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Sunday's
Feature

An analysis of the case against Chevron in Ecuador


Petroecuador, the operator and sole owner of the oil fields for 15 years, never fulfilled its responsibility to remediate its share of the venture's production sites and, since Texpet's exit from Ecuador, has compiled an atrocious and well-documented record of environmental neglect and misconduct.

By Gustavo Coronel

In the courts of Lago Agrio, Ecuador, a legal action has been taking place against the U.S. oil company Chevron-Texaco. The action has been introduced by a group of Ecuadorian citizens who claim that Texaco, later acquired by Chevron, caused significant environmental damage to the area in which it conducted oil production between 1964 and 1990. An expert designated by the court produced a report in which he assigned full responsibility to Texaco for the environmental damages inflicted upon the region and its citizens and recommended that Chevron – the new owner of the company - pay damages for some $26 billion. Not only this is one of the largest amounts ever asked from a defendant in a civil action suit but the litigation has all the ingredients of high geopolitical drama: a big multinational oil company, an array of international environmentalist groups aligned with the plaintiffs, lawyers galore, government intervention, intense political lobbying in the United States, a judge freely expressing his opinions about the case before rendering judgment, experts who might or might not have the required level of expertise.

And, underlying all of these ingredients, a fundamental ideological clash between the advocates of big oil and of the environment.

The currrent paper includs events up to January of 2010.

I. The Basic Facts.

Between 1964 and 1990 the U.S. oil company Texaco operated an oil production concession from the Ecuadorian government on behalf of a consortium made up of Texaco, the Ecuadorian state oil company PetroEcuador and, briefly, another U.S. oil company, Gulf. 13 years after the start of operations, in 1977, PetroEcuador became the majority partner in the consortium with 62,5 percent of the shares while Texaco remained as operator and minority partner with the remaining 37,5 percent. Texaco ceased operations in1990 and the consortium ended in 1992. From this year onwards the sole operator in the area has been the Ecuadorian state oil company, PetroEcuador.

Texaco operated for the first 26 years while PetroEcuador has been operating for the last 19 years.

In 1998 the government of Ecuador, represented by the Minister of Energy and Mines and by the Chairman of PetroEcuador, signed a full release to Texaco that reads as follows: “the Government and Petroecuador proceed to release, absolve and discharge Texaco, Texas Petroleum Company, Compañía Texaco de Petróleos del Ecuador, S.A., Texaco Inc. and all their respective agents, servants, employees, officers, attorneys, indemnitors, guarantors, heirs, administrators, executors, beneficiaries, successors, predecessors, principals and subsidiaries, forever, from any liability and claims by the Government of the Republic of Ecuador, Petroecuador and its Affiliates, for items related to the obligations assumed by Texpet in the aforementioned Contract, which has been fully performed by Texpet, within the framework of that agreed with the Government and Petroecuador; for which reasons the parties declare the Contract dated May 4, 1995, and all its supplementary documents, scope, acts, etc., fully performed and concluded.”(The complete release document can be read at 1998 Rele...PDF).

However, this was not the end of the story…because

In 1993 a group of Ecuadorian citizens, supported by U.S. lawyers, introduced a civil suit for environmental damages in U.S. courts against Texaco. This action was cut short since the U.S. Courts decided that they had no competence, referring the case back to Ecuadorian courts.

Six years later, in 1999, a new Environmental Management Act was passed in Ecuador allowing individuals to introduce legal actions against perceived transgressors of this law. This became an opportunity for the introduction, by Maria Aguinda Et Al, of a 2003 legal action against Chevron. This case, number 002-2003, is the one currently before the Lago Agrio court of Ecuador.

In March 19, 2007 the court designated an expert, Mr. Richard Stalin Cabrera Vega, to prepare a report to the court and submit his conclusions on the case, essentially an evaluation of: (1), the magnitude and origin of the environmental damage in the region, (2), the current environmental conditions in the area and (3), the issuing of recommendations for the remedial action that would be required to bring back the environment to its original conditions. The original report by Mr. Cabrera described the damages sustained by the region and its inhabitants and estimated those damages as follows:

Reparations for Damages, U.S. dollars:

Soil remediation $1,700,000,000

Health care system $480,000,000

Indigenous impacts $430,000,000

Drinking water systems $428,000,000

Infrastructure $ 375,000,000

Total Reparations for damages: $3,413,000,000
Compensation for Losses

Excessive Cancer Deaths $2,910,400,000

Ecosystem Losses, a range of $1,697,000,000 - $875,000,000

Total Losses, a range of $4,607,400,000 - $3,785,400,000

Total Damages and Losses: a range of $8,020,400,000- $7,198,400,000

In addition to these totals Mr. Cabrera said that the company had increased its benefits unfairly by cutting down on environmental work and estimated this “unjust enrichment” in $8,310,000,000. As a result the compensation to be paid by Chevron was estimated at $16,3 billion.

In November 2008, Mr. Cabrera released an updated report, increasing the damage assessment by $9.5 billion, for a total of some $26 billion. According to the report this additional amount was required to provide compensation for more exposure-related deaths than previously estimated and to address the additional cost of remediation groundwater and soil not included in the original report.

Chevron vigorously rejected the Cabrera reports on several grounds: (1), Texaco was duly released from any further obligations regarding this activity by the government of Ecuador; (2), Chevron was the wrong defendant in this case since it is PetroEcuador that should be held liable for any environmental damages that occurred after 1990; (3), all scientific data indicated that Texaco did not unduly contaminate the area of operation; (4), Mr. Richard Cabrera was an unqualified expert and had received money from the plaintiffs; (5), Chevron cannot be subject to litigation under the provisions of a law passed in 1999, almost ten years after Texaco ceased to be an operator since laws cannot be applied retroactively and, (6), the government of Ecuador is applying undue pressure on the court to decide in favor of the plaintiffs.

II. Where is the truth?

After 20 years of Texaco’s departure from Ecuador, several years of court action, thousands of pages of documents related to the case and a new political philosophy and style prevailing in the presidency of Ecuador, it seems evident that the legal merits of the case, the scientific data, the objective evaluations of competent experts, would all seem to be losing ground to the perception that a decision has already been made on political and ideological grounds.

The case is of special interest to me, both as an oilman and as a student of corporate and government ethics. Therefore, I established contact with representatives of the plaintiffs and of the defendant and they provided me with documents related to the case and gave me their perspectives on the case.

1. The case from the Perspective of the Plaintiffs.

The plaintiffs, in the number of some 30,000, are led by two Ecuadorian environment activists, Pablo Fajardo and Luis Yanza, who were awarded the 2008 Goldman Prize for his efforts. They are assisted by U.S. lawyers and supported by a group called Amazon Defense Coalition, ADC, not to be confused with Washington DC based Amazon Coalition, although they also have representatives in this city. ADC is not a formal coalition. I have not been able to find a website or a headquarters for them, although their representative in Washington DC is Ms. Karen Hinton, with whom I met for about one hour in 2009 and provided me with information. One of the main legal advisers of the group is Harvard trained lawyer, Mr. Steven Dezinger, with whom I have not met.

The plaintiffs claim that Texaco did not carry out a proper remedial action at departure from Ecuador, leaving behind what they refer to as an “Amazonian Chernobyl”. They claim that the environmental disaster produced immense damages to the environment and to the people living in the region where Texaco’s operations took place for 26 years, from1964 to 1990.

The expert named by the court to report on the situation produced a report that supports the claims by the plaintiffs. Mr. Richard Stalin Cabrera Vega’s report to the court makes very strong statements related to Texaco’s full responsibility in the environmental disaster and talks about the severe degree of contamination left in the soils and waters of the region by Texaco’s operation and about the excessive cancer cases that occurred among the population as a result of this contamination. In general the international media reporting on the case seems to have received the claims of the plaintiffs, as reinforced by the expert’s report, with sympathy. A search on Internet on his topic will reveal a preponderance of commentaries favorable to the plaintiffs. A report issued by a Boulder, Colorado, consulting company called Stratus Consulting, engaged by the plaintiffs, gives a favorable opinion about the Cabrera’s report, defining it as “a reasonable” assessment of the situation.

Although the details of the case are very extensive and complex, a good, compact summary of the plaintiff’s case, as seen from their perspective, can be found in: Understanding Chevron’s “Amazon Chernobyl”. Key Questions and Answers, www.chevrontoxico.com - spring 2009.

2. The case from the Perspective of the Defendants.

Chevron has presented several lines of defense against this action. They claim that they are not even the proper party to be accused. They cite as a prominent component of its defense the release made to Texaco by the Government of Ecuador, signed by the Minister of Energy and Petroleum and by the Chairman of PetroEcuador, the majority partner in the operation. This document freed Texaco from any future claims connected with the activities they carried up to 1990, when PetroEcuador replaced them as operators in the region. They argue that Chevron cannot be the object of a legal action based on a 1999 law that did not exist when Texaco was active in Ecuador. Chevron rejects the manner in which the expert was named, as well as his credentials. They feel that there should have been a team of experts, named both by the plaintiffs and the defendant, given the complexity of the case. They reject the transparency and the qualifications of the team named by the expert, Mr. Lenin Cabrera to assist him. They reject the validity of the methods utilized by Mr. Cabrera to conduct his analysis and, as a result, the validity of his conclusions. They claim that Mr. Cabrera has received money from the plaintiffs. They also claim that the Ecuadorian government, at the highest level, the Presidency, has been publicly in favor of the plaintiffs, which makes a fair trial impossibility. They strongly reject the study on which Mr. Cabrera bases his assertions about “excess cancer cases”. They argue that PetroEcuador is more responsible for any environmental damages done to the region and its people than Texaco, since they were the majority shareholder since 1977 and have operated in the same area for the last 19 years. They add that PetroEcuador’s performance has been very poor during this period, experiencing 801 oil spills with a loss of almost 2 million gallons of oil. They argue that Chevron has been selected as the target for this action, rather than PetroEcuador, because it has deeper pockets and is an international and not an Ecuadorian company. In brief, they define the action as a fraudulent attempt against the company.

3. My perspective on this case.

I am a former oilman and, later on in my life, I have become an advocate and activist for corporate, personal and government ethics. As I reviewed the facts of the case I was aware of my shortcomings. I only visited a portion of the area briefly, many years ago. I do not know the people involved: Richard Cabrera, the judge, PetroEcuador’s managers, Chevron’s managers, the lawyers, the environmentalists, the inhabitants of the region. Therefore, I can only evaluate the case in abstract. On the other hand this could be positive. I am sufficiently detached from the case to afford being reasonably objective. I say reasonably objective because, as a former oilman of 30 years, I have some built-in bias in favor of oil companies and because, as a Latin American, I am acutely aware that our governments often tend to be authoritarian and to obstruct the autonomous exercise of justice. On the other hand, I have instinctive sympathy for the underdog and for the poor of our Latin American region, so often victimized with impunity by the strong, be it an international enterprise or the rulers of the country.

Truth is rarely evident for all to see, especially in issues involving many actors, multiple activities, factual and presumed events and strong sentiment running high on both sides of the legal fence. I have little doubt that Texaco, during its oil production and transport activities in Ecuador during 26 years generated damages to the environment. As an oilman, I am convinced that it would have been impossible for an oil company active over a large region to operate without some degree of contamination to the environment, even if performing in the most efficient manner.

Texaco carried out oil production activities for about 26 years. PetroEcuador was partner during all these years and majority shareholder for the last 13 years of the consortium. After Texaco’s departure, in 1990, PetroEcuador operated alone, using essentially the same methods of its predecessor. During these 20 years PetroEcuador has generated environmental damages partly superimposed on any damages that might have been inflicted by Texaco. This makes it difficult, if not impossible, to differentiate between the relative impacts made by both companies on the region. In parallel, Ecuador had a Ministry of Energy and Petroleum in Ecuador, legally responsible for assuring that oil activities were conducted in the best possible manner, under existing laws and in accordance with international standards. To me these three organizations, Texaco, PetroEcuador and the Ministry had a shared responsibility to the people of Ecuador during the course of the life of the consortium. Rarely, if ever, the sole responsibility for the performance of the operations could be attributed to only one of the partners, much less so to the minority partner, even if it were the operator. A majority partner (or, even, a minority partner) is obliged to have full knowledge of the operations at all times. The reason is simple: the way these operations are conducted will impact their finances, legal status and reputation. PetroEcuador cannot reasonably claim that “they did not know” what was going on. In the same line of reasoning, if the government of Ecuador did not act in a timely manner, through its ministry, in order to remedy whatever violations to the environment might have been taking place, they were guilty of gross negligence. The fact that only Texaco (now Chevron) has been named as a defendant in a case in which there were three major actors involved, all three having a clear share of responsibility, leads me to believe that the case might not be as straightforward as the plaintiffs suggest. Whatever environmental damages beyond accepted limits were inflicted to the environment and the people of Ecuador, these three organizations must carry a- to be established- portion of the blame. The fact that Ecuador went through many political administrations during the period of operations by Texaco would seem to eliminate the possibility that Texaco was “in bed” with the politicians in power to avoid its responsibilities. Even if this were true the government entities would then be guilty as accomplices.

It seems difficult to accept that Texaco violated the Ecuadorian law and the good standards of oil production performance with total impunity for 26 years under the very nose of the majority partner and under the very nose of the bureaucrats of the Ecuadorian government. PetroEcuador and the ministry had geologists, petroleum engineers, environmental experts (their own or hired), and lawyers who must have had unlimited access to the site of operations. I have been told that periodic meetings were held between the partners and the Ministry officials, in order to rewview and evaluate these activities.

When the representatives of the Ecuadorian government gave Texaco the 1998 release from all future claims and liabilities, we must conclude that this release was based on the realization on the part of the Ecuadorian government and of the majority partner, PetroEcuador, that Texaco had satisfactorily fulfilled its commitments. The other possibility, collusion between Texaco, PetroEcuador and the Ecuadorian government to defraud the Ecuadorian people is improbable and, in fact, has not been suggested by the plaintiffs.

III. The magnitude of the damage.

The determination of the true extent of the damage is crucial to the issue. The allegations for excessive damage are presented, basically, in expert Cabrera’s report while counter arguments to this report were issued by Chevron after the Cabrera report was concluded.

1. The Cabrera Report.

I attach below selected portions of Mr. Richard Cabrera’s statement of findings (all italics are mine, to call attention to what I consider to be critical assertions by Mr. Cabrera):

“Crude oil spills in the Concession area

Texpet operations in the Concession area caused a large number of oil spills over the years.

These spills are described in a series of communiqués, memoranda, letters, notices and reports sent and received by Texpet, which have been compiled and analyzed (Annex I).

Due to the long period of time that the company was operating, the precise number of spills are unknown.

Exposure of people and the environment to the chemicals

The people living in the Concession area have been exposed to chemicals from crude oil, production water, gas flaring and well additives in a variety of ways. One of these is inhaling vapor either from crude oil operations or gas flares…

The numeric environmental standards in Ecuador were established after Texpet ceased operating in the Concession area. However, while Texpet was operating there were guidelines and accepted practices for handling and disposing of oil exploration and production waste which were not followed by Texpet (e.g., API 1962). Furthermore, current environmental standards are applicable to environmental damage regardless of when the contamination occurred. Even if the contamination was caused many years previously, current standards are applicable as cleanup standards for remediation ….

. Therefore, the fact that the Ecuadorian environmental regulations were established after Texpet operations had concluded is irrelevant, and these standards should be used to determine adequate levels of contaminant cleanup..

Petroleum hydrocarbons in the soil

At every production well and station that was sampled, at least one soil sample contained TPH concentrations exceeding 1,000 ppm. This fact indicates that crude oil has been spilled or leaked at every one of these sites and that TPH concentrations exceed the Ecuadorian standard in at least one sample at each site…

Timetable of Texpet operations causing contamination

Texpet operated in the Concession area until June 1990, when Petroecuador took over operations via Petroamazonas, currently Petroproducción.

Since then Petroecuador has installed additional wells, although these wells are not included at all in this report .

After Petroecuador took over operations, it continued operating most of the wells and all the stations that Texpet had installed.

One issue to consider is the relative amounts of contamination caused by Texpet and by Petroecuador since it took over operations.

Petroecuador also contributed to environmental contamination. Petroecuador continues to discharge waste into unlined pits at the oil wells. For several years, Petroecuador continued to discharge production water directly into rivers and streams, although it did make an effort to reinject production water back into the ground. As of 2005 almost 100% of the production water has been reinjected. Petroecuador is still releasing gases despite the fact it has constructed installations to capture more gas and not flare it into the atmosphere. There have also been additional oil spills since Petroecuador took over operations in 1990.

However, it is clear that all of the contaminants that were released into the environment prior to June 1990 is the responsibility solely of Texpet .

Conversely, all of the contamination at sites that were constructed by Petroecuador after June 1990 is the responsibility solely of Petroecuador; these sites are not included in this report.

The question remains then regarding the contamination that has occurred after June 1990 at sites operated initially by Texpet and then taken over by Petroecuador.

There are two possible ways of establishing liability at sites operated first by Texpet and then by PetroEcuador after June of 1990. One is to determine that Texpet is still responsible for the majority of the contamination at these sites since it established the operating methods of the sites which started the contamination and which are still being used. For example, Texpet built the waste pits that are still being used at these sites. Texpet also established the normal operating procedures for handling waste, such as discharging production water into streams and rivers and releasing gas into the atmosphere. Texpet also created the procedures for activities such as oil pipeline control and maintenance. It is unrealistic to expect that Petroecuador could immediately change all of the Concession operations in order to make them safer. Instead, Petroecuador has had to operate all of the infrastructure in the Concession in the manner in which it was handed over by Texpet, and thus the contamination which has continued since June 1990 at the sites originally operated by Texpet is substantially the responsibility of Texpet.

I believe that Texpet failed to install a system that would have considerably reduced the ecological impact for its successor in the operations. This would require deploying technical advances to ensure appropriate and complete formation water reinjection(Annexes S and T) in order to prevent further environmental contamination.

A second way of looking at the contamination which has occurred and continues to occur after June 1990 is to use the relative quantity of crude oil produced at the sites since June 1990 to represent total liability. However, this quantity would probably underestimate Texaco’s relative contribution to total contamination of the sites, as Petroecuador has improved its operations and reduced the volume of environmental contamination. For example, Petroecuador now reinjects almost 100% of production water into underground wells. This means that the second method of calculation would probably attribute too low a percentage of the environmental contamination to Texaco.

3.2.17

Texpet pit remediation

….. the government of Ecuador and Petroecuador signed a document on September 30, 1998 releasing Texaco and all persons or companies related to it from all liability. However, the plaintiffs state that the company (Texpet) which operated 100% of the consortium should bear all liability, as the material cause of the damage . They also state that it is irrelevant whether Texaco carried out the clean-up, as the area remains highly contaminated, including the sites where Texpet conducted its cleanup.

Impact on Human Populations.

Adverse effects on human health, including high rates of cancer, spontaneous abortions, high infant mortality rates and birth deformities.

Human Rights violations suffered at the hands of Texpet employees, such as rape, ethnic violence and discrimination .

Impact on indigenous communities, including displacement from their ancestral territories and loss of cultural integrity and identity.

Data presented below are taken from field studies carried out by Beristain, et al. These studies included quantitative surveys of 1064 persons from different families, as well as a qualitative surveys using six focus groups selected according to ethnic criteria (Annex L).

The surveys and focus groups focused on people living in the area during Texpet operations and their findings are related to this company

Cancer

Cancer distribution by type, sex and age

The quantitative study described in Annex L asked several questions about cancer. In 21.33% of the families surveyed, or almost one in every four, we found at least one case of cancer in the family. The total number of cases refers to persons suffering from or who have died of cancer. This incidence of cancer, in almost than one in every four families surveyed, is very high.

For comparison, according to the National Records on tumors, there is a lower frequency of cancers in Quito than in the Beristain study among young people. We note that the exact characteristics of these two studies are different, and therefore we cannot make definitive conclusions from this data. However, the data suggest that there is a higher proportion of people of this age with tumors in the area.

Of the cancer cases reported in the survey, a slight majority occurred in women. In women the most frequent type of cancer was uterine cancer (37.34%), while among men it was stomach cancer (25.7%).

Distribution as a function of distance from the wells

We compared the aforementioned cancer cases with the distance that the survey population lived from the wells. The results are shown in the following table:

Approximately 58.62% of those surveyed that live less than 250 m from a well reported at least one case of cancer, which is numerically significant considering that only 34% of people in the survey live within this radius.

The appearance of cancer can be related to the period of Texpet operations (which is to 1990), and cancer has continued to appear beyond this period. Therefore it could be argued that these later effects are related to later factors such as continued exploration carried out by other companies which has affected people’s health. However, there are several reasons why this probably is not true: 1) exposure during the 25 years that Texpet was operating in the area covers an extremely relevant period of time, more so than later periods, 2) the levels of contamination described at that time were not based on guidelines or effective controls, resulting in massive contamination as was shown in previous sections, 3) direct contact with petroleum does not immediately lead to cancer, rather the cancer can appear years later, 4) the survey concentrated specifically on people residing in the region during

Texpet operations .

Stratus Consulting Co., A U.S. Consulting company based in Boulder engaged by the plaintiffs, has evaluated fsavorably this report by Mr. Cabrera. Colorado, to the effect that the methods, conclusions and recommendations contained in the report are reasonable and adhere to international standards. This report, however, only offers a general opinion about the reasonableness of the report but does not offer specific support for Mr. Cabrera’s claims. It is interesting that the consultants talk about “the oil spills by Texaco during its over 40 years of operation in Ecuador”. Obviously they did not seem to realize that this period of 40+ years includes 26 years of operations by Texaco and almost 20 years of operation by PetroEcuador.

2. Chevron’s counter arguments.

Most of the counter-arguments by Chevron are summarized in a petition introduced by Chevron’s legal representative to the Lago Agrio court after Mr. Cabrera’s report was issued. I have selected portions of the document that I consider the most pertinent to the case:

  • There is no valid legal claim against Chevron or Texpet
  • The 1999 Environmental Management Act does not apply retroactively
  • All Events underlying this litigation occurred before the 1999EMA was enacted
  • Plaintiffs cannot, as a matter of Law, bring environmental contamination claims against Chevron under the 1999 EMA...
  • This case should be dismissed because the new procedures violate due process. Plaintiffs have completely failed to meet their burden of proof in their attempt to establish environmental harm attributable to Texaco Petroleum

Company…

Chevron argues that:

While their initial plan was to conduct evidence gathering at more than 100 sites, they abruptly began to obstruct the evidentiary process when the Court’s settling experts fully supported Chevron’s suggested experts’ scientific assessment of the first site. Thereafter, Plaintiffs prevented judicially ordered inspections of the questionable laboratory that was producing their suggested experts’ evidentiary submissions and refused to honor the Court’s orders to pay their share of the expenses for the Court’s settling experts. As a result, the court-ordered evidentiary process ground to a halt, with no further findings by the Court’s settling experts. Having obstructed the initial phase of evidence collection and assessment, Plaintiffs have presented no qualifying evidence with which to proceed into the second phase of the case. Their case therefore fails and must be dismissed.

When it became apparent that Plaintiffs could not prove their claims, the Court allowed them effectively to waive their own burden of proof and to seek an award of damages—from a lone, unqualified expert—for harms they cannot and will not be required to prove. Such a process plainly violates the right to due process guaranteed to Chevron and to all litigants by the Ecuadorian Political Constitution and by the universal principles of justice on which it is based. No litigation can be allowed to proceed in these circumstances.

  • The court has failed to follow the Law of Ecuador
Specifically, court-appointed experts suggested by Chevron have conducted judicial inspections at 45 sites, during which they properly collected and analyzed 1344 water and soil samples. These experts concluded, based on the reliable scientific data collected, that Chevron has no liability for Plaintiffs’ claimed environmental damages. Not surprisingly, the court appointed experts suggested by Plaintiffs disagreed, albeit without any basis in fact or science. As a result, the Court’s procedure required the appointment of “settling experts” to resolve the disagreement and to render a final assessment of the scientific findings for each inspection site.

The first set of five settling experts (for the Sacha 53 site) agreed with the conclusions of

Chevron’s suggested experts and issued a report—now properly before this Court—finalizing the Sacha 53 judicial inspection with a finding in favor of Chevron’s defense.

  • All reliable evidence shows that TexPet properly remediated the sites.

Petroecuador, the state-owned Ecuadorian oil company, has grievously failed to fulfill its remediation obligations and has operated the oil fields in question in a manner that has caused numerous environmental problems. Petroecuador (formerly CEPE) has been the sole operator of the oil concession in Lago Agrio for the last seventeen years, the sole owner for the last fifteen years, and was the majority partner in the concession for 15 years before that. It joined in the Government’s release of TexPet a decade ago following TexPet’s extensive three-year remediation project, but has never, until very recently, faced its own share of environmental responsibility. “For over 30 years, Petroecuador has done absolutely nothing to remediate those pits under its responsibility.” (MEM Miguel Muñoz 5/10/06 Congressional Testimony.) Indeed, Petroecuador has an established history of environmental negligence. According to its own data, Petroecuador has recorded a total of 801 spills between 1990 and 2004 and a total spill volume of 1.9 million gallons. Published reports in the press reveal that the number of spills is even higher: 325 spills between 2003 and 2004, and a total spill volume greater than 3.2 million gallons between 1990 and 2005.

  • The plaintiff expert’s reports are biased and unreliable..

Mr. Cabrera has refused to provide or sign chain-of-custody documentation for the samples that he collects. As a result, there will be no means to authenticate any of the analyses that Mr. Cabrera ultimately provides. Mr. Cabrera has even refused to comply with a direct order from Judge Novillo to begin providing chain-of-custody documentation. Mr. Cabrera’s refusal to establish a chain of custody for his sampling destroys any remaining shred of legitimacy—however small—associated with the inspection process, and his disregard for the simplest scientific protocol further evidences Mr. Cabrera’s lack of credentials to serve in the capacity for which he has been appointed. Indeed, Mr. Cabrera has sampled rainwater or surface water that has collected in a soil borehole, and has erroneously claimed it is groundwater. Mr. Cabrera obviously lacks even the most basic skills of groundwater hydrology and site assessment.

  • The expert began his work violating basic scientific protocols and denying due process.

Only five of the mere 465 soil and water samples sent to analysis by the Plaintiff experts were actually analyzed in an accredited laboratory meeting the required standards. It is therefore not a surprise that the analytical results from those five samples corroborate the Defense experts’ and settling experts’ conclusions that there is no significant health risk from TexPet-remediated areas.

A majority of the soil and water sample analysis conducted for the Plaintiff experts took place at the then-unaccredited HAVOC laboratory in Quito. Because Chevron’s own suggested experts had indicated that no Ecuadorian laboratory met the standards required by the Analysis Plan, Chevron petitioned the Civil Court in Quito to inspect the HAVOC laboratory. On seven separate occasions, however, HAVOC has obstructed the Court from inspecting its facilities. After the initial three inspections failed to take place as scheduled, Chevron petitioned this Court to order the Ecuador Accreditation Organization (the “EAO”) to answer a series of questions about HAVOC and its accreditation status. The Court issued the necessary order, and in a July 11, 2006 letter, the EAO stated that the HAVOC laboratory was not accredited for the specific analysis required by the phase-one protocol: “[the evidence] demonstrates that the analysis [performed by HAVOC in this case] does not form part of accreditation competency of the mentioned laboratory.”

  • The procedure established for resolution denies Chevron due process and justice.

Ecuador’s executive branch has offered the National Government’s full support to Plaintiffs, and in a news release the Government announced its intention to provide them with “assistance in gathering evidence” against Chevron. Indeed, high-level executive officials recently visited sites in the former Petroecuador-TexPet oil concession, (accompanied by Plaintiffs’ representatives and attorneys) and announced to the media that Chevron had blatantly failed to carry out a proper remediation at those sites and that the Government of Ecuador officials who approved the remediation, along with Chevron representatives, should be prosecuted. The Government officials failed to acknowledge, and the Plaintiffs failed to point out, that the sites visited are the sole responsibility of Ecuador’s state-owned oil company, Petroecuador. This manner of interference by the executive branch in a private civil dispute certainly suggests an ulterior motive (i.e., the avoidance of Petroecuador’s liability), and it intolerably offends the most basic tenets of due process.

III. My comments about the trial and the findings.

1. Credentials of the court expert.

It is remarkable that the court named one single expert to decide on such a complex case, when it should have logically selected a small team of, say, three to five experts, each one conversant with the different aspects of the issue, for example: environment, petroleum engineering, medicine, sociology and petroleum law. All of these experts should have possessed ample experience and impeccable credentials and, ideally, be acceptable to both plaintiffs and defendant. Instead, the court decided to name, rather unilaterally, a person with a geological/engineering degree and a very recent master’s degree in environment. His geological degree is from the Universidad Central, Quito, Ecuador and his master’s degree is from the Escuela Politecnica Javeriana of Ecuador. This last institution seems to be of rather modest academic ranking, a private Quito-based institution led by two brothers (Francisco Yanez and Pablo Yanez) who act as president and chancellor respectively. According to the website of this family-run institution the master’s degree in Environment became officially offered in June 2008. However, Mr. Cabrera’s C.V. lists his master’s studies there from 2004 to 2006. I am sure there must be a logical explanation for this.

Mr. Cabrera’s work experience, as given in the C.V. is related almost completely to the mining sector, with no significant petroleum related experience. It is not easy to understand for anyone looking at this C.V. why Mr. Cabrera was chosen to conduct an evaluation of such complexity, one that would dramatically influence the lives of thousands of Ecuadorians and/or the finances and reputation of a big international oil company. I will be blunt. If I had been given this C.V. to consider Mr. Cabrera for employment in a major oil company I would have rejected it, thinking that the person in question should more logically direct his employment search to the mining industry, where he had already some experience.

2. The impartiality of the court’s expert, Mr. Richard Stalin Cabrera Vega.

The information I have gathered suggests that Mr. Cabrera is strongly biased in favor of the plaintiffs. Some of the conclusions of his report are based on work done by Mr. Carlos Beristain a member of his team of experts. Mr. Beristain is an academic from Spain with a strong, documented link with the Amazon Defense Coalition, the organization supporting the plaintiffs. February 9, 2010 Chevron filed a request to the Lagro Agrio court to strike the full report of the expert, Mr. Richard cabrera, from the record. This filing was made on the basis that Mr. Cabrera is guilty of conflicts of interest. The filing claims:

“ My client has recently learned that when the Court appointed Mr. Cabrera as a possible expert, he had—and continues to have to this date—an extensive undisclosed financial interest in an Ecuadorian company with a direct financial interest in the result of this case. In fact, Cabrera is the co-founder, majority shareholder, general manager, and legal representative of an oil remediation company known as the CAMPET company that is registered to do business with Petroecuador and is well situated to directly profit from any remediation work that might eventually be ordered by the Court on the basis of the Cabrera Report.

This business interest in the remediation company CAMPET, undisclosed by Cabrera, and its registration in Petroecuador, mean that he could obtain incalculable advantages in current and future deals through Petroecuador’s numerous remediation contracts, as a result of his slanted and biased report absolving Petroecuador from any liability, despite the fact that this state-owned company was the majority owner of the former Consortium and has had exclusive control in the oil fields since 1992 and has been the operator since 1990.

The discovery and disclosure of Cabrera’s secret financial interest in an issue intimately related to his expert report exceeds even the intentional misconduct shown in his enormously exaggerated calculations of the cost of the remediation recommended in this report, as well as his recommendation that the Court order my client to pay to Petroecuador hundreds of millions of dollars”.

The filing ends: “Finally, I move that if you deem it appropriate to do so, you order the commencement of the appropriate legal actions aimed at punishing the unethical and unlawful conduct of the expert Richard Stalin Cabrera Vega”.

If proven true, this would be reason enough to dismiss the trial.

3. Contrasting findings in the sampling work conducted by both sides.

While Chevron’ experts conducted 1,344 water and soil samples without finding evidence of Texaco’s liability the plaintiffs rejected these findings. Settling experts called by the court generally supported Chevron’s findings. Meanwhile some of the samples analyzed by the plaintiffs were deemed to be unreliable by the defendants since they were carried out in a Quito laboratory not rated for doing this type of work. Of the 465 samples sent for analysis by the plaintiffs, argues the defendant, only five were made in an accredited laboratory and these corroborated the findings of the defendants.

Mr. Cabrera’s report contains numerous references to samples of soil with excessive contents of metals, benzene and other harmful components. The defendant claims that some of the assertions made by Mr. Cabrera, such as the presence of hexavalent chromium in samples, are wrong since the method used did not measure such a compound. The defendant adds that some samples showing excessive contaminants according to Mr. Cabrera’s report were, in fact, taken in PetroEcuador’s specific area of responsibility. The defendant also claims that the reports of benzene in some of Mr. Cabrera’s samples are wrong. In more general terms the defendant argues that the court had ordered that the same experts named in October 2003 would be conducting the sampling work but the naming of a sole expert contradicted the law of the case.

The numerous discrepancies on the results of the sampling seems to require further examination by a team of settling experts accepted by both sides.

A recent finding by a court named biologist, Mr. Jorge Bermeo, (Dow Jones newswires, February 10, 2010) “has found no evidence of hydrocarbons contamination in Ecuadorean rivers near where Chevron Corp. (CVX) is being sued for alleged environmental damages…the expert said he found high levels of bacterial contamination from fecal matters that could be the source of the local population's health problems”.

4. On Mr. Cabrera’s report.

I will limit my comments to three sections of the report:

  • In one section of the report Mr. Cabrera talks about the remedial action that will be necessary (in bold italics in the text, above) based on the standards existing today in Ecuador (after 1999). He says that any remediation work that would be required should conform to currently existing standards, even if these standards came into existence after the Texaco operations had ceased. This statement seems reasonable but it cannot be extended to say that Texaco violated standards that did not exist at the time. Remedial action, if justified? Yes, according to current standards. Can a violation to standards be claimed if such standards did not exist at the time of the operation? I would say no.
  • Later on in the report Mr. Cabrera discusses the relative responsibility of Texaco and PetroEcuador in causing the environmental damages. He freely admits that he did not deal in his report with any contamination produced by PetroEcuador in workdone in areas not worked by Texaco. This shows that Mr. Cabrera has made a conscious point to exclude PetroEcuador from liabilities for environmental damage present in the Amazon region of Ecuador. I believe that this cannot a matter of choice for Mr. Cabrera, the expert in charge of establishing the truth, the whole truth and nothing but the truth. I think that the mandate given to Mr. Cabrera by the court did not mean to exclude PetroEcuador. Further down in his report he goes on to say that there are two ways to establish the comparative responsibility of Texaco and PetroEcuador in those areas where both companies operated. The first way, he says, is to assume that PetroEcuador could not change the manner of operation in the area vacated by Texaco since all installations had been inherited from Texaco. This statement sounds surprisingly weak. If I inherited a criminal operation I would become an accomplice the moment I continued operating in the same manner. PetroEcuador had a legal mandate to work according to the best possible practices. If this was not possible to do, for whatever reason, the company should not have operated until establishing the correct conditions. If they were forced to keep operating under existing conditions by the government of Ecuador, then the government of Ecuador should become liable for this decision. Of course, the alternative explanation of what happened is that PetroEcuador kept operating in the same manner because it considered that existing conditions and standards of operation were adequate.
  • Another way to look at the responsibility of the two operators, says Mr. Cabrera, is to allocate responsibilities on the basis of the production volumes generated by the two partners during their period as operators. Mr. Cabrera discards this solution since, he says, such a method would “underestimate” Texaco’s responsibility, given that PetroEcuador “improved” the quality of the operation.

In these sections of the report Mr. Cabrera clearly admits that PetroEcuador should be liable for environmental damages but he chose not to deal with this issue in his report. I think this throws considerable doubts on the impartiality of Mr. Cabrera and on the completeness of his work, although his candor is commendable.

  • My third comment pertains to the issue of the cancer cases. The evaluation of Mr. Cabrera relies on a study made by Mr. Sebastian Beristain, incorporated by Mr. Cabrera as a member of his team. The links of Mr. Beristain with the Amazon Defense Coalition seem to have been firmly established, according to the defendant. If so this would weaken the credibility of Mr. Cabrera’s findings on this area.

Proving the existence of cancer cases can be a difficult matter, as illustrated by the events of San Ramon, California, in 2007. On August 3, the U.S. District Court for the Northern District of California threw out complaints against Chevron Corporation filed on behalf of three Ecuadorians, finding that the plaintiffs fabricated their claims that they or their relative had cancer caused by the former operations of a Chevron subsidiary, Texaco Petroleum Company, in Ecuador. Apparently the ladies confessed to telling lies, hoping to get some quick money from the oil company.

A study written by Michael Kelsh and Libby Morimoto, funded by Chevron, titled “Cancer Mortality and Oil production in the Amazon Region of Ecuador” (International Archives of Occupational Environmentl Health, June 25, 2008) mentions a previous 2000 study by Wong and Raabe, in which epidemiological data from 350,000 petroleum workers found no increase in mortality from most types of cancer, with skin cancers showing what they call a “slight statistical deviation”. The study further suggests that a comparison of the population exposed and non-exposed to oil operations in the Amazon region of Ecuador indicates that the exposed population had lower cancer rates in all types of cancer, although differences were not statistically significant. Such a result, if valid, would be the exact opposite of what the plaintiffs claim.

IV. The role being played by President Rafael Correa and the government of Ecuador.

There has been intense lobbying by both sides in the United States. Chevron has testified before the U.S. CBS’s 60 Minutes presented an account of the issue highly favorable to the plaintiffs. The visits of U.S. Congressman James McGovern and actress Daryl Hannah to Ecuador to express their solidarity with the plaintiff received much attention from the U.S. press.

However, the highest potential danger of distortion of justice is represented by the behavior of Ecuadorian President Rafael Correa and members of his government team. President Correa has made no effort to disguise his sympathy for the plaintiffs and has had harsh words to say about the Ecuadorian government officials who signed the Texaco release, suggesting that they were traitors and would be prosecuted. During the visit of U.S. Congressman James McGovern to Quito he said:

At 4 p.m. we received U.S. Democrat Congress member James McGovern. He is a very nice guy… [not a gangster] like many Americans. [The Spanish version includes the word gangster to refer to Americans but this word has been eliminated from the English translation]. One may have the image that all Americans are like those Republicans… who [don’t] give a damn about the rest of the world. However there are senators and North American representatives who are very concerned about Third World countries…[and] the environment. For example, Democrat Congress member McGovern came to meet with the Amazon Defense Coalition who has this long battle with Chevron Texaco”…..

In August 2008 President Correa said:

“… on August 9 at 8:30 am we received the Amazon Defense Front; we received Luis Yanza and Pablo Fajardo, extraordinary Ecuadorians who work for their people, for the Amazonía, for the whole country. They filed a lawsuit against Chevron Texaco for the destruction the company left behind after years of oil exploitation activities in the country. They were very concerned because of all the times they have been betrayed by former administrations that always supported the oil company. They were concerned because they had heard the government was having talks with Chevron Texaco because Minister Larrea (Gustavo Larrea, Minister of Internal Security) had met these people in the United States. They have also asked me to receive them.”

“I told them: “compañeros” we are with the truth, with justice. We cannot intervene in this case, a private cause. But the days of those submissive and treacherous governments are over; those governments that were always on the multinational’s side. We shall receive ChevronTexaco’ss officials only if you agree to this and if you attend the meeting. So, we have reached an agreement: we shall meet ChevronTexaco but in your presence “compañeros” from the Amazon Defense Front. Luis, Pablo, the Amazon Defense Front can be sure this is a patriotic, sovereign, and honorable government that will never submit the country to the interests of large multinationals.” – Weekly Radio Program (August 16, 2008)

Also in August 2008, in a radio program, he emphasized:

“Former governments supported Texaco Chevron and betrayed our people. They signed agreements saying that everything was solved –when nothing was solved- and this has been one of the main arguments of Texaco Chevron’s defense. Washington Pesantez, the Public Prosecutor, has wisely opened investigations to sanction these people, because it is a lie. Nothing had been solved; no contamination had been remediated.” – Weekly Radio Program (August 9, 2008 ). It must be noted that Prosecutor Pesantez found no evidence of wrongdoing by Texaco and said so publicly.

In January 2008, over the radio, President Correa said:

“We continued with our regular office activities and then received representatives of the Amazon Defense Front who have been fighting for decades against ChevronTexaco; they have all the support of the National Government. This is a legal matter, but they know they can count on the support given by the National Government. This constitutes a change in times because former administrations supported the multinationals” Radio program, January 2008.

In April, 2007, in TV, he said:

“Who was it? Well, it was Chevron Texaco that operated in Ecuador from 1964 on, and it applied technologies which were absolutely brutal on the environment; it totally destroyed the area at the beginning of the 90’s.”- La Televisión, Ecuavisa TV Station, (April 29, 2007) 9A. “

In April 2007 President Correa said:

Here we have Chevron-Texaco’s attorneys, these lawyers “vende patria” (sold to foreign interests), who for a fistful of dollars are capable of selling their souls, their country. We also have people from Petroecuador who in 1998 signed an Agreement declaring everything had been remediated, when many of these pits had not been even covered. I hereby call the Attorney General to present a report to the General Comptroller’s Office establishing criminal responsibilities against Petroecuador’s officials who signed this nonsense. They said everything was remediated when nothing had been done. I ask that this cause is processed and criminal indictment against these corrupt “vende patrias” is started, because despite contamination was absolutely evident, they said everything was remediated. I want to take this opportunity to show my solidarity with our fellow countrymen in the Amazonía, especially with Luis Yanza and those who have fought for justice. Our dear friends Luis and Pablo, you have set an example for everyone.” - Weekly radio program (April 28, 2007)

In August 2005, he said:

One example is the oil activity since Texaco started working in the 60´s. The damage can be quantified in thousands of millions of dollars caused by spills, contamination, burning of gas, deforestation, loss of biodiversity, death of animals, salinity of rivers, diseases…Texaco is responsible for the extinction of Indian communities like the Tetetes and Sansahuaris.”- Hoy (August 24, 2005)

Other government officials also gave their opinions:

The Ecuadorian Attorney General said in October 2008:

“ The lawsuit was filed against ChevronTexaco by a group of Indians that live in this sector. This is a legal process for environmental damages caused in this region; the State is not a party in this case. However, what the Company sought was to turn the State -or Petroecuador- into a party in the claim and to force them to share the responsibility for the possible payment of compensations. What the District Court, and now the Court of Appeals have decided is that in accordance with the Agreement signed in 1965, Ecuador and Petroecuador were not part of this process and therefore, have no responsibility whatsoever”.

“I believe that in this case, Petroecuador –the company that substituted CEPE-, has no responsibility whatsoever. This is why several agreements were signed between the State-owned and Texaco that, at that time, worked on some remedial activities.” – Teleamazonas TV Station (October 8, 2008)

René Vargas Pasos, Ecuadorian Ambassador in Venezuela, this Sunday spoke insupport of the Venezuelan government, following the aggression of US Exxon Mobilagainst Petróleos de Venezuela (Pdvsa): “Like Venezuela, Ecuador has suffered the attacks of multinationals; we have similar problems with foreign companies. A lawsuit with Occidental and with ChevronTexaco; these are being confronted and we shall emerge triumphant.” - Agencia Bolivariana de Noticias Newswire (February 17, 2008)

National Assembly Member Manuel Mendoza, said in February 2008:

"This has to be paid and that is why we want justice and directly support the tireless struggle of those who have sued Texaco, the remediation of damages, compensation for thousands of sick people.” –National Assembly (February 12, 2008)

V. Alleged criminal actions by high-level officers of the Ecuadorian government.

In September 2009 Chevron made public information on a $3 million bribe scheme involving the judge of the case and members of the Ecuadorian “ruling party and government officials”. The company published videos “showing discussions of a prejudged verdict against the company by the judge and details of how the bribe might work”. A letter by the company to Ecuadorian authorities asked for a complete investigation of the bribery scheme and also an investigation of the role of the legal adviser to president Correa, Mr. Alexis Mera, and other government officials in efforts to influence the outcome of the trial, “including assisting the judge to write an opinion against Chevron”. The company also requested an investigation of bank transactions in Galveston, Texas, which would hold the bribe payments. The company demanded an investigation of the relationship between Judge Juan Nuñez and the expert of the trial, Richard Cabrera and claimed that Judge Cabrera had acted in Cabrera’s favor when they requested his being deposed. The company requested an investigation into “any communication between parties involved in the Lago Agrio suit…relating to the distribution, use or administration of any damages relating to the damages awarded by the Lago Agrio court”.

Obviously these accusations by Chevron, if found to be well founded, should be sufficient cause to declare a mistrial. Four months later, however, I know of no action being taken in regard these extremely serious claims.

In strong presidential regimes such as Ecuador’s a presidential wish tends to become an order. When dealing with a $27 billion civil suit in a country where the president is the unquestioned leader, where checks and balances are weak or inexistent and where government officers or judges might engage in criminal acts, it becomes difficult to expect the judicial system to behave in an impartial manner. The 2008 Human Rights Report of the U.S. Department of State warns: “there is coruption and denial of due process in the [Ecuadorian] judicial system”.

VI. Conclusion: this trial should be declared null and void.  

Low quality experts, inconclusive findings, biased judges or worse, political contamination, possible criminal actions by government officials, combine to render the administration of justice in this case an impossibility. International public opinion has shown to be largely sympathetic to the plaintiffs because they are perceived as the weak side. Environmentalists, indigenous groups, leftist organizations, Hollywood actors, anti-big oil organizations, have come together to defend the plaintiffs as the underdog against the all-powerful big corporation. The defense of Chevron is almost solely in the hands of Chevron itself since few organizations would like to be seen siding with big oil. Yet, after looking at the facts concerning this case I have little doubts that Chevron is being wronged in this case. The usual roles of David and Goliath appear to be reversed, as a vocal, pro-plaintiffs coalition of the Ecuadorian executive, the Ecuadorian judicial system, ideologically inspired organizations and much of the international media looks all-powerful as compared to Chevron’s relative solitude in the Lago Agrio court.  

VII. The outlook of the civil action.

The case can only have three outcomes: a decision for the plaintiffs, a decision for the defendant or the declaration of a mistrial.

If the plaintiffs were awarded the decision and Chevron condemned to pay the amounts of money requested in the report by the expert, Chevron will most probably appeal and will go to whatever legal lengths are necessary to further defend their case and to avoid payment of what they would consider to be an unfair demand. If the defendant were favored by the decision, the plaintiffs might accept the verdict without further efforts, since it would be very unlikely that they would ever find a more favorable political and legal environment for their claims. If a mistrial were called it would also be very dificult for the plaintiffs to start, again, from scratch.

A decision against Chevron would probably escalate the case to international levels and could become a source of extensive conflict between the international oil industry and Ecuador, as international oil companies would think it carefully before doing business with Ecuador. There could be muh friction between the governments of the U.S. and of Ecuador. The group of plaintiffs and their lawyers would probably grow old before any money comes to them.

If Chevron is exonerated from liability this could create a political crisis in Ecuador. Given the affinity between Correa and the Venezuelan aggressive leader, Hugo Chavez, they could decide to retaliate in concerted fashion against U.S. companies in both countries. Chevron’s holdings in Venezuela could be confiscated. However, such a course of action would damage the host countries much more so than the companies, since it would complicate the hemispheric political situation, presumably even triggering some kind of multilateral sanctions against the Ecuadorian government. .

See :

A Web influence: The complex case againts Chevron in Ecuador

The Amazon Post

The Amazon watch

ChevronToxico



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. All his articles can be read in Gustavo's blog. Lass Armas de Coronel . Petroleumworld does not necessarily share these views.

Editor's Note: The above paper by Venezuelan Petroleum Geologist Gustavo Coronel is, probably, the most complete and objective account of the legal action against Chevron in Ecuador. In order to write it he consulted with representatives of boh the plaintiffs and the defendants, who gave him much information.  Aided by his knowledge of geology and the international oil industry, where he worked for almost 30 years,  Coronel put togeteher a balanced account of the case and reaches some important conclussions. Coronel desires to make it very clear that he  has no received remuneration of any sort for this document from any source directly or indirectly related to the plaintiffs or to the defendant, or, for that matter, fom any other source.

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