The Amazon vs. Big Oil: Chevron Faces Possible $27 Billion Dollar Damages Claim

San Carlos, Ecuador

For over a decade, Judid Angamarca lived in a wooden shack on stilts next to an old waste pit, where for years oil sludge from drilling was dumped.

The patch of land, the size of a tennis court, was cleaned and covered with earth in 1996. But it stubbornly refused to produce anything she tried to grow. Her three children played in the grass as babies; her animals roamed around, too. The residents living in and around San Carlos have long lived among the wells, pipes, and waste pits laid down for the oil bonanza in the Ecuadorean Amazon.

But two years ago, from a six-inch hole, oil waste emerged -- and so did Ms. Angamarca's doubts about her dead pigs and chickens and her children's rashes and coughs. The government relocated her family to a new home recently.

"You get mad, you want to leave [the area], but you have nowhere to go," says Angamarca.

San Carlos sits in the middle of more than 100 wells drilled in the Sacha field by Texaco, which pumped oil as the sole operator of a consortium here from 1972 until 1990. At the time, it was one of the highest concentrations of wells in the Amazonian region, and today this remote town finds itself in the middle of what could be the largest damage claim against the oil industry in its history.

The landmark lawsuit, which began in 1993 in New Yo rk and is now in an Ecuadorean court in this jungle region, alleges that Texaco, which was acquired by Chevron in 2001, knowingly unleashed toxins across an estimated 1,700 square miles -- roughly the size of Rhode Island.

This allegedly occurred in one of the most biodiverse forests on the planet. Plaintiffs' lawyers say Texaco's dumping represents 30 times more than the crude spilled in the 1989 Exxon Valdez disaster in Alaska. According to a report by a court-appointed expert, Chevron could face $27 billion in damages to soil, groundwater, and drinking water -- and even for cancer-related deaths. The decision is expected any day.

Chevron says Texaco cleaned up its share of damage after leaving the country and that the state oil company, which took over its operations entirely in 1992, has not fulfilled its environmental obligations. If Chevron loses the case, it will affect more than its finances: It could reverberate throughout the industry at a time when companies big and small are searching for oil in ever more remote areas, including the Amazon basin.

"This will definitely make it harder on oil companies working in these areas," says Fernando Santos, a former Ecuadorean energy minister and oil analyst in Quito. "It brings them uncertainty. It sets a precedent that if you leave, it does not end the story. Anyone can open it up again."

The lawsuit names 48 plaintiffs who represent approximately 30,000 residents. Plaintiffs' lawyers claim that, contrary to standard US practice at the time, Texaco dumped more than 18 billion gallons of toxic waste; left more than 900 waste pits of toxic sludge, like the one in Angamarca's front yard; and flared millions of cubic yards of poisonous gasses into the atmosphere. That, they say, has led to 1,000-plus deaths from cancer and to ecological damage beyond repair.

"There was almost no escape for people living [with] all of this," says Steven Donziger, a New York-based attorney and legal adviser to the plaintiffs' case. Texaco saved some $8 billion by using substandard practices, according to the report issued by the court-appointed expert.

Chevron denies liability

The science to assess damages is at best faulty, at worst fraudulent, Chevron says. Chevron claims the report's author, selected by an Ecuadorean judge, sides with the plaintiffs. It also says that public statements by Ecuador's president, Rafael Correa, in favor of the plaintiffs makes the trial a farce. The oil company's defense centers on the fact that Texaco spent about $40 million in the mid-1990s cleaning up more than one-third of the waste pits, more than its share of the consortium at the time. State-owned Petroecuador owned the other two-thirds.

"Texaco did its job, now the state has to do its part," says James Craig, Chevron's lead spokesman for the case, standing in front of an open waste pit that is about 200 feet long and 75 feet wide, a dark brown pit with a layer of degraded petroleum five feet deep. It is an example Mr. Craig uses to show what Chevron says are Petroecuador's unmet responsibilities.