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Chevron expects to lose $27B suit but will refuse to pay damages

Chevron Corp. expects to lose a multibillion dollar environmental lawsuit in Ecuador but has no intention of paying damages and will continue to fight for “decades”, reports the Wall Street Journal.

The oil giant is facing up to $27 billion in damages for large-scale pollution caused in Ecuador by Texaco, a firm it acquired in 2001. Texaco’s environmental liabilities were well established at the time of its acquisition by Chevron: the company fought a class-action suit filed by 30,000 Ecuadorian plaintiffs through most of the 1990s. In 2001 Texaco successfully had the case moved out of U.S. court to Ecuador. Plaintiffs sued Chevron in Ecuador two years later.

Plaintiffs say that Texaco caused environmental widespread damage in eastern Ecuador, leaving toxic waste pits and allows chemicals and oil to spill into local rivers. Chevron acknowledges the damages but says Texaco’s $40 million cleanup effort in the 1990s absolved it of any environmental liability. The energy giant says that remaining problems are the responsibility of Petroecuador, the state-run oil company that took over Texaco’s operations in 1992.

Last year a court-appointed expert recommended the judge hold Chevron responsible for up to $27 billion in damages, a potential record-setting award. But Chevron has told shareholders it “doesn’t expect to be forced to pay any judgment imposed by Ecuador,” according to the Wall Street Journal.

“We’re not paying and we’re going to fight this for years if not decades into the future,” Chevron spokesman Don Campbell told the paper. “We’re not going to be bullied into a settlement.”

Chevron has been working to undermine the potential judgment by questioning the qualifications of the court-appointed expert and calling into question the credibility of Ecuador’s legal system. The oil company has also been using public relations tactics, including posting remarks disparaging the suit via comments on blogs and news articles.

The Wall Street Journal says most immediate threat to Chevron is its reputation. The firm has lately been promoting its greenery.

BEN CASSELMAN. Chevron Expects to Fight Ecuador Lawsuit in U.S. The Wall Street Journal. JULY 21, 2009

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