Fraud in Ecuadorian Oil Battle

The case against oil giant Chevron may finally be coming to an end after at least 16 years in the court system

By Sophie Palmer, Reportage Enviro
09 November 2009

The long running environmental case against oil giant Chevron over its activities in the Amazon rainforest of Ecuador gained momentum recently, when two Chevron lawyers committed fraud in their testimony.

This case has spanned decades, beginning when Ecuador's state oil company, Petroecuador, was involved in a project with US partner Texaco Petroleum (Texpet), which merged into Chevron in 2001.

The lawsuit was first filed against Texaco in 1993, and will now determine whether Chevron will be forced to pay for clean up and remediation costs for the 18 billion gallons of toxic wastewater that was dumped during its operation in the Amazon from 1964 to 1990.

Although the Ecuadorian government and Texaco declared the sites remediated after the company spent $40 million in the 1990's to clean up the contaminated areas, a civil suit has been brought against the company on behalf of thousands of indigenous residents.

The pollution has been labelled one of the biggest environmental catastrophes ever witnessed, and a new court-ordered report has found extensive levels of toxic contamination in oil well sites, which the company previously claimed to have been effectively remediated in the mid 1990's. The report now clears the way for a decision within the coming months.

Pablo Fajardo represents the Ecuadorian communities, and believes the latest results will most likely be used against two Chevron lawyers and seven former Ecuadorian government officials for lying about the results of the remediation in the mid 1990's in exchange for a release from government claims against the company.

The case has been presented by an international team of lawyers claiming that the area's high rates of cancer and other health issues are a direct result of pollution from the oil company's operations there.

Plaintiffs allege that cleanup efforts have continually been substandard, with hazardous waste and crude oil left in hundreds of open pits dug all over the Amazonian forest floor.

The remediation carried out by Texaco has been particularly criticised for being an illegal cost cutting exercise. It is alleged that the oil giant deliberately chose not to use the standard oil industry operation known as "re-injection", a process that involves firing the toxic waste back into the bored well cavity.

Instead, Texaco was allegedly involved in dumping topsoil over small portions of 916 unlined pools of toxic waste so as to disguise the remnant pollutants in the open dumpsites.

It is claimed that this resulted in the poisonous waste by-products seeping into the water table, contaminating the drinking water of local inhabitants. The plaintiffs say that over the last 20 years, cancer and other serious health issues have escalated enormously in populations who live close to these sites.

According to Chevron in Ecuador in their international campaign website Campaign for Justice in Ecuador, Texaco deliberately and fraudulently took short cuts in their remediation programs. This saved them between $1.5 and $4.5 billion in operational expenses at the cost of the health and welfare of the local indigenous population.

One of the lead plaintiffs, Luis Yanza, had nothing but contempt for the remedial work that Chevron claims it undertook years ago.

"The corrective work they say they performed does not exist," he told the United States radio program Free Speech Radio. "Water and soil samples have been taken at the sites which Chevron says they have cleaned up, and the results show incredibly high levels of toxicity."

Similarly, New York based attorney Steve Donziger argues that the remediation work was more of a cover up than a clean up.

"They just took dirt and ran it over the pits without cleaning them out. You cannot live over a toxic waste pit without being exposed to carcinogens."

According to a damages assessment produced in April 2008 by a team of court-appointed experts, all 45 of the remediated sites previously inspected during the trial showed illegal levels of Total Petroleum Hydrocarbons (TPHs) that were thousands of times higher than normal.

Of the 178 water and soil samples collected by Chevron's own experts, over 90 percent indicated high levels of contamination that surpass the lax Ecuadorian norms. Of the 69 separate samples taken by the Amazon Defence Coalition, every test sample showed extensive levels of toxic contamination.

Chevron does not deny that Texaco dumped the toxic waste into the rainforest, but maintains that the Ecuadorian government released it from further clean-up operations.

However, Mr Fajardo argues that although Chevron has attempted to use the remediation as a defence in the trial, this recent evidence of fraudulent test results give these claims little or no value.

"Not only does the remediation fail as a defence at trial, it has backfired into a criminal indictment against Chevron lawyers, who orchestrated a fake clean up with the apparent help of corrupt Ecuadorian government officials," Mr Fajardo said.

"Chevron's continued use of this defence in the face of scientific evidence that clearly exposes the remediation as a sham, calls into question the company's credibility on many aspects of the trial."

The original damage estimate of $6 billion has been reassessed to $27 billion and the number of cancer deaths from oil is estimated to be greater than 1,400.

Analysts seem to have mixed opinions as to what the Ecuadorian fallout may mean to Chevron, but agree that there will be at least a short term knock to the stock price. Leading oil industry analyst, Faded Gheit, said that the case has been poorly handled by Chevron.

"I think the longer it lingers the more it will cost," said Gheit. "The sooner they resolve it, the better off shareholders are. I don't think it will cost $27 billion, but it will certainly cost a hell of a lot more than the $1.8 billion Chevron has reserved for liabilities."

If the legal experts are correct in their prediction, it will be the first time in history that a large oil company will be subject to a significant judgement over environmental damages in the court of a developing nation.

In September this year, Chevron filed an international arbitration claim against the government of Ecuador claiming Ecuador is exploiting the company through the ongoing lawsuit, as well as the failing to uphold its duties under decade-old contracts. The arbitration is currently before the Permanent Court of Arbitration in The Hague under the Rules of the United Nations Commission on International Trade Law.

Director of the Los Angeles Environmental Law Center, Sean Hecht, believes this to be an epic case.

"The sheer size of the money involved explains why a company like Chevron will continue to fight this as long as possible," he said. "You could be looking at years, if not decades before any money exchanges hands."

Although this may be true, for now the noise appears to be getting louder.

Perhaps public opinion and corporate share value will draw a better response from Chevron management than the Ecuadorian villagers who are living in the toxic, oil polluted environment created by the company.