Will Chevron Be Held Accountable for Rainforest Damage?(A)

By Shelley Alpern
Last year, I joined a small group of Chevron investors in Ecuador to see firsthand the impact of oil drilling in the fragile rainforest area of eastern Ecuador, known as the Oriente. The advocacy group Amazon Watch was our tour guide, leading us through proverbially steamy jungles dotted by numerous pits filled with crude oil byproducts. We met with tribal people and settlers forced to bathe and drink from contaminated rivers and streams, their only sources of water. We visited a tiny, desperately under-funded rural clinic, which saw abnormally large numbers of patients suffering from cancers, miscarriages, birth defects, skin rashes, and persistent headaches and intestinal problems. In our Quito visits with congressional representatives, government officials and human rights workers, we learned that Chevron is company non grata in the eyes of many Ecuadorians, because of the role its Texaco subsidiary played in polluting this fragile ecosystem in the 1970s and 1980s.
A class-action lawsuit against Texaco – pending since 1993 – is one of the most significant and closely watched international cases in years, and the reason is this: After years of legal limbo in which venue was the key issue, a breakthrough ruling by a U.S. circuit court judge determined that the case should be heard in Ecuador, and that any damages imposed in that country would be honored in the U.S. This unprecedented arrangement promises to force U.S multinationals to think twice about which environmental standards they observe overseas when their host country’s laws are lax.
In 1998, the government of Ecuador certified that Texaco had completed remediation at one-third of 627 identified oil pits that remained after the drilling ceased in the 1980s. Texaco spent $40 million completing the agreement. The plaintiffs say Texaco did a shoddy job and that the remaining contamination may be responsible for serious ailments and diseases plaguing the region’s people, which have been linked with exposure to hydrocarbons.
The physical dimensions of the case are staggering. Texaco deposited 18.5 billion gallons of petroleum waste and wastewaters into waterways and waste pits, rather than re-injecting it deep into the ground as was standard practice in the U.S. at the time. Nearly 17 million gallons of oil were spilled from the pipeline (1.5 times that of the Exxon Valdez). Texaco does not dispute the spillage and dumping claims, but insists that it complied with Ecuador’s environmental laws at the time (which barely existed, even on paper). The plaintiffs’ lawyers say that Texaco took advantage of Ecuador’s inexperience and should have implemented best practices, producing documents showing that Texaco chose not to reinject simply in order to save money.
In the trial’s current phase, field samples are being collected from numerous sites to determine whether and how much damage can be traced to Texaco’s activities. Twenty-two of 120 scheduled inspections have been completed, and both sides disagree on their implications as passionately as they do on every other question before the court. Chevron insists that Texaco completed its cleanup responsibilities adequately in 1998, and points the finger at other sources for any remaining land and water contamination. Texaco primarily casts doubt upon Petroecuador, its one-time partner in the venture (known as “TexPet”), which later took control of many of the disputed sites.
This summer, Chevron launched an ad campaign and web site (http://www.willyoujoinus.com/) focusing on the complexity involved in meeting the world’s ever-rising demand for energy. The company acknowledges that oil reserves are getting “harder to reach,” and touts the more than $100 million it has invested in renewables, alternative fuels, and efficiency improvements. Since Chevron’s renewables investment equals only 0.06 percent of 2004 revenues, however, this will not permit the second largest U.S. oil company to kick the petroleum habit any time soon. In an interview earlier this year in International Petroleum Finance, Chevron CEO David O’Reilly said of the United States, “We are importing more and more of our oil and more and more of our natural gas. We can’t behave as we have for much of our history when we were self-sufficient in oil and gas,” and emphasized the need for strong diplomatic relationships with West Africa, Latin America and other oil-producing regions.
Add to these technical challenges the human and ecological complexities of oil extraction. The world’s richest oil and gas fields lie in remote areas, which are also biodiversity hotspots – and human hotspots. Indigenous peoples are fighting to keep their ancestral lands intact and developing-nation governments are bargaining harder than ever with foreign oil companies. In August, 420 of Petroecuador’s 450 wells were shut down by insurgents who dynamited a pipeline and cut off electric power to most of Petroecuador’s facilities.
Responsible corporate practices will increasingly determine which companies succeed in the competition for contracts. For this reason, corporations and their critics have been following the trial very closely as a possible bellwether.
As the lawsuit has dragged on, there have been several interesting developments:
Arbitration. Chevron has asked a U.S.-based arbitration panel to transfer any liability for further cleanup costs to Petroecuador. The Ecuadorian government obtained a temporary injunction blocking Chevron’s request, and a New York judge is hearing testimony to determine whether the arbitration should proceed. It may be months before the matter is decided.
An unplayed card? This past spring, Amazon Watch led a second investor delegation to Ecuador. While visiting with the Ecuadorian attorney general, he casually dropped a bombshell on them: in his belief, he said, the remediation agreement between Texaco and Ecuador had been executed “in violation of the Constitution.” An aide explained that because the required signature from the country’s Controller General did not appear anywhere in the agreement. As the government is not party to the lawsuit, the validity of the agreement is irrelevant to the case – making the AG office’s admissions to the investor delegation all the more intriguing. Speaking to SocialFunds.com, a Chevron spokesperson cast doubt on the legal validity of the AG’s interpretation and whether statements had been made at all.
Scientists cry foul. In the Spring edition of the International Journal of Occupational and Environmental Health, 61 physicians and public health researchers from around the world signed a statement excoriating Chevron for buying full-page ads in Ecuador’s major newspapers, in which paid scientific consultants cast doubts on studies linking oil development to adverse health effects in the Amazon. The scientists declared the ad “a blatant effort by the company to sway public opinion as the legal case was being heard,” in which the consultants went to “great pains to find flaws… [some of which] are not even themselves of particular concern” within the field of epidemiology. The proper place to air such criticisms, wrote the scientists, is in the research literature, where the critiques can be properly debated.
Growing investor awareness. While support for the Trillium-sponsored shareholder resolution on Ecuador remained flat at 9 percent between 2004 and 2005, the risk to the Chevron brand did not escape the notice of California State Controller Steve Westly, a board member of the massive California Public Employees Retirement System (CalPERS). This spring, Westly declared his support for the resolution and called upon its board to undertake an independent review of the situation. The New York CommonRetirement Fund was a cosponsor of last year’s resolution.
Ecuador was a dominant issue at Chevron’s annual meeting in April and it will continue to haunt Chevron until the damage is addressed adequately, with or without a court edict. In our view, gambling on full exoneration by the Ecuadorian courts sends the wrong message at the wrong time to future host countries of the company’s operations.
1For comparison’s sake, we also enjoyed a day and a half of relaxation inside a national rainforest reserve Yasuní National Park, where this intrepid reporter was pleased to survive encounters with languid alligators, a napping boa constrictor and a grasshopper-like thing in the shower the size of an iPod (later seized excitedly by fellow lodgers, a small group of British entomologists who joyously declared it to be exactly what they were looking for). Despite these harrowing distractions, however, the stark and depressing contrast between undeveloped and developed rainforest could not fail to impress. Some habitats are simply too fragile to drill in – period.