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Chevron: Biased and Improper Report

Chevron's statement and background on the latest developments in the Ecuador environmental damage suit.

EDITOR'S NOTE: The following is an unedited version of a press release Chevron sent out on April 2, 2008 in response to the submission to an Ecuadorian court of a report by a court-appointed investigator asking that the company pay between $8.1 billion and $16 billion in compensation for environmental damages.

Chevron Corporation  (NYSE:CVX) said today that it will petition the Superior Court in Lago Agrio to strike from the record a flawed and patently partisan report submitted in the ongoing environmental lawsuit filed by Ecuadorian citizens against Chevron.

"This is a defining moment for the Superior Court of Ecuador," said Ricardo Reis Veiga, managing counsel for Chevron Latin America. "The Court's appointee has knowingly violated the judge's orders and delivered a report that is biased and scientifically indefensible. No legitimate court in the world would permit such a charade. If the Court fails in this respect, it will be absolute proof that this trial has deteriorated beyond any shred of legitimacy."

The purported purpose of the report, presented to the Court yesterday by Richard Cabrera, a mining engineer appointed by the Court, was to evaluate what, if any, environmental effects exist in the area of the former consortium between Petroecuador, the state-owned oil company of Ecuador, and Texaco Petroleum Company ("Texpet"), a Chevron subsidiary. Chevron has repeatedly presented objections to the Court about Cabrera's lack of qualifications and expertise, bias in favor of the plaintiffs, and violation of Court orders.

"In considering the report, it should be noted that Cabrera was selected with the full support of plaintiffs' attorneys. Cabrera is being paid solely by the organization that stands to be the financial beneficiary of any ruling and his work plan and product is aligned with the plaintiffs' attorneys' strategy and objectives," Veiga added. "It should come as no surprise that the plaintiffs' attorneys knew the day and hour the Court's appointee would deliver his report, let alone its content before it was available to Chevron and the public. This demonstrates clear, undeniable and highly unethical cooperation between the plaintiffs' attorneys, their surrogates and Cabrera."

Chevron objects to the report for several reasons. First, Cabrera, whose appointment violated Ecuadorian law, refused to follow numerous Court orders on how to conduct the evaluation of the former consortium area. Second, Cabrera relied on a scientifically flawed work plan for his environmental evaluation. Third, Cabrera conducted field work that ignored all scientifically accepted technical procedures for site assessment. Lastly, the fact that Cabrera's field support team was comprised of members and supporters of the Frente de la Defensa de la Amazonia (the entity designated by plaintiffs in the complaint as the recipient of any potential payment in the litigation) raises serious questions about Cabrera's objectivity.

Cabrera has also disregarded the obvious fact that Petroecuador, owner of an approximate two-thirds share of the venture, became the operator of the consortium area in 1990 and the sole owner in 1992. Since then, Petroecuador has amassed a record of mismanagement, operational neglect and environmental damage. It has been publicly reported that the company is responsible for more than 1,000 oil spills from 2002 through 2007.

The appointment of Cabrera to prepare this report marks a deviation from prior Court orders as well as the Ecuador Code of Civil Procedure. This phase of the trial was to occur only after 122 site inspections had concluded and a credible evidentiary record had been established.

"To date, only 47 inspections have occurred, and only one has been seen through to completion. Notably, the report that settles the findings was favorable to Chevron. Unable to contradict the findings from that first site inspection, plaintiffs' attorneys brought the inspections to a halt. They then succeeded in securing the illegitimate nomination of Cabrera, in total violation of existing Court orders and the law," Veiga said.

Chevron is preparing a detailed rebuttal to the report and will petition the Court to declare the report null and void, and strike it from the record.

Editor's Note: The following is a more detailed description of the lack of expertise, authority and objectivity of the report's author.

Work Plan Was Flawed

Several renowned environmental engineers and professors concluded that the work plan presented by Cabrera to the Court would likely not yield results that could withstand scientific scrutiny. One of these experts, Rafael ("Ralph") Marquez, a former Texas environmental commissioner, concluded that Cabrera's work plan was "poorly conceived and lack[ed] sufficient transparency and detail." Based on Cabrera's work plan, another noted expert — Dr. Raymond Loehr, a former chair of the Environmental and Water Resources Engineering program at the University of Texas and an American Academy of Environmental Engineering-certified professional with more than 50 years of experience in the field, noted that Cabrera did "not have enough qualified professionals and time to carry out his stated objectives." Even though Chevron raised these concerns with the Court before Cabrera began the evaluation, the Court failed to address the matter. The following illustrates some of the flaws in Cabrera's work plan:

  • Cabrera's work plan was too generalized to yield results that would withstand a professional peer review and scientific scrutiny. Describing Cabrera's plan as an "overview of intended activities," Dr. Loehr stated: "The [Cabrera] Plan does not provide adequate detailed information to determine if what is identified as to be done actually can be done successfully and in a scientifically and technically defensible manner. If the activities in the Cabrera Plan are conducted in the general way described in the Plan, it is doubtful that the resultant report will be able to withstand the level of scientific and professional peer review that such a report is expected to receive."
  • Cabrera's work plan lacked, among other things, information about the methodologies to be used, demonstrating that it would be a relatively meaningless and limited technical evaluation. About this point, Marquez stated: "It is difficult for me to imagine how … Cabrera will draw scientifically valid conclusions from such limited technical investigation and how it is possible to extrapolate the results to an area that covers over 450,000 hectares."
  • Cabrera's work plan would take at least one to two years to complete, but instead, Cabrera spent a mere 40 days collecting samples in the field. As Dr. Loehr concluded: "The Cabrera Plan is not likely to meet the goals established by the Court."

Failed to Follow Scientifically Accepted Technical Procedures

During his field work, Cabrera committed the following flagrant technical errors:

  • Cabrera took samples from areas that are the sole responsibility of Petroecuador, areas which Petroecuador has publicly acknowledged its obligation to remediate, and from areas already remediated by Petroecuador.
  • Cabrera did not collect a single sample from surface water or drinking water resources despite plaintiffs' claims that drinking water is contaminated with hydrocarbons and is the main source of health issues in the area.
  • Cabrera collected only 179 samples in the former concession area that covered approximately 450,000 hectares, which is grossly inadequate for evaluating such a large area.
  • Cabrera refused to analyze at least 40 percent of the soil borings that he drilled, and he discarded without analysis any visibly clean samples without noting any reasons for doing so.

Repeated Failure to Adhere to Court Orders

Cabrera violated his Court-ordered mandate at every step in the process. The following are examples of the numerous violations Cabrera committed in these proceedings:

  • Cabrera repeatedly limited Chevron's ability to observe his field work. Cabrera also refused to disclose the identity and qualifications of the members of "secret teams" that he admitted were simultaneously conducting field work under his supervision.
  • Cabrera repeatedly refused to comply with Court orders to establish and adhere to stringent chain-of-custody procedures for his sampling. Chain-of-custody is needed to demonstrate that samples have been properly handled, stored, transported, and protected from tampering.
  • Cabrera refused to identify the laboratory conducting the sample analyses. There is no indication that the sample analyses were performed by an accredited laboratory, that is, one that is independently verified as being qualified to perform the requested level of testing.
  • While the Court never ordered Cabrera to include an economic "valuation of the remediation costs," Cabrera stated in his work plan that he would conduct such an economic valuation. In subsequent court orders, the Court directed Cabrera to limit his evaluation to the Court's initial order that did not include an economic valuation. Cabrera ultimately ignored these orders as well.

Bias in Support of the Plaintiffs

Cabrera's bias on behalf of plaintiffs has compromised the integrity of Cabrera's work and further tainted his conclusions. The following are just a few examples evidencing Cabrera's bias:

  • Cabrera's work plan is based on the presumption that Texaco Petroleum Company was responsible for all of the environmental damages in the concession area, without acknowledging Petroecuador's role in the consortium and its exclusive 17-year operations of the area. Such an erroneous presumption demonstrates prejudice that clearly disqualifies Cabrera as reliable, impartial or objective before the Court.
  • Cabrera has included "a valuation of remediation costs" against Chevron in his work plan in violation of court orders. Cabrera is echoing the plaintiffs' desire to develop such an economic valuation against Chevron.
  • Cabrera has repeatedly asked the Court to stop Petroecuador from conducting remediation of the areas of the former concession that Petroecuador has publicly recognized were under its responsibility and have gone unfulfilled since 1998.

Disregard of Petroecuador's Responsibility and Environmental Record

Petroecuador took over operations for the former concession in 1990 and has been its sole owner since 1992. Since taking over operations in 1990, Petroecuador has had a poor environmental record in the area. According to its own data, Petroecuador has been responsible for more than a 1,000 spills from 2002 through 2007.

Furthermore, Undersecretary of Environmental Protection Lucy Ruiz has admitted that "[Petroecuador] is not the model company that it should be." She further added that Petroecuador's oil spills have "cost the country a real nightmare and, in economic terms, a horror." (El Universo, Feb. 23, 2008).

Albeit a decade too late, Petroecuador has publicly recognized its responsibility for the environmental conditions in the former concession area in the Oriente region. In January 2008, Fernando Zurita, president of Petroecuador, acknowledged the company's poor environmental record. Zurita recently admitted that Petroecuador has "no corporate policies for environmental remediation." (El Universo, Feb. 23, 2008). Nevertheless, Petroecuador has failed to complete the pit and spill remediation, for which it has acknowledged responsibility, and has not maintained its leaking pipelines, which are in terrible condition.

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