Texaco quit the oil production consortium in Ecuador in 1990, and negotiated an agreement with the Ecuadorian government in which it would pay for and conduct a cleanup of environmental damage it had produced.
Unfortunately, from the start, the terms of this agreement limited the scope of the remediation. Texaco only agreed to take responsibility for 37.5% of contaminated sites, in accordance with its share in the oil production consortium, despite that Texaco had been the sole operator for 26 years and had designed the system responsible for 100% of the contamination in the region. Texaco also negotiated a grossly inflated standard for acceptable levels of contamination. Finally, Texaco's remediation addressed only specific well sites, with no consideration of the damage the company had done to the broader ecosystem by polluting surface streams and groundwater.
Even with the deck thus stacked in its favor, Texaco still failed to honestly live up to the standards it had basically set for itself. In some cases Texaco used scientific trickery to obtain soil samples that complied with the agreed-upon contamination standard, as more recent study of the exact same sites has found contamination far exceeding that standard. Evidence has also shown that in ensuing years that many waste pits were simply covered with dirt, rather than truly remediated. The toxic waste is still there, several feet underground. Local people have since built houses on some of these sites, having been assured by Texaco that there was no remaining danger.
In 1998, Texaco certified to the Ecuadorian government that it had completed its remediation, at a cost of a meager $40 million (compared to the billions of dollars that the judge, based on expert testimony, has now estimated an actual comprehensive cleanup will cost). The government thus signed off on a release waiving its right to seek any further compensation from Texaco for environmental damage.
Chevron, which purchased Texaco in 2001, has used this release to argue that the current lawsuit is invalid, but in fact, the release only applies to claims originating from the Ecuadorian government. Private citizens, such as the 30,000 residents of the Oriente represented in the current suit, are entirely free to seek redress from the company in a court of law. No court in the U.S. or Ecuador has ever accepted Chevron's broad interpretation of the release.
Furthermore, recent evidence strongly suggests that Texaco knowingly deceived the Government of Ecuador about the results of its remediation, which could render the release invalid, the product of a deliberate fraud. In September 2008, two Chevron attorneys who worked for Texaco at the time of the remediation were indicted in Ecuador, along with five former government ministers accused of complicity in the fraud.