Chevron Swings Back at Ecuador

The adventures continue in the lawsuit between Ecuador and Chevron (NYSE: CVX  ) , the second-largest U.S. oil company. As you no doubt recall, the litigation stems from claims that Texaco, before it was acquired by Chevron, was responsible for considerable environmental damage in the country.

That damage supposedly occurred between 1964 and 1990, when Texaco operated a consortium in Ecuador. Chevron didn't buy Texaco until 2001, at which time the case, which had first been filed in 1993, was refiled. Now, facing the specter of a judgment that could run to $27 billion, the company has filed suit in The Hague, Netherlands, under the auspices of a trade pact between Ecuador and the U.S. that was passed in 1997.

In essence, by filing the suit, Chevron is requesting arbitration through a procedure established by a United Nations commission specializing in international trade law. That procedure is separate from the core lawsuit, although under the 1997 pact, Ecuador is required to recognize arbitration as binding.

Last week's activities follow the August release of secretly recorded tapes in which two businessmen are shown meeting with Judge Juan Evangelista Nunez, the case's presiding judge. After the tapes were placed on the Chevron website and alleged judicial improprieties claimed, Nunez asked to be removed from the case. However, his request was denied by the court on Tuesday -- a decision he says he'll appeal.  

Latin America has been a difficult place for oil companies to operate of late. Chevron was one of those affected by Hugo Chavez's nationalization of energy and other industries, as were ExxonMobil (NYSE: XOM  ) , ConocoPhillips (NYSE: COP  ) , Total (NYSE: TOT  ) , and BP (NYSE: BP  ) .

In addition, as I've told you, Brazil's government has begun to flex its muscles and contemplate a bigger piece of the action in the prolific deepwater Santos Basin through Petrobras (NYSE: PBR  ) . As a result, companies like Shell (NYSE: RDS-A  ) are waiting for clues regarding how potential Brazilian changes might affect them.

But back to Chevron. The company has been making substantial strides in a number of areas of late. On that basis alone, I wouldn't let a process which has been going on for years (decades, really), and which could be much further drawn out into the future, separate me from this solid company.

Chevron has been accorded four stars (of a possible five) by Motley Fool CAPS players. Why not register your thumb up or down on the company?

Fool contributor David Lee Smith doesn't own shares in any of the companies mentioned in this article. He welcomes your comments. Petroleo Brasileiro and Total SA are Motley Fool Income Investor picks. Try any of our Foolish newsletters today, free for 30 days. The Fool has a disclosure policy.


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  • Report this Comment On September 30, 2009, at 1:45 PM, TekJansen wrote:

    "That damage supposedly occurred between 1964 and 1990..." spoken like someone who has never been there and knows actually very little about the case or the reality on the ground. Next...!

  • Report this Comment On December 20, 2009, at 12:51 PM, malulos wrote:

    I live on a large south texas ranch with Chevron. I know a little about them. I went out and made a movie on our ranch this weekend. No one besides CHevron Texaco has operated on this lease since 1934. No one else to blame. You want to see some current reality on the ground in a Chevron operation -- check it out -

    http://www.youtube.com/watch?v=lLEuaAChjnQ

    Texaco has 100,000's of acres of legacy oilfield mess in my area - I don't know how Chevron's stockholders are going to like cleaning it up - but someone has to do it!

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