The Republic of Ecuador – through their Ambassador to the United States, Nathalie Cely – and Steven Donziger’s PR team have been promoting a report commissioned by the Republic, which they claim proves Texaco is responsible for oil contamination in the Amazon. The report, however, only sampled five sites (out of more than 300), which have been operated by the state-owned oil company, Petroecuador, for the last 25 years. Despite this fact, and defying science, the Republic and Donziger’s team claim the environmental impacts at the sites are a result of Texaco Petroleum’s operations – even though the company hasn’t operated there for nearly 25 years.
Not surprisingly, the Republic and Donziger’s team blame Chevron for contamination for which Ecuador itself is responsible. Petroecuador, the Ecuadorian state oil company, was the majority owner of an oil producing consortium in the Ecuadorian Amazon since 1976, and has been the sole operator of former consortium facilities since 1990. During the past 24 years of Petroecuador operations, Ecuador has drilled more than 700 new oil wells, dug and buried thousands of unlined pits for oil wastes, and spilled more than 125,000 barrels of oil in the Amazon region. While Texaco Petroleum Co. (“TexPet”) remediated its agreed-upon share of the consortium’s oil operations when it left the country in the 1990s, Petroecuador has to this day failed to clean up its share of the oil operations. By promoting this report, the Republic is trying to avoid its own cleanup responsibilities, and to blame Chevron for the environmental impact of Petroecuador.
Ecuador’s State-Owned Oil Company is Responsible for any Environmental Impacts in the Oriente
In 1965, TexPet and others in an oil consortium began exploring for oil and gas in the Oriente region of Ecuador under a concession agreement with the government of Ecuador. Starting in 1976, the government acquired a majority ownership interest in the consortium. In 1990, Petroecuador assumed the role of operator of the consortium, and in 1992, the concession agreement terminated and Petroecuador became the sole owner of all former consortium operations. While Ecuador now criticizes the operational practices of TexPet from decades ago, contemporaneous audits found that TexPet followed existing exploration and production norms, including the manner in which it handled environmental issues. Indeed, many of the practices that Ecuador now criticizes are still used by Petroecuador today.
Since 1990, Petroecuador has continued to operate hundreds of former consortium wells, and has vastly expanded oil operations in the area. Many of the hundreds of new Petroecuador wells and pits have been built at former consortium well sites. These continued and expanded operations, with which TexPet and Chevron have no connection, have resulted in countless environmental mishaps. Petroecuador’s own reports indicate that between 1990 and 2009, it spilled about 125,000 barrels of crude oil – about 5 million gallons – from 727 spills inside the former concession area. The Ecuadorian newspaper “El Universo,” puts the number much higher, reporting that Petroecuador had 1,415 spills in the 2000-2009 timeframe alone.
Further, TexPet did not simply walk away after Petroecuador assumed full ownership and operation of the consortium. Rather, TexPet completed an extensive environmental cleanup that was monitored and approved by the Ecuadorian government. In particular, the government of Ecuador and TexPet entered into a settlement and release agreement in 1995 where the parties agreed on exactly which pits, spills, and other environmental responsibilities TexPet was required to address and the standards that it was required to meet. Under this contract, TexPet was not required to address all environmental conditions in the former concession area. Rather, consistent with the shared ownership of the pre-1990 operations and in recognition of Petroecuador’s ongoing operations, the parties allocated cleanup responsibilities with Petroecuador accepting the majority. TexPet completed all of its remediation obligations under the 1995 Agreement. Importantly, and not mentioned in the materials being promoted by the Republic or Donziger’s team, is that Ecuador inspected and approved the work and released TexPet from any further responsibility. Pursuant to their agreement, any remaining (or newly occurring) environmental conditions are Petroecuador’s responsibility.
U.S. District Court Found that the $9.5 Billion Judgment was a Product of Fraud
Years after TexPet had fulfilled its remediation obligations, Donziger engineered a lawsuit against Chevron (which had previously acquired TexPet) that he filed in Ecuador on behalf of the Lago Agrio plaintiffs. This lawsuit led to a $9.5 billion judgment against Chevron. After a seven-week RICO trial against Donziger in the Southern District of New York, Judge Kaplan concluded in March 2014 that Donziger had engaged in extortion, mail and wire fraud, money laundering, and witness tampering, and the resulting Ecuadorian judgment was a fraud.
Chevron’s Open and Forthright Conduct during the Judicial Inspection Process
Before Chevron was able to uncover Donziger’s and his associates’ corrupt and fraudulent conduct, the parties to the Lago Agrio litigation conducted environmental sampling in and around several of the well sites and production stations formerly owned and operated by the consortium. These sites included both those where TexPet had conducted remediation and those that were Petroecuador’s responsibility. Both the Lago Agrio plaintiffs and Chevron conducted pre-investigation sampling (a fact the Republic and Donziger’s team ignore) and judicial inspection sampling. That sampling showed that TexPet had complied with its obligations under the 1995 Agreement, and that, while there was still a need for Petroecuador to remediate former and current impacts, the well sites did not pose any significant risk to human health or the environment.
Both the Republic and Donziger’s team criticize Chevron for its conduct during the Lago Agrio litigation pre-inspection and judicial investigations. None of those criticisms are valid:
- They claim that Chevron relied on a test, known as the TCLP test, that was never meant to “assess the existence of petroleum hydrocarbons.” In fact, Ecuador recommended that TexPet use the TCLP test to assess the effectiveness of its remediation obligations under the 1995 Agreement. And, Ecuadorian regulations today require Petroecuador to use the TCLP test when assessing new waste pits at oil facilities.
- They also contend that Chevron used the pre-inspection process during the Lago Agrio trial to withhold information from the court and to avoid sampling where contamination existed. This claim has been rejected by experts that evaluated the sampling process, and by Judge Kaplan during the RICO trial when the Lago Agrio plaintiffs made the same unfounded assertion. Both Chevron and the Lago Agrio plaintiffs conducted pre-inspection investigation and sampling, all of which was authorized by the Lago Agrio court. Chevron used the pre-inspection and judicial inspections to thoroughly evaluate each site and delineate the extent of any contamination that was found, something the Lago Agrio plaintiffs failed to do. Contrary to assertions by the Republic and Donziger’s team, the inspection results show that any environmental impacts identified in Chevron’s pre-investigations were investigated appropriately in the judicial inspections. The Lago Agrio plaintiffs—who were also conducting investigations side-by-side with Chevron’s experts—were unfettered in their ability to investigate and sample at any of the inspection sites. Indeed, Ecuador’s own environmental expert from the Louis Berger Group expressly rejected the Republic’s claim about pre-inspections. Ecuador’s expert testified under oath that he saw no evidence that Chevron used pre-inspections to selectively sample known clean locations.
- The Republic complains about Chevron’s use of composite sampling during judicial inspections, but composite sampling was specified for use in the party-approved judicial inspection scope of work. Composite sampling also is a sampling method provided for in Ecuador regulations and used by Petroecuador today.
- The Republic and Donziger’s team team assert that Chevron’s sampling found “levels of known carcinogens in the soil that exceed Ecuadorian standards,” and “found petroleum hydrocarbons above allowable limits in more than half of the sediment samples it took,” and did not disclose those results to the Lago Agrio court. However, they ignore that Chevron provided the results of all judicial inspection sampling to the Lago Agrio court, again, unlike the Lago Agrio plaintiffs, who discarded clean samples. They also ignore that the vast majority of samples taken during the judicial inspections were of sites and pits that were operated by Petroecuador or were the responsibility of Petroecuador to remediate. The sampling results that the Republic and Donziger’s team complain of are Petroecuador’s responsibility, not TexPet’s.
LBG’s Secret 2013 Inspections Confirm that TexPet’s Remediation was Appropriate
The Republic and Donziger’s team point to five sites (out of more than 300) at which an environmental consulting group known as Louis Berger Group (LBG) purportedly conducted environmental sampling. LBG’s sampling for Ecuador in response to Chevron’s arbitration claims was done in secret, with no notice to Chevron or the arbitration Tribunal and no opportunity for Chevron to participate or observe. LBG’s sampling was admittedly neither random nor representative. There are hundreds of well sites in the former concession area and LBG visited several sites (and possibly sampled a number of sites), before it chose the five sites cited by the Republic and Donziger’s team. Although LBG’s site selection was intended to generate evidence for Ecuador to use during the ongoing arbitration against Chevron, the five sites actually show: (1) TexPet properly completed its remediation obligations under the 1995 Agreement; (2) the continued environmental impacts in the former concession area are the result of Petroecuador’s operations; and (3) there are no significant human health risks associated with any of the sites.
Before turning to the specifics at each site, it is important to note that Petroecuador continued to operate all five sites after TexPet left the concession area. The Republic, Donziger’s team and LBG ignore this fact, but the environmental impacts from these continued operations explain LBG’s observations at these sites. Indeed, on Petroecuador’s watch, more than 20 reported oil spills and almost 40 oil well workovers have occurred at these five sites alone.
Lago Agrio 2
The Republic, Donziger’s team and LBG make two assertions about this site: (1) that Chevron concealed from the Ecuadorian court the presence of four pits; and (2) that TexPet is responsible for Pits 1, 2 and 3. As to the first point, the Lago Agrio court was made aware of all four pits during the judicial inspection process and received information on each. As to the second point, only Pit 1 was the responsibility of TexPet, which it remediated pursuant to the 1995 Agreement. TexPet’s remediation of Pit 1 was overseen and approved by Ecuador as meeting all applicable cleanup standards. LBG did not even sample Pit 1 during its 2013 inspection. As for Pits 2 and 3, neither of these were TexPet’s responsibility under the 1995 Agreement. Both pits were in use after 1990 and are therefore Petroecuador’s responsibility to remediate. Finally, Petroecuador, not TexPet, closed Pit 3 sometime after it assumed operations in the former concession.
Guanta 6
They claim that TexPet was responsible for an area known as “Pit A” and that Pit A was contaminating swamp sediments and a nearby stream. First, the Republic, Donziger’s team and LBG ignore that “Pit A” is the site of a gas flare built and solely operated by Petroecuador after 1990 when it took over operations of the consortium. TexPet was neither involved in Pit A nor in the 11 oil spills that Petroecuador reported it has had at this site. Second, even setting aside the fact that Pit A was built and operated solely by Petroecuador, the Republic, Donziger’s team and LBG ignore that TexPet was not assigned any remediation obligations at Guanta 6 under the 1995 Agreement with Ecuador. Any environmental issues at Guanta 6 are solely the responsibility of Petroecuador under the 1995 Agreement. Finally, while Chevron sampled upstream of the gas flare to properly delineate the boundaries of any environmental impacts from Petroecuador’s flare, contrary to the Republic’s assertions, Chevron also collected and analyzed samples downstream of the flare location and submitted those samples to the Lago Agrio court.
Shushufindi 25
The Republic and Donziger’s team correctly note that TexPet was responsible for closing three pits at this site, but they incorrectly claim that these pits were not properly closed and are the source of continued environmental contamination in the area. The evidence gathered during the judicial inspection shows that the pits met the cleanup criteria in the 1995 Agreement. The samples of soil and groundwater gathered during the judicial inspection and by LBG in 2013 show that there is no contamination migrating from the pits. The Republic, Donziger’s team and LBG also ignore that Petroecuador reported a spill at this site in 1997, well after TexPet left Ecuador, and has conducted several well workovers at the site.
Aguarico 2
The judicial inspection at this site showed that TexPet properly remediated and closed the pits at this location pursuant to the 1995 Agreement. The only environmental impact at this site is a small patch of weathered asphalt, and this feature was not part of TexPet’s remediation obligation. The sampling during the judicial inspection process and more recently by LBG showed the nearby stream to be free of impacts by oilfield operations. There are no overflowing pits, as no open pits exist at this site.
Yuca 02
The Republic and LBG claim that a small area of remote swampland shows evidence of a crude oil spill for which TexPet is responsible. Contrary to their assertions, there is no evidence that this spill occurred prior to 1990, and the 1995 Agreement did not identify this oil spill as an area of TexPet responsibility. Further, there have been a number of known oil spills and other activities at this site by Petroecuador after TexPet left the concession area, which could account for the impacts the Republic blames on TexPet.
The Ecuadorian Judgment is a Sham
As Donziger’s team is well-aware, a U.S. District Court has found that the judgment LBG is trying to support is a sham. The stated purpose of LBG’s 2013 sampling was to confirm the environmental “evidence” submitted by the Lago Agrio plaintiffs, which, in turn was relied upon by the Ecuadorian judicial system to underpin the $9.5 billion judgment. But as disclosed in testimony and documents presented during the RICO trial before Judge Kaplan, the Lago Agrio plaintiffs’ environmental expert work was controlled and directed by their corrupt lawyers, not by any valid scientific process.
In his opinion, Judge Kaplan recognized that (i) “there is no evidence of any competent study during this time period by any qualified person that supports Donziger’s claim [that remediation would cost billions]”; (ii) the Lago Agrio’s own experts “never concluded that TexPet had failed to remediate any site or that any site posed a health or environmental risk;” and (iii) even the Lago Agrio plaintiffs’ experts confirmed that their sampling in the area was “much more indicative of contamination from PetroEcuador rather than Texaco.”
The $9.5 billion award is untethered to any reality. After conducting its secret sampling, even LBG was unable to express the opinion that the $9.5 billion judgment was reasonable. The actual remediation costs that Petroecuador has been and continues to incur to fulfill its contractual and regulatory environmental obligations are the best evidence of clean-up costs in the former concession area. This evidence reveals that Petroecuador’s actual remediation costs are orders of magnitude less than the Judgment’s remediation damages. The $5.4 billion award for soil remediation is 77 times higher than Petroecuador’s own estimate of only $70 million being needed to remediate pits throughout the Amazon. Further, pursuant to its obligations under the 1995 Agreement, Petroecuador has already cleaned up or is in the process of cleaning up a number of the same sites that are the subject of the Lago Agrio Judgment.
Simply put, the assertions made by the Republic and Donziger’s team are unfounded.
Read more in Chevron’s Supplemental Memorial here.
