Mr. Donziger’s math is finally adding up and, perhaps unintentionally, Mr. Donziger has exposed one of the most fraudulent aspects of the Ecuador trial – the $27 billion damage recommendation known as the “Cabrera Report.”

The assessment developed by the plaintiffs’ representatives and delivered to the court by mining engineer Richard Cabrera looks to hold Chevron liable for more than $27 billion in damages. In part of the dubious $27 billion claim, Cabrera recommends Chevron pay damages of $2.743 billion for pit remediation.  In comparison, Petroecuador, the government-owned oil company responsible for the current condition of Ecuador’s oil fields, remediates pits to current laws and standards at a cost of $85,000 per pit. Cabrera’s estimates imply a per-pit remediation cost of up to $3 million per pit. This recommendation is more than 30 times higher than the cost the state pays for pit remediation.

Meanwhile, Texaco Petroleum made less than $500 million during the days of the consortium.  The vast majority of the proceeds, approximately $25 billion, went to the government of Ecuador.  And, at the conclusion of the consortium, Texaco Petroleum performed remediation work at 108 of 321 well sites – work that corresponded with the company’s 37.5% stake in the consortium. The remaining remediation is the admitted responsibility of Petroecuador.

So, no matter how you slice it, Mr. Donziger has finally conceded the truth about remediation costs.  Any realistic assessment of the conditions in Ecuador clearly shows that the remediation work for which Petroecuador is responsible would cost a fraction of what Mr. Donziger and his colleagues have contended.  Now, if they would only focus their efforts on the responsible party rather than the deep pockets, some solutions might actually occur.

In a December 7th interview with Ecuadorian radio station Majestad, plaintiff’s attorney Julio Prieto makes mention of a law firm bankrolling the environmental lawsuit currently pending against Chevron in Ecuador.

The referenced firm is Kohn, Swift & Graf PC of Philadelphia, the primary entity providing a majority of, if not all of the funding for the lawsuit against Chevron.

When U.S.-based trial lawyer, Cristóbal Bonifaz, first concocted the original lawsuit against Texaco in 1993, he contacted Harold Kohn, a Philadelphia class-action lawyer. Shortly thereafter, Kohn’s son, Joe, who later became a partner at Kohn Swift & Graf, signed on. Subsequently, Kohn enlisted Steven Donziger, a New York-based trial lawyer who went to law school with Bonifaz’s son.

When asked about his motivation for taking on the case against Chevron in the movie Crude, Joe Kohn candidly stated, “it was not taken as a pro bono case, you know, a lot of my motivation is, at the end of the day… it will be a lucrative case for the firm.”

As part of the Kohn, Swift and Graf financed PR campaign to take Chevron’s reputation hostage and ransom it back to the company in the form of a large settlement, Kohn has hired DC lobbyist Ben Barnes to lobby the US Congress on “environmental matters resulting from oil exploration in Ecuador.” Barnes then hired DC based PR representative Karen Hinton to spread misinformation and distort the facts of the case.

Years of misinformation and distortion spread by U.S. trial lawyers and their PR cohorts lead the public and media to believe that 30,000 indigenous Amazonians are behind this lawsuit, and that any financial award from a settlement or verdict would go to the indigenous peoples of the Oriente.

However, the truth tells a different story.  Kohn’s firm has coordinated a series of economic and political relationships between the Ecuadorian government, U.S. trial lawyers and activist groups in an effort to put pressure on a small rural courtroom in Lago Agrio, Ecuador, to find Chevron guilty in an environmental lawsuit. Any financial awards as a result of a settlement or judgment against Chevron would invariably go only to the Ecuadorian government and the U.S. contingency fee lawyers driving this frivolous lawsuit. In fact, Washington Pesántez Prosecutor General of Ecuador confirmed that “90% [of any judgment against Chevron] would be delivered to the State…”

One thing is certain, Chevron will continue to fight this misguided and disingenuous lawsuit until justice prevails.

Such claims are patently false.

(1)   It is well documented that Texaco Petroleum, now a fifth tier subsidiary of Chevron, operated in Ecuador as a minority partner with state owned Petroecuador. All consortium decisions were made jointly by Petroecuador, the Government of Ecuador and Texaco Petroleum. In fact, the system that Petroecuador assumed full responsibility for in 1992 was constructed in a manner consistent with applicable Ecuadorian regulations and with industry practices that are still in use in many places in the world today.

(2)   In the last two decades, Petroecuador has spent over a billion dollars to more than double the size number of wells in the concession area. In an effort to increase oil production, Petroecuador has drilled more than 400 wells, which represent a cost of more than $1.2 billion and performed thousands of well workovers (250 at an approximate cost of $170,000 each in 2009). Yet, Petroecuador has spent little on corrosion prevention and maintenance which is critical to prevent oil spills. They also continue to use unlined pits, having constructed at least 270 pits (over 90% of which are located in the former concession area) in the last 3 years.

Montage of Ecuador media headlines showing numerous spills.

In the early 1990’s, after the Government of Ecuador made the decision not to renew the concession agreement, Texaco Petroleum spent $40 million remediating its share of the consortium operations. The Government of Ecuador then signed off on this remediation and granted Texaco a full release of liability from any future claims. Petroecuador has repeatedly acknowledged that it is their responsibility to remediate the rest of the sites in the concession area including “all of the pits.”

Since assuming complete control over Oriente oilfield operations, Petroecuador’s operations have generated over 1.2 billion barrels of crude oil and 260 million cubic feet of natural gas, representing a market value of over $57 billion. While the company has recently funneled more than a billion dollars into drilling new wells to maximize oil profits, they have spent little on environmental remediation and socioeconomic projects in the area. The lack of spending on maintenance and proper safeguards against spills has led to crumbling flowlines and pipelines, which has resulted in a deplorable record of oil spills.

Despite Petroecuador’s ongoing pollution, neither the Amazon Defense Coalition nor Amazon Watch has made Petroecuador a focus of their Oriente clean-up campaign, and they have never pursued any legal action against the state oil company. In fact, when Petroecuador began remediating pits in 2006, the Amazon Defense Coalition demanded that the company stop their long awaited cleanup plans as these efforts were “changing the lawsuit.”

While the U.S. trial lawyers and their partners consistently portray Petroecuador’s ongoing environmental mismanagement as the responsibility of Chevron, it is clearly not. The facts are clear – Texaco Petroleum acted responsibly and cleaned up its share of the consortium years ago, while the Government of Ecuador and Petroecuador have chosen profits over environmental stewardship.

]]> http://theamazonpost.com/news/petroecuador-responsible-for-oil-field-infrastructure/feed 0 http://theamazonpost.com/news/web-of-influence-shows-financial-political-ties-of-the-government-of-ecuador-u-s-attorneys-and-their-efforts-to-sway-justice-in-the-case-against-chevron-in-ecuador http://theamazonpost.com/news/web-of-influence-shows-financial-political-ties-of-the-government-of-ecuador-u-s-attorneys-and-their-efforts-to-sway-justice-in-the-case-against-chevron-in-ecuador#comments Thu, 29 Oct 2009 19:48:31 +0000 Chevron Ecuador http://theamazonpost.com/?p=2295 An elaborate series of relationships between the Ecuadorian government, U.S. trial lawyers and activist groups show that strong economic and political ties exist in their efforts to put pressure on a small rural courtroom in Lago Agrio, Ecuador, to find Chevron guilty in an environmental lawsuit.

This interactive diagram highlights these relationships and provides an examination of the forces behind the lawsuit. The Web of Influence diagram shows that the legal case against Chevron in Ecuador is a coordinated effort by U.S. trial lawyers and activist NGOs working with the executive branch of the Ecuadorian government to influence the Ecuadorian judiciary to ensure a guilty verdict against Chevron.

Click here to view this web of influence.

The major health concerns in the Oriente region are not the result of oil operations, but are related to a lack of water treatment infrastructure, a lack of sufficient sanitation infrastructure and inadequate access to medical care.  (Read about Texaco Petroleum’s past operations and questions of health.)

Drinking water samples taken during court-ordered inspections of sites remediated by Texaco Petroleum found high levels of bacterial contamination from human or animal waste in 90 percent of the samples, indicating widespread microbial contamination of the water sources.

While the samples contained a high level of microbial contamination, results showed little evidence of contamination from oil. Court-ordered inspections found that 98 percent of surface water and 99 percent of drinking water samples meet international drinking water standards for petroleum hydrocarbons.  Those few samples indicating petroleum-related impacts were from areas where Petroecuador’s poor operations had resulted in contamination.

The Government of Ecuador has not fulfilled its obligation to remediate the environmental impacts that it has caused, much less to modernize or even maintain its facilities to mitigate further impact.  Nor has the government provided any sewage treatment in the region with raw sewage being discharged directly into streams and rivers used for bathing and drinking water by the local communities.  As a result, many rural residents do not have access to potable water.

Ever wonder why the U.S. trial lawyers in the Ecuadorian Amazon litigation case against Chevron choose to sue Texaco, the minority partner in the consortium that launched the country’s energy industry, and not Petroecuador? After all, Petroecuador, the state owned oil company, was the majority partner and became 100% responsible for the oil production in the concession area in 1992.

Here’s why.

According to Ecuadorian news sources, the plaintiffs’ lawyers in the lawsuit against Chevron promised the Quito government they would not sue Ecuador’s state oil company Petroecuador over environmental damage in the Amazon.

Lawyer Cristobal Bonifaz, one of the architects of the lawsuit, has given written assurances to Ecuador’s government that Petroecuador would be spared a lawsuit if government officials threw their clout behind the plaintiffs.

In a 1997 interview appearing in the Ecuadorian newspaper Hoy, Bonifaz said, “There is no reason for the Government to worry because the plaintiffs and their lawyers have undertaken in legal documents to refrain from suing the Government if it is ultimately held to be jointly liable with Texaco for the environmental damage caused.”

A week later, Bonifaz told the Ecuadorian newspaper El Comercio, “I delivered notarized documents to the Attorney General confirming the indigenous people’s commitment to refrain from suing the Government.”

However, none of the plaintiffs’ attorneys have ever reported this arrangement or provided these documents to the Superior Court of Nueva Loja, which is overseeing the current trial. Nor have Chevron’s attorneys been able to obtain a copy.

Instead of taking on Texaco Petroleum and Petroecuador, U.S. trial lawyers have sought to sue only Chevron for environmental issues they say were left behind in Ecuador by Texaco (which Chevron acquired in 2001). Moreover, they knowingly ignore Petroecuador’s ongoing pollution and environmental mismanagement.

Meanwhile, the case in Ecuador has been marred by excessive government interference – interference that has prompted a warning by the U.S. government trade representatives.