Private Empire: ExxonMobil and American Power

by Steve Coll

  Altogether, ExxonMobil sold about 14 billion gallons of gasoline to American drivers each year. Andrea Loiero reported to a downstream division of the corporation in Fairfax, Virginia, on the site of the old Mobil headquarters, which oversaw this retail system. There were almost 29,000 ExxonMobil-affiliated gas stations worldwide, about 14,000 of them in the United States. Market researchers conducted public opinion surveys after the merger and discovered that consumers valued and felt loyal to each of the Exxon and Mobil brands, and so they concluded that there was no reason to change any of the names, or to create a combined ExxonMobil brand. More than 8,000 of the gas stations carrying one or the other name were owned and operated by independent distributors who paid ExxonMobil for the right to use the brands and who agreed to abide by the strict rules in franchise contracts. Another 1,000 or so stations were referred to within the corporation as Heritage Mobil stations, branded as Mobil and owned directly by the company. Some were operated entirely by ExxonMobil employees; others were owned by ExxonMobil but operated by an independent dealer under contract. There were also about 2,200 Heritage Exxon stations similarly organized. Jacksonville Exxon was a Heritage station owned by the corporation but managed under contract by the Storto family. It had operated this way since it had opened.

  Running a gas station had become steadily more complicated since the 1960s. The typical retail snack and grocery shop under a red Exxon roof now generated as much as or more profit than gasoline sales did. Managing the retail business required expertise in credit cards, customer reward programs, and packaged food supply. Technology and regulation had at the same time transformed the gas station’s physical plant into an intricate system of electronic monitoring systems, interconnected pumping systems, computerized inventory managers, alarms, and console boards. The blinking monitors set up behind the thick safety glass where the cashiers and station managers worked allowed ExxonMobil corporate managers to see from a distance, for example, when a particular dealer like the Stortos needed more gasoline, so that deliveries could be scheduled efficiently. The gas station business had become infused with new technical jargon: What customers referred to casually as the gas pump was now known within ExxonMobil as the M.P.D., or multi-product dispenser. Its digital systems might allow a driver to use a single handle to pump multiple grades of gasoline. A modern gas station’s electronics required continual supervision, to ensure that the systems were operating properly and that gasoline sales were being captured and credited correctly.

  The scene at Jacksonville Exxon on the brisk winter morning of January 12, 2006, reflected this new complexity. On one side of the station tarmac that day, a contractor had arrived to fix a submersible sump pump that pulled the gasoline out of the ground and delivered it to the multiproduct dispensers. The contractor was drilling holes in the asphalt. As this work proceeded, around 9:00 a.m., an ExxonMobil tanker truck also arrived to refill the station’s 12,000-gallon underground storage tank.

  As the tanker driver directed gasoline down a thick hose into a storage vat, alarms rang out suddenly—they signaled that gasoline was leaking somewhere in the station’s system. All of the multi-product dispenser islands at Jacksonville Exxon shut down automatically, cutting off befuddled customers in midsale.

  The tanker-truck driver came inside and spoke to the cashier. “I think I overfilled the regular tank,” he said, referring to the station’s underground storage vat. Spilled gasoline from the tanker hose had set off the station’s gasoline leak alarm system, he suspected.2

  At every stage of its operations—from oil wells in Africa to filling stations in America—ExxonMobil relied on outside contractors to perform much of its technical work. Halliburton and Schlumberger constructed oil and gas wells for ExxonMobil around the world. Companies specializing in offshore oil production leased their ships and crews to the corporation to drill wells in deep ocean water. Similar business practices had become the norm in ExxonMobil’s retail gasoline division. Contractors, not corporate employees, serviced ExxonMobil station managers under fixed-price agreements: They mowed lawns, painted walls, and they also installed and repaired electronic and gasoline storage systems.

  When a leak alarm sounded at any Exxon station in the mid-Atlantic region, it automatically alerted a call center in Greensboro, North Carolina, operated by an ExxonMobil contractor called Gilbarco Veeder-Root. The contractor’s technicians in turn telephoned another independent company in Connecticut called I.P.T., which was responsible for dispatching maintenance specialists to Exxon stations. That January morning, in response to the ringing alarm, I.P.T. telephoned Alger Electric, which had a subcontract in the Baltimore area. An Alger truck turned up at the Jacksonville station within two hours of the alarm’s first bell to diagnose and fix the problem, so that the Stortos could begin selling gasoline again.

  Alger’s technicians had learned through experience that leak detector alarms at Exxon stations usually did not go off because there was an actual gasoline leak. The detectors were sensitive devices that could be triggered by any number of causes—a paper jam inside the office, a faulty electrical component, or simply because the station was running out of gasoline. “A very big majority” of times that Alger was called to Exxon stations to inspect a leak alarm, it turned out that the alarm had been set off by something other than leaking gasoline, David Schanberger, an Alger manager, said later.

  On January 12, the Alger technician first checked for evidence that the gasoline delivery driver had overfilled the storage tank as he had reported to the cashier. There was no evidence of such a spill, however. Then he ran troubleshooting tests on other station equipment. He concluded that a motor in the pumping system was at fault; he unplugged the motor from the leak detector wires, replaced it with a new motor, reconnected it to the leak detector, reset the alarm, and departed. Jacksonville Exxon was back in business and Alger Electric, the repair contractor, was “under the impression . . . that everything was working properly.”3

  Russell Bowen had worked for Exxon and then ExxonMobil for thirty-seven years. As a territory manager he worked from his Maryland home and looked after scores of gas stations in his home state, Delaware, the District of Columbia, and northern Virginia. Bowen lived just eleven miles from Jacksonville Exxon. He had known the Storto family for many years. On February 16, 2006—about six weeks after the morning incident with the ringing leak alarm—he was driving back from a corporate meeting in Fairfax when his cell phone rang. It was Andrea Loiero, the Jacksonville Exxon’s manager.

  “I’ve got a problem,” she said. “I’m missing some gasoline.”

  Bowen asked what she meant. How much was she missing?

  About 24,000 gallons, she said. That was a lot—double the capacity of an underground storage tank at the station—and not easy to misplace. Bowen figured that the gasoline was not actually missing physically, but that the problem was probably a faulty meter or a glitch in an inventory computer program. Still, he thought they should be cautious. “Shut everything down,” he told Andrea. “I’ll come on over there.”4

  Bowen had been around the retail gas station business long enough to remember how things were done before all the computers came in. “Back in the day,” as he put it, each gasoline pump had a meter on it called a “totalizer” that kept track of how much gas was dispensed to customers. At the end of each day, the station manager would take a reading off each mechanical pump totalizer and check it against cash register receipts. To complete the inventory check, the manager would grab a dipper stick, go outside, drop it into the underground storage tanks, and measure the level of gasoline, to make sure the level conformed with the totalizer readings and the register receipts. A station manager would expect to lose a few gallons here and there because of small spills around the pump and the like, but otherwise, he would expect the daily totals to be aligned.

  It was dark when Russell Bowen arrived at Jacksonville. He first checked the electronic multi-product dispenser totalizer readings; the meters were
computerized now but they still counted up the number of gallons of gas pumped that day. Bowen first wanted to be sure that the measuring device was working properly; he bought a gallon of gasoline, pumped it into his own car, and then rechecked the totalizer to see if the sale had registered. It had.

  Inside, he found Andrea Loiero in a nervous state. Bowen asked to see her daily inventory records. He saw that Jacksonville Exxon had been posting a “negative variance”—missing gasoline—on the scale of hundreds of gallons each day since early January. Between January 13 and January 31 alone, 14,501 gallons appeared to be missing. Why had it taken her six weeks to notice that so much gasoline seemed to be missing? Had she been failing to undertake her required daily electronic inventory reconciliations? It was just like “doing your checkbook,” Bowen said later. ExxonMobil rules required station managers to report to the corporation if they experienced significant losses of any grade of gasoline. Loiero seemed agitated and confused about what her daily inventory records showed—how the math worked.

  “Did any leak alarms go off?” Bowen asked her.

  “No.”

  The more they talked, the more Andrea Loiero seemed to be “bouncing around,” thinking out loud about the work that had been done by the Alger Electric contractor back in early January.5 Had that caused the gasoline to go missing somehow?

  Bowen called to ensure that another contractor was on his way to Jacksonville to start running new tests on the station’s equipment. He told Andrea to calm down, think through the events of the last six weeks, and write out a chronology that could help them diagnose what had happened.

  He returned in the morning and found a new contractor had also arrived with metal tanks full of helium gas. The technician drilled quarter-inch holes in the concrete near the multi-product dispenser to inject gas into the ground, to search for evidence of leaks in the lines or tank walls, through which gasoline might have escaped. About an hour later, he called Bowen: There was a single fluid leak near the station’s big underground storage tanks. It was about the size of the holes that the contractor—who happened also to be from Alger Electric—had been drilling during his sump pump repair project back in January.

  The news was catastrophic: In all probability, about 24,000 gallons of toxic gasoline had been leaking into the ground for six weeks in an area where there were houses located within five hundred yards of the Exxon station. Worse still, those homes drew their water supplies from wells drilled on their properties; the county system of piped and treated drinking water did not serve them. Those household wells would be vulnerable to contamination from the gasoline in ways that piped county water would not. Since January, scores of local families and children had been consuming their well water, bathing in it, and cooking with it, unaware that they might be imbibing and dousing themselves with diluted gasoline. How could this have happened? Why didn’t the station’s leak detector alarm bells ring as they were supposed to do?

  Bowen relayed the findings up ExxonMobil’s chain of command. His report reached Steven Polkey in Fairfax. Polkey was an Englishman who had joined Exxon out of a British university, rose through the corporation’s retail gasoline businesses in the United Kingdom and Europe, and then moved to the United States in 2004 to take a senior position in ExxonMobil’s Safety, Health, and Environment department—“She,” as it was known to acronym-savvy corporate insiders. Polkey was now responsible for all of the environmental issues involving spilled gasoline at Exxon and Mobil stations in the United States. When he took the call about Jacksonville, he said later, “I was stunned, I was shocked. . . . I didn’t believe that we could have lost 25,000 gallons.”6

  There was no precedent in the retail gasoline division for a leak of this scale—especially one that had been allowed to unfold over six weeks without detection. Worse, the spill had occurred at a gas station known within ExxonMobil as a Consequence I site because it was located near houses that relied on aquifer wells for drinking water.

  ExxonMobil promoted itself as one of the safest large industrial corporations in the world; its executives increasingly scoffed in public and private at competitors such as BP that seemed accident prone. By 2006, ExxonMobil’s record was certainly better than the industry norm, but the truth was that, nonetheless, accidents with serious environmental impact or in which workers were injured were regular events at the corporation. They involved pipeline spills, trouble at refineries, accidents at construction sites, and losses of inventory of dangerous chemicals. Since the Exxon Valdez accident, under Frank Sprow, the daredevil adventurer and dangerous game hunter, Safety, Health, and Environment had seen worker fatality rates, in particular, fall to the point where if one did occur, it seemed a shocking anomaly inside the corporation. Yet such a massive global enterprise that daily moved toxic materials from beneath the earth to customers at 29,000 retail gas stations, plus large refineries and chemical plants, could hardly expect zero accidents. On the retail gasoline side, ground leaks of as much as 1,000 gallons of gasoline occurred periodically at American stations or storage facilities. ExxonMobil’s Public Affairs and Safety, Health, and Environment departments had developed standardized playbooks to respond to such events. The protocols included prepackaged talking points for communicating with alarmed members of the public. The leak at Jacksonville was exceptionally large, but it was exactly the sort of accident that ExxonMobil’s playbook was intended to address. When Steven Polkey hung up after receiving the news about Jacksonville, he set ExxonMobil’s spill response plans into motion.

  Public Affairs faxed Andrea Loiero talking points to use if homeowners around the station or journalists turned up asking questions about all the commotion and activity now taking place at the Jacksonville station, which had been closed to customers as contractors drilled and dug to determine the extent and flow of the leaked gasoline. “We’re investigating,” she was to tell neighboring homeowners. “We’ll provide an update.”

  Outside Jacksonville Exxon, a sign soon appeared that explained the station’s closure as well as the presence of so many mysterious trucks and workers drilling in the ground: “Please excuse our appearance. We’re working to serve you better. Fueling facility is temporarily closed for upgrade.”7

  Transportation fuel—the production, refining, and distribution of gasoline, diesel, jet fuel, and the like—is the second-largest segment of the worldwide energy economy, and the fastest growing. Power generation—the production of electricity—is the largest. The fuel economy’s worldwide growth is mainly a function of rising incomes in previously car-deprived poor countries. In Europe and the United States, however, by 2006, gasoline consumption had reached a plateau and possibly peaked forever.

  The retail gasoline stations had always been an unglamorous stepchild division within ExxonMobil. If the value of the land on which corporation-owned stations sat was factored in, the division’s profit margins were embarrassing by ExxonMobil standards, particularly compared with upstream oil and gas production or chemical manufacturing. Since the 1980s, like other large international oil corporations, Exxon had been steadily divesting itself of retail stations: Its total of 29,000 Exxon and Mobil stations worldwide in the early days of Rex Tillerson’s reign as chief executive represented less than half of the 62,000 stations Exxon had operated under its brand alone three decades before.

  The environmental and legal aspects of the gas business looked particularly unfavorable. In the euphoric postwar automobile age, neither citizens nor government officials in the United States paid much attention to gasoline’s toxic properties or to the consequences of so much sloshing and spilling of gasoline on and beneath the ground. Only after the rise of environmentalism and the birth of the Environmental Protection Agency in 1970 did federal regulators begin to look seriously at carcinogenic effects of gasoline exposure and to tighten the loose, expedient storage and cleanup practices of retail gasoline sellers. Like other oil corporations that had previously pumped gas without much reason to think about environmental impact
, Exxon discovered, as the laws tightened after 1970, that it would henceforth be responsible for hundreds of “remediation sites”—that is, sites where gasoline had leached into the ground at some point in the pre-E.P.A. era and where it now had to be located and scrubbed out as best as possible, whatever the cost.

  By 2006, ExxonMobil managed four thousand environmental remediation sites around the United States.8 Of those located at gas stations, many involved “historic spills,” as they were called, that dated to the pre-environmentalism era. The origins and extent of these old leaks were often unknown—all that could be said was that gasoline had somehow gotten into the ground, contaminating the soil and any water that might lie beneath.

  To prevent the recurrence of such leaks, the E.P.A. issued regulations in 1998 requiring gas station operators to upgrade their storage tanks, improve the tank hulls, and install more spill buckets and other protections. It also required station operators to install leak detection systems that were better than the old system of physical inventory reconciliation.

  The purpose was to protect people from health damage caused by exposure to gasoline. So far as federal scientists could determine, there were two elements in gasoline that might be damaging, if a person suffered sufficient exposure: benzene and methyl tertiary butyl ether, or MTBE.

  Benzene is an aromatic hydrocarbon compound long known to cause cancer; it has been formally designated as a “known human carcinogen” by the U.S. Department of Health and Human Services. Benzene was widely used as a gasoline additive in the 1950s. Its use was discontinued, but as the government moved to replace lead in gasoline, to attack air pollution, benzene made a limited comeback as an additive. Regulators limited the amount that could be blended into gasoline, however—no more than 1 percent, precisely because of fears that spilled gas might accidentally leach into groundwater accessed by household drinking wells.