SEC Denies Chevron’s Latest Attempt to Silence its $27 Billion Liability

chevron.jpgFrom 1964 to 1990, Texaco (which later merged with Chevron in 2001), drilled for that precious black gold in the Ecuadorian Amazon. During that time, 18 billion gallons of toxic wastewater was dumped, and about 16 million gallons of crude was spilled. Hundreds of open pits, filled with toxic waste were also abandon in the forest. As a result of this “cost of doing business,” groundwater and soil became so contaminated, that locals began developing stomach and uterine cancer and birth defects.
In 1992, Texaco handed over the polluting operations to Petroecuador, and walked away from what had really turned into a massive environmental and public health crisis. Chevron did clean up about one percent of the mess, costing the company about $40 million. And here’s where it gets messy…

Last year, environmental consulting firm, Stratus Consulting, conducted a damage assessment of Texaco’s former operations. Based on the latest scientific data concerning groundwater contamination and the cancer deaths caused by the oil contamination, Chevron’s potential liability came to around $27 billion. This study added further fuel to the current litigation over who should pay for the real environmental cleanup in the region.
Of course, Chevron is challenging the whole thing based on scientific and legal grounds. After all Chevron’s “inspections” don’t seem to coincide with the latest inspections. According to Chevron’s 2006 Corporate Responsibility Report, “the evidence obtained by Chevron’s nominated experts show there are no significant oil-related risks to health and the environment in the areas remediated by Texpet (Texaco Petroleum Company).” In Chevron’s defense, the Ecuadorian government did grant a full release of liability in 1998. So on those grounds, is it safe to say that Chevron really doesn’t have any further responsibility for cleaning up those sites? I guess that depends on who you ask. But some shareholders are still not satisfied with how the company has handled this issue.
Two large pension funds in New York that own more than $1 billion in Chevron stock sponsored a resolution to call on management to assess whether the company’s operations in host countries comply with environmental regulations. This resolution came as a result of evidence that Chevron had used lax environmental standards in developing nations that allow the company to pollute with little to no accountability.
And according to plaintiffs, Chevron’s lawyers proposed that the Ecuador court adopt a soil cleanup standard 100 times more lax than what’s accepted in most U.S. states, in an effort to avoid liability.
Bottom line: Shareholders are concerned that Chevron not only filed misleading information with the SEC to downplay the significance of the Ecuador case, but also neglected to set aside funds to satisfy a potential judgment. And that’s what brought about the resolution. As a result, Chevron management attempted to block the resolution, but the Securities and Exchange Commission rejected that attempt this week. The vote will now take place on May 26 at Chevron’s annual meeting.
Now I suspect some will read this, and claim that I’m not being objective. After all, Chevron has dedicated quite a bit of web space to what they call “Facts About Chevron and Texaco in Ecuador.” Here you will find instances of where Chevron finds flaws in the damage assessments, and claims fraud. Certainly I am not an expert in these matters, so I’m including a link to Chevron’s page right here. Take a look at it, and decide for yourself. Let us know what you think.
Is Chevron disregarding its responsibility?
Is the company simply being railroaded?
How much responsibility should fall on the government of Ecuador?

I am the co-founder and managing editor of Green Chip Stocks. We are an independent investment research service focused exclusively on "green" markets.

4 responses

  1. Chevron spends a mountain of money advertising their “efforts” in developing the alternative energy technologies of the future. This always smacked of greenwashing to me, and is now confirmed by Chevron’s dismal environmental record in developing countries. Maybe they should spend less money on green marketing and put some money where their mouth is?

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