Chevron, the second-largest US oil company, may never pay a cent of the more than $17 billion in fines and penalties levied by an Ecuadorean court for environmental damage dating back to the 1960s.
Chevron doesn’t have any refineries, storage terminals, oil wells or other properties in Ecuador that could be seized to pressure the company to pay, said Mark Gilman, an analyst at Benchmark in New York. In anticipation of an adverse ruling, Chevron went to court in New York last week to obtain an order shielding the company anywhere in the world from collection efforts related to the case.
The judgment handed down yesterday by a judge in Lago Agrio, a provincial capital near the Colombian border, ordered Chevron to pay an $8.6 billion fine and an equal amount in punitive damages, according to the court ruling obtained by Bloomberg. The judgment stemmed from an 18-year-old lawsuit that alleged Texaco dumped chemical-laden wastewater in the Amazon River basin from 1964 to 1992. Chevron acquired Texaco in 2001.
“It’s probably unenforceable,” Gilman said yesterday in a telephone interview. “I wouldn’t want to say $8 billion is insignificant in any way, shape or form for Chevron, because it’s not, but given the lack of local assets, Ecuador is going to have difficulty enforcing this.”
The court ordered the company to pay an additional 10 per cent of the value of the fines to the Amazon Defense Front, according to the ruling. The organisation is also the beneficiary of the trust fund that the court wants created to pay the fines.
Damages doubled
The company will be pardoned from paying the punitive damages if it issues a public apology in major newspapers within 15 days of the court’s decision, according to the ruling.
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Kent Robertson, a Chevron spokesman, said the company will appeal the judgment. Chevron attorneys were still poring over the document late Monday to calculate the amount of damages, fines and other penalties imposed by the judge, he said.
“One thing we do know is that this ruling was the product of fraud and is contrary to the legitimate scientific evidence,” Robertson said yesterday in a telephone interview.
Chevron had $17.1 billion in cash and near-cash equivalents at the end of December, according to a January 28 statement. Chevron’s $195 billion market valuation is more than three times the size of Ecuador’s annual economic output.
Water, soil contamination
Ecuador pumped an average of 470,000 barrels of crude a day last year, the lowest production among Organization of Petroleum Exporting Countries members, International Energy Agency figures showed. Ecuador ranked 127th out of 178 nations in Transparency International’s 2010 corruption-perception index. Ethiopia, Indonesia and Armenia were perceived as less corrupt, according to the index.
The ruling held Chevron responsible for water and soil contamination that a court-ordered assessment estimated caused Amazon residents $27 billion in damages from illness, deaths and economic loss.
Chevron argued that it cleaned up its portion of the oil fields and was released from pollution claims in an agreement with Ecuador and state-owned oil company PetroEcuador, which took control of the Texaco operations in 1992.
“The case really sends a message that companies operating in the undeveloped world cannot rely on a compliant government or lax environmental rules as a way of permanently insulating themselves from liability,” said Robert Percival, a law professor and director of the environmental law programme at the University of Maryland School of Law in Baltimore.