Background on Texaco Petroleum Operations, Remediation Program and Judicial Site Inspections

In 1964, Texaco-Petroleum Company (Texpet) and Ecuadorian Gulf Oil Company (Gulf) were awarded a concession to explore for and produce oil in a 400,000-hectare area of the Oriente region of Ecuador. Texpet was selected as operator, and thus executed operational decisions made by Consortium owners. Production began in 1972, and in that same year the government of Ecuador demanded a 25 percent share of the consortium. Consequently, Texpet and Gulf each granted CEPE (a predecessor to state oil company Petroecuador) 12.5 percent each of their respective 50 percent interest in the consortium. Four years later, CEPE acquired the remainder of Gulf's 37.5 interest, giving it majority control of the consortium, with a 62.5 percent interest. Texpet held the remaining 37.5 percent minority interest. Petroecuador assumed operatorship of the oil field in 1990, and Texpet's concession expired in 1992, ending its interest entirely in the venture.

In 1995 Texpet, the Government of Ecuador and Petroecuador signed a Memorandum of Understanding (MOU) stating that Texpet would conduct a remediation program to address environmental conditions at a number of sites that were proportional to Texpet's minority interest in the oil consortium. The Government of Ecuador approved Texpet's compliance plan as outlined by "Scope of Environmental Remedial Work" (SOW, March 1995) as well as its "Remedial Action Plan" (RAP, September 1995) outlining the work to be completed. Using remediation experts and state-of-the-art technology, Texpet conducted the following remedial action projects from 1995 to 1998:

Each site was inspected and certified by the government of Ecuador, and in 1998, having expressed its full satisfaction with the remediation program, the government of Ecuador granted Texpet a full and complete release of all further claims, liabilities and obligations associated with Texpet's involvement with the oil consortium.

Environmental experts who visited the proposed judicial inspection sites during early 2004 concluded that the sites remediated by Texpet were in good condition. Further, these environmental experts witnessed open pits and other evidence of pollution at sites operated by Petroecuador, and concluded that any petroleum contamination remaining in the Oriente was either outside the scope of Texpet's responsibility as directed by the government of Ecuador, or clearly the result of continuing oil operations of Petroecuador and oil activities occurring long after Texpet stopped operating in Ecuador in 1990.