Brazil, Ecuador Lawsuits Point to New Competitive Pressures
QUITO, Ecuador – Now that it is embroiled in a new $11 billion pollution lawsuit in Brazil, Chevron’s total legal tab in Latin America for environmental problems is fast approaching $30 billion and could rise further if forced to defend enforcement actions throughout the region related to its long-term Ecuador pollution problem, say analysts.
“Chevron shareholders cannot be happy to wake up to the news that the company faces yet another major environmental liability in Latin America,” said Simon Billenness, an analyst who covers the industry for environmental groups and the author of a report on Chevron’s $18 billion liability in Ecuador for despoiling the Amazon.
“Chevron is beginning to look like a very unattractive dance partner for oil producing Latin American governments,” he added. “Any government that works with Chevron is going to risk a profound backlash from its own constituents given these growing problems.”
Brazil’s government sued Chevron for $11 billion to cover damages for the devastating offshore spill in November that is eerily reminiscent of the BP disaster in the Gulf of Mexico. Chevron outraged Brazilian regulators by being totally unprepared to contain the spill and by downplaying the amount of oil gushing into the ocean.
Chevron further shocked Brazilian officials this week with news that the leak still has not been completely contained.
In Ecuador, Chevron has been in open conflict with the government after a court in February awarded $18 billion to thousands of villagers based on evidence the oil giant dumped toxic oil sludge into the rainforest and abandoned more than 900 unlined waste pits that continue to contaminate groundwater and surface waters. The trial was held in Ecuador at Chevron’s request.
The case is currently under appeal in Ecuador, with the plaintiffs seeking an increase in the amount of damages.
When it operated in Ecuador from 1964 to 1992, Chevron created an environmental and public health catastrophe that decimated indigenous groups and caused dramatic increases in cancer rates, according to the evidence. The Ecuador environmental damage dwarfs the impact of the BP spill in the Gulf, according to experts.
Because Chevron has refused to pay the Ecuador award, the plaintiffs are being forced to consider a series of asset seizure actions in any of the dozens of countries where the oil giant operates. Such actions likely will create additional conflicts between Chevron and oil-producing governments around the world and further deepen the company’s legal woes, said Billenness.
“Chevron has never come clean to its own shareholders about worst-case scenarios in this regard,” he said.
Ecuadorian lawyer Pablo Fajardo, who led the contamination lawsuit against Chevron in his country, said Brazil should understand that Chevron is a company that will not hesitate to lie when faced with evidence of its own malfeasance.
“Chevron has a history of mistreating Latin American countries in its thirst to increase its profits,” he said. “My advice to Brazil is to hit the company hard and do not let up until the problem is fixed.”
Notably, the Brazilian government is being much tougher on Chevron than the Ecuador court. Chevron’s fines in Brazil amount to approximately $18,000 per barrel of oil spilled — far higher than similar fines imposed by the court in Ecuador, according to Karen Hinton, the U.S. spokesperson for the Ecuadorians.
When the Brazil spill became public, a Chevron official at first suggested it was the product of “natural” leakage from an underwater stone — reminiscent of the now-infamous statement by a Chevron attorney on the U.S. news show 60 Minutes that the company’s massive damage in Ecuador was no more dangerous to human life than the “make-up on my face.”