Thirteen years have passed since the Exxon Valdez oil spill, and Exxon is still fighting the multibillion-dollar award of punitive damages handed down in federal court. Under orders from a federal appeals court, Anchorage federal Judge H. Russel Holland recently reduced the award by $1 billion, to $4 billion. Exxon says an appropriate amount is closer to $40 million -- lower by a factor of 100 -- so years of litigation are probably ahead.
Exxon's lawyers are doing the firm a great service with every year they can delay payment. While Exxon eventually will owe interest on whatever amount it has to pay, running from the day judgment was entered, the interest rate is so low that it rewards Exxon for dragging out the case as long as possible.
Under federal law, Exxon pays 5.9 percent interest, while the company typically makes somewhere between 14 percent and 18 percent on its investments, according to David Oesting, an attorney for Alaskans suing Exxon. Even at the lower rate of return, each year Exxon can put off paying, the amount it earns from holding the money exceeds the interest it will owe on the judgment by $81 million for every $1 billion involved.
By today's standards, 5.9 percent interest may seem like a pretty good deal. Bank accounts are paying less than half that on savings accounts. Compared with Exxon's earning power, however, the rate has been nowhere near enough to encourage swift justice for those damaged by Exxon's reckless conduct.
Thirteen years after the Exxon Valdez oil spill, everyone involved should be able to close that chapter of life and move on. One reason it hasn't happened is that federal law lets Exxon profit from a strategy of delay, delay and more delay.
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