Chevron Rebuffed On Ecuador Trade Benefits By Obama Administration

Oil Giant Had Tried to Lobby USTR Over $27 Billion Environmental Liability in Ecuador’s Amazon

Amazon Defense Coalition

Amazon Defense Coalition
Contact: Paul Paz y Miño: +1 510.281.9020 x302,

Washington, DC – In a setback over its attempt to avoid a $27 billion environmental liability, Chevron has failed for the third time in as many years to convince the Obama and Bush administrations to cancel bilateral trade benefits for Ecuador in retaliation for letting indigenous groups sue the oil giant in that country’s courts.

Ecuador’s trade benefits were automatically renewed for six months at midnight when the Obama Administration failed to initiate a review of the issue, despite intense Chevron lobbying in Congress and at the office of the United States Trade Representative.  Chevron had hired two former U.S. trade ambassadors – Mickey Kantor and Carla Hills – to approach officials at the agency they formerly headed to seek a cancellation of the benefits, but to no avail.

If Chevron had succeeded in canceling the benefits, Ecuador’s government estimated the country would have lost 350,000 jobs.  Similar lobbying efforts by Chevron -- last year and in 2006 -- to enlist U.S. trade policy a pressure point in the private lawsuit met stiff opposition from a number of Senators and Congressmen, and also failed.

The extension of the benefits comes just one day after the U.S. Supreme Court denied Chevron’s attempt to appeal a decision that prevented it from arbitrating the liability with Petroecuador, Ecuador’s state-owned oil company. The company is also being investigated by New York State Attorney General Andrew Cuomo to determine if it misled shareholders about its financial risk in Ecuador.

The long history of the case appears to be haunting Chevron as it suffers a series of setbacks in courts, with regulatory agencies, and in the media.  The company was recently the subject of unflattering reports on 60 Minutes and in several newspapers, including the Wall Street Journal, Financial Times, The New York Times, and The Washington Post.

While it now claims it is not receiving a fair trial, Chevron had fought for nine years to transfer the legal case to Ecuador after it was originally filed in 1993 in U.S. federal court in New York.  As a condition of the transfer, Chevron agreed to submit to jurisdiction and be bound by any ruling in Ecuador. The company also submitted 14 sworn affidavits praising the fairness of Ecuador’s courts.

Once the trial in Ecuador started in 2003 and the evidence pointed to Chevron’s culpability, the company launched a public relations and lobbying campaign to discredit Ecuador’s courts and pressure Ecuador’s government to quash the case.  The threat of U.S. trade policy was the primary “weapon” Chevron chose to create leverage with Ecuador’s government to pressure it to interfere in the legal case on Chevron’s behalf, said Steven Donziger, an American legal advisor to the 80 indigenous and farmer communities suing the oil giant.

“Chevron’s lobbying effort was based on the theory that Ecuador’s President could be forced to violate his country’s Constitution by interfering in a private litigation,” said Donziger. “By engaging in these heavy-handed tactics reminiscent of the worst days of Uncle Sam, Chevron has damaged its own image and that of other U.S. investors in Latin America.”

“Chevron’s management and its lobbyists need to let the trial in Ecuador conclude without further interference,” added Donziger.

Texaco (now Chevron) had admitted to dumping billions of gallons of toxin-laced “water of formation” into Ecuador’s Amazon over an area the size of Rhode Island when it operated a large oil concession from 1964 to 1990.  The pollution has been dubbed the “Amazon Chernobyl” by several experts, some of whom believe a clean-up would dwarf the largest decontamination effort ever undertaken.

A final decision on a $27.3 billion damages assessment, prepared by a court-appointed special master and team of experts, is expected later this year.   Chevron has said it expects an “adverse” decision and will appeal, while the plaintiffs say they will seek to have the judgment enforced immediately in U.S. courts because of Chevron’s attempts to undermine the trial process and cause wanton delay.

Further exacerbating the humanitarian situation is that five indigenous groups in the region have seen their cultures decimated by oil-related contamination, and all are struggling to survive on small areas of largely poisoned land.  Rep. James McGovern (D-MA), the only member of Congress to have visited the region, called it a “terrible humanitarian and environmental crisis” in a letter to President Obama written in November of last year.

"It is past time for those responsible for this contamination to step up to the plate and be held accountable," wrote McGovern in the letter. "I...saw the infrastructure Texaco/Chevron created that allowed for the wholesale dumping of formation water and other highly toxic materials directly into the Amazon and its waters."

Chevron was able to rally several business organizations to its side, including the U.S. Chamber of Commerce, the Business Roundtable, and the National Association of Manufacturers (Chevron contributes funds to each of these organizations).  But just last week, four Democratic U.S. Senators – Wyden, Durbin, Leahy, and Casey – wrote a letter to the USTR asking it to ensure that it does not meddle in the lawsuit on behalf of Chevron.

In 2006, then-Sen. Obama and Senator Leahy wrote a similar letter to the USTR asking that it reject Chevron’s attempts to use trade policy to pressure Ecuador’s government over the lawsuit.

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