Chevron fights Ecuador pollution lawsuit

By Naomi Mapstone in Nueva Loja
Published: June 12 2009 18:01

After almost 40 years of drilling, this stretch of Amazon jungle on Ecuador’s border with Colombia is pockmarked with long, deep pits of viscous black crude or blended oil and earth that the locals call “swimming pools”.
About 916 pits were used by Texaco Petroleum, the US oil major, and PetroEcuador, the state company, for the 23 years before Texaco’s exit from the country in 1992.
Now they are at the centre of what is shaping up to be the biggest environmental lawsuit in history, with $27bn (€19bn, £16bn) in potential damages sought against Chevron, which bought Texaco in 2001. That is almost seven times the damages awarded against ExxonMobil for its 1989 Alaska spill.
“The only other oil problem that might be comparable is the first Gulf war, in which Iraq trashed Kuwait’s oil fields,” says Douglas Beltman, an environmental scientist for the plaintiffs, rubbing crude-tainted mud from a riverbank between his fingers. “That’s the scale of contamination we are looking at.”
The fact that this rough, impoverished frontierland is heavily polluted is not at issue. The region is home to marginalised indigenous tribes, “colonisers” from other parts of Ecuador, Colombian refugees and the occasional leftwing guerrilla from across the border looking for rest and recreation.
But after 15 years of litigation, almost every other aspect of the case is contested. Lawyers who brought the class-action suit against Chevron say Texaco operated below environmental standards of the day to maximise profits.
They allege the company released 18.5bn gallons of produced water – the hot salty byproduct of drilling – into waterways instead of reinjecting it deep into the earth; that it used unlined earthen pits for permanent rather than temporary storage of waste; and that it chose not to report many spills. They allege widespread contamination of waterways and high levels of associated sickness, including cancer.
Chevron, the world’s third biggest oil company, denies the charges, accusing the plaintiffs of a blatant “shakedown” and the court of bias.

It says its responsibility ended when it cleaned up 37.5 per cent of the well sites as part of a $40m remediation agreement with the Ecuadorean government in 1995. PetroEcuador, Texaco’s consortium partner, which continues to operate in Lago Agrio, has responsibility for the remaining sites, it argues. PetroEcuador declined to comment.
In the 15 years that Chevron has been fighting the charges in both US and Ecuadorean courts, it has seen the damages claim shoot up to exceed its estimates of the $490m profit it says Texaco made over 26 years as operator of the consortium.
The company has lobbied US Congress to withdraw trade preferences over the suit and, even before the Ecuadorian trial judge, Juan Nuñez, hands down his decision this year, it is planning to exhaust all avenues of appeal.
“We feel the court process in Ecuador is so badly tainted it is virtually irredeemable at this point,” says James Craig, a Chevron spokesman, standing on a site he says Texaco successfully remediated. “We are being pursued under a law that did not exist until nine years after Texaco ceased to operate in the country . . . They [the plaintiffs] illegally abandoned the evidential phase of the trial, which required both sides to present scientific evidence to a panel of five experts for assessment.
“It was only after intense pressure and two appeals by the plaintiffs’ lawyers that the court relented and appointed [its own expert].”
Mr Craig says the plaintiffs have not submitted medical records to the court to support the claims of cancer deaths.
“Chevron has absolutely no intention of paying this extortion or writing a cheque to these trial lawyers to settle this case,” he said.
In an interview with the Financial Times, Mr Nuñez, denied bias, saying the only pressure he felt was that of his own conscience.
“People say this is the case of the century, that what happens here is important not just for Ecuador but for all humanity . . .  I see with my eyes. I see the damage; I see the contamination in the rivers.”
Away from the courtroom, locals have seen little of the vast wealth that has flowed from the ground.
“All of our water in contaminated,” said Leonor Velasquez, a diminutive woman waiting in a health clinic. “We all have rashes, I am so itchy all the time.”
Donald Moncayo, an activist who conducts “toxic tours”, illustrated her point at a creek behind a nearby abandoned house, digging into the bank to reveal blackened soil reeking of oil. “Before it was worse,” he said. “This river was black, and the animals passed by and drank the water . . . the chickens and pigs were black.”
Roberto Poncé believes his son Jose Luis’s death from leukaemia seven years ago was linked to contamination by the oil industry. Jose Luis died the day after his 17th birthday.
Hacking his way through a tangle of vines to an old pit beside his house, Mr Poncé says the family has stopped using the well on their property.
“Just because there are plants here doesn’t mean it is safe,” he said.
Copyright The Financial Times Limited 2009