Chevron fights massive lawsuit in Ecuador

A case about responsibility for cleaning up a toxic drilling site could cost the company billions and send a chill through the industry.

For over a decade, Judid Angamarca lived in a wooden shack on stilts next to an old waste pit, where for years oil sludge from drilling was dumped.

The patch of land, the size of a tennis court, was cleaned and covered with earth in 1996. But it stubbornly refused to produce anything she tried to grow. Her three children played in the grass as babies; her animals roamed around, too. The residents living in and around San Carlos have long lived among the wells, pipes, and waste pits laid down for the oil bonanza in the Ecuadorean Amazon.

But two years ago, from a six-inch hole, oil waste emerged – and so did Ms. Angamarca’s doubts about her dead pigs and chickens and her children’s rashes and coughs. The government relocated her family to a new home recently.

“You get mad, you want to leave [the area], but you have nowhere to go,” says Angamarca.

San Carlos sits in the middle of more than 100 wells drilled in the Sacha field by Texaco, which pumped oil as the sole operator of a consortium here from 1972 until 1990. At the time, it was one of the highest concentrations of wells in the Amazonian region, and today this remote town finds itself in the middle of what could be the largest damage claim against the oil industry in its history.

The landmark lawsuit, which began in 1993 in New Yo rk and is now in an Ecuadorean court in this jungle region, alleges that Texaco, which was acquired by Chevron in 2001, knowingly unleashed toxins across an estimated 1,700 square miles – roughly the size of Rhode Island.

This allegedly occurred in one of the most biodiverse forests on the planet. Plaintiffs’ lawyers say Texaco’s dumping represents 30 times more than the crude spilled in the 1989 Exxon Valdez disaster in Alaska. According to a report by a court-appointed expert, Chevron could face $27 billion in damages to soil, groundwater, and drinking water – and even for cancer-related deaths. The decision is expected any day.

Chevron says Texaco cleaned up its share of damage after leaving the country and that the state oil company, which took over its operations entirely in 1992, has not fulfilled its environmental obligations. If Chevron loses the case, it will affect more than its finances: It could reverberate throughout the industry at a time when companies big and small are searching for oil in ever more remote areas, including the Amazon basin.

“This will definitely make it harder on oil companies working in these areas,” says Fernando Santos, a former Ecuadorean energy minister and oil analyst in Quito. “It brings them uncertainty. It sets a precedent that if you leave, it does not end the story. Anyone can open it up again.”

The lawsuit names 48 plaintiffs who represent approximately 30,000 residents. Plaintiffs’ lawyers claim that, contrary to standard US practice at the time, Texaco dumped more than 18 billion gallons of toxic waste; left more than 900 waste pits of toxic sludge, like the one in Angamarca’s front yard; and flared millions of cubic yards of poisonous gasses into the atmosphere. That, they say, has led to 1,000-plus deaths from cancer and to ecological damage beyond repair.

“There was almost no escape for people living [with] all of this,” says Steven Donziger, a New York-based attorney and legal adviser to the plaintiffs’ case. Texaco saved some $8 billion by using substandard practices, according to the report issued by the court-appointed expert.

Chevron denies liability

The science to assess damages is at best faulty, at worst fraudulent, Chevron says. Chevron claims the report’s author, selected by an Ecuadorean judge, sides with the plaintiffs. It also says that public statements by Ecuador’s president, Rafael Correa, in favor of the plaintiffs makes the trial a farce. The oil company’s defense centers on the fact that Texaco spent about $40 million in the mid-1990s cleaning up more than one-third of the waste pits, more than its share of the consortium at the time. State-owned Petroecuador owned the other two-thirds.

“Texaco did its job, now the state has to do its part,” says James Craig, Chevron’s lead spokesman for the case, standing in front of an open waste pit that is about 200 feet long and 75 feet wide, a dark brown pit with a layer of degraded petroleum five feet deep. It is an example Mr. Craig uses to show what Chevron says are Petroecuador’s unmet responsibilities.

The pit, surrounded by giant palms and Heliconia flowers that hang like racks of red bells, is outside the small town of Shushufindi. It illustrates the seemingly irreconcilable views on either side of the courtroom. The day before, plaintiffs’ supporters had accompanied visitors to the same site to present the opposite argument. This, they said, exemplified the damage wreaked by Texaco – the exclusive operator of this area – for one purpose: to cut costs.

Far-reaching implications for a decision against Chevron

The local community here is not completely united against Chevron. Some residents aren’t even aware of the case. Others dismiss the claims that the water is unsafe.

Johana Mantuano, who lives near the Victoria River, where children dive off oil pipelines into the water below, says she worries little. Some even quietly say that Petroecuador is far worse than Texaco ever was. Mr. Santos, the former energy minister, agrees.

Still, a decision against Chevron would reverberate across the oil industry, says Santos, especially at a time when oil companies from China to Argentina are voraciously exploring petroleum sources in the Amazon, one of the largest unexplored areas for hydrocarbons after Antarctica.

Locals hope it echoes in areas where foreign oil firms still operate. Luis Yanza, of the Amazon Defense Coalition, the group leading the fight against Chevron, says his community used to kowtow to oil companies.

When oil first started to flow from wells here, residents say they had little idea of its impact. Mr. Yanza says he would go to school with red blotches all over his body, and so would everyone else. “We looked like fish,” he says. “We would laugh at each other.”

It is the first time that indigenous people of the Amazon have made an American oil company submit to jurisdiction in their country’s court system, plaintiffs say. “The most important impact is giving people the confidence to demand that oil companies change their practices,” Yanza says.

The plaintiffs are supported by US-funded environmental groups, and celebrities such as Sting have spoken out on their behalf. Still, a strong current of David vs. Goliath runs through this stretch of the country.

The case’s lead lawyer, Ecuadorean Pablo Fajardo, worked as a laborer in the palm and oil industries, and says he became a lawyer because the local community did not have one. To put himself through school, he relied on donations from local priests and friends, who collected money for his studies. This is his first case. He closes his eyes when asked what it means to him: “Chevron is fighting for their reputation and for money,” says Mr. Fajardo. “We are fighting for life.”

Chevron on the defensive

Chevron has fought back mightily. The corporation has taken visitors to the sites they have cleaned up and point out rivers where fecal matter, not hydrocarbons, they say, has made the local population sick.

It has taken out quarter-page ads in local newspapers with headlines such as “the fraud of the century.” Chevron recently tucked 280,000 supplements into four Ecuadorean papers, highlighting the impact that relocation programs – instituted by a government desperate for the prosperity oil would bring – has had on this once pristine region.

“We expect the judgment here will be against us,” says Chevron spokesman Craig. “If we don’t find justice in Ecuador, we will go abroad.”
Residents here say it is neither revenge nor money that inspires their fight, but a desire for safe water for drinking, cooking, bathing, and washing their clothes. They blame the government just as much as big oil.

They say they have long been abandoned by both. “What do I want? I just want them to come here and clean up so we can all move on,” says Angamarca. “So that I know my children will be OK."