Private Empire: ExxonMobil and American Power

by Steve Coll

  “I’m asking for your view, sir.”

  “I think— I’m never going to say that we are always doing everything exactly right. I would be naive to do that; but if you are asking me, are there any major decision points that we faced in how to respond to that spill, that in hindsight we would go back and say we think we were wrong, and I don’t think there are any.”17

  As the oil spread, Samuel Skinner, the secretary of transportation, summoned Admiral Paul Yost, commandant of the United States Coast Guard, to a meeting at the White House. They waited in the West Wing for President George H. W. Bush, a former oil wildcatter who earned his fortune in West Texas before embarking on his career in politics, intelligence, and diplomacy. That spring President Bush was preoccupied by events abroad—spreading dissent in Eastern and Central Europe, pro-democracy students camped out in Beijing’s Tiananmen Square, and the rising radicalism of Mikhail Gorbachev’s perestroika.

  Admiral Yost had made his professional reputation as a patrol boat commander in Vietnam. As Coast Guard commandant since 1986, he had pulled the service toward military discipline. He banned beards, earning the enmity of a generation of officers, and he moved to install naval weapons systems aboard Coast Guard vessels.

  In the Oval Office, Yost briefed President Bush on the militarylike dimensions of the Exxon Valdez crisis, “trying to explain what was needed to mobilize in a major oil spill, and what Valdez looked like, with one or two motels, and one or two little restaurants,” as Yost recalled it.

  Bush looked at his watch. “I’ve had the German ambassador waiting for ten minutes,” he said. “I’ve got to go see him.”

  The president turned to his chief of staff, John Sununu, a former governor of New Hampshire. “You take this into your office and get this thing moving,” he said.

  Yost and Skinner trailed Sununu through the West Wing. When they sat down, Sununu told him, “Admiral, you’re going to Alaska and you’re going to supervise this oil spill.”

  “Mr. Sununu, I’m not going to Valdez,” Yost answered. “I can’t run the Coast Guard from Valdez. It’s a worldwide operation.”

  Sam Skinner laid his hand on Yost’s shoulder. “Paul, you’re going to Alaska.”18

  By the time he arrived, the debate about chemical dispersants was no longer relevant.

  On the night of Sunday, March 26, about seventy-two hours after the initial grounding, a fierce spring storm raged through Prince William Sound. Southwesterly gales up to seventy miles per hour blew and scattered the oil from the sea surfaces around Bligh across to rocky island beaches dozens of miles away, on the far side of the sound: Knight Island, Eleanor Island, Ingot Island, Disk Island, Naked Island. It was as if someone had blown very hard on an ashtray and scattered its ashes. The swirling winds were so strong that crude even appeared in treetops on the distant islands. The gales rendered the earlier debates about chemical dispersants academic; if they had been applied all out during the first three days, they might have reduced by a little the amount of oil that the winds blew, but not enough to forestall catastrophe.

  The storm transformed the cleanup. Now the challenge became to remove the contamination from dozens of beaches during the summer months before the snow and harsh weather of late autumn returned. Otto Harrison, a bespectacled veteran of Exxon’s international operations and offshore oil production, led the effort. Harrison was to work alongside Commandant Yost. Exxon reported that it spent $2.1 billion on cleanup operations in 1989, and even some critics of the company credited the vigor of its efforts once the operation became organized. Disagreements persisted, however, about whether Exxon was doing all that it could.

  In public, Exxon president Lee Raymond suggested that the corporation would take its orders about its cleanup decisions from the Coast Guard’s on-scene commander. “That is the man we look to,” he said. “That is the man who approves our plans.”19

  In private, Exxon and the Coast Guard found themselves in conflict. The commandant “didn’t get along with [Otto] Harrison at all,” Yost recalled. His Exxon counterpart “was a big man. He made decisions very quickly. He stood by his guns and he wouldn’t be pushed around. . . . I told him what to do and he sometimes did what he wanted. It was that kind of a relationship, but he was good. He was plenty good.”

  To build political support for Harrison’s decisions, Raymond and Lawrence Rawl flew regularly to Washington to meet with Sununu, Skinner, Interior secretary Manuel Lujan Jr., and Environmental Protection Agency director William K. Reilly. In Juneau they pressed Governor Cowper and his aides to back Exxon’s cleanup plan.

  Commandant Yost argued about the number of workers they should deploy on the beaches. Yost told Harrison that he wanted five thousand people hired for the summer crews.

  “Admiral, I can’t support five thousand people on the beaches,” Harrison replied.

  “Then get the support up there—that’s your problem. I want five thousand on the beaches.”

  “I’m going to the White House on this,” the Exxon executive said.

  “Go ahead,” Yost replied.20

  Soon the commandant received a call to return to Washington. He met with Skinner again, and the Transportation secretary accompanied him to the White House to see John Sununu.

  “Admiral,” Sununu announced, “I’m not going to require five thousand people on the beach.”

  “In that case,” the Coast Guard commandant answered, “I can’t guarantee the president that this is going to be cleaned up this summer.”

  He added, “Let the record show that you’ve got a very unhappy commandant.”21

  At a congressional hearing that spring, Senator Slade Gorton of Washington State pointed out to Exxon’s chairman that Japanese executives routinely accepted responsibility for serious corporate failings, no matter the cause, by resigning from their positions. Gorton asked Lawrence Rawl whether he had considered doing the same.

  Rawl was the Irish American son of a New Jersey truck driver who had enlisted in the United States Marines, made sergeant, and then became a petroleum engineer at the University of Oklahoma using the G.I. bill. He had spent his entire professional life at Exxon. “A lot of Japanese kill themselves as well,” Rawl answered Gorton, “and I refuse to do that.”22

  Lee Raymond never surrendered his conviction that irrational environmentalists had exacerbated Exxon’s problems in Alaska by their opposition to dispersant use, but he did scrutinize the catastrophe for other lessons. One of these was that “no matter what you decide is the right thing to do in terms of trying to deal with the spill, you have to get after it very quickly. The lesson learned here was to try and make sure that there were procedures both in the company and in the respective governments that they knew and we knew that if an incident were to happen, exactly what to do and how to do it.”

  Raymond conceded that the Exxon Valdez episode suggested the need for “perhaps a rebalancing of risk-reward in many of our operations.” The risks of accidents of the sort that poisoned Prince William Sound that spring and summer of 1989, he said three years later, “apparently are much higher than anybody in either our company or the industry had envisioned.”23

  John Browne—later Lord Browne of Madingley—joined British Petroleum, as it was then known, in 1966, as a university apprentice. In comparison with Lee Raymond of South Dakota, Browne was an international and cosmopolitan figure. He was half Hungarian, half British; he was born in Germany and spent parts of his childhood in Singapore and Iran. As a young oil executive assigned to New York, he lived in Greenwich Village, taught himself to cook, and spent his spare time at the opera and in Soho art galleries. He was a charismatic young man with floppy ears and a mop of dark hair. As he rose through B.P.’s leadership ranks, Browne began to think that corporations “must behave consistently with the will of society,” as he put it. He puzzled over what that insight might imply for the practices of a large oil corporation.

  The oil in the holding tanks of the Exxon Valdez had been pumped from
Arctic Alaskan fields partially owned by B.P. On the morning of the ship’s grounding, Browne happened to be asleep at a company base camp on the North Slope, where he had come to say good-bye to colleagues as he departed for a new assignment. At 5:00 a.m., B.P.’s Alaska general manager woke him up. “We’ve got a message,” he reported. “There’s some oil seeping around Valdez. It’s from a tanker and they say it’s Exxon’s. But no one seems to be doing anything.”

  Browne would recall that he “knew right away that something terrible had happened.” He boarded a plane and flew over Prince William Sound, “home to precious wildlife” where “whales would be returning from the warm water in the south soon.” As he peered down from above, he could see that white ice floes already were tinged with black. It seemed to him that too little was happening by way of response and cleanup. Where were the response boats and the booms to keep oil off the beaches? In fact, that was a question that British Petroleum’s senior executives should have been able to answer; the inadequate response was their failure, too, but it would soon be overshadowed by Exxon’s culpability.

  Browne sensed that the spill’s “repercussions for the industry would be huge. It was the start of a new chapter.”

  The Exxon Valdez had “damaged not just a fragile environment but also the flimsy trust in oil companies.” Environmental groups would “have a field day,” he expected. Unfortunately, “it was no use” saying to them “that B.P. was better than its competitors. The industry was now measured by its weakest member, the one with the worst reputation. That oil company was now Exxon.”24

  A few days before the Exxon Valdez ran onto Bligh Reef, tens of thousands of Hungarians marched through Budapest. The demonstrators turned the commemoration of an 1848 uprising against Austrian rule into a revolt against Soviet-backed communism. “Resign!” they shouted outside downtown buildings housing Communist Party bureaucrats. “Freedom! . . . No more shall we be slaves!” They carried flags from Hungary’s pre-Communist era and demanded the withdrawal of Soviet military forces. “Ivan, Aren’t You Homesick?” and “Legal State, Not a Police State” declared their protest signs.

  The defiant march added to the cracks spreading that spring through the structures of global politics. The Berlin Wall fell a few months later, in November. The Soviet Union fissured and then disappeared. Democratic and free-market revolutions and revivals swept through Central Europe, Africa, Asia, and Latin America. Ethnic, religious, and territorial conflicts, long subdued by the cold war, erupted one after another. The world was remade, tossed, liberated—and reopened for international business.

  The Valdez wreck stunned Exxon and its rising leader, Lee Raymond. The disaster would change the corporation profoundly. Internal reforms imposed by Raymond in response to the accident would turn one of America’s oldest, most rigid corporations into an even harder, leaner place of rule books and fear-inspiring management techniques. At the same time, Raymond and the rest of Exxon’s leaders would gradually pass through the introspection triggered by the Valdez spill and seek out the oil and gas plays that opened so unexpectedly after 1989. An age of empire beckoned America and Exxon alike.

  In a bracingly short time, Anglo-American optimism and idealism about free markets, foreign investment, and the rule of law found adherents in the most unlikely world capitals. Brand-new nations brimming with oil and gas and others previously closed to Western corporations hung out FOR LEASE signs to lure geologists from Houston and London: Russia, Kazakhstan, Azerbaijan, Angola, Qatar, and tiny Equatorial Guinea, on the West African coast, soon to market itself through its Washington lobbyists as the “Kuwait of Africa.” These post–cold war opportunities for American, British, French, and Italian oil companies could be ambiguous, risky, and sometimes fleeting. Resentful nationalism and suspicion of the United States and Europe persisted in many capitals of the new oil powers. State-owned petroleum companies from China, India, Brazil, and elsewhere were rising quickly as competitors. Exxon might be America’s largest and most powerful oil corporation, but it would require all the political influence, financial resources, dazzling technology, speed, and stamina that its leaders could muster to seize the lucrative oil deals made possible by communism’s fall and global capitalism’s revival.

  The United States now stood unchallenged as a worldwide military power. Exxon’s empire would increasingly overlap with America’s, but the two were hardly contiguous. Pentagon policy, after the Soviet Union’s demise, sought to keep international sea-lanes free; to reduce the global danger of nuclear war, terrorism, and transnational crime; to manage or contain Russia and China; to secure Israel; and to foster, against long odds, a stable Middle East from which oil supplies vital for global economic growth could flow freely. Exxon benefited from the new markets and global commerce that American military hegemony now protected. Yet the corporation’s activity also complicated American foreign policy; Exxon’s far-flung interests were at times distinct from Washington’s. Lee Raymond would manage Exxon’s global position after 1989 as a confident sovereign, a peer of the White House’s rotating occupants. Raymond aligned Exxon with America, but he was not always in sync; he was more akin to the president of France or the chancellor of Germany. He did not manage the corporation as a subordinate instrument of American foreign policy; his was a private empire.

  Exxon’s power within the United States derived from an independent, even rebellious lineage. The corporation had been hived off from John D. Rockefeller’s Standard Oil monopoly in 1911, after a bruising antitrust campaign led by economic reformers and populist politicians. The visceral hostility toward Washington sometimes eschewed by Exxon executives eight decades later suggested some of them had still not gotten over it.

  Exxon’s size and the nature of its business model meant that it functioned as a corporate state within the American state. Like its forebearer, Standard, Exxon proved across decades that it was one of the most powerful businesses ever produced by American capitalism. From the 1950s through the end of the cold war, Exxon ranked year after year as one of the country’s very largest and most profitable corporations, always in the top five of the annual Fortune 500 lists. Its profit performance proved far more consistent and durable than that of other great corporate behemoths of America’s postwar boom, such as General Motors, United States Steel, and I.B.M. In 1959, Exxon ranked as the second-largest American corporation by revenue and profit; four decades later it was third. And more than any of its corporate peers, Exxon’s trajectory now pointed straight up. The corporation’s revenues would grow fourfold during the two decades after the fall of the Berlin Wall, and its profits would smash all American records.

  As it expanded, Exxon refined its own foreign, security, and economic policies. In some of the faraway countries where it did business, because of the scale of its investments, Exxon’s sway over local politics and security was greater than that of the United States embassy. In impoverished African countries increasingly important to Exxon’s strategy, such as Chad, the weight of the corporation’s investments and the cash flow it shared with local governments overwhelmed the economy and became the central prize in violent local contests for power. In Moscow and Beijing, Exxon’s independent power and negotiating agenda competed with and sometimes attracted more attention than the démarches issued by American secretaries of state. Yet the corporation could also be insular and even passive in the faraway places where it acquired and produced oil and gas. It fenced off local operations and separated its workforce from upheaval outside its gates. If its oil flowed and its contract terms remained intact, then Exxon often followed a directive of minimal interference in local politics, especially if those politics were controversial, as in the case of the African dictatorships with which the corporation partnered, or the countries, such as Indonesia and Venezuela, where civil conflict swirled around Exxon properties. In Washington, Exxon was a more confident and explicit political actor. The corporation’s lobbyists bent and shaped American foreign policy, as well as economic,
climate, chemical, and environmental regulation. Exxon maintained all-weather alliances with sympathetic American politicians while calling as little attention to its influence as possible.

  The cold war’s end signaled a coming era when nongovernmental actors—corporations, philanthropies, terrorist cells, and media networks—all gained relative power. Exxon’s size, insularity, and ideology made its position distinct. Unlike Walmart or Google (to name two other multinational corporations that would rise after 1989 to global influence), the object of Exxon’s business model lay buried beneath the earth. Exxon drilled holes in the ground and then operated its oil and gas wells for many years, and so its business imperatives were linked to the control of physical territory. Increasingly, the oil and gas Exxon produced was located in poor or unstable countries. Its treasure was subject to capture or political theft by coup makers or guerrilla movements, and so the corporation became involved in small wars and kidnapping rackets that many other international companies could gratefully avoid.

  The time horizons for Exxon’s investments stretched out longer than those of almost any government it lobbied. “We see governments come and go,” Lee Raymond once remarked, an observation that was particularly true of Washington, with its constitutionally term-limited presidency.25 Exxon’s investments in a particular oil and gas field could be premised on a production life span of forty or more years. During that time, the United States might change its president and its foreign and energy policies at least half a dozen times. Overseas, a project’s host country might pass through multiple coups and political upheavals during the same four decades. It behooved Exxon to develop influence and lobbying strategies to manage or evade political volatility.

  American spies and diplomats who occasionally migrated to work at Exxon discovered a corporate system of secrecy, nondisclosure agreements, and internal security that matched some of the most compartmented black boxes of the world’s intelligence agencies. The corporation’s information control systems guarded proprietary industrial data but also sought to protect its long-term strategic position by minimizing its visibility. Exxon’s executives deflected press coverage; they withheld cooperation from congressional investigators, if the letter of the law allowed; and they typically spoke in public by reading out sanitized, carefully edited speeches or PowerPoint slides. Their strategy worked: Exxon made a fetish of rules, but it rarely had to justify or explain publicly how it operated when the rules were gray.