Ed Reinke/AP

Judge Evaluates Oil Case That Could Cost Chevron Billions

December 31, 2008 03:15 PM
by Lindsey Chapman
An Ecuadorean judge is preparing to decide in what could become the largest environmental pollution case in world history.

Chevron Judgment Pending

Some of the residents in Ecuador’s Amazon Rain Forest live next to “lakes of oil.”
They inhabit an area of land where Texaco Inc. and state-run oil company Petroecuador drilled for oil for 40 years. Those same companies, residents and lawyers and other experts allege, have dumped enough drilling waste over the years to create “one of the worst environmental and human health disasters in the Amazon basin,” according to Bloomberg.

One group of activists has called the region the “Amazon Chernobyl,” Newsweek explained. A lawsuit about the matter was filed in 1993, and the case has been tried for the last five years.

According to Bloomberg, Texaco has been charged with dumping 16 billion gallons of drilling-related wastewater. However, Chevron says Texaco’s share of the mess was cleaned up by 1998. Petroecuador, which assumed control of Texaco’s operations in 1990, should be responsible for wastewater released from 1990 until 2007, Chevron stated.

Residents living amid the oil companies’ operations say they have contracted a variety of health conditions, including cancer, because of the waste dumping. Doctors, engineers and biologists say that 1,401 people died.

The waste dumping could be remembered as the most expensive “corporate ecological catastrophe” in the world once a judge rules on the matter, according to Bloomberg. If Judge Juan Nunez follows the recommendation issued by an expert panel, Chevron Corporation, the current owner of Texaco, could pay up to $27 billion in damages.

Newsweek reported that Chevron has tried encouraging the Bush administration to stop trade preferences for Ecuador if the case isn’t thrown out. However, one attorney fighting Chevron on the matter says the company is trying to make Ecuador “cry uncle.”

Judge Nunez is expected to rule on the matter later in 2009.

Background: Chevron’s argument

Chevron has contended that it was released from liability in the case after paying $40 million for environmental cleanup in the 1990s, Reuters reported. Plaintiffs say contaminated water and soil have made them sick, but proving their illnesses are a result of the contamination has been difficult. The company has promised to appeal its case to an international court if it loses in Ecuador.

Nunez seems aware of the magnitude of his decision. “The Amazon gives the breath of life to humanity,” Bloomberg quoted Nunez as saying. “That’s why this is the trial of the world.”

Analysis: Is mediation a possibility?

In August 2008, Eduador President Rafael Correa announced that he planned to sit down with Chevron officials and lawyers to discuss the Amazon case. Chevron, which has called the lawsuit a “judicial farce,” according to the International Herald Tribune, agreed to the meeting after Ecuador had said it would agree to an out-of-court settlement over the dumping issue.

No date for the meeting was given, the Herald Tribune reported, but Correa was quoted as telling Ecuadoreans, “Be confident that you have a patriotic and sovereign government that will never again bow to the interests of big transnational” organizations.

Historical Context: Environmental pollution legal settlements

The Chevron case joins a long list of environmental pollution cases that have netted sizable settlements for people affected by them.

The Exxon Valdez Spill

In 1989, the Exxon Valdez supertanker spilled 11 million gallons of oil into Alaska’s Prince William Sound. ExxonMobil was initially required to pay $5 billion in punitive damages, but the United States Supreme Court reduced that amount to approximately $500 million in June 2008, according to The New York Times.

In maritime cases, Justice David H. Souter explained that punitive damages, considered a punishment, generally should follow a one-to-one ratio with compensatory damages. Exxon had already paid about $507 million to plaintiffs in this case.

The Erin Brockovich Case

Another landmark settlement over environmental pollution took place in 2006 when the PG&E utility holding company agreed to pay up to $315 million to settle a case about the discharge of hexavalent chromium, a cancer-causing agent, into groundwater used by small communities in California. This case was popularized by the movie Erin Brockovich.

Union Carbide Leak

Considered one of “the world’s worst industrial accidents,” a gas leak at the Union Carbide chemical factory in Bhopal, India, killed hundreds of people in 1984. According to the BBC, a deadly gas cloud drifted over Bhopal, making it difficult for many to breathe. One Bhopal resident was quoted as saying, “Mothers didn’t know their children had died, children didn’t know their mothers had died and men didn’t know their whole families had died.” Union Carbide paid $470 million in that case, Bloomberg reported.

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