Historical News Releases & Statements

April 8, 2008

Ten Most Outrageous Claims in So-Called "Expert's" Report in Environmental Trial in Ecuador

QUITO, Ecuador, April 8, 2008 - The report submitted by Court-appointed expert Richard Cabrera to the Superior Court of Nueva Loja last week is more notable for its outrageous and unsubstantiated claims than for any meaningful role it might play in the ongoing environmental trial in Ecuador, Chevron said today.

Mr. Cabrera's report, according to Court instructions, was to solely determine what, if any, environmental effects stem from the former oil consortium of state-owned Petroecuador and Texaco Petroleum Company (Texpet). Instead, it ventures well beyond the Court's mandate and includes a long list of claims and assertions that have not been substantiated and have little or nothing to do with Texpet's involvement in the oil consortium from 1964 to 1992.

"The absurdity of Mr. Cabrera's unfounded allegations and preposterous compensation claims could just as easily have been written by the plaintiffs' attorneys themselves. His report is consistent with the plaintiffs' long-standing campaign to extort money for matters that have nothing to do with Chevron or Texaco," said Ricardo Reis Veiga, managing counsel for Chevron Latin America. "How could any reasonable person believe Texaco could be held responsible — legally or morally — for the damages suggested by Mr. Cabrera, who has neither the evidence nor license to draw such conclusions?

The Ten Most Absurd Claims in the Cabrera Report

1. Texaco is responsible for all oil contamination in the Oriente

Petroecuador has operated the Oriente oil fields exclusively for more than 17 years with a well-documented record of hundreds of oil spills and environmental neglect. Despite this, Mr. Cabrera alleges that "all of the contaminants released into the environment are still the exclusive responsibility of Texpet" from the time that it operated as the minority partner in a consortium with Petroecuador, and also for those up until the present day. Yet Mr. Cabrera ignores the facts that a) Texpet conducted a thorough remediation which received the approval of the government, and b) that Petroecuador's own data show that from 2002 to 2007 alone it was responsible for more than 1,000 spills amounting to as much as 71,000 barrels spilled.1 Yet nowhere does Mr. Cabrera reconcile this dilemma nor is Petroecuador's responsibility for the condition of the Oriente properly addressed.

2. Absurd remediation calculations

First, Mr. Cabrera incorrectly states that all of Texpet's and even Petroecuador's Project for Eliminating Pits in the Amazonian District (PEPDA) remediation are insufficient even though the appropriate agencies within the government of Ecuador approved all of these clean-up projects. Mr. Cabrera's call for $1.7 billion for soil remediation amounts to more than $5 million per site for the 335 oil wells which were drilled during consortium operations. To put this claim into context, the average remediation cost for Petroecuador's (PEPDA's) program currently under way is about $150,000 per site — amounting to a 3,283% increase for Cabrera's proposed bill to Chevron. Additionally, Mr Cabrera ignores the fact that Petroecuador has already scheduled remediation on the remaining pits for which he assigns responsibility to Chevron, one has to wonder where this additional remediation money would go.

3. Chevron should pay to upgrade Petroecuador's Infrastructure

Mr. Cabrera proposes that Chevron pay $375 million to upgrade and replace equipment that Petroecuador has owned, operated and profited from for seventeen years. On what basis is Chevron responsible for this? Furthermore, it is common knowledge that Petroecuador has failed to maintain their equipment. According to Manuel Muñoz, the National Director of Environmental Protection (within the Ministry of Energy and Mines), on May 10, 2006:

"I want to bring up that there is a very serious problem regarding the pipelines, regarding all transmission systems … which have mostly become obsolete because the budget is not adequate to replace them. Mr. President, this is one of the most important sources of contamination because their useful life has come to an end and they have not been replaced, so spills occur …"

Mr. Cabrera's suggestion is tantamount to asking a person who sold you a car seventeen years ago to replace the car because it's worn out for lack of maintenance.

4. Chevron should provide potable water systems to the Oriente

Mr. Cabrera recommends that Chevron should cover the cost of a $428 million project to improve drinking water systems in the region without even demonstrating that drinking water is impacted by oil-related chemicals. In fact, Mr. Cabrera admits that "oil operations aren't directly responsible for all of the potable water contamination and all of the adverse health affects suffered." Nevertheless, Mr. Cabrera, who never collected a single drinking water sample to support his claim, ignores the facts that: a) the only valid data available clearly demonstrates that drinking water sources, public or private, meet safe drinking water limits for oil-related chemicals, b) most of the people in the area where he proposes to install water systems are already served by public water systems that, as mentioned before, meet safe drinking water limits for oil-related chemicals, and c) where there is measurable water contamination, it is due to animal and human wastes in the local water supply.

5. Requirement to compensate cancer victims

Even though the plaintiffs' lawsuit does not seek damages for alleged health impacts, Mr. Cabrera recommends that Chevron should pay $2.9 billion in compensatory damages for 428 cancer-related deaths. Cabrera does not establish either that oil production caused any type of cancer or that Chevron was responsible in any way. Apparently, the author relies on discussions with local residents, without verifying the self-reported effects through medical examinations and reports. The problem with an approach like this was illustrated in a U.S. Court decision last year in which a Federal Judge concluded that health claims against Chevron, brought on behalf of Ecuadorian plaintiffs, were knowingly false.

The San Francisco case was filed by the same U.S. attorney who launched the litigation against Chevron in Ecuador. Under oath, his clients admitted that they had fabricated their claims of cancer and leukemia. As a result, he was fined and sanctioned by the Court. Subsequently, the case was dismissed.

Meanwhile, Ecuadorian government statistics (INEC) show that there is no evidence of excess deaths from cancer in oil producing regions of the Ecuadorian Amazon. The total cancer mortality rate in Oriente cantons where oil production has taken place is less than the total cancer mortality rates in nearby Oriente cantons where there was limited or no oil production activities.

6. Chevron should pay for the reforestation of sites in the former concession area

Using a warped line of logic that, taken to its full extent would suggest that all oil development in the government-granted concession area is illegal, Mr. Cabrera claims "direct losses in the tropical rainforest" required for the installation of well sites and production stations, and calls for a restoration cost of $875 million to $1.697 billion for the wells and production sites. This suggests that Petroecuador should cease operating its sites in order to achieve reforestation of these areas. If this absurd line of reasoning was applied to Petroecuador's oil operations, they would be liable for much more than $2 billion since they have drilled many more wells in the Oriente than Texpet did. Texpet fulfilled it contractual obligations to the Government to develop and produce oil from the concession area.

7. Texaco is solely responsible for introducing alcohol to the indigenous communities

Among the adverse impacts that Mr. Cabrera describes as "not being a natural byproduct of the process of cultural contact, but rather part of a systematic practice" on the part of Texaco is the exposure of the indigenous people to money, alcohol and the Spanish language. To support his point, Mr. Cabrera points to the alcohol-related death of a Cofán shaman, "gravely affecting the health and community cohesion" of this group.

8. Texaco is responsible for sexual assault by oil workers in the region

Mr. Cabrera makes the very serious claim that 10.1% of the people he interviewed said that "at least one woman in their family was a victim of sexual abuse on the part of oil workers." Chevron believes that any allegation of sexual assault should have been investigated thoroughly by law enforcement authorities. However, Mr. Cabrera's report presents no evidence to support the assertion or inference that Texpet was somehow associated with or responsible for such criminal conduct.

9. The data from the Havoc Laboratory used by the plaintiffs is "irrefutably valid."

Mr. Cabrera determines that all of the data presented by the plaintiffs in the judicial inspection phase of the case are "irrefutably valid," even though they did not provide any quality assurance documentation and they used laboratories that were not certified to conduct the analyses.

On eight separate occasions, lawyers for the plaintiffs and their laboratory have blocked a judge in Quito from performing an inspection. The inspection of the Quito-based Havoc laboratory was originally ordered by the Civil Court of Pichincha (Quito) in February 2006. Chevron had noted to the Superior Court of Nueva Loja that the laboratory was not properly accredited by the Ecuadorian Accreditation Organization (OAE) to perform the necessary analyses required in the evidence gathering phase of the trial. One must ask how Mr. Cabrera comes by his conclusion when plaintiffs' attorneys themselves blocked a Judge's efforts to make such a determination.

Meanwhile, analysis of Chevron's water and soil samples confirm Texpet's remediation was effective and demonstrated that the remediated areas pose no significant risk to human health or the environment. In fact, the only settling report prepared by independent experts assigned by the Court to assess the results of the specific site inspections found that Chevron's conclusions were valid.

10. "Unjust Enrichment"

In another example of Mr. Cabrera going beyond the scope of his instructions from the Court, he recommends that the Court consider awarding the plaintiffs $8.3 billion in damages for "unjust enrichment" for allegedly having "saved great quantities of money by operating the concession with operational practices aggressive to the ecosystem." This conclusion suggests the company's behavior was somehow inappropriate, even though it complied with all contractual obligations and government regulations. Moreover, it stands in stark contrast to the realities of the situation, where Petroecuador and the government received approximately 95 percent of all moneys generated by the consortium in the form of royalties, taxes and revenues. Altogether, this amount represented more than 50 percent of Ecuador's gross national product during that period.

"Mr. Cabrera's ploy to assign liability to Chevron for erroneous and unsubstantiated damages defies the law, logic and the most basic tenets of fairness," Veiga added. "Chevron will file a petition with the Court asking the Judge to reject the report. The several irregularities observed during Mr. Cabrera's field work, his refusal to comply with Court orders and the excesses contained in the report renders the document illegitimate and calls into question the author's motives. One can only marvel at the report's alignment with the plaintiffs' lawyers' cynical attempt to extort money from Chevron and our shareholders."

1El Universo, January 23, 2008

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