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Gustavo Coronel:
Chevron goes on the attack in Ecuador

Chevron Corporation, the U.S. oil company being tried in Ecuadorian courts for environmental damages estimated at $26 billion, has gone on the attack by filing an international arbitration claim before the Permanent Court of Arbitration in The Hague. The action by Chevron is connected to the lawsuit in progress at the courts of Lago Agrio, Ecuador, in which a group of Ecuadorian citizens supported by a team of U.S. based and Ecuadorian lawyers, claim that Texaco, later acquired by Chevron, had caused considerable environmental and health damages in the area where it had petroleum production operations up to 1992. An estimate by an “expert” named by the court placed the remediation costs at some $26 billion.

Chevron argues that this lawsuit represents an attempt by the Ecuadorian government to avoid the environmental obligations of its state-owned company. After the Texaco contract ended and after a release from further obligations was extended to this company by the Ecuadorian government, the state-owned company, PetroEcuador, continued operations in the area and kept drilling oil wells. In fact, PetroEcuador has now drilled more than 400 wells in the area, more than Texaco ever did and has contributed significantly to environmental damages due to its low quality of operations. Chevron argues that the Ecuadorian judicial system is no longer fair and autonomous and is acting under the influence of the executive power. President Correa, Chevron further argues, has publicly committed to support the plaintiffs. This support, by the way, has been open and is well documented. Other allegations by Chevron are related to the murky activities of the Attorney General office of Ecuador, that has been conspiring with plaintiffs’ lawyers to change the integrity of the contracts signed with Texaco in 1995 and 1998 and with the illegal behavior of the judge, who has been found, in video and tape recordings, to be prejudiced against the company.

All in all the accusations of Chevron against the government of Ecuador are extremely serious. In a detailed analysis made of this case, slated for publication in the near future, I had already concluded that the “expert” named by the court lacked the knowledge and experience required to render a valid estimate of damages. Chevron has shown that he, the expert, has been in close contact with the plaintiffs’ own advisers and has received help from the plaintiffs’ side.

In this atmosphere charged with corruption and illegal actions by the court and by representatives of the government of Ecuador it is clear that no judgment rendered about this case can be acceptable. The judge has already recused himself and the situation of the lawsuit seems to be in chaos.

In going on the attack Chevron has followed a strategy that few oil companies choose when involved in legal actions. Most companies prefer an out of court transaction since this often is the least damaging to the company’s reputation. In this case Chevron has decided to fight and, as time goes by, it seems that they have chosen the right path.

Gustavo Coronel is a 28 years oil industry veteran, a member of the first board of directors (1975-1979) of Petroleos de Venezuela (PDVSA), author of several books. At the present Coronel is Petroleumworld associate editor and advisor on the opinion and editorial content of the site. Petroleumworld does not necessarily share these views. Petroleumworld not necessarily share these views.

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Petroleumworld News 09/28/09

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