Chevron shareholders to vote on environmental report
By Randy Woods, Business News Americas
16 April 2009
In
a new chapter in the trial over alleged environmental damage in
Ecuador, Chevron's (NYSE: CVX) shareholders will decide May 27 whether
the board must prepare a report on the California-based oil major's
compliance with host country policies.
Although the proposal does not specifically cite Ecuador, it is
widely seen as a strategy to answer outstanding questions - and perhaps
pressure the company - on the US$27bn trial.
US securities regulator SEC rejected Chevron's attempt to block the
report, disagreeing with the oil company's arguments that the proposal
is vague, repetitive and difficult to implement.
"We do not believe that Chevron may omit the proposal from its
proxy material," the SEC said of the proposal, presented by
shareholders including the New York City Employees' Retirement System,
the New York City Police Pension Fund and Amnesty International of the
USA.
The proposal calls for the board to prepare the report on "policies
and procedures" that "guide Chevron's assessment of host country laws
and regulations with respect to their adequacy to protect human health,
the environment and our company's reputation."
The Amazon Defense Coalition, an NGO that supports the plaintiff's
case against Chevron and is the named financial beneficiary of the
lawsuit, hailed the SEC decision.
"We applaud the SEC for rejecting Chevron's attempt to deny
shareholder democracy," according to the NGO's statement on what it
calls the "resolution" on the "Ecuador environmental case."
Chevron, however, pointed out that the proposal uses Ecuador as a
proof point but does not call for a study on Ecuador given that the
company does not operate in the South American country.
"We had three years of Ecuador-specific stockholder proposals on
the proxy; all of them were defeated on a nine-to-one margin," media
relations advisor Kent Robertson told BNamericas, adding that SEC rules
block shareholders from requesting that same study again.
"If the resolution were successful, it would have nothing to do with Ecuador," he said.
The plaintiffs disagree.
"The purpose of the resolution relates primarily to Ecuador, but
also seeks a report to determine if similar substandard practices used
by Texaco in Ecuador were used around the world by Chevron. But for
Chevron's substandard practices and potential liability in Ecuador,
this resolution would not have been proposed," attorney for the
plaintiffs Steven Donziger said in an email.
Chevron believes the plaintiffs are trying to use shareholders to
put pressure on the company in the trial. "If things are going so well
for them as they claim things are, why do they need to be targeting
stockholders and why do they need to be pressuring for a settlement?"
Robertson said.
The case dates back decades to when Ecuador's state oil company
Petroecuador led an E&P project with partner Texaco Petroleum
(Texpet), which years later merged into Chevron. The
Petroecuador-Texpet partnership resulted in total crude production of
1.7Mb, with Texpet - which stopped operating in the country in 1992 -
taking 5% of the financial proceeds, according to Chevron figures.
Ecuador's government in 1999 enacted a new environmental statute
that allows any Ecuadorian resident to file a collective suit for
environmental reparations. As a result, plaintiffs filed suit against
Chevron in 2003, alleging environmental damage from the Texpet project.
Plaintiffs allege Texpet did substandard work and made major
decisions about project technology and methodology. Chevron denies the
allegations and says it performed a US$40mn remediation project.
Attorney Donziger says the remediation does not protect Chevron from
claims in the lawsuit.
© BNAMERICAS