Madison River Case

Ennis, Montana is a rural community of 1000 plus people located in Southwestern Montana. It is primarily a resort community that attracts a seasonal population because of its location in the heart of prime fly-fishing territory. The Madison River, which skirts the east side of Ennis, is a blue-ribbon trout stream. During the spring, summer and fall, fly fisherman from all over the world fill the town's hotels, campsites and restaurants, and flock to the six fly fishing shops.

The Chevron Silvertip Pipeline, which crosses several states, runs through Ennis where it is buried beneath the Madison River. In October of 2010, 63,000 gallons of crude oil spilled into the Madison River in Ennis through a rupture in the pipeline. The spill turned the river into a thick mass of sludge, killing all the fish and contaminating the drinking water for Ennis. With no fishing available and the drinking water contaminated, the residents of Ennis were forced to abandon their businesses and homes, and move elsewhere.

Chevron denied responsibility for the spill and claimed that someone had intentionally tampered with the pipeline. The pipeline was originally constructed in the 1950's. Portions of the pipeline in some states had been replaced in the 1970's, but the section that ruptured in Ennis had not been replaced. The U.S. Department of Transportation, Office of Pipeline Safety had 150 inspectors to oversee 2.6 million miles of gas, oil and other interstate pipelines. They relied primarily on the reports submitted by the owners of the pipelines.

Thomas Zamora, a geological and civil engineer, was hired by Chevron upon graduation from college in June of 2009 to work in Montana. His job duties included monitoring and inspecting pipelines for leaks. In June of 2010, after only one year on the job, he concluded from his inspections and testing that a catastrophic leak in the pipeline beneath the Madison River in Ennis was imminent. He prepared a report of his findings and recommendation to immediately replace the pipeline in Ennis. He submitted his report to his supervisor, Chevron V.P., John Glendive, C.P.A.

Glendive, a 30-year employee of Chevron, began his career with Chevron in the accounting department and worked his way up to V.P. He advised Zamora that the recommended pipeline replacement would require shutting down and draining the pipeline at a cost of $100 million, and $1billion in lost profits during the shut-down period. Chevron averages $30 billion in profits each year and 2010 was shaping up to be a record profit year. Glendive thought it would be best for the company and Zamora's job security to revisit the issue the following year. He instructed Zamora to destroy his report and to submit a new report with no adverse findings.

Zamora, respectful of Glendive's position and experience, and fearful of losing his job, did as instructed even though he knew it was wrong. However, he retained a copy of his original report. When the pipe ruptured in the fall of 2010, Zamora immediately contacted the U.S. Department of Transportation. In exchange for complete immunity, Zamora turned over a copy of his original report and divulged the details of his conversation with Glendive regarding the original report. Chevron was ordered to immediately replace the pipe at a cost in excess of $100 million, and to fund the clean-up, estimated to take 5-6 years at a cost of $8 billion. Additionally, Chevron paid $100 million in federal fines. Glendive was fired.

The U.S. Department of Transportation obtained a $30 million budget increase from congress to add 100 additional inspectors who, via revised federal statutes, will oversee pipeline testing conducted by the pipeline owners. Congress is considering enacting criminal penalties for pipeline owners who knowingly fail to repair or replace faulty pipes that result in oil spills.

Write an Issues analysis (Individual, Corporate and Systemic Factors)

A. INDIVIDUAL FACTORS - ethical questions about an individual's decisions (who made the decision and why)?

B.CORPORATE FACTORS - ethical questions about a corporation's policies, culture, climate or actions?

C. SYSTEMIC FACTORS - ethical questions about the social. political, legal or economic systems within which companies operate?