Deontological principles provide possible alternative guideposts for decision mak-ing. For example, valuing nature and the physical environment could mean seekingenvironmental protection, restoration and/or enhancement, signifying increasinglevels of duty and obligation. Causality could be used to allocate some responsibility,with parties causing harm to the physical environment incurring requisite duties torestore the damage done (i.e. the polluter pays principle).

Responsibilities toward the environment might also be apportioned accordingto capability, with actors (countries and/or companies) possessing the most capacityto protect natures resources bearing proportionate obligations to do so. Evaluating apartys degree of control over actions impacting the environment suggests one way tohelp operationalize principles dealing with causality and capability, such as assessingthe level of ownership or influence a corporate entity holds in a joint businessventure.

Relevant deontological guidelines might also be conceptualized in the context ofinternational human rights principles. The UN Universal Declaration of HumanRights does not address rights linked specifically to nature and the physical environ-ment, but broad environmental principles have emerged from UN forums such asthe landmark 1992 Earth Summit in Rio de Janeiro. Perhaps there should be anindividual human right to a clean and safe environment, and a corollary duty toprotect such an environmental right for future generations.3 Alternatively, ratherthan focusing on rights of the individual, environmental principles might begin froma recognition of complex interdependence between human and non-human life,evolving within the common surrounding sphere of nature and the physicalenvironment. Conceptualized thus, a common morality ethic might develop tomatch the direction and needs of an emerging and sustainable global community.

PROTECTION, RESTORATION AND SUSTAINABLE DEVELOPMENTOver the past several decades, rising concern about increased damage to the earthsphysical environment sparked remarkable growth in the time, attention and priorityaccorded environmental issues by governments, business and NGOs. Few advocatespopulate the extreme positions that argue for either unconstrained exploitation ofenvironmental resources or absolute preservation policies that would negate poten-tial human development. However, vigorous debate takes place across the interveningspectrum where diverse public and private sector actors pursue agendas that reflectsome combination of environmental protection, restoration and sustainable devel-opment goals.

Natural resource projects in developing countries provide some of the most prom-inent and useful examples for ethical analysis. As illustrated in earlier chapters, theseprojects often involve interrelated political, cultural and environmental concerns, asportrayed in case scenarios on MNE investments in Nigeria and Papua New Guinea.Countries with relatively ineffective government institutions run the greatest risk ofadverse environmental (and political and cultural) impacts from such large naturalresource investments.

A long-running controversy over environmental damage associated with the

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exploitation of oil reserves in Ecuador4 poses a series of important questions forethical analysis. This precedent-setting dispute led to a court case filed in New Yorkbased on assertions of environmental damage caused during a quarter-century of oildevelopment by a joint-venture operation involving US-based Texaco. One questionasks when project performance should be evaluated and whether contemporary orprior environmental standards should be used to judge the business ventures activ-ities. Texacos president argued that the business venture complied not only withEcuadorian laws and regulations but also with prevailing international industrystandards, asserting further that most oil spills resulted from natural disasters ratherthan operational shortcomings.5 Other Texaco officials compared operations inEcuador to the way the oil patch was operated in the US twenty years ago, protest-ing the use of standards evolved in the early 1990s to judge the companys workdating from 1967.6 By the time the court case was filed, Texacos involvement in theEcuadorian project had ended.

The question of who has responsibilities in this case becomes linked to issues oftiming as well as control and capability. The government of Ecuador not only set theprevailing legal regulations for business activities but actually participated directly indeveloping an oil sector that became a principal component of the countrys econ-omy. The state oil company, Petroecuador, was Texacos joint venture partner in theproject, Texpet. Texaco held a minority ownership position with 37.5 percent of thejoint venture but exercised operational control through a contract with the govern-ment of Ecuador. The operating contract expired in 1990, two years before Texacosold its share and three years before the court case was filed. Consider how thesevarious factors might be used to allocate relative responsibility between Texaco andthe government of Ecuador for actions undertaken by Texpet.

Decisions on when to evaluate factors in this case also affect the identity of who isinvolved, since the composition of both business and government actors evolved overtime. When Texaco sold its shares in Texpet the companys existence as a legal personin Ecuador changed, leaving the US parent corporation as the targeted respondentfor public criticism or legal action. As the court case dragged on, a 2001 mergercreated a new entity, ChevronTexaco. Corporate representatives contend that the newenterprise cannot be sued or held responsible for actions taken by a company that nolonger exists.7 The government of Ecuador also experienced transformations in itsleadership, character and position during this dispute. After initially opposing theattempt to file a case in New York courts, the government changed its position whena different political faction took control. Then, in 1995, the government reached andcertified an agreement whereby Texaco reportedly spent $40million to help clean upsome toxic wastewater pits in rough proportion to its former ownership share. How-ever, both local and foreign critics attacked this agreement and it was voided by thenext Ecuadorian administration.8

This case set new legal precedents when the New York court sent the case toEcuador for trial in 2002, but ruled that the foreign courts decision would be bind-ing on the US parent company. Exhibit 9.1 provides an updated discussion of thislong-running story. The court case in Ecuador yielded competing studies and experttestimony regarding asserted damage to the environment and human health as well

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as disputes over which actors bear what level of responsibility. The article depicts apending judicial decision, but further legal and political delays appear inevitable afterbias and bribery charges led the judge to recuse himself from the case.9 Whatever thelegal outcome, what ethical assessments should be made in this case scenario, basedprimarily on which key factors?

One approach might seek to determine whether Texacos responsibility should beevaluated teleologically by its operational impact on the environment and humanhealth or deontologically by specific operational process standards (such as local legalregulations or industry practice, at the time or now). Readers might compare theseassessments with the Bhopal gas leak scenario in Chapter 5. Should corporationsemploy the best safety and environmental standards in operations throughoutthe world or is it sufficient to comply with local regulatory requirements? Should ajoint-venture partnership with a state enterprise such as Petroecuador affect whichstandards are followed?

Political factors also may be important in assigning levels of corporate responsibil-ity. The current President of Ecuador called Texacos earlier cleanup a charade andinitiated legal proceedings against former government officials who approved, assert-ing that their action did not relieve ChevronTexaco of responsibility. AlthoughChevrons lawyers initially asked the US court to move the trial to Ecuador and relyon the professionalism of the Ecuadoran judicial system, an adverse ruling in

In May 1999, a local resident sits in front of an oil pit left by Texaco, some 200 yards from his home in Ecuador. Whileenvironmental damage is clear, a landmark lawsuit is struggling to determine how much compensation is due, fromwhom, to whom, and whether an Ecuadoran or US court should decide. Photo by Justin Ide/Getty Images.

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Exhibit 9.1 Ecuador and Chevron/Texaco Dispute Oil Damage

In Ecuador, High StakesAgainst Chevron

; Washington Post Foreign Service

Deep in the northern Ecuadoran rain forest, nextto pits filled with noxious sludge, a lawyer on hisvery first case argued that a U.S. oil companyhad deliberately fouled a swath of jungle nearlythe size of Delaware during two decades ofproduction.

Wearing a straw hat for the recent outdoorhearing, Pablo Fajardo was delivering the finalarguments in a lawsuit that began in New York in1993 against Texaco but is wrapping up hereagainst Chevron, which bought Texaco in 2001.The stakes are highand so tinged with national-ism that Ecuadors President Rafael Correa hasopenly sided with the plaintiffs, 48 individualsrepresenting tens of thousands of people in theregion.

If the judge rules against Chevron, the com-pany could face the largest damages award everhanded down in an environmental case, dwarfingthe $3.9 billion awarded against ExxonMobil forthe 1989 spill in Alaska.

A report by a court-appointed team lastyear concluded that pollution caused mainly byTexacos Ecuadoran affiliate, Texaco Petroleum,had led to 1,401 cancer deaths in this stretch ofAmazonian jungle. The teams leader, Ecuadorangeologist Richard Cabrera, reported finding highlevels of toxins in soil and water samples nearTexacos production sites and assessed damages atup to $27.3 billion.

This is a simple case, said Fajardo, 37, a for-mer oil worker. We ask, is there damage or not? Ifthere is damage, who pays? And if there is pay-ment, how much and to whom?

For Fajardo and his team, two 20-somethinglawyers financed by a Philadelphia law firm, theblame rests squarely with Texaco and, now, Chev-ron. They say that for 18 years, from the timeTexaco started full-scale production in Ecuadorin 1972, the company unloaded drilling mud andwastewater into hundreds of unlined pits or dir-ectly into waterways. They accuse Texaco of

choosing savings over safety, and say the companybotched a highly publicized cleanup of its produc-tion sites in the 1990s.

Chevron argues that Texaco complied withEcuadoran law and that the case is driven more byemotion than science. A cornerstone of its defenseis that Ecuadors government relieved Texaco ofresponsibility after the $40 million, three-yearcleanup, which ended in 1998. Chevron alsoblames Texacos successor and former partner,Petroecuador, saying that the state oil company isresponsible for hundreds of oil spills since it tookover operations in 1990.

Attorneys for Chevron call Cabreras report asham and say he was cozy with the plaintiffs. Thecompany has issued its own expert reports to sup-port its assertion that there is no link between oiland cancer in this swath of jungle.

Judge Juan Nuez said he will begin reviewingabout 145,000 pages of evidence after reports onthe effects of the discharges on fishing and agri-culture are completed.

This trial should finish this year, he said,speaking in his bare office here in Lago Agrio, adusty oil town named for Sour Lake, Texas, whereTexaco got its start in 1903. This has taken toolong.

The case has attracted the attention of energycompanies worldwide and, closer to home,the interest of Ecuadors 46-year-old populistpresident.

Correa, who took office in 2007 and has fre-quently tangled with oil companies, has said thatTexacos savage exploitation of oil killed andpoisoned people. He has also called Texacoscleanup a charade, in which the company simplycovered polluted sites with dirt, and labeledChevrons Ecuadoran attorneys sellouts.

Last April, Correa called for criminal investiga-tions of former government officials who hadsigned off on Texacos cleanup in 1998. InSeptember, the attorney general indicted twoChevron attorneys and seven former governmentofficialstwo years after prosecutors had dis-missed a similar criminal complaint against thesame people.

That is not the way Chevron had hoped eventswould unfold when its lawyers filed motions in

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federal court in New York earlier this decadevouching for the professionalism of the Ecua-doran judicial system and asking that the trial bemoved here. In 2003, proceedings began, alternat-ing between Lago Agrios ramshackle courthouseand visits to oil production sites and waste pits.But nearly six years later, Chevrons rosy assess-ment has given way to a sobering recognition thatit may lose the case.

Were concerned that no court in Ecuador isgoing to be able to hear or rule freely, said JamesCraig, a Chevron spokesman. Clearly, the thumbsof politics are weighing heavily on the scales ofjustice in Ecuador, and the president has played amajor part in that.

During the trials latest stage, the judicialinspections of aging waste sites, local Cofan Indi-ans in traditional garb and residents who say Tex-acos operations left them ill showed up to watchthe opposing lawyers spar. Judge Nuez, a baseballcap worn low over his forehead, listened intently.

Among those who came on a recent day wasGabriel Ruales, who recounted how his family usedto bathe and fish in a nearby river. He had broughtalong a 15-year-old son who suffers from a mentaldisorder and was seated in a wheelchair. The waterwas completely salty, poisoned, Ruales said.

Carmen Isabel Bone, a nurses assistant, alsosaid the local drinking water had been poisoned.I ask the authorities to give us justice, she said,blaming Texaco for ailments ranging from the fluand skin rashes to cervical cancer.

Diego Larrea, a Quito-based lawyer for Chev-ron, argued that no medical or scientific evidencehas been presented to back such claims. What wehave here is the myth of the jungle, he toldNuez.

Fajardo shot back, reading from a 1977 letter tostate energy officials in which Texaco admitted toa serious leak from a waste pit. An internal 1972memo, also in Nuezs hands, instructed Texacoofficials in Ecuador to report only spills thatattracted the attention of the news media orregulators.

In another letter submitted in court, from1980, Texaco officials told state energy officials thatlining pitsa precaution against leaks that iscommon in the United Stateswould be pro-hibitively expensive. It was cheaper to pay thefines than make the improvements, Fajardo toldthe judge.

Chevron says such documents were taken outof context and has submitted its own documenta-tion to show that Texaco responded to accidents.

If there is a rare point of agreement in the trial,it is that Petroecuador is not blameless. Companyand government officials acknowledge that thestate firm also dumped waste into waterways afterit assumed control, and that there were spills fromits pipelines.

But for 26 years, Texaco was the sole operator,and the plaintiffs say that the waste the companyleft behind continues to leach into groundwater.The plaintiffs and the Ecuadoran government alsoargue that Petroecuador has upgraded equipmentleft by Texaco and modernized disposal of waste,for instance re-injecting wastewater into theground.

The plaintiffs said that much of their strongestevidence lies in the waste pits surrounding the 356wells that Texaco put into operation from 1967,when the company first struck oil, until 1990,when Petroecuador took over.

Chevron acknowledges that Texaco usedunlined pits but argues that the use of such holdingponds is standard in the industry, including in theUnited States, according to Craig, the spokesman.

Unlined pits are indeed common in Texas,according to the Texas Railroad Commission,which oversees land use by oil firms. But commis-sion officials said that in Texas, such pits are usedto hold mud and heavy metals temporarily, beforethey are re-injected into the ground or otherwisedisposed of.

The plaintiffs say Texaco did not re-injectthe waste in Ecuador but instead used the shod-dily designed pits for permanent storage. In 2001,Ecuadors General Controller, an office thatinvestigates malfeasance, said that waste hadoozed from pits and that Texacos cleanup hadfallen short. The plaintiffs also say that thecleanup covered only a few of the polluted sitesand did not include groundwater or streams.

Kent Robertson, a Chevron spokesman, saidthat government inspectors later found flaws inthe controllers report but that the report wasnever corrected. Chevron says the government-mandated cleanup it carried out at 161 pits andseven spill sites was effective, entailing removalof oil from soil, incineration of debris andrevegetation.

These days, the ponds at the center of the

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Ecuador would likely lead the company to argue the proceedings were unfair and UScourts should not enforce the decision. The company already reportedly backed lobby-ing efforts to bring US government trade pressures on Ecuador related to the case.10

What would be the ethical basis for a US government response? Should US standardsof judicial fairness apply to a case decided by the Ecuadoran judicial system?

PRESERVATION VERSUS DEVELOPMENTWHO PAYS AND HOW?For oil production projects, potential deforestation impacts represent a side effect ofconstruction activities or an unintended follow-on consequence of building accessroads. Examined more directly, business activities in the forestry sector present afundamental challenge to the management of human relations with nature andthe physical environment. The majority of all plant and animal species reside inforests, along with diverse groups of indigenous people. Forests also act as a naturalsink for carbon-based gases related to global warming. Yet the world has lost overone-half its tropical forests, mainly during the twentieth century.11 The most com-mon choice posed on forestry resources casts preservation goals versus developmentactivities through logging. Core ethical issues center on who decides, who benefits,and who pays.

For example, the government of Suriname faced a difficult choice in 1995.12 Con-fronting serious economic problems, Surinames government viewed the exploit-ation of its tropical forest resources as perhaps the only available developmentoption. The government invited bids from timber companies and received proposalsfrom Indonesian and Malaysian MNEs that sought logging rights to nearly one-quarter of the country. Despite some domestic protests, the legislature was poised toaccept MNE investment proposals, but environmental NGOs, international organiza-tions and the US government entered the debate, arguing against the proposed dealsand offering alternative economic inducements.

Much of the debate over Surinames decision revolved around teleologicalassessments of whether timber company proposals or the environmentally focused

debate have drawn Donald Moncayo, an activistwho works with the plaintiffs. His specialty is tak-ing visitors on what he calls toxic tours.

After a walk along a forest trail, he stopped at apool that had been used by Texaco and poked along stick into the black sludge. Waste alsodripped out through a drainage pipe and randown to a creek below. As you can see, there is noprotection, Moncayo said. All these waters windup in the rivers.

Among those who have spent their lives next towells, waste pits and polluted waterways isCarmen Chamba, 54, who said she has sufferedfour miscarriages.

Chamba happens to live near an installationnow operated by Petroecuador. But it was Texacothat first ran production near her home, so shesays the U.S. company is liable.

They need to pay me for my loss, she said.

Source: From The Washington Post, 28 April 2009,p. A12 2009 The Washington Post. All rightsreserved. Used by permission and protected by theCopyright Laws of the United States. The printing,copying, redistribution, or retransmission of theMaterial without express written permission isprohibited.

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