1993 general accounting office report on use of evos settlement funds

8/9/2019 1993 General Accounting Office Report On Use of EVOS Settlement Funds

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AOf .ITnited States Gcnerd Accounting OfEceBriefing Report to the Chairman,Committee on Natural Resources,House of Representatives

NATURAL RESOURCESRESTORATIONUse &Exxon ValdexOil Spill SettlementFunds

GAWRCED-9:3-206I3R


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AO United StatesGeneral Accounting OfficeWashington, D.C. 20548Resources, Community, audEconomic Development DivisionB-254199

August 20,1993The Honorable George MillerChairman, Committee onNatural ResourcesHouse of RepresentativesDear Mr. Chairman:The March 1989 grounding of the supertanker Exxon Valdezin Alaska's Prince William Sound spilled 11 milliongallons of crude oil--the largest oil spill in U.S.history. The spilled oil affected more than 1,200 milesof Alaskan shoreline, killed or injured large numbers ofwildlife, and touched off massive cleanup and restorationefforts by Exxon1 and federal and state of Alaskaagencies.In October 1991, the U.S. District Court for the Districtof Alaska approved settlements between Exxon and thefederal government and the state of Alaska to resolvecivil claims and criminal charges for damages caused bythe oil spill. Under the civil settlement, Exxon agreedto pay a total of $900 million in 11 annual payments.Under the criminal settlement, Exxon was fined $150million ($125 million of which was forgiven because of,among other things, Exxon's cooperation during thecleanup) and required to pay $50 million each to thefederal government and to the state of Alaska as remedialand compensatory payments to be used exclusively forrestoring natural resources damaged by the oil spill.Oil from the Exxon Valdez affected the natural resourcesmanaged by the state of Alaska and three federal agencies--the Departments of Agriculture; Commerce, through theNational Oceanic and Atmospheric Administration (NOAA);and the Interior. Federal and state trustees have beendesignated to assess the damage to the natural resources'As used in this report, the name Exxon includes the ExxonCorporation and its subsidiaries: the Exxon PipelineCompany and the Exxon Shipping Company, which owned theExxon Valdez.


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caused by the oil spill and to restore these resources.Currently, the federal trustees are the Secretary of theInterior; the Secretary of Agriculture; and theAdministrator, NOAA.' The state of Alaska trustees arethe Commissioner, Department of EnvironmentalConservation; the Commissioner, Department of Fish andGame; and the Alaska Attorney General, Department of Law.In May 1989, the federal government and the state ofAlaska established a trustee council to (1) coordinatedamage assessment activities and (2) provide the frameworkto seek funds from responsible parties to restore orreplace natural resources damaged by the oil spill. InAugust 1991, the federal government and the state ofAlaska converted the original trustee council into theExxon Valdez Oil Spill Trustee Council (Trustee Council)3to jointly direct the restoration. After the civil claimsand criminal charges were settled in October 1991, theTrustee Council became responsible for jointly managingthe distribution of the civil settlement funds. (See sec.1 for additional background information.)In response to your request and subsequent agreements withyour office, this briefing report provides information on-- the amount of money that Exxon has paid throughDecember 1992 under the settlements and thedistribution of this money and-- issues surrounding the functioning of the TrusteeCouncil.

'In 1989, the then Secretary of Commerce recused himself ofhis duties as a trustee in matters related to the ExxonValdez oil spill because of a potential conflict ofinterest. Since then, the Administrator, NOAA, has servedas Commerce's trustee instead.3The Trustee Council comprises three federal and threestate members. The federal members are the Alaska-basedrepresentatives of the federal trustees--the AlaskaRegional Forester, U.S. Forest Service, Department ofAgriculture; a Special Assistant to the Secretary of theInterior; and the Director, Alaska Region of the NationalMarine Fisheries Service, NOAA. The state members are thestate of Alaska trustees.2


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On March 19, 1993, we briefed your office on thepreliminary results of our review. Following thatbriefing, we provided--at your office's request--twosimilar briefings: one on May 12, 1993, to seniorofficials from the Departments of Agriculture, Commerce,and the Interior in Washington, D.C.; and a second, onMay 26, 1993, to federal and state members of the TrusteeCouncil in Alaska. As subsequently agreed with youroffice, this letter and the following sections summarizeand update the information provided at these briefings.EXXON PAYMENTS AND DISTRIBUTIONOF SETTLEMENT FUNDSThrough December 1992, Exxon paid two annual installments--totaling $240 million--on the $900 million to be paidunder the civil settlement. As of February 1993, the $240million was distributed as follows:-- $107 million was returned to federal and state agenciesas reimbursement for presettlement cleanup and damageassessment costs,-- $40 million was offset against Exxon's payments, asprovided in the settlement, for cleanup costs thatExxon incurred in 1991,-- $19 million was approved by the Trustee Council forexpenditure on damage assessment and restoration

projects and administrative costs, and-- $74 million remained in a joint federal/state trustfund for future use.Both an August 1991 Memorandum of Agreement between thefederal government and the state of Alaska and the civilsettlement placed a limit of $142 million on the amount ofpresettlement cleanup and damage assessment costs that canbe reimbursed--$67 million for federal agencies and $75million for state agencies. Trustee Council membersbelieve that reimbursements will not exceed the $142million limit.About 40 percent of the $19 million for projects approvedby the Trustee Council through February 1993 was used fordamage assessment. The remainder was split almost evenlybetween restoration projects and administrative costs.Furthermore, the $19 million was divided almost evenly3


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between federal and state agencies. The Trustee Councilhas approved a resolution to use $21.1 million of the $74million remaining in the joint trust fund for damageassessment and restoration projects, habitat protection,and administrative costs for 1993. Of the $21.1 million,about $7.5 million was allocated for restoration work andhabitat protection each.In accordance with the criminal settlement, Exxon has paid$25 million of the $150 million fine, which was depositedinto the North American Wetlands Conservation Fund(16 U.S.C. sec. 4401-4413) and the Victim Compensation andAssistance Act (42 U.S.C. 10601-10605) account. Under theterms of the settlement, the $125 million balance of thefine was forgiven because of Exxon's cooperation duringthe cleanup. Exxon has also paid $100 million in remedialand compensatory (restitution) payments--$50 million eachto the federal government and to the state of Alaska.Plans have been proposed or are under way to use thesefunds for such measures as acquiring land for habitatprotection, building a marine mammal rehabilitationcenter, and restoring subsistence resources or serviceslost or damaged in rural communities. (See sec. 2.)ISSUES SURROUNDING THE FUNCTIONINGOF THE TRUSTEE COUNCILIssues surrounding the functioning of the Trustee Councilfall into three categories: restoration planning, habitatprotection, and overall organization and administration.Restoration PlanninqA key ingredient --which the Trustee Council does not yethave--in the transition from the Trustee Council's role ofassessing damage to taking action to restore the naturalresources affected by the oil spill is an approvedrestoration plan. The plan is scheduled to be issued inDecember 1993. At present, however, the Trustee Council'sannual work plans are not tied to a comprehensiverestoration plan, and some projects do not appear to havea direct link to the oil spill or else appear to duplicateexisting agency responsibilities. In addition, someparticipants in and observers of the Trustee Council'sactivities believe that the damage assessment andrestoration work carried out to date has been dominated byfederal and state agencies and that, as a consequence, fewnongovernmental organizations have been able to4


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participate in the process. For example, almost all ofthe 1992 and 1993 work projects were not open forcompetitive bid and were carried out by federal and stateagency personnel. The Trustee Council's chief scientistbelieves that open competition would encourage more timelycompletion of projects at reduced costs. According toTrustee Council members, there was a need for federal andstate agencies to do most of the damage assessment work;however, as more restoration projects are undertaken, lessuse will be made of federal and state agencies and moreprojects will be subject to bid proposals fromnongovernment sources. (See sec. 3.)Habitat ProtectionThe Trustee Council is facing increasing public pressureto acquire land to protect habitat. However, landacquisition is expensive, as is illustrated by the TrusteeCouncil's estimates to acquire land for habitat protectionthat run as high as $3 billion. Currently, landacquisition activities are not yet tied to an approvedland acquisition plan that is linked to an approvedrestoration plan. Meanwhile, using interim evaluationcriteria approved by the Trustee Council, a habitatprotection/acquisit ion work group classified about 42,000acres as critical habitat to help the recovery of injuredwildlife species. This land was identified as "imminentlythreatened" because of its vulnerability to activities,such as logging, that would significantly lessen theland's ability to provide habitat protection for wildlifespecies injured by the oil spill. The Trustee Council hasapproved over $60 million to acquire 24,500 acres, whichincludes the work group's two top-ranked imminentlythreatened parcels totaling 22,500 acres. The work groupclassified another 338,000 acres as "opportunity-to-buy"parcels--land that is important as habitat protection butnot imminently threatened. (See sec. 4.)Overall Orqanization and AdministrationThe Trustee Council's current procedures and practiceslead many to view the Trustee Council's objectivity withsome skepticism. Among other things, the individuals.making up the Trustee Council and its organization, whichincludes a restoration team and several work groups, are,for the most part, employees of the various federal andstate trustee agencies. The same agencies--and sometimesthe same individuals--that recommend a project for funding5


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also approve and carry out the project. Moreover,financial reviews or audits have not been conducted of thefederal and state agencies' reimbursement claims or of theuse of civil settlement funds.In addition, required project reports on damage assessmentand restoration efforts are frequently submitted late andoften require extensive revision because of such problemsas incomplete analyses, overreaching conclusions, andimbalanced presentations. Consequently, the TrusteeCouncil has often made decisions on follow-on projectswithout the knowledge of the final conclusions of earlier,related studies. Also, there are some who believe thatthe Trustee Council organization has not sufficientlysought meaningful public participation or independentscientific viewpoints in deciding which studies andrestoration activities should be undertaken. Because ofthe importance placed on the public's views, the TrusteeCouncil has held numerous public meetings and hasestablished a 17-member public advisory group tofacilitate the gathering of the views of individuals andvarious interest groups throughout Alaska. (See sec. 5.)CONCLUSIONSOur review raised a number of issues surrounding thefunctioning of the Trustee Council. These issues requireattention before adequate assurance can be provided thatthe $1 billion being received as a result of the ExxonValdez oil spill civil and criminal settlements areexpended as intended. Several of the issues relate to thecompletion of a comprehensive restoration plan to guidesuch things as annual work plans and land acquisitions,more timely and better quality project reports, and moreopen competition for restoration projects. Other issuesinvolve the adequacy of internal controls, including (1)financial reviews and program audits to ensure thepropriety of reimbursements and subsequent expenditures ofsettlement funds and (2) a separation of duties amongagency personnel involved in recommending, approving, andcarrying out the projects.RECOMMENDATIONSWe recommend that the three federal trustees proactivelywork with the three state of Alaska trustees to betterensure that the $1 billion being received as a result ofthe Exxon Valdez oil spill settlements is expended as6


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intended. Among other things, attention should be givento (1) completing restoration and land acquisition plans,(2) requiring more timely and better quality projectreports, (3) providing for more open competition forrestoration projects, and (4) improving internal controls.AGENCY COMMENTSAt your office's request, we did not obtain written agencycomments on a draft of this report. We did, however,discuss the information in the report with members of theTrustee Council. They generally agreed with theinformation in the report and provided comments andsuggestions, which we incorporated where appropriate.More specifically, the Trustee Council members suggestedthat we more clearly distinguish between the role andmakeup of the presettlement and postsettlement trusteecouncils, which we did. They also commented that we hadunderstated the extent of public participation activelysought and used for the Trustee Council's decisions. Werevised the report as necessary to more clearly reflectthe extent and form of public participation.The Trustee Council members expressed concern that we hadnot fully reflected the magnitude of the challenge theyfaced in establishing a joint federal/state organization,process, and plan for addressing the restoration ofresources damaged and services affected by the largest oilspill on record. We believe that the report doesrecognize the magnitude and complexity of the challengesfaced by the trustees and the Trustee Council, and thatthis is all the more reason for the trustees to addressthe issues identified in the report to ensure thatsettlement funds are expended efficiently, effectively,and as intended.Finally, the Trustee Council members believe that weshould have addressed the multiplicity of federal andstate procedures and requirements that must be met indeveloping a restoration plan. Although the scope of ourreview did not include an in-depth analysis of all thestatutes, laws, and regulations affecting the TrusteeCouncil's operations, we believe that the report doesprovide a fairly comprehensive overview of its operations,including the restoration planning process.

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SCOPE AND METHODOLOGYTo determine how much Exxon has paid to date under thesettlement and how the money has been distributed, weobtained documents and interviewed officials from federalagencies in Washington, D.C., and their regional officesin Alaska, as well as state of Alaska agencies. Thefederal agencies we contacted were the Departments ofgriculture, Commerce (NOAA), the Interior, Justice, andTransportation (U.S. Coast Guard). The state of Alaskaagencies included the Departments of EnvironmentalConservation, Fish and Game, and Law.To identify issues surrounding the functioning of theTrustee Council, we interviewed the six federal and statemembers of the Trustee Council and various other officialsof the Trustee Council organization, including members ofthe Trustee Council's restoration team, work groups, thepublic advisory group, and the chief scientist. We alsoreviewed the Trustee Council's documents, includingtranscripts of the Trustee Council's monthly meetings;annual budgets and work plans; and analyses prepared bythe chief scientist.We conducted our review between February and July 1993 inaccordance with generally accepted government auditingstandards. As agreed, however, we did not verify theaccuracy or reliability of the annual budgets or actualdistributions of funds.

- - - - -As requested, unless you publicly announce its contentsearlier, we plan no distribution of this briefing reportuntil 30 days from the date of this letter. At that time,we will make copies available to the Secretary ofAgriculture; the Secretary of Commerce and theAdministrator, NOAA; the Secretary of the Interior;designated federal and state members of the TrusteeCouncil at Anchorage, Alaska; and other interestedparties. Copies will also be made available to others onrequest.

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This work was performed under the direction of JamesDuffus III, Director, Natural Resources Management Issues,who can be reached at (202) 512-7756 if you or your staffhave any questions. Other major contributors to thisbriefing report are listed in appendix I.Sincerely yours,


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CONTENTSPaqe

1ETTERSECTION

123

45

APPENDIXI MAJOR CONTRIBUTORS TO THIS BRIEFING REPORT 34

TABLE1.12.12.22.3 Planned 1993 Distribution of Funds2.43.13.2

BACKGROUND 12EXXON PAYMENTS AND SETTLEMENT FUNDDISTRIBUTIONSRESTORATION PLAN AND ANNUAL WORK PLANISSUESRestoration PlanAnnual Work PlansHABITAT PROTECTION AND ACQUISITION ISSUES 28TRUSTEE COUNCIL ORGANIZATIONAND ADMINISTRATION ISSUESTrustee Council OrganizationTrustee Council's Administration

17242425

303031

Schedule of Exxon's Civil Settlement Payments 13Reimbursements to Federal AgenciesThrough December 1992 20Distribution of Funds From the JointTrust Fund Through February 1993 21

From the Joint Trust Fund 22Proposed Use of Criminal Restitution Funds 23Issues Related to the Restoration Plan 24Issues Related to Annual Work Plans 25

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4.1 Issues Related to Habitat Protectionand Acquisition 285.1 Issues Related to the Trustee CouncilOrganization 305.2 Issues Related to the Trustee Council's

Administration 32FIGURE

1.1 Exxon Valdez Oil Spill Trustee CouncilOrganization2.1 Exxon Payments and Settlement FundDistributions2.2 Distribution of $240 Million in ExxonPayments Through February 1993

GAONOAANRDA&R

ABBREVIATIONSGeneral Accounting OfficeNational Oceanic and Atmospheric AdministrationNatural Resources Damage Assessment andRestoration Fund

11

151719


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SECTION 1BACKGROUND

Shortly after midnight on March 29, 1989, the supertankerExxon Valdez struck a reef and ran aground in Prince WilliamSound, off the coast of Alaska, spilling 11 million gallons ofcrude oil, the largest oil spill in U.S. history. The spilledoil spread to more than 1,200 miles of Alaska's coastline,including portions of one national forest, four national wildliferefuges, three national parks, f ive state parks, four statecritical habitat areas, and one state game sanctuary. Thiscoastline is rich in fish and wildlife, such as herring, salmon,sea otters, whales, bald eagles, and seabirds. The spill killedand injured large numbers of many of these wildlife species.Services dependent upon these natural resources--such as nativesubsistence, commercial and sport fishing, sport hunting,camping, boating, and tourism--were also reduced or lost.

Oil from the Exxon Valdez affected the natural resourcesmanaged by the state of Alaska and three federal agencies--theDepartments of Agriculture; Commerce, through the NationalOceanic and Atmospheric Administration (NOAA); and the Interior.The Comprehensive Environmental Response, Compensation, andLiability Act (42 U.S.C. sec. 9607); the Clean Water Act (33U.S.C. sec. 1321); and implementing regulations provide for thedesignation of federal and state officials to act as trustees toensure that responsible parties pay to restore, rehabilitate, orreplace natural resources damaged or destroyed by an oil spill.The federal trustees were the Secretary of the Interior; theSecretary of Agriculture; and the Administrator, NOAA. The stateof Alaska trustee was the Commissioner, Department of Fish andGame.

Although the response of the state of Alaska and of thevarious federal agencies to the oil spill was swift, a need soonemerged for a formal interagency structure to coordinate responseand damage assessment activities. In May 1989, the trusteesestablished a trustee council to coordinate activities. Thecouncil was composed of three Alaska-based representatives of thefederal trustees--the Alaska Regional Forester, U.S. ForestService, Department of Agriculture; the Director, Alaska Regionof the U.S. Fish and Wildlife Service, Department of theInterior; and the Director, Alaska Region of the National MarineFisheries Service, NOAA--and the state's Commissioner , Departmentof Fish and Game. The U.S. Environmental Protection Agencyparticipated in the council's activities as an adviser on thelong-term revival of Prince William Sound.

During 1989, state and federal agency efforts focused oncontaining and cleaning up the spill and rescuing oiled wildlife.Although winter storms helped in cleaning many beaches,12


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additional cleanup work was needed in 1990 and 1991. Along withthe cleanup effort, the state and federal trustee agencies--underthe coordination of the trustee council--also planned anddirected natural resources damage assessment studies to determinethe nature and extent of injuries sustained in the oil spillarea. The results of these studies were to be used as evidencein pending civil and criminal claims against Exxon and to help inthe restoration of the damaged resources.

Both the state of Alaska and the federal government filedclaims against Exxon seeking to recover damages for injuries toand the restoration and replacement of natural resources affectedby the oil spill. In October 1991, the U.S. District Court forthe District of Alaska approved agreements that settled theclaims of the United States and the state of Alaska against Exxonfor civil damages and criminal charges. Under the major terms ofthe civil settlement, Exxon (1) agreed to pay the federalgovernment and the state of Alaska a total of $900 million in 11annual payments (see table 1.1) beginning in December 1991 andending in September 2001 and (2) might be liable for up to anadditional $100 million between 2002 and 2006 for projects torestore populations, habitats, or species that had suffered asubstantial loss or decline not anticipated on the effective dateof the settlement.Table 1.1: Schedule of Exxon's Civil Settlement PaymentsDollars in millions

Scheduled payment dateDec. 1991Dec. 1992Sept. 1993Sept. 1994Sept. 1995Sept. 1996Sept. 1997Sept. 1998Sept. 1999Sept. 2000Sept. 2001Total

Amount$90150100

7070707070707070

$90013


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Under the criminal'settlement, Exxon agreed to plead guiltyto four criminal charges arising from the oil spill and be fined$150 million. The $150 million fine was the largest fine everimposed for an environmental crime. Of this amount, $125 millionwas forgiven because of Exxon's cooperation during the cleanup,timely payment of many small claims, and environmentalprecautions taken since the spill. The remaining $25 million waspaid into the North American Wetlands Conservation Fund(16 U.S.C. sec. 4401-4413) and the Victim Compensation andAssistance Act (42 U.S.C. sec. 10601-10605) account. Inaddition, Exxon agreed to pay $100 million ($50 million to thefederal government and $50 million to the state of Alaska) asremedial and compensatory (restitution) payments to be usedexclusively for the restoration of natural resources damaged bythe oil spill.

Guidelines for the use of the $900 million civil settlementfunds are set forth in a Memorandum of Agreement between thefederal government and the state of Alaska, which was approved bythe U.S. District Court in August 1991. The agreementestablished a federal/state trusteeship--known as the ExxonValdez Oil Spill Trustee Council (Trustee Council)--to review andapprove the expenditure of civil settlement funds for such thingsas damage assessment and restoration projects. The federalmembers of the Trustee Council are the same as those on theearlier trustee council, except that a Special Assistant to theSecretary of the Interior replaced the Director, Alaska Region ofthe U.S. Fish and Wildlife Service. The Memorandum of Agreementalso designated as state of Alaska trustees and as members of theTrustee Council the Commissioner, Department of EnvironmentalConservation; the Commissioner, Department of Fish and Game; andthe Alaska Attorney General, Department of Law. Figure 1.1 showsthe postsettlement Trustee Council organization.

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Fiqure 1.1: Exxon Valdez Oil Spill Trustee Council Orqanization

I Trustee Chief Scientist/Peer ReviewersI H Council HAdministrativeDirector andRestoration Team

Work GroupsI I

Under the Memorandum of Agreement, civil settlement fundsmust be used to restore, replace, rehabilitate, enhance, oracquire the equivalent of the natural resources injured, lost, ordestroyed as a result of the oil spill and the reduced or lostservices provided by such resources. The funds must be spent onthe restoration of natural resources in Alaska unless thetrustees unanimously agree that spending funds outside of thestate is necessary for effective restoration. The agreement alsoestablished a joint trust fund, within the jurisdiction of theU.S. District Court, as a depository for Exxon's payments. Theuse of the $100 million restitution funds from the criminalsettlement was not covered by the Memorandum of Agreement;however, these funds must be used by the federal government andthe state of Alaska for restoration activities, within the state,relating to the Exxon Valdez oil spill.

The six-member Trustee Council receives input and advicefrom a contracted chief scientist and a peer review group ofscientists, a financial committee, a public advisory group, andthe public at large. The primary day-to-day activities of theTrustee Council organization are performed by an interimadministrative director, a six-member restoration team, and15


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various work groups. The restoration team reviews and recommendsproposed actions to the Trustee Council, and the work groupsprepare plans and documents as directed by the restoration team,including annual work plans and a long-term habitat-protectionplan. The work groups are staffed by officials from state andfederal agencies represented on the Trustee Council orrestoration team. The Trustee Council's first of generallymonthly meetings occurred in December 1991. All Trustee Councilmeetings are open to the public under Alaska's open-meeting laws.Teleconferencing is used in many of these meetings as a means ofinvolving individuals from up to 10 communities throughout thestate who, otherwise, would be unable to participate. Asignificant part of each meeting is devoted to the publiccomments received on the issues being considered by the TrusteeCouncil.

According to Trustee Council members, settlement fundexpenditure decisions are made in the following manner. Theannual work plan group initially develops a proposed list ofdamage assessment and restoration projects, including projectsproposed by the public. The group then forwards the recommendedlist of proposed projects to the restoration team. At least fiveof the six members of the restoration team must approve aproposed project before it is recommended to the Trustee Council.The Trustee Council may also consider projects in addition tothose recommended by the restoration team. The chief scientistreviews the proposed projects and provides comments to theTrustee Council. The list of proposed projects is also availablefor public review and comment. A unanimous vote is required byall six members of the Trustee Council to approve a project'sfunding. After a project begins, periodic progress reports and afinal completion report for the project must be submitted to thechief scientist for review and approval.

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SECTION 2EXXON PAYMENTS AND SETTLEMENTFUND DISTRIBUTIONS

Figure 2.1 shows the flow of dollars resulting from thecriminal and civil settlements. As mentioned earlier, Exxon owed$100 million in criminal restitution payments--half to thefederal government and half to the state of Alaska. The $50million payment to the federal government was deposited into theDepartment of the Interior's Natural Resource Damage Assessmentand Restoration (NRDA&R) Fund and the state of Alaska's $50million was deposited into a state account.Fiqure 2.1: Exxon Payments and Settlement Fund Distributions

Criminal Civil$100 million inrestitution

$900 million intotal paymentsI I I II I

17

15s .

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Exxon's payments from the $900 million civil settlement flowto three areas:-- reimbursements to federal and state agencies of up to$142 million for past spill-related work,-- a credit of $40 million to Exxon for the reimbursement ofcertain agreed-upon cleanup work performed at thedirection of a federal on-scene coordinator, and-- deposits of the remaining funds from 11 annual paymentsfrom Exxon into the joint federal/state trust fund heldin a depository under the jurisdiction of the U.S.District Court.After the Trustee Council approves damage assessment andrestoration projects and the administrative costs of the TrusteeCouncil organization, the U.S. District Court is petitioned torelease funds from the joint trust fund to cover theseactivities. For projects carried out by federal agencies, the

funds are transferred from the joint trust fund to the NRDA&Rfund. Interior then transfers funds from the NRDA&R fund to thefederal agency carrying out the activity. For Alaska agencies'projects, the funds are transferred from the joint trust fund tothe state's general fund for subsequent distribution to thevarious state agencies.Through December 1992, two civil settlement paymentstotaling $240 million were made by Exxon. The next Exxonpayment, in the amount of $100 million, is scheduled forSeptember 1993. Prior to each of Exxon's annual civil settlementpayments, the respective federal and state agencies reachagreement on the amount of the payment that will apply toward

reimbursements and the amount that will be deposited into thejoint trust fund for activities authorized by the federal andstate trustees. Figure 2.2 shows the distribution of the $240million in Exxon payments through February 1993.

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Fiqure 2.2: Distribution o-f $240 Million in Exxon PavmentsThroush February 1993

Joint Trust Fund Disbursements

Joint Trust Fund Balance ($74million)

Exxon Credit ($40 million)

I Reimbursements ($107 million)

Most of the funds distributed to date have been used toreimburse various government agencies and Exxon for past cleanupcosts; some have been used for the Trustee Council's activitiessuch as administration, damage assessment and restorationprojects, and restoration planning; and the remainder resides inthe joint trust fund. The $40 million Exxon credit was providedfor in the settlement. The credit was to reimburse Exxon forexpenditures it made for cleanup costs incurred at the directionof a federal on-scene coordinator in early 1991 as well asspecified cleanup costs performed at a later date. The CoastGuard performed a financial review of Exxon's claims and allowedthe $40 million credit. Additional credits against future Exxonpayments may result if federal/state on-scene coordinators directExxon to perform add-itional cleanup work. According to theTrustee Council, cleanup work that met federal and statestandards was completed as of August 1992.

Both the Memorandum of Agreement and the civil settlementplace a limit of $142 million on the amount of presettlementcleanup and damage assessment costs that can be reimbursed. Thelimit is divided into maximums of $67 million for federalagencies and $75 million for state agencies. Trustee Councilmembers believe that reiwrsements will n-ot exceed the $142million limit. Through December 1992, approximately $107 millionwas used to reimburse f&era& and state agencies for19


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presettlement response, cleanup, and damage assessment costsincurred before January 1991. Certain additional reimbursements,including litigation costs, incurred since then may also beclaimed but must be jointly agreed to by the federal and statetrustees. Of this $107 million, federal agencies have beenreimbursed $49 million and state agencies $58 million. Table 2.1shows a summary of reimbursements to federal agencies throughDecember 1992. A detailed breakdown of the reimbursements tostate agencies was not available at the time of our review.Table 2.1: Reimbursements to Federal Aqencies Throuqh December1992Dollars in millions unless otherwise noted

Federal agencyDepartment of Army:Corps of EngineersDepartment of Agriculture:Forest ServiceDepartment of Commerce:NOAADepartment of the InteriorDepartment of Transportation:Coast GuardFederal Aviation AdministrationEnvironmental Protection AgencyTotalb

Amount$5.510.411.710.2

7.2 a4.2

$49.2aLess than $10,000.bReimbursements do not include about $226,000 in interest paid byExxon between the scheduled and actual dates of the first paymentunder the civil settlement. This amount was distributedproportionately among the federal agencies being reimbursed fromthe first payment.

Of the $240 million paid by Exxon through December 1992,about $93 million was deposited into the joint trust fund to fundactivities approved by the Trustee Council. Of this amount,about $19 million was authorized by the Trustee Council to funddamage assessment and restoration projects included in therestoration work plan approved by the Trustee Council for 1992.Table 2.2 shows how these funds were distributed among damage20

,. :I 5


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assessment projects, restoration projects, and administrationthrough February 1993. The $19 million was about equally dividedbetween federal and state agencies. On the federal side, theForest Service received the most funds--about 20 percent--and forthe state of Alaska, the Department of Fish and Game received themost--about 40 percent. The balance--about $74 million--remainsin the joint trust fund and is earning interest.Table 2.2: Distribution of Funds From the Joint TrustFund Throuah February 1993Dollars in millions

Category Amount

'pi

Total $19.2In April 1993, the Trustee Council approved a resolution todraw $21.1 million from the joint trust fund to finance damageassessment projects, restoration projects, the Trustee Council'sadministrative costs, and other activities included in the 1993work plan. (See table 2.3.) The 1993 work plan reflects aphasing out of damage assessment studies and an increase inrestoration projects. Overall, about 25 percent of the $21.1million will fund federal agencies' work, and 75 percent willfund state agencies' work.

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Table 2.3: Planned 1993 Distribution of Funds From the JointTrust FundDollars in millions

Category AmountDamage assessment $1.5Restoration 7.5Administration 2.8Other 9.3Total $21.1

Note: Distribution of these funds is for the period March 1,1993, to September 30, 1993.Included in the $9.3 million "other" category is $1.5million to fund an archaeologica l repository on Kodiak Island.The repository will preserve and protect artifacts from about 17sites on Kodiak Island that were destroyed or discovered as aresult of the cleanup following the spill. Also, the TrusteeCouncil approved $7.5 million to be used by the state, along withabout $14 million from the state's restitution funds from thecriminal settlement and another source of state funds, topurchase 7,500 acres of privately owned land within theboundaries of Kachemak Bay State Park on the Kenai Peninsulaacross from Homer, Alaska. The purchase is intended to provideadditional lands to protect habitat from further degradation and

to allow recovery of various species. Following the drawdown tofund the 1993 work plan, a balance of about $52.9 million willremain in the joint trust fund. This balance will increase whenExxon makes its third annual civil settlement payment--in theamount of $100 million--in September 1993. The actual amount tobe deposited into the joint trust fund will depend on how much ofExxon's payment is used for reimbursements.As of June 1993, none of the $100 million in criminalrestitution funds had been expended. However, as shown in table2.4, several projects have been proposed by the federal and stategovernments. In March 1993, the federal trustees proposed that$25 million be used to acquire private land concentrated within

the boundaries of the Chugach National Forest, Kenai FjordsNational Park, Kodiak National Wildlife Refuge, and the MaritimeWildlife Refuge Islands. Although the precise use of theremaining $25 million has yet to be determined, agencies areconsidering the funds for various habitat acquisition,restoration, and monitoring projects.22


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Table 2.4: Proposed Use of Criminal Restitution FundsDollars in millions

Federal shareProposed uses:

Habitat acquisitionOther (habitat acquisition,restoration, and monitoring)

State shareProposed uses:

Build marine centerBuy land for habitat protectionRestore subsistence areasOil spill research programsRestore recreation sitesEnhance hatchery systemOther smaller projects

$50.0

25.025.0

$50.0

12.57.05.05.04.84.0

11.7

Using its share of the restitution funds, the Alaska statelegislature, in May 1993, approved funding for a variety ofprojects, the larger of which include the following:-- the design and construction of a recreation and marinemammal rehabilitation center for education and research;-- the partial funding of the acquisition of private landwithin the Kachemak Bay State Park to add habitat forrecovering wildlife species;-- the restoration, replacement , or enhancement ofsubsistence resources or services lost or damaged inrural communities; and-- the development of research programs directed at the

prevention, containment, cleanup, and amelioration of oilspills.

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SECTION 3RESTORATION PLAN ANDANNUAL WORK PLAN ISSUES

We identified several issues relating to the development ofthe Trustee Council's restoration plan for damaged resources andservices and its annual work plans.RESTORATION PLAN

Table 3.1 shows issues relating to the Trustee Council'sdevelopment of a restoration plan.Table 3.1: Issues Related to the Restoration Plan

l No restoration plan in placel Plan scheduled to be issued in December1993, but issuance date may slip

An approved restoration plan is a key ingredient in thetransition from the Trustee Council's role of assessing damage totaking action-- as provided for in the August 1991 Memorandum ofAgreement--to restore, replace, rehabilitate, enhance, or acquirethe equivalent of natural resources injured as a result of theoil spill and the reduced or lost services provided by suchresources. Moreover, according to the Trustee Council, therestoration plan is a primary means for the public to help theTrustee Council prioritize restoration activities. However, anoverall restoration plan is not yet in place to provide directionto restoration planning for Prince William Sound. Restorationplanning began in late 1989. In April 1992, a restorationframework document was published that proposed a process to guidethe trustees in restoration efforts, discussed possible actionalternatives, and invited public comment.

A year later, in April 1993, a brochure providing an advancedescription of a draft restoration plan was distributed forpublic comment. Five potential restoration alternatives werepresented:1. Natural recovery: No action.2. Habitat protection: Over 90 percent of the settlementfunds would be used for habitat protection andacquisition. Restoration activities would be limited tothe spill area.

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3.

4.

5.

The

Limited restoration: About 75 percent of the settlementfunds would be used for habitat protection andacquisition. Some effort would be directed at restoringonly the most severely injured species with decliningpopulations within the spill area.Moderate restoration: About 50 percent of thesettlement funds would be used for habitat protectionand acquisition. An additional one-third of the fundswould be used to restore all injured species, includingthose whose populations did not decline and are locatedoutside of the spill area.Comprehensive restoration: About one-third of thesettlement funds would be used for habitat protectionand acquisition. About one-half of the settlement fundswould be used to restore all injured species, includingthose whose populations did not decline and are locatedoutside of the spill area.public was asked to comment on the plan and the f iverestoration alternatives by August 6, 1993. In addition, theTrustee Council scheduled public meetings in 21 communitiesthroughout the state to solicit input. Trustee Council memberstold us that about 1,200 responses from the public were receivedand will be considered in further development of the plan. Adraft environmental impact statement analyzing the impacts of thealternatives on the physical, biological, social, and economicaspects of the environment was due to be released for publiccomment in June 1993, but it had not been released as of the endof July 1993. The final restoration plan is scheduled to beissued in December 1993, but according to Trustee Councilmembers, this too may slip.

ANNUAL WORK PLANSTable 3.2 shows three issues relating to the TrusteeCouncil's development of annual work plans.

Table 3.2: Issues Related to Annual Work Plans

l Not tied to restoration planl Some projects may not be directly linked

to the oil spill or appear to duplicateagencies' responsibilitiesl Few projects competitively bid

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First, the Trustee Council's 1992 and 1993 annual work planswere not linked to an approved restoration plan. About 90projects totaling nearly $40 million were approved during thistime. Although not directly linked to a restoration plan,Trustee Council members have reported that they have strived towork within the restoration framework by approving projectsmeasuring damage or monitoring injured resources that either weretime-critical or represented a lost opportunity if not conducted.Some Trustee Council members claimed that if action had beenpostponed until a restoration plan were developed, work projectswould not have been approved until 1995 or 1996. Because of thelead time needed to implement approved work projects, the TrusteeCouncil will approve the 1994 work plan before issuing the finalrestoration plan. Trustee Council members advised us that the1994 work plan decisions will be based on a synopsis of publiccomments related to the restoration plan, scientific dataavailable from past studies, and input from the public and thechief scientist on the merits of the proposed projects.

Second, certain projects either do not appear to be directlylinked to the oil spill, as required in the settlement, or appearto duplicate existing responsibilities of federal and stateagencies, particularly several sockeye salmon and killer whaleprojects. According to Trustee Council members, where linkage orcontribution of the spill to an injured resource is unclear,Trustee Council members have been inclined to approve datacollection projects so that members are put in a better positionto evaluate the causes and extent of damage to the resourceresulting from the oil spill.

To illustrate, the management of the sockeye salmon fisheryhas historically been a responsibility of the Alaska Departmentof Fish and Game, including the development and maintenance of astate plan for the rehabilitation, enhancement, and developmentof the state's salmon fisheries. One particular problem that theAlaska Department of Fish and Game has been dealing with forseveral years--both before and after the oil spill--is theoverescapement of sockeye salmon into the Kenai River duringmigration to their spawning areas upstream. Overescapementoccurs when too many migrating adult fish reach the spawningareas and produce too many juvenile fish that deplete theavailable food supplies needed to sustain them until they areready to migrate downstream and out to sea. The depletion of thefood supplies causes reduced growth and high mortality of currentand future generations.The overescapement of sockeye salmon occurred on the KenaiRiver system in 1987 and 1988--before the oil spill occurred--andagain in 1989 when the sockeye salmon f ishery was closed becauseof the presence of oil in the fishing areas from the Exxon Valdezoil spill. Consequently, the problems associated with theoverescapement of sockeye salmon entering the Kenai River

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probably are only partially due to the closure of the salmonfishery following the oil spill. Thus far, the Trustee Councilhas approved five projects totaling about $3 million to study theKenai River sockeye salmon fishery. According to Trustee Councilofficials, although there may not be a direct link between thesituation with the sockeye salmon and the oil spill, there isenough of an indirect link to justify the spending of settlementfunds to study the problem.Several killer whale studies also illustrate projects whichdo not appear to have a direct link to the oil spill or appear toduplicate existing agency responsibilities. Between 1989 and1992, the Trustee Council approved four studies totaling about$700,000 to examine the mortality rate of the approximately 245killer whales in Prince William Sound. However, the chiefscientist believes that the disappearance of some killer whaleshas not been convincingly linked to the oil spill. Nevertheless,in 1993, the Trustee Council approved an additional $127,000 tofurther assess the disappearance of 13 out of a group of 36killer whales since the oil spill occurred. NOAA's NationalMarine Mammal Laboratory is responsible for the generalmonitoring of killer whales off Alaska, and it has been studyingthese whales for several years both before and after the oilspill. For example, from 1989 through 1993, the laboratory'sbudget--in addition to the oil spill funds provided through theTrustee Council--for killer whale studies totaled about $665,000.Trustee Council officials stated that the chief scientist is notan expert on all issues and that public comments received on thework plans indicated a very high interest in determining whetherthe whales' disappearance was linked to the oil spill.

Last, some participants in and observers of the TrusteeCouncil organization believe that the carrying out of damageassessment and restoration work to date has been dominated byfederal and state agency personnel and that, as a consequence,few nongovernment organizations have been able to competitivelybid for these projects. For example, almost all of the 1992 and1993 work projects were not open for competitive bid and werecarried out by federal and state agency personnel. The TrusteeCouncil's chief scientist believes that open competition wouldencourage more timely completion of projects at reduced costs.According to Trustee Council members, as more restorationprojects are undertaken, less use will be made of federal andstate agencies and more projects will be subject to bid proposalsfrom nongovernment sources.

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SECTION 4HABITAT PROTECTION ANDACQUISITION ISSUES

We identified several issues relating to the TrusteeCouncil's activities to protect and acquire habitat to aid in therestoration of the natural resources damaged by the oil spill.These issues are shown in table 4.1.Table 4.1: Issues Related to Habitat Protection and Acquisition

l Acquisition plan not approved or tied torestoration planl Interim criteria used to identifyacquisition parcelsa 42,000 acres identified as imminentthreat

l 338,000 acres identified asopportunity parcelsl Pressure is building for Trustee Councilto acquire land and protect habitatl Much of the remaining $660 million may beused for land purchase

An acquisition plan has neither been approved by the TrusteeCouncil nor tied to an approved restoration plan. The TrusteeCouncil, however, has approved interim evaluation criteria foruse by its habitat protection/acquisition work group. Usingthese criteria, in February 1993 the work group classified 42,000acres as being "imminently threatened." The group concluded thatvarious parcels of land were significant ecologically and thatthey were threatened by actions--such as imminent logging--whichwould significantly lessen the land's ability to provide habitatprotection for wildlife species injured by the oil spill. Thetwo top-ranked imminently threatened parcels were 7,500 acreswithin Kachemak Bay State Park near Homer, Alaska, and 15,000acres near Seal Bay on Afognak Island north of Kodiak Island.Both of these parcels of land were described in the TrusteeCouncil's ranking analysis as essential habitat sites for injuredspecies, such as bald eagles and marbled murrelet, and werelocated within the area affected by the oil spill. Thesewildlife species are considered vulnerable or threatened by humanactivity. The Trustee Council has approved, subject toappraisal, the purchase of these two parcels--the 7,500 acres ofprivate land in Kachemak Bay State Park for $21.5 million and

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42,000 acres (25,000 acres of which are to be donated by the landowner) near Seal Bay, which includes the 15,000 acres classifiedas imminently threatened, for $38.7 million. The work groupclassified an additional 338,000 acres as "opportunity-to-buy"parcels--land important as habitat protection, but not imminentlythreatened.Public pressure is building for the Trustee Council toacquire more land to protect habitat because many consider landacquisition to be an effective restoration activity. The TrusteeCouncil's habitat protection/acquisition work group receivedcomments from various public interest groups encouraging theTrustee Council to protect habitat. Comments included thefollowing:-- II . . . habitat acquisition is the most meaningful form ofrestoration . . . .'I-- t) . . . habitat protection is [the] best means ofprotecting natural and cultural resources . . . .'I-- r* . . . the acquisition process [is] taking too much time;no more talk--start using funds to buy land."With the pressure building for the Trustee Council toapprove the acquisition of land to protect habitat, some TrusteeCouncil officials believe that much of the remaining Exxonpayments --about $660 million--may be used for land acquisitionsrather than for other restoration purposes. The TrusteeCouncil's estimate of the cost to acquire parcels of landclassified as "imminently threatened" and "opportunity to buy,"and additional parcels of land that may eventually be classifiedas such, runs as high as $3 billion. Because Exxon's settlement

payments will continue until 2001, it appears that difficult landacquisition choices will have to be made throughout the period.

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SECTION 5TRUSTEE COUNCIL ORGANIZATIONAND ADMINISTRATION ISSUES

We identified several issues relating to the Trustee Councilorganization and its day-to-day administration.TRUSTEE COUNCIL ORGANIZATION

Table 5.1 shows four issues relating to the Trustee Councilorganization.Table 5.1: Issues Related to the Trustee Council Orqanization

l Agencies propose, review, approve, andcarry out projectsl No executive director to lead effortsl Meaningful public participation andindependent scientific viewpoints notalways soughtl Financial audits and program reviewsnot conducted

First, the current makeup and process of the Trustee Councilorganization leads many to view the objectivity of theorganization with some skepticism. The federal and stateagencies that propose damage assessment and restoration projectsare the same agencies that review, approve, and carry out theprojects. This organization has the same general makeup as thepresettlement organization responsible for measuring the natureand extent of the injuries, losses, and destruction of resourcesas part of the litigation process leading up to criminal andcivil law suits against Exxon. Trustee Council members believethe organization has provided the best source of expertise forcleanup and damage assessment, and foresee a gradual lessening ofdependence on federal and state agency personnel to conductprojects as damage assessment is completed and the restorationplan is implemented.Second, no executive director or chief executive officer isin place to lead and direct day-to-day operations. The TrusteeCouncil currently employs an interim administrative director whomainly functions as a coordinator of Trustee Council organizationactivities. In March 1993, the Trustee Council advertised

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Table 5.2: Issues Related to the Trustee Council'sAdministration

l Few project reports approved by thechief scientistl Some planning meetings lacked proceduresand focusl High travel costs incurred(Juneau/Anchorage)

First, only 8 of about 91 scheduled project reports havebeen approved by the Trustee Council's chief scientist. Manyreports have been returned by the chief scientist to theprojects' principal investigators for needed revision because ofhis belief that they were poorly organized and contained unclearmessages, incomplete analyses, overreaching conclusions, andimbalanced presentations. For example, the chief scientistreturned for revision 10 of the 20 reports due in 1992. Of theremaining 10, 4 were approved, 3 were still under review, and 3had not been received for review by the chief scientist as of May1993. Because of these types of delays, the Trustee Council isforced to make decisions on follow-on projects without theknowledge of the final conclusions of earlier, related studies.Trustee Council members stated that they are aware of reportingproblems and that they would like reports to be (1) completed ontime and (2) of acceptable quality. We were told that theTrustee Council has directed that all project reports besubmitted before the Trustee Council deliberates the 1994 annualwork plan this fall.

Second, although the restoration team and the work groupshave held frequent meetings to develop proposed plans andapproaches that need to be acted upon by the Trustee Council, thework groups did not have final operating procedures untilNovember 1992. Many products resulting from this process havebeen late, required substantial rework, and have not reflectedthe consensus of the restoration team. This, in turn, oftencaused the public to comment on plans and the Trustee Council tomake decisions without sufficient time to thoroughly review theplans and supporting material.And third, many of the federal and state officials on theTrustee Council's restoration team and various work groups livein Juneau but must travel to Anchorage to attend frequent worksessions and meetings. This travel increases administrativecosts for the Trustee Council organization. For example, theround-trip airfare between Juneau and Anchorage is about $450.

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Trustee Counci l members anticipate that travel costs willdiminish in the future as the restoration plan is implemented andthe number of restoration team and various work group meetings isreduced.

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APPENDIX I APPENDIX I

MAJOR CONTRIBUTORS TO THIS BRIEFING REPORTRESOURCES, COMMUNITY, AND ECONOMICDEVELOPMENT DIVISION, WASHINGTON, D.C.Ralph W. Lamoreaux, Assistant DirectorLarry D. Hamner, Assignment ManagerOFFICE OF THE GENERALCOUNSEL, WASHINGTON, D.C.Stanley G. Feinstein, Senior AttorneySEATTLE REGIONAL OFFICESterling J. Leibenguth, Issue Area ManagerPaul E. Staley, Jr., Evaluator-in-Charge

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Ordering InformationThe first copy of each GAO report and testimony is free.Additional copies are $2 each. Orders should be sent to thefollowing address, accompanied by a check or money ordermade out to the Superintendent of Documents, whennecessary. Orders for 100 or more copies to be mailed to asingle address are discounted 25 percent.Orders by mail:U.S. General Accounting OfficeP.O. Box 6015Gaithersburg, MD 20884-6015or visit:Room 1000700 4th St. NW (corner of 4th and G Sts. NW)U.S. General Accounting OfficeWashington, DCOrders may also be placed by calling (202) 512-6000or by using fax number (301) 258-4066.

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