Environmental Economics: Exxon's Valdez settlement

Environmental Economics: Exxon's Valdez settlement: "Just a reminder ($92 Million More ...):

In March 1989, the Exxon Valdez supertanker, with an inebriated captain, ran aground on Bligh Reef, ruptured and spilled 11 million gallons of crude oil into the sound, contaminating about 900 miles of shoreline.

In 1991, the State of Alaska and Exxon reached a $1 billion natural resource damages settlement -- $900 million to be paid out over a number of years and $100 million to be paid this year, maybe, if the cleanup wasn't complete.

Well, the cleanup isn't complete according to the state and, naturally, Exxon disagrees.

'No one doubts there is ongoing damage,' said Eleanor Huffines, of the Alaska office of the Wilderness Society. 'The challenge is that the ocean is so dynamic that it will be a hard thing to do to make the connection. But since this has been the most well-studied area since the spill, they have been able to document the lack of recovery.'

Mark Boudreaux, the media relations manager for Exxon Mobil, focused on this uncertainty in a statement responding to the action. A link between the remaining oil and effects on wildlife, Mr. Boudreaux said, 'is no more than a hypothesis.' He added, 'Nothing we have seen so far, however, indicates that this request for further funding from Exxon is justified.'

The thing about the Exxon settlement that is irritating to economists is that it was NOT a $1 billion settlement ... since it was paid out over a number of years. Consider the $100 million (the state is asking for $92 million) to be paid in 2006, 15 years after the 1991 settlement. With a 3% inflation rate, $100 million in 2006 is the same as $64.2 million in 1991 dollars. Exxon's lament, and Alaska's boast, over the amount of the settlement was bogus.

The thing that is irritating is not that Exxon should be forced to pay $1 billion in real dollars, maybe the nominal payments are about right (although the State of Alaska's funded research found that the damages were $3 billion), but that people who know the difference between real and nominal dollars distort the facts."