Chevron’s potential US$ 27.3 billion liability for causing the world’s worst oil-related catastrophe in Ecuador’s rainforest, dubbed the ‘Amazon Chernobyl’ by locals, is starting to look like a glaring underestimate compared to the astronomical damages facing BP in the wake of the Gulf oil spill.
BP could be a target for a takeover because it is facing a US$ 40 billion liability for the gulf spill. The US$ 40 billion includes an estimated US$ 23 billion in clean-up costs according to Credit Suisse and an additional US$ 14 billion from fisherman and the tourism industry, according to analysts. The amount could lead BP to what bankers call the dreaded ‘Texaco Scenario’, where Texaco’s US$ 10.5 billion liability in the Penzoil case forced it to file for bankruptcy in 1987. The real question is who would want to buy BP, given its huge liabilities.
Chevron is facing similar problems, as it is estimated to have dumped at least ten times as much oil as BP into the Amazon rainforest. If worst comes to worst and the Ecuadorian Judge awards damages above the current US$ 27 billion estimate, Chevron may be forced to file for bankruptcy.
“We believe the damages estimate in Ecuador is glaringly low in light of the latest assessments of BP’s liability by Wall Street analysts,” said Pablo Fajardo, the lead Ecuadorian attorney for the plaintiffs.
The Ecuador disaster is still considered the world’s largest oil-related catastrophe, though it often is not ‘ranked’ because it was the product of deliberate planning to cut costs rather than a spectacular accident, according to representatives of the plaintiffs. “Chevron dumped more than 18.5 billion gallons of toxic waste, about 4 million gallons per day for more than two decades, and the world paid almost no attention,” said Mitch Anderson, an American organiser who works with the affected Amazonian communities.
The dumping took place while Texaco (now Chevron) operated a concession from 1964 – 1990. Thanks to the environmental damage that followed their illegal dumping, the traditional lifestyles of five indigenous groups were destroyed and a sixth group has since disappeared. The case was deliberately moved from a US Federal Court to an Ecuadorian court in an attempt to reduce liabilities and public exposure.
Experts have concluded that Chevron discharged at least 345 million gallons of pure crude into the Amazon as part of its illegal dumping, far more than both the 11 million gallons spilled in the Exxon Valdez and the enormous amounts of crude spewing out of the BP well in the Gulf.
Much of the damage in Ecuador, including 916 unlined waste pits gouged from the jungle floor and used for permanent waste storage, is still visible and will cause harm for centuries unless cleaned up, according to experts.
The damage Texaco did is now coming back to haunt Chevron, who took over Texaco and took over responsibility for their liabilities. The new CEO John Watson, is under attack for helping to engineer Chevron’s purchase of Texaco for US$ 31 billion in 2001 without proper due diligence. Watson oversaw the integration of the two companies.
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