A court in Ecuador's Amazon told Chevron Corp on Monday to pay $8.6 billion in environmental damages, but the U.S. oil company vowed to fight on in a lawsuit seen as a global test case.
Chevron said it would appeal, meaning the case, which
dates from drilling in the Andean nation during the 1970s and 1980s, could drag
on.
The legal battle has spawned accusations of dirty tricks
and bribery. Activists portray it as a fight for justice against rich
polluters, but Chevron says it is driven more by opportunism and greedy trial
lawyers. It has triggered related legal action in U.S. courts and international
arbitration.
The court gave Chevron 15 days to apologize publicly for
the contamination or face doubling of the damages figure.
"We plan to appeal that and every other aspect of
this illegitimate verdict and see to it that the perpetrators of this fraud are
brought to justice," Chevron spokesman James Craig told Reuters.
The company, which says the judge in the case ignored
evidence of fraud on the part of the plaintiffs, has no assets in Ecuador and
believes it is unlikely ever to pay.
Chevron's shares traded 1.3 percent higher to close at
$96.95 as investors shrugged off news of the court ruling. The stock had been
lifted by gains in crude oil, and analysts said a final verdict in the court
case was likely years away.
The plaintiffs, who originally demanded $27 billion in
the lawsuit, were disappointed by the $8.6 billion figure and gathered to
discuss whether they would push for more money.
"Given the insignificance of the economic figure, we
are going to analyze, discuss and decide if we will appeal this decision or
not," Pablo Fajardo, a lawyer for the plaintiffs, said in an e-mailed
statement.
The plaintiffs had said they would try to grab Chevron
assets around the world once armed with a favorable judgment from the Lago
Agrio court.
But their case is complicated by a ruling last week from
international arbitrators ordering Ecuador to suspend enforcement of any
judgment.
The saga is being monitored by the oil industry for
precedents that could lead to other large claims against companies around the
world that have been accused of contaminating the countries where they operate.
Judge Nicolas Zambrano issued the 187-page ruling from
Sucumbios provincial court in the hardscrabble Amazon town of Lago Agrio. His
courtroom is on the fourth story of a run-down building which houses a ground
floor casino called The Mirage.
Chevron said the ruling was "illegitimate" and
"unenforceable in any court that observes the rule of law."
The California-based company had revenue of $198 billion
and net profit of $19 billion in 2010.
LENGTHY APPEALS
The case highlights the risks of doing business in
Ecuador, where leftist President Rafael Correa often feuds with the private
sector and has publicly sided with the plaintiffs.
Residents of Ecuador's Amazon region have said faulty
drilling practices by Texaco, which was bought by Chevron in 2001, caused
damage to wide areas of jungle and harmed indigenous people in the 1970s and
1980s.
"This ruling is an intermediate step. The appeals
could go on for many years," said John van Schaik, oil analyst at Medley
Global Advisors in New York.
"But the fact that the Lago Agrio court ruled in
favor of the plaintiffs sends a signal to oil companies that, more than ever,
they need to be good corporate citizens," he added.
"The ruling shows that times have changed, and
companies need to take environmental concerns seriously."
Texaco first struck oil in Ecuador in 1967 and started
pumping in 1972 as part of a consortium with the state. The company operated in
Ecuador until 1990. Soon after, it turned its share of the consortium over to
the Ecuadorean government.
State oil company Petroecuador has continued drilling in
the area over the 20 years since Texaco pulled out.
"If you look at the Exxon-Valdez case, that took 20
years to settle," said Allen Good, oil analyst at Morningstar in Chicago.
"I think there were expectations that the initial judgments would go
against Chevron and I think the case is going to play out over a very long
time."
Chevron says it cleaned up all the pits it was
responsible for. But the dirt just under the surface around some former waste
pools still has a black sheen and carries the eye-watering stench of oil.
Farmers say they cannot raise crops or livestock in these
areas due to the contamination.
One oil analyst, Fadel Gheit of New York-based Oil &
Gas Research Oppenheimer & Co, said he had spoken to Chevron Chairman and
CEO John Watson recently about the case.
He "was exceptionally combative and absolutely
adamant. He said 'This is not going to happen on my watch. There is no way I am
going to pay this kind of money,'" Gheit told Reuters.
*Additional reporting by Santiago Silva in Quito,
Alexandra Valencia and Hugh Bronstein in Bogota,Anna Driver in
Houston, Daniel Wallis in Caracas, writing by Hugh Bronstein; Editing
by Andrew Cawthorne, Kieran Murray and Matthew Lewis