Chevron’s dirty fight in Ecuador
No regrets, no apologies and not a penny in damages. The US energy giant Chevron came out fighting last night after a court in Ecuador ordered it to pay $8.6bn (£5.3bn) in fines and clean-up costs, plus $900m reparations, to the victims of oil pollution that fouled a swathe of Amazon rainforest along the country’s remote north-eastern border.
The opening paragraph of the Independent’s article Chevron’s dirty fight in Ecuador paints a familiar picture of an oil corporation weaseling their way out of responsibility for environmental and social damages. Chevron has been facing an ongoing lawsuit since 1993, originally filed by a group of U.S. trial lawyers on behalf of thousands of indigenous inhabitants of Ecuador’s rainforest. The suit accuses Texaco (acquired by Chevron in 2001) of dumping billions of gallons of toxic oil wastes into the region’s rivers and streams. It is often described by activists as an Amazon Chernobyl.
What does Chevron’s denial of responsibility mean for the victims? And what does oil company impunity mean for New Zealand?
Texaco was the exclusive operator of a license to explore and drill for oil in the remote northern region of the Ecuadorian Amazon from 1964 to 1990. The indigenous inhabitants of this area – including the Cofán, Siona, Secoya, Kichwa and Huaorani – were reliant on subsistence from the surrounding forests and rivers. They had little idea what to expect from an oil company, as did the Ecuadorian government; no one had ever successfully drilled for oil in the Amazon rainforest before.
The lawsuit alleges that Texaco’s oil extraction system in Ecuador was designed, built, and operated using substandard technology from the outset. While the government entrusted the company to employ oil industry best practice, Texaco made cost-cutting operational decisions that resulted in heavy environmental and social damage to the region and its inhabitants.
Chevron has admitted that Texaco dumped more than 18 billion gallons of toxic “produced waters” (a byproduct of the drilling process) into Amazon waterways, abandoned more than 900 waste pits, burned millions of cubic meters of gases with no controls, and spilled more than 17 million gallons of oil due to pipeline ruptures. At the height of Texaco’s operations, the company was dumping an estimated 4 million gallons of produced waters per day, a practice outlawed in major US oil producing states like Louisiana, Texas, and California decades before the company began operations in Ecuador. Many of the abandoned waste pits currently leak into the water table or overflow in heavy rains, polluting rivers and streams that ~30,000 people depend on for drinking, cooking, bathing and fishing. Cancer rates and other oil-related health problems in the region where Texaco operated have skyrocketed.
By handling its toxic waste in Ecuador in ways that were illegal in its home country, Texaco saved an estimated $3 per barrel of oil produced. In contrast, five indigenous groups have had their traditional lifestyles decimated, and one group (the Tetetes) has disappeared.
Texaco fought for nine years to avoid trial in U.S. and transfer the case to Ecuador, claiming Ecuador’s courts were a fair and an adequate forum. In 2002, Texaco won that battle but was forced by the U.S. court to submit to jurisdiction in Ecuador and be bound by any ruling there. The Aguinda v. ChevronTexaco lawsuit was re-filed in May 2003 in Ecuador. The trial began in October 2003.
As scientific evidence began to demonstrate Chevron’s culpability, the company initiated a campaign to attack the trial process as unfair.
This case represents one of many examples of oil companies escaping punishment for environmental and social damage. The Exxon Valdez oil spill in Alaska in 1989, which occurred when an Exxon tanker struck a reef in Prince William Sound, contaminated 2,100 km of coastline with an estimated 260,000 to 750,000 barrels of crude oil. It is considered one of the worst environmental disasters in history. An initial law suit awarded victims of the oil spill USD$5.2 billion in damages, but since then multiple appeals have brought the figure down to only $500 million, a mere fraction of ExxonMobil’s annual profit.
A 2006 spill of about 267,000 gallons of oil from a BP-owned pipeline in the tundra of Alaska’s North Slope originated from cost-cutting measures and lapse management leading to corrosion in the pipeline. BP was fined US$20 million, and has not since shown much evidence of improving management practices – as demonstrated by the recent Deepwater Horizon spill, for which the settlement process is still ongoing.
What does this mean for New Zealand’s oil and gas industry?
New Zealand has several oil fields currently in production, including the onshore McKee, Mangahewa and Kapuni fields, all in Taranaki; and the offshore Maui, Maari, Pohokura, Tui and Kupe fields, off the coast of Taranaki.
The Brazilian company Petrobras was recently invited to prospect for oil and gas in the Raukumara basin, off the east coast of the North Island. The New Zealand Ministry of Economic Development’s Crown Minerals Group has also been promoting bids for the Reinga and Northland Basins. Exploration in the Canterbury basin began in 2008, where the oil prospects are estimated to be 500 million barrels.
Companies operating in New Zealand include Horizon Oil, Shell, BP, Mobil Exxon, Todd Corporation, Greymouth petroleum, Australian Worldwide Exploration, Tap Oil, and AWE New Zealand Pty Ltd.
Deep-ocean drilling presents many risks for New Zealand. Scientific understanding of the natural processes in deep-sea ecosystems is poor, and environmental damage may have long-term or unpredictable effects.
Chronic environmental damage is a risk during oil production, mainly due to pollution from drill cuttings, drilling muds and produced waters. The impacts of drill cuttings on the environment are well documented: physical smothering, organic enrichment, and chemical contamination are all caused by the accumulation of cuttings on the sea floor, and pose a significant risk to marine life. In addition to this, water drained from the deck of a rig may contain drilling fluids and oil.
While discharge of produced waters directly into the ocean and waterways is illegal, minor spills have occurred during our history of offshore crude oil production. In 2007, approximately 15 tonnes of oil from the Tui oil field contaminated the west coast of the North Island due to an accidental discharge of produced waters and drilling muds.
For New Zealand, the threat posed by this kind of environmental damage is high. The coastline contains many sensitive resources to which we attach great importance, whether for their biological, economic, or intrinsic values. Should a major spill occur in New Zealand, our geographic isolation means it could take some time to mobilise resources and help from overseas. And if major environmental damage were to occur, would the oil company responsible for it be held liable?
Sources:
- http://chevrontoxico.com
- http://www.texacotoxico.org/eng/
- http://www.nzog.net
- Taranaki Regional Council. 2008. Navigation Safety and Harbour Management Annual Report 2007/2008
- Maritime New Zealand. 2006. NZ Marine Oil Spill Response Strategy
- Glover, Adrian G. and Craig R. Smith, “The deep-sea floor ecosystem: current status and prospects of anthropogenic change by the year 2025″ Environmental Conservation (2003) Vol. 30:3 pp. 219-241
- Odeyemi, O. and O. A. Ogunseitan, “Petroleum Industry and its Pollution Potential in Nigeria” Oil & Petrochemical Pollution (1985) Vol. 2 pp. 223-229
- Boesch, Donald F. and Nancy N. Rabalais (eds). 1987. Long-term Environmental Effects of Offshore Oil and Gas Development. Taylor & Francis: Abingdon
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