An Ecuadorian court’s near US$17 billion award on 15 February against US oil company Chevron for environmental damages dating back four decades sent mainstream and blogosphere commentators in overdrive. Most cheered the judgment as a necessary strike against the evils of the oil multinationals, and compared the award with the US$20 billion compensation created by oil company BP in the wake of last year’s Deep Horizon drilling rig explosion and oil spill in the Gulf of Mexico.
Pablo Fajardo, a lawyer representing the Ecuadorian plaintiffs, said that a further suit would be brought against the country’s state oil company, Petroecuador. If such litigation goes ahead, this 18-year long epic case may last another 18 years and everyone could lose.
Little Care for the Oriente
Ecuador has been producing oil since 1918, first from small oilfields on the Pacific coast, and from the 1960s, in larger fields in the eastern jungle region known as the Oriente. As long as the oil kept flowing, no-one cared much how it was produced. The oil industry was nationalised by a military government in 1972 during a period of escalating commodity prices. Revenues from nearly 10 percent of oil production were paid directly to the military, a situation which was changed only several years ago.
At this time, literature, life and legend in Ecuador were restricted to the Pacific coastal regions and the inner highlands. Settlement of the Oriente by highlanders and coastal people in so-called “colonies” began in the early 1960s. Many of the new inhabitants were former employees of the highland landowners and had been working in near-feudal conditions. Jobs were available in the nascent oil industry. But differences between incomers and indigenous Oriente tribes remain.
The combination of colonists and oil industry left a legacy of land clearances, pre-fabricated settlements and vast expanses of what seem like jungle but where the wildlife is noticeable by its absence. Its silence is more stunning than the one felt in Scandinavian boreal forests. The main oil pipeline from the Oriente to the coast perched precariously above ground at the edge of a precipice alongside the main road to the west. It ruptured during an earthquake in 1986, closing off oil exports for over five months. Untreated waste oil still pollutes the Oriente land and waterways.
Environmental Damage
Texaco operated Oriente oil fields between 1964 and 1990, when Petroecuador took over. The US company left Ecuador in 1992. Petroecuador held a two-thirds majority share in the joint venture from the mid-1970s following oil nationalisation. The late Rene Bucaram, a former Texaco manage in Ecuador between 1977 and 1987 and who died in 2006, used to say that the state oil company ignored anything to do with the environment just to save money. Texaco was not unhappy to follow suit, he added.
Environmental damage and diseases in the Oriente related to oil operations came to world attention in the wake of the 1992 Earth Summit in Rio de Janeiro. US law firms representing the Oriente population started proceedings against Texaco in 1993 in US courts under the Alien Tort Claims Act (ATCA). The initial claim was for US$1.5 billion and later US$6 billion. The actions and counter-actions continued against Chevron, who acquired Texaco in 2001. Lawyers on both sides have been changed and both sides have ignored calls to settle.
Chevron has termed the latest award as “illegitimate and unenforceable”, and has launched lawsuits against the Ecuadorian lawyers alleging fraud and falsification of evidence. Ecuadorian groups are speculating that the ultimate claim for compensation could be as high as US$113 billion, the equivalent of the country’s GDP in 2010.
Petroecaudor: National Paymaster
Oil export revenues provide about 40 percent of Ecuador’s national budget and the state oil company, Petroecuador, is paymaster to the three most important vested interests in the country, politicians, the military and labour unions. Just as Petrobras in Brazil and Pemex in Mexico, it has a reputation as an untouchable and unaccountable national icon. The chances that an ordinary group of people could sue such a behemoth successfully for damages have been almost non-existent.
As evidenced from the Deep Horizon oil spill, the mistakes of a foreign multinational oil company provide a grandstanding opportunity for politicians and environmentalists alike. But when the target is a national icon the repercussions could be dire politically. A successful lawsuit against Petroecuador for a mere fraction of the award against Chevron could destroy the state oil company, and presumably, the fortunes of those in the Ecuadorian establishment who are a product of its largesse. It could also destroy the country's entire oil industry, Quito executives have claimed, and replace it with eco-tourism, already a growing vested interest among local politicians.
Conspiracy theories about who has been behind all of these lawsuits – CIA Plot? Libya? Saudi Arabia? Eco-tourism industry? – have abounded since 1993. “No-one cares the rainforest. We just want to get the multinational", this writer was told by one activist from a nominally environmental organisation when the plaintiffs were claiming a mere US$6 billion from Chevron. With Petroecuador in the firing line as a possible co-respondent, this litigation is set to become very nasty.
Maria Kielmas - Maria Kielmas
