Lago Agrio oil field
|Lago Agrio oil field|
|Start of production||1972|
The Lago Agrio oil field is an oil-rich area near the city of Nueva Loja in the province of Sucumbíos, Ecuador. It is located in the Western Oriente Basin. Hydrocarbons bearing formations are the Cretaceous Napo and Hollin formations. Oil was discovered in the area in 1960s. The Lago Agrio field is known internationally for the serious ecological problems that oil development has created there, including water pollution, soil contamination, deforestation and cultural upheaval.
Since 1993, lawyers representing local residents have sought to force former well operator Texaco and its now parent company Chevron Corporation to clean up the area and to provide for the care of those allegedly affected. In February 2011, an Ecuadorian court ordered Chevron to pay $8 billion in compensation, a ruling the company called "illegitimate" and vowed to appeal. In March 2014, a United States court found that the 2011 Ecuadorian verdict was obtained by the plaintiffs against Chevron through "coercion, bribery, money laundering and other misconduct."
- 1 Development and ownership
- 2 Impact
- 3 Litigation
- 4 References
- 5 External links
Development and ownership
In 1964, Texaco Petroleum Company (TexPet) began exploring for oil in northeast Ecuador, in an area which was inhabited by indigenous people. The following year it started operating a consortium owned equally by itself and Gulf Oil, to develop a tract in the area. Nueva Loja was originally founded as a base camp of Texaco. The consortium struck oil in 1967 and began full-scale production in 1972. The Ecuadorian government, through its national oil company CEPE, now Petroecuador, obtained a 25% interest in the consortium in 1974. Gulf subsequently sold its interest to CEPE. By 1976, the consortium was majority-owned by the Ecuadorian government. TexPet transferred management of the consortium to Petroecuador in 1990. TexPet's concession expired in 1993, leaving Petroecuador as the sole owner. Petroecudaor continues drilling in the area.
Over a period of 20 years, the Lago Agrio field produced 1.7 billion barrels (270×106 m3) of oil with a profit of $25 billion. According to Chevron, 95% of the profit from the consortium went to the government.
Chinese consortia Andes Petroleum and PetroOriental operate the Tarapoa Block in Sucumbios and blocks 14 and 17 in Orellana.
Produced oil is transported by the 498-kilometre (309 mi) Sistema de Oleoducto Transecuatoriano (SOTE) and 506-kilometre (314 mi) Oleoducto de Crudos Pesados (OCP) pipelines to the marine terminal at Balao. Lago Agrio is also connected by the San Miguel–Lago Agrio pipeline. The multiproduct Poliducto pipeline runs from Lago Agrio to Quito.
An estimated 18 billion gallons of produced water has been diverted into open pits. The produced water contained polycyclic aromatic hydrocarbons at levels many times higher than permitted in the US, where produced water is typically re-injected underground. The plaintiffs maintain that the resulting pollution has caused an increase in cancer rates; Chevron and its supporters maintain that no causal link between the produced water and cancer has been shown and that most of the crude spills occurred after Texaco withdrew. Ecuadorian President Rafael Correa, visiting the region in 2006, remarked "Let’s not deceive ourselves. There was a crime against humanity here."
In 1995, amid litigation, Texaco agreed to clean a number of waste pits in proportion to its interest in the consortium, at a cost of $40 million. In exchange, the Ecuadorian government released Texaco from further liability. Chevron has used this agreement as its primary defense against the ongoing legal claims. The plaintiffs argue that the cleanup was incomplete.
Lawyers for the indigenous residents of the Lago Agrio field sued Texaco in New York in 1993. The 30,000 member class-action lawsuit accused TexPet of discharging produced water into open pits, contaminating the water that was used by the locals for fishing, bathing, and drinking. The case was dismissed for improper venue in 2001.
Chevron claims that the company is being unfairly targeted as a deep pocket. It maintains that responsibility for damage and cleanup now lies with Petroecuador and the government, and contends that much of the present damage comes from Petroecuador's activities since 1990, including spills from a pipeline system built by the consortium that Petroecuador has not maintained.
Litigation in Ecuador
In 2008, a court-appointed expert issued a report accusing Texaco employees of not only widespread pollution, but deforestation and cultural destruction as well. The report estimated the damages by TexPet between $8 billion and $16 billion, which the expert later increased by $11 billion.
Cristóbal Bonifaz, the lawyer who had filed the initial action in New York in 1993, was dismissed from the litigation in 2006. He went on to file a case against Chevron in 2007 on behalf of new clients who claimed that pollution had given them cancer. The court found that three of the plaintiffs did not have cancer. After dismissing their claims (leaving two claims active), the court imposed a $45,000 fine against Bonifaz for making frivolous claims.
Attorney Pablo Fajardo, who represents the plaintiffs, and activist Luis Yanza received the Goldman Environmental Prize in 2008 for their work in this case. The prize is considered the most prestigious award for environmental protection in the world.
Plaintiffs in the Ecuadorian court case had initially demanded compensation payments of $27 billion. When the court ordered Chevron to pay $18 billion in February 2011 (later reduced to $9.5 billion), the company vowed to appeal, calling the ruling "illegitimate" and "unenforceable in any court that observes the rule of law", and said that "the United States and international tribunals had already taken steps to bar enforcement of the ruling." Plaintiffs were also planning to appeal, as a recent report had put the true damages at $113 billion.
Attempts to collect the judgement
Chevron obtained an injunction by a U.S. federal judge, preventing the plaintiffs from collecting on the Ecuadorean judgement anywhere in the world. This injunction was overturned by the Second Circuit Court of Appeals in September 2011.
Since Chevron Corporation has no substantive assets in Ecuador, plaintiffs filed actions to enforce the judgment against Chevron Corporation subsidiaries in Brazil, Argentina and Canada.
In May 2013, Justice David Brown of the Ontario Superior Court stayed the action, but ruled that the Canadian courts have no jurisdiction to enforce the award ruled by an Ecuadorian court.
In June 2013, Argentina's Supreme Court revoked an embargo on the assets and future income of Chevron's Argentina subsidiary.
Already in 2009, Chevron had filed a complaint against Ecuador under the 1997 bilateral investment treaty between the United States and Ecuador, charging that Ecuador had failed to ensure a fair trial and had reneged on a 1998 contract absolving Texaco of any compensation claims. The three-person tribunal, acting under The Hague's Permanent Court of Arbitration, ruled in 2011 that Ecuador should halt all enforcement efforts of the Ecuadorian judgement against Chevron, both within and without Ecuador.
In February 2013, the tribunal said the Ecuador government should have stopped plaintiffs in the case from going to courts in Brazil, Argentina and Canada to try to collect the judgment handed down by an Ecuadorean court in 2011. A spokesperson for the plaintiffs said the "courts hearing enforcement actions would likely pay little attention to the tribunal since it was not binding on the rain-forest communities". In September 2013, The Hague arbitration panel ruled in favor of Chevron, finding that an agreement signed in 1995 by the government of Ecuador released Texaco Corporation from financial responsibility from any claims of “collective damage.” However, the panel left open the possibility that Chevron could still be liable for damages incurred by individuals.
Allegations of attorney misconduct
In August 2009 a video surfaced showing an alleged member of Ecuador's ruling party, Alianza PAIS, bribing Judge Juan Núñez, who is the presiding judge in the case. In the video, the judge agreed to rule against Chevron, to deny Chevron's appeals, and also discusses the allocation of the $3 million bribe between himself, the president, and the plaintiffs. The video also shows discussion regarding the awarding of remediation contracts that would result from a ruling against Chevron. The judge was forced to resign. Chevron claims it had no involvement in the videotaping, however in April 2010 it was found that one of the men involved in the filming was a long-time Chevron contractor, who in turn was later caught on hidden camera saying he "has enough evidence to ensure a victory by the Amazon communities if Chevron failed to pay him what he was promised". This man was later relocated to the United States with his family at Chevron's expense, where he is also receiving an undisclosed amount of living expenses. The other man involved in filming the video is a convicted drug smuggler.[unreliable source?]
Chevron acquired outtakes of the 2009 documentary Crude which covers part of the case. The outtakes suggest that Donziger considered the Ecuadorian system of justice to be corrupt and had urged Ecuadorian President Rafael Correa to issue criminal indictments against two Chevron lawyers involved in the settlement negotiations of the late 1990s. The two lawyers were subsequently indicted. When Donziger was ordered to testify about this in the U.S. federal case, he claimed attorney–client privilege but was rebuked by the judge. Donzinger subsequently was forced to hand over all his case files, his computers, his tax returns and bank account information to Chevron, and he was deposed under oath. Donzinger's diary, which had been stored on one of his computers, became a matter of public record. The deposition revealed that the 2009 environmental report signed by a court-appointed expert had largely been written by an environmental consultancy company hired by the plaintiffs.
In February 2011, Chevron filed suit in New York against Donziger and several other people involved in the plaintiff's case, invoking the RICO Act and alleging extortion and fraud in that they made up evidence and tried to manipulate the legal system of Ecuador.
In March 2014, a United States district court judge ruled that the Ecuadorian plaintiff’s lead US attorney, Steven Donziger, had used “corrupt means,” including payment of almost US$300,000 in bribes, to obtain the 2011 court verdict in Ecuador. The judge did not rule on the underlying issue of environmental damages. While the US ruling does not affect the decision of the court in Ecuador, it has blocked efforts to collect damages from Chevron in US courts. Donziger promised to appeal.
In 2010, the plaintiffs engaged the Washington D.C. law firm of Patton Boggs to oversee the legal strategy of suing Chevron in various countries around the world, to collect the Ecuadorean judgment. Patton Boggs is the leading lobbying firm in the US in terms of revenue, and was seen as having the international legal experience needed to enforce the award against Chevron. In return, Patton Boggs would receive five percent of the money collected. Chevron sued Patton Boggs, alleging that by participating in the case, the law firm knowingly abetted fraud on the part of the plaintiff’s lead attorney, Steven Donziger. In May 2014 Patton Boggs agreed to withdraw from the Lago Agrio case, pay Chevron $15 million in damages, assign to Chevron its percentage of claims collected, and assist Chevron in discovery in Chevron’s lawsuits against Donziger and others. In return, Chevron dropped all claims against Patton Boggs. Patton Boggs released a statement that, in view of a US court finding of fraud on the part of Donziger, it regretted its involvement in the case.
Lawyers for Donziger and his two Ecuadorean co-defendants, Hugo Camacho and Javier Piaguaje, appealed Judge Kaplan’s verdict in July 2014. In their brief to the US Second Circuit Court of Appeals, they argued that Judge Kaplan lacked jurisdiction to hear the case. They further wrote that allegations of attorney misconduct should not affect Chevron’s liability for damages, as determined by the Ecuadorean judicial system, a process which included the initial verdict, review by an Ecuadorean court of appeals, and confirmation by the Ecuadorean Supreme Court.
The Lago Agrio case has become a public issue. The plaintiffs, seeking to put public pressure on Chevron to settle, have successfully enlisted public support from environmental groups and celebrities.
Actors, musicians, and other celebrities have long campaigned against Chevron, blaming it for pollution in the rainforest in Ecuador. The government of Ecuadorian President Rafael Correa has stepped in with a media campaign promoting the stars’ animosity toward Chevron. Celebrities such as Mia Farrow, Danny Glover, Sting and Cher have visited Ecuador to bring attention to the scope of the environmental damage in the Amazonian rainforest.
The plaintiffs hired human rights activist Kerry Kennedy to conduct public relations for their cause. Kennedy traveled to Ecuador in 2009, after which she blasted Chevron in an article for the Huffington Post. Neither her Huffington Post pieces nor the news coverage of her advocacy disclosed that she was being paid by the plaintiffs, a fact not made public until 2012. Shortly after her Huffington Post pieces, the plaintiffs lead American lawyer reportedly paid Kennedy $50,000 in February 2010, and the law firm budgeted $10,000 per month for her services, plus $40,000 in expenses in June 2010. Kennedy was also reportedly given a 0.25 percent share of any money collected from Chevron, worth US$40 million if the full amount were to be collected. Kennedy responded that she was “paid a modest fee for the time I spent on the case,” but denied that she had any financial interest in the outcome.
Ecuador is supported in the dispute with Chevron by a Venezuelan group, The Ecuador Solidarity Committee, and the ex-Minister of Environment of France, Corinne Lepage, outgoing Euro Assembly Representative, and Delphine Batho, Socialist deputy
Financing the litigation
Neither the plaintiffs nor their legal counsel have the resources to fight a drawn-out legal battle of attrition with Chevron. To finance the litigation, New York lawyer Steven R. Donziger, who acts as a spokesman and lobbyist for the plaintiffs, sold a percentage of the final settlement to a hedge fund.
Early on, the plaintiffs obtained funding from the Philadelphia legal firm of Kohn, Swift & Graf, PC. In 2009, after investing $6 million in the case, Kohn, Swift & Graf withdrew from the case in November 2009, citing differences with lead attorney Donziger.
The plaintiffs next turned to Burford Capital, which agreed to finance the litigation in exchange for a share of any award to the plaintiffs. Burford invested US$4 million in the case before it announced in April 2013 that the plaintiffs’ lawyers had misled Burford, and it was quitting the case.
Chevron hired former US trade representative Mickey Kantor and former Bill Clinton chief of staff Mack McLarty to lobby the Obama administration to pressure Ecuador to block the lawsuit, by threatening to end trade preferences for Ecuador.
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