In Ecuador, High Stakes in Case Against Chevron

By Juan Forero
(c) 2009, The Washington Post

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 Nunez 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 so-called judicial inspections of ageing 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 Nunez, 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 Nunez.

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 Nunez'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.