Tag Archives: Chevron Ecuador

Foreign Corporate Immunity: Chevron/Canada against Ecuador

A Toronto judge halted on May 1, 2013 an effort to enforce a $19 billion Ecuadorean judgment against U.S. oil company Chevron Corp in Canada, finding that his Ontario provincial court was the wrong place for the case.  The action is the latest skirmish in a two-decade conflict between Chevron and residents of Ecuador’s Lago Agrio region over claims that Texaco, which Chevron acquired in 2001, contaminated the area from 1964 to 1992.

Citing Chevron’s promise to fight the plaintiffs until “hell freezes over, and then fight it out on the ice,” Justice David Brown of the Ontario court foresaw a “bitter, protracted” battle that would be costly and time consuming.  “While Ontario enjoys a bountiful supply of ice for part of each year, Ontario is not the place for that fight,” Brown wrote in his ruling on Wednesday. “Ontario courts should be reluctant to dedicate their resources to disputes where, in dollars and cents terms, there is nothing to fight over.”

Alan Lenczner, principal lawyer in Toronto for the Ecuadorean plaintiffs, said they would definitely appeal, arguing that a multinational company could not be immune from enforcement in a country where it earns so much. “Chevron Corp itself earns no money,” he said in a statement. “All its earnings and profits come from subsidiaries including, importantly, Chevron Canada.”  Chevron Canada’s assets are worth more than $12 billion, the plaintiffs had said, and alongside separate actions in Argentina and Brazil, they had sought to persuade the Ontario court to collect the damages awarded to them by the South American court.

Chevron, the second-largest U.S. oil company, has steadfastly refused to pay, saying the February 2011 ruling by the court in Lago Agrio was influenced by fraud and bribery. A related fraud case goes to trial in New York in October.  The Supreme Court of Canada has ruled that the country’s courts can recognize and enforce foreign judgments in cases where there is a “reasonable and substantial connection” between the cause of the action and the foreign court. Chevron called Brown’s ruling a “significant setback” to the Ecuadoreans’ strategy of seeking enforcement against subsidiaries that were not parties to the Ecuador case.  “The plaintiffs should be seeking enforcement in the United States – where Chevron Corporation resides. In the U.S., however, they would be confronted by the fact that eight federal courts have already found the Ecuador trial tainted by fraud,” Chevron said in a statement. Last month, a consulting firm whose work helped lead to the $19 billion award against Chevron disavowed some environmental claims used to obtain the judgment.

Excerpt, Judge halts Chevron-Ecuador enforcement action in Canada, Reuters, May 1, 2013

See also how Chevron Destroyed the Paper Trail

HardBall: Chevron and the Oil Pollution in Amazon

texaco ecuador.  Image from wikipedia

An environmental case that has pitted Chevron against Ecuadorean Amazon villagers for two decades has taken another bizarre twist, with an American consulting firm now recanting research favorable to the villagers’ claims of pollution in remote tracts of jungle.  The consulting firm, Stratus Consulting of Boulder, Colo., announced late Thursday (April 11, 2013) that it had originally been misled by Steven R. Donziger, a lead lawyer for the Ecuadorean villagers, and had decided to disavow its contributions to scientific research about whether there was groundwater contamination that sickened the residents in swaths of rain forest.

The move prompted the plaintiffs to assert that Chevron was coercing parties to the case, citing this as another example of strong tactics employed by the company as it tries to overturn an Ecuadorean judge’s decision two years ago that it pay $18 billion in damages, one of the largest environmental awards ever. In this instance, the plaintiffs claim that Chevron pressured Stratus to retract its assessment in exchange for dismissal of legal claims in a countersuit filed by Chevron made against the firm — claims that could have pushed the consulting business into bankruptcy.  “Stratus deeply regrets its involvement in the Ecuador litigation,” the firm said. It remains unclear whether this development with Stratus will have much impact on Chevron’s appeals, because the judge also based his ruling on other environmental assessments. The judge ruled that back in the 1970s, Texaco had left an environmental mess in oil drilling operations while operating as a partner with the Ecuadorean state oil company, and that Chevron, which bought Texaco in 2001, must apologize for and was liable for the damage.

Chevron has refused to apologize. In addition to appealing the decision in the Ecuadorean courts, Chevron also filed a countersuit in federal court in New York against Mr. Donziger and Stratus Consulting, accusing them of racketeering and fraud. Because Stratus has now retracted its statements on the Ecuadorean pollution, Chevron agreed not to pursue claims against the firm anymore. On Friday, Chevron filed witness statements from Douglas Beltman, a Stratus vice president, and Ann Maest, a Stratus scientist, in which they now say they were not aware of scientific evidence of groundwater contamination in the former Texaco concession area or of any adverse health impact to people from the operations.

Mr. Beltman stated that “at Donziger’s direction,” he drafted portions of a report in the first person as if it were written by Richard Cabrera, the supposedly independent expert, that detailed environmental damage for the Ecuadorean court. “Donziger stressed to me and Ann Maest the importance of Stratus ensuring that no one learn of Stratus’ involvement in any aspect of the Cabrera Report or Responses,” he said.  In an interview, Mr. Beltman said, “This settlement was extensively negotiated with Chevron and we think it’s fair and it’s not extortion.”  Mr. Donziger said he could not comment since he was a defendant in the racketeering case filed by Chevron.

It was not immediately clear what impact Stratus’s recantation would have on the case. Chevron’s appeal is before Ecuador’s highest court, the National Court of Justice, and the company is defending itself in courts in Canada, Argentina and Brazil to avoid paying damages in those countries. The plaintiffs are waging an international campaign seeking damages because Chevron has no assets in Ecuador itself…

Kent Robertson, a Chevron spokesman, said the statements should uphold the company’s position in the American racketeering case and in the international enforcement proceedings. “The declarations today show there is no scientific evidence to support the plaintiffs’ lawyers’ allegations,” he said.

Craig Smyser, a lawyer for some of the Ecuadorean plaintiffs, said the statements by the consulting firm “should have almost no effect” because the Ecuadorean judge relied on many expert reports other than the one that Stratus was involved in.  He attributed the decision by Stratus to repudiate its earlier work to the “immense financial strain that threatened the financial extinction of the firm, including a campaign by Chevron to discredit Stratus with various government agencies and businesses with which Stratus worked.”

Chevron has been playing hardball for at least four years. The company produced video recordings from pens and watches wired with bugging devices that suggested a bribery scheme surrounding the proceedings and involving a judge hearing the case. An American behind the secret recordings was a convicted drug trafficker.  But the oil company appeared to gain the upper hand three years ago when it won a legal bid to secure the outtakes from a documentary about the case, “Crude,” in which Mr. Donziger was shown describing the need to pressure a Ecuadorean judge and boasting of meetings with Ecuadorean officials.

In a sworn statement filed in an American court, Alberto Guerra, an Ecuadorean judge who heard the Chevron case in 2003 and 2004, accused Nicolas Zambrano, the judge who issued the $18 billion verdict against Chevron, of taking a $500,000 bribe from the plaintiffs. Mr. Zambrano denied the charge, and in his own affidavit, said that Mr. Guerra had told him that Chevron would offer him $1 million in return for a favorable judgment.  Chevron has denied offering any bribes.

By CLIFFORD KRAUSS, Consultant Recants in Chevron Pollution Case in Ecuador, NY Times, April 12, 2013

Chevron in the Amazon

Argentina against Chevron: the Amazon Rainforest Judgment

An Argentine judge embargoed Chevron Corp.’s assets in Argentina to carry out an Ecuadorean court order that awarded $19 billion to plaintiffs in an environmental damage lawsuit in the Amazon, a lawyer said Wednesday (Nov. 7, 2012).  Judge Adrian Elcuj Miranda ordered the freezing of Chevron’s assets in Argentina as plaintiffs try to collect the judgment won in Ecuador last year, Argentine lawyer Enrique Bruchou told reporters in a conference call.  The order states that all the cash flows from sales and bank deposits be frozen until the $19 billion is collected, Bruchou said. The order applies to 100 percent of Chevron’s capital stock in Argentina, 100 percent of its dividends and its entire minority stake in Oleoductos del Valle. It also includes 40 percent of any current or future money that Chevron Argentina holds as well as 40 percent of all its crude sales.

Bruchou said the decision in the largest environmental suit in the world should send a strong message to foreign investors that they must apply the same environmental standards wherever they do business. Similar lawsuits have been filed this year in Canada and Brazil.  “We’re making history in the preservation of the environment,” Bruchou said.  “This is a ruling that sets an example. What we’re telling the world is that in Latin America we want to demand that whoever comes to exploit does it following the same health an environmental standards as they do in their countries of origin,” he said.

Chevron officials said the company knew of neither a filing by the plaintiffs nor an order from a court in Argentina. They also said Chevron’s operations in Argentina had nothing to do with the case in Ecuador.  “The plaintiffs’ lawyers have no legal right to embargo subsidiary assets in Argentina and should not be allowed to disrupt Argentina’s pursuit of its important energy resources,” said James Craig, a Chevron spokesman for Latin America and Africa. “The Ecuador judgment is a product of bribery, fraud, and it is illegitimate.”  Chevron has refused to pay the sum stemming from waste water pollution and oil industry waste, saying that fraud marked the trial and that Texaco Petroleum Co. mitigated the environmental damage long before 2001, when it became a Chevron subsidiary.

Ecuador’s highest court has upheld the ruling, while the plaintiffs have accused Chevron of dirty tricks designed to subvert the lower-court ruling.  The plaintiffs say Texaco, and now Chevron, remain responsible for environmental contamination and illnesses resulting from the operations of an oil consortium from 1972 to 1990 in Ecuador’s rainforest…

The plaintiffs will begin a suit in Colombia in the coming days and are also preparing legal actions in Asia, Europe and elsewhere, Fajardo said.  “Environmental crime will not go without punishment and we’re going to chase them anywhere in the world,” he said.  Chevron argues that a 1998 agreement Texaco signed with Ecuador after a $40 million cleanup absolves it of liability and that Ecuador’s state-run oil company is responsible for much of the pollution in the oil patch Texaco quit more than two decades ago.

Chevron is a major player in Argentina producing about 26,000 barrels of crude and 4 million cubic feet of natural gas daily, the plaintiffs have said.  The company is also key for the South American country’s future energy needs, especially after it agreed to work with the state-run YPF energy company to develop shale reserves that could be the third-largest in the world.

Argentine judge embargoes Chevron assets on spill, Associated Press, Nov. 7,2012

See also Chevron US Courts

Chevron, the “Energy Link” between US and Latin America, Gamble with Corporate Reputation

Chevron is being sued for more than $11 billion by Brazilian prosecutors [for spilling at least 2,400 barrels of oil offshore Brail]Officials say they are preparing criminal charges against Chevron and its management….Eager to halt criticism from regulators, politicians and environmental groups, Chevron said last November that it “accepted full responsibility” for the incident. But federal prosecutor Eduardo Santos de Oliveira viewed that as an admission of guilt.

Chevron also faces fines of up to $121 million and has had its drilling license suspended in Brazil, where it has spent over $2 billion developing the largest foreign-run oil field.  The crisis in Brazil adds big new risks for Chevron in what could be a year of reckoning for its Latin American portfolio. It already faces an $18 billion environmental verdict in Ecuador, arising from decades of oil pollution in the Amazon region by Texaco, which Chevron acquired in 2001.  Its footing in Venezuela — where Chevron stayed after major U.S. oil companies Exxon Mobil and ConocoPhillips departed in 2007 following oil nationalizations — is also unstable.  Ali Moshiri, Chevron’s head of exploration and production in Latin America and Africa, is hailed as a “close friend” by Venezuela’s anti-American President Hugo Chavez.

Once a playground for U.S. oil investment, Latin America’s resource nationalism, toughening environmental standards, and courts have spooked Big Oil.  “Other oil majors have pulled back,” says Fadel Gheit, an oil analyst at Oppenheimer in New York. Chevron “is stuck on the ground, and a string of mishaps means things have gotten difficult.”  Despite all that, the company is proceeding with its newest Brazil project, the 140,000 barrel-a-day Papa Terra offshore field led by state-run Petrobras, scheduled to start next year….

Latin America is only a minor money maker for Chevron, whose operations span more than 35 countries. It pumps about 166,000 barrels-per-day of oil and equivalent natural gas from Brazil, Venezuela, Argentina and Colombia, or around 6 percent of its 2.67 million bpd output worldwide.  From a liability and public-image perspective, its stakes are far higher. If Brazilian litigation goes badly, Chevron may “rethink” its projects here, people familiar with the situation said.  Chevron’s worst-case scenario damages from Brazil and Ecuador could top the company’s $26.9 billion in 2011 profits.

In January, a judge in Ecuador upheld a ruling ordering Chevron to pay Amazon region plaintiffs $18 billion. Today, Chevron pumps no oil in Ecuador, but the judgment takes the case to a new phase where plaintiffs can attempt to seize Chevron’s assets around the world. One of their lawyers, Steven Donzinger, expects that process to begin within weeks.  Targets for collection may include Latin American countries where legal systems similar to Ecuador’s are seen as sympathetic.  Chevron has counter-sued Donzinger, alleging the Ecuador judgment was obtained through fraud. Since 2004, plaintiffs have leveled their own fraud charges against Chevron. Chevron had chances in past years to settle for a small fraction of the judgment. “It will have a hard time convincing plaintiffs to settle now for less than the full amount,” Donzinger said.  Chevron, which has pressed Ecuador’s government to void the verdict, is optimistic about an eventual victory, as are some analysts. Mark Gilman, an oil analyst at Benchmark in New York, said “Chevron will absolutely not settle this lawsuit.” Ultimately, he said, lawsuits against Chevron in both Ecuador and Brazil have little chance of badly hurting its finances.  But Chevron’s deputy comptroller, Rex Mitchell, warned in U.S. District Court last year that the Ecuadorians’ collection effort could “cause irreparable injury to Chevron’s business reputation and business relationships.”  Chevron may be spending $200 million per year in legal fees related to Ecuador alone, the plaintiff lawyers estimated. Chevron declined to comment on legal fees.

The risks have not stopped Moshiri, 60, a dapper Iranian-American, from jetting around the region and pressing Chevron’s board to maintain investments.  The reason is simple: South America pumps 12 percent of the world’s oil and holds more than 30 percent of its oil and gas resources, and its governments need the oil majors’ expertise.  Venezuela holds 297 billion barrels of reserves, and Brazil aims to become the world’s No. 3 producer by nearly tripling output to around 7 million barrels a day in 2020.  “Venezuela (is) too rich a prize for international oil companies to abandon,” Moshiri told U.S. diplomats, according to a June 2007 cable published by WikiLeaks. He also warned them a “vacuum” left by U.S. companies in Venezuela could be filled by Chinese, Russian and Iranian rivals.  Chevron does not break out investment plans by region, but a review of its Latin America projects suggests it could spend more than $10 billion this decade at five joint-venture oil or gas projects in Venezuela, three large offshore fields in Brazil, three gas fields in Colombia and Argentine concessions…..Moshiri has also served as a back-channel diplomat, State Department cables show. Venezuela “approached Chevron for assistance in dealing with U.S. issues,” Moshiri told U.S. diplomats in 2008. He also called Chevron “the energy link” between Venezuela and the United States, the top buyer of its exports….

Chevron did not put its “best foot forward” in Brazil, CEO John Watson told analysts.  The company initially denied responsibility for a sea surface oil sheen that led to detection of its leak. Earlier, it had experienced a pressure kick at a new Frade well. Oliveira says that Chevron drilled recklessly, allowing a surge of oil and “drilling mud” to puncture fragile rock and breach the seabed. He says Chevron knew the rock it was drilling through might not withstand the oil and gas pressure levels it could find in the reservoir. Chevron has said it took no undue risk at Frade, where its drilling plans were pre-approved by the ANP and environmental regulators.The prosecutor told Reuters the more than $11 billion civil award sought against Chevron is not based on a clear assessment of damages from the spill. The figure is meant to send a message.

Excerpts, By Joshua Schneyer and Jeb Blount, Analysis: Chevron’s Amazon-sized gamble on Latin America, Mar. 12, 2012