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Chevron's environmental oil case turns into duel in the Amazon

April 30, 2011|By Jim Wyss

LAGO AGRIO, Ecuador — Donald Moncayo walks to the edge of a flat grassy field that once held two large pits that brimmed with a stew of water and crude from an oil-drilling operation. He lifts a heavy auger above his head and prepares to plunge it into the ground.

"They always show you the shirt, the coat and the tie," he said of the area, called Sacha 53, which is now pastureland and spindly trees. "They never show you the tumor underneath the shirt."

For almost a decade, celebrities, journalists and shareholders have tromped through Ecuador's jungles on competing excursions that have become a routine part of what could be the world's most expensive environmental case.

The "Toxic Tour" — led by Moncayo — is held on behalf of some 30,000 Ecuadorian villagers who claim Chevron's predecessor poisoned their environment with shoddy environmental practices that included pumping millions of gallons of oil-tainted wastewater into creeks and streams.

The other tour is led by Chevron. The oil giant shows idyllic agrarian landscapes — like Sacha 53 — where Texpet, a subsidiary of Texaco, helped pump crude from the 1960s to 1992 when it was a minority partner of the state-run oil company.

When Texaco left Ecuador, it spent $40 million to clean up its share of the operations, and the government absolved it of any further legal responsibilities in 1998.

But Ecuador's courts found that the government deal did not cover third-party claims. So when Chevron and Texaco merged in 2001, Chevron inherited the legal battle.

The company contends it's the victim of a global shakedown engineered by greedy lawyers, environmental groups and unscrupulous government officials.

The case — in one form or another — has dragged on for 18 years, generated more than 200,000 pages of evidence and chewed through six Ecuadorian judges. In February, the court awarded the plaintiffs $9.5 billion — the largest environmental verdict in history — but far less than the $27 billion they were seeking.

The battle is far from over. The case is under appeal in Ecuador, Chevron has won temporary injunctions in The Hague and New York to keep the plaintiffs from recovering damages, and the company is pursuing a Racketeer Influenced and Corrupt Organizations Act case against their accusers, saying they engaged in racketeering and extortion.

The one thing both agree on is that Ecuador's landscape tells the story but what the land is saying is a matter of interpretation.

The Sacha 53 oil field is a case in point.

Pushing back brush and stepping over a barbed-wire fence, Moncayo leads the way to a lush clearing a few hundred yards from the wellhead.

Completed in 1973, it was wells like Sacha 53 that helped jumpstart the nation's economy and earn it a place in OPEC.

Texpet operated the well until 1989, when it handed it over to the government. During those years, Sacha 53 produced almost 3 million barrels of oil. In the process, Texpet dug two large pits to hold the drill-bit lubricant, or drilling mud, and to catch the initial spurts of crude that gurgled up during the extraction process.

The pits were among the 162 that the company was required to clean up under the government agreement.

Chevron said the site was typical of its remediation efforts. It vacuumed up the oil, dug out the tainted dirt, used chemical stabilizers, refilled the pit with clean soil and replanted the area. The company has photographs detailing the process, and the government's report approving the remediation. The surrounding pastureland seems to speak for the area's ecological health.

But then Moncayo plunges his auger into the ground. Within a few inches the dirt gives off the pungent odor of petroleum. Within a few feet the dirt glistens with oil residue. When a few handfuls of the soil are dropped into a bucket of water, a thick oil-slick coats the surface.

"This is their remediation effort," Moncayo says. "They're no better than animals."

The plaintiffs say it's proof that Chevron lied about the cleanup and then got compliant government officials to sign-off on its shoddy work.

Chevron spokesman and tour leader, James Craig, said it's not surprising to find degraded crude at the site. It might be naturally occurring, Moncayo might have dug outside the boundaries of the remediation area, or the plaintiffs might have spiked the ground with oil to discredit Chevron, he said.

"Even if you do find hydrocarbons in the ground, it doesn't mean that they're a risk to people's health or the environment," Craig said.

There's no evidence that residue from Sacha 53 — or any other Texpet operation — has polluted rivers or streams, and there's even less evidence that oil is making villagers sick, he said.

"This is a smoke-and-mirror shell game," he said.

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