ChevronTexaco shareholders defeated a resolution submitted by major institutional investors that sought to force the company to address litigation pitting it against native communities in Ecuador’s Amazon region over alleged environmental violations.
For a second straight year, a coalition comprised of California’s State Controller, New York’s State Comptroller and Trillium Asset Management, as well as human rights groups Amnesty International and the Amazon Defense Coalition, submitted a proposal at Chevron’s annual shareholder meeting pressing Chief Executive David O’Reilly to address how his company’s operations in Ecuador’s Lago Agrio region have affected local communities.
The resolution called on the California-based major to compile a report addressing the “oil-related contamination in the area where Texaco operated in Ecuador.”
“I am concerned that ChevronTexaco’s decision to engage in a lengthy legal battle over Texaco’s past behavior may cause damage to the company’s reputation and further erode shareowner value,” said California State Controller Steve Westly. In a statement, New York State Comptroller Alan Hevesi said, “Each day that this environmental and health crisis continues, ChevronTexaco’s future business opportunities abroad are more at risk.”
The latest defeat highlights the sometimes unpleasant relations between energy companies and the socially responsible investment community. “Most of the time [energy companies] want to give us their public relations spin,” says Leslie Lowe, the director of the energy and environmental program at the Interfaith Center on Corporate Responsibility (ICCR). “What we say is that not being socially responsible in the long run leads to waste and does affect the bottom line.”
“We respectively disagree with the views expressed by the pension fund managers,” said Chevron spokesman Chris Gidez. “The fact is that the overwhelming body of science demonstrates that Texaco’s remediation work was effective.”
Plaintiffs in Lago Agrio allege a subsidiary of Texaco – which merged with Chevron in 2001 – of dumping 18.5 billion gallons of oil-laden water into local rivers, contaminating drinking water. The company asserts that it took measures to keep water clean in accordance with accepted practices at the time and paid $40 million for a cleanup project approved by Ecuador’s government. The two sides are now embroiled in a myriad of suits and counter-suits in Ecuador and the US (OD Feb.10,p5).
Houston-based independent Burlington Resources is also feeling the heat from activists and socially conscious investors for its activities in Ecuador. For years, local communities have stalled development of Blocks 23 and 24 in southeastern Ecuador. The company owns 100% of Block 24 and jointly owns Block 23 with Argentina’s Compania General de Combustibles (CGC).
Burlington Resources’ spokesman James Bartlett said it has recently begun discussions with the Fipse and Ficsh tribes about the matter. According to Ecuadorian law, energy companies have to engage in a dialogue with affected communities before starting any exploration and development work. “We are going beyond the law. The law says we just have to consult and we are engaged in a dialogue,” said Bartlett.
Last year, Burlington invested $12 million in Ecuador to develop Block 7, which has net production of 2,600 barrels of oil equivalent per day, and Block 21, averaged 4,000 boe/d in 2004.
The ongoing litigation between Chevron and the Lago Agrio communities involves each side performing contamination tests over the next two years. A local court will then submit judgment in part based on the reports’ findings.
