"Christmas in July" for big oil companies

Exxon spends more money on its Chief Executive Officer than it does on energy research, according to Senate Democratic Conference Vice Chairman Charles Schumer (D-N.Y.). Schumer said that he was not surprised with the profits oil companies are making but rather, he was surprised about how oil companies are spending their profits. According to Schumer, oil companies are using the profits to buy back their own stock and increase their share prices.

House Democratic Caucus Chairman Rahm Emanuel (D-Ill.) said that the government must stop subsidizing big oil companies and demand that the companies divert more resources into increased domestic production. Emanuel said that American taxpayers are spending billions of dollars for handouts to big oil companies and are also being forced to pay record prices at the pump. According to Emanuel, big oil companies are spending $180 billion on stock buy-backs but only spending $10 billion on research and development.

House Select Committee on Energy Independence and Global Warming Chairman Ed Markey (D-Mass.) said that BP now stands for Bloated Profits. Markey also doled out statistics regarding big oil companies' profits. According to Markey, big oil companies made $40.6 billion profits in 2007 and spent $32 billion on stock buy-backs. Markey emphasized that big oil companies had only spent $10 million on renewable energy.

Supreme Court: $2.5 billion too much for Exxon Valdez; death penalty not allowed for child rape

Exxon v. Baker (5–3 that $2.5 billion was too high a damage award): After the Exxon Valdez oil spill, Exxon paid $3 billion in cleanup fees and fines. Alaskan fishermen brought this case for compensatory damages due to their lost revenue from the damaged fishing areas. They also asked for punitive damages. The jury awarded $287 million in compensatory damages to some of the fishermen (some others had already settled their claims), and it assessed $5,000 in punitive damages against captain Hazelwood and $5 billion against Exxon (an appeals court later halved the amount awarded to Exxon, to $2.5 billion). Exxon made three arguments in this case: that it should not face punitive damages for Hazelwood's actions, that these kinds of events were regulated by the Clean Water Act and no other damages were appropriate, and that the damages award was too large. Justice Alito sat out the case, and the Justices split 4–4 on the question of whether Exxon can be fined for Hazelwood's actions, so the 9th Circuit's decision that Exxon can be held responsible stands. The Court found 8-0 that the Clean Water Act does not prohibit this kind of action. Finally, the Court found 5-3 that the damage award was excessive. Justice Souter, writing for the majority, went through a long historical analysis and found that an appropriate ratio of punitive damages to compensatory damages in maritime cases is 1:1.. Justices Souter, Roberts, Scalia, Kennedy, and Thomas agreed on this point. Justices Stevens and Ginsburg each wrote separately to say that they thought Congress should decide the question of punitive damages in the maritime field, and until then the $2.5 billion award should be left standing. Justice Breyer wrote separately to say that he thought the excessiveness of the recklessness here was enough to justify the award.

Kennedy v. Louisiana (5–4 that death penalty is unconstitutional in cases of child rape): Kennedy raped his 8-year-old stepdaughter. He was sentenced to death. He brought suit, claiming the death penalty for child rape violated the 8th Amendment prohibition against cruel and unusual punishment. In announcing the opinion, Justice Kennedy said that the 8th Amendment must be interpreted “not by the standards that prevailed when the 8th Amendment was adopted” but by evolving standards of decency. Noting the Court's prior decisions of Roper v. Simmons (2005, invalidating the death penalty for minors), Atkins v. Virginia (2002, invalidating the death penalty for mentally retarded), and Coker v. Georgia (1977, invalidating the death penalty for adult rape), Justice Kennedy summarized the legal situation in the states: 6 U.S. states allow the death penalty for child rape, while 44 states and the federal government do not allow it. There has been no execution for child or adult rape since 1964. Finally, there are only 2 people on death row in the United States for crimes other than homicide (the petitioner is one of them). In comparison, there were 5,702 child rapes in 2005, almost twice as many as homicides, so that number of people would be opened to the death penalty if the law were upheld. Justice Kennedy, joined by Justices Stevens, Souter, Ginsburg, and Breyer, voted to invalidate the law. Justice Alito, joined by Justices Roberts, Scalia, and Thomas, dissented, arguing that the Coker case led states to believe laws like this would be struck down and dissuaded them from passing them, and thus their scarcity is not reflective of a real consensus of opinion. Notably, Justice Alito did not spend much time discussing whether it is proper to examine the 8th Amendment under “standards that prevailed when the 8th Amendment was adopted,” yet Justices Scalia and Thomas joined his opinion in full without writing separate opinions.

Giles v. California (6–3 out-of-court statements by a murder victim are not necessarily allowed as evidence in the murder trial): Giles shot and killed his girlfriend. At trial, he argued self defense. To rebut that claim, the prosecution sought to bring into evidence statements the girlfriend had made about prior violence against her by Giles. Giles argued that the 6th Amendment gave him a right to cross examine her, but since she couldn't be cross examined the statements couldn't be used. California said that it was Giles's fault that she was unavailable, so he had no right to complain. The Supreme Court, in an opinion by Justice Scalia, found that the 6th Amendment right to confrontation did not have an exception for cases like there; there is an exception if someone makes a witness unavailable intentionally so that the person cannot testify, but California's argument against Giles was broader than that. Justices Scalia, Roberts, Souter, Thomas, Ginsburg, and Alito joined that opinion, arguing based on historical cases that an exception to the confrontation clause does not exist. Justice Thomas wrote separately to argue that statements to a police officer (like these were) should be admissible anyway, but he joined the majority because he agreed that Giles's actions were not reasons to make the statements admissible. Justice Alito wrote separately, making an argument similar to Justice Thomas's. Justice Souter, joined by Justice Ginsburg, wrote separately to say that they were not convinced by historical cases but by the need to avoid the circularity of having a court find that a defendant killed a victim in order to have evidence admitted in the defendant's murder trial; if the court finds that the defendant killed, what question is left for the jury? Justice Breyer, joined by Justices Stevens and Kennedy, dissented, arguing that historical cases found that an exception applies and the evidence should be admitted.

Plains Commerce Bank v. Long Family Land (9–0 saying Indian Tribal Courts can't hear cases over non-indians selling reservation land to non-indians): The bank owned some land on an indian reservation (sale of indian land was allowed for a short time by Congress). It sold that land to a non-indian. The Longs had previously leased that land with an option to buy, and they claimed the terms offered to the new buyers were better than the ones they had gotten. They brought their claim before an indian Tribal Court. Tribal Courts generally do not have jurisdiction over non-indians, and the only exceptions are when the case involves a consensual relationship involving an indian (such as a lease or contract) and when the case deals with reservation land and would dramatically affect the tribe. In this case, Justice Roberts wrote for the Court, the Tribal Court was hearing a case about a non-indian bank selling non-indian-owned land to a non-indian, so the Tribal Court had no jurisdiction. He said the Longs are free to pursue their discrimination claims in federal court. The decision of the Court was unanimous, but 4 Justices (Ginsburg, Stevens, Souter, Breyer) would have let the non-indian keep the land while still allowing the Tribal Court to fine the bank $750,000 for the discrimination.

The Court announced that it will release the remaining opinions from this term tomorrow, Thursday, June 26.

Protesting profits

Demonstrators on Capitol Hill protest profits of oil companies and call for investment in renewable energy on a day where gas prices have reached a national average of $3.29 per gallon.

Congress grills oil executives over profits, subsidies, and global warming

Members of the House Select Energy Independence and Global Warming Committee held a hearing called “Drilling for Answers: Oil Company Profits, Runaway Prices and the Pursuit of Alternatives” with five representatives from top oil companies including Chevron, Exxon, Shell, BP America, and ConocoPhillips.

Chairman Markey opened the hearing with an acknowledgment that the national gas price reached a record high of $3.29 yesterday, and said that Americans are hoping to be told on April Fools’ Day that skyrocketing prices are a massive hoax. He said that the poorest 20 percent of Americans are now spending approximately 10 percent of their income on gas, while oil company profits have nearly quadrupled. Markey said he hoped the oil companies would explain this disparity and divulge plans to invest these massive profits in research for renewable energy, and claimed that Americans “shouldn’t have to break the bank to fill the tank.”

Congressional representatives expressed personal and constituent dissatisfaction with the current oil situation. Rep. John Shadegg (R-AZ) said that US oil dependency forces America to rely on nations who are not its allies. Rep. Candice Miller (R-MI) said that the oil companies should expect to see a major backlash from Congress, shareholders, and the American people as a result of big oil executives profiting instead of investing in clean energy alternatives. Rep. Emanuel Cleaver (D-MO) said that his constituents are losing jobs because they can no longer afford to drive to them. Rep. Blackburn (R-TN) emphasized that America does have the capacity to be energy independent, but questioned if it has the will to take steps towards implementation.

The oil company executives expressed a need for fewer restrictions against domestic drilling, and highlighted other factors independent of oil companies that contribute to rise in oil prices. John Hofmeister, President of Shell Oil, claimed that price increases are not controlled by oil companies but rather result from relentlessly rising demand, obstructions to accessing domestic oil, shortened capacity, and other external factors.

Peter Robertson, Vice Chairman for Chevron Corporation, called on Congress to “help to open up the 85 percent of the Outer Continental Shelf that is off limits” and claimed that America cannot “expect other countries to expand their resource developments to meet our needs as we limit our development without good reason.”

John Lowe, Executive Vice President of ConocoPhillips, said that America needs to continue to develop all kinds of energy and cannot expect alternate energy to replace fossil fuel in a few short decades. He speculated that based on the current situation, fossil fuels must still supply two-thirds of American energy in 2030. Lowe also expressed a need for utilization of domestic fossil fuel reserves, and suggested that there is huge potential for drilling in Canada. As for development of alternate energy, Lowe said that ConocoPhillips is the largest blender of ethanol fuel and has formed a relationship with Tyson foods to create fuel out of animal fat products.

Robert Malone, Chairman and President of BP America, said that the United States will consume more oil in 2030 than it does today. He emphasized that taxing one form of energy to increase research for another will be harmful to production and the economy.

Supreme Court today: Exxon v. Baker

There was one ruling, announced by Justice Kennedy. The question was whether plaintiffs could file an age discrimination suit against Federal Express even though they did not go through the normal EEOC complaint process first. The Court deferred to the EEOC's interpretation of its rules and found that the filings to the EEOC, though not the complete normal process, were a "complaint," so the suit can go forward. Justices Thomas and Scalia dissented.

The case today was Exxon v. Baker. Justice Alito has recused himself, likely because he is an Exxon-Mobil stockholder. The question is whether maritime law allows punitive damages against Exxon for the Exxon Valdez oil spill, and if so whether there's a limit to how large they can be. There is no clear, recent precedent on the issue, so the Court is looking at rulings from 200 years ago in cases that aren't directly comparable. Exxon is arguing that the captain of a ship cannot make company policy and is therefore independent enough that the company should not be held liable for his actions violating their policy; these concerns are the grounding for the precedents. Additionally, Exxon argued that punitive damages are unneeded in a case where the action was not intentional and did not benefit the company in any way. Baker argues that nothing has changed since the spill, indicating Exxon does need incentive to make sure it doesn't happen again. Baker also argues that the captain is in charge of a "business unit" of Exxon and therefore is high enough in the company that the company should be liable for his actions. Most states follow a "managerial agent" standard for determining when a company should be held liable in cases like this, and Exxon does not contest that the captain is a managerial agent; instead they argue that the rules are different in the maritime context. Justice Souter suggested the distinction may have been relevant when ship captains were out of touch with land for long periods and captains had to act independently, but the distinction may no longer make sense. On the size of the award, Exxon argues the Clean Water Act's limit of double the compensatory damages should be considered, but Baker points out the CWA considers economic harms to people rather than environmental harms.

All of the Justices seemed unsure of the strength of precedent in this case, so I do not feel comfortable predicting how any of the Justices will vote.

[Disclosure: the author is an Exxon-Mobil stockholder.]