The pollution trial here pitting Ecuadorian Amazon Indians against Chevron has touched off a legal battle between the oil company and Ecuador’s government.

In 2004, Chevron and Texpet, its Ecuadorian subsidiary, filed an arbitration claim in New York asking that Petroecuador, Ecuador’s state oil company, pay their legal bills in the pollution case and cover any damage awards stemming from the litigation.

Ecuador recently fired back, filing papers in New York federal court to block the arbitration. Ecuador argues in part that Texpet—formerly a subsidiary of Texaco and now a subsidiary of Chevron by virtue of Chevron’s 2001 acquisition of Texaco—committed fraud in connection with an environmental-remediation program that lies at the heart of the pollution litigation.

Prompting the legal volleys is the continuing, high-profile court battle in Ecuador between Chevron and indigenous plaintiffs who charge that Texpet, while a subsidiary of Texaco, caused widespread pollution in the Ecuadorian Amazon from 1972 to 1992.

The plaintiffs, claiming to represent 30,000 rainforest Indians, allege Texpet did so while managing partner of a consortium in which Petroecuador held a majority stake. They say toxic production water was disposed of on land and in surface waters rather than re-injected deep underground, and that a remediation program Texaco conducted from 1995 to 1998 to address the environmental impacts of this and other oilfield practices was inadequate.

Chevron says it cannot be held responsible for additional remediation, arguing Texpet met the terms of the remediation contract it signed with Ecuador in 1995. It points out that Ecuadorian authorities in 1998 certified that the work specified in the agreement had indeed been completed and released the company from further responsibility.

It was against this backdrop that Chevron and Texpet filed their 2004 arbitration claim demanding that Petroecuador—Texpet’s former consortium partner—pay their legal bills in the pollution trial, which has been underway since 2003 in Lago Agrio, Ecuador.

The Ecuadorian government response, filed June 20 in New York federal court, takes aim at the 1995 remediation agreement as well as the Sept. 30, 1998 release document certifying completion of the cleanup work. The government claims both documents are invalid because they were “procured by a series of material misrepresentations or omissions that defendants knew were false and misleading…”

Ecuador also asks that hearings on the dispute begin in September of next year, a position Texaco rejects, arguing that if Ecuador can prove fraud it should do so immediately.

Trial marches (slowly) on

In Ecuador, the pollution trial brought by Amazon Indians continues to progress slowly. To date, court investigators have made 42 of the 122 oilfield waste-site inspections originally requested by the two parties in the litigation. On July 21, plaintiffs’ attorneys attempted to speed the process by proposing to trim the number of inspections they’re seeking to 64 from their original 96. Evidence gathered in the inspections, the plaintiffs’ lawyers said, “has become repetitive because it already has demonstrated the pollution caused by Texaco, and the inspections are unnecessarily prolonging the trial.”

The view is not shared by Ricardo Reis Veiga, a Chevron vice president and longtime Texpet executive who helped negotiate the remediation agreement. Says Reis Veiga: “[T]he trial cannot end by inference, and the plaintiffs must demonstrate the charges against Texaco in all the inspections requested.”

The judge handling the case has yet to rule on the plaintiffs’ motion, but in January he rejected a similar request.

Texpet’s track record is not only undergoing scrutiny in the pollution trial; it also has drawn the attention of the Ecuadorian National Comptroller’s office. In a study of the oilfield remediation, the comptroller concluded Texpet’s work plans contained technical and legal deficiencies and omissions, yielding “a very limited remediation and with insufficient technical parameters.” The comptroller asserts Texaco operated 306 wells with 632 pools for waste crude, but that the remediation covered just 108 wells and 225 waste pools.

Reis Veiga acknowledges the difference. He says Texaco wanted the remediation to address all wells and waste pools, with Texaco and Petroecuador sharing the costs in proportion to their stakes in the consortium (37.5% and 62.5%, respectively). But Petroecuador, he says, expressed concern it might not be able to bear the cost and insisted Texaco do its share of the remediation alone while Petroecuador would do the rest later. (See Q&A, this issue.) Reis Veiga attributes any pollution problems to Petroecuador’s failure to meet its obligation.

Investigation underway

Meanwhile, the Ecuadorian Prosecutor’s office has begun an investigation of Reis Veiga and Rodrigo Pérez, Texpet’s legal representative in Ecuador, over allegations of falsified documentation concerning the remediation work. Reis Veiga says it will be proved there was no falsification of documents and that, even if there were, the problem would have had nothing to do with Texaco or any of its officers.

An attorney with the Ecuadorian Attorney General’s office tells EcoAméricas the investigation will require a review of the 1995 remediation agreement and the 1998 document releasing Texpet of responsibility for further cleanup work.

“It is inexplicable that the state would permit one who pollutes to pick what he will remediate…” says the official with the Attorney General’s office. “There was a lot of haste in signing the remediation contract and greater haste in signing the project-completion settlement. If Petroecuador and the Energy Ministry share responsibility, then they’ll have to answer for it, but this situation must be cleared up.”

Julio Prieto, one of the plaintiffs’ attorneys in the Lago Agrio pollution case, says that in negotiating the remediation agreement with the Ecuadorian government, the Texaco subsidiary “presented a panorama very different from the real one, hiding a great quantity of [environmental] damage and ignoring the law.”

Prieto also questions the government’s role, however. “There are serious suspicions of corruption because there is falsified documentation, and it must be determined if it was falsified by public functionaries, private [functionaries] or both,” he says.