Duel in the Amazon

Excursions in Ecuador's jungles show two sides in Chevron's long legal battle over the environment.

By Jim Wyss, Los Angeles Times
30 April 2011

Lago Agrio, Ecuador – Donald Moncayo walks to the edge of a flat grassy field that once held two large pits that brimmed with a stew of water and crude from an oil-drilling operation. He lifts a heavy auger above his head and prepares to plunge it into the ground.

"They always show you the shirt, the coat and the tie," he said of the area, called Sacha 53, which is now pastureland and spindly trees. "They never show you the tumor underneath the shirt."

For almost a decade, celebrities, journalists and shareholders have tromped through Ecuador's jungles on competing excursions that have become a routine part of what could be the world's most expensive environmental case.

The "Toxic Tour" – led by Moncayo – is held on behalf of some 30,000 Ecuadorian villagers who claim Chevron's predecessor poisoned their environment with shoddy environmental practices that included pumping millions of gallons of oil-tainted wastewater into creeks and streams.

The other tour is led by Chevron. The oil giant shows idyllic agrarian landscapes – like Sacha 53 – where Texpet, a subsidiary of Texaco, helped pump crude from the 1960s to 1992 when it was a minority partner of the state-run oil company.

When Texaco left Ecuador, it spent $40 million to clean up its share of the operations, and the government absolved it of any further legal responsibilities in 1998.

But Ecuador's courts found that the government deal did not cover third-party claims. So when Chevron and Texaco merged in 2001, Chevron inherited the legal battle.

The company contends it's the victim of a global shakedown engineered by greedy lawyers, environmental groups and unscrupulous government officials.

The case – in one form or another – has dragged on for 18 years, generated more than 200,000 pages of evidence and chewed through six Ecuadorian judges. In February, the court awarded the plaintiffs $9.5 billion – the largest environmental verdict in history – but far less than the $27 billion they were seeking.

The battle is far from over. The case is under appeal in Ecuador, Chevron has won temporary injunctions in The Hague and New York to keep the plaintiffs from recovering damages, and the company is pursuing a Racketeer Influenced and Corrupt Organizations Act case against their accusers, saying they engaged in racketeering and extortion.

The one thing both agree on is that Ecuador's landscape tells the story but what the land is saying is a matter of interpretation.

The Sacha 53 oil field is a case in point.

Pushing back brush and stepping over a barbed-wire fence, Moncayo leads the way to a lush clearing a few hundred yards from the wellhead.

Completed in 1973, it was wells like Sacha 53 that helped jumpstart the nation's economy and earn it a place in OPEC.

Texpet operated the well until 1989, when it handed it over to the government. During those years, Sacha 53 produced almost 3 million barrels of oil. In the process, Texpet dug two large pits to hold the drill-bit lubricant, or drilling mud, and to catch the initial spurts of crude that gurgled up during the extraction process.

The pits were among the 162 that the company was required to clean up under the government agreement.

Chevron said the site was typical of its remediation efforts. It vacuumed up the oil, dug out the tainted dirt, used chemical stabilizers, refilled the pit with clean soil and replanted the area. The company has photographs detailing the process, and the government's report approving the remediation. The surrounding pastureland seems to speak for the area's ecological health.

But then Moncayo plunges his auger into the ground. Within a few inches the dirt gives off the pungent odor of petroleum. Within a few feet the dirt glistens with oil residue. When a few handfuls of the soil are dropped into a bucket of water, a thick oil-slick coats the surface.

"This is their remediation effort," Moncayo said. "They're no better than animals."

The plaintiffs say it's proof that Chevron lied about the cleanup and then got compliant government officials to sign-off on its shoddy work.

Chevron spokesman and tour leader James Craig said it's not surprising to find degraded crude at the site. It might be naturally occurring, Moncayo might have dug outside the boundaries of the remediation area, or the plaintiffs might have spiked the ground with oil to discredit Chevron, he said.

"Even if you do find hydrocarbons in the ground, it doesn't mean that they're a risk to people's health or the environment," Craig said.

There's no evidence that residue from Sacha 53 – or any other Texpet operation – has polluted rivers or streams, and there's even less evidence that oil is making villagers sick, he said.

"This is a smoke-and-mirror shell game," he said.

In his 188-page ruling, Ecuadorean Judge Nicolas Zambrano said the contradictory evidence, conflicting claims by expert witnesses and mountains of data put an "unprecedented burden" on the court. But he said there was sufficient evidence to find Chevron liable.

Zambrano would not talk about the case while it is under appeal.

Over the years, the case has become only more contentious. Experts for both parties have been accused of lying, labs have been accused of evidence tampering, and both sides say the other's legal teams have used bribes and intimidation to make their case.

Meanwhile, public relations firms have kept the issue in the news media.

Chevron said it can no longer get a fair trial in Ecuador -- where the nation's center-left President Rafael Correa has railed against oil companies and recently threw out the U.S. ambassador.

When the case was first filed in New York in 1993, Chevron argued that it needed to be held in Ecuador. The plaintiffs resisted, saying Chevron's resources and influence in the small Andean nation would make it impossible to get a fair trial. Even so, the case – with some modifications – began in Ecuador in 2002.

Now, Chevron says it's being railroaded. And it has effectively put the trial on trial.

In 2009, Chevron secretly taped the presiding judge, Juan Nunez, seeming to suggest that he had made up his mind about the company's guilt and that the appeals process was a mere formality.

Another tape showed an alleged political consultant of the ruling Alianza Pais party suggesting a $3-million bribe paid to Nunez, the presidency and the plaintiffs would help guarantee cleanup contracts in the wake of the verdict.

Nunez recused himself and is facing investigation.

The plaintiffs said those tapes show no wrongdoing on their part and were edited to the point of meaninglessness.

Last year, Chevron subpoenaed outtakes from "Crude," a 2009 documentary about the case.

In that footage, the plaintiffs' New York-based lawyer, Steven Donziger, talks about putting political pressure on the judge. At one point, he's heard asking an environmental group for $100,000 to raise "an army" that could be called on to swarm the courthouse on short notice.

"This is Ecuador. You can say whatever you want, but at the end of the day, if there are a thousand people around the courthouse, you will get what you want," Donziger says in another clip.

The excerpts also showed the plaintiffs meeting with the court-appointed expert, Richard Cabrera, and offering to help write his supposedly independent report.

The plaintiff's lawyer said such meetings are legal under Ecuadorean law and that the video was taken out of context, but Zambrano tossed out Cabrera's report. Even so, Chevron says his verdict is peppered with Cabrera's language – including the damage calculations.

Chevron said the videotapes are part of its effort to defend itself against a rigged judicial system. But the plaintiffs have accused the company of foot-dragging.

When Chevron realized it was going to lose the case "they started to figure out a way that they could argue in front of other courts that the judgment was unenforceable," said Karen Hinton of Hinton Communications, the public relations firm that represents the plaintiffs.

Bouncing along a dirt road in a double-cabin pickup truck, the Toxic Tour also includes former Texpet operations that were not part of the government remediation program, but that the plaintiffs argue the company should be responsible for.

There, large pools of thick black oil glisten in the sun. It's those dramatic fields that often make it into photo spreads about the case.