
                         Roanoke Times
                 Copyright (c) 1995, Landmark Communications, Inc.

DATE: FRIDAY, March 22, 1991                   TAG: 9103220227
SECTION: NATIONAL/INTERNATIONAL                    PAGE: A-2   EDITION: METRO 
SOURCE: Associated Press
DATELINE: WASHINGTON                                LENGTH: Medium

SPILL COULD COST EXXON LESS THAN HALF ANNOUNCED $1 BILLION

Exxon's agreement to pay $1 billion to settle government claims and charges for the nation's largest oil spill could actually cost the company less than half that amount, an Associated Press analysis shows.

The company's cost would be reduced if it chose to purchase an annuity that would guarantee the 10 future annual payments called for under the settlement in the Exxon Valdez case - a growing business practice. Exxon's cost would be further cut because most of the payments are tax deductible.

The AP calculations, based on an actual market quotation for an annuity, show it could cost Exxon as little as $486.3 million to meet its obligations to repair the damage caused when the supertanker ran aground and spilled 11 million gallons of crude oil in Alaska's Prince William Sound in March 1989.

In Houston, Exxon spokesman Bill Smith had no comment on the calculations or the current value of the settlement.

Last week, Attorney General Dick Thornburgh proudly announced a $1 billion settlement by Exxon that included record criminal fines and civil damages. But the settlement drew skepticism at a congressional hearing Wednesday. "A lot of taxpayers' money is going back into this to pay Exxon's share," said Rep. George Hochbrueckner, D-N.Y.

The Congressional Research Service, using three different estimates of how much investments might earn over the next 10 years, calculated Exxon's costs at between $421 million and $524 million in material prepared for the hearing.

At the request of The Associated Press, JMW Settlements Inc. of Washington, a national company that specializes in writing deferred payment settlements of lawsuits, calculated that it would charge Exxon $527.3 million for an annuity that would make $785 million in deferred payments.

An annuity, most often sold by insurance companies, is used to set deferred payments. It costs less to buy than the payments it provides, because the underwriter invests the original amount and uses the interest to meet the payments and make a profit.

by CNB