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Legacy in Ecuador
From 1964 to 1992, Texaco Petroleum Company (Texpet) was a minority partner in an oil exploration and production consortium in an environmentally sensitive rain forest region in Ecuador. For most of that period, Texpet was the operator of the field and associated pipeline, while PetroEcuador, the state oil company, was the majority partner.
Although 95 percent of the total earnings that the consortium produced went to PetroEcuador and contributed to Ecuador's economy, questions have been raised about the possible environmental and health consequences for the region and the indigenous people who live there.
Consistent with company practice, at the time of Texpet's departure from the consortium, it undertook environmental audits to determine whether there were any concerns that needed to be addressed. The company subsequently entered into an agreement with PetroEcuador, the Ecuadorian national government and representatives of indigenous groups and local municipalities to manage and fund a US$40 million remediation program. This included closure and remediation of well sites, soils remediation and installation of produced water treatment and reinjection systems.
In addition, the company created a US$1 million fund for socio-economic projects by nongovernmental organizations and a second US$1 million fund for the construction of four schools and adjacent medical clinics and vehicles for transportation.
The company received certification and approval from government inspectors on a site-by-site basis made through several phases of the project. In 1998, the government of Ecuador and the local municipalities provided a final certification for the program, releasing the company from further claims or obligations.
Notwithstanding these efforts, in 1993, lawyers representing a group of indigenous Ecuadorian Indians brought suit against Texaco Inc. in the United States, charging that the company was responsible for alleged health problems and environmental damage caused by the oil-producing activities. On four separate occasions, U.S. courts dismissed the lawsuit because they determined that the United States was not the proper jurisdiction. Ultimately, the plaintiffs' lawyers accepted these rulings, and in May 2003 filed a suit against ChevronTexaco Corporation in an Ecuadorian court. ChevronTexaco Corporation and Texaco Inc. maintain there has yet to be presented any scientific evidence to substantiate the allegations and there is no basis for this action.
This case has received widespread publicity over the years. It illustrates the complex issues associated with oil-producing activities, including the responsibilities of minority and majority partners, the accountability of state oil companies and governments, the differing expectations of various stakeholders and the ability of court systems to adjudicate complex affairs where the issue of jurisdiction is not always clear.
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