UPDATE 5-Ahead of Modi visit, U.S. sees no threat to Pakistan from arms deal with India
* Unarmed drones would help watch Chinese navy (Adds details from White House briefing)
* Oil spill hits Arkansas town, threatens lake
* Huge Exxon Mobil response team descends on town
* Company closely manages cleanup and affected parties
* Gives money to local schools and residents
By Edward McAllister
MAYFLOWER, Arkansas, April 11 Warren Andrews had just finished putting up balloons for his stepdaughter's 18th birthday party at their suburban home in Mayflower, Arkansas, when his wife came inside and said something was wrong.
After stepping out of his house, and taking one glance, he immediately dialed 911.
"I don't know what's going on, but I've got a river of oil coming down the street at me," Andrews told the operator.
Five minutes later, the slick of noxious black crude spewing from a ruptured Exxon Mobil pipeline was eight feet wide, six inches deep and growing fast.
Within half an hour, a representative from Exxon Mobil Corp was on the scene. By the next day, Exxon's agents had contacted the evacuated residents and were writing checks for their living expenses.
Three days after the spill on the afternoon of March 29, 120 workers had descended on the town, a number that would eventually swell to more than 600 from across the country, including company doctors, communication specialists and wildlife experts.
Now, nearly two weeks after the 5,000-barrel spill occurred on Good Friday, a picture has emerged of a giant oil company thrust into a small blue-collar community, intricately managing not just the cleanup of a major spill, but also using its large check book to try to win over the townsfolk and seek to limit the fallout.
At stake is not just the reputation of the world's largest publicly traded oil company, but the spill's impact on a fractious national debate about the effect of shipping increasing amounts of tarry Canadian crude across the United States.
"We are trying to make sure that people are not financially impacted by this," said Exxon spokesman Alan Jeffers. "We will honor all valid claims."
The incident in Mayflower, 25 miles north of Little Rock, pales in comparison to the Exxon Valdez spill in 1989, when hundreds of thousands of barrels of crude spilled from an Exxon oil tanker into Alaskan waters. It's too early to estimate the financial cost from Mayflower to Exxon, but it is likely to be a drop in the bucket for the $400 billion company.
But the spill has stoked a national debate about the safety of carrying crude in pipelines across the United States just as politicians weigh whether to approve the mega Keystone XL pipeline that will help to link the oil sands of Alberta, Canada, with oil refineries on the U.S. Gulf Coast.
And although significant pipeline spills happen every three days on average in the United States, according to federal data, rarely do they occur in a town and rarely in these volumes.
As efforts to clean up the sprawling mess grew over the Easter weekend, a parallel response was developing behind the scenes, one in which Exxon oversaw every issue surrounding the spill - from sick children at the local school and oiled ducks in the creek, to the residents displaced from 22 homes.
When eight students, who were vomiting and complained of headaches, were sent home from Mayflower Elementary School on the Monday morning after the spill, an Exxon Mobil doctor arrived quickly on the scene. The doctor quelled concerns about the air quality around the school, which is just a block south of the spill site, according to school principal Candie Watts.
"The doctor explained that some students would have greater sensitivity than others, but because of the air tests done, there was no cause for alarm," Watts said.
Exxon has given the school $15,000 to pay for a party planned after state exams next week. The money will also help pay for a playground upgrade, new computers and an electronic announcement sign, Watts said.
Exxon has also offered to put money towards a new school science and math program, she said.
"We do have a room that was built to be a science lab, but we've never been able to supply it with resources or a teacher," Watts said. "We would like to speak with them about that."
Exxon confirmed it was paying for the party. It could not immediately confirm if any discussions were being held about the math and science program.
Meanwhile, Exxon was quickly in contact with the residents in the North Woods housing development who had been evacuated from their homes and were staying in nearby hotels.
Company agents sat down with residents, estimating their cost of living and cutting checks for each family in weekly amounts, including for hotel rooms, meals and gasoline.
"They said if it didn't cost what I gave you, take the rest and keep it in your pocket," said Andrews, the Mayflower resident. "If I said something cost $140, he said $200. He said he liked round numbers."
Exxon bought Andrews a lift chair for his disabled mother-in-law and offered to pay for any damage the oil caused to his two vehicles, which he expected would come to about $500.
Exxon confirmed it was paying for the living expenses of displaced residents and that they could pocket any leftover money if the checks were larger than needed.
Gerald Baron, an expert on emergency management communications at PR consultancy Agincourt Strategies, said Exxon's Mayflower play book is not unique.
"It is their instinct to pay first and ask questions later," said Baron. "That is par for the course for the oil industry majors. They don't want to alienate people whose backyard they're working in."
ACT OF DESPERATION
It remains to be seen if the oil giant succeeds in its efforts to placate Mayflower residents and stem liabilities. The cause of the pipe's rupture is still under investigation and some residents said they are seeking legal advice, or will consider doing so in the future if house prices plunge. The area had been one of the most desirable parts of town.
As an oil spill through a town is very rare, it is difficult to find a precedent for the outcome of any legal proceedings.
Exxon has not so far offered to pay for affected houses or any loss in their value, according to its spokesman Jeffers. When asked if Exxon plans to compensate for any loss in housing value, he said only that "valid claims" will be addressed.
Mayflower, with a predominantly white, Republican population of 2,234, is normally a quiet, commuter town off Interstate 40, with a few one-story stores, a diner, a Baptist church and a couple of gas stations along its one main strip.
But the peace was shattered after the oil spill, as heavy machinery and trucks and workers tried to halt the flow of crude along the storm drains and creeks that cross the town's center. The pipeline can carry more than 90,000 barrels a day of crude from Illinois to Texas.
The loss in pipeline tariffs - which amount to more than $5 per barrel, according to government data - could cost Exxon more than $3 million a week while the pipeline is shut, based on Reuters calculations. It is unclear when it will reopen.
The response to the spill was initially a local effort, as emergency responders rushed to keep the oil from running into Lake Conway, a prized local fishing spot that attracts tourists from across Arkansas.
Less than an hour after the rupture was discovered on Exxon's Pegasus pipeline at 2.45 p.m. CT (1945 GMT) on March 29, Faulkner County Judge Allen Dodson was overseeing the construction of makeshift dams out of piles of gravel, sand and plywood sourced from nearby stores.
"There is no oil in that open water. It's the locals that got it done," said Dodson, who described their efforts as "an act of desperation."
Exxon soon sent in contractors from oil clean-up specialists United States Environmental Services (USES) with absorbent booms. USES hired air quality monitors from a private firm and they were taking measurements shortly after 5 p.m. CT.
Secure behind an eight-foot chain link fence topped with barbed wire, the joint command center comprised a makeshift warehouse and a fleet of mobile units. Inside, Exxon representatives worked with town, state and federal officials.
Security guards monitored the entrance, refusing entry to anyone without clearance, and reporters were directed to an Exxon Mobil phone line.
By mid-week, in the marshy woods around the compound, hundreds of workers in yellow hazmat suits bagged up brush and leaves blackened by the spill. Pumps sucked up oil into large tankers. Lawns were being dug up in the North Woods area.
One of the workers said they were told not to stand near the road while wearing their hazmat suits for fear that it would alarm residents.
Exxon contractor Wildlife Response Services from Seabrook, Texas, took charge of affected wildlife on the Tuesday after the spill, replacing a nearby volunteer organization that initially dealt with oiled birds. In all, 23 ducks, a river rat and five turtles have died because of the spill, Exxon said on April 8.
The company has defended itself against any criticism from environmentalists about its handling of the spill. On a blog on April 5, Exxon listed a number of "whoppers" that it claimed had been said, including that the company had ordered a no fly zone over the spill.
All the while, Exxon imprinted itself on town life. Orders for more than 500 sandwiches were placed from a Subway store one day and a local deli the next - the equivalent of catering for about a quarter of the town's normal population.
"They are spreading the love around town," said Julie Jeffery, owner of Julie Ann's deli in Mayflower just after serving up 500 sandwiches and burgers for the responders.
While many in town have applauded Exxon's cleanup efforts and even welcomed their presence, the effects of the spill will linger - at least for a while.
Many of the homeowners in North Woods told Reuters they had been unaware that Exxon's pipeline, which was built in the late 1940s, ran just yards from their houses, buried in the woods near where local children played.
Exxon said it is required by regulators to notify people every two years who are within 650 feet of the pipeline. "We go beyond that to 1,300 feet," Jeffers said.
The $150,000 properties in the sought-after neighborhood rarely spend more than a few weeks on the market - some last just a few days. Now, displaced residents are worried that North Woods' reputation has been tarnished and could knock significant value off their properties.
So far, four displaced residents have been given the option to return permanently. The rest are staying in nearby hotels.
Jonathan Jameson, a chiropractor who works in Mayflower, closed a deal to purchase a house at 19 North Starlite Road just two hours before the spill.
"I went round to look at the house on Tuesday and it looked like a disaster area," Jameson said. "It is definitely going to affect the value of the house," he said, adding that his property had not been damaged by the oil. Jameson said he is seeking legal advice from a local law firm. He did not want to say how much he paid for the house.
It is difficult to know what will be the lasting impact of the spill on Mayflower's real estate market as there are few examples of major residential spills.
Sandara Bridges, a real estate broker in Mayflower, said it will be virtually impossible to sell a house in the neighborhood in the near term.
"No one is going to buy their houses in the middle of this. Someone would have to be nuts to do that," she said.
Bridges said that if the spill is cleaned up properly and there are no residual effects, it's possible for prices to begin to recover in six months.
* Unarmed drones would help watch Chinese navy (Adds details from White House briefing)
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