Big Oil on Trial

In the Ecuadorian Rainforest, Chevron is Charged as a Major Polluter

In a courtroom crawling with conga ants and abuzz with mosquitoes, Briceno Castillo waited his turn. Standing near a black, putrid-smelling mud puddle the 70-year-old peasant farmer watched the judge talk. Then he watched the lawyers talk. When it was his turn, he told how, 35 years ago, he came here to the Ecuadorian rainforest, whacked out a space and planted good crops. Then the oil companies came, he said, and left a mess that killed everything.

Castillo and his dead crops are part of a billion-dollar environmental lawsuit against Chevron Corporation, whose predecessor company, Texaco Petroleum Company (known as Texpet), first drilled for oil in Ecuador in 1967, setting off a boom that has contaminated rivers and streams, killed plants and animals, and caused strange illnesses in people living at the headwaters of the Amazon River network, according to activists.

Located at the world’s sweltering midriff, Ecuador, a grindingly poor, politically unstable country, has 13 million people and proven oil reserves of 4.4 billion barrels, the 26th largest in the world.Ecuador’s Oriente region covers 38,000 square miles of one of the world’s most ecologically diverse rainforests.

The Oil Rush

Texpet started an oil boom that became what some call the worst oil-related ecological problem on the planet. Across once-pristine rainforest, sloppy extraction and poor regulation have left open, unlined pits gurgling with black sludge. Methane pipes belch fire and contaminants. Processing plants spew gases, unchecked by temperature or contamination controls.

Some rivers and streams are coated with a rainbow sheen, and people forced to drink from them scoop away the oil to get the "good water" it covers. The human fallout, documented by activists, attorneys, nonprofit groups and reporters, is staggeringly heart-wrenching: Children born with fused fingers and deformed eyes; teenagers with tumors; amputated limbs; slow deaths from stomach cancers.

In 1993, U.S. lawyers representing some 30,000 Amazonian jungle dwellers sued Texaco (which merged with Chevron Corporation in 2001), charging that it dumped 18 billion gallons of "produced water," a toxic byproduct of oil extraction, into rivers and streams people used for bathing, drinking and cooking. Saying it would enforce any judgments against the company, a U.S. federal court kicked the case to Ecuador in 2003, where it wound up in a sweaty, low-slung jungle oil town named Lago Agrio (also known as Nueva Loja), a chaotic place with a reputation for housing Colombian rebels, drug runners and kidnappers.

For months in jungle isolation, the case has sleepily inched along as courts inspect oil wells, scientists examine soil and water samples and lawyers argue over epidemiological data. Along the way each side refines its pitch. Chevron says Texaco, which was a minority partner in a government-controlled consortium from 1962 to 1992, used industry-accepted practices at the time, and has seen no solid evidence proving health risks associated with the company’s activities. Most important, Chevron says it was released from liability by the Ecuadorian government, which in 1995 approved a $40 million remediation program. Rodrigo Perez, Texpet’s former general manager, told me the figure plaintiffs say they want—$6 billion—is arbitrary, the result of an off-the-cuff assessment by a consultant.

Plaintiffs say the liability release signed by the Ecuadorian government was obtained fraudulently. They accuse Texaco of cutting corners by injecting produced water into streams rather than back into the ground, and of passing substandard oil infrastructure to its successor, PetroEcuador, the state oil firm.

Like many U.S.-based environmental suits, science is key, with each side spinning statistics. Plaintiffs trumpet a study published in the Journal of Epidemiology that found, among other things, that children under 15 were three times more likely to contract leukemia in places near Texaco operations than in other Amazonian provinces. But the study concluded the data "cannot lead to a causal inference," a qualification Chevron has taken and run with.

Observers say the case inched along in that way until October, when plaintiffs upped the stakes by accusing Chevron before an international human rights body of having improper ties to the Ecuadorian military that could be putting the case and the lives of their legal team in danger.

Military Might

The Trans-Ecuadorian pipeline carries crude from the country’s eastern rainforests to the Balao terminal in the port town of Esmeraldas. Paralleling a main highway, it crosses scraggly jungle farms, banana trees and African palms, muddy streams and the front yards of wooden shacks dotted with bony donkeys and cattle. Nearly half of Ecuador oil leaves Esmeraldas for the U.S., which increasingly sees the strategic importance of diversifying from Middle Eastern supplies.

Grindingly poor, in debt and well off Americans" radar screens, Ecuador fits the bill. As the New York Times" Peter Maas has pointed out, in an oil-hungry world where "expediency is the rule," every barrel not taken from environmentally sensitive areas in the U.S. will come from nations such as Nigeria, Burma and Ecuador—poor, developing and outside the Middle East. Barrels that leave the Alaskan artic unscathed, in other words, will come from Amazonian rainforests loaded with rare plants and animal life, untapped human cultures and ethno-botanical knowledge. In Ecuador, four major companies hold rights to 24 million acres of land, and the government plans to open more rainforest areas, according to Atossa Soltani of Amazon Watch, a California-based activist group supporting the plaintiffs.

Rising indigenous opposition has stalled some development, but a legal win against Chevron could set big precedents. "This is as much about the future as it is past wrongdoing," Soltani says. "If we hold them accountable, then we raise the bar for future projects."

Last November, plaintiff groups asked the Organization of American States (OAS) to protect the lives of four lawyers and an activist in their employ. The petition claims: a skillful robbery of a law office in which only material that seemed relevant to the case was stolen; a threatening phone call to the lead plaintiffs" lawyer; and a man identifying himself as a member of a military unit with known links to Chevron appearing at the home of another attorney and putting him under surveillance.

Plaintiffs also say the nine-year-old daughter of an Ecuadorian social activist who is heavily involved in the case was the recent victim of an attempted kidnapping. In December, an OAS commission requested that the Ecuadorian Government "adopt necessary measures to guarantee the life and the physical safety of Alejandro Ponce Villacés, Ermel Chãvez, Pablo Fajardo and Luis Yanza."

The plaintiffs are pointing to Chevron’s links to an Ecuadorian Special Forces Group known as Rayo 24 (Lightning 24). "Since the beginning of the judicial process, Chevron lawyers and executives have received support, protection, and personal security from members of Ecuador’s armed forces," the OAS petition states. "It is a known fact that Ch

evron lawyers and executives continually house themselves with the confines of military installations of the Special Forces Group "Rayo 24" in the city of Nueva Loja
where the trial itself is taking place."

That connection became a hot spot last October, when an Ecuadorian judge cancelled an October 19 inspection of an oil well known as Guanta located in indigenous territory belonging to the COFAN tribe, whose numbers have been decimated as a result of oil exploration. According to copies of the documents, the head of military intelligence for Rayo 24 submitted a report to the court the day before saying COFAN indigenous groups posed a risk for Chevron operatives. Only moments later, Chevron attorneys submitted a written request that the inspection be postponed. It is the timing of that filing that plaintiffs say proves Chevron knew of the report beforehand.

A Fair Trial?

American Steven Donziger is a linebacker-sized attorney and former news reporter who shuttles between Manhattan and Ecuador to advise the plantiffs" legal team. He seems to be a bridge between the indigenous groups and a Pennsylvania firm that has been funding them. I asked him why he was making an issue of this. "We want a fair trial. But when a party to the trial has a private security contract with the Ecuadorian military, it raises concerns as to whether there is manipulation on the part of Chevron," he says.

Donziger also says that contracts between oil firms and the Ecuadorian military are letting companies spy on Ecuadorian citizens under the color of law. Jeff Moore, Chevron’s spokesperson, says company lawyers prepared the Guanta request based on media reports that COFAN members were planning to be at the inspection. He also noted that Chevron was in no way trying to block the inspection, stressing that Chevron had originally requested it.

Moore said his company has never tried to hide the fact that its lawyers live on the military base. He said the military’s protection is a must, and he confirmed that Chevron has a private security contract, but he could not discuss it for security reasons.

"I am aware of 13 people working for companies in the Oriente who have been kidnapped since August of 1999, and two have died," Moore told me. "That is the reason we take security so seriously."

Moore adds that early on in the process the plaintiff’s legal counsel asked Chevron if its personnel could join the company’s "convoy movements to and from the inspection locations for their own security," a request Chevron agreed to "without hesitation." Moore also told me that he personally called a nonprofit group’s representative who was hosting North American guests on an oil well inspection to give them a "heads-up" when the company heard rumors there had been a kidnapping in Lago Agrio the night before.

Is It Ecuadorian Politics as Usual?

Will the spying allegations and Chevron’s military ties help sway the outcome of a billion-dollar environmental case that’s one of the last pegs against petroleum’s push into one of the world’s most important ecological hot spots? So far, these connections have made some waves. In November, Hina Jilani, the UN Secretary General’s Special Representative on Human Rights Defenders, wrote to the Ecuadorian government demanding a full accounting of the alleged acts and the government’s response.

In California, Amazon Watch turned up the pressure. The group sent a letter to Chevron CEO David O"Reilly. "To clarify, we are not accusing Chevron or any of its employees of prompting these unfortunate events," the letter says. "However, the timing and the way these events transpired seem to raise serious questions about possible links between Chevron and elements in the Ecuadorian armed forces who may be involved in these events."

Ecuador is a political carnival whose institutional lunacy taints everything here. The country has had seven presidents in 10 years. During my three-week stay in November, newspapers wrote that President Alfredo Palacio (who took over in April after indigenous protesters forced his predecessor, Lucio Gutierrez, out of office and into asylum in Brazil) had for the 11th time in a matter of months replaced members of Ecuador’s version of the Joint Chiefs of Staff. Another story was a political scandal involving ranking police and military officials caught raiding the bank accounts of a recently deceased financier (whose body that week was exhumed to verify its identity, a grotesquely swollen corpse, surrounded by gawking onlookers).

Perhaps the most important, and predictable, political current: rising indigenous anger at oil companies. In August, as they’ve done before, native protesters wanting a bigger share of oil profits took to the streets, forcing a shutdown of the country’s oil infrastructure, all the while demanding the expulsion of U.S.-based Occidental Petroleum for alleged contract violations.

The effect has been chilling. A consortium led by Houston-based Burlington Resources, for example, has a contract with the government to explore a vast block of rainforests, but is holding back due to intense opposition by the Achuar tribe, which holds the title to the territory. "If you look at the government’s map of the Ecuadorian Amazon, 80 percent is intended to be set aside for oil exploration," says Soltani of Amazon Watch. "Part of the reason oil companies have not been bidding on much of it is indigenous opposition and the lawsuit. They are seeing there are big risks for potentially marginal returns."

Land rights are complicated in this part of the Amazon. Indigenous tribes hold title to territorial lands but the government owns the subsoil rights, which it leases to foreign companies. Some make the legal argument that international conventions signed by Ecuador grant indigenous groups rights that arguably supersede the government’s subsoil claims.

Ironically, Chevron’s military links may turn out to be a bigger deal outside Ecuador. Neither the Rayo 24 contract, nor the kidnapping and intimidation claims, have made dents in the local press. One reason for the lack of interest may be that intimidation and death threats are par for the course here.

Not surprisingly, Ecuadorians are not fazed to hear about army links with oil firms either. Earlier this year, a lawsuit forced the Ecuadorian Ministry of Defense to release security contracts it had with all oil companies operating in the country. One, dated April 2001 between Oxy and the Ministry of Defense, required Ecuadorian soldiers to carry out "counterintelligence operations" to prevent sabotage of oil facilities. (Oxy requested and was given a revised contract in 2004 that did not include references to counterintelligence and made other demands in keeping with the company’s human rights policy, a spokesperson told me.) Some contracts dictated that armed military units control "undocumented persons" in hundreds of square miles of jungle, where few have such documents and those who do have them rarely carry them.

Perhaps one reason for the lack of public outrage is that the military is respected by many Ecuadorians. Alexandra Alper, an American who for two years worked for an anti-mining newspaper in Ecuador, explains, "Historically, the military in Ecuador has been

seen as a big safeguard for the will and wellbeing of the people, ousting several unpopular regimes."

However, Alexandra Almeida of Accion Ecology in Quito tells me that she has interviewed people who say they have suffered at the hands of state forces that were serving oil companies. In one case, she claims, a farmer who opposed oil companies had his fingers cut off.

The Big Picture

In November, news came that Chevron lobbyists in Washington were pushing to attach the case to Ecuador’s Free Trade Agreement. Jeff Moore said Chevron thinks the U.S. should be made aware that Ecuador does not adhere to its contracts.

Indigenous v. Industrial, North v. South, Developed v. Developing, First v. Third. From Ecuadorian oil fields to Peruvian gold mines, that helps explain South America’s map of environmental battles. As countries from China to the U.S. eye these vast and largely untapped lodes, some South American governments (including Bolivia and oil-rich Venezuela) are turning left, pushed by populist sentiment and a weariness of U.S.-backed policies that opened resources to privatization and are blamed for economic chaos in the late 1990s. Just as the Achuar have kept Burlington at bay, poor protesters in Bolivia have pushed out France-based multinational firm Bechtel. The list is long, but the threads are common: a hatred of globalized systems that activists believe would let an oil company hijack U.S. trade accords to win out over dirt-poor people it nearly killed in the first place.

Critics say that countries like Ecuador, which owes billions, are forced by international lending institutions, The World Bank and the International Monetary Fund (IMF), to use oil revenues to pay off debt instead of helping poor citizens. In November, The Nation.com obtained a classified copy of the World Bank’s 2003 Structural Adjustment Program Loan. The deal made Ecuador pay "bondholders 70 percent of the revenue received from any spike in the price of oil, while another 20 percent of the oil windfall is set aside for "contingencies" (i.e., later payments to bondholders).

Activists in the U.S. continue to bite at Chevron’s heels. In October they accused officials of not reporting the trial in Securities and Exchange Commission (SEC) and shareholder reports. Supporters of the case are aligning themselves with Chevron shareholders and are pushing for a clarification of the company’s legacy.

KELLY HEARN, a former UPI staff writer, divides his time between the U.S. and South America. A correspondent for The Christian Science Monitor, his work has appeared in The American Prospect and elsewhere.