Chevron vs. Ecuadorean activists

Barring delays, an epic legal battle is expected to be decided this year.

by John Otis

www.globalpost.com/, May 3, 2009

In the middle of the Amazon rain forest, an epic 15-year-long legal battle pitting Chevron Corp. against Ecuadorean environmental activists is finally drawing to a close.

Billions are at stake in the lawsuit, which is being argued before a judge in a ramshackle courtroom in the Ecuadorean oil boom town of Lago Agrio, located just across the border from Colombia. If Chevron loses, the San Ramon, Calif.-based firm could be ordered to pay up to $27 billion in reparations - potentially the largest civil damages award ever imposed.

The plaintiffs, who are represented by Ecuadorean and U.S. attorneys, claim to speak for a broader community of about 30,000 residents living in the Amazon region in northeastern Ecuador. They allege that oil production by Texaco, which operated in Ecuador from 1964 to 1990 and was acquired by Chevron in 2001, poisoned their lands, rivers and ground water with toxic chemicals.

They also say that the contamination forced Indian communities to relocate and led to a surge in cases of cancer and miscarriages.

"This is probably the world's worst oil-related contamination on the planet at this moment," said Steven Donziger, a New York-based attorney representing the plaintiffs.

"It is horrendous," Donziger, who has made more than 100 trips to the region, said in a telephone interview. "It is at least 30 times larger than the Exxon Valdez oil spill."

Chevron, which has no operations in Ecuador, argues that Texaco carried out a successful clean-up of 160 waste pits in the 1990s that cost the company $40 million. Texaco was then released from any future liability for environmental damages by the Ecuadorean government.

Chevron portrays itself as the victim of opportunistic attorneys, a corrupt legal system, and Ecuador's left-wing president, Rafael Correa, who has spoken out against the American firm.

"This is fraud," said Donald Campbell, a Chevron spokesman, during a recent interview in Bogota. "It's the product of collusion between the president of Ecuador and U.S. lawyers who are looking for a big payday."

Texaco first began drilling in the Ecuadorean Amazon in 1964 and struck oil in 1967. Full-scale production began in 1972 in a consortium with the Ecuadorean state oil company, which later became known as Petroecuador.

Though Texaco was the minority partner, the U.S. company was the operator, and was therefore responsible for all key decisions, according to the plaintiffs.

Over the years, Texaco produced about 1.7 billion barrels of oil, though the bulk of the profits went to the Ecuadorean government. Today, Ecuador is one of Latin America's largest oil exporters. Petroleum accounts for about half of the nation's export earnings.

But when Texaco began operating, Ecuador, like most Latin American nations, had weak environmental regulations. Lawyers for the plaintiffs charge that Texaco took full advantage of the lax rules and saved billions by recklessly disposing of toxic oil waste.

Between 1967 and 1990, lawyers claim that Texaco spilled more than 26,000 barrels of oil, and released drilling muds and billions of gallons of toxic production waters directly into the soil and rivers of northeastern Ecuador, where the company operated 356 wells.

Much of the oil waste was dumped into about 900 unlined pits that often leached toxic chemicals - such as barium, benzene and toluene - into the forest and groundwater, according to a report by Richard Cabrera, a court-appointed expert.

Donziger said that Texaco's disposal methods would have been illegal in the United States. As early as the 1920s, he said, "the entire oil industry was moving away from the waste disposal methods Texaco used in Ecuador."

In his report, Cabrera wrote that he found higher-than-normal rates of cancer and miscarriages among the people living in and around the former Texaco concession. Chevron officials strongly dispute his claim, saying that independent analysts have determined that cancer rates are no higher in the Amazon region than in the rest of the country.

The case is attracting attention far beyond Ecuador. On April 28, Democratic Rep. Jim McGovern of Massachusetts held a congressional hearing in Washington to discuss the Chevron case. At one point, he recalled his visit to former Texaco oil sites in Ecuador late last year.

"What I found was shocking - a super-fund site about the size of Rhode Island in the Ecuadorean Amazon," McGovern said.

"I visited one indigenous community that had been forced to move three times to try and escape the oil pollution and contamination that was killing the fish, driving away the game, destroying medicinal plants and sickening the community, including the children," he said. "Despite moving, they still couldn't escape the impact of the oil."

Chevron officials, who are waging a fierce lobbying campaign to turn the tide in the legal case and win over public opinion, insist that the lawsuit should be thrown out on several grounds.

For starters, they claim that much of the environmental damage was caused by Petroecuador, the state-run oil company that took over Texaco's operations in 1990. Texaco pulled out of the country two years later.

Soon afterwards, Texaco signed the agreement with the Ecuadorean government to clean up 160 waste sites in exchange for immunity from any future legal claims.

"If you go to those areas today, the area is grazing land, jungle or palm oil plantations," said Campbell, the Chevron spokesman. By contrast, he said, many concerned eco-tourists and journalists have been taken to sites that were polluted by Petroecuador, not Texaco.

Another problem is what he described as a corrupt and biased legal system in Ecuador.

For example, he said that Cabrera, the court-appointed expert charged with reconciling differences between the two sides, is in cahoots with the plaintiffs and has lifted passages from their briefs for his own reports.

Meanwhile, President Correa, a left-wing nationalist who was re-elected April 26, has lambasted Chevron in public, making it even harder for the company to receive a fair trial, according to Campbell.

However, Chevron successfully petitioned a U.S. federal judge in New York - the former home of Texaco's world headquarters, and the place where the suit was originally filed in 1993 - to transfer the case to Ecuador. In doing so, Chevron praised Ecuador's legal system as fair and professional.

The plaintiffs, in turn, call Texaco's immunity agreement the product of corrupt wheeling and dealing. Two Chevron lawyers and seven former Ecuadorean government officials who put together the agreement are now under criminal indictment for lying about the results of Texaco's clean-up.

Amid all the legal wrangling, the lawsuit has produced about 150,000 pages of testimony and has dragged on for a decade and a half. Barring more delays, the judge is expected to rule on the case by the end of the year.

If Chevron loses, Campbell vowed that the company would appeal. "We're going to fight this until hell freezes over," he said. "And then we'll fight it out on the ice."

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