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January 18, 2011 11:53 AM

The Global Lawyer: Judging Chevron in Ecuador on the Evidence

Posted by Michael D. Goldhaber

From The Am Law Litigation Daily

The judge has officially closed the evidentiary phase of the Ecuadorian trial of Chevron Corporation, where lawyers representing residents of the region are seeking $113 billion from the oil company for allegedly despoiling a chunk of Amazonia the size of Rhode Island. As the dispute begins its eighteenth calendar year, we decided to sift through the evidence that the Ecuadorian judge must now evaluate. In recent months, the merits of the case have been lost in the sound and the fury of Chevron's fraud allegations against the plaintiffs' legal team. In my experience, casual observers often assume: "Maybe the plaintiffs got carried away, but surely the oil company is at fault." Both parties say they would be thrilled to be judged on the science. So, here is one journalist's guided tour of the evidence.

How much crude was spilled?

It's well established that Texaco (Chevron's predecessor) used two substandard practices during its 18 years of operation in Ecuador, which ran from 1972-1990. It dug hundreds of unlined pits for drilling wastes, and dumped billions of gallons of "produced water" directly into streams. (Produced water is flushed from oil-bearing rock formations during oil drilling; it is extremely salty, but its toxicity varies.) By contrast, the American Petroleum Institute urged the use of waste storage tanks in 1972, and recommended the reinjection of produced water underground as early as 1942.

However, Chevron points out that PetroEcuador, the state oil company, long used similar practices. That's relevant because PetroEcuador took over Texaco's oil operations in 1990, and plaintiffs seek to recover for injuries incurred through 2019 (when their envisioned cleanup is done). Chevron says that PetroEcuador dug 270 new pits, and dumped some 14 billion gallons of produced water before it started reinjecting.

Plaintiffs' repeated press statements that Texaco spilled more oil in Ecuador than BP did in the Gulf of Mexico appear to be baseless. The U.S. government's estimate of the BP spill is 206 million gallons of oil. Plaintiffs claimed in 2010 that Texaco spilled 332 million gallons of oil, but the World Watch Institute in 2004 placed that number at 16.8 million gallons. The plaintiffs have offered no explanation for how they arrived at their figure.

How strong is the evidence of water contamination?

The principal components in petroleum proven to be carcinogens are benzene and certain polyaromatic hydrocarbons (PAHs). None of the trial sampling, which was conducted from 2003 to 2006, found these substances. Plaintiffs argue that other compounds of petroleum are harmful, but have not been sufficiently studied. They also argue that the known harmful compounds were present in Ecuador, but broke down before the trial samples were taken. On their first field trip, in 1994, plaintiffs found that produced water contained both benzene and PAH, and that the drinking water contained PAH, but they did not identify the specific PAH compounds. Chevron questions the plaintiffs' testing methods.

Some groundwater samples were high in "total petroleum hydrocarbons," which is one broad measure of oil pollution. TPH levels exceed Ecuadorian standards in nearly 60 percent of plaintiff's samples, in more than 30 percent of the samples taken by the court-appointed expert (whose independence is questioned), and in few of Chevron's.

Chevron argues that TPH is not necessarily toxic, and again questions the reliability of the plaintiffs' samples. Chevron's chief environmental scientist, Sara McMillen, said categorically in an interview: "There is no evidence whatsoever of water contamination from historical Texaco operations."

The contamination level for a sample seems to depend mostly on how close to a pit the sample was taken. On that, both sides seem to agree.

How strong is the evidence of soil contamination?

Soil samples from oil wells and production sites typically exceeded 1 percent TPH--one of the highest regulatory limits in use. Chevron insists that TPH isn't necessarily bad, and argues that the compounds present are highly immobile, and didn't leach into water.

Of soil samples taken near remediated pits, plaintiffs say that 83 percent exceed 1,000 milligrams per kilogram of TPH, which they maintain is the relevant Ecuadorian standard. Plaintiffs conclude that the limited cleanup Texaco undertook before it left the country was a sham.

Chevron argues that virtually all of the remediated pit samples it gathered (as opposed to the samples taken by plaintiffs or court experts) satisfy the laxer standards that Texaco negotiated with Ecuador for its exit cleanup.

Plaintiffs counter that the Texaco standard is so lax that it could almost never be violated. "All they say is that nothing violated the ridiculous standard in place at the time," said the plaintiffs' lead expert Douglas Beltman, of Stratus Consulting in Denver. "Our point is that the cleanup was ineffective." It's certainly fair to say that plaintiffs have strong evidence of soil contamination.

Did the contamination cause cancer?

Plaintiffs' health case--accounting for $70 billion of $113 billion sought in maximum damages--rests on a series of 2002-2004 epidemiological studies led by Miguel San Sebastian, who is now a researcher at Umea University in Sweden. In a nutshell, San Sebastian found elevated cancer levels for adult residents in the region's four oil-producing cantons (as well as higher rates of child leukemia and spontaneous abortion).

To reach $70 billion, plaintiffs' expert Daniel Rourke, a statistician formerly associated with the RAND Corporation, multiplies $7 million (a figure used by the U.S. EPA for the value of a life) by nearly 10,000 excess cancer deaths. Where do the 10,000 cancers come from? Rourke extrapolates San Sebastian's findings to the population of the four Ecuadorian cantons between 1967 (when Texaco struck oil) and 2019 (when the hoped-for cleanup will finish), projecting forward to cumulative deaths by around 2090. This is an aggressive estimate, considering that Texaco produced oil only in a portion of those cantons, from 1972 to 1990, and PetroEcuador has been producing oil there ever since.

San Sebastian himself did not claim to have established a causal link between Chevron's operations and cancer, but merely a relationship between cancer and oil. Jack Siemiatycki, an independent epidemiologist reviewing the adult cancer study for the science journal that published it, called San Sebsastian's findings "at best a hint," based mainly on clusters of 96 cervical cancers and 49 male stomach cancers, among 120,000 people over 14 years.

Not surprisingly, Chevron contests San Sebastian's data. A rival epidemiologist hired by Chevron, Michel Kelsh, of Exponent Inc. in Los Angeles, found no excess cancers when he drew his figures on the incidence of cancer from Ecuador's census statistics, rather than drawing them from Ecuador's cancer registry, as San Sebastian did. Even using San Sebastian's cancer data, Chevron argues that the apparent elevations in the cancer rate can be explained by the undocumented migration of oil workers into the area.

Chevron argues that the plaintiffs have not established a plausible explanation to account for the relationship between Chevron's operation and the cases of cancer that San Sebastian postulates. Bathing and drinking are the main ways that people could be exposed to cancer-causing compounds, and Chevron maintains that there's no evidence of water contamination.

Plaintiffs raise serious questions about public health in Ecuador, but it is hard to imagine that a U.S. court would accept plaintiffs' contested epidemiology and aggressive statistical estimates as evidence of specific causation of personal injuries.

So how much of the plaintiffs' damages claim is left?

With a starting demand of $113 billion, plaintiffs can win a sliver of the damages they seek and still make history. Plaintiffs' latest expert places the maximum cost of soil remediation, which is their strongest claim, near a billion dollars. That happens to be the value plaintiffs put on the whole case eight years and four estimates ago.

The modest conclusion of this exercise is that Texaco did leave hydrocarbon pollution in the Ecuadorian environment, but not nearly as much as plaintiffs claim and many observers assume. We won't judge whether the plaintiffs deserve to recover on their claims. Legally, Chevron argues that it is released from liability by Texaco's exit settlement with Ecuador, and that the entire proceeding is tainted by plaintiffs' alleged ghostwriting of the court's damages report.

Unfortunately--thanks to the Second Circuit's misguided 2002 dismissal of the case under the doctrine of forum non conveniens--this dispute will never be considered by a U.S. court. As both parties now agree, that's a tragedy.

Editor's note: The Ecuadorian plaintiffs have sent a lengthy response to this column. It's available here.
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