Top American Technical Experts Weigh In On High-Profile Damages Case
Amazon Defense Coalition
17 September 2010 - FOR IMMEDIATE RELEASE
Contact: Karen Hinton at +1.703.798.3109
A group of highly respected American technical and medical experts, using conservative assumptions, have concluded that it could cost Chevron up to tens of billions of dollars to clean up oil waste discharged into Ecuador's rainforest and compensate local communities for the damage it caused over the 26 years it operated a large oil concession, according to valuation assessments submitted Thursday to the Ecuador trial court.
Relying on official Ecuador census and mortality data, as well as relevant studies, the analysis finds that what is believed to be the world's largest oil-related catastrophe likely will cause nearly 10,000 Ecuadorians to be at significant risk of dying from cancer by the year 2080 even if Chevron cleans up in the next ten years. The numbers could rise substantially if no remediation takes place.
The assessments analyzed numerous categories of damages, including soil and groundwater contamination, drinking water, excess cancer deaths, natural resources damage, and health costs. While the high end of the damages range of $113 billion is substantially greater than the $27.3 billion damages number set forth in a report in 2008 by court-appointed expert Richard Cabrera, some categories of damages were found to be lower than those estimated in that report.
For example, the combined cost of clean-up for soil and groundwater contamination in the new analysis – which relied mostly on Chevron's own internal environmental audits -- at the high end of the range was roughly $1.8 billion, compared to more than the $5 billion estimate in the earlier Cabrera report. The analysis found the existence of other categories of contamination, such as oil sediment in rivers, but they could not be accurately quantified.
The differences in the soil and groundwater remediation numbers is largely a function of the fact the new analyses used far more conservative assumptions than the Cabrera report. For example, the Cabrera report concluded soil should be cleaned to a depth of five meters, while the recent analysis assumed only four meters.
A large portion of the damages in the new analyses can be attributed to Chevron's "unjust enrichment" – money saved by using sub-standard drilling practices – and compensation for potential excess cancer deaths that have a significant chance of occurring in coming decades due to exposure to cancer-causing crude oil. Most of the damages in the Cabrera report were from the same two categories.
"The new valuation analyses are different, in many ways, than the damage assessment report from 2008 but both present reasonable and sound assessments based on the evidence," said Pablo Fajardo, the lead lawyer for the Amazonian communities suing the oil giant.
"The Ecuador court has more than enough evidence and expert analyses to determine the cost of remediating the extensive oil pollution that has devastated thousands in the region for decades," Fajardo added. "There are more than 100 different expert reports in evidence, dozens of them produced by Chevron, which overwhelmingly demonstrate extensive contamination at all of Chevron's former oil production facilities."
The new damages analyses came in a supplemental report submitted by lawyers for the dozens of Amazon communities suing Chevron for what is believed to be the world's worst oil-related disaster – larger than the size of the BP Gulf spill. Unlike the BP Gulf spill, the Ecuador disaster has been contaminating the rainforest ecosystem for almost 50 years.
Ecuadorian law provides that the court can consider the supplemental information when reaching a decision, but under Ecuadorian law the judge is under no obligation to adopt the estimates. Chevron, which has attacked the credibility of Cabrera's damages assessment, had the opportunity to submit its own valuations analysis but the company previously indicated it would boycott the process.
Lawyers for the affected communities have asserted Chevron has been trying to sabotage the Ecuador trial by bombarding the court with frivolous motions and boycotting any part of the case that addresses damages. The indigenous and farmer communities first filed the lawsuit in 1993 in U.S. federal court, but it was shifted to Ecuador at Chevron's request.
"The information in this submission is highly significant because it reflects clearly that there is a terrible oil-related disaster in Ecuador in the area where Chevron operated," said Fajardo.
"What these analyses make chillingly clear is that thousands of Ecuadorian citizens may well contract and die of cancer in the coming decades because of Chevron's contamination," he added.
The analyses, based largely on technical information found in the 200,000-page trial record and relevant studies, found the following damages:
- Soil Remediation: A conservative estimate of potential costs to remediate contaminated soils at all of Chevron's 378 former oil production facilities in Ecuador ranges from $487 million to $949 million depending on the clean-up standard used. The actual cost could be significantly higher.
- Groundwater Remediation: Based on data in the trial record, the range for clean-up of groundwater is $396 million to $911 million.
- Rivers and wetlands: Data indicates that sediment contamination exists, but no clean-up number was presented pending further investigation.
- Health Care: Using recent data from the World Health Organization and the Ecuadorian Ministry of Health, an estimated $1.4 billion will be needed to provide health care to the thousands of affected persons over the next three decades.
- Drinking Water: Degradation of the environment with petroleum hydrocarbons associated with Chevron's production activities has been documented at numerous locations. The cost of a comprehensive series of regional water systems is estimated to be between approximately $326 million to $541 million.
- Excess Cancer Deaths: Actuarial life-table methodology demonstrates that the aggregate cost of excess cancer deaths due to exposure to oil contamination in the area where Chevron operated could be approximately $69.7 billion. This is the based on the value of a statistical life used by averaging relevant data used in the U.S. court system and by the U.S. Environmental Protection Agency ($7 million for each lost life), and comparing it with official Ecuador mortality data and census information. Up to 9,950 people in the affected area will face a significant risk of dying from cancer in the coming decades even if the area is remediated in the next ten years. Even if the analysis stops in 1990 – the year when Chevron ceased being the operator of the oil fields – the aggregate cost of excess cancer deaths is still estimated at $12.1 billion based on 1,732 deaths from cancer. (The earlier Cabrera report estimated 1,401 deaths from cancer, but he did not project future deaths.)
- Natural Resources Losses: This estimate is based on the evidence that concentrations of petroleum hydrocarbons and harmful metals in soil, groundwater, and surface water have exceeded levels considered to be toxic to terrestrial and aquatic biota. While determining the exact values of service losses in the rainforest with precision is not possible, it is not clear that further studies would produce a range of plausible values different from the range posited earlier by Mr. Cabrera – approximately $874 million to $1.7 billion, depending on the methodology employed.
- Unjust Enrichment: Chevron's unjust enrichment ranges from $4.57 billion to $9.46 billion assuming a 100% probability of detection and ultimate payment, and from $18.26 billion to $37.86 billion assuming a 25% probability of detection and ultimate payment. Given the evidence of Chevron's malfeasance in Ecuador, the plaintiffs assume the company had at best a 25% probability of detection and ultimate payment, and therefore the unjust enrichment award should at minimum range from $18.26 billion to $37.86 billion. This is a conservative figure, as in reality it is highly unlikely that Chevron believed it had more than a 10% probability of detection and ultimate payment.
- Cultural Impacts on Indigenous Groups: Representatives of the Amazonian communities, noting the acute interdependence between indigenous groups and the rainforest ecosystem, analyzed the impact of hydrocarbon contamination on indigenous culture. The team reviewed economic valuations to repair the loss of cultural and ancestral practices, including a program to purchase unspoiled land, and to construct pools of native fishes and centers to restore flora and fauna. The cost for this restoration is estimated at $481.5 million.
The analyses were submitted by the following scientists and technical experts:
- Douglas Allen, who has 25 years of experience as an environmental consultant working in soil and groundwater remediation;
- Dr. Lawrence Barnthouse, one of the nation's leaders in ecological risk assessment and a Fellow at the American Association for the Advancement of Science;
- Carlos Emilio Picone, a medical doctor certified in critical care medicine and Chief of the Pulmonary Section at Sibley Memorial Hospital in Washington, D.C.;
- Jonathan S. Shefftz, a financial economist from Harvard who has performed economic modeling on theories of unjust enrichment for the U.S. Environmental Protection Agency and the U.S. Department of Energy;
- Dr. Daniel L. Rourke, who has extensive experience applying advanced statistical techniques to solve complex litigation problems; and
- Dr. Robert Paolo Scardina, a civil and environmental engineer and member of the faculty at the Virginia Polytechnic Institute.