Lago Agrio oil field


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. The site's hydrocarbon-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.
In 1993, local residents started a class action lawsuit to force former well operator Texaco to clean up the area and provide for the care of the 30,000 inhabitants affected by oil contamination. In February 2011, an Ecuadorian court ordered Chevron to pay $8 billion in compensation. The verdict was later confirmed by the Ecuador Supreme Court in 2013, with the amount fixed to $9.5 billion. Despite having previously insisted to move the process from the New York Court to Ecuadorian tribunals and having accepted jurisdiction there, Chevron Corporation has refused to pay the judgement claiming that the decision was “illegitimate and inapplicable”. 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. In August 2016, an appeals court upheld the 2014 racketeering verdict against the Chevron adversaries.
In 2018 the Permanent Court of Arbitration in The Hague ruled in favor of Chevron and said the 2013 Ecuador Supreme Court case was obtained "through fraud, bribery and corruption."

Development and ownership

In 1964, Texaco Petroleum Company 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 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 percent 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, however, was still the company responsible for drilling technical operations. TexPet transferred management of the consortium to Petroecuador in 1990. TexPet's concession expired in 1992, leaving Petroecuador as the sole owner. Petroecuador continues drilling in the area.
Over a period of 20 years, the Lago Agrio field produced of oil, with a profit of $25 billion. According to Chevron, 95 percent of the profit from the consortium went to the government. This figure has been harshly contested by the government itself.
Produced oil is transported by the Sistema de Oleoducto Transecuatoriano and Oleoducto de Crudos Pesados 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.

Pollution, remediation, impact

Pollution

An estimated 18 billion gallons of produced water has been diverted into some 880 unlined open pits, causing severe contamination of streams and rivers relied on by local inhabitants for their drinking water, bathing and fishing. Moreover, 650,000 barrels of crude oil have been spilled directly in the jungles and pathways. The produced water contained polycyclic aromatic hydrocarbons at levels many times higher than permitted in the US, where produced water was typically re-injected underground since at least the 1970s. Given the magnitude of the contamination and its lasting impact many environmentalists claim it is the worst oil-related disaster in the world, the amount of crude and toxic waste dumped by Texaco allegedly being 30 times the one spilled in the Exxon Valdez oil spill.

Remediation

In 1995, amid litigation, Texaco — which would later be acquired by Chevron — signed an agreement with the Ecuadorian government to clean a number of waste pits in proportion to its interest in the consortium, at a cost of $40 million. Evidence has been found that the cleanup was incomplete, as the largest part of the area was not restored and the pits Texaco supposedly cleaned up were simply filled with ground on top to hide the toxic wastes.
Though having admitted the dumping of some 18 billion gallons of run-off while drilling for oil in the rainforest, Chevron has maintained that it did so legally and according to industry standards, and has used the 1995 agreement as its primary defense against the ongoing legal claims. However, while the Ecuadorian government released Texaco from further liability, the agreement explicitly applied "without prejudice to the rights possibly held by third parties tor the impact caused as a consequence of the operations of the former PETROECUADOR-TEXACO Consortium."

Impact

The plaintiffs in the subsequent litigation maintain that the pollution has resulted in an increase in cancer rates. Apart from maintaining its lack of responsibility for the bulk of the pollution, Chevron has maintained that there is no causal link between the produced water and cancer. A new health study published in 2017 seems however to confirm such correlation.

Litigation

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

Blocked from suing Texaco in US courts, in 2003 the plaintiffs filed their case 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. A U.S. district court later ruled in support of Chevron's allegations that the report had been ghostwritten by Mr. Donziger and his associates and an environmental consulting firm hired by the plaintiffs in addition to participating in the bribing of the deciding judge.
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, 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.
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, 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, seeking damages of $113 billion.

Environmental consultants

In 2004, the plaintiffs hired biologist Dr. Charles Calmbacher to study and report on environmental conditions in the field. In 2005, the plaintiffs submitted to the court reports bearing Calmbacher's signature which said that there were high pollutant concentrations at two sites. Calmbacher, however, disavowed the reports, and said that his signature had been attached to reports which he did not write, and which misrepresented his findings. He actually found that the contaminant levels at the two sites were too low to pose a risk to human health or the environment.
In 2007, the Ecuadorean plaintiffs hired consultants Stratus Consulting, of Boulder, Colorado, to study environmental conditions and operational history at the Lago Agrio oilfields. At the direction of the plaintiffs’ lead US attorney Steven Donziger, Stratus conducted detailed technical analyses and prepared documents that Donziger and other Ecuadorian plaintiff attorneys provided to an expert appointed by the Ecuadorian court, Richard Cabrera, for him to adopt into his report on environmental damages caused by oil exploration and production in the oilfields. In December 2008, Stratus issued a review of the Cabrera Report endorsing its methods and conclusions, without disclosing that Cabrera had used material written by Stratus and provided to him by the Ecuadorian plaintiffs' attorneys. Stratus was instructed by Donziger to keep their work strictly confidential, and was also told that the process of the Ecuadorian attorneys providing Stratus's work product to Cabrera, who was appointed at the request of the Ecuadorian plaintiff attorneys, was legitimate under Ecuadorian court procedure.
Chevron named Stratus in its 2011 RICO lawsuit against various parties that worked on the Ecuadorian plaintiffs' case against Chevron. Chevron also contacted Stratus' clients in an attempt to pressure the clients to drop Stratus, and vigorously attacked Stratus in the public media. Stratus defended the scientific integrity of its work and maintained that during the course of its work for the Ecuadorian plaintiffs it was not aware that any of the activities of the plaintiffs' attorneys was fraudulent. In April 2013, after revelations during the RICO case about the conduct of the Ecuadorian plaintiffs' attorneys and under intense financial pressure, the company disavowed its involvement in the case, citing the taint introduced by those revelations. Chevron's lawsuit against Stratus was then dismissed with prejudice, meaning that Chevron cannot re-file the claim. After settling the lawsuit, Stratus posted a statement on its website denying that the company "falsified its findings" on the Ecuador project, and noted, "We have taken steps to ensure that a situation such as this will never be repeated." The firm reports that it has engaged a legal consultant specializing in business ethics, and trained staff in appropriate practices.
In 2015, a New Jersey-based environmental engineering firm, the Louis Berger Group released a new scientific report on the contamination. The report found that:
  1. Human "exposure to toxic and hazardous chemicals" migrating from oil pits built by Texaco, to streams people use today for cooking, bathing and washing clothes;
  2. Pits Texaco claimed to have remediated remain contaminated; and
  3. More pits existed than previously thought.
The report concludes: "It is our opinion that information developed, while substantial, just scratches the surface of identifying the environmental condition of the (former Chevron Texaco sites…". LBG prepared the report for the Government of Ecuador to defend against a Chevron arbitration claim to avoid paying a $9.5 billion Ecuador judgment.

Attempts to collect the judgment

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.
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 judgment 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".
Argentina: In June 2013, Argentina's Supreme Court revoked an embargo on the assets and future income of Chevron's Argentina subsidiary.
Belgium: 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.
Brazil: In November 2017, the Superior Court of Justice of Brasil rejected enforcement of the 2013 Ecuadorian Supreme Court award, with the Prosecutor concluding that verdict was “issued in an irregular manner, especially under deplorable acts of corruption.”
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. However, the Court of Appeal for Ontario ruled that Justice Brown's stay was premature and held that the "issues deserve to be addressed and determined." After a long procedural history, the Ontario Court of Appeal ultimately declined to recognize and enforce the foreign judgment. On May 23, 2018, it determined that Chevron Canada's assets were not exigible by Chevron's judgment debtors, because of the principle of corporate separateness. The plaintiffs sought leave to appeal the decision to the Supreme Court of Canada. Leave to appeal was denied on April 4, 2019, thus ending the enforcement proceedings in Canada.
United States: Chevron obtained an injunction by a U.S. federal judge, preventing the plaintiffs from collecting on the Ecuadorean judgment anywhere in the world. This injunction was overturned by the Second Circuit Court of Appeals in September 2011.

U.S. Civil Judgment Against Donziger and Ecuadorian Plaintiffs; Bar Suspension Orders Against Donziger

Chevron acquired outtakes of the 2009 documentary Crude, which covered 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. Donziger 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. Donziger'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 2009, Chevron released videos that it said showed evidence that the Ecuadorian judicial proceedings were corrupted by bribery and political influence. Chevron stated that it had been given secretly recorded videos of three meetings, in one of which the presiding judge appears to state that he will rule against Chevron and that the company's appeals would be denied in spite of the fact that the trial was still in progress. In a second video, Patricio Garcia, who claims to be a political coordinator for the presidency and an official of the ruling political party, suggests that government lawyers would help write the judge's final ruling. Garcia also demands a bribe of $3 million from contractors seeking cleanup contracts, and states that the money will be divided between the judge, the presidency, and the plaintiffs. 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.
In February 2011, Chevron filed suit in New York against Donziger and several other people involved in the plaintiff's case, invoking the Racketeer Influenced and Corrupt Organizations Act and alleging extortion and fraud in that they made up evidence and tried to manipulate the legal system of Ecuador.
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 was to have received 5% of moneys 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.
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 and the two Ecuadorian defendants appealed, and on August 8, 2016, the United States Court of Appeals for the Second Circuit affirmed the district court's judgment against them in all respects.
In September 2018, the District of Columbia Court of Appeal suspended plaintiff's attorney Steven Donziger from practicing law in DC, joining the New York State Supreme Court in doing so. Having no law license elsewhere, Donziger can no longer practice law in the United States. The DC court found Donziger "guilty of professional misconduct...while he represented a number of citizens from Ecuador who sued Chevron".

Public perceptions, paid advocacy

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 make a deal via a proposed threat to end trade preferences for Ecuador.
The plaintiffs, seeking to put public pressure on Chevron to settle, have successfully enlisted public support from environmental groups, and since 2013 the Ecuador government has spent over $500,000 dollars to recruit celebrity advocates for their position.
Environmental and human rights organizations have, for this reason, and independently, campaigned for the company to take responsibility for cleaning up the former oil fields. In 2013, forty-three environmental and human rights organizations including The Sierra Club and Greenpeace USA signed an open letter condemning Chevron's legal actions as a threat to free speech an open society. In May 2014 simultaneous protests were held in twenty countries on five continents against Chevron. Also in 2014, thirteen organizations including Amnesty International filed an amicus brief in opposition to Chevron's RICO attack, again on the grounds of its threat to free speech.
Actors, musicians, and other celebrities have long campaigned against Chevron, blaming it for pollution in the rainforest in Ecuador. Celebrities such as Mia Farrow, Danny Glover, Sting, and Cher have visited Ecuador to bring attention to advocate the Ecuador government's position. Payments of $188,391 and $330,000 were made to agencies representing Mia Farrow and Danny Glover, respectively.
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, invoking the term "genocide." Kennedy was paid for the effort by the plaintiffs, a fact made public in 2012, but left undisclosed in the Huffington Post or other news coverage of her advocacy. 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.
A protest against Chevron's refusal to pay the Ecuador judgment, held outside the Chevron annual meeting in Midland, Texas in May 2014, turned controversial when reporters determined that some of the several dozen protesters had been hired to participate, at $85 per person. The plaintiffs and their American public relations firm MCSquared both denied responsibility for hiring protesters, and the Los Angeles-based film company that recruited the paid protesters declined to identify who ordered and paid for their presence. In turn, Chevron has hired several public relations firms and 60 law firms to advocate on its behalf and launched retaliatory legal actions against the plaintiffs, their lawyers, journalists and environmental advocates. Pulitzer Prize winner Mark Fiore collaborated with Amazon Watch to release a series of animated videos portraying the extent of Chevron's retaliatory actions and the use of the RICO statute to "suppress free speech."
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, and Delphine Batho, a Socialist deputy in France.

Plaintiff financing

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. 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.

International arbitration

On September 7, 2018 the Permanent Court of Arbitration in The Hague unanimously issued an award in favor of Chevron and Texaco Petroleum Company. The decision concluded that the judgment in Ecuador was fraudulent, corrupt and “should not be recognised or enforced by the courts of other States.” The amount Ecuador must pay to Chevron to compensate for damages is yet to be determined. The award found that Ecuador violated its obligations under international treaties, investment agreements and international law.
The Court of Arbitration's findings of fraudulent activities included:
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