Environmentalists have criticized a settlement this month in which Chevron agreed to pay R$95.2 million (US$41.7 million) to dismiss two lawsuits related to two offshore oil spills, substantially less than the R$40 billion (US$17.5 billion) in damages that federal prosecutors originally sought.

In the first spill, in November 2011, 3,700 barrels escaped from seven ocean-floor fissures, each roughly 250 meters (820 feet) long, near a Chevron deepwater exploratory well at the Frade field off the coast of southeastern Rio de Janeiro state. In the second spill, in March 2012, small amounts of oil seeped from a half-mile seafloor fissure near the first spill site. Prosecutors had sought a combined R$40 billion in reparations for the two accidents.

Chevron took responsibility for both spills, the first of which was caused by an underground blowout that fractured the ocean bottom, according to the regulatory National Oil Agency (ANP).

Transocean, Chevron’s drilling operator, also signed the settlement, but that company faced no penalty because ANP did not hold it responsible for the spills. The settlement was also signed by ANP and Ibama, the enforcement arm of the Environment Ministry. ANP and Ibama assessed the damage done by the spills and respectively collected R$25.6 million ($11.2 million) and R$42.8 million ($18.7 million) in fines from Chevron.

Plans for penalty funds

Funds from the oil company’s payment of an additional R$95.2 million in compensatory penalties will be used for projects to protect coastal biodiversity, improve environmental education and strengthen small-scale fishing, the settlement text said.

Chevron last December had offered to pay R$90 million ($39.5 million) to offset environmental damage caused by the spills. That figure was based on a comparison with damage and reparations payments made by BP in connection with its Gulf of Mexico spill in 2010 and by Exxon in relation to the Exxon Valdez tanker spill in Alaska in 1989.

The settlement did not set a value on how much Chevron would invest to make its procedures and operations safer, though Chevron in December pledged to spend R$221 million ($96.8 million) in safety-related upgrades. (See “Proposed oil-spill settlement is criticized in Brazil”—EcoAméricas, Dec. ’12). But Chevron agreed to round-the-clock monitoring of the spill sites with at least two emergency vessels, radar surveillance and remotely operated vehicles on the ocean bottom to ensure oil does not resume leaking from the fissures.

The original R$40 billion in damages sought for both spills was set by Eduardo Santos de Oliveira, a federal prosecutor in Campos, the city in Rio de Janeiro state nearest the spill. In December, Santos de Oliveira told EcoAméricas he picked a high figure in part because the spills fractured the sea floor and damaged its geological structure.

Without explaining why, the settlement bypassed that issue, stating only that “the damage compensated by the settlement is specifically due to the oil spilled and not to the geological damage of the areas where the incidents of November 2011 and March 2012 occurred.”

“How can you set a figure of R$95.2 million in compensatory environmental damages for the spill in a settlement that doesn’t consider seabed fractures as criteria for calculating environmental damages?” argues Renata Nitta, Climate and Energy Campaigner for Greenpeace Brazil.

Lack of evidence cited

Rio de Janeiro federal prosecutor Gisele Porto, who was involved in settling the lawsuits, says the settlement figure was far lower than the R$40 billion in reparations sought in the two original lawsuits because the original figures were developed “before either Ibama or the ANP had investigated what environmental damages were caused by the spills and were based on a presumption of damage.” She adds: “Neither Ibama nor the ANP could find evidence of damage to marine fauna or flora or to the coastline.”

Counters Richard Charter, Senior Fellow at the U.S.-based Ocean Foundation: “Because the volume of oil Chevron spilled was not an inconsequential amount, and occurred on the sea floor in deep water, one would not expect to see visible environmental damage because the oil could have either spread as a sheen over a large area or settled as a tar-mat on the ocean bottom. But what is visible and is most worrisome in these types of blowout-triggered spills are the fractures created on the sea floor from which oil seepages can’t always be stemmed. Chevron got lucky because natural processes appear to have stopped the seepages.”

Charter argues a steeper fine was needed to send a message.

“Heavy fines are meant to be a wake-up call to companies to operate more safely and for regulators to be more rigorous,” he says. “It’s too early to say whether this slap-on-the-wrist-sized fine Chevron received will be such a wake-up call or whether Brazilian authorities will make drilling safer in their waters.”