PERFORMANCE
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For a year or two after oil began to flow, federal and state oversight was routinely conducted by inspectors who made daily inspections of the loading terminal and tankers. These inspectors made it a practice to coordinate their investigations into oil spills and tanker incidents. This system worked fairly well until both state and federal inspection programs lost funding to continue at the same level that had been instated.
The reduction in funding was brought on by many causes. The State of Alaska was sued by the oil industry because they did not like the State's aggressive inspection program and did not like other provisions of the State Law which required the escort of laden tankers or paying annual risk charges that were based on safety features built into tanker design, to reduce the risk of an accident.
The Federal Court separated the lawsuit into two parts. In 1978, the oil companies won some key provisions of their suit and the dedicated funds were no longer available. The State began the appeal process but later decided not to continue with the appeal and looked for other funding sources. In 1979, the Federal Court ruled in favor of the oil industry and the State Legislature repealed the Tank Vessel Regulation Act and Oil Discharge Prevention and Pollution Act. In short, what happened was the Federal Court said that the State Law should not be more progressive that the Federal system, a good deal of local control was lost. Once the dedicated funding provisions of the law were lost, so were the state's oversight positions. 13
Concurrent with this action the oil industry exercised its political right to lobby the state and federal legislative bodies. It increased its effort to reduce all oversight, both State and Federal. One cannot blame any one group or organization and I do not attempt to attach blame to anyone. There is plenty to go around and we all share some of the responsibility for reduced vigilance.
Over the years, prior to the EXXON VALDEZ oil spill, with the change in leadership in the Federal government with the election of the Reagan and Bush Administration, there was a 12 year period where the industry essentially became "self regulating", the distant federal government located thousands of miles away did not see the problems that locals saw; after all the industry was saying that the transportation system was safe and in good hands.
Even the State of Alaska, whose head officials are located only 500 miles away from Valdez, could not see that there were problems and if they did, there was not enough concern to increase vigilance or funding back to the levels deemed necessary in 1977. There were only a few lonely cries for help from concerned citizens, low ranking State officials and the occasional person in the Federal government who said that there were problems which needed attention. They were not heard. After all, had not the industry committed to the best available technology and the safest tankers in the world? Critical voices could not be heard due to the background noise of 2,000,000 BPD of oil flowing down the pipeline and all the money that meant to the industry, state and federal governments.
This "cash cow" was putting big dollars into everyone's pockets. In the state of Alaska new schools, roads, airports, hospitals, and other infrastructure were being built. But there was not enough money, however, to conduct the continued oversight that was deemed necessary when TAPS was being constructed. Likewise, the federal government was not sufficiently motivated to fund the USCG or EPA to provide adequate oversight.
By the time the oil was produced, moved down the pipeline and loaded on the tankers in Valdez, the Alaskan oil industry North Slope profit, through 1987, averaged well over $10,000,000 per day, after all costs had been recovered. 14 The Industry seemed so interested in making profits it failed to provide the safeguards it had so readily committed to before passage of the Trans-Alaska Pipeline Act.
Alaska's experience with government, the oil industry, and the shipment of oil demonstrates this fact: the less public involvement you have, the more things are likely to go wrong. Extensive public involvement is essential for the most effective functioning of all the other government and private elements in the complex system of oil transportation, a system that ought to run efficiently and responsively from prevention and enforcement through clean-up. Local control comes from the people who are the most affected and the most interested. They are the most motivated to monitor situations, to gather information, and to put out the effort needed to make the rest of the system perform at its best. To the extent that you lose - or never attain -good public involvement, the quality of information declines, and the energy that drives effective regulation grows weak.
Additionally, the industry has realized another cash windfall of mind boggling magnitude: the industry was granted the ability to collect money for the eventual Dismantling, Removal, and Restoration (DR&R) of TAPS. Those monies were not held in trust, not have they been used to prevent or decrease environmental deterioration. It has been estimated that upon completion of the task for which DR&R was collected, this money will generate for the owners of TAPS a tax paid surplus of 12 to 22 billion dollars in 1992 dollars. 15 The owners' DR&R windfall is not included in the current profit on production and transportation to Valdez, which was recently estimated for 1991 to be $4.77 per barrel or $8,200,000 per day. At current production rate of approximately 1,600, 000 BPD and a lower market price for crude oil the industry's profits have still averaged over 3.2 million dollars per day over the last five years. These figures do not include other profits the industry makes on marine transpiration from Valdez, the refining, or other downstream activities and sales. 16
One way to try to put the vast profits into language you and I can more easily visualize is to think in terms of what it costs to provide more protection for our environment. For example a new enhanced tractor tug to keep tankers from running aground would cost about four days of TAPS profits, a one time expenditure. A vapor recovery system to recover the vapors produced when loading the oil onto a tanker in Valdez, estimated by some to be equal to two EXXON VALDEZ spills every year, would take about three weeks TAPS profits to fund. Is the industry doing what it can to protect the environment by making these modest investments? Not yet!
Although the oil industry has told the public that the industry is responsible how they will build a tanker vapor recovery system and get tractor tugs, when pressed they will admit that the oil industry will only do it when regulations force them to.
Not until the EXXON VALDEZ disaster shocked people did the federal and state governments get motivated enough to enact new legislation to fund oversight and require modest changes in how the oil is produced and transported. That started a process of re-examination and more promises of commitment and action. However again, it appears that there is waning commitment to follow through on the promises with continued performance.
As I speak here today, a new, oil friendly legislature in Juneau, our state capital, after being heavily lobbied by the oil industry, passed laws to reduce oversight of the oil industry and reduce, that minimal fee of one-eighth of a penny per gallon that had been collected, since the EXXON VALDEZ disaster, to create a fund to respond to future spills in Alaska. Oversight is once again waning. It appears that the present profit of over $3,200,000 a day average, is not enough for the oil industry in Alaska.
Alaska's experience with government, the oil industry, and the shipment of oil demonstrates this fact: the less public involvement you have, the more things are likely to go wrong. Extensive public involvement is essential for the most effective functioning of all the other government and private elements in the complex system of oil transportation, a system that ought to run efficiently and responsively from prevention and enforcement through clean-up. Public involvement comes from people who are the most motivated to monitor situations, to gather information, and to put out the effort needed to make the rest of the system perform at its best. To the extent that you lose - or never attain - public involvement, the quality of information declines, and the energy that drives effective regulation grows weak.
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| LIST OF ADDITIONAL PERSONS or REFERENCES NOT SPECIFICALLY CITED |
Richard Townsend, personal communications.
Dr. Riki Ott, personal communications.
Dr. Riki Ott, STATUS REPORT ON ALASKA'S OIL INDUSTRY: A BLUEPRINT FOR IMPROVING PERFORMANCE, (prepared for on behalf of the Oil Reform Alliance), February 1993.
Stan Stephens, President of the Prince William Sound Regional Citizens Advisory Committee, personal communications.
Dr. Jonathan Wills, personal communications.
Captain George H. Sutherland, Director of Ports and Harbours, Ports and Harbours Authority, Shetland Islands Council, personal communications.
Mr. James T. Dickson, Oil Pollution Control Officer, Ports and Harbour Authority, Shetland Islands Council, personal communications.
GAO, TRANS-ALASKA PIPELINE: Regulators Have Not Ensured That Government Requirements Are Being Met, (Report to the Chairman, Subcommittee on Water, Power, and Insular Affairs, House of Representatives), U.S. General Accounting Office, Gaitersberg, Md., GAO/RECD-91-89.
J.G. Nelson and Sabine Jessen, The Scottish and Alaskan Offshore Oil and Gas Experience and the Canadian Beaufort Sea, Canadian Arctic Resources Committee, University of Waterloo, 1981.
Dr. Richard A. Fineberg, The Revenue Side of the Budget Equation: How We Gave Away Up To Ten Years of General Fund Revenues Without Even Noticing It, and What To Do About It Now, Remarks of Richard A. Fineberg to Common Ground, March 13, 1993, Anchorage, Alaska.
1 Hearing Testimony, Alyeska Pipeline Service Company ( U.S. Department of Interior hearings, Anchorage Alaska and Washing, D.C. ), February 1971, p. 33.
2 1973 C Q ALMANAC p. 598
3 Ibid.
4 Oil and Natural Gas Pipeline Rights-of Way, Hearings before the Subcommittee on Public Lands of the Committee on Interior and Insular Affairs (Serial 93-12) , at p. 526.
5 119 Congressional Record Section 13346-47 .
6 Ibid. .
7 Statement by Secretary of the Interior Rogers C. B. Morton Concerning the Application for the Trans-Alaska Right-of-Way, Department of the Interior News Release.
8 Proceedings of the Cordova Fisheries Institute, April 1-3, 1977, SEA GRANTS REPORT 77-8, August 1977 .
9 Ibid. .
10 Walter B. Parker, Chairman Alaskan Oil Spill Commission, personal communications.
11 Richard Townsend and Burr Heneman, THE "EXXON VALDEZ" OIL SPILL: A MANAGEMENT ANALYSIS , Center for Marine Conservation, Washington, D.C.., September 1989, p. 9-11.
12 Alaska Oil Spill Commission, February 1990, "SPILL: THE WRECK OF THE EXXON VALDEZ, Vol. 1, Appendix E, p.20.
13 Ibid.
14 Edward B. Deakins, Oil Industry Profitability in Alaska, 1969-1987, (Alaska Department of Revenue), March 15, 1989, Appendix E.
15 Dr. Richard A. Fineberg, Hidden Billions: The taps D.R. & R. Provision, August 21, 1992, ( a report prepared for Stan Stephens, Valdez, Alaska), p. 23, 25.
16 Dr. Richard A. Fineberg, North Slope Profits and Production Prospects, (a report prepared for: Senate Finance Committee, Alaska State Legislature), November 1992, p 43, 52.
AFER paper for ICEF conference
August 3-5, 1995
INDEX
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