Chevron Fined $8.6 Billion for Pollution in Ecuador

Environmentalist Donald Moncayo shows his glove after conducting a test made on an affected field in Lago Agrio January 25, 2011. Moncayo coordinates visits to the polluted fields involved in the $27 billion suit brought against Chevron Corp by local farmers who say the U.S. energy giant polluted the rain forest with faulty drilling practices in the 1970s and 1980s. (Credit: Reuters/Guillermo Granja)

Chevron Fined $8.6 Billion for Pollution in Ecuador

A court in Ecuador has told oil giant Chevron Corp to pay $8.6bn in environmental damages, but the US company has termed the court order as "illegitimate and unenforceable" and said it would appeal.

An Ecuadorean judge ruled on Monday that Chevron was responsible for oil drilling contamination and also asked it to pay a legally mandated 10 per cent reparations fee.

The amount - $8.6bn plus the legally mandated 10 per cent reparations fee - is far below the $27.3bn award recommended by a court-appointed expert, but appeared to be the highest damage award ever issued in an environmental lawsuit.

"We plan to appeal that and every other aspect of this illegitimate verdict and see to it that the perpetrators of this fraud are brought to justice," James Craig, a Chevron spokesman, told the Reuters news agency.

In case Chevron appeals, the lawsuit, which dates from drilling in the Andean nation during the 1970s and 1980s, could drag on.

"This ruling is an intermediate step. The appeals could go on for many years," John van Schaik, an oil analyst at Medley Global Advisors in New York, said.

"But the fact that the Lago Agrio court ruled in favour of the plaintiffs sends a signal to oil companies that, more than ever, they need to be good corporate citizens," he added.

Chevron has long contended it could never get a fair trial in Ecuador and has removed all assets from the country, whose leftist president, Rafael Correa, had voiced support for the plaintiffs.

Plaintiffs disappointed

The plaintiffs were disappointed by the $8.6bn figure and gathered to discuss whether they would push for more money.

"Given the insignificance of the economic figure, we are going to analyse, discuss and decide if we will appeal this decision or not," Pablo Fajardo, a lawyer for the plaintiffs, said in an emailed statement.

The plaintiffs, including indigenous groups, say their hunting and fishing grounds in Amazon river headwaters were decimated by toxic wastewater that also raised the cancer rate.

Residents of Ecuador's Amazon region have said faulty drilling practices by Texaco, which was bought by Chevron in 2001, caused damage to wide areas of jungle and harmed indigenous people in the 1970s and 1980s.

Chevron's shares traded 1.3 per cent higher to close at $96.95 as investors shrugged off news of the court ruling. The stock had been lifted by gains in crude oil, and analysts said a final verdict in the court case was likely years away.

Order hailed

Monday's ruling was hailed by the environmentalist groups, Amazon Watch and Rainforest Action Network, as "proving overwhelmingly that the oil giant is responsible for billions gallons of highly toxic waste sludge deliberately dumped into local streams and rivers, which thousands depend on for drinking, bathing, and fishing".

"It is time Chevron clean up its disastrous mess in Ecuador," they said in a joint statement.

If upheld and enforced, Monday's award would substantially exceed the $5bn originally awarded to victims of the 1989 Exxon Valdez oil spill in Alaska's Prince William Sound. That jury award was later cut down to $507.5m by the US Supreme Court.

Other major environmental damage payments include the $470m paid by Union Carbide in 1989 to India's government for the lethal gas leak five years earlier in Bhopal that killed an estimated 15,000 people.

BP set up a $20bn oil spill compensation fund after last year's massive Gulf of Mexico oil spill, of which about $3.4bn has been paid out.

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