How The Valdez Oil Spill Shaped ExxonMobil

Steve Inskeep talks to Steve Coll about his new book, Private Empire: ExxonMobil and American Power. In it, Coll delves into the business model of one of the country's largest and most profitable corporations. He explores how the Exxon Valdez oil spill in 1989 shaped the culture at the company for years to come.

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DAVID GREENE, HOST:

A new book begins with a story you may think you already know. The oil tanker Exxon Valdez ran aground in 1989 covering Alaska's Prince William Sound in oil.

STEVE INSKEEP, HOST:

For the writer Steve Coll, that disaster opens a window on something still unfamiliar, the culture of the secretive oil company known today as ExxonMobil. It's executives believed in 1989 they were the industries best.

STEVE COLL: I think they did believe that their systems were more idiot-proof than it turned out that they were. And in fact, they had done quite a lot of cost cutting in the decade leading up to that accident, and I'm not sure that they had reckoned with the consequences of that cutting to their safety systems. But in any event, they were shocked into recognition that their systems were grossly inadequate.

GREENE: Coll's book, "Private Empire," traces the way that Exxon has adapted to that shock.

INSKEEP: He examines the recent history of a company that drills for oil around the world, yet has reason to be insecure.

GREENE: It's incredibly powerful, yet doesn't always get what it wants.

INSKEEP: It's a company obsessed with security to the point of paranoia. And after the Exxon Valdez, Coll says executives seemed determined never to make any mistake again.

COLL: They adopted a whole series of integrated global systems called the Operations Integrity Management System, or OIMS. If you work at Exxon, OIMS is in your brain. It's a series of huge binders with rules telling you about everything that you should do. If you requisition a stapler or if you drive across the plant, you are following this manual. And it was designed essentially to put everybody literally on the same page around the world about every task relevant to Exxon Mobile's operation.

INSKEEP: I'm sorry, requisitioning a stapler - was that a safety concern when you're getting into details like that?

COLL: Yes, well there's - they started these safety confessionals, almost worker groups where people would stand around and talk about near misses, including near misses away from the office. So if you were mowing a lawn and you mishandled the lawnmower and a rock came out and struck you in the leg, you would confess that to your colleagues.

The idea was to reduce accidents to as close to zero as was possible, and to do this in a kind of collective culture, almost communist, which is sort of odd to say, considering this is an engine of formidable American capitalism.

INSKEEP: That's one analogy that comes to mind. The other, when you say safety confessionals, this is beginning to sound like some kind of religious organization.

COLL: Or a 12-Step program. There's definitely a 12-Step element to the way groups talk to each other about their mistakes. And also, the current chairman and chief executive, Rex Tillerson, is well-known as a supporter of the Boy Scouts of America, and he also instituted a kind of merit badge system inside the organization where outstanding performances in safety and other areas would be rewarded with coins of the sort that commanders hand out in the military to their soldiers and officers.

INSKEEP: Am I wrong in thinking that this points to something larger about Exxon? As you describe it, you suggest that this is a company where they really believe they are the smartest guys around, and it must have been intolerable for them to be in that situation after the Exxon Valdez, when it didn't look like they were.

COLL: Yeah, I think that's right. And also, it's a very insular and cohesive culture, very distinctive even among large American corporations. I think if you took the top 200 corporations in the United States and then you looked at the, say, the top 40 or 50 positions in each company, you'd find in many cases that those positions were occupied by executives who'd come from competing corporations in the same industry, or maybe from another industry. They come in with fresh ideas, a reforming spirit.

At ExxonMobil, everybody is there for life. If you're willing to adapt to this very rule-heavy culture, if you're willing to move every three or four years, and you're willing to basically abide by this very insular system, you will rise and you will enjoy lifelong economic security well into retirement.

INSKEEP: Well, this is interesting to think about for a moment, because we have this company where people honestly believe that they've got the best systems and that it's the best company that could possibly be. But some of the things you're describing actually suggest to me insecurity, anxiety. They're not sure how good they are. They're not sure what people would find if they were open to full inspection.

COLL: Yeah, that's an interesting point, and one of the things I tried to understand in the reporting was let's put ourselves in their shoes. What is it like to run a company that is so unpopular? What do you do about that? Well, they've asked themselves that question, and they look back at American history in search of a golden age of oil industry popularity and they can't find it. So they're not really sure what model to build.

And the fact that no matter what strategy they try they remain unpopular only reinforces this sort of defensive crouch. And finally, you know, they look out at some of their competitors who have tried to green themselves, like BP, which adopted a logo...

INSKEEP: Beyond petroleum.

COLL: Yeah, with a sun and little green trim - and they laugh at that. And they take pride in the fact, they say, look, we're not going to try to fool you into thinking that we're a solar company when, you know, 98 percent of our revenue comes from oil and gas or chemicals.

INSKEEP: What do you think their greatest anxiety is?

COLL: I think they have a basic problem of replacing the amount of oil and gas they pump out of the ground every year because of their sheer scale. They pump out 4.5 million barrels of oil and gas every year. That's basically a billion and a half barrels a year. They've got to go out and find that and bring it online every year. And the world is not friendly to super-majors that want to own oil and gas the way it was back in the '60s and '70s.

INSKEEP: Super majors, that's the handful of really, really large oil companies.

COLL: Yeah, and so Saudi Arabia and Iran and Iraq used to be the playground of a company like Exxon, and they never really had to worry about running out of oil, because there was so much of it, and they owned it in those places. Well, an era of nationalism, resource nationalism, arose in the Middle East in the 1970s and basically locked ExxonMobil out of the easy oil and gas and sent them basically in two directions.

One, into weak states, in places like Africa, where the host governments just don't have the capacity to own and develop the oil and gas themselves. They need a partner like ExxonMobil. Or into the free-market West, where anybody can own anything, but there hasn't been a lot of oil and gas to drill until very recently with these discoveries of unconventional gas.

So the basic problem they face is what they call reserve replacement - that is, finding enough oil and gas to replace that which they pump out and sell every year.

INSKEEP: Well, is the world gradually forcing ExxonMobil to change, however much they would prefer not to?

COLL: It's bringing them back to the United States in an interesting way. That's one way it's forcing them to change, and it's bringing them to natural gas. That's the big story looking ahead for ExxonMobil. They've made a big bet on natural gas in the United States, fracking unconventional gas. They bought the biggest producer of such gas in the United States, XTO, in 2010.

And when they look out over the next 20 or 30 years, a lot of their strategic plan involves moving to natural gas and moving into the - what you would think of in comparison to Chad or Nigeria as the relatively stable political environment of the United States. But as we all know, fracking itself has already become a great controversy.

And I think what's interesting is that ExxonMobil's once again going to be challenged to find political adeptness, you know, in the United States on a big environmental controversy around fracking. Do they have the skills to work subtly to achieve their goals, or will they continue to just put their elbows out and charge ahead?

INSKEEP: Steve Coll is the author of "Private Empire: ExxonMobil and American Power." Thanks very much.

COLL: Thank you, Steve.

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