A big win-—and unknowns—for Chevron’s accusers


Immediately after an Ecuadorian court this month handed down one of the largest environmental awards in history, ordering Chevron to pay US$9.5 billion in connection with Amazon oilfield pollution, the questions arose. What impact will the ruling have? Will the plaintiffs actually be able to collect?

The Feb. 14 court ruling, issued in the ramshackle oil town of Lago Agrio, clearly marks a major milestone in the 17-year-old case and, more broadly, in litigation concerning the conduct of multinational oil companies in the developing world. Green advocates say that even if the plaintiffs never receive a dime, the blow to Chevron’s reputation and the tens of millions of dollars the company has paid to fight the suit would make oil corporations think twice about cutting corners in developing countries.

“This decision sends a clear and unmistakable signal that there is no impunity for oil companies when they contaminate the environment and harm people’s health,” says Astrid Puentes, co-director of the nonprofit Interamerican Association for Environmental Defense (Aida). “It affects Chevron’s image, will stir concerns with stockholders and have a huge cost politically.”

But analysts say that while Chevron is paying a public-relations price and running up big legal bills, it is unlikely to have to pay the damages. Pointing out that Chevron, a San Ramon, California-based company, no longer has a presence or assets in Ecuador, they question whether the 47 plaintiffs, representing some 30,000 indigenous people, will ever collect—even if Chevron loses its legal appeals.

And the oil giant does seem determined to appeal. In a statement, Chevron said it would seek to overturn the decision, which it calls “illegitimate,” adding it “does not believe today’s judgment is enforceable in any court that observes the rule of law.”

Chevron is fighting a legal battle it inherited from Texaco when it acquired that company in 2001. The litigation began in 1993, when indigenous plaintiffs from the Ecuadorian Amazon filed a lawsuit targeting a Texaco subsidiary, Texaco Petroleum (Texpet). The plaintiffs charged that Texpet disposed of huge quantities of toxic oil-drilling waste on rainforest land from 1972 to 1992 while acting as managing partner of a consortium in which Ecuador’s state oil company held a majority stake.

Health impacts alleged

Toxins, they claimed, flowed from waste pits into groundwater and rivers, damaging habitat and saddling indigenous rainforest dwellers with health problems ranging from spontaneous abortions to childhood leukemia. Plaintiffs argued that the damage could have been avoided if the production water had been pumped deep underground, a process called reinjection, and that to save money, Texaco did not use that disposal method. Chevron has countered that reinjection was not standard industry practice at the time.

In litigating the case in Lago Agrio, Chevron argued that Texpet was absolved of responsibility for the pollution by meeting the terms of remediation accords it signed with Ecuador after turning oilfield operations over to the state oil company, Petroecuador, in 1992. It also claimed plaintiffs’ attorneys and an ostensibly independent court investigator colluded on a vastly inflated assessment of damages.

On Feb. 1, the company filed a racketeering complaint for extortion against the plaintiffs’ attorneys in a New York federal court. A week later the court issued an order temporarily blocking enforcement in the United States of any decision against the company.

Analysts say Chevron’s apparent determination to fight on means that plaintiffs face an uphill battle in collecting the money awarded to them by the Ecuadorian court. Appeals by Chevron, moving up through Ecuador’s judiciary to its Constitutional Court, could take years, they say. And even if successful, the plaintiffs may then have to track Chevron’s money in places where it operates and has assets, such as Brazil, Argentina, Venezuela and the United States, with no guarantee of success.

“This is a 17-year dispute that has been wandering around different courts and different legal processes, and I don’t see any reason to think it will be over any time soon,” says Dianne Saxe, a Canadian environmental lawyer and former senior counsel to Ontario’s Ministry of the Environment. “If the judgment stands [as a $9 billion award], that’s the sort of thing that scares investors, affects stock prices, and has to be disclosed in financial statements. It has a real impact on the company.”

Awaiting industry’s reaction

What impact the judgment will have on other oil companies doing business in Latin America remains to be seen. Dozens of new oil and gas concessions have cropped up in recent years in Latin America’s most biodiverse and pristine areas, including the western Amazon and the Orinoco. And as multinational companies begin to explore and exploit those resources, Chevron’s experience could influence how the industry behaves, analysts say.

Natalie Bridgeman Fields, an attorney representing the Achuar people of Peru in a suit against Occidental Petroleum, says the Chevron case had affected oil industry practices in Latin America well before the Feb. 14 ruling. “The way Chevron fought tooth-and-nail against a community that wanted its day in court and to see its rights restored has terribly damaged its image and suggested to other companies there are other models to follow,” she says.

A December decision by the Ninth Circuit Court of Appeals in California ensures the case involving the Achuar and Occidental remains for now in the United States. (See “Peruvian oil-pollution lawsuit can be tried in United States”—EcoAméricas, Dec. ’10.) But Bridgeman Fields says another case she is working on, involving two Peruvian indigenous groups and five alleged oil spills by the international company Maple Energy, is nearing settlement talks just a year since complaints were brought.

Some suggest that prevention also has improved. Says Gustavo Coronel, former board member of the state-owned oil company Petróleos de Venezuela (PDVSA): “Environmental concerns are much more important for the oil industry in Latin America and in most parts of the world than 30 or even 15 years ago.”

- Steve Ambrus

Natalie Bridgeman Fields
Executive Director
Accountability Counsel
San Francisco, CA, United States
Tel: (415) 412-6704
Email: natalie@accountabilitycounsel.org
Gustavo Coronel
Independent writer and consultant
Washington, D.C., United States
Tel: (703) 622-5278
Email: gustavocoronelg@hotmail.com
Astrid Puentes
Inter-American Association for Environmental Defense (AIDA)
Mexico City, Mexico
Tel: +(52 55) 5212-0141
Email: apuentes@aida-americas.org
Dianne Saxe
Environmental lawyer
Saxe Law Office
Toronto, Canada
Tel: (416) 962 5882, ext. 224
Email: admin@envirolaw.com