Global Policy Forum

By T. Christian Miller

As ChevronTexaco faces a major lawsuit, evidence portrays a company and a nation that for years showed little concern for the environment.

When Texaco contractors showed up at Monica Torres' wood shack in the jungle, they said they had come to clean up the mess the company had left behind. A pool of black oil sludge sat like a tar pit in her backyard, dumped by the company years earlier while drilling nearby. Company contractors trundled in a bulldozer, covered the pit with dirt and told her that it was clean. But today, nearly a decade later, black gunk still oozes from the weed-covered mound when it rains. Water from the family's main source, a nearby stream laced with paisley rainbows of petroleum residue, makes her children vomit. Torres suffers from severe headaches. "The crude is still there, alive," said Torres, 40, as one of her sons pushed a stick a few inches into the pit to reveal black ooze beneath the dirt. "They just covered it up and left."

Torres is one of thousands of Ecuadoreans who stand to benefit from a multibillion-dollar lawsuit alleging that Texaco's operations between 1972 and 1992 destroyed land, sickened residents and contributed to the demise of indigenous tribes. Oil company officials deny the charges, saying the operations had minimal impact. The trial, begun this year in Ecuador, has resulted in the release of thousands of pages of previously confidential memos, studies and internal documents that reveal the inner workings of Texaco and its majority partner, the Ecuadorean state oil company, Petroecuador.

With U.S. and international oil companies now pushing deeper into Ecuador's virgin rain forest, a review of the documents, new studies, and interviews with current and former Texaco executives and Ecuadorean officials provide a portrait of how the search for oil can wreak havoc on a remote place and its people.

According to the interviews and documents: Texaco dumped waste water directly into streams and jungle instead of using disposal methods safer for the environment and public health that became common in the United States during the 1970s and 1980s. Oil company officials regarded those methods as too expensive to be cost-effective in Ecuador. The Ecuadorean government showed little concern about the environmental impact of Texaco's drilling operations, regularly cutting the budget for environmental programs.

Texaco issued favorable loans and work contracts, and occasionally withheld oil payments during its volatile and often contentious relationship with the government that was supposed to regulate its operations. During the 20-year period, Texaco pumped 1.5 billion barrels of oil from Ecuador -- most of it bound for California markets. By the time the company pulled out, environmentalists estimated that Texaco had dumped more than 19 billion gallons of waste and spilled 16.8 million gallons of crude oil, 1 1/2 times the amount spilled by the oil tanker Exxon Valdez. "Texaco took out the best and left its trash behind," said Mario Melo, who tracks the oil industry for the Center for Economic and Social Rights, a left-leaning think tank with an office in Quito, Ecuador's capital.

Officials with San Ramon, Calif.-based ChevronTexaco Corp., the product of a merger between Chevron and Texaco in 2001, maintained that their waste disposal techniques at the time were consistent with oil industry practices in other tropical countries such as Colombia, Niger and Brazil. Moreover, they said that because they were the minority partner, all their operations were controlled and approved by the Ecuadorean government. They dismissed the health claims as unsubstantiated. And they pointed to a $40-million cleanup effort, completed in 1998 and approved by the government. "The bottom line is that when we ceased to be the operator, there was minimal impact," said Ricardo Veiga, ChevronTexaco's vice president for Latin American Products.

Current and former Ecuadorean government officials acknowledged that they exercised little control over Texaco or its operations. Texaco "should have followed the same standards they were following in the United States, but the authorities here were not demanding it," said Pedro Espin, president of Petroecuador and a former Texaco worker. "Texaco did what the authorities asked, the minimum required. Back then, nobody talked about the environment."

The issues are taking on new importance because Ecuador, once again desperate for oil income, appears to be on the verge of a new boom. Companies such as Los Angeles-based Occidental Petroleum and Spanish energy giant Repsol YPF are taking advantage of a newly opened oil pipeline to drill in untouched sections of the Amazon. The new ventures face greater scrutiny and tighter regulations than Texaco did. But even the most careful drilling will affect the environment. Roads and pipelines must be built. Oil spills are inevitable. "You can minimize the effect. But there's no human activity that can be done without impacting the environment," said Carlos D'Arlach, Oxy's regional vice president of community relations. "None."

Striking It Rich

In 1967, Texaco found oil near Ecuador's border with Colombia. The first well was dubbed Lago Agrio No. 1 -- Sour Lake in Spanish, in homage to the small Texas town that produced the company's first gusher. At the time, the region was inhabited by indigenous tribes and missionaries. It was known in Ecuador simply as the Oriente -- the East -- an unspoiled land of tumbling brown rivers and humid jungle. Within a decade, Texaco had transformed the place. Working with partner Gulf Oil and the Ecuadorean government, it built a 312-mile-long pipeline traversing the Andes, crisscrossed the jungle with roads, and drilled hundreds of wells.

The waste generated by those wells became the focus of the lawsuit, filed by an Ecuadorean-born U.S. lawyer in 1993 in the U.S. on behalf of 30,000 local residents. After 10 years of legal wrangling, it was refiled in Ecuador this year after a U.S. appeals court determined that the Latin nation was the proper forum for the complaint. The suit focuses on two kinds of waste, and names only Texaco. Plaintiffs' lawyers said the oil company was responsible because it operated the oil fields; privately, they acknowledged that the suit targeted the company because it had much deeper pockets than the Ecuadorean government. When well-drilling begins, the process produces "drilling muds" that may contain water, oil, heavy metals and chemicals used in drilling. This mud was dumped into unlined pits near the wells. Government studies have shown that in the U.S., such muds can contain toxic levels of benzene, a known carcinogen, and lead, which can impede mental development in children.

Once the oil started flowing, the company would hook the well into a pipeline that carried oil, water and gas to one of 22 processing stations. At those stations, another series of dirt pits was used to separate oil from the water. Once finished, this second type of waste, a brine called "produced water," was dumped into nearby streams. Produced water is considered dangerous primarily because it normally contains high levels of salt that can kill flora and fauna. In the U.S., produced water has also been found to have high levels of benzene and arsenic, according to government studies. By the time Texaco left, there were more than 600 waste pits pockmarking the region. Today, many of them -- black scabs in green jungle -- are still visible from the air.

Texaco maintained that its disposal techniques were standard practice at the time. "Everything we did in Ecuador was consistent with operations in the oil industry around the world," Veiga said. But by the mid-1980s, large operators had mostly abandoned the use of unlined dirt pits to dispose of drilling muds in the United States. Tougher disposal regulations were prompted by growing concerns about the health and environmental impact of oil waste.

A 1985 survey by the American Petroleum Institute, an industry trade group, found that its members were dumping less than 5% of an estimated 5.7 million barrels of oil waste in dirt pits that year in the U.S. Most drilling muds were being shipped to special off-site disposal centers or dumped in lined pits that were later drained for off-site disposal, cleaned and covered after their use. As for produced water, most U.S. states with petroleum activity outlawed direct oil waste discharge in freshwater streams in the 1940s and 1950s. The federal government banned such dumping nationwide in 1979 with limited exceptions in arid or brackish coastal areas.

In the United States and many other countries, oil companies were reinjecting waste water deep into the ground. The practice is better for both the environment and oil operations. The reinjected water increases underground pressure, forcing out more oil. Former Texaco officials said it was too expensive to do that in Ecuador. "You know how much it costs? It's tremendously expensive," said Rene Bucaram, a retired Texaco executive who ran operations between 1977 and 1987 and is now the president of an Ecuadorean oil industry group. Industry experts put the savings at between $1 to $3 a barrel.

Texaco continued dumping the waste water even after a 1987 study by the U.S. Environmental Protection Agency, considered the most comprehensive ever done, raised concerns about the environmental and public health risks of the practice. The study found that, in general, oil waste posed relatively low health or environmental risks, as long as regulations in place in the U.S. were followed -- regulations that didn't exist in Ecuador at the time. However, the study found widespread environmental damage in cases in the U.S. where oil producers were pouring waste directly into freshwater streams. And in some cases, the study predicted that small wells that dumped no more than 100 barrels of waste water a day into streams could slightly increase the risk of cancer among local residents. In the Amazon, Texaco was dumping up to 100,000 barrels of waste water a day -- 1,000 times more. "That's an obviously bad practice. They would never have done that in the United States," said Michael Economides, coauthor of "The Color of Oil," a generally pro-industry history of the oil business.

Even though Texaco was doing nothing illegal, its actions were still a cause for worry inside the company. A 1976 internal memo stated that the Ecuadorean government wanted the pits drained and covered because they collapsed in heavy rains and released contaminated water. The memo warned, however, that such an action would be "considerably more costly" than simply repairing the breaches. The pits were never drained, though ChevronTexaco officials said in interviews that they were promptly repaired.

A Texaco study four years later concluded that the risk of pollution was minimal because the water in the pits was low in salt and had not damaged nearby vegetation. "Regulations force you to do things differently in different places. You can't come in and say, 'In Texas, they do this,' " Bucaram said.

But environmentalists said Texaco knew that its Ecuador operations would not have met standards in the United States, and that the company had a responsibility to do more than local laws required. They acknowledged that the environment was not as important an issue in the early 1970s as today, but contended that Texaco did not keep up with changes in technology as environmental practices improved. "The big picture is that we know from experience around the world that it's irresponsible to just dig a hole, dump your waste and walk away," said Judith Kimerling, an environmental law professor who first documented Texaco's practices more than a decade ago. "That's exactly what Texaco did in Ecuador."

Difficult Relations

In 1972, just before oil prices began soaring, a military junta took over Ecuador and began pressuring Texaco and its partner, Gulf, to sell part of the concession. At one point, the regime threatened to seize the company's assets. The junta, which relied on oil revenue for half the nation's budget, bought out Gulf Oil in 1976, and Ecuador became the majority owner. The government repeatedly hiked income taxes, shrank Texaco's operating area and routinely manipulated oil prices in the country's internal market to improve its share of profits. The two squabbled continuously over taxes, oil royalties and production levels.

Texaco used its economic resources and political ties to fight back. Its executives dined with presidents and ministers. The U.S. Embassy gave Texaco access to top officials during trade missions. Texaco handed out contracts to current and former Ecuadorean military officials. One memo notes the benefits of continuing a contract with a former Ecuadorean navy officer. "I feel it would be a big mistake to change contractors at this time," wrote one Texaco official in Ecuador at the time. "I am frankly taking into consideration the individual himself and his particular relationship with the Ecuadorean government, navy and [port] officials."

On a few occasions, when the disputes got especially nasty, the company withheld payments to the government for the oil it was shipping out. At other times, Texaco played kindly banker, issuing multimillion-dollar loans with generous terms. After a devastating earthquake in 1987, Texaco agreed to supply an interest-free $33-million loan after Ecuador's president made an urgent plea. At the time, officials noted that it would help the company's quest for a contract extension. "Texaco's public relations image is in need of improvement, which will be attended to immediately," said one memo written by a Texaco executive after the quake.

In the thousands of pages of correspondence made available in the trial, the environment was rarely mentioned. Bucaram said that for much of his time as manager, the state oil company erased the budget line for environmental operations to save money. Texaco, he said, would follow suit by suspending its 37.5% share of the funding required in the consortium deal. In some years, Texaco's budget showed zero for environmental tasks, the memos showed. "Nine out of 12 months, [the government] cut the costs for environmental work," Bucaram said. "I wouldn't say Texaco was sorry to see this happen. I'd be a liar."

For their part, government officials at the time said they were unaware of the environmental damage taking place. Texaco, they said, assured them that it was using the best technology available. "Call us ignorant, call us ingenious, I accept it. We just didn't know," said retired Gen. Rene Vargas, who headed the nation's Energy Ministry in the early 1970s and is a plaintiff's witness. "If they had done in the U.S. what they did here, they would have been made prisoners. They knew it was a crime."

Vanishing Jungle

The legacy of oil exploration cuts across the Oriente like a scar. Texaco's roads slice through the jungle. Settlers used those roads to slash and burn their way into the rain forest to plant crops and raise cattle, encouraged by a government program designed to protect the territory from incursion by Peru. All told, about 2.4 million acres of jungle disappeared. Pipelines snake through towns and schoolyards, in front of churches and health clinics, gathering the oil from hundreds of wells. Oil drilling turned out to be disastrous for the region's indigenous tribes. Within a few years of its arrival, Texaco had drilled hundreds of wells in territory claimed by the Cofan, Huaorani and other tribes.

There was no need to pay them for the use of the land, or even consult with them, as is required today. In Ecuador, all oil belongs to the state. At least one small tribe, the Tetetes, who lived near Lago Agrio, simply vanished. Researchers believe that they intermarried with settlers and abandoned all traces of their language and culture. The Huaorani fled deeper into the jungle. The Cofan saw their territory cut into pieces by roads and wells. Hunters complained of the increasing difficulty of finding game. Tribal shamans were confounded by unknown diseases that resisted traditional cures. "The oil was of no benefit to any of us," said Emergildo Criollo, a Cofan leader.

The settlers who followed the oil often fared no better. Oil coated the roads. It filled waste pools. And it sat in the front yard of residents such as Estuardo Lopez, 58, and his wife, Mariana Barrera, 53, who have lived in a wood shack at the edge of a jungle clearing for 35 years. Green trees soar in the background. Gold-tailed oropendula birds warble in the distance. Like most of the settlers, they came from Ecuador's highlands in search of land. They claimed 60 acres outside the small town of San Carlos, clearing most of it to plant crops and raise cattle. Within a few years, the Lopez family was surrounded by waste pits and oil wells, thumping day and night like a heartbeat. Eventually, Texaco constructed more than 30 wells in the area and dozens of waste pits.

The stream that runs behind the Lopez house would occasionally turn black from oil spills. Sometimes, the water tasted like petroleum, even though it ran clear. The Lopezes thought nothing of it. Settlers who arrived after the start of the oil boom associated oil with riches. Many smeared crude on their bodies, believing it to be a cure for disease and baldness. Children coated their faces to play a local version of cowboys and Indians. It was only after Mariana got sick six years ago that the couple began to suspect that something was wrong. She lost a baby -- it would have been her 10th -- and went to see the doctor, who told her that she had uterine cancer. She had a hysterectomy. Later, when she began to have pain in her back, a doctor told her that there was something wrong with her kidneys. He told her that she would need treatment, but the family could not afford the trip to the nearest clinic. Mariana -- and others -- blame the oil for health problems. "There are health problems everywhere. But here, they are worse," she said.

Spanish epidemiologist Miguel San Sebastian examined 985 cases of cancer in the Amazon that had been reported to a central health registry between 1985 and 1998. The study, published last year, found that people living in counties with oil drilling faced significantly higher risks of cancer, especially stomach, rectum and kidney cancer for men, and cervix and lymph node cancer for women. There is no proven link between crude oil exposure like that experienced by those in Ecuador to greater risk of specific cancers. However, studies have linked exposure to various chemicals found in petroleum to stomach and rectal cancer, among others.

In another study, San Sebastian surveyed 648 women in river communities in the Oriente and found that women living within three miles of an oil well faced 2 1/2 times the risk of miscarriage. "What the studies show is that something is happening there," said San Sebastian, who is a witness for the plaintiffs' lawyers in the oil trial. "But it's tough to make the direct link that the oil is causing these cancers."

ChevronTexaco, which has long denied that San Sebastian's work proves a link, got a boost recently from Jack Siemiatycki, a University of Montreal professor of epidemiology who is an authority on environmental causes of cancer. Siemiatycki, an independent scientist who reviewed San Sebastian's study when it was published in a leading scientific journal, issued a written response criticizing its suggestion of a connection -- though he didn't rule out the possibility. "There's no more than a hint of link" between cancer and oil exposure, Siemiatycki said in an interview. "I wouldn't bet my mortgage on it, that's for sure."

Disputing the Damage

As for the claims of environmental damage, ChevronTexaco says the Oriente today speaks for itself. A helicopter ride shows the jungle continues to grow thick and green. There are few zones of withered trees or brown fields. In some abandoned pits, weeds even grow up through the sludge. When the company prepared to leave in 1992, it paid for two separate environmental audits. A summary of one of them given to The Times by ChevronTexaco said that during the consortium's two decades of operations, "some activities were potentially noncompliant with Ecuadorean law."

Samples from five rivers determined that the discharge of produced water had altered their chemistry to be higher in salt, oil and particulate waste. The summary also noted contamination at 25% of the well sites visited, though it characterized the damage as "limited." ChevronTexaco said that its $40-million cleanup in response to the audits was designed to ensure that there was no "lasting environmental damage." The company said workers cleaned more than 200 pits, draining the water, testing it and then discharging it. They covered the pits with earth and, in many cases, planted them with native species. The company also donated four injection wells so that Petroecuador, which continues to work in the fields, could reinject produced water instead of dumping it into streams. The audits "concluded that there was minimal environmental impact and that we complied with the standards of the industry," Veiga said.

A local environmental group working with the plaintiffs, however, conducted a survey of the waste pits cleaned by Texaco in which they found that nearly all continued to have oil residue or other contamination. "It's like treating skin cancer with makeup. They never dealt with the underlying problems," said Steven Donziger, one of the plaintiffs' lawyers in the case.

Some industry experts said the greenery alone was an indication that Texaco's operations could not have done lasting damage. One of the biggest components of both produced water and drilling mud is salt, which kills plants. "A green plant is a good indicator that there isn't anything bad there," said Lloyd Deuel Jr., a soil chemist who frequently testifies in court for the oil industry. "A lot of the things that would be harmful to humans or animals are toxic to plants too."

Oil's New Frontier

Seventy miles southeast of the oil towns and flaring smokestacks, it is primal jungle again. A vast, chaotic tangle of green stretches out to the horizon and mingles in the distance with blue sky and towering white clouds. The mighty Napo river flows toward the Amazon, a muscled brown serpent curling through the forest. This is the new oil frontier.

Since 1972, Texaco and other companies have pumped more than 3 billion barrels of oil out of the Amazon rain forest. By some estimates, that leaves 4.5 billion more to go -- the equivalent of the entire U.S. oil demand for about eight months. Production began this year with the inauguration of a new pipeline, which doubles the capacity from the Amazon to terminals on the Pacific Coast. Occidental Petroleum hopes to boost production from 70,000 to 100,000 barrels a day by next year from its new Eden oil field, about 70 miles south of Lago Agrio.

The main complex rises out of the rain forest, a mass of shiny pipes and green tanks the size of several football fields. It was designed like an offshore oil platform so as to take up the smallest space possible. All power lines were buried to prevent animals from being electrocuted. Rainwater that falls on the site is filtered and cleaned. Ecuador's Environment Ministry and groups such as the Amazon Defense Front agree with Occidental that Eden is one of the most environmentally friendly oil facilities in Ecuador. "It had a high cost, but it's the most responsible thing to do," said Fernando Granizo, Eden's field manager.

Still, some think that areas with a sensitive environment and primitive cultures should be completely off limits to oil exploration. "It's not right to sacrifice new areas when this frontier is in such fragile territory," said Esperanza Martinez of Ecological Action, an Ecuadorean environmental group. "You can't say something is right, just because it is legal."

A judge in Lago Agrio heard the first part of the lawsuit against ChevronTexaco in October. No matter the outcome, the case will certainly be appealed. The process could take years. In the meantime, the people of the Oriente will wait, as they have for decades: for doctors, for clean water and air, for better roads and schools. It's a promise the government is making even now, to people such as Monica Torres. The men from the state oil company came by recently and told her that they wanted to drill another oil well behind her house. As compensation, they gave her three sheets of tin to cover her roof. They told her that it was the right thing to do for the nation. "They said they were going to take out more crude to help Ecuador," she said, a worried look on her face. "That's what they said."

FAIR USE NOTICE: This page contains copyrighted material the use of which has not been specifically authorized by the copyright owner. Global Policy Forum distributes this material without profit to those who have expressed a prior interest in receiving the included information for research and educational purposes. We believe this constitutes a fair use of any such copyrighted material as provided for in 17 U.S.C § 107. If you wish to use copyrighted material from this site for purposes of your own that go beyond fair use, you must obtain permission from the copyright owner.