Shareholders Increasingly Nervous About Possible $27 Billion Liability for Oil Giant
Amazon Defense Coalition
1 May 2009 - FOR IMMEDIATE RELEASE
Contact: Karen Hinton at +1.703.798.3109
To obtain additional background on this issue, download a press kit
Washington, D.C. (May 1, 2009) – The CBS investigative news show 60 Minutes has announced it will air a segment this Sunday about Chevron's complicity in the contamination of pristine rainforest deep in the Amazon jungle of Ecuador. The highly-acclaimed news show is expected to focus on the sub-standard practices used by Texaco, now owned by Chevron, for oil exploration from 1964 to 1990 when it extracted more than one billion barrels of oil from a pristine area of rainforest that was once home to six thriving indigenous groups.
Chevron faces a potential liability of $27 billion in a 15-year class action lawsuit over the environmental damage in Ecuador's courts, which experts have called the "Amazon Chernobyl". A decision in that case, which was transferred from U.S. federal court to Ecuador at Chevron's request, is expected later this year.
The 60 Minutes piece follows insightful and compelling news coverage by large media outlets during the past few weeks, including an article in the Wall Street Journal about pension funds' concerns over Chevron's actions and its failure to adequately disclose information about the case to shareholders. This week, the Washington Post and National Public Radio exposed new details about Texaco's sub-standard operational practices in Ecuador.
Public pension funds from New York City and Philadelphia, and the states of New York, Pennsylvania, and Maryland, have expressed concern to Chevron over the threat to shareholder value posed by the potential clean-up liability in Ecuador.
Driving the 60 Minutes segment is the epic court battle in Ecuador between Chevron and the indigenous groups and farmer communities whose way of life has been decimated by the dumping of what even Chevron admits was over 18 billion gallons of untreated waste water directly into Amazon waterways. Texaco also gouged more than 900 large, unlined pits out of the jungle floor to store oil sludge left over from exploration and well maintenance.
During the past five decades, toxic sludge from these pits has leached into the underground water and surrounding soils. Because no other water supply is available, most people in the area are forced to drink and bathe in water contaminated with carcinogens and other toxic hydrocarbons, leading to a dramatic increase in cancer deaths and the decimation of the traditional lifestyles of five indigenous groups.
A court-appointed team of 15 experts that recently reviewed almost 200,000 pages of evidence in the case concluded that the contamination has produced more than 1,400 deaths from cancer and an undetermined number of skin diseases, miscarriages, and respiratory illnesses. The team's report, which totals 4,000 pages and has won praise from several scientists who have reviewed it, also estimated that damages to Chevron could be as high as $27 billion – an amount that would wipe out more than a year of profits for the oil giant.
Testifying before a congressional committee earlier this week, Steven Donziger, a U.S. legal advisor to the affected Amazonian communities, described Texaco's operation in Ecuador as an environmental “pump and dump” operation.
"The environmental degradation of this area, done intentionally by Texaco to lower production costs, has today produced a humanitarian crisis of epic proportions," Donziger testified.
Chevron's main line of defense has been to blame the government-owned oil company Petroecuador for the pollution, and to claim that a 1995 remediation agreement between the government of Ecuador and Texaco releases them from damages.
These defenses fall flat for several reasons:
- Texaco exclusively engineered, built, and operated the system in way that was designed to pollute without any involvement from its investment partners. As the Washington Post and NPR reported, Texaco was the "sole operator" of the oil fields for 26 years. Petroecuador inherited the deficient operation in 1990 and has invested significant amounts to upgrade the system to minimize environmental impacts.
- Chevron also has the right to sue Petroecuador for indemnification at part of the trial process, but has chosen not to do so.
- Chevron also argues that Texaco's use of unlined pits was consistent with U.S. practices; however, unlined pits are generally prohibited in the U.S. because of the threat they pose to groundwater. In the rare instances when they are used, it is for temporary storage of waste. In Ecuador, Texaco used the pits for permanent storage and most have been on the ground for almost four decades and will be there for centuries unless cleaned up, according to experts.
- The remediation agreement, often cited by Chevron in its defense, did not release third-party private claims of the type being pressed in the lawsuit (it only released Chevron from government claims). In fact, that "release" is irrelevant to the private lawsuit as the plaintiffs in the case never signed it; a Chevron attorney recently acknowledged in sworn testimony that it does not apply to the private lawsuit.
- Language from the Memorandum of Understanding signed in conjunction with the release expressly carves out private claims: "The provisions of this [MOU] shall apply without prejudice to the rights possibly held by third parties for the impact caused as a consequence of the operations of the former Petroecuador-Texaco consortium."
- Evidence in the trial has shown the agreement to be invalid, and possibly fraudulent, because the oil pits Texaco agreed to clean up in exchange for the release remain highly contaminated. In fact, the court damages team found no difference in levels of contamination between pits "remediated" by Texaco and those not remediated. All 94 former Texaco production sites inspected by the court demonstrated high levels of soil contamination and much of the proof came from Chevron itself, according to the court report on damages.
Recently, an Ecuadorian prosecutor indicted two Chevron lawyers and seven former Ecuadorian officials for lying about the results of the “remediation” so Texaco could obtain the release.