$27 Billion Damages Assessment

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Communities affected by Chevron's contamination in the Ecuadorian Amazon scored a major and historic victory in April 2008. As part of the final phase of the trial, the court in Lago Agrio had appointed an independent expert to review the scientific evidence, assess the causes and extent of environmental damage, and outline the measures required to conduct a thorough remediation.

The resulting report, supported by over 4,000 pages of evidence, dealt a huge blow to Chevron's efforts to avoid responsibility in Ecuador. It recommended to the judge that Chevron be held liable for between $7 billion and $16.3 billion in damages. If the judge accepts this estimate, it will be the largest civil damages claim ever awarded in an environmental case.
In November 2008, the court-appointed expert revised his estimate of the damages to be as high as $27 billion. This estimate takes into consideration several factors ignored in the initial April report, such as the cost of cleaning up groundwater contamination. The $27 billion figure, although historically large for a court-imposed penalty, is in line with the estimated clean-up cost for other environmental disasters of similar scope. For example, the Hanford nuclear waste site in Washington State will cost an estimated $53 billion or more to clean up, twice as much as Chevron’s “Amazon Chernobyl.”

Court Expert’s Findings

The court-appointed independent expert, Richard Cabrera, has released two estimates of the damages for which Chevron is liable. The first report, in April 2008, found the following:

The ecosystem of the oil concession area near Lago Agrio is severely contaminated with petroleum hydrocarbons and toxic heavy metals. Contamination many times above legal limits is present in the soil, surface water, and groundwater near current and former oil facilities.

The operations conducted by Texaco (now Chevron) beginning in 1967 are the primary cause of contamination in the concession area. Texaco operated with almost no environmental controls, and polluted the area through oil spills, improper waste disposal, dumping of produced water into rivers and streams, and openly burning noxious gases.

Contamination caused by Texaco's operating decisions has led to severe health impacts, including elevated rates of cancer and spontaneous abortions.

Contamination caused by Texaco's operating decisions has led to severe social impacts. It has displaced indigenous people from their traditional lands, and devastated their traditional cultures by harming the plants and game animals they have always depended upon for subsistence.

Previous clean-up efforts were inadequate. The remediation conducted by Texaco from 1995 to 1998 ignored many contaminated sites, and used methods that served to hide evidence of contamination rather than truly clean it up. Most of the allegedly remediated sites still contain toxic substances above the legal limit, and in some cases even above the standard (several times higher than the legal limit) agreed to in the remediation contract.

Chevron, as the responsible party, should fund a thorough remediation of the existing contamination, provide health care and potable water to those impacted, and compensate the citizens of the concession area for ecosystem losses and excess cancer deaths. The total cost of these measures is estimated at $8 billion.

In addition, the judge may require Chevron to pay an "unjust enrichment" penalty, based on the fact that Texaco directly saved money by its choice to operate with substandard environmental practices. These profits were thus acquired at the expense of the residents of the Oriente. Texaco's unjust enrichment is estimated at $8.3 billion.

By adding these figures, the independent expert report recommends that the court assess damages up to a total of $16.3 billion.

Estimate Revised Upwards

In November 2008, Professor Cabrera revised his damages estimate to a range of $18.1 billion to $27.3 billion. Again, the higher estimate reflects an “unjust enrichment” penalty for Chevron’s ill-gotten profits.

The additional $11 billion in damages found by Cabrera includes:

Compensation for excess cancer deaths from exposure to oil contamination is now $9.527 billion due to updated demographic and health data that takes into account population increases. Cabrera estimated 1,401 excess cancer deaths due to the contamination caused by Texaco. The monetary estimate is based a value of $6.8 million for each lost life, which tracks the method used by the U.S. Environmental Protection Agency.

Roughly $3.2 billion to clean groundwater. In his first report, Cabrera had excluded this category despite evidence that the groundwater is contaminated. Groundwater is a source of drinking water and is considered a primary source of exposure to toxins.

Roughly $1 billion for clean-up of contaminated soils in and around the 916 waste pits abandoned by Texaco. In his previous report, Cabrera had used a soil clean-up standard far more lax than is typically used in the U.S. The additional funds are to remediate the soils to the stricter standard.

A final decision on Chevron's liability and damages will be made by the trial judge. However, courts in Ecuador generally give wide deference to reports prepared by independent experts.