How Exxon Learned From its Mistakes: A Conversation With Steve Coll
Just after midnight on March 24, 1989 the Exxon Valdez oil tanker struck a reef in Prince William Sound, Alaska. 11 million gallons of oil spilled into the water, which soon made its way to shore. It took three years to clean up. It was the worst oil spill in history.
That was until two years ago, when the BP Deepwater Horizon oil rig exploded in the Gulf of Mexico. That spill released 206 million gallons of oil into the sea.
In his new book, ‘Private Empire: ExxonMobil and American Power‘, reporter Steve Coll takes a look inside the largest oil company in the world, a juggernaut with annual revenues of 450 billion dollars. “That’s more than economic activity of most countries,” Coll says in the first part of our interview. In part two, we talk to Coll about how the company reacted to both disasters.
Q: One of the things you talk about in the book about the corporate culture at ExxonMobil. It’s clouded in secrecy; it almost resembles a cult. And you’re saying that culture came out of the aftermath of the Exxon Valdez spill.
A: If we follow the metaphor that ExxonMobil is like a state, then the Valdez spill is kind of like 9/11 for them. It was a huge shock, it cost them their reputation overnight. Fifteen years later, they would run focus groups on why they were so hated, and they’d enter into wordplay games and say: ‘I’ll say Exxon,’ and all of their subjects would immediately say: ‘Valdez.’
So it was a huge stain on their reputation and their sense of themselves. Economically, it was costly, but they have the cash flow to deal with the settlements. But afterwards they undertook a series of sweeping reforms to try, essentially, to achieve a day-to-day practice in which nothing like that could happen again. Their goal was, basically, to ring all human fallibility out of their enormous daily industrial operations, whether at refineries, offshore oil platforms, or gas drilling. Everything.
And to do that, you think about the scale, where you have to get people to not make mistakes to the greatest possible degree that humans are capable of.
Then the system you create is one of idiot-proofing: automation, manuals, everything by the book. Procedures for everything, and accountability if you fail to follow the manual. So they created a system that they called Operations Integrity Management System (OIMS).
It’s this series of binders telling you how to do everything. How to requisition a stapler, park your car, walk across the plant, at what pace, through what door …
And this system began to produce results, especially in worker safety. They started to have a very good record. And they enforced it by having these — the sort of cult comparison — these sort of worker collectives, where people meet and confess to each other about near-misses.
So, groups would get together regularly and talk about things that almost went wrong, like ‘I was at home and operating my lawn mower, and a rock came out and struck me in the leg.’ Or, ‘I went on vacation and I got too much sun, and I missed half a day of work.’ If at the office somebody left a file drawer open, they would receive a written reprimand cause someone might bump into it. If there were a rash of paper cuts around the copier, these would be investigated, documented, and corrected. Bee stings were a reportable accident.
So it just became all-encompassing. I suppose if you had a sister or brother who’s working on an oil refinery, you’d like them to work in a place where they have the greatest chance of coming home each day with life and limb. But it requires a certain attitude to conform to this, because it was just pervasive.
Q: When the BP Deepwater Horizon disaster happened, a lot of people were comparing it back to the Valdez. What was the company’s reaction to the BP disaster? Did they look at that and say, ‘Oh, you know, we actually didn’t have that counter-measure in place and there are some lessons to be learned,’ or did they look at it and say: ‘You know what, if that had been our platform, this would have never happened?’
A: It was the second. They were very emphatic. And I thought they were kind of a little bit over-the-top. Rex Tillerson, the current chairman and chief executive [of ExxonMobil], went before a congressional committee and he testified very emphatically that this would never have happened on their watch. That this was a complete outlier [in their] operative environment. That it was unconscionable. I remember listening to him, thinking, ‘Boy, if I were the plaintiff’s lawyer for the people making claims about the damage caused by the BP spill, I think I would call him as my first witness.’
But two things about this. First, it’s convincing that ExxonMobil’s operating standards are higher than BP’s were at the time of the deep water horizon. I think everybody in the industry knew that BP had problems in its operating culture — their record at the Texas City Plant and other accidents, their record in ocean compliance — made statistically clear that they did have problems in their operating culture.
The idea that these corporations — at their scale, working frontier environments, where nobody has really operated under these conditions for very long — if they can promise, in effect, that ‘This will never happen?’ I think that’s unrealistic.
What the Deepwater Horizon showed was: Okay, that accident might have been preventable, but once it happened, there was nobody who could have prevented the extent of damage that occurred. And even ExxonMobil will admit, yeah, once you blow a well in those circumstances, you’re sunk.
Ok, now that’s a disturbing admission. Then we’re just betting on the fact that you will always bat 1000, even though human beings are involved. I mean, Japan thought its nuclear industry was bulletproof. One tsunami wave has called into question whether it will ever operate another nuclear power plant. So it’s a very delicate balance. I understand their confidence and appreciate that they have a good record, but I don’t believe that human beings are perfectible.
Q: I think at the same time though, it’s commendable, in a sense. The fact that after Valdez, they made such sweeping changes, that they did this top to bottom hierarchy of rules and manuals and confessionals about not using your lawn mower the right way. Whereas you see other companies in the industry, and they do have a disaster like this, and it’s not always clear that they’re that interested in changing the way they do things.
A: Yeah, I think that’s true, and I wonder whether came from internal embarrassment or just a desire to reform. I think Lee Raymond [President of Exxon at the time of the spill, and later its Chairman and CEO*] said that he really wanted to use the crisis to tighten the company up anyways. He had a sense that the company was too loose and too bureaucratic and not responsive enough, and so the crisis could be an instrument for change that you couldn’t otherwise accomplish.
And I think they’ve been succesful in building an excellent record of financial discipline, operating discipline, and worker safety. I think, for them as a business looking out 30, 40, 50 years, the kind of flipside — the other side of the coin for that culture — is that it’s an extraordinarily closed and rigid environment.
And where the question is numbers, or engineering effectiveness, or worker safety performance, then being closed and rigid and compromising gets results. But when the question involves the human factor, building trust with your communities where you’re drilling, or convincing people that fracking is not going to ruin their water, or dealing with political environments in 150 different countries with lots of supply problems, or dealing with violence on the ground around your oil fields in Africa — in all of those areas, I think they have a habit of not really taking anybody’s advice.
They keep the windows closed, and everybody’s there for life. It’s more like the Marine Corps than a corporation where people come in from other jobs or other industries with fresh perspectives. They have an enormous amount of confidence in themselves, and I think they defeat themselves in these other areas of political communications more often than they need to.
Because everything is done the same way, they bring the same mindset to worker safety and operating discipline that they do to political contributions and community relations. And I’m not sure that over next 30 or 40 years that’s going to be good enough.
*This post originally incorrectly stated that Lee Raymond was Chairman and CEO of Exxon at the time of the Valdez spill. Raymond was President of Exxon at the time of the spill, and later its Chairman and CEO. Lawrence Rawl was Chairman and CEO of Exxon at the time of the Valdez accident.