A Baseless Lawsuit Against Chevron in Ecuador

Can plaintiffs in a lawsuit generate infinite favorable publicity, yet have virtually no substance to back up their claims?  The Amazon Defense Coalition (ADC) has found a way to play into many peoples’ concerns about oil companies—but with very little substance behind their accusations.  ADC is shaking down Chevron for $27.3 billion, with essentially nothing to back it up.

The ADC uses its position as an Ecuadorian Non-Governmental Organization (NGO) to raise funds as a not-for-profit in the United States. With these funds, it pays for a widespread publicity network (including a Washington, D.C. public relations firm) that would never exist in the absence of well-meaning donors. This network publicizes over and over that Chevron is liable for damages of $27.3 billion.  But the claims have no basis in fact.

How could this situation arise?

It seems to me that the Ecuador suit may have begun with good legal intentions, but has gone badly off course. One possible scenario:

Texaco operated in Ecuador until the early 1990s.  By 1992, Texaco turned over all its operations to Petroecuador.  Then Texaco paid for and oversaw a cleanup of many of the oil pits, pursuant to its agreement with Petroecuador and the national government.

In 1993 Texaco got sued in US court over the Ecuador matter.  The ADC was formed at about the same time, probably not by coincidence.  To be accurate, in 1993 there were a lot of unremediated pits related to oil production in Ecuador.  There were many local concerns about what the long-term health issues would be.

Case Dismissed?  Not So Fast…

But in 1995-1998, Texaco cleaned up its share of the pits, pursuant to an agreement with Petroecuador and the Ecuadorean government.  The cleanup was good enough that new vegetation started to grow on these sites. Eventually, after a lot of legal haggling, the US court case was dismissed on grounds of forum non conveniens.  So what happened?  Plaintiffs filed a new case in Ecuador in 2003.

Then with the new case in Ecuador, the plaintiffs started learning some unpleasant truths—Texaco had done a pretty decent job of cleaning up the pits. There wasn’t any evidence linking Texaco-remediated sites to higher cancer rates, and tests for soil and water pollution kept coming up negative.

So what were the plaintiffs’ lawyers to do? Drop the case?  No way. They had the big troop of ADC folks, whom they had convinced of a huge problem. These ADC folks volunteered their time and contributed money to the cause.

Also by that time, the suit was in Ecuador where the court system was much looser (and has become more so over time).  Almost any allegation can be made in a lawsuit, no matter how scandalous.

When current President of Ecuador, Rafael Correa was elected in 2006, he made it clear that he was on the side of ADC.  Correa made it even easier for the plaintiffs to paint the story however they wanted, and to get the court to support them so that results came out as they wanted.  In his weekly radio program, Correa has talked about his support for the ADC and his solidarity with the Ecuadorian lawyers in this case.

The US trial lawyers in the case, and their Ecuadorean co-counsel, started embroidering on the truth, and found they could get away with it.

Instead of just trying to get back to where they would have been if the pits hadn’t been remediated, the lawyers decided to make a huge suit out of it — $27.3 billion instead of the original $1 billion. To get to such a large suit, a lot of embroidering on the truth was needed—including accusations that had little to do with the underlying facts.

Complicated Case

The nature of the case was so complicated that only a very few at the top of ADC understood how misstatements were being made. The rank and file of ADC, let alone the local citizens near the Ecuadorean oil operations, never knew the difference.

Most of the well-intentioned people who had volunteered their time and money to the ADC never figured out where the paths diverged. It seemed like such a “good cause,” and as the allegations increased, ADC donors became more and more convinced they were doing the right thing.

US Press Takes Sides – Against the Oil Company (Surprise!)

Almost all of the US press assumed that if an NGO was making the allegations, there must be some substance behind them. Certainly, an oil company can’t be believed in this day and age.

Once the story got started – including the catchy (but totally false) notion that Chevron caused an “Amazon Chernobyl” — it was easy to propagate.  More and more media were unwittingly drawn into what was pretty close to a multi-billion dollar scam.

The fact that the suit was in a foreign country and much of the evidence was in Spanish made it even easier to issue accusations as if there were substance behind them, and to pass off problems caused by the state-run oil company, Petroecuador, as problems caused by Chevron.

Examples of Baseless Allegations and Questionable Claims

1. Pits recently in use by Petroecuador are being passed off as showing damage caused by Texaco Petroleum prior to 1992.

Newspapers and magazines are peppered with photos such as this one from the Economist:

Looks terrible, huh?  Except that it’s not a Texaco pit.  It’s a pit from Petroecuador operations.  Whoops.  Wrong oil company.

When the ADC shows reporters pits at issue in the suit, it shows pits such as the one above with liquid oil in them. Any pit that still has liquid petroleum in it clearly has been in recent use (by Petroecuador), because the more volatile elements quickly evaporate in the heat of the Amazon, leaving a substance similar to asphalt.

Texaco has been completely out of the country since 1992.  So that means the pit shown in the photo is one that Petroecuador has been using. Trying to pass it off as Texaco’s responsibility is just plain fraudulent.

Texaco remediated 161 pits back in the 1990s.  These were Texaco’s responsibility under its agreement with Petroecuador and the government of Ecuador.  These old, remediated pits are undetectable to someone now looking at the sites, based on the ones I saw during a recent visit.

2. Water pollution that is either non-existent, or that is caused by current Petroecuador operations, is being passed off as the responsibility of Chevron.

The example of Texaco-caused water pollution that is now being offered to the press is that of “Mr. Salinas’ well.”  In the movie Crude and in a recent segment on the CBS News show, 60 Minutes,  Mr. Salinas indicates his well is polluted with petrochemicals, and that this has caused health problems.

One problem with this allegation is that if it is true, it could not possibly be the fault of Texaco. Mr. Salinas’ well was tested in 2005, as part of the official, court-sanctioned “Judicial Inspection” phase of the Ecuadorian trial. When it was tested in 2005, there was no petrochemical contamination as determined in tests performed by the plaintiffs and the defendants. So if there is petrochemical contamination of the well, it must have occurred after 2005 – and long after Texaco left Ecuador.

A May 11, 2009 article  in Terra Magazine talks about pollution of the well near Mr. Salinas’ house caused by a recent Petroecuador accident. If there was a problem with pollution at the time of the filming in early 2009, this recent Petroecuador accident would seem to be the likely cause.

La Nueva Casa de Senor Salinas

One thing that is strange about the whole story is that Mr. Salinas recently received a new house, as part of a program sponsored by ADC and the Ecuadorian government. As a condition of the grant, the house near the polluted well was to be torn down, because of the pollution.

Yet I had a chance to visit Mr. Salinas’ old house when I visited Ecuador in early June. Mr. Salinas has moved (presumably to his new house), but his old house has not been torn down. Instead, his daughter and her children were living in the house near the well. We could detect no sign of hydrocarbons in the well. In fact, Mr. Salinas’ daughter seemed to be washing clothes with the water, as shown in this photo I took. One wonders whether the extra house was some sort of bribe or payment, in return for testimony.

3. The truth is being stretched when it comes to health issues of people affected by petroleum pollution.

If there were huge numbers of individuals suffering from cancer as the result of petroleum pollution, it’s likely we would find them, and they’d be plaintiffs in this or other law suits. Yet when attorney Cristóbal Bonifaz (the lawyer who filed the initial suit in 1993) filed a suit in San Francisco in 2006 on behalf of nine Ecuadorian plaintiffs supposedly having cancer, three of the plaintiffs didn’t have cancer.  A US federal district court dismissed the case and sanctioned and fined Bonifaz.

The suit in Ecuador against Chevron also does not include the names of any individuals with cancer. Since the Ecuador suit doesn’t claim the particular individuals named in the suit have cancer, it isn’t necessary that any of the 48 named individuals have cancer.  But the lack of individuals with cancer is somewhat strange. When one looks at government statistics regarding cancer in Ecuador, cancer rates are lower in the area with oil extraction than they are in the nation’s capital of Quito.

A second approach to stretching the truth is a peer-reviewed paper whose data appears to have been doctored. The 2008 paper “Monitoring of DNA Damage in Individuals Exposed to Petroleum Hydrocarbons in Ecuador” by Cesar Paz-y-Mino et al. purports to show injuries from hydrocarbons. Yet, another paper with the same lead author from 2004 called “Chromosome and DNA damage analysis in individuals occupationally exposed to pesticides with relation to genetic polymorphism for CYP 1A1gene in Ecuador” has identical summary exhibits.

The likelihood of identical results in two supposedly “different” cohort  studies is virtually nil, especially since there were different numbers of subjects in the two studies. One can only conclude that results of the second study (the one regarding hydrocarbons) are incorrect—the second study really reflects the results of the earlier study on pesticides, but it was tossed into the pileup onto Chevron.

A third approach to stretching the truth is determining the incidence of illness by asking residents their recollections of illnesses of types that may or may not have anything to hydrocarbon pollution. Sewage water in the area is not treated prior to discharge into rivers, so there are a large number of illnesses related to bacterial contamination. Yet no attempt is made to distinguish between illnesses cause by bacterial contamination and illnesses caused by hydrocarbon exposure.

A fourth approach to overstating health issues is repeated mention of the possibility of benzene contamination (for example, here).  Benzene is known to cause cancer.  But in the lawsuit against Chevron, none of the test results submitted to the court show evidence of benzene contamination.

I could go on and on with many other baseless allegations and questionable claims. Some of these are given in a post I wrote earlier for The Oil Drum.

Why Am I Writing This Post?

The primary reason I am writing this post is that I am appalled at the level of journalistic investigation in the US. It is ridiculous that a case such as this one against Chevron can have so many baseless allegations repeated endlessly, without any attempt to discern the truth.

The fact is that I’m an energy-oriented blogger.  I work for nothing (or often, less than nothing).  Yet I’m the one investigating these issues, involving multi-billion dollar international claims that appear to be riddled with fraud.  It’s bizarre.

A second reason I am writing this is that I believe that current press treatment is manifestly unfair to Chevron.   There seems to be a belief today that oil companies are somehow “bad,” so it’s OK to treat them differently.

As far as I am concerned, with world oil shortages ahead, US oil companies will be ever more important to the US mix of energy needs. We are still far from the point where we can expect renewable energy systems suddenly to appear on the horizon and save the day, even if many people would like immediate salvation from them.

I’ll come right out and say that Chevron paid most (only most) of the cost of my trip to Ecuador to see the oil extraction sites.  But Chevron buying me an airline ticket, hotel lodging and a few meals has not influenced my independence of thinking. I’m just following the facts as I see them.

Actually, I came out financially behind on the trip to Ecuador, and risked physical harm, both from yellow fever (for which no vaccine was available) and from the people of the area—we were accompanied by armed guards on the trip.

Meanwhile, I do not own any shares of any oil company or any renewable energy company.  I have no opinion about the future financial prospects of Chevron, although I happen to believe that a company like Chevron is vital to the world’s future energy prospects.

I did not get any answers when I twice attempted to get information from the ADC. I do not see this as a huge disadvantage. The “ADC story” – supported by a slick, Washington, D.C. public relations firm — is told endlessly on the Internet and in much of the mainstream media.

But based on what I saw when I visited the site of the so-called “Amazon Chernobyl,” the ADC story is baseless.  The lawsuit is nothing but a world-class shakedown of Chevron.

Gail Tverberg

July 15, 2009

The Daily Reckoning