Pall of Mistrust Remains 3 Years After Alaska Spill

Alyeska consortium beset with spying scandal, pollution problems

THREE years after the nation's worst oil spill and 15 years after oil began flowing through the 800-mile trans-Alaska pipeline, a pall of mistrust hangs over Prince William Sound.

A spying scandal, continuing battles over pollution at the pipeline's marine terminal, and arguments over the company's responsibility for the Exxon Valdez spill damages have convinced people like cruise-company owner Stan Stephens that Alyeska Pipeline Service Company's reform promises were hollow.

"The things that existed before still exist," he says. The attitude is widespread, despite Alyeska's attempts to clear its reputation.

Soon after the Exxon supertanker struck Bligh Reef, Alyeska, a consortium dominated by British Petroleum (BP), Atlantic Richfield, and Exxon, launched an in-house cleanup. A new president and new officers were installed. An extensive image campaign was started.

Alyeska spokesman Marnie Isaacs says the company's complex structure and the pairing of the pipeline terminal with the town of Valdez, produces unfair, simplistic, and emotional criticism. "The industry is not as devious as some people think we are. We're just a bunch of Alaskans trying to do our jobs every day."

But environmentalists complain that Alyeska has largely escaped the scrutiny Exxon endured after the spill. Some hope the new administration will take a tougher line with Alyeska. "It's no secret that the oil industry had sympathetic ears in the outgoing administration," says Joe Bridgman, a staff member of the Prince William Sound Regional Citizens Advisory Council (RCAC). "Now, maybe administration ears will be turned a little more sympathetically toward those of us who are at risk because of pollution

from oil-industry activity here."

Among the issues awaiting the new administration:

* Alyeska's 1990 undercover investigation, conducted by Florida-based Wackenhut Corporation, had agents posing as environmentalists tape-record conversations and probe private telephone calls, personal financial records, and trash contents. The primary target was Charles Hamel, a Virginia oil broker and Alyeska gadfly who has fed information about environmental violations to reporters and regulators, and Alyeska employees acting as environmental whistle-blowers. Others probed apparently include Mr. Steph ens.

The operation sparked an investigation by the United States House Interior Committee and lawsuits from Mr. Hamel and other alleged victims. On Nov. 4, the committee sent its report alleging Alyeska crimes to US Justice Department prosecutors.

Alyeska has argued that the affair was legitimate to stop leaks and theft of internal documents. But the company took out newspaper advertisements in which it apologized for the operation. Ms. Isaacs defends company president James Hermiller: "[His] philosophy is one of tremendous empathy for his employees and the community." Still, many predict Mr. Hermiller will lose his job.

Suspicions seem to be mutual in Valdez. A July Alyeska memo describes activists attending a meeting on air pollution as a "recruited audience" asking "planted" questions.

* Alyeska is fighting a proposal to mandate control of hydrocarbon vapors that stream into the air as tankers are loaded with crude oil from the pipeline. The Alyeska terminal is North America's top producer of volatile organic-compound air pollution (VOC).

The uncontrolled vapors give Valdez, a city of 4,500, 1/10th of the total VOC that envelops the entire Los Angeles Basin; the 450 tons of benzene emitted yearly pose a significant health risk, according to a study funded by a local citizens group.

Alyeska says a hard-piping system to recover hydrocarbon vapors would cost $120 million to $140 million. The company calls it unnecessary and, citing a health study, claims that air pollutants are blown out to sea. The study, however, was dismissed as flawed by RCAC-hired scientists.

The oil industry has long known about the air pollution. A 1977 report to the US Bureau of Land Management from Sohio Transportation Corporation predicts that heavy hydrocarbon fumes would head to town. Whether Alyeska is ordered to install a vapor-recovery system is up to the Environmental Protection Agency. It is drafting oil-tanker loading regulations authorized by the 1990 Clean Air Act amendments. But Alyeska may be exempted if the agency deems the health risks from the terminal's pollution too smal l to justify a regulation.

* Alyeska claims that it has no legal duty to respond to spills in the Sound. Meanwhile, plaintiffs press lawsuits against Alyeska for spill compensation. Alyeska has portrayed itself as a mere volunteer spill-responder bound by contracts with shippers, not law, even though almost all tankers loaded with crude oil are owned or contracted by companies that own Alyeska.

The Alaska legislature has rejected the argument, passing a bill designating the pipeline operator responsible for spill cleanup. A similar provision was dropped from Congress's national energy bill.

Alyeska has also suggested downscaling its ship escort and response system, a program that costs some $50 million a year. The program was mandated by state and federal laws passed after the spill; Alyeska complains that its size is unwieldy.

* Alyeska admits that its relationship with the RCAC, for which it provides the $2 million-a-year budget, is rocky. Letters and messages from Alyeska to the RCAC protest council members' public statements and discussions with reporters, and assert that no information gathered by the council be publicly released before its review by the company.

Gary Bader, Alyeska's liaison to the council, denies any effort to pressure the RCAC. But he says Alyeska has a right to object to council members' lobbying, biases, and early release of information because the group is bound by contract to be an adviser. Increasingly, Alyeska has protested post-spill controls as burdens that could force an early shutdown of the state's economic jugular vein.

"All of these rules and regulations are fueling America's biggest export - the exportation of jobs," Mike Williams, a company official known as a reformer, said at a conference this summer.

That's a powerful argument in Alaska, where the state treasury depends on oil revenues for 85 percent of its operating budget. It is even more powerful in Valdez, where 400 to 600 well-paid residents are employed by Alyeska and where Alyeska tax payments account for more than 90 percent of city revenues, providing generous public services that are the envy of other towns.

Former Mayor John Devens, who lost a bid this month for Alaska's sole US House seat, stirred up resentment when he took on Exxon and Alyeska after the spill. Environmentalists applauded, but some residents dubbed him "Benedict Arnold Devens." He expected it.

"Quite frankly, I'd say that Valdez is a microcosm of the state of Alaska," he said.