarship programs, and internship programs.



SOURCES OF INFORMATION

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galvin, kevin. "exxon wants exxon valdez allowed back in prince william sound." san diego daily, 16 january 1997.

mack, toni. "the tiger is on the prowl." forbes, 21 april 1997.

patty, stanton h. "prince william sound rebounds." the columbian, 29 march 1998.

"stevens institute of technology honors exxon for its support of the ambassador franklin williams scholarship program." 13 may 1997. available at http://biz.yahoo.com.

teitelbaum, richard. "giants of the fortune 5 hundred: exxon: pumping up profits for years." fortune, 28 april 1997.


For an annual report:

on the internet at: http://www.exxon.com


For additional industry research:

investigate companies by their standard industrial classification codes, also known as sics. exxon's primary sics are:

1311 crude petroleum and natural gas

1382 oil and gas exploration services

2911 petroleum refining

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Oil Pollution Acts

Oil Pollution Acts

Introduction

Oil is a resource for energy and the chemical industry, but it needs to be handled with care. It is usually transported from its source in large tanker ships, and occasionally these tankers spill some oil into the sea. The resulting pollution can have severe and long-lasting effects on sea birds and fish. The widespread devastation caused by major oil spills, most notably the disastrous Exxon Valdez spill off the coast of Alaska in 1989, led to legislation on oil pollution.

The United States Oil Pollution Act of 1990 provides a legal framework for the U.S. Environmental Protection Agency (EPA) to do its job of protecting national waters from oil pollution. It covers facilities that handle oil and requires them to take measures to prevent oil from escaping. They also need to have an emergency plan to deal with any spills that do occur.

Historical Background and Scientific Foundations

Every year, 1.5 billion tons (1.3 billion metric tons) of oil are shipped in large tankers, of which around 1% escapes as a spill. The EPA says that there are around 14,000 spills of oil each year in the United States occurring on inland or coastal waters, some of which extend to beaches. There are many ways in which an oil spill may occur. The ship may develop a mechanical fault or crack in its hull that leads to leaking, it may run aground, or oil may be discharged through washing procedures. Sometimes oil is dumped illegally at sea, and oil spills can also be used as an act of war or terrorism. An oil spill can also result from extreme adverse weather conditions such as a hurricane.

One of the most notorious oil spills came from the tanker Amoco Cadiz, which was carrying a cargo from the Persian Gulf to Rotterdam in the Netherlands. At the time it was the largest-ever oil spill. The ship encountered a severe storm in the English Channel and broke up near the coast of Brittany, France, on March 16, 1978. It lost its entire cargo to the water, consisting of 68.7 million gallons (260 million liters) of oil. Around 200 mi (320 km) of the French coastline was contaminated with oil, with fishing and tourism being affected to the cost of around $1 billion.

On March 24, 1989, the Exxon Valdez ran aground on a reef in Prince William Sound in Alaska, creating an 8-mi (13-km) oil slick. Shortly after, the U.S. government passed the Oil Pollution Act of 1990 in an attempt to protect the nation from oil spills. Any facility that stores, processes, transfers, refines, or otherwise handles oil must do everything it can to prevent an oil release from happening. Should a spill occur, despite these precautions, then there must be a response plan to contain and clean up the oil and reduce its impact on the waterway. This is known as an Oil Spill Prevention, Control, and Countermeasure plan. Moreover, owners of a boat that creates an oil spill will have to pay compensation for every ton that escapes into the water. One obvious way of preventing oil spills is to make tankers have a double hull, so that escapes are contained between two layers. All boats in the United States will be required to have a double hull by 2015.

Over recent years, technologies have been developed to help clean up oil pollution and limit the environmental damage it causes. A boom, or physical barrier, is placed around the spill to stop it spreading farther on the water or reaching the beach. Then skimmers, which are special boats or vacuum machines, physically remove the oil into a container. They work best on still waters. Oil dispersants may be sprayed onto the spill from a boat or from a plane. These are chemicals that can break down the oil into tiny droplets, which may then be degraded by marine microorganisms. Environmental legislation will control which chemicals can be put into the ocean as a dispersant. Sometimes the oil is burned off, but this is controversial because it creates air pollution, particularly if there is wind. The method employed will depend on the location of the spill and prevailing tidal and weather conditions.

Oil spilled on a beach is dealt with differently. This type of spill is treated by high-pressure hosing and materials called sorbents that soak up the oil. The affected sand will often be shoveled away. Hand cleaning and ongoing care is necessary for animals, like birds, that have been affected by spilled oil. It is extremely difficult to remove oil from plants and often they have to be destroyed. Bioremediation, which is the use of microorganisms that are known to break down the compounds in oil, may be used for cleaning up the oil over a period of time. All of these remedial actions have to be carried out in accordance to the provisions of the Oil Pollution Act of 1990 or equivalent legislation elsewhere.

Impacts and Issues

The impact of an oil spill can be severe and long-lasting, which is why environmental legislation is needed for prevention and remedy. Clearly, oil pollution on a waterway or beach is unsightly and will hit recreation and tourism, but its effect on marine ecosystems is more serious. Oil is a complex mixture of hydrocarbons. The lighter fractions may evaporate from the surface of the water over a period of time. The heavier fractions that remain are rich in toxic materials called polyaromatic hydrocarbons. Media images of the aftermath of an oil spill often show sea birds covered in oil. Unable to fly because the oil weighs it down, the bird will naturally try to clean itself. Once ingested, the oil may enter the lungs or liver and poison the bird. Oil may also blind a bird so that it cannot see predators. Specialized hand cleaning of the bird in a sanctuary involves removal of the oil from the exte-or and interior of its body. Unless they receive this kind of attention, most sea birds will be killed by an oil spill.

Fish covered in oil may be eaten by whales. The oil then is transferred to the whale’s blowhole and causes it to suffocate. Sea otters and seals are also severely affected by oil spills. The oil blocks the air insulation in their coats and makes them prone to hypothermia. Meanwhile, oil can also poison the plankton and marine invertebrates, having an adverse impact upon the entire marine food web.

Oil spills have a large visual impact upon the general public, both directly or indirectly. Seeing the damage that oil can do to vulnerable wildlife can help people question their use of oil and look to whether they can find ways of reducing their consumption. The less oil is transported, the less the overall environmental impact of spills.

WORDS TO KNOW

BOOM: A physical barrier placed around an oil spill to contain it.

HYDROCARBONS: Molecules composed solely of hydrogen and carbon atoms.

OIL: Liquid petroleum.

PETROLEUM: A deposit formed from the action of high pressure and temperature on the buried remains of organisms from millions of years ago.

Primary Source Connection

The Exxon Valdez spill is considered to be the largest oil spill in American shipping history. The incident acted as a driving force to amend and strengthen the provisions of the original Oil Pollution Act of 1924. These provisions are now incorporated in the Oil Pollution Control Act (OPA) 1990. OPA 1990 is a federal act that defines Valdez and the surrounding areas as an exclusive economic zone. It prohibits and thereby imposes severe liability on discharge of oil into navigable waters in this area. It also establishes liabilities for resulting injuries, and also for loss of natural resources.

The Oil Spill Recovery Institute (OSRI) was established by the U.S. Congress in response to the 1989 Exxon Valdez oil spill. The act identifies the Prince William Sound Science and Technology Institute (known as the PWS Science Center) situated in Cordova, Alaska, as administrator and headquarters for OSRI. The purpose of the institute was to understand the impact of oil spills on the environment, especially the marine ecosystem, to enhance the response ability of rescue teams, to gather information and bring general awareness, and to collaborate with other organizations and take benefit of their research and analytical knowledge.

OIL POLLUTION ACT OF 1990

Section 2731. Oil Spill Recovery Institute

(a) Establishment of Institute

The Secretary of Commerce shall provide for the establishment of a Prince William Sound Oil Spill Recovery Institute (hereinafter in this section referred to as the “Institute”) through the Prince William Sound Science and Technology Institute located in Cordova, Alaska.

(b) Functions

The Institute shall conduct research and carry out educational and demonstration projects designed to:

  1. identify and develop the best available techniques, equipment, and materials for dealing with oil spills in the arctic and subarctic marine environment; and
  2. complement Federal and State damage assessment efforts and determine, document, assess, and understand the long-range effects of Arctic or Subarctic oil spills on the natural resources of Prince William Sound and its adjacent waters (as generally depicted on the map entitled “EXXON VALDEZ oil spill dated March 1990”), and the environment, the economy, and the lifestyle and well-being of the people who are dependent on them, except that the Institute shall not conduct studies or make recommendations on any matter which is not directly related to Arctic or Subarctic oil spills or the effects thereof.

Section 2732. Terminal and tanker oversight and monitoring

(a) Short title and findings

  1. Short title. This section may be cited as the “Oil Terminal and Oil Tanker Environmental Oversight and Monitoring Act of 1990.”
  2. Findings. The Congress finds that:
    1. the March 24, 1989, grounding and rupture of the fully loaded oil tanker, the EXXON VALDEZ, spilled 11 million gallons of crude oil in Prince William Sound, an environmentally sensitive area;
    2. many people believe that complacency on the part of the industry and government personnel responsible for monitoring the operation of the Valdez terminal and vessel traffic in Prince William Sound was one of the contributing factors to the EXXON VALDEZ oil spill;
    3. one way to combat this complacency is to nvolve local citizens in the process of preparing, adopting, and revising oil spill contingency plans;
    4. a mechanism should be established which fosters the long-term partnership of industry, government, and local communities in overseeing compliance with environmental concerns in the operation of crude oil terminals;
    5. such a mechanism presently exists at the Sullom Voe terminal in the Shetland Islands and this terminal should serve as a model for others;
    6. because of the effective partnership that has developed at Sullom Voe, Sullom Voe is considered the safest terminal in Europe;
    7. the present system of regulation and oversight of crude oil terminals in the United States has degenerated into a process of continual mistrust and confrontation;
    8. only when local citizens are involved in the process will the trust develop that is necessary to change the present system from confrontation to consensus;
    9. a pilot program patterned after Sullom Voe should be established in Alaska to further refine the concepts and relationships involved; and
    10. similar programs should eventually be established in other major crude oil terminals in the United States because the recent oil spills in Texas, Delaware, and Rhode Island indicate that the safe transportation of crude oil is a national problem.

(b) Demonstration programs

(1) Establishment. There are established 2 Oil Terminal and Oil Tanker Environmental Oversight and Monitoring Demonstration Programs (hereinafter referred to as “Programs”) to be carried out in the State of Alaska.

(2) Advisory function. The function of these Programs shall be advisory only.

(3) Purpose. The Prince William Sound Program shall be responsible for environmental monitoring of the terminal facilities in Prince William Sound and the crude oil tankers operating in Prince William Sound. The Cook Inlet Program shall be responsible for environmental monitoring of the terminal facilities and crude oiltankers operating in Cook Inlet located South of the latitude at Point Possession and North of the latitude at Amatuli Island, including offshore facilities in Cook Inlet.

With respect to the Cook Inlet Program, the terminal facilities, offshore facilities, or crude oil tanker owners and operators enter into a contract with a voluntary advisory organization to fund that organization on an annual basis and the President annually certifies that the organization fosters the general goals and purposes of this section and is broadly representative of the communities and interests in the vicinity of the terminal facilities and Cook Inlet.

Section 2734. Vessel traffic service system

The Secretary of Transportation shall within one year after August 18, 1990:

  1. acquire, install, and operate such additional equipment (which may consist of radar, closed circuit television, satellite tracking systems, or other shipboard dependent surveillance), train and locate such personnel, and issue such final regulations as are necessary to increase the range of the existing VTS system in the Port of Valdez, Alaska, sufficiently to track the locations and movements of tank vessels carrying oil from the Trans-Alaska Pipeline when such vessels are transiting Prince William Sound, Alaska, and to sound an audible alarm when such tankers depart from designated navigation routes; and
  2. submit to the Committee on Commerce, Science, and Transportation of the Senate and the Committee on Merchant Marine and Fisheries of the House of Representatives a report on the feasibility and desirability of instituting positive control of tank vessel movements in Prince William Sound by Coast Guard personnel using the Port of Valdez, Alaska, VTS system, as modified pursuant to paragraph (1).

Section 2735. Equipment and personnel requirements under tank vessel and facility response plans

(a) In general

In addition to the requirements for response plans for vessels established by section 1321(j) of this title, a response plan for a tanker loading cargo at a facility permitted under the Trans-Alaska Pipeline Authorization Act (43 U.S.C. 1651 et seq.), and a response plan for such a facility, shall provide for:

  1. prepositioned oil spill containment and removal equipment in communities and other strategic locations within the geographic boundaries of Prince William Sound, including escort vessels with skimming capability; barges to receive recovered oil; heavy duty sea boom, pumping, transferring, and lightering equipment; and other appropriate removal equipment for the protection of the environment, including fish hatcheries;
  2. the establishment of an oil spill removal organization at appropriate locations in Prince William Sound, consisting of trained personnel in sufficient numbers to immediately remove, to the maximum extent practicable, a worst case discharge or a discharge of 200,000 barrels of oil, whichever is greater;
  3. training in oil removal techniques for local residents and individuals engaged in the cultivation or production of fish or fish products in Prince William Sound;
  4. practice exercises not less than 2 times per year which test the capacity of the equipment and personnel required under this paragraph; and
  5. periodic testing and certification of equipment required under this paragraph, as required by the Secretary.

Section 2737. Limitation

Notwithstanding any other law, tank vessels that have spilled more than 1,000,000 gallons of oil into the marine environment after March 22, 1989, are prohibited from operating on the navigable waters of Prince William Sound, Alaska.

Section 2738. North Pacific Marine Research Institute

(a) Institute established

The Secretary of Commerce shall establish a North Pacific Marine Research Institute (hereafter in this section referred to as the “Institute”) to be administered at the Alaska SeaLife Center by the North Pacific Research Board.

Functions

(a) The Institute shall:

  1. conduct research and carry out education and demonstration projects on or relating to the North Pacific marine ecosystem with particular emphasis on marine mammal, sea bird, fish, and shellfish populations in the Bering Sea and Gulf of Alaska including populations located in or near Kenai Fjords National Park and the Alaska Maritime National Wildlife Refuge; and
  2. lease, maintain, operate, and upgrade the necessary research equipment and related facilities necessary to conduct such research at the Alaska SeaLife Center.

(f) Availability of research

The Institute shall publish and make available to any person on request the results of all research, educational, and demonstration projects conducted by the Institute. The Institute shall provide a copy of all research, educational, and demonstration projects conducted by the Institute to the National Park Service, the United States Fish and Wildlife Service, and the National Oceanic and Atmospheric Administration.

U.S. Congress

U.S. CONGRESS. “OIL POLLUTION ACT.” 33 U.S.C.A. 40. II, SEC. 2731–8. WASHINGTON, D.C.: U.S. CONGRESS, 1990.

See Also Marine Ecosystems

BIBLIOGRAPHY

Books

Cunningham, W.P., and A. Cunningham. Environmental Science: A Global Concern. New York: McGraw-Hill International Edition, 2008.

Web Sites

U.S. Environmental Protection Agency (EPA). “Oil Program.” http://www.epa.gov/region09/waste/sfund/oilpp (accessed April 21, 2008).

U.S. Environmental Protection Agency (EPA). “Threats from Oil Spills.” http://www.epa.gov/emergencies/content/learning/effects.htm (accessed April 21, 2008).

Susan Aldridge

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Oil Spills

Oil spills


An oil spill is the common expression used to refer to the release of crude oil or petroleum into water or on land. Crude oil released in this way represents an evironmental issue of great concern because spills threaten animals, plant life and other marine resources. Oil can also cause long term environmental and economic damage to the marine ecosystem near a spill. According to a 2002 report from the National Academy of Sciences , approximately 210 million gal (790 million l) of oil spills into the oceans each year. Sources include the wells from which oil is extracted and the ships used to transport it, as well as natural oil seepage from geologic formations below the seafloor, as for example in Coal Oil Point along the California Coast, where an estimated 2,0003,000 gal (7,57011,350 l) of crude oil is released naturally from the ocean floor every day. While accidental tanker oil spills receive the most publicity, they only account for approximately 20% of the crude oil released into the oceans each year by human activity with the remainder largely due to routine oil tanker ship maintenance operations such as loading , discharging, and emptying ballast tanks.

Oil and spills are often measured in gal (l) or "barrels of petroleum"; a barrel equals 42 gal (159 l), and a (metric) tonne equals 7.2 barrels. Tankers sometimes transport more than 30,000 barrels of oil (200,000 tonnes).

According to a 2002 study performed by the National Research Council , a total of 29 million gal (110 million l) of petroleum are released into North American ocean waters each year as a result of human activities or carelessness. However, only a small fraction of that environmental pollution is due to pipeline ruptures or oil tanker spills. Approximately 85% of those spills involve land-based runoffs from cars and trucks, fuel dumping by commercial airplane pilots, and emissions from small boats and crafts.

Oil and its properties

The word oil usually refers to petroleum, a liquid that occurs in nature and consists of hydrocarbons , a group of organic chemical compounds of hydrogen and carbon atoms. Petroleum, also known as crude oil, is classified in categories that range from light, volatile oils (Class A) to heavy, sticky oils (Class C), depending on physical properties and charcateristics. Refined oil is crude oil that has been processed for use as gasoline , kerosene, lubricating oil, and fuel oils of varying weights.

In spills, the majority of oils spread horizontally to form a smooth, slippery layer on the surface of water. This surface is called a slick. When oil stays on the ocean surface, it cuts off the oxygen supply to the marine life below. The oil also kills birds, animals, and can harm the water supply and the coastline.

"Fate" is the term used by scientists to describe what happens to the various oil components after a spill. Factors that determine fate include the type of oil, the quantity spilled, water temperature, and climate . The fates of oil are natural processes. Weathering is a series of chemical and physical changes that causes oil to break down and become heavier than water. Evaporation occurs when lighter substances in the oil evaporate and leave the water surface.

About half of a spill may evaporate within several days. Warm water temperatures help this process. Although oil evaporates, the process of emulsification may increase the size of a spill. Emulsions are a mixture of small drops of oil and water. Wave action mixes together a water-in-oil mixture called "chocolate mousse." Mousse may remain in the environment for months or years, according to the United States Environmental Protection Agency (EPA).

Oxidation reactions may also result from the contact of oil with water and oxygen. Portions of the slick cling together in tar balls. Biodegradation occurs when microorganisms like bacteria feed on oil. How oil affects the environment depends on the rate at which the oil spreads. The slick is affected by surface tension, which is the measure of the attraction between the surface molecules of a liquid. Oil with a higher surface tension usually remains in one place. If the surface tension is lower, the oil tends to spread. Wind and water currents also cause oil to spread. Furthermore, higher temperatures can reduce surface tension so oil tends to spread more in warmer water.

Light refined products like gasoline and kerosene spread on the water surface and quickly penetrate porous soil . The risk of fire and toxic hazards is high, but these oils evaporate quickly and leave little residue. Heavier refined oil products are less of a fire and toxic hazard risk.

Oil spills and their aftermaths

After a spill, oil can spread very quickly unless contained, for example, by a boom or a boat slip. The lighter the oil, the faster it spreads out. For example, gasoline spreads faster than heavy fuel oil. Faster currents and winds can also cause oil to spread faster and temperature can sometimes make a difference as well because colder oil does not flow as well and spreads more slowly.

Oil spills have occured all over the world. The Cutter Information Corporation tracks oil spills involving at least 10,000 gal (34 tonnes). It reports that spills of that magnitude have occurred in the waters of 112 countries since 1960. Oil spills are also known to happen more often in some parts of the world. Major oil spills from tankers have occurred in the Gulf of Mexico (267 spills); the northeastern United States (140 spills); the Mediterranean Sea (127 spills); the Persian Gulf (108 spills); the North Sea (75 spills); Japan (60 spills); the Baltic Sea (52 spills); the United Kingdom and English Channel (49 spills); Malaysia and Singapore (39 spills); the west coast of France and north and west coasts of Spain (33 spills); and Korea (32 spills).

The aftermath of an oil spill always results in environmental damage. During the 1991 Gulf War, oil was spilled onto Kuwaiti land and into the Arabian Gulf when the Iraqi Army began destroying tankers, oil terminals, and oil wells. Approximately 9,000,000 barrels of oil were spilled in the Arabian Gulf, forming a slick measuring some 600 mi2 (1,600 km2). When the slick moved close to Saudi Arabia, people pumped water into the area between the beach and the oil. Some 400 mi (640 km) of the western shores of the gulf was oiled, with Saudi Arabian shores the most severely affected, the spill destroying most of its shrimp fields.

In 1989, the Exxon Valdez ran aground Bligh Reef in Prince William Sound , Alaska, spilling more than 11 million gal (41 million l) of crude oil. The spill was the largest in United States history and focused worldwide attention to the damage caused by oil spills. The first day, thousands of animals died. During the month after the spill, more than 7,000 sea otters in Prince William Sound died. Other casualties included more than 100 bald eagles, and 36,000 birds including puffin, auklet and other species. As the oil spread, people tried to rescue wildlife. They had to calm terrified animals. Rescuers fed animals and kept them warm. When the animals were stronger, people started cleaning birds and mammals.

Three methods were used in the effort to clean up the spill, namely burning, mechanical cleanup and the use of chemical dispersants. Burning was conducted during the early stages by placing a fire-resistant boom on tow lines, with two ends of the boom each attached to a different ship. The two ships with the boom between them sailed very slowly throughout the slick until the boom was full of oil. They then towed the boom away from the slick and the oil was set on fire. The procedure did not endanger the main slick nor the Exxon Valdez, because a safe distance separated them. Mechanical cleanup was also carried out using booms and skimmers with people cleaning birds and mammals. Chemical dispersants were also used in the cleanup effort but were not very effective because there was not enough wave action to mix the dispersant with the oil in the water.

The aftermath of the Exxon Valdez spill included the adoption of the federal Oil Pollution Act of 1990. The law created a spill clean-up fund, set penalties for oil spillers, and directed the federal government to respond quickly to oil spills. In 1993, federal law required a double hull for all tankers carrying oil to the United States.

The United States produces an average of 125 billion gal (473 billion l) of crude oil each year. The country imports an additional 114 billion gal (430 billion l) and 29 million gal (110 million l) of oil enter coastal waters off the United States each year. Nearly 85% of that oil comes from polluted rivers, small boats, vehicles, and street run-off. As a result, the National Academy of Sciences has called on the federal government to work with state environmental agencies to address these issues.

In the United States, various techniques are used to respond to oil spills. Containment and recovery are usually the primary goals of the response team. Equipment includes booms and skimmers that are used to collect the oil and store it. Floating booms are mechanical barriers that extend above and below the surface of the water to stop the spread of oil. They can be used to surround a slick completely and reduce its spread, to protect harbor entrances or biologically sensitive areas, and to divert oil to an area where it can be recovered. Dispersants are chemicals used to break up oil and keep it from reaching the land. Furthermore, the spill response team works to keep birds and animals away from the oil spill area. Their equipment includes propane scare cans, floating dummies, and helium balloons.

Oil spills on a global level

The EPA, the National Oceanic and Atmospheric Administration , and the American Petroleum Institute are among the sponsors of the International Oil Spill Conference. Since 1969, the conference has been scheduled every two years. Goals include delineating the overall oil spill problem and exploring ways to prevent and respond to spills. A 2003 conference was planned in Vancouver, British Columbia.

Oil spills are a global problem. In 1999, the tanker Erika caused the greatest oil spill in European history. The tanker broke and spilled 3 million gal (11 million l) of oil off the coast of Brittany, France. The following year, a pipeline ruptured and spilled 343,200 gal (1.3 million l) of oil into Guanabara Bay in Brazil. And in 2000, the tanker Westchester ran aground south of New Orleans, spilling 567,000 gal (2.1 million l) of oil into the Mississippi River. That was the largest spill in the United States since the Exxon Valdez.

Environmental organizations concerned with oil spills include the Sea Shepherd Conservation. Founder Paul Wat son's goal in 2002 was to create a coalition of oil producers and conservationists. The coalition would develop airborne teams that would respond to oil spills within 12 hours. Team equipment would include items for cleaning wildlife and pumps for oil.

[Liz Swain ]


RESOURCES

BOOKS


Burger, Joanna. Oil Spills. New Brunswick, NJ: Rutgers University Press, 1997.

Fingas, Mervin F., and Jennifer Charles. The Basics of Oil Spill Cleanup, Second Edition. Boca Raton: CRC Press, 2000.

Garcia-Martinez, R., and C. A. Brebbia, eds. Oil and Hydrocarbon Spills, Modelling, Analysis and Control. Southampton, UK: Computational Mechanics (WIT Press), 1998.

Hayes, Miles. Black Tides. Austin: University of Texas Press, 1999.

Keeble, John, and Natalie Fobes. Out of the Channel: The Exxon Valdez Oil Spill in Prince William Sound. Seattle: University of Washington Press, 1999.

ORGANIZATIONS

EPA - Oil Spill Program, UNIDO New York Office, Toll Free: 800-424-9346, Email: [email protected], <http://www.epa.gov/oilspill/>

International Tanker Owners Pollution Federation Limited, Staple Hall, Stonehouse Court, 87-90 Houndsditch, London, U.K. EC3A 7AX +44(0)20-7621-1255, Toll Free: 800-424-9346, Email: [email protected], <http://www.itopf.com/index2.html>

National Oceanic and Atmospheric Administration., 14th Street and Constitution Avenue NW, Room 6013, Washington, D.C. USA 20230 (202) 482-6090, Fax: (202) 482-3154, Email: [email protected], <http://www.noaa.gov>

Oil Spill Response Ltd (ORSL), 1 Great Cumberland Place, London, U.K. W1H 7AL +44 (0)20-7724-0102, Toll Free: 800-424-9346, Email: [email protected], <http://www.oilspillresponse.com/>

Sea Shepherd International., 22774 Pacific Coast Highway, Malibu, CA USA 90165 (310) 456-1141, Fax: (310) 456-2488, Email: [email protected], <http://www.seashepherd.org>

The National Academies, 2101 Constitution Avenue, NW, Washington, DC USA 20418 (202) 334-2000, , <http://www4.nationalacademies.org>

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Oil Spills

Oil Spills

Characteristics of petroleum

Oil pollution

Ecological damages of oil spills

Resources

Petroleum is an important natural resource that is often produced in places far away from the regions where most of its consumption occurs. Accordingly, petroleum must be transported in large quantities, mostly by oceanic tankers, barges on inland waters, and both subsea and overland pipelines. Any of these transportation systems can release pollution through spills of oil, by operational discharges associated with cleaning of the storage tanks of tankers, or during unloading at refineries. Some accidental oil spills have been spectacular in their magnitude and their near-term ecological impact, involving losses of huge quantities of petroleum from wrecked supertankers or offshore platform facilities.

Oil pollution can also be caused by discharges of improperly handled hydrocarbon-laden waste water from petroleum refineries and in urban runoff. Although individual spills typically involve relatively small amounts of oil, frequent small spills can release a large amount of oil into the environment.

Characteristics of petroleum

Petroleum is a naturally occurring mixture of organic chemicals, the most abundant of which are hydrocarbons (molecules containing only hydrogen and carbon atoms). Petroleum is synthesized from biomass by complex, anaerobic reactions occurring at high pressure and temperature over long periods of time deep in sedimentary geological formations. Petroleum can occur as a liquid known as crude oil, which may also contain natural gas, and also as a semi-solid tar or asphalt in oil sands and shales. There are hundreds of molecular species in petroleum, ranging from gaseous methane with only 16 g/mole, to very complex substances weighing more than 20,000 g/mole.

Petroleum differs in its physical and chemical characteristics from deposit to deposit. Some crude oils are thick and viscous, while others are light and volatile. The lighter fractions of petroleum evaporate relatively quickly when spilled into the environment. This leaves behind residues of relatively heavy molecules that are more persistent in terrestrial or aquatic habitats, and cause longer-lasting effects.

Oil pollution

The total spillage of petroleum into the oceans through human activities is estimated to range from about 0.7-1.7 million tons (0.6-1.5 million tons) per year, equivalent to less than 0.1% of the quantity of petroleum transported by tankers. In comparison, the production of hydrocarbons by marine plankton is about 28.7 million tons (26 million tons)/year. These natural hydrocarbons contribute to background concentrations in the oceans, but they are well dispersed and not associated with ecological damage or pollution. In addition, natural oil seeps contribute about 6-13% of the total petroleum input to the oceans, sometimes causing local damage.

The largest and most consequential oil spills of petroleum or heavy bunker fuel come from disabled oceanic tankers or drilling platforms, from barges or ships on inland waters, or from blowouts of wells or damaged pipelines. Damage is also caused by the relatively frequent spills and operational discharges associated with coastal refineries and urban runoff. Large quantities of oil are also spilled when tankers clean out the petroleum residues from their huge storage compartments, often discharging the oily bilge washings directly into the ocean.

Some examples of disastrous oil spills include the following accidents involving oceanic supertankers: (1) the Prestige, which split in half off Galicia, Spain in November 2002, spilling about 67,000 tons (61,000 metric tons) of crude oil; (2) the Torrey Canyon, which ran aground in 1967 off southern England, spilling about 129,000 tons (117,000 metric tons) of crude oil; (3) the Metula, which wrecked in 1973 in the Strait of Magellan and spilled 58,000 tons (53,000 metric tons) of petroleum; (4) the Amoco Cadiz, which went aground in the English Channel in 1978, spilling 253,000 tons (230,000 metric tons) of crude oil; (5) the Exxon Valdez, which ran onto a reef in Prince William Sound in southern Alaska in 1989 and discharged 39,000 tons (35,000 metric tons) of petroleum; and (6) the Braer, which spilled 93,000 tons (84,000 metric tons) of crude oil off the Shetland Islands of Scotland in 1993. All of the tankers involved were of the older single hull design. Such occurrences should decrease with the advent of double-hulled tankers.

Significant oil spills have also occurred from offshore drilling or production platforms as the result of mechanical or operational failure. In 1979 the IXTOC-I exploration well had an uncontrolled blowout that spilled more than 551,000 tons (500,000 metric tons) of petroleum into the Gulf of Mexico. Smaller spills include one that occurred in 1969 off Santa Barbara in southern California, when about 11,000 tons (10,000 metric tons) were discharged, and the Ekofisk blowout in 1977 in the North Sea off Norway, which totaled 33,000 tons (30,000 metric tons) of crude oil.

A leak from a hole in an oil pipeline at Prudhoe Bay, Alaska, is estimated to have released between 200,000 and 300,000 gallons of crude oil in early 2006. Discovery and cleanup of the spill were complicated by the fact that the pipeline is heavily insulated, and oil may have been leaking into the insulation surrounding the pipe for some time. Sub-zero temperatures made repairs, in which a steel sleeve was place around the pipeline and welded into place, and cleanup difficult. Later that year, the discovery of extensive corrosion in the 30-year old Prudhoe Bay pipeline system, which sends oil to the Trans Alaskan Pipeline, led to a complete shutdown of that oilfield while 16 miles of the 22 mile long pipeline were replaced. Corrosion in oilfield pipelines can be monitored using tools known as smart pigs, which are computerized tools run through the pipeline to assess its condition. At the time of the shutdown, the Prudhoe Bay oil field produced about 400,000 gallons of oil per day, or about 8% of the United States daily consumption. One of the immediate results of the reduction in oil production, which was compounded by other events such as the U.S. occupation of Iraq and political instability in such oil producing countries as Nigeria, was an increase in oil prices to record levels.

Enormous quantities of petroleum have also been released during warfare. Because petroleum and its refined products are important economic and industrial commodities, enemies have commonly targeted tankers and other petroleum-related facilities during wars. For example, during World War II German submarines sank 42 tankers off the east coast of the United States, causing a total spillage of about 460,000 tons (417,000 metric tons) of petroleum and refined products. There were 314 attacks on oil tankers during the Iran-Iraq War of 19811987, 70% of them by Iraqi forces. The largest individual spill during that war occurred when Iraq damaged five tankers and three production wells at the offshore Nowruz complex, resulting in the spillage of more than 287,000 tons (260,000 metric tons) of petroleum into the Gulf of Arabia. Sabotage of pipelines and petroleum facilities was also common in the post-2001 U.S. led invasion of Iraq, during which insurgents frequently attacked oil pipelines. The amount of oil that leaked into the environment as a result of the attacks is unknown. An Israeli air attack on an oil-fired power plant in Lebanon released about 15,000 tons of oil into the Mediterranean Sea during the 2006 Hezbollah-Israel conflict, causing extensive environmental damage.

The largest-ever spill of petroleum into the marine environment occurred during the 1991 Gulf War. In that incident, Iraqi forces deliberately released an estimated 0.6-2.2 million tons (0.5-2 million tons) of petroleum into the Persian Gulf from several tankers and an offshore tanker-loading facility known as the Sea Island Terminal. An additional, extraordinarily large spill of petroleum to the land and atmosphere also occurred as a result of the Gulf War, when more than 700 production wells in Kuwait were sabotaged and ignited by Iraqi forces in January 1991. The total spillage of crude oil was 46138 million tons (42126 million tons). Much of the spilled petroleum burned in atmospheric conflagrations, while additional amounts accumulated locally as lakes of oil, which eventually contained 5.523 million tons (521 million tons) of crude oil. Enormous quantities of petroleum vapors were dispersed to the atmosphere. About one-half of the free-flowing wells were capped by May, and the last one in November 1991.

After oil is spilled into the environment, it dissipates in a number of ways. Spreading refers to the process by which spilled petroleum moves and disperses itself over the surface of water. The resulting slick can then be transported by currents and winds. The rate and degree of spreading are affected by the viscosity of the oil, wind speed, and turbulence of the water surface. Evaporation is important in the initial reduction of the volume of an oil spillage, especially of relatively light and volatile hydrocarbon fractions. Evaporation typically accounts for almost 100% of spilled gasoline at sea, 30-50% of spilled petroleum, but only 10% of bunker fuel. Solubilization occurs when some fractions of the spilled oil dissolve into the water column, causing a contamination of subsurface waters in the vicinity of the oil spill. For example, beneath a petroleum slick in the North Sea the concentration of hydrocarbons in water was 4 g/m3(ppm), compared with about 1 mg/m3 (ppb) in uncontaminated seawater. Lighter hydrocarbon fractions of petroleum are much more soluble in water than heavier ones, and aromatics are much more soluble than alkanes. (Aromatic hydrocarbons such as benzene and naphthalene have an unsaturated ring structure, while alkanes such as octane have a linear structure.) In addition, some of the spilled hydrocarbons are slowly oxidized by ultraviolet radiation and microorganisms into simpler compounds, ultimately to carbon dioxide and water.

The combined influences of solubilization, evaporation, and oxidation are known as weathering. Weathering preferentially removes the lighter hydrocarbon fractions, leaving a residual material made up of relatively heavy hydrocarbons. Over the shorter term in aquatic environments, this residuum forms a stable water-in-oil emulsion known as mousse, which is the material that usually impacts shorelines after an offshore spill. The mousse combines with sediment particles on the shore to form sticky patties of oil and sand, which eventually form asphaltic lumps.

At sea, weathering of the mousse eventually results in the formation of a dense, semi-solid, asphaltic residuum known as tar balls. In the vicinity of frequently traveled tanker routes worldwide, tar balls can be commonly found floating offshore and on beaches. Tar balls are especially common in places where the oceanic circulation resembles a surface vortex. A well known example of this phenomenon is the oceanic gyre known as the Sargasso Sea, famed for its accumulations of natural debris such as floating seaweed, as well as such human debris as tar balls.

Ecological damages of oil spills

Even small oil spills can cause important changes in ecologically sensitive environments. For example, a small discharge of oily bilge washings from the tanker Stylis during a routine cleaning of its petroleum-storage compartments caused the deaths of about 30,000 seabirds, because the oil was spilled in a place where the birds were abundant. Even relatively small operational spillages of petroleum can have significant though, perhaps temporary, ecological impact, especially to seabirds and marine mammals. An ecosystem is dynamicever changingand continues its natural cycles and fluctuations at the same time that it struggles with the impact of spilled oil. As time passes, separating natural change from oil-spill impacts becomes more and more difficult.

Studies made after large oceanic spills have shown that the ecological damage can be intense. After the Torrey Canyon spill in 1967, hundreds of kilometers of the coasts of southern England and the Brittany region of France were polluted by oily mousse. The oil pollution caused severe ecological damage, due to the physical and toxic effects of fouling of organisms with petroleum residues. Those direct ecological damages were made much worse by some of the cleanup methods, because of the highly toxic detergents and dispersants that were used. As is the case with many oil spills, seabirds were victims of the Torrey Canyon incident. This accident caused the deaths of at least 30,000 birds, causing a substantial decrease in their breeding populations in subsequent years.

The damage caused by detergents and dispersants during the cleanup of shorelines polluted by the Torrey Canyon spill were an important lesson. Subsequent cleanups used less toxic chemicals. In addition, their use became largely restricted to offshore locations and places of high value for industrial or recreational purposes, rather than natural habitats.

In 1978, the Amoco Cadiz was wrecked in the same general area as the Torrey Canyon. Considerable ecological damage was also caused by this accident. However, the damage was less intense than that caused by the Torrey Canyon because less-toxic detergents and dispersants were used during the cleanup, in much smaller quantities, and only in high-value places such as harbors.

The most damaging oil spill ever to occur in North American waters was the Exxon Valdez accident of 1989. It was caused when an intoxicated captain gave temporary command of the supertanker to a subordinate, who erred in his navigation and ran the ship aground on a reef. The spilled oil affected about 1,200 mi (1,900 km) of shoreline of Prince William Sound and its vicinity, causing ecological damages in tidal and subtidal habitats. Large numbers of sea mammals and birds were also affected in offshore waters. An estimated 5,000-10,000 sea otters (Enhydra lutris ) were present in Prince William Sound, and at least 1,000 of these charismatic mammals were killed by oiling. About 36,000 dead seabirds of various species were collected from beaches and other places, but the actual number of killed birds was probably in the range of 100,000-300,000 birds. At least 153 bald eagles (Haliaeetus leucocephalus ) died from poisoning when they scavenged the carcasses of oiled seabirds.

Great efforts were expended in cleaning up the oiled shoreline, almost entirely using manual and physical methods, rather than dispersants and detergents. In total, about 11,000 people participated in the cleanup, and about $2.5 billion was spent by the ship owners and $154 million by the U.S. federal government. This was by far the most expensive cleanup that has ever been undertaken after an oil spill. Within a year of the spill, the combined effects of the cleanup and winter storms had removed most of the residues of the Exxon Valdez spill from the environment. However, in August 2002 the Exxon Valdez Trustee Council released a report stating that while it is clear that many fish and wildlife species injured by the spill have not fully recovered, it is less clear what role oil plays in the inability of some populations to recover. Bald eagles, black oystercatchers, common murre, pink salmon, river otters and sockeye salmon have recovered. Wilderness area intertidal communities, killer whale, marbled murrelet, sea otters, clams and sediments are recovering but the common loon, three species of cormorants, harbor seals, harlequin duck,

KEY TERMS

Bilge washings Hydrocarbon-contaminated water that results from cleaning of the petroleum-holding compartments of a tanker, and that may be discharged to the environment.

Bunker fuel A relatively viscous, liquid hydrocarbon mixture, also known as bunker-C fuel oil, that remains after lighter hydrocarbons are distilled from petroleum during refining. Bunker C is used as a fuel by oil-fired generating stations, heating plants, and ships.

Detergent A chemical used as a cleaning agent because it encourages the formation of an oil-in-water emulsion.

Dispersant A chemical agent that reduces the surface tension of liquid hydrocarbons, encouraging the formation of an oil-in-water emulsion. This reduces the volume of residual oil on shorelines or the water surface after a spill.

Mousse A water-in-oil emulsion that is formed by turbulence of the surface water after a petroleum spill to the aquatic environment.

Petroleum A naturally occurring, liquid mixture of hydrocarbons that is mined and refined for energy and the manufacturing of chemicals, especially plastics. Also known as crude oil.

Pacific and pigeon guillemot have shown little or no recovery.

See also Fossil fuels.

Resources

BOOKS

Wang, Z. and S. Stout. Oil Spill Environmental Forensics: Fingerprinting and Source Identification. Burlington, Mass.: Elsevier, 2006.

Bill Freedman

William J. Engle

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Oil Spills

Oil Spills

Introduction

Oil spills refer to the release of oil (liquid petroleum hydrocarbon) onto land or into water. The release can be accidental and due to human activity; the most well-known example is the loss of crude oil, a processed oil product such as gasoline or diesel fuel from a tanker following an accident near a seacoast or coast of a large freshwater river or lake.

More commonly, oil spills are the result of the leakage of oil or oily liquid from ships during their normal operation, and from runoff of oily wastes from the land into the water. Oil spills can also occur naturally and are the result of the seepage of oil from a seafloor deposit.

The environmental consequences of an oil spill can be devastating. Animals and birds are killed if they ingest the oil, and the oily coating on the fur or feathers can prove to be lethal. Also, the oily fouling of coastal beaches and vegetation can take months to remove, and can disrupt normal ecological functions for years.

Clean-up efforts have been aided by the use of microorganisms that have naturally adapted to use the hydrocarbons in an oil spill as a food source. As well, microbes can be genetically manipulated to be capable of digesting the pollutant, although the use of these genetically modified organisms in a natural environment is not usually done. However, if the oil spill can be collected and the fouled material transported to a secure site, use of the genetically modified bacteria can be useful.

Historical Background and Scientific Foundations

Oil spills caused by human error or accident have occurred ever since oil has been recovered from the ground and from the sea. Oil recovery is a complex process that involves drilling down into the ground or below the seabed to deposits, and—unless the oil formation is under great pressure that can push the oil to the surface—pumping the oil to the surface.

A century ago, oil production was more of a domestic issue, with seagoing transport of oil confined to small quantities carried aboard sailing ships. By the 1970s, however, with the demand for oil growing in countries including the United States, crude and processed oil was being loaded onto large tankers for transport all over the globe. The capacity of the tankers grew. In 2008, “supertankers” that stretch up to 1,770 ft (540 m) in length—almost the distance of six football fields—can hold up to two million barrels of oil.

From the time shipping began, it has been a hazardous practice. Storms, mechanical failure, and other calamities have caused countless shipping accidents. When this happens to an oil transport ship, the result can be an environmental disaster.

There have been hundreds of large ship-related oil spills since the beginning of the 1970s. The following are just a few noteworthy examples. In March 1972, the tanker Torrey Canyon ran aground off the coast of Cornwall in England and spilled nearly 120,000 tonnes of oil (one tonne is 1,000 kilograms or over 2,200 pounds). In 1976, the Argo Merchant ran aground off Nantucket in the United States, and spilled 25,000 tonnes of oil. The resulting film of oil on the surface of the water (an oil slick) was 100 mi (160 km) long and more than 50 mi (80 km) wide. Two years later, over 136,000 tonnes of crude oil were spilled onto more than 100 mi (160 km) of coastline near Portsall, France, when the tanker Amoco Cadiz ran aground.

In February 1983, a rupture at the Nowruz oil field in the Persian Gulf caused the release of 260,000 tonnes of oil. In August of the same year, the tanker Castillo de Bellver caught fire off the coast of South Africa, spilling

WORDS TO KNOW

BIOREMEDIATION: The use of living organisms to help repair damage such as that caused by oil spills.

ECOSYSTEM: The community of individuals and the physical components of the environment in a certain area.

GROUNDWATER: Fresh water that is present in an underground location.

POLLUTION: Physical, chemical or biological changes that adversely affect the environment.

252,000 tonnes of oil. In 1990, the tanker American Trader gashed its hull and the resulting oil spill off the coast of southern California created a 15-mi (24-km) long slick that contaminated the Boca Chica nature reserve. In the 1991 Persian Gulf War, a massive amount of oil was spilled from refinery terminals, anchored tankers, and oil wells during the Iraqi invasion of Kuwait. Estimates of the amount of oil that was spilled range up to 780,000 tonnes. In 1999, the Erika broke up in stormy seas off the Atlantic coast of France; the resulting slick polluted over 100 mi (160 km) of coastline. Finally in this brief list, a 2004 spill from the Terra Nova, an oil drilling platform in the Atlantic Ocean off the Canadian province of Newfoundland, killed up to 100,000 seabirds.

Oil spills can involve what is termed crude oil. The planet’s crude oil was made millions of years ago by the decay of plants and animals that settled onto seabeds. This decay formed deposits of crude oil, which today is recovered as a black liquid (oil that is contained in sandy formations in northern Alberta, Canada, is near molasseslike in consistency, and has to be recovered using very sophisticated and energy-intensive techniques). Crude oil is also known as petroleum. Tankers are one of the transportation routes used to transfer the crude oil to a facility called an oil refinery, where components including gasoline are separated in the process of refining and collected.

Both crude and refined oil are composed of molecules called hydrocarbons. These are sticklike molecules built of linked carbon atoms containing attached hydrogen molecules. This structure makes hydrocarbon virtually unable to dissolve in water; such compounds are termed “hydrophobic” (“water hating”). Because of its hydrophobic property, spilled oil will tend float on the surface of fresh and marine water, creating the oil slick.

As the slick is washed ashore by waves, the thick oil coats rocks, vegetation, sand, and living creatures that it contacts. The effects on wildlife can be disastrous. When oil coats a bird’s feathers, for example, it destroys the feather’s normal ability to repel water and retain air between the layer of feathers and the skin. As a result, the bird losses its ability to regulate its body temperature and dies of hypothermia, or drowns from the loss of buoyancy and the weight of the oil. Death can also result from poisoning, as the bird ingests oil in its attempt to clean itself. Birds that are poisoned but survive may have damage to organs including the liver, kidneys, and intestines, and may have difficulty in breeding. Females can become less capable of laying eggs.

Thus, an oil spill may not only affect bird populations immediately, but can disrupt population numbers for years afterward. Plants and animals can also be harmed or killed.

A frequent sight after an oil spill has fouled a coastline is the army of people attempting to clean up the spill. They may spray steam onto the spill, which can heat the oily coat and make it easier to wash off. As well, chemicals termed dispersants can be applied that cluster

IN CONTEXT: THE EXXON VALDEZ OIL SPILL, AN INFAMOUS AND LASTING LEGACY

Just after midnight on March 24, 1989, the fully loaded oil tanker Exxon Valdez, sailing from the port of Valdez, Alaska, and carrying just over 53 million gallons (200.6 million liters) of oil, hit the Bligh Reef in Prince William Sound, Alaska, at top speed. Nearly 11 million gallons (41.6 million liters) of oil were spilled into the Sound’s waters and fragile ecosystem.

Driven by winds and currents, the spill ultimately stretched 460 mi (740 km) and affected 1,300 mi (2,100 km) of shoreline. It is estimated that 250,000 seabirds, 2,800 sea otters, and 300 harbor seals were killed by the oil spill. In addition, 250 bald eagles and at least 22 Orca whales were killed. Billions of salmon and herring eggs were also destroyed.

Following the accident, the U.S. National Transportation Safety Board conducted an investigation into the causes. They found five events contributed to the grounding of the ship. First, the third mate, Gregory T. Cousins, did not maneuver the ship properly, probably because he was tired. Second, the ship’s captain, Joseph J. Hazelwood, did not provide an appropriate navigation watch. In his criminal trial, Hazelwood was found not guilty of operating a vessel while intoxicated, but guilty of negligent discharge of oil. Third, the Exxon Shipping Company was negligent in its supervision of Hazelwood and his crew. Fourth, the U.S. Coast Guard failed to adequately monitor the shipping traffic. Finally, the ship should have had a more effective pilot and escort service.

The event is considered one of the worst environmental disasters in U.S. history. It happened in an ecologically rich habitat, with rugged and inaccessible coastlines. Results from studies of the area affected by the oil spill showed that for at least twelve years, oil attributed to the spill could easily be found in the area. Surveys of beaches, for example, found significant amounts of oil below the surface in areas affected by the oil spills.

around the oil and form droplets that enclose the oil molecules. The dispersed oil needs to be collected before it washes back into the water. Other means of cleaning up spills include skimming the slick off the water’s surface and confining a slick inside a plastic ring known as a boom.

Clean up of an oil spill can be difficult, time consuming, and expensive. As an example, the 1989 spill from the Exxon Valdez tanker released enough oil to fill almost 125 Olympic-sized swimming pools. The slick, which fouled over 1,000 mi (1,600 km) of Alaskan coastline, took four summers to clean up. The clean-up involved 10,000 workers and 1,000 boats. Exxon’s bill for the clean-up was approximately $2.1 billion.

Impacts and Issues

The environmental consequences of oil spills cannot be understated. Environments and the wildlife in those environments can be affected for decades. For example, the Exxon Valdez spill fouled Alaska’s Prince William Sound, a productive fishery and area teeming with birds and wildlife. Studies conducted nearly 15 years later still demonstrated environmental damage. As of 2008, the region has essentially returned to the pre-spill state, but the damage lasted almost 20 years.

In the United States, the consequences of major oil spills that occurred in Pennsylvania in 1988 and the Exxon Valdez disaster spurred Congress to amend the Clean Water Act by passage of the Oil Pollution Act of 1990. This legislation improved the ability of the Environmental Protection Agency (EPA) and Coast Guard to response to spills and to prevent spills.

The response to the Exxon Valdez spill involved the use of bacteria that could use the oil hydrocarbons as food. This strategy had not been tried before, due to environmental concerns over the use of bacteria in a natural setting. The results, especially the application of a fertilizer spray to accelerate the bacterial breakdown of the hydrocarbons, were promising enough to spur the technology to become incorporated as a response option by the EPA, and spawned the new industry of bioremediation.

Remediation of oil spills has become an unfortunate legacy of the world’s dependence on fossil fuel. According to the EPA, even with more stringent shipping regulations and improved ship hull design, nearly 14,000 oil spills occur in freshwater and marine coastal waters every year.

See Also Chemical Spills; Oil Pollution Acts; Soil Contamination; Water Pollution

BIBLIOGRAPHY

Books

Owens, Peter. Oil and Chemical Spills. New York: Lucent Books, 2003.

Wang, Zhendi, and Scott Stout. Oil Spill Environmental Forensics: Fingerprinting and Source Identification. New York: Academic, 2006.

Web Sites

U.S. Environmental Protection Agency (EPA). “Oil Spills.” 2008. http://www.epa.gov/oilspill/ (accessed March 24, 2008).

Brian D. Hoyle

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Oil Spills

Oil spills

Petroleum is a critically important natural resource. However, petroleum is often mined in places that are far away from the regions where most of its consumption occurs. Accordingly, petroleum must therefore be transported in large quantities, mostly by oceanic tankers, barges on inland waters, and both subsea and overland pipelines. Any of these transportation systems can release pollution through accidental spills of oil, by operational discharges associated with cleaning of the storage tanks of tankers, or during unloading at refineries. Some accidental oil spills have been spectacular in their magnitude and their near-term ecological impact, involving losses of huge quantities of petroleum from wrecked supertankers or offshore platform facilities.

In addition, oil pollution is caused by discharges of improperly handled hydrocarbon-laden waste water from petroleum refineries and in urban runoff. Although each of these spills typically involves relatively small quantities of material, the spills occur rather frequently, so in total, large amounts of oil are spilled in this way.

Characteristics of petroleum

Petroleum is a naturally occurring mixture of organic chemicals, the most abundant of which are hydrocarbons (molecules containing only hydrogen and carbon atoms ). Petroleum is synthesized from biomass by complex, anaerobic reactions occurring at high pressure and temperature over long periods of time deep in sedimentary geological formations. Petroleum can occur as a liquid known as crude oil, which may also contain natural gas , and also as a semi-solid tar or asphalt in oil sands and shales. There are hundreds of molecular species in petroleum, ranging from gaseous methane with only 16 g/mole, to very complex substances weighing more than 20,000 g/mole.

Petroleum differs in its physical and chemical characteristics from deposit to deposit. Some crude oils are extremely thick and viscous, while others are light and volatile. The lighter fractions of petroleum evaporate relatively quickly when spilled into the environment. This leaves behind residues of relatively heavy molecules that are more persistent in terrestrial or aquatic habitats, and cause longer-lasting effects.


Oil pollution

The total spillage of petroleum into the oceans through human activities is estimated to range from about 0.7-1.7 million tons (0.6-1.5 million tons) per year, equivalent to less than 0.1% of the quantity of petroleum transported by tankers. In comparison, the production of hydrocarbons by marine plankton is about 28.7 million tons (26 million tons)/year. These "natural" hydrocarbons contribute to background concentrations in the oceans, but they are well dispersed and not associated with ecological damage or pollution. In addition, natural oil seeps contribute about 6-13%percnt; of the total petroleum input to the oceans, sometimes causing local damage.

The largest, most consequential events of oil pollution involve spills of petroleum or heavy bunker fuel from disabled oceanic tankers or drilling platforms, from barges or ships on inland waters, or from blowouts of wells or damaged pipelines. Damage is also caused by the relatively frequent spills and operational discharges associated with coastal refineries and urban runoff. Large quantities of oil are also spilled when tankers clean out the petroleum residues from their huge storage compartments, often discharging the oily bilge washings directly into the ocean .

Some examples of disastrous oil spills include the following accidents involving oceanic supertankers: (1) the Prestige, which split in half off Galicia, Spain in November 2002, spilling about 67,000 tons (61,000 metric tons) of crude oil; (2) the Torrey Canyon, which ran aground in 1967 off southern England, spilling about 129,000 tons (117,000 metric tons) of crude oil; (3) the Metula, which wrecked in 1973 in the Strait of Magellan and spilled 58,000 tons (53,000 metric tons) of petroleum; (4) the Amoco Cadiz, which went aground in the English Channel in 1978, spilling 253,000 tons (230,000 metric tons) of crude oil; (5) the Exxon Valdez, which ran onto a reef in Prince William Sound in southern Alaska in 1989 and discharged 39,000 tons (35,000 metric tons) of petroleum; and (6) the Braer, which spilled 93,000 tons (84,000 metric tons) of crude oil off the Shetland Islands of Scotland in 1993. All of the tankers involved were of the older single hull design. Such occurrences should decrease with the advent of double-hulled tankers.

Significant oil spills have also occurred from offshore drilling or production platforms as the result of mechanical or operational failure. In 1979 the IXTOC-I exploration well had an uncontrolled blowout that spilled more than 551,000 tons (500,000 metric tons) of petroleum into the Gulf of Mexico. Smaller spills include one that occurred in 1969 off Santa Barbara in southern California, when about 11,000 tons (10,000 metric tons) were discharged, and the Ekofisk blowout in 1977 in the North Sea off Norway, which totaled 33,000 tons (30,000 metric tons) of crude oil.

Enormous quantities of petroleum have also been released during warfare. Because petroleum and its refined products are critically important economic and industrial commodities, enemies have commonly targeted tankers and other petroleum-related facilities during wars. For example, during the World War II German submarines sank 42 tankers off the east coast of the United States, causing a total spillage of about 460,000 tons (417,000 metric tons) of petroleum and refined products. There were 314 attacks on oil tankers during the Iran-Iraq War of 1981–1987, 70% of them by Iraqi forces. The largest individual spill during that war occurred when Iraq damaged five tankers and three production wells at the offshore Nowruz complex, resulting in the spillage of more than 287,000 tons (260,000 metric tons) of petroleum into the Gulf of Arabia.

The largest-ever spill of petroleum into the marine environment occurred during the brief Gulf War of 1991. In that incident Iraqi forces deliberately released an estimated 0.6-2.2 million tons (0.5-2 million tons) of petroleum into the Persian Gulf from several tankers and an offshore tanker-loading facility known as the Sea Island Terminal. An additional, extraordinarily large spill of petroleum to the land and atmosphere also occurred as a result of the Gulf War, when more than 700 production wells in Kuwait were sabotaged and ignited by Iraqi forces in January, 1991. The total spillage of crude oil was an enormous 46-138 million tons (42-126 million tons). Much of the spilled petroleum burned in spectacular atmospheric conflagrations, while additional, massive quantities accumulated locally as lakes of oil, which eventually contained 5.5-23 million tons (5-21 million tons) of crude oil. Enormous quantities of petroleum vapors were dispersed to the atmosphere. About one-half of the free-flowing wells were capped by May, and the last one in November 1991.

After oil is spilled into the environment, it dissipates in a number of ways. Spreading refers to the process by which spilled petroleum moves and disperses itself over the surface of water. The resulting slick can then be transported by currents and winds. The rate and degree of spreading are affected by the viscosity of the oil, wind speed, and turbulence of the water surface. Evaporation is important in the initial reduction of the volume of an oil spillage, especially of relatively light and volatile hydrocarbon fractions. Evaporation typically accounts for almost 100% of spilled gasoline at sea, 30-50% of spilled petroleum, but only 10% of bunker fuel. Solubilization occurs when some fractions of the spilled oil dissolve into the water column, causing a contamination of sub-surface waters in the vicinity of the oil spill. For example, beneath a petroleum slick in the North Sea the concentration of hydrocarbons in water was 4 g/m3 (ppm), compared with about 1 mg/m3 (ppb) in uncontaminated sea-water. Lighter hydrocarbon fractions of petroleum are much more soluble in water than heavier ones, and aromatics are much more soluble than alkanes. (Aromatic hydrocarbons such as benzene and naphthalene have an unsaturated ring structure, while alkanes such as octane have a linear structure.) In addition, some of the spilled hydrocarbons are slowly oxidized by ultraviolet radiation and microorganisms into simpler compounds, ultimately to carbon dioxide and water.

The combined influences of solubilization, evaporation, and oxidation are known as weathering . Weathering preferentially removes the lighter hydrocarbon fractions, leaving a residual material made up of relatively heavy hydrocarbons. Over the shorter term in aquatic environments, this residuum forms a stable water-in-oil emulsion known as "mousse," which is the material that usually impacts shorelines after an offshore spill. The mousse combines with sediment particles on the shore to form sticky patties of oil and sand , which eventually form asphaltic lumps.

At sea, weathering of the mousse eventually results in the formation of a dense, semi-solid, asphaltic residuum known as "tar balls." In the vicinity of frequently traveled tanker routes worldwide, tar balls can be commonly found floating offshore and on beaches. Tar balls are especially common in places where the oceanic circulation resembles a surface vortex. A well known example of this phenomenon is the oceanic gyre known as the Sargasso Sea, famed for its accumulations of natural debris such as floating seaweed, as well as human debris, including tar balls.

Ecological damages of oil spills

Even small oil spills can cause important change in ecologically sensitive environments. For example, a small discharge of oily bilge washings from the tanker Stylis during a routine cleaning of its petroleum-storage compartments caused the deaths of about 30,000 seabirds, because the oil was spilled in a place where the birds were abundant. This is a regrettably common occurrence. Even relatively small operational spillages of petroleum can have significant though, perhaps temporary, ecological impact, especially to seabirds and marine mammals . An ecosystem is dynamic—ever changing—and continues its natural cycles and fluctuations at the same time that it struggles with the impact of spilled oil. As time passes, separated natural change from oil-spill impacts becomes more and more difficult.

Studies made after large oceanic spills have shown that the ecological damage can be intense. After the Torrey Canyon spill in 1967, hundreds of kilometers of the coasts of southern England and the Brittany region of France were polluted by oily mousse. The oil pollution caused severe ecological damage, due to the physical and toxic effects of fouling of organisms with petroleum residues. Those direct ecological damages were made much worse by some of the cleanup methods, because of the highly toxic detergents and dispersants that were used. As is the case with many oil spills, seabirds were among the most tragic victims of the Torrey Canyon incident. This accident caused the deaths of at least 30,000 birds, causing a substantial decrease in their breeding populations in subsequent years.

The damage caused by detergents and dispersants during the cleanup of shorelines polluted by the Torrey Canyon spill were an important lesson. Subsequent cleanups of oil spills involved a much more judicial use of less toxic chemicals. In addition, their use became largely restricted to offshore locations and places of high value for industrial or recreational purposes, rather than natural habitats.

In 1978, the Amoco Cadiz was wrecked in the same general area as the Torrey Canyon. Considerable ecological damage was also caused by this accident. However, the damage was less intense than that caused by the Torrey Canyon because less-toxic detergents and dispersants were used during the cleanup, in much smaller quantities, and only in high-value places such as harbors.

The most damaging oil spill ever to occur in North American waters was the Exxon Valdez accident of 1989. More than most tanker accidents, this one was very preventable. It was caused when an intoxicated captain gave temporary command of the supertanker to an unqualified and inexperienced subordinate, who quickly erred in his navigation and ran the ship aground onto a well known reef. The spilled oil affected about 1,200 mi (1,900 km) of shoreline of Prince William Sound and its vicinity, causing especially great ecological damages in tidal and subtidal habitats. Large numbers of sea mammals and birds were also affected in offshore waters. An estimated 5,000-10,000 sea otters (Enhydra lutris) were present in Prince William Sound, and at least 1,000 of these charismatic mammals were killed by oiling. About 36,000 dead seabirds of various species were collected from beaches and other places, but the actual number of killed birds was probably in the range of 100,000-300,000 birds. At least 153 bald eagles (Haliaeetus leucocephalus) died from poisoning when they scavenged the carcasses of oiled seabirds.

Great efforts were expended in cleaning up the oiled shoreline, almost entirely using manual and physical methods, rather than dispersants and detergents. In total, about 11,000 people participated in the cleanup, and about $2.5 billion was spent by the ship owners and $154 million by the U.S. federal government. This was by far the most expensive cleanup that has ever been undertaken after an oil spill. Within a year of the spill, the combined effects of the cleanup and winter storms had removed most of the residues of the Exxon Valdez spill from the environment. However, in August 2002 the Exxon Valdez Trustee Council released a report stating that while it is clear that many fish and wildlife species injured by the spill have not fully recovered, it is less clear what role oil plays in the inability of some populations to recover. Bald eagles, black oystercatchers , common murre, pink salmon , river otter and sockeye salmon have recovered. Wilderness area intertidal communities, killer whale, marbled murrelet, sea otters, clams and sediments are recovering but the common loon, three species of cormorants , harbor seals , harlequin duck, Pacific and pigeon guillemot have shown little or no recovery.

See also Fossil fuels.

Resources

books

Freedman, B. Environmental Ecology. 2nd ed. San Diego: Academic Press, 1994.

GESAMP. Impact of Oil and Related Chemicals and Wastes in the Marine Environment. Joint Group of Experts on the Scientific Aspects of Marine Pollution (GESAMP). Report 50, London: International Marine Organization, 1993.

Keeble, J. Out of the Channel: The Exxon Valdez Oil Spill inPrince William Sound. Eastern Washington University Press, 1999.


periodicals

U.S. Environmental Protection Agency. "Oil spills." January 28, 2003 [cited February 20, 2003] <http://www.epa.gov/oil-spill/>.


Bill Freedman
William J. Engle

KEY TERMS

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Bilge washings

—Hydrocarbon-contaminated water that results from cleaning of the petroleum-holding compartments of a tanker, and that may be discharged to the environment.

Bunker fuel

—A relatively viscous, liquid hydrocarbon mixture, also known as bunker-C fuel oil, that remains after lighter hydrocarbons are distilled from petroleum during refining. Bunker C is used as a fuel by oil-fired generating stations, heating plants, and ships.

Detergent

—A chemical used as a cleaning agent because it encourages the formation of an oil-in-water emulsion.

Dispersant

—A chemical agent that reduces the surface tension of liquid hydrocarbons, encouraging the formation of an oil-in-water emulsion. This reduces the volume of residual oil on shorelines or the water surface after a spill.

Mousse

—A water-in-oil emulsion that is formed by turbulence of the surface water after a petroleum spill to the aquatic environment.

Petroleum

—A naturally occurring, liquid mixture of hydrocarbons that is mined and refined for energy and the manufacturing of chemicals, especially plastics. Also known as crude oil.

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Oil Spills

Oil Spills

Oil is a critical resource for the world. Millions of barrels of oil are shipped from where the oil is taken from the Earth to where it is processed (refined) into substances varying from fuel to plastics. Because the world's demand for crude oil is great, oil must be shipped in large quantities by oceanic tankers, barges on inland waters, and pipelines that run over the land and under the sea. When there is a mistake or accident that causes oil to spill from any of these means of transport, damage to the water, beaches, and economy can be devastating.

Oil (also known as petroleum) is a naturally occurring thick liquid mixture of the elements hydrogen and carbon combined to form chemicals known as hydrocarbons. The oil taken from the ground (or seafloor) is called crude oil. Crude oil is then pumped or shipped to plants (refineries) where the crude oil is converted into fuels such as gasoline and home heating oil, or turned into chemicals that are used in hundreds of other products such as plastic.

In addition to accidental spills, oil can also be spilled during routine processes of cleaning ships and pipelines as well as when loading and unloading ships. Evidence is mounting that the combined effects of these small spills in ports or local waters can cause substantial damage over time. More spectacular and damaging, however, are the sudden spills associated with the sinking or damage to an oil tanker or oil drilling platform at sea.

Oil pollution of waters

The total spillage of petroleum into the oceans through human activities is estimated to range from one million tons to two million tons of oil every year. Although this is less than about one-thousandth of the amount of oil shipped every year (0.1%), the effects can be very damaging if the concentration of oil (for example, the amount of oil in a liter or gallon of water) in a small area becomes too large.

The most damaging oil spills arise from disabled ocean tankers or drilling platforms, from barges or ships on inland waters, or from blowouts of wells or damaged pipelines. Damage is also caused by the relatively frequent spills and discharges from refineries. Large quantities of oil are also spilled when tankers clean out the petroleum residues from their huge storage compartment, sometimes dumping the oil and water mixture directly into the ocean.

Accidents and spills

Some the largest oil spills from ocean supertankers include:

  • Amoco Cadiz, which went aground in the English Channel in 1978, spilling 253,000 tons (230,000 metric tons) of crude oil
  • Torrey Canyon, which ran aground in 1967 off southern England, spilling about 129,000 tons (117,000 metric tons) of crude oil
  • Braer, which spilled 93,000 tons (84,000 metric tons) of crude oil off the Shetland Islands of Scotland in 1993
  • Prestige, which split in half off Galicia, Spain, in November 2002, spilling about 67,000 tons (61,000 metric tons) of crude oil
  • Metula, which wrecked in 1973 in the Strait of Magellan and spilled 58,000 tons (53,000 metric tons) of petroleum
  • Exxon Valdez, which ran onto a reef in Prince William Sound in southern Alaska in 1989 and discharged 39,000 tons (35,000 metric tons) of petroleum.

Prestige Oil Spill Near Spain

Despite rescue efforts, the oil tanker Prestige sank off the coast of Spain in November 2002. Oil washed ashore along the coasts of Spain, Portugal, and France. The spill threatened hundreds of miles of wildlife-rich coasts. Scientists and environmentalists compared the damage from the Prestige spill to the damage caused by the 1989 Exxon Valdez spill in Alaska.

Although the final estimate on the size of the spill is debated, most petroleum engineers estimate that about 67,000 tons (61,000 metric tons) of fuel oil spilled. The tanker broke apart as it was being towed to deeper waters. Engineers initially hoped that most of the oil might solidify (form tar balls) inside the sunken Prestige tanker's compartments in the colder and deeper water, but later estimates showed that most of the oil escaped.

The oil spilled was far more toxic (poisonous) than the type of oil carried by the Exxon Valdez.

Experts predict that marine and bird life will suffer death and disease caused by the Prestige spill well into 2012. In addition to those species directly harmed, other species in the food chain will also suffer, either from lack of food or from eating other poisoned animals.

The preliminary cost for cleanup and lost economic activity is estimated at $42 million.

All of the tankers involved in these spills were of the older single hull (the frame or body of a ship) design. New-double hulled tankers are designed to reduce the chances of a spill following an accident.

Significant oil spills have also occurred from offshore drilling or production platforms. In 1979, the IXTOC-I exploration well had an uncontrolled blowout that spilled more than 551,000 tons (500,000 metric tons) of petroleum into the Gulf of Mexico. Smaller spills include one that occurred in 1969 off Santa Barbara in southern California, when about 11,000 tons (10,000 metric tons) were discharged, and the Ekofisk blowout in 1977 in the North Sea off Norway, which totaled 33,000 tons (30,000 metric tons) of crude oil.

Wartime spills

Enormous quantities of petroleum have also been released during warfare. Because petroleum and its refined products are critically important to economies and industry, enemies have commonly targeted tankers and other petroleum-related facilities during wars. For example, during World War II (1939–45), German submarines sank 42 tankers off the east coast of the United States, causing a total spillage of about 460,000 tons (417,000 metric tons) of petroleum and refined products. There were 314 attacks on oil tankers during the Iran-Iraq War of 1981–87, 70% of them by Iraqi forces. The largest individual spill during that war occurred when Iraq damaged five tankers and three production wells at the offshore Nowruz complex, resulting in the spillage of more than 287,000 tons (260,000 metric tons) of petroleum into the Gulf of Arabia.

The largest-ever spill of petroleum into the marine environment occurred during the brief Gulf War of 1991. In that incident, Iraqi forces deliberately released an estimated 0.6–2.2 million tons (0.5–2 million metric tons) of petroleum into the Persian Gulf from several tankers and an offshore tanker-loading facility known as the Sea Island Terminal. An additional, extraordinarily large spill of petroleum to the land and atmosphere also occurred as a result of the Gulf War, when more than 700 production wells in Kuwait were sabotaged and ignited by Iraqi forces in January 1991. The total spillage of crude oil was an estimated 46 to 138 million tons (42 to 126 million tons). Much of the spilled petroleum burned in spectacular atmospheric infernos, while additional, massive quantities accumulated locally as lakes of oil, which eventually contained 5.5–23 million tons (5–21 million tons) of crude oil. Large quantities of petroleum vapors were dispersed to the atmosphere. About one-half of the free-flowing wells were capped (closed) by May, and the last one in November 1991.

Exxon Valdez

The most damaging oil spill ever to occur in North American waters was the 1989 Exxon Valdez accident.

More than most tanker accidents, this one was very preventable. It was caused when the captain (who was later found to have been drinking alcohol) gave temporary command of the supertanker to an unqualified and inexperienced subordinate, who quickly made a mistake in navigation and ran the ship aground onto a well-known reef. The spilled oil affected about 1,200 miles (1,900 kilometers) of shoreline of Prince William Sound and its vicinity, causing especially great ecological damage.

Large numbers of sea mammals and birds were also affected in offshore waters. An estimated 5,000–10,000 sea otters were present in Prince William Sound, and at least 1,000 of these charismatic mammals were killed by oiling. About 36,000 dead seabirds of various species were collected from beaches and other places, but the actual number of killed birds was probably in the range of 100,000–300,000. At least 153 bald eagles died from poisoning when they consumed the carcasses of oiled seabirds.

Great efforts were expended in cleaning up the oiled shoreline, almost entirely using manual and physical methods, rather than dispersants and detergents. In total, about 11,000 people participated in the cleanup, and about $2.5 billion was spent by the ship owners and $154 million by the U.S. federal government. This was by far the most expensive cleanup ever undertaken after an oil spill. Within a year of the spill, the combined effects of the cleanup and winter storms had removed most of the residues of the Exxon Valdez spill from the environment. However, in August 2002, the Exxon Valdez Trustee Council released a report stating that many fish and wildlife species injured by the spill had still not fully recovered.

After the spill

After oil is spilled into the environment, it spreads out or sinks (dissipates) in a number of ways. Spreading refers to the process by which spilled petroleum moves and disperses itself over the surface of water. The resulting slick can then be transported away from the initial site of the spill by currents and winds. The rate and degree of spreading are affected by the thickness (viscosity) of the oil, wind speed, and waves.

If a spill is near enough to land, a mixture of oil and water called a mousse can wash up on the shore. The mousse combines with sand on the shore to form sticky patties that can harden into asphalt like lumps (material similar to that used to make roads).

At sea, the mousse eventually forms tar balls and in the vicinity of frequently traveled tanker routes world-wide, tar balls can be commonly found floating offshore and on beaches.

Ecological damages of oil spills

Even small oil spills can cause important change in ecologically sensitive environments. For example, a small discharge of oily bilge (wastewater) washings from the tanker Stylis during a routine cleaning of its petroleum-storage compartments caused the deaths of about 30,000 seabirds, because the oil was spilled in a place where the birds were abundant.

Studies made after large oceanic spills have shown that the ecological damage can be severe. After the Torrey Canyon spill in 1967, hundreds of miles of the coasts of southern England and the Brittany region of France were polluted by oily mousse. The oil pollution caused severe ecological damage and many different life forms suffered from exposure to petroleum. The ecological damages were made much worse by some of the cleanup methods, because of the highly toxic detergents and dispersants that were used.

The effects of oil spills can be harmful both immediately and over time. For example, the Torrey Canyon spill caused the deaths of at least 30,000 birds, but it also resulted in a large population of surviving birds that experienced difficulty in laying eggs for many years after the spill.

The damage caused by detergents and dispersants (chemicals used to break up spills) during the cleanup of shorelines polluted by the Torrey Canyon spill provided an important lesson. Subsequent cleanups of oil spills involved the use of less toxic chemicals.

In 1978, the Amoco Cadiz was wrecked in the same general area as the Torrey Canyon. Considerable ecological damage was also caused by this accident. However, the damage was less intense than that caused by the Torrey Canyon because less-toxic detergents and dispersants were used during the cleanup.

William J. Engle andWilliam Arthur

For More Information

Books

Keeble, John Out of the Channel: The Exxon Valdez Oil Spill in Prince William Sound. 2nd ed. Cheney: Eastern Washington University Press, 1999.

Websites

U.S. Environmental Protection Agency. "Oil Program." http://www.epa.gov/oilspill/ (accessed on September 8, 2004).

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