In Ecuador, High Stakes in Case Against Chevron

By Juan Forero

Washington Post Foreign Service
Tuesday, April 28, 2009

LAGO AGRIO, Ecuador -- Deep in the northern Ecuadoran rain forest, next to pits filled with noxious sludge, a lawyer on his very first case argued that a U.S. oil company had deliberately fouled a swath of jungle nearly the size of Delaware during two decades of production.

Wearing a straw hat for the recent outdoor hearing, Pablo Fajardo was delivering the final arguments in a lawsuit that began in New York in 1993 against Texaco but is wrapping up here against Chevron, which bought Texaco in 2001. The stakes are high -- and so tinged with nationalism that Ecuador's President Rafael Correa has openly sided with the plaintiffs, 48 individuals representing tens of thousands of people in the region.

If the judge rules against Chevron, the company could face the largest damages award ever handed down in an environmental case, dwarfing the $3.9 billion awarded against ExxonMobil for the 1989 spill in Alaska.

A report by a court-appointed team last year concluded that pollution caused mainly by Texaco's Ecuadoran affiliate, Texaco Petroleum, had led to 1,401 cancer deaths in this stretch of Amazonian jungle. The team's leader, Ecuadoran geologist Richard Cabrera, reported finding high levels of toxins in soil and water samples near Texaco's production sites and assessed damages at up to $27.3 billion.

"This is a simple case," said Fajardo, 37, a former oil worker. "We ask, is there damage or not? If there is damage, who pays? And if there is payment, how much and to whom?"

For Fajardo and his team, two 20-something lawyers financed by a Philadelphia law firm, the blame rests squarely with Texaco and, now, Chevron. They say that for 18 years, from the time Texaco started full-scale production in Ecuador in 1972, the company unloaded drilling mud and wastewater into hundreds of unlined pits or directly into waterways. They accuse Texaco of choosing savings over safety, and say the company botched a highly publicized cleanup of its production sites in the 1990s.

Chevron argues that Texaco complied with Ecuadoran law and that the case is driven more by emotion than science. A cornerstone of its defense is that Ecuador's government relieved Texaco of responsibility after the $40 million, three-year cleanup, which ended in 1998. Chevron also blames Texaco's successor and former partner, Petroecuador, saying that the state oil company is responsible for hundreds of oil spills since it took over operations in 1990.

Attorneys for Chevron call Cabrera's report a sham and say he was cozy with the plaintiffs. The company has issued its own expert reports to support its assertion that there is no link between oil and cancer in this swath of jungle.

Judge Juan Nuñez said he will begin reviewing about 145,000 pages of evidence after reports on the effects of the discharges on fishing and agriculture are completed.

"This trial should finish this year," he said, speaking in his bare office here in Lago Agrio, a dusty oil town named for Sour Lake, Texas, where Texaco got its start in 1903. "This has taken too long."

The case has attracted the attention of energy companies worldwide and, closer to home, the interest of Ecuador's 46-year-old populist president.

Correa, who took office in 2007 and has frequently tangled with oil companies, has said that Texaco's "savage exploitation" of oil "killed and poisoned people." He has also called Texaco's cleanup a charade, in which the company simply covered polluted sites with dirt, and labeled Chevron's Ecuadoran attorneys "sellouts."

Last April, Correa called for criminal investigations of former government officials who had signed off on Texaco's cleanup in 1998. In September, the attorney general indicted two Chevron attorneys and seven former government officials -- two years after prosecutors had dismissed a similar criminal complaint against the same people.

That is not the way Chevron had hoped events would unfold when its lawyers filed motions in federal court in New York earlier this decade vouching for the professionalism of the Ecuadoran judicial system and asking that the trial be moved here. In 2003, proceedings began, alternating between Lago Agrio's ramshackle courthouse and visits to oil production sites and waste pits. But nearly six years later, Chevron's rosy assessment has given way to a sobering recognition that it may lose the case.

"We're concerned that no court in Ecuador is going to be able to hear or rule freely," said James Craig, a Chevron spokesman. "Clearly, the thumbs of politics are weighing heavily on the scales of justice in Ecuador, and the president has played a major part in that."

During the trial's latest stage, the "judicial inspections" of aging waste sites, local Cofan Indians in traditional garb and residents who say Texaco's operations left them ill showed up to watch the opposing lawyers spar. Judge Nuñez, a baseball cap worn low over his forehead, listened intently.

Among those who came on a recent day was Gabriel Ruales, who recounted how his family used to bathe and fish in a nearby river. He had brought along a 15-year-old son who suffers from a mental disorder and was seated in a wheelchair. "The water was completely salty, poisoned," Ruales said.

Carmen Isabel Bone, a nurse's assistant, also said the local drinking water had been poisoned. "I ask the authorities to give us justice," she said, blaming Texaco for ailments ranging from the flu and skin rashes to cervical cancer.

Diego Larrea, a Quito-based lawyer for Chevron, argued that no medical or scientific evidence has been presented to back such claims. "What we have here is the myth of the jungle," he told Nuñez.

Fajardo shot back, reading from a 1977 letter to state energy officials in which Texaco admitted to a serious leak from a waste pit. An internal 1972 memo, also in Nuñez's hands, instructed Texaco officials in Ecuador to report only spills that attracted the attention of the news media or regulators.

In another letter submitted in court, from 1980, Texaco officials told state energy officials that lining pits -- a precaution against leaks that is common in the United States -- would be prohibitively expensive. "It was cheaper to pay the fines than make the improvements," Fajardo told the judge.

Chevron says such documents were taken out of context and has submitted its own documentation to show that Texaco responded to accidents.

If there is a rare point of agreement in the trial, it is that Petroecuador is not blameless. Company and government officials acknowledge that the state firm also dumped waste into waterways after it assumed control, and that there were spills from its pipelines.

But for 26 years, Texaco was the sole operator, and the plaintiffs say that the waste the company left behind continues to leach into groundwater. The plaintiffs and the Ecuadoran government also argue that Petroecuador has upgraded equipment left by Texaco and modernized disposal of waste, for instance re-injecting wastewater into the ground.

The plaintiffs said that much of their strongest evidence lies in the waste pits surrounding the 356 wells that Texaco put into operation from 1967, when the company first struck oil, until 1990, when Petroecuador took over.

Chevron acknowledges that Texaco used unlined pits but argues that the use of such holding ponds is standard in the industry, including in the United States, according to Craig, the spokesman.

Unlined pits are indeed common in Texas, according to the Texas Railroad Commission, which oversees land use by oil firms. But commission officials said that in Texas, such pits are used to hold mud and heavy metals temporarily, before they are re-injected into the ground or otherwise disposed of.

The plaintiffs say Texaco did not re-inject the waste in Ecuador but instead used the shoddily designed pits for permanent storage. In 2001, Ecuador's General Controller, an office that investigates malfeasance, said that waste had oozed from pits and that Texaco's cleanup had fallen short. The plaintiffs also say that the cleanup covered only a few of the polluted sites and did not include groundwater or streams.

Kent Robertson, a Chevron spokesman, said that government inspectors later found flaws in the controller's report but that the report was never corrected. Chevron says the government-mandated cleanup it carried out at 161 pits and seven spill sites was effective, entailing removal of oil from soil, incineration of debris and revegetation.

These days, the ponds at the center of the debate have drawn Donald Moncayo, an activist who works with the plaintiffs. His specialty is taking visitors on what he calls "toxic tours."

After a walk along a forest trail, he stopped at a pool that had been used by Texaco and poked a long stick into the black sludge. Waste also dripped out through a drainage pipe and ran down to a creek below. "As you can see, there is no protection," Moncayo said. "All these waters wind up in the rivers."

Among those who have spent their lives next to wells, waste pits and polluted waterways is Carmen Chamba, 54, who said she has suffered four miscarriages.

Chamba happens to live near an installation now operated by Petroecuador. But it was Texaco that first ran production near her home, so she says the U.S. company is liable.

"They need to pay me for my loss," she said.