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Sep 02, 2010
Chevron's Ecuador Legal Battle Might Take Years MoreJul 07, 2009
By Mercedes Alvaro
Of DOW JONES NEWSWIRES
QUITO (Dow Jones)--Chevron Corp.'s (CVX) legal battle with indigenous groups in Ecuador appears to be far from over, even if a local court may give an initial ruling by the end of the year.
The $27 billion lawsuit, which started in Ecuador six years ago, is expected to drag out to international tribunals and courts.
Lawyers for the plaintiffs believe an initial verdict could come as early as this year. A Chevron spokesman says that any possible appeals could take decades.
In 2001, Chevron acquired Texaco Inc., which had operations in Ecuador starting in 1964. Texaco had formed a consortium in 1967 with Ecuador's state-owned oil firm, Petroecuador. Texaco had a 37.5% interest in the venture, and Petroecuador a majority 62.5% stake.
Texaco was in charge of the venture's operations until 1990, when Petroecuador took full operational control. Texaco left the consortium in 1992.
Chevron, for its part, has never had exploration and production operations in Ecuador.
Ecuadorean indigenous groups sued Texaco in the U.S. District Court in New York in 1993, alleging the company polluted the rainforest and rivers, causing environmental damage and personal injuries as a result of its operations in Ecuador.
That court said the case should be resolved by an Ecuadorean court, and the plaintiffs filed a lawsuit in the small, jungle city of Lago Agrio, located in Sucumbios province.
In 1998, following a $40 million remediation program, based on a 1995 agreement between Texaco and Petroecuador, Ecuador's government released Texaco and its related companies from any claims and liabilities regarding cleanup efforts.
Chevron has said that Texaco remediated 161 of 430 identified oilfield pits and seven spill areas, in proportion to the company's shares in the consortium, which met the standards of the time and the terms of the agreement.
Chevron blames Petroecuador for most of the pollution, and says the state oil company has never fulfilled its responsibility to remediate its share of the venture's production site.
"Since the termination of the consortium in 1992, Petroecuador has compiled a well-documented record of environmental neglect," the company said.
Petroecuador spokesman Byron Galarza declined to comment on the case, saying only that there is a legal process underway.
The plaintiffs say that the remediation agreement is invalid because the company never cleaned the pits, adding that the agreement didn't release it from third-party claims.
"There is no difference in levels of contamination between pits remediated by Texaco and those not remediated," a press release from the plaintiffs said.
Lawyers for the plaintiffs say they plan to ask courts in the United States to request a trusteeship to guarantee any eventual payment that Ecuadorean courts could order.
"It can't be predicted when the first sentence could be issued. However, it could be this year," Jorge Nunez, the judge hearing the case, said in a telephone interview.
Fifty-six judicial inspections have been carried out in the case. The last eight requested by Chevron were finished in March.
According to reports submitted by Court-appointed expert Marcelo Munoz, several of the almost 90 samples analyzed showed the presence of total petroleum hydrocarbons higher than the maximum allowed by law, especially in Auca 17 and Auca 19. Those areas were cleaned up by Texaco, as part of the agreement signed with the Government.
Munoz's reports show the level of total petroleum hydrocarbons, aromatic hydrocarbons, chromium and other chemicals that had been found, and their relationship to the maximum rates allowed by the law.
Munoz's reports, reviewed by Dow Jones Newswires, do not say whether environmental contamination or any health risks were caused by oil extraction activities.
Julio Prieto, one of the plaintiffs' lawyers, said: "There is a lot of ambiguity in the reports, which could favor Chevron, even though the laboratory results show that hydrocarbons levels are over what the law allows and what was agreed upon in the remediation agreement."
Prieto says the fact chemicals have been found shows that the remediation efforts weren't as successful as they should have been.
"To find high hydrocarbons levels years after the remediation was carried out means that it was an outrageous lie. The proof is included in Munoz's report, even though it is not as definitive as it should be," Prieto said.
James Craig, a Chevron spokesman, said that during the judicial inspections and expert analysis, chemicals such as BTEX or some polycyclic aromatic hydrocarbons that could cause risks for human health were not found in pits remediated by Texaco.
A damages assessment from 2008 submitted by court-appointed investigator Richard Cabrera said that Chevron should pay $27 billion in compensation for environmental damages in Ecuador, including compensation for cancer deaths he said were caused by the pollution.
Craig said there aren't any medical records documenting cancer as a result of the work in those areas.
"Years after the remedial work was performed, Ecuador has introduced new remediation standards. Attempting to hold Texaco liable for standards that did not even exist at the time violates Ecuador's constitution and common logic," Craig said.
Both parties have opportunities to appeal. Ecuador's Supreme Court could issue a final verdict.
The plaintiffs' lawyers say they aren't ruling out extending legal actions to other nations where Chevron has assets to force it to respect court decisions.
Chevron, meanwhile, is planning to go to international courts if the ruling is adverse because the company feels the trial in Ecuador has deteriorated into what it calls "a judicial farce."
"This case is likely to go on for years and years, through the end of this decade and very possibly through the end of the next decade because Chevron will not accept this extortion," Chevron's Craig said.
"U.S. trial lawyers are pursuing this baseless lawsuit and an aggressive media campaign of lies and distortions aimed at damaging the company's reputation to pressure Chevron into writing them a huge check. That is called extortion," he added.
Steven Donziger, a U.S. lawyer advising the plaintiffs' team, said Chevron "distorts the reality."
"In the trial there are a lot of scientific proofs about Chevron's guilt. They know that they will lose the trial and for that reason they attack the court and the lawyers for the plaintiffs," he said.
-By Mercedes Alvaro, Dow Jones Newswires; 5939-9728-653; mercedes.alvaro@dowjones.com [back] |
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