Environmental Liabilities in Ecuador

• Background
• Proxy Solicitation Materials
• Shareholder Response to Chevron Opposition
• Rainforest Jekyll and Hyde

Background

Between 1964 and 1992, Texaco Petroleum (TexPet), a joint venture between Texaco and Petroecuador in which Texaco was the operating partner, discharged 18.5 billion gallons of petroleum waste and waste waters into 627 open, unlined pits and directly into rivers, streams and swamps. Most U.S. states had banned the discharge of “produced” water into freshwater streams in the 1940s and 1950s. Most large operators had also stopped using unlined pits to deposit petroleum solid wastes by the 1980s. Between 1971 and 1991, the operation also spilled 16.8 million gallons of oil from the trans-Ecuadorian pipeline – 50% greater than that spilled by the Exxon Valdez.

In 1998, TexPet completed a limited cleanup at a cost of $40 million as part of an agreement with Petroecuador and the government of Ecuador. The completion of the remediation released Texaco from any further obligations or liabilities in settlement agreements reached with Ecuadorian government authorities. The agreement, however, did not address groundwater contamination, nor did it shield Texaco from lawsuits by private parties – hence the current class action, which dates from 1993. For many years, Texaco tried unsuccessfully to have the lawsuit dismissed. Finally it ended up in the Ecuadorian courts, and in a precedent-setting decision, the U.S. Second Circuit Court of Appeals declared that it reserved the right to intervene to ensure that ChevronTexaco respects the ruling of the Ecuadorian court. A subsequent attempt by ChevronTexaco to have the case arbitrated in the United States was dismissed last year by a New York federal court, which resulted in considerable negative publicity in both Ecuador and the United States.

This civil class action lawsuit (Aguinda v. Texaco) now represents 30,000 residents of the Ecuadorian Amazon. Judicial inspections are currently taking place and are expected to continue for many months. The plaintiffs are seeking a judgment that would compel Chevron to remediate hundreds of sites where it operated and left toxic waste. The plaintiffs believe that the contaminated land and waters are responsible for outbreaks of cancer, miscarriages and reproductive disorders, skin diseases and other serious ailments. If found liable, Chevron could be held accountable for billions of dollars of remediation costs.

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