WEBVTT 00:00:00.000 --> 00:00:01.899 Okay, let's get into this. I want you to, for 00:00:01.899 --> 00:00:05.080 a second, just imagine a place. Picture it. It's 00:00:05.080 --> 00:00:08.160 just after midnight and it is freezing cold. 00:00:08.220 --> 00:00:09.820 I mean, the kind of cold that hurts your teeth. 00:00:09.919 --> 00:00:12.279 Moan chilling, yeah. Exactly. The date is March 00:00:12.279 --> 00:00:16.899 24th, 1989. And you are in the middle of Prince 00:00:16.899 --> 00:00:20.660 William Sound, Alaska. It's one of the most remote, 00:00:20.800 --> 00:00:23.980 pristine places on the entire planet. It really 00:00:23.980 --> 00:00:25.879 is. I mean, to get there, you need a helicopter, 00:00:26.140 --> 00:00:28.920 a plane, or a boat. That's it. It's this incredibly 00:00:28.920 --> 00:00:32.299 quiet, almost sacred -feeling wilderness. Glaciers, 00:00:32.340 --> 00:00:35.259 black water, just silence. Total silence. And 00:00:35.259 --> 00:00:37.200 in the middle of that silence, in the pitch dark, 00:00:37.359 --> 00:00:40.280 a sound rips through the air that, and this is 00:00:40.280 --> 00:00:42.439 not an exaggeration, is going to change, well, 00:00:42.520 --> 00:00:44.700 everything. It's the sound of metal tearing, 00:00:44.859 --> 00:00:47.439 a massive, horrifying sound. It's the hull of 00:00:47.439 --> 00:00:50.200 a supertanker, the Exxon Valdez, which is what, 00:00:50.259 --> 00:00:52.560 almost 1 ,000 feet long? Three football fields, 00:00:52.679 --> 00:00:54.979 end to end. Three football fields of steel grinding 00:00:54.979 --> 00:00:59.219 and ripping open on a reef. And just like that, 00:00:59.320 --> 00:01:02.079 the story begins. Now, look, everyone listening 00:01:02.079 --> 00:01:05.219 knows that name, Exxon Valdez. It's become, you 00:01:05.219 --> 00:01:07.519 know, shorthand. It's the go -to reference for 00:01:07.519 --> 00:01:10.239 an environmental catastrophe. Right. But here's 00:01:10.239 --> 00:01:12.840 the thing. I bet if we asked 100 people what 00:01:12.840 --> 00:01:15.439 happened, 99 of them would give you the exact 00:01:15.439 --> 00:01:18.319 same, very simple story. The drunk captain story. 00:01:18.540 --> 00:01:20.099 The drunk captain. That's the whole narrative. 00:01:20.159 --> 00:01:22.420 And, you know, for this deep dive, that's where 00:01:22.420 --> 00:01:24.870 we want to start. Because our mission today is 00:01:24.870 --> 00:01:27.370 to look at this whole mountain of source material, 00:01:27.590 --> 00:01:29.930 official reports, court records, scientific studies, 00:01:30.150 --> 00:01:33.170 you name it, and go way beyond that fable. Exactly. 00:01:33.329 --> 00:01:36.170 Because the easy story, the one bad apple story, 00:01:36.409 --> 00:01:39.730 lets everyone else off the hook. Today we want 00:01:39.730 --> 00:01:42.129 to uncover the systemic failures that made this 00:01:42.129 --> 00:01:44.590 almost inevitable. And the cleanup, which... 00:01:45.040 --> 00:01:47.079 I had no idea about this, but the cleanup itself 00:01:47.079 --> 00:01:50.579 was, in some ways, a second disaster. A huge 00:01:50.579 --> 00:01:53.040 counterintuitive mistake, yeah. And then there's 00:01:53.040 --> 00:01:56.159 the part that is just, it's mind -blowing. The 00:01:56.159 --> 00:01:58.400 connection between this spill and a financial 00:01:58.400 --> 00:02:00.500 invention that helped crash the global economy 00:02:00.500 --> 00:02:04.359 in 2008. It's a wild connection. And on top of 00:02:04.359 --> 00:02:06.480 all that, we have to talk about the oil itself. 00:02:07.140 --> 00:02:09.759 Because, and this is the big spoiler, a lot of 00:02:09.759 --> 00:02:12.039 it is still there. Right now, today, it hasn't 00:02:12.039 --> 00:02:13.729 gone anywhere. So let's start at the beginning. 00:02:13.870 --> 00:02:18.930 Section one, the crash, the myth versus the much 00:02:18.930 --> 00:02:21.330 messier reality. Let's just tackle it head on. 00:02:21.449 --> 00:02:23.810 Captain Joseph Hazelwood. The villain of the 00:02:23.810 --> 00:02:25.949 story. The narrative I've always heard is that 00:02:25.949 --> 00:02:29.870 he was, you know, three sheets to the wind, joyriding 00:02:29.870 --> 00:02:33.550 a super tanker and whoops. And it's a convenient 00:02:33.550 --> 00:02:36.430 story, especially for Exxon at the time, because 00:02:36.430 --> 00:02:39.310 if it's just one guy, a rogue employee, then 00:02:39.310 --> 00:02:41.949 the system is fine. The company is fine. It contains 00:02:41.949 --> 00:02:44.860 the blame. Perfectly. But when you dig into the 00:02:44.860 --> 00:02:47.659 NTSB accident report, when you read the actual 00:02:47.659 --> 00:02:50.080 trial transcripts, that story just completely 00:02:50.080 --> 00:02:52.539 falls apart. So let's fact check it. Was he drinking 00:02:52.539 --> 00:02:55.539 at all? He was. That part has a colonel's truth. 00:02:55.719 --> 00:02:58.520 He was seen at a bar in the town of Valdez earlier 00:02:58.520 --> 00:03:00.860 that day while the ship was still in port. OK, 00:03:00.979 --> 00:03:02.979 so that part is real. That part is real. But 00:03:02.979 --> 00:03:04.879 the crucial distinction, the one that changes 00:03:04.879 --> 00:03:07.360 the entire story, is that by the time the ship 00:03:07.360 --> 00:03:09.099 was out in the sound, by the time the actual 00:03:09.099 --> 00:03:11.870 crash happened. He wasn't on the bridge. He wasn't 00:03:11.870 --> 00:03:14.330 even there. He was in his stateroom. He was off 00:03:14.330 --> 00:03:17.090 duty. Most accounts say he was probably asleep 00:03:17.090 --> 00:03:19.590 when the ship hit the reef. So the image of him 00:03:19.590 --> 00:03:22.629 at the wheel drunk, that's just a fabrication. 00:03:22.629 --> 00:03:24.770 It is. And the courts confirm this. It's a huge 00:03:24.770 --> 00:03:28.699 point. At his trial, 21 separate witnesses testified 00:03:28.699 --> 00:03:30.800 that he did not seem intoxicated or impaired 00:03:30.800 --> 00:03:33.419 around the time of the accident. 21 people. And 00:03:33.419 --> 00:03:36.020 the jury listened. He was acquitted of operating 00:03:36.020 --> 00:03:39.159 a vessel while intoxicated. The big charge, the 00:03:39.159 --> 00:03:41.560 one everyone remembers, he was clear of it. He 00:03:41.560 --> 00:03:43.620 was convicted of a much smaller misdemeanor, 00:03:43.759 --> 00:03:47.020 negligent discharge of oil. But the drunk driver 00:03:47.020 --> 00:03:51.000 label is legally and factually a myth. Wow. That 00:03:51.000 --> 00:03:54.960 single fact completely changes the framing. If 00:03:54.960 --> 00:03:57.219 the captain is asleep in his bunk, who is steering 00:03:57.219 --> 00:03:59.599 this thing? The man in charge of navigation on 00:03:59.599 --> 00:04:01.800 the bridge was the third mate, a guy named Gregory 00:04:01.800 --> 00:04:04.719 Cousins. And this is where we see the first real 00:04:04.719 --> 00:04:08.020 systemic failure, and it's a huge one. Fatigue. 00:04:08.039 --> 00:04:11.180 The classic problem in shipping, trucking. Any 00:04:11.180 --> 00:04:13.379 of these long haul industries. Absolutely. Cousins 00:04:13.379 --> 00:04:15.580 was at the end of a long watch. He was tired. 00:04:15.699 --> 00:04:17.540 Now, protocol says he should have been relieved 00:04:17.540 --> 00:04:19.639 by the second mate. So where was the second mate? 00:04:20.019 --> 00:04:23.259 The second mate had just pulled an absolute marathon 00:04:23.259 --> 00:04:25.680 shift, getting the tanker loaded with all that 00:04:25.680 --> 00:04:28.540 oil. He was completely exhausted. So Cousins, 00:04:28.540 --> 00:04:31.259 trying to be a good guy, a team player, decided 00:04:31.259 --> 00:04:33.480 not to wake him up. He thought he could handle 00:04:33.480 --> 00:04:35.160 it. He thought he could handle it. He lets his 00:04:35.160 --> 00:04:38.379 exhausted colleagues sleep. Which, you know, 00:04:38.399 --> 00:04:40.600 you can understand the human impulse, but it 00:04:40.600 --> 00:04:43.800 was a direct violation of company policy. The 00:04:43.800 --> 00:04:46.279 bridge was understaffed. So you have a single, 00:04:46.459 --> 00:04:50.019 tired officer making critical decisions. Yes. 00:04:50.120 --> 00:04:52.079 But even then, there should have been safeguards, 00:04:52.079 --> 00:04:54.199 right? There's technology, there's an autopilot, 00:04:54.259 --> 00:04:56.459 there's radar. This shouldn't have been a catastrophic 00:04:56.459 --> 00:04:58.920 failure. Which brings us to the maneuver itself. 00:04:59.519 --> 00:05:01.759 Why were they even near a reef? Aren't there, 00:05:01.860 --> 00:05:04.899 you know, shipping lanes for this? Like highways. 00:05:04.939 --> 00:05:07.319 There are, but they weren't in it. And for a 00:05:07.319 --> 00:05:10.439 good reason. The nearby Columbia Glacier had 00:05:10.439 --> 00:05:14.040 been calving. Calving. Dropping huge chunks of 00:05:14.040 --> 00:05:17.379 ice, basically icebergs, into the water. So the 00:05:17.379 --> 00:05:19.759 main shipping channel was dotted with these massive 00:05:19.759 --> 00:05:22.300 ice hazards. So they had to go off -road to avoid 00:05:22.300 --> 00:05:25.079 them. Exactly. Captain Hazelwood, before he went 00:05:25.079 --> 00:05:27.339 to bed, gave the order to leave the standard 00:05:27.339 --> 00:05:30.360 lane, steer around the ice field, and then make 00:05:30.360 --> 00:05:32.540 a turn to get back into the lane at a specific 00:05:32.540 --> 00:05:34.939 point. A totally standard procedure, I assume. 00:05:35.180 --> 00:05:37.699 It is, but it's a procedure that requires very 00:05:37.699 --> 00:05:40.579 precise timing when you're piloting a ship that 00:05:40.579 --> 00:05:44.339 is over 900 feet long and loaded with millions 00:05:44.339 --> 00:05:46.839 of gallons of oil. It has an immense amount of 00:05:46.839 --> 00:05:48.980 momentum. It's not turning on a dime. Not at 00:05:48.980 --> 00:05:52.079 all. And Cousins, the third mate... He was supposed 00:05:52.079 --> 00:05:54.459 to make that turn, but he delayed it. He missed 00:05:54.459 --> 00:05:56.579 the window. And this is the part of the story 00:05:56.579 --> 00:06:00.100 that, for me, goes from tragic error to something 00:06:00.100 --> 00:06:04.120 much, much worse. The radar. The RAH system. 00:06:04.459 --> 00:06:06.980 Raytheon collision avoidance system. And you 00:06:06.980 --> 00:06:08.920 have to understand, this wasn't some primitive 00:06:08.920 --> 00:06:12.279 blip on a screen. This was a sophisticated computer 00:06:12.279 --> 00:06:14.959 aided system designed to prevent exactly this 00:06:14.959 --> 00:06:17.319 scenario. It would have painted a clear picture 00:06:17.319 --> 00:06:19.720 of Bligh Reef getting closer and closer. It should 00:06:19.720 --> 00:06:21.399 have been screaming a warning at it. It should 00:06:21.399 --> 00:06:24.180 have been. But it couldn't. It was broken. And 00:06:24.180 --> 00:06:26.860 not just, you know, it failed that night. The 00:06:26.860 --> 00:06:29.240 reporting from journalist Greg Pallast, and this 00:06:29.240 --> 00:06:31.220 was confirmed elsewhere, is that the radar had 00:06:31.220 --> 00:06:33.699 been broken and left disabled for more than a 00:06:33.699 --> 00:06:37.560 year before the disaster. A year. On a supertanker, 00:06:37.560 --> 00:06:40.160 how is that even possible? How does a company 00:06:40.160 --> 00:06:42.939 like Exxon let a ship like that sail without 00:06:42.939 --> 00:06:46.120 its primary navigation safety tool? Two words. 00:06:46.379 --> 00:06:48.660 Too expensive. It was a budget decision. It was 00:06:48.660 --> 00:06:51.100 a budget decision. The documentation shows that 00:06:51.100 --> 00:06:53.420 Exxon management knew it was broken. They knew 00:06:53.420 --> 00:06:55.660 it needed repairs. But they decided that the 00:06:55.660 --> 00:06:58.319 cost of fixing it, and frankly, the cost of staffing 00:06:58.319 --> 00:07:00.360 someone to operate it properly, was just too 00:07:00.360 --> 00:07:02.939 high. They wrote it off. That reframes the entire 00:07:02.939 --> 00:07:05.540 event. Yeah. It's not an accident caused by one 00:07:05.540 --> 00:07:08.660 tired guy making a mistake. It's a predictable 00:07:08.660 --> 00:07:11.220 outcome of a corporate culture that prioritize 00:07:11.220 --> 00:07:13.839 budget lines over basic safety. 100 percent. 00:07:13.879 --> 00:07:16.319 They made a calculated risk. And on March 24th, 00:07:16.319 --> 00:07:19.279 1989, they lost that bet. So you have a tired 00:07:19.279 --> 00:07:21.740 third mate on an understaffed bridge with no 00:07:21.740 --> 00:07:24.100 functional collision avoidance radar steering 00:07:24.100 --> 00:07:27.079 a three football field long vessel through ice 00:07:27.079 --> 00:07:29.620 filled waters in the dark. A recipe for disaster. 00:07:30.189 --> 00:07:33.069 The lookout, who is also up there, spots the 00:07:33.069 --> 00:07:35.949 light on Bly Reef, but she misjudges the angle. 00:07:36.250 --> 00:07:38.550 She reports it as being off the side of the ship 00:07:38.550 --> 00:07:41.589 when it's actually dead ahead. No. By the time 00:07:41.589 --> 00:07:44.050 Cousins realizes the catastrophic error, it's 00:07:44.050 --> 00:07:46.970 too late. He orders a hard right rudder, a desperate 00:07:46.970 --> 00:07:49.990 turn, he's on the phone trying to wake up Captain 00:07:49.990 --> 00:07:53.089 Hazelwood, and then he feels it. The impact. 00:07:53.509 --> 00:07:55.930 The helmsman at the trial just called it a bumpy 00:07:55.930 --> 00:08:00.500 ride. Cousins described it as six very sharp 00:08:00.500 --> 00:08:03.279 jolts. It must have been surreal, the sheer momentum 00:08:03.279 --> 00:08:05.600 of that vessel. It didn't just hit the reef and 00:08:05.600 --> 00:08:08.959 bounce off. It drove onto it. The ship was impaled. 00:08:08.959 --> 00:08:11.800 It came to rest, perched on this pinnacle of 00:08:11.800 --> 00:08:14.259 rock, which tore open the hull like a can opener. 00:08:14.439 --> 00:08:16.600 How many of the tanks were breached? Eight of 00:08:16.600 --> 00:08:19.240 the 11 cargo holds were punctured. Instantly. 00:08:19.279 --> 00:08:21.939 And the oil just started gushing out. A torrent. 00:08:22.060 --> 00:08:23.819 What was the rate of the spell? They estimate 00:08:23.819 --> 00:08:26.259 5 .8 million gallons poured out in the first 00:08:26.259 --> 00:08:29.000 three hours alone. It's almost impossible to 00:08:29.000 --> 00:08:31.000 visualize that volume. And what's Hazelwood doing 00:08:31.000 --> 00:08:32.919 at this point? He's awake. He's on the bridge. 00:08:33.120 --> 00:08:36.000 He's on the bridge. And here's a terrifying detail. 00:08:36.360 --> 00:08:39.720 His first instinct was to try and power the ship 00:08:39.720 --> 00:08:41.899 off the reef. You tried to back it up. He was 00:08:41.899 --> 00:08:44.980 revving the engines, trying to dislodge it, trying 00:08:44.980 --> 00:08:49.019 to wiggle a 987 -foot tanker off a spike of rock. 00:08:49.259 --> 00:08:50.980 That could have made it so much worse. Infinitely 00:08:50.980 --> 00:08:53.220 worse. The first mate basically had to yell at 00:08:53.220 --> 00:08:55.299 him, Captain, if you do that, the ship might 00:08:55.299 --> 00:08:57.799 break in half. The reef was the only thing holding 00:08:57.799 --> 00:08:59.580 the tanker's structure together at that point. 00:08:59.620 --> 00:09:02.179 If it had slipped off, it likely would have capsized, 00:09:02.240 --> 00:09:05.340 spilling its entire cargo. All of it. The whole 00:09:05.340 --> 00:09:08.009 thing. That's a terrifying image. So the ship 00:09:08.009 --> 00:09:10.669 is bleeding oil, the clock is ticking, and the 00:09:10.669 --> 00:09:13.190 world is about to wake up to this. Which brings 00:09:13.190 --> 00:09:16.330 us to section two, the response, which could 00:09:16.330 --> 00:09:18.720 also be called chaos and chemistry. It really 00:09:18.720 --> 00:09:21.039 feels like a tragic comedy of errors. It is. 00:09:21.039 --> 00:09:23.200 I mean, you would logically assume that Valdez, 00:09:23.220 --> 00:09:25.100 being the end of the Trans -Alaska pipeline, 00:09:25.360 --> 00:09:29.159 a major oil port, would have a world -class instantaneous 00:09:29.159 --> 00:09:32.399 oil spill response team on standby. Right. Like 00:09:32.399 --> 00:09:34.860 a fire department. The alarm goes off. The boots 00:09:34.860 --> 00:09:37.080 are in the water in five minutes. That is the 00:09:37.080 --> 00:09:39.460 assumption. That was the plan on paper. But the 00:09:39.460 --> 00:09:43.139 reality was a joke. When the call for help went 00:09:43.139 --> 00:09:46.029 out, nothing was ready. The main response barge, 00:09:46.049 --> 00:09:48.029 the one carrying all the containment booms. The 00:09:48.029 --> 00:09:50.070 floating barriers that are supposed to circle 00:09:50.070 --> 00:09:52.909 the slick. Yes. That barge was in dry dock. It 00:09:52.909 --> 00:09:54.789 wasn't even in the water. It was buried under 00:09:54.789 --> 00:09:57.190 snow, undergoing repairs. You're kidding me. 00:09:57.289 --> 00:10:00.289 Not at all. And the skimmers, the boats that 00:10:00.289 --> 00:10:02.669 physically suck the oil off the surface of the 00:10:02.669 --> 00:10:05.710 water, they didn't arrive for a full 24 hours. 00:10:06.090 --> 00:10:09.009 24 hours. By then, the oil isn't a manageable 00:10:09.009 --> 00:10:11.809 spill. It's an unstoppable slick that's already 00:10:11.809 --> 00:10:14.279 spreading for miles. And the weather was. calm 00:10:14.279 --> 00:10:16.480 for the first couple of days. That was the window. 00:10:16.600 --> 00:10:18.259 That was the only chance they had to contain 00:10:18.259 --> 00:10:20.419 the worst of it. And they just missed it completely. 00:10:20.779 --> 00:10:23.120 I saw a statistic in our source material that 00:10:23.120 --> 00:10:25.500 I just can't get out of my head. After months 00:10:25.500 --> 00:10:28.460 of cleanup, billions of dollars spent, what was 00:10:28.460 --> 00:10:30.940 the final percentage of oil they actually fully 00:10:30.940 --> 00:10:33.480 recovered from the water? The number that NOAA 00:10:33.480 --> 00:10:36.159 and most agencies agree on is somewhere around 00:10:36.159 --> 00:10:39.399 10 percent, maybe less. 10 percent. So 90 percent 00:10:39.399 --> 00:10:42.909 of that crude oil just. stayed in the environment. 00:10:43.110 --> 00:10:45.629 It either evaporated into the air, sank to the 00:10:45.629 --> 00:10:48.830 seafloor, or most damagingly, it washed ashore. 00:10:49.269 --> 00:10:52.309 And this is the pivot point. When the mechanical 00:10:52.309 --> 00:10:55.549 cleanup with booms and skimmers failed so miserably, 00:10:55.769 --> 00:10:58.309 they turned to a different strategy. Chemical 00:10:58.309 --> 00:11:00.809 warfare. Essentially, yes. Chemical dispersants. 00:11:00.950 --> 00:11:02.909 The main product they wanted to use was called 00:11:02.909 --> 00:11:05.129 Corexit. I've heard of this. It's basically a 00:11:05.129 --> 00:11:07.789 super detergent, right? Like a soap for oil slicks. 00:11:07.950 --> 00:11:10.110 That's a great way to put it. It's a surfactant. 00:11:10.539 --> 00:11:13.620 It breaks the surface tension of the oil, shattering 00:11:13.620 --> 00:11:16.759 the big, thick slick into billions and billions 00:11:16.759 --> 00:11:19.080 of tiny little droplets. And the theory is that 00:11:19.080 --> 00:11:21.539 these tiny droplets then sink down into the water 00:11:21.539 --> 00:11:23.720 column. And once they're down there, in theory, 00:11:23.820 --> 00:11:26.500 naturally occurring microbes, bacteria can more 00:11:26.500 --> 00:11:28.799 easily consume them. It's an out of sight, out 00:11:28.799 --> 00:11:31.480 of mind solution. You make the ugly black slick 00:11:31.480 --> 00:11:33.990 on the surface disappear. What? But there were 00:11:33.990 --> 00:11:36.769 so many problems. First, their application was 00:11:36.769 --> 00:11:38.970 a mess. There was a test flight with a helicopter 00:11:38.970 --> 00:11:42.149 on March 24th, and it literally missed the slick. 00:11:42.370 --> 00:11:45.470 The dispersant fell into clean water. An omen 00:11:45.470 --> 00:11:48.320 of things to come. You could say that. But the 00:11:48.320 --> 00:11:51.320 bigger problem was a massive political and social 00:11:51.320 --> 00:11:54.279 fight. You had the local fishermen, the native 00:11:54.279 --> 00:11:56.720 communities, the conservationists all screaming, 00:11:56.919 --> 00:12:00.679 do not pour millions of gallons of unknown chemicals 00:12:00.679 --> 00:12:03.080 into our pristine fishing waters. Which seems 00:12:03.080 --> 00:12:05.460 like a very reasonable objection. You're trying 00:12:05.460 --> 00:12:07.779 to solve a pollution problem by adding more pollution. 00:12:07.960 --> 00:12:10.500 Exactly. So you had this huge battle between 00:12:10.500 --> 00:12:13.580 Exxon and the Coast Guard, who wanted to use 00:12:13.580 --> 00:12:15.659 it, and the state of Alaska, which was trying 00:12:15.659 --> 00:12:19.620 to block it. all arguing about permits and toxicity 00:12:19.620 --> 00:12:23.860 levels, the weather changed. The storm. A huge 00:12:23.860 --> 00:12:26.840 storm rolled in on day three. We're talking 70 00:12:26.840 --> 00:12:29.870 mile per hour winds. And that was it. That was 00:12:29.870 --> 00:12:31.610 the point of no return. The wind and waves just 00:12:31.610 --> 00:12:33.830 took that contained slick and spread it everywhere. 00:12:34.090 --> 00:12:35.929 It was like taking a bucket of paint and hitting 00:12:35.929 --> 00:12:39.269 it with a fire hose. It drove the oil onto hundreds 00:12:39.269 --> 00:12:41.970 of miles of coastline. And it also changed the 00:12:41.970 --> 00:12:44.269 oil's consistency. It whipped it up with the 00:12:44.269 --> 00:12:47.389 seawater into this thick, sticky emulsion, a 00:12:47.389 --> 00:12:49.610 mousse. Which the skimmers couldn't deal with 00:12:49.610 --> 00:12:52.029 at all. Useless against it. So the fight moved 00:12:52.029 --> 00:12:54.840 from the water. to the land, to the beaches. 00:12:55.100 --> 00:12:57.320 And this is where we get to what is, for me, 00:12:57.379 --> 00:12:59.419 the most shocking and important lesson from the 00:12:59.419 --> 00:13:01.759 entire disaster. The hot water treatment. The 00:13:01.759 --> 00:13:03.740 high pressure hot water. We've all seen this 00:13:03.740 --> 00:13:06.490 image. It was on the news. For months, crews 00:13:06.490 --> 00:13:09.389 in yellow hazmat suits, looking like heroes, 00:13:09.610 --> 00:13:12.990 holding these powerful hoses and just blasting 00:13:12.990 --> 00:13:15.370 the oil off the blackened rocks. And it looks 00:13:15.370 --> 00:13:17.509 so effective, doesn't it? You see a black rock, 00:13:17.590 --> 00:13:19.610 you blast it and it turns gray again. It looks 00:13:19.610 --> 00:13:22.190 like you're winning. It was a fantastic public 00:13:22.190 --> 00:13:24.230 relations move. It was an ecological nightmare. 00:13:24.470 --> 00:13:26.769 A complete disaster. They were using seawater 00:13:26.769 --> 00:13:29.779 heated to... 140 degrees Fahrenheit. That's about 00:13:29.779 --> 00:13:32.679 60 Celsius. It's scalding hot. So what's the 00:13:32.679 --> 00:13:34.220 problem with that? You're just washing rocks. 00:13:34.500 --> 00:13:36.600 But you're not just washing rocks. A shoreline, 00:13:36.620 --> 00:13:38.759 an intertidal zone, isn't just a pile of sterile 00:13:38.759 --> 00:13:41.159 gravel. It is a living, breathing ecosystem. 00:13:41.720 --> 00:13:45.340 It's coated in a biofilm. A biofilm. It's a layer 00:13:45.340 --> 00:13:48.419 of microscopic life. Algae, plankton, fungi, 00:13:48.539 --> 00:13:51.440 and crucially, bacteria. Those organisms are 00:13:51.440 --> 00:13:54.299 the absolute bedrock of the entire coastal food 00:13:54.299 --> 00:13:57.409 chain. Everything depends on them. And I'm guessing 00:13:57.409 --> 00:13:59.549 some of those bacteria are the same ones that 00:13:59.549 --> 00:14:02.070 are supposed to eat the oil. You got it. There 00:14:02.070 --> 00:14:04.809 are naturally occurring hydrocarbon degrading 00:14:04.809 --> 00:14:08.049 microbes in that environment. Given time, they 00:14:08.049 --> 00:14:11.789 will slowly, patiently biodegrade the oil. It's 00:14:11.789 --> 00:14:14.610 nature's own cleanup crew. But if you hit them 00:14:14.610 --> 00:14:17.779 with... 140 degree water? You don't just displace 00:14:17.779 --> 00:14:20.519 the oil. You cook the beach. You boil that entire 00:14:20.519 --> 00:14:23.220 microscopic ecosystem alive. You sterilize it. 00:14:23.340 --> 00:14:25.600 So they were killing the very organisms that 00:14:25.600 --> 00:14:27.600 would have naturally fixed the problem over time. 00:14:27.759 --> 00:14:30.360 They were creating a dead zone. And the science 00:14:30.360 --> 00:14:33.700 on this is now crystal clear. Numerous studies 00:14:33.700 --> 00:14:36.019 in the years that followed compared the cleaned 00:14:36.019 --> 00:14:37.980 beaches to oiled beaches that were just left 00:14:37.980 --> 00:14:41.139 alone. The untouched beaches recovered faster. 00:14:41.379 --> 00:14:44.220 The biodiversity returned more quickly. The high 00:14:44.220 --> 00:14:46.320 pressure hot water treatment actually set the 00:14:46.320 --> 00:14:49.480 recovery back by years, maybe even decades. It 00:14:49.480 --> 00:14:51.879 did more long term harm to the food web than 00:14:51.879 --> 00:14:53.779 just leaving the oil there would have. That is 00:14:53.779 --> 00:14:56.210 just it's a stunning lesson. in the arrogance 00:14:56.210 --> 00:14:58.529 of thinking we can easily fix the complex systems 00:14:58.529 --> 00:15:01.029 we break. It's a perfect example of the action 00:15:01.029 --> 00:15:03.850 bias, the compulsion to do something, anything, 00:15:04.029 --> 00:15:06.850 even if that something is destructive. It looked 00:15:06.850 --> 00:15:09.269 good on camera, but it was ecologically devastating. 00:15:09.769 --> 00:15:12.470 And the damage wasn't just to the microbes. The 00:15:12.470 --> 00:15:15.730 humans holding those hoses, the thousands of 00:15:15.730 --> 00:15:18.509 cleanup workers, they paid a steep price. They 00:15:18.509 --> 00:15:20.509 did. You started hearing reports of something 00:15:20.509 --> 00:15:23.700 they call the Exxon Valdez cough. This is the 00:15:23.700 --> 00:15:26.519 human cost that often gets lost in the talk about 00:15:26.519 --> 00:15:29.539 birds and otters. For sure. You had tens of thousands 00:15:29.539 --> 00:15:31.620 of people, many of them local fishermen who'd 00:15:31.620 --> 00:15:33.799 lost their jobs and needed the money, working 00:15:33.799 --> 00:15:37.519 12 -hour days, breathing in a fine mist of aerosolized 00:15:37.519 --> 00:15:40.320 crude oil and the chemical dispersant Corexit. 00:15:40.580 --> 00:15:42.580 And Corexit has some nasty stuff in it. It does. 00:15:42.700 --> 00:15:45.159 One of its main solvents is a chemical called 00:15:45.159 --> 00:15:47.889 2 -betoxyethanol. And the science on that is 00:15:47.889 --> 00:15:50.250 pretty clear. It's linked to damage to the liver, 00:15:50.370 --> 00:15:53.529 kidneys, central nervous system, and blood disorders. 00:15:53.730 --> 00:15:56.289 What was Exxon's position on these health claims? 00:15:56.799 --> 00:15:59.059 Their official stance has always been that there's 00:15:59.059 --> 00:16:02.039 no definitive scientific evidence of long term 00:16:02.039 --> 00:16:04.600 health problems caused by the cleanup work. But 00:16:04.600 --> 00:16:06.659 that's not the story you hear when you talk to 00:16:06.659 --> 00:16:08.580 the people who were there. They tell a different 00:16:08.580 --> 00:16:11.620 story. A very different story. Accounts of chronic 00:16:11.620 --> 00:16:14.820 respiratory failure, neurological issues, cancers. 00:16:15.399 --> 00:16:17.840 These people felt they were treated as disposable. 00:16:18.279 --> 00:16:21.159 They were the ground troops in a toxic war and 00:16:21.159 --> 00:16:23.919 they were given leaky rain gear as armor. It's 00:16:23.919 --> 00:16:26.220 a grim picture. Which leads us directly into 00:16:26.220 --> 00:16:29.000 the next part of this, section three, the ecological 00:16:29.000 --> 00:16:33.179 toll, the body count, both then and now. And 00:16:33.179 --> 00:16:34.860 the numbers, they're just numbing. They're so 00:16:34.860 --> 00:16:36.539 large, they almost lose their meaning, but we 00:16:36.539 --> 00:16:38.860 have to say them. Let's hear them. The best estimates 00:16:38.860 --> 00:16:40.919 from government and independent studies suggest 00:16:40.919 --> 00:16:44.360 anywhere from 100 ,000 to 250 ,000 seabirds were 00:16:44.360 --> 00:16:46.200 killed. A quarter of a million birds. Around 00:16:46.200 --> 00:16:52.279 2 ,800 sea otters, 300 harbor seals, 247 bald 00:16:52.279 --> 00:16:54.580 eagles, and something that really hits hard, 00:16:54.740 --> 00:16:59.019 22 orcas. The killer whales. Yes. And it wasn't 00:16:59.019 --> 00:17:02.539 just any 22 orcas. The impact on one specific, 00:17:02.720 --> 00:17:05.680 unique group of orcas tells a much deeper story 00:17:05.680 --> 00:17:08.279 than just the raw numbers. We need to talk about 00:17:08.279 --> 00:17:10.680 the AT1 -polled. These are the Chugach transients, 00:17:10.740 --> 00:17:12.799 right? Right. And transient is the key word. 00:17:12.960 --> 00:17:16.059 These orcas are genetically distinct. They only 00:17:16.059 --> 00:17:18.680 eat marine mammals. They have their own language, 00:17:18.740 --> 00:17:20.920 their own culture, and they do not breed with 00:17:20.920 --> 00:17:23.380 other orca populations in the area. They are 00:17:23.380 --> 00:17:26.480 a unique, closed society. And they swim right 00:17:26.480 --> 00:17:28.329 through the thickest part of the slick. They 00:17:28.329 --> 00:17:30.670 did. And in the year after the spill, that pod 00:17:30.670 --> 00:17:33.369 lost almost half of its members. But it's who 00:17:33.369 --> 00:17:35.369 they lost that was so devastating. They lost 00:17:35.369 --> 00:17:38.190 the matriarchs, the older reproductive females 00:17:38.190 --> 00:17:40.410 who are the leaders, the memory keepers of the 00:17:40.410 --> 00:17:42.710 pod. And orcas have such a slow reproductive 00:17:42.710 --> 00:17:45.569 cycle. Losing the breeding females is a death 00:17:45.569 --> 00:17:48.170 sentence. It's a death sentence for the lineage. 00:17:48.430 --> 00:17:50.970 And that's what's happened. The pod has never 00:17:50.970 --> 00:17:53.759 recovered a single member. Today, scientists 00:17:53.759 --> 00:17:56.519 consider the 81 pod to be functionally extinct. 00:17:56.900 --> 00:17:59.339 The few remaining animals are getting old. They 00:17:59.339 --> 00:18:01.559 will live out their lives, but the pod will die 00:18:01.559 --> 00:18:04.920 with them. A unique branch of life on Earth was 00:18:04.920 --> 00:18:07.920 effectively erased by the spill. A ghost pod. 00:18:08.319 --> 00:18:10.839 That's an incredibly sad term. It is. And this 00:18:10.839 --> 00:18:13.359 story of collapse repeats itself, but in the 00:18:13.359 --> 00:18:16.259 economy, too. Let's talk about the herring. This 00:18:16.259 --> 00:18:18.480 connects the environmental damage directly to 00:18:18.480 --> 00:18:20.519 the financial ruin of the local communities. 00:18:20.740 --> 00:18:23.319 The town of Cordova, Alaska, was built on herring. 00:18:23.460 --> 00:18:26.180 The spring herring run was their Super Bowl, 00:18:26.380 --> 00:18:28.240 their Christmas. Everything rolled into one. 00:18:28.299 --> 00:18:30.640 It was a multimillion dollar fishery. And what 00:18:30.640 --> 00:18:32.480 happened after the spill? The interesting thing 00:18:32.480 --> 00:18:34.440 is it wasn't immediate. The first couple of years, 00:18:34.480 --> 00:18:38.400 the runs were OK. But in 1993, four years after 00:18:38.400 --> 00:18:40.640 the spill, the herring population completely 00:18:40.640 --> 00:18:43.799 catastrophically collapsed and it has never come 00:18:43.799 --> 00:18:46.549 back. Why the four year delay? The leading scientific 00:18:46.549 --> 00:18:49.210 theory is that the oil didn't kill the adult 00:18:49.210 --> 00:18:52.529 fish directly. Instead, the exposure to the oil's 00:18:52.529 --> 00:18:55.369 toxins damaged the eggs and the young fish. It 00:18:55.369 --> 00:18:58.069 weakened their immune systems. So when a naturally 00:18:58.069 --> 00:18:59.930 occurring virus came through the population, 00:19:00.269 --> 00:19:02.589 a virus they normally would have survived, it 00:19:02.589 --> 00:19:05.329 just wiped them out. So the spill made them vulnerable 00:19:05.329 --> 00:19:07.890 to something else. It was a delayed death sentence. 00:19:08.150 --> 00:19:10.509 And for the fishermen of Cordova, it meant their 00:19:10.509 --> 00:19:13.890 livelihood wasn't just paused, it was gone. Forever. 00:19:14.599 --> 00:19:17.400 The fishery has remained closed for 30 years. 00:19:17.680 --> 00:19:19.460 Which brings us to the really big question that 00:19:19.460 --> 00:19:21.299 hangs over all of this. We're talking three decades 00:19:21.299 --> 00:19:25.579 later. Is the oil gone now? If you ask ExxonMobil, 00:19:25.700 --> 00:19:28.160 their official corporate statement is yes. They 00:19:28.160 --> 00:19:30.900 say the area is healthy and thriving and that 00:19:30.900 --> 00:19:33.799 any remaining oil is inert and harmless. But 00:19:33.799 --> 00:19:36.849 if you ask the scientists at NOAA... the National 00:19:36.849 --> 00:19:39.150 Oceanic and Atmospheric Administration. You get 00:19:39.150 --> 00:19:40.950 a very, very different answer. And that answer 00:19:40.950 --> 00:19:43.630 is an emphatic no. And this is where that very 00:19:43.630 --> 00:19:46.329 unappetizing mayonnaise analogy comes in. It's 00:19:46.329 --> 00:19:48.430 a visceral image, but it's incredibly accurate. 00:19:48.990 --> 00:19:51.410 Scientists from the USGS, a geological survey, 00:19:51.569 --> 00:19:53.589 found that if you go to many of the beaches in 00:19:53.589 --> 00:19:56.069 Prince William Sound today, right now, and you 00:19:56.069 --> 00:19:59.160 dig down just a few inches into the gravel. you 00:19:59.160 --> 00:20:02.200 will hit a layer of oil. Still liquid. Not exactly. 00:20:02.599 --> 00:20:04.940 Over the years, the oil that got trapped under 00:20:04.940 --> 00:20:07.339 the rocks was churned by the tides with seawater. 00:20:07.480 --> 00:20:11.460 It emulsified. It formed this thick, gooey mousse. 00:20:11.519 --> 00:20:13.599 Like mayonnaise. Exactly, the consistency of 00:20:13.599 --> 00:20:16.039 mayonnaise. And then the very top layer of that 00:20:16.039 --> 00:20:18.119 mousse was exposed to the air, and it hardened 00:20:18.119 --> 00:20:20.680 into a crust, almost like asphalt. So it formed 00:20:20.680 --> 00:20:23.920 a seal. Like a scab over a wound. A perfect seal. 00:20:24.079 --> 00:20:26.960 And that scab protected the wet, gooey oil underneath 00:20:26.960 --> 00:20:29.859 from oxygen, from water, from the microbes that 00:20:29.859 --> 00:20:31.599 would normally break it down. So the oil inside 00:20:31.599 --> 00:20:34.079 is trapped in a time capsule. It's almost as 00:20:34.079 --> 00:20:37.519 toxic and undegraded as it was in 1989. So if 00:20:37.519 --> 00:20:40.299 an animal like a sea otter is digging for clams 00:20:40.299 --> 00:20:43.720 on that beach. And it breaks that crust, it gets 00:20:43.720 --> 00:20:46.680 a direct dose of fresh 30 -year -old crude oil. 00:20:47.579 --> 00:20:50.039 And this isn't just a trace amount. As of 2014, 00:20:50.400 --> 00:20:52.220 federal scientists estimated there were still 00:20:52.220 --> 00:20:56.000 between 16 ,000 and 21 ,000 gallons of this stuff 00:20:56.000 --> 00:20:58.279 buried in the beaches. So for the animals living 00:20:58.279 --> 00:21:01.119 there, the spill isn't a historical event. It's 00:21:01.119 --> 00:21:04.380 an ongoing chronic exposure. That is the crucial 00:21:04.380 --> 00:21:06.980 takeaway. It never really ended. OK, this is 00:21:06.980 --> 00:21:09.279 a major pivot point in the story. We've talked 00:21:09.279 --> 00:21:12.039 about the ecology, the chemistry, but the legal 00:21:12.039 --> 00:21:14.059 and financial fallout was a whole other kind 00:21:14.059 --> 00:21:16.759 of toxic spill. And this is where things get. 00:21:17.440 --> 00:21:20.720 frankly bizarre. Section four, the legal and 00:21:20.720 --> 00:21:22.859 financial roller coaster. Let's start with the 00:21:22.859 --> 00:21:25.119 story of the Seattle 7. This reads like something 00:21:25.119 --> 00:21:26.720 out of a John Grisham novel. It really does. 00:21:26.779 --> 00:21:29.559 So it's 1991. Exxon is facing this enormous class 00:21:29.559 --> 00:21:31.720 action lawsuit from fishermen, cannery workers, 00:21:31.920 --> 00:21:35.119 native corporations. Everyone. And they are staring 00:21:35.119 --> 00:21:37.640 down the barrel of a potentially massive punitive 00:21:37.640 --> 00:21:40.019 damages award. Billions of dollars. Billions. 00:21:40.160 --> 00:21:43.200 So they get creative. Their lawyers quietly approach 00:21:43.200 --> 00:21:45.720 seven of the largest seafood processing companies 00:21:45.720 --> 00:21:48.400 who are part of the lawsuit, the Seattle Seven. 00:21:48.619 --> 00:21:51.039 And they offer them a settlement. It was more 00:21:51.039 --> 00:21:53.359 clever and I would say more cynical than that. 00:21:53.500 --> 00:21:56.950 They made a secret deal. Exxon paid these seven 00:21:56.950 --> 00:22:01.329 companies a total of $63 .75 million in cash 00:22:01.329 --> 00:22:03.869 right then and there. Okay, so what was the catch? 00:22:04.130 --> 00:22:06.569 The catch was in the fine print. The agreement 00:22:06.569 --> 00:22:08.950 stipulated that if these seven companies later 00:22:08.950 --> 00:22:11.710 won any money from the big punitive damages trial, 00:22:11.950 --> 00:22:15.130 they had to pay almost all of it back to Exxon. 00:22:15.250 --> 00:22:17.390 Wait, wait, let me get this straight. Exxon paid 00:22:17.390 --> 00:22:20.609 the plaintiffs to give back any money they might 00:22:20.609 --> 00:22:23.640 win from Exxon. You got it. It was a hedge. Exxon 00:22:23.640 --> 00:22:25.819 was betting against itself. They basically bought 00:22:25.819 --> 00:22:28.319 an insurance policy from their own victims. If 00:22:28.319 --> 00:22:30.740 the jury came back and slammed Exxon with a $5 00:22:30.740 --> 00:22:33.759 billion fine, Exxon knew they'd get a significant 00:22:33.759 --> 00:22:36.000 chunk of that money funneled right back to them 00:22:36.000 --> 00:22:38.960 through this secret side deal. That feels deeply 00:22:38.960 --> 00:22:41.930 unethical. It rigs the whole system. The judge 00:22:41.930 --> 00:22:43.970 in the case, Russell Holland, thought so too. 00:22:44.170 --> 00:22:47.150 When this secret deal finally came to light years 00:22:47.150 --> 00:22:50.009 later, he was incandescent with rage. He said 00:22:50.009 --> 00:22:52.369 it created a secret alliance and distorted the 00:22:52.369 --> 00:22:54.930 entire legal process. But it just shows you the 00:22:54.930 --> 00:22:57.250 lengths they were willing to go to mitigate their 00:22:57.250 --> 00:22:59.529 financial risk. And speaking of that financial 00:22:59.529 --> 00:23:02.549 risk, let's talk about the punitive damages themselves, 00:23:02.930 --> 00:23:06.670 that $5 billion number. It became a legal ping 00:23:06.670 --> 00:23:09.809 pong ball for almost two decades. The jury in 00:23:09.809 --> 00:23:12.630 Alaska wanting to send a message awards $5 billion. 00:23:13.150 --> 00:23:16.710 A landmark decision. Absolutely. But Exxon immediately 00:23:16.710 --> 00:23:19.170 begins the appeals process. And it just goes 00:23:19.170 --> 00:23:21.410 on and on and on. It goes up to the appeals court, 00:23:21.470 --> 00:23:23.569 which reduces it. It goes back down to Judge 00:23:23.569 --> 00:23:25.450 Holland, who bumps it back up. It goes back to 00:23:25.450 --> 00:23:27.450 the appeals court, which cuts it again. It was 00:23:27.450 --> 00:23:29.950 a legal war of attrition. And it all culminates 00:23:29.950 --> 00:23:32.309 in 2008 at the Supreme Court. Exxon shipping 00:23:32.309 --> 00:23:34.630 code V Baker. And there's a fascinating little 00:23:34.630 --> 00:23:38.009 detail here. Justice Samuel Alito had to recuse 00:23:38.009 --> 00:23:40.450 himself from the case. Why? Because he owned 00:23:40.450 --> 00:23:43.690 a significant amount of Exxon stock. So it was 00:23:43.690 --> 00:23:45.869 an eight justice court deciding the fate of this 00:23:45.869 --> 00:23:48.990 fine. And what did they decide? In a 5 -3 decision, 00:23:49.250 --> 00:23:52.329 they slashed it. They absolutely gutted the award. 00:23:52.569 --> 00:23:55.970 From the original $5 billion to what? $507 .5 00:23:55.970 --> 00:23:58.630 million. That's, what, 10 cents on the dollar? 00:23:58.869 --> 00:24:02.000 About that, yeah. It was a devastating blow to 00:24:02.000 --> 00:24:04.359 the thousands of plaintiffs, many of whom had 00:24:04.359 --> 00:24:06.339 already died in the 20 years they'd been waiting 00:24:06.339 --> 00:24:08.339 for their money. What was the court's reasoning 00:24:08.339 --> 00:24:11.339 for such a drastic reduction? Their ruling was 00:24:11.339 --> 00:24:14.019 that in maritime law, punitive damages should 00:24:14.019 --> 00:24:16.759 generally not exceed compensatory damages, basically 00:24:16.759 --> 00:24:19.480 a one -to -one ratio. The punishment shouldn't 00:24:19.480 --> 00:24:22.140 be bigger than the actual calculated harm. And 00:24:22.140 --> 00:24:24.460 what legal precedent did they use to justify 00:24:24.460 --> 00:24:27.099 that? This is the amazing part. They cited a 00:24:27.099 --> 00:24:30.740 case from 1818. A case called the amiable Nancy. 00:24:31.220 --> 00:24:33.839 1818. They're using legal principles from the 00:24:33.839 --> 00:24:36.960 age of wooden sailing ships and pirates to regulate 00:24:36.960 --> 00:24:40.279 a multinational oil corporation operating supertankers. 00:24:40.420 --> 00:24:42.539 That is precisely what they did. And it set a 00:24:42.539 --> 00:24:45.140 huge precedent that has limited punitive damages 00:24:45.140 --> 00:24:48.359 in maritime cases ever since. But this isn't 00:24:48.359 --> 00:24:50.500 even the most incredible financial story to come 00:24:50.500 --> 00:24:52.440 out of this. This is the big one. The connection 00:24:52.440 --> 00:24:54.819 that you teased at the beginning. How does a 00:24:54.819 --> 00:24:58.000 lawsuit over an oil spill in Alaska lead to the 00:24:58.000 --> 00:25:01.200 two? 2008 global financial crisis. It is one 00:25:01.200 --> 00:25:03.339 of the most unbelievable stories of unintended 00:25:03.339 --> 00:25:06.619 consequences I've ever come across. So go back 00:25:06.619 --> 00:25:09.650 to the beginning of the legal battle. Exxon is 00:25:09.650 --> 00:25:12.970 facing that potential $5 billion judgment. Right. 00:25:13.069 --> 00:25:15.470 They need to prove to the courts and their shareholders 00:25:15.470 --> 00:25:18.329 that they can cover that cost if they lose. So 00:25:18.329 --> 00:25:20.490 they need a massive line of credit. They need 00:25:20.490 --> 00:25:23.450 a bank loan. A huge one. They go to one of the 00:25:23.450 --> 00:25:25.869 biggest banks in the world, JP Morgan, and ask 00:25:25.869 --> 00:25:29.890 for a $4 .8 billion standby line of credit. And 00:25:29.890 --> 00:25:33.069 JP Morgan, I assume, wants that business. Exxon 00:25:33.069 --> 00:25:36.490 is a huge client. They desperately want the business, 00:25:36.650 --> 00:25:39.029 but it's also incredibly risky for them. Under 00:25:39.029 --> 00:25:41.049 banking regulations at the time, if they set 00:25:41.049 --> 00:25:44.230 aside nearly $5 billion for Exxon, that's capital 00:25:44.230 --> 00:25:46.490 they can't use for anything else. It's dead money 00:25:46.490 --> 00:25:48.950 on their books, and it exposes them to a huge 00:25:48.950 --> 00:25:51.769 loss if Exxon were to somehow default. So they're 00:25:51.769 --> 00:25:53.509 stuck. They want the deal, but it's a dangerous 00:25:53.509 --> 00:25:57.119 deal. Exactly. So a brilliant team of young bankers 00:25:57.119 --> 00:25:59.579 in J .P. Morgan's derivatives group came up with 00:25:59.579 --> 00:26:02.019 a radical new idea. They said, what if we don't 00:26:02.019 --> 00:26:04.380 have to hold the risk ourselves? What if we can 00:26:04.380 --> 00:26:06.720 sell the risk to someone else? How would it even 00:26:06.720 --> 00:26:09.640 work? They created a new kind of contract. They 00:26:09.640 --> 00:26:11.920 went to another financial institution, in this 00:26:11.920 --> 00:26:13.920 case, the European Bank for Reconstruction and 00:26:13.920 --> 00:26:16.299 Development, and they made them an offer. Which 00:26:16.299 --> 00:26:20.859 was? We, JP Morgan, will pay you a steady, regular 00:26:20.859 --> 00:26:24.359 fee, like an insurance premium. In exchange for 00:26:24.359 --> 00:26:27.039 that fee, if our client Exxon defaults on this 00:26:27.039 --> 00:26:30.200 credit line, you agree to cover the loss. So 00:26:30.200 --> 00:26:32.299 it's literally an insurance policy on a loan. 00:26:32.579 --> 00:26:35.220 Precisely. They had invented the modern credit 00:26:35.220 --> 00:26:38.559 default swap, a CDS. And this was the very first 00:26:38.559 --> 00:26:41.200 major use of it. It was born directly out of 00:26:41.200 --> 00:26:43.779 the Exxon Valdez litigation. And for this one 00:26:43.779 --> 00:26:46.339 deal, it worked like magic. JP Morgan got the 00:26:46.339 --> 00:26:48.240 risk off its books, bringing up its capital. 00:26:48.420 --> 00:26:51.200 The European Bank got a nice, steady income stream. 00:26:51.400 --> 00:26:53.599 And Exxon got its credit line. Everybody won. 00:26:53.759 --> 00:26:56.339 In that instance, yes. But then Wall Street realized, 00:26:56.519 --> 00:26:58.640 wait a minute, we can do this with everything. 00:26:58.759 --> 00:27:02.039 We can create these swaps, these side bets on 00:27:02.039 --> 00:27:05.079 mortgages, on student loans, on corporate bonds, 00:27:05.140 --> 00:27:07.259 on entire countries. It allowed them to package 00:27:07.259 --> 00:27:09.000 up risk and sell it off, so it felt like the 00:27:09.000 --> 00:27:11.319 risk had just... Disappeared. It created a global 00:27:11.319 --> 00:27:14.519 casino. And two decades later, it was those exact 00:27:14.519 --> 00:27:16.900 instruments, credit default swaps, particularly 00:27:16.900 --> 00:27:19.880 on subprime mortgages, that became the weapons 00:27:19.880 --> 00:27:22.500 of mass financial destruction that blew up the 00:27:22.500 --> 00:27:25.640 global economy in 2008. So the financial instrument 00:27:25.640 --> 00:27:28.460 designed to handle the fallout from a toxic oil 00:27:28.460 --> 00:27:31.200 spill ended up becoming the toxic sludge that 00:27:31.200 --> 00:27:33.559 poisoned the entire financial system. That is 00:27:33.559 --> 00:27:36.480 the direct lineage. It's a staggering piece of 00:27:36.480 --> 00:27:39.119 history. Truly unbelievable. OK, so with that 00:27:39.119 --> 00:27:41.220 in mind. Let's look at the more concrete legacy. 00:27:41.420 --> 00:27:43.740 What actually changed in the real world because 00:27:43.740 --> 00:27:47.799 of this? Section 5, politics, reform, and culture. 00:27:48.200 --> 00:27:50.619 The biggest and most immediate change was a piece 00:27:50.619 --> 00:27:52.859 of legislation called the Oil Pollution Act of 00:27:52.859 --> 00:27:56.200 1990, OPA 90. What did that do? A few really 00:27:56.200 --> 00:27:59.099 critical things. First, it massively increased 00:27:59.099 --> 00:28:01.680 the penalties for spills. But most importantly, 00:28:01.859 --> 00:28:04.500 it mandated the phase out of single hull tankers 00:28:04.500 --> 00:28:07.640 in U .S. waters. It required all new tankers 00:28:07.640 --> 00:28:10.660 to be built with double hulls. A simple but profound 00:28:10.660 --> 00:28:14.099 engineering change. Incredibly simple. The Valdez 00:28:14.099 --> 00:28:17.519 was a single layer of steel separating 53 million... 00:28:17.549 --> 00:28:20.269 gallons of oil from the ocean. A double hull 00:28:20.269 --> 00:28:22.890 is basically a ship within a ship. You have an 00:28:22.890 --> 00:28:25.450 outer hull and an inner hull with a gap in between. 00:28:25.670 --> 00:28:28.369 A built -in crumple zone. A perfect way to describe 00:28:28.369 --> 00:28:30.849 it, if you get a gash in the outer hull like 00:28:30.849 --> 00:28:33.309 the Valdez did, the inner hull remains intact 00:28:33.309 --> 00:28:36.230 and keeps the oil contained. And do we know if 00:28:36.230 --> 00:28:38.069 a double hull would have made a difference for 00:28:38.069 --> 00:28:40.029 the Valdez? The Coast Guard did a major study 00:28:40.029 --> 00:28:42.750 on it. Their conclusion was that a double hull 00:28:42.750 --> 00:28:45.230 would have prevented about 60 % of the spill. 00:28:45.670 --> 00:28:48.279 60%. That's more than 6 million gallons that 00:28:48.279 --> 00:28:50.160 would have stayed in the ship. A massive difference. 00:28:50.579 --> 00:28:53.279 OPA -90 also beefed up the response requirements. 00:28:53.839 --> 00:28:56.740 Now, by law, two powerful escort tugboats have 00:28:56.740 --> 00:28:59.480 to accompany every single tanker through Prince 00:28:59.480 --> 00:29:01.420 William Sound. So there are helpers right there 00:29:01.420 --> 00:29:04.000 if something goes wrong. Instantly. And OPA -90 00:29:04.000 --> 00:29:06.579 had one other very specific, almost personal 00:29:06.579 --> 00:29:09.819 provision. It banned any vessel that had spilled 00:29:09.819 --> 00:29:12.579 more than a million gallons of oil from ever 00:29:12.579 --> 00:29:17.480 reentering Prince William Sound. the Exxon Valdez 00:29:17.480 --> 00:29:19.660 itself from ever going back. It effectively did, 00:29:19.779 --> 00:29:22.539 yes. And Exxon actually sued the government to 00:29:22.539 --> 00:29:24.440 try and get that provision overturned. They wanted 00:29:24.440 --> 00:29:26.700 to keep using the ship on that route. That takes 00:29:26.700 --> 00:29:28.420 some nerve. What happened to the ship in the 00:29:28.420 --> 00:29:31.079 end? Oh, it had a long and very sad afterlife. 00:29:31.859 --> 00:29:34.660 Exxon spent $30 million repairing it, but the 00:29:34.660 --> 00:29:37.339 name was toxic, so they renamed it. First, it 00:29:37.339 --> 00:29:39.779 was the Exxon Mediterranean. Then the Sea River 00:29:39.779 --> 00:29:41.619 Mediterranean when they tried to rebrand their 00:29:41.619 --> 00:29:43.519 shipping company. Then they sold it and it became 00:29:43.519 --> 00:29:46.039 the Dongfang Ocean. And then finally, the Oriental 00:29:46.039 --> 00:29:48.960 Nicety. It was passed around, hauling iron ore 00:29:48.960 --> 00:29:51.740 in Asia because its reputation and the law kept 00:29:51.740 --> 00:29:54.359 it away from most major ports. A pariah ship. 00:29:54.539 --> 00:29:58.460 And its final fate. In 2012, 33 years after the 00:29:58.460 --> 00:30:01.200 spill, the ship formerly known as the Exxon Valdez 00:30:01.200 --> 00:30:03.660 was deliberately run aground on a scrap beach 00:30:03.660 --> 00:30:07.180 in Alang, India, and dismantled by hand for scrap 00:30:07.180 --> 00:30:10.240 metal. An ignominious end. A fitting one, some 00:30:10.240 --> 00:30:12.799 might say. So the ship is gone. But what about 00:30:12.799 --> 00:30:15.599 the social impact, especially on the native Alaskan 00:30:15.599 --> 00:30:17.619 communities who had lived there for millennia? 00:30:17.680 --> 00:30:19.640 The impact was devastating, and it's a part of 00:30:19.640 --> 00:30:21.700 the story that often gets overlooked. The village 00:30:21.700 --> 00:30:24.490 of Chenega, for example. Their population tripled 00:30:24.490 --> 00:30:27.289 overnight with cleanup workers, media, lawyers. 00:30:27.589 --> 00:30:30.470 Their entire way of life was shattered. And it 00:30:30.470 --> 00:30:32.329 wasn't just a financial disruption. It was a 00:30:32.329 --> 00:30:34.990 cultural one. Deeply. They had a subsistence 00:30:34.990 --> 00:30:36.589 lifestyle. That doesn't mean they were poor. 00:30:36.930 --> 00:30:39.569 It means they lived in a rich, direct relationship 00:30:39.569 --> 00:30:42.250 with the land and the sea. They ate the fish, 00:30:42.369 --> 00:30:44.890 the seals, the berries. And after the spill. 00:30:45.069 --> 00:30:48.410 A deep fear took hold. Is the food safe to eat? 00:30:48.670 --> 00:30:51.779 The clams? The salmon? Are they contaminated? 00:30:52.079 --> 00:30:54.819 That trust, that ancient connection to their 00:30:54.819 --> 00:30:57.339 food source was broken. And for many, it has 00:30:57.339 --> 00:31:00.220 never been repaired. It created a kind of spiritual 00:31:00.220 --> 00:31:03.039 sickness. This also led to this fascinating economic 00:31:03.039 --> 00:31:06.779 concept of existence value. It did. Economists 00:31:06.779 --> 00:31:08.759 were trying to calculate the total damage and 00:31:08.759 --> 00:31:11.730 they had to ask. What is the dollar value of 00:31:11.730 --> 00:31:14.369 a pristine Prince William sound to someone in, 00:31:14.509 --> 00:31:17.690 say, Ohio, who will never visit it but is glad 00:31:17.690 --> 00:31:20.289 to know it exists? How do you put a price tag 00:31:20.289 --> 00:31:23.289 on the public's value for a wild, untouched place? 00:31:23.569 --> 00:31:26.329 A very difficult question to answer. It is. And 00:31:26.329 --> 00:31:28.890 finally, there's the pop culture footprint. The 00:31:28.890 --> 00:31:31.690 spill became more than an event. It became a 00:31:31.690 --> 00:31:34.000 symbol. The ultimate shorthand for corporate 00:31:34.000 --> 00:31:36.380 negligence and environmental ruin. Absolutely. 00:31:36.460 --> 00:31:38.819 The most famous example is probably the 1995 00:31:38.819 --> 00:31:42.039 movie Waterworld. The big budget Kevin Costner 00:31:42.039 --> 00:31:44.660 film. Right. The villain's ship, the base for 00:31:44.660 --> 00:31:47.339 all the bad guys, is explicitly the Exxon Valdez. 00:31:47.500 --> 00:31:50.079 It's rusted and decayed. And in the captain's 00:31:50.079 --> 00:31:52.160 cabin, they have a framed portrait of Joseph 00:31:52.160 --> 00:31:55.099 Hazelwood on the wall. They revere him as a kind 00:31:55.099 --> 00:31:57.859 of destructive saint. That is so dark and so 00:31:57.859 --> 00:32:00.900 specific. It shows how deeply the story penetrated 00:32:00.900 --> 00:32:03.019 the culture. It was in Saturday Night Live sketches. 00:32:03.240 --> 00:32:05.240 It was referenced in shows like Breaking Bad. 00:32:05.380 --> 00:32:08.099 It became a permanent cultural touchstone. Okay, 00:32:08.180 --> 00:32:10.079 let's try to pull all of these threads together. 00:32:10.299 --> 00:32:13.000 This has been a huge, sprawling story. It really 00:32:13.000 --> 00:32:15.519 has. We started with a myth. the drunk captain. 00:32:15.680 --> 00:32:18.380 And we found the reality was a perfect storm 00:32:18.380 --> 00:32:22.420 of systemic failures. A tired crew, a deliberately 00:32:22.420 --> 00:32:25.440 broken radar, and a corporate culture that put 00:32:25.440 --> 00:32:28.000 profits ahead of safety. Then we saw how the 00:32:28.000 --> 00:32:30.819 response, especially the decision to blast the 00:32:30.819 --> 00:32:33.299 beaches with hot water, was a well -intentioned 00:32:33.299 --> 00:32:36.200 disaster that actually sterilized the coastline, 00:32:36.339 --> 00:32:38.900 doing more harm than good in many places. We 00:32:38.900 --> 00:32:41.240 followed the legal battle. which dragged on for 00:32:41.240 --> 00:32:44.460 20 years, saw the victim's award slashed by 90%, 00:32:44.460 --> 00:32:47.559 and in a shocking twist, gave birth to the credit 00:32:47.559 --> 00:32:49.880 default swap, the financial weapon that helped 00:32:49.880 --> 00:32:52.319 trigger the 2008 crisis. And we learned that 00:32:52.319 --> 00:32:55.079 the disaster never truly ended, that thousands 00:32:55.079 --> 00:32:57.579 of gallons of oil are still there today, preserved 00:32:57.579 --> 00:32:59.980 like a toxic mayonnaise under the rocks of Prince 00:32:59.980 --> 00:33:03.019 William Sound, and an entire pot of orcas is 00:33:03.019 --> 00:33:05.680 now functionally extinct. So after all of that, 00:33:05.720 --> 00:33:07.079 here's the final thought I want to leave you 00:33:07.079 --> 00:33:09.079 with, a thing to really chew on. We like our 00:33:09.079 --> 00:33:11.759 stories to have a clean timeline. A beginning, 00:33:11.920 --> 00:33:15.140 a middle, and an end. The spill happened on March 00:33:15.140 --> 00:33:19.720 24th, 1989. The cleanup officially ended. The 00:33:19.720 --> 00:33:21.960 Supreme Court made its final ruling in 2008. 00:33:22.619 --> 00:33:25.339 It feels like the book is closed. But ecosystems 00:33:25.339 --> 00:33:28.440 and economies, they don't operate on news cycles 00:33:28.440 --> 00:33:31.400 or court dockets. Exactly. For the herring in 00:33:31.400 --> 00:33:33.859 Cordova, the spill is still happening every single 00:33:33.859 --> 00:33:36.549 spring when the fishery doesn't open. For the 00:33:36.549 --> 00:33:38.890 sea otters that dig on those beaches, the spill 00:33:38.890 --> 00:33:41.190 is still happening. For the ghost pod of the 00:33:41.190 --> 00:33:44.430 AT -1 orcas, the spill is still happening. So 00:33:44.430 --> 00:33:46.609 the next time you hear on the news that a company 00:33:46.609 --> 00:33:49.089 or a government agency has declared an environmental 00:33:49.089 --> 00:33:52.049 cleanup complete, the question you have to ask 00:33:52.049 --> 00:33:55.190 is, what does complete actually mean? Does it 00:33:55.190 --> 00:33:57.490 mean the ecosystem has truly recovered its health 00:33:57.490 --> 00:33:59.670 and complexity? Or does it just mean that the 00:33:59.670 --> 00:34:01.910 TV cameras have gone home, the checks have been 00:34:01.910 --> 00:34:03.650 written, and the problem is now out of sight 00:34:03.650 --> 00:34:06.970 and therefore out of mind? Is clean a scientific 00:34:06.970 --> 00:34:09.409 reality or is it just a public relations term? 00:34:09.590 --> 00:34:11.590 That's the question. A very important one. Thank 00:34:11.590 --> 00:34:13.710 you for listening to this deep dive. It's a heavy 00:34:13.710 --> 00:34:16.869 one, but an important one. As always, stay curious.