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Chevron Case Highlights Difficulty of Making Oil Companies Pay for Spills

The biggest oil spill cases show that lengthy and expensive litigation works in favor of oil companies

By Michael Keller and Stacy Feldman

Mar 20, 2011
Oil contamination in the Ecuadorean Amazon rainforest.

The case took 14 years to settle and resulted in a payout of $282 million to French claimants in the 1990s and none for ecological damage. The French government wanted seven times that amount.

A year later in 1979, a massive accident at an exploratory well, called Ixtoc I, spilled 126 million gallons in the Bay of Campeche, Mexico, the second-largest such spill in history, after BP's.

The Mexican state oil company Pemex asserted sovereign immunity from compensation claims in U.S. courts. In the end, it paid just $100 million for minimal cleanup and capping the well, which took nearly ten months. The price tag of the disaster is estimated to be at least $1.5 billion.

With the 1989 Exxon Valdez disaster, the oil litigation landscape changed.

The supertanker dumped about 11 million gallons of crude into Alaska's Prince William Sound, wiping out the herring industry and harming other fisheries. A jury ordered the company to pay $5 billion in punitive damages to Alaskans in a relatively swift five years. But this was cut in half by a federal appeals court in 2006, before being sent to the U.S. Supreme Court.

Justices capped the payout at $507.5 million, and Exxon agreed to pay $383.3 million of it. In total, it has spent about $3.8 billion for cleanup and compensation costs, though litigation continues to this day.

Ten years after Exxon Valdez, the Erika tanker spilled another 6.2 million gallons of crude off the coast Brittany. In 2008, French oil giant Total SA was ordered to pay civil penalties totaling around $260 million. An appeals court in 2010 added another 200 million euros to the fine, and recognized the presence of ecological damage, a first for a French court.

Plaintiffs had sought more than $1.5 billion for damages.

BP Will Trigger More Accountability, For Now

The BP oil spill is the biggest oil accident by far, releasing an enormous 205 million gallons of crude into the Gulf of Mexico last year. The disaster could end up costing the company $40 billion.

About 400 cases have been filed, involving thousands of plaintiffs, with about 15 lawsuits pending now in state courts from California to Florida, according to , along with at least eight shareholder suits.

Because it is so high-profile, experts say more accountability in both accident prevention and response is inevitable — at least temporarily.

"BP has raised consciousness and, if the Valdez experience is any indication, there will clearly be a tightening in practice and on the books," said Zygmunt Plater, a Boston College law professor and former chairman of the Alaska Exxon Valdez Oil Spill Commission's legal task force.

"In time, though," he continued, "there will be an erosion in practice and on the books. We’ll still take two steps forward and one step back."

In the U.S., current laws hold companies accountable for some damages. Elements of the Clean Water Act, the Oil Pollution Act, Superfund and others all have strict provisions that put absolute responsibility on the polluter. The regulations have limited defenses for releases caused by war or Acts of God.

Oil Spills 'Minor' Cost to Companies

Oil companies work disasters into their bottom lines, observers say.

"For the most part, oil companies seem to be fairly confident that major releases into the environment can be tolerated as a cost of doing business," said Tyson Slocum, the energy program director of advocacy group .

"I see on a routine basis that companies do a cost-benefit analysis of violating the law and right now it is a minor cost to them. Regulations are not strong enough and the agencies don't have enough manpower."

John Pendergrass, an attorney with the , said the bigger the spillage and potential court penalty, the larger the fight.

I think that any company

I think that any company whether it be oil, environmental, or otherwise be held completely responsible for the damage that they do. This include loss of life, in any form. Maybe this is just an impossible dream.


    Der einzige Nachteil beim Pokern in besteht darin, dass Sie nicht über die Mimik der Mitspieler auf deren Blatt schließen können, da deren Gesichter nicht sichtbar sind.

False equivalency.

Chevron in Ecuador is not properly classed with other spills. Ecuador itself is responsible for the spill. I'd love to hate Chevron on this one, but it isn't correct.

Also highlights the better behaviour of BP

when it comes to paying out and cleaning up... so much better than Exxon... and yes, I know it doesn't make them perfect; just a little better.

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