OIL AND GAS:

Judge at heart of landmark pollution case unfazed by spotlight

First of a three-part series.

LAGO AGRIO, Ecuador -- Sitting in a dimly lit office with blue paint peeling off the walls, Judge Nicolas Zambrano is remarkably relaxed for a man responsible for the biggest environmental damage ruling in history.

In February, Zambrano ordered Chevron Corp. to pay up to $18 billion for oil pollution in the region around this hard-edged frontier town on the fringe of the Amazon jungle.

Only the tab likely to be faced by BP PLC over the Deepwater Horizon spill in the Gulf of Mexico has the potential to be bigger.

Sporting a gold watch on his left wrist and an arresting shaven head, Zambrano -- the sixth judge to preside over the case -- has received his fair share of attention since his 188-page blockbuster.

He said, with a straight face, that the Chevron case is like any other.

"The case is as important as all the cases that are handled by this court," he said in a rare interview. "We treat all cases with the same attention and depth."

Zambrano, who has the tough stare of a former prosecutor, is clearly aware of the attention his ruling has received around the world.

After all, the case has, in one form or another, been ongoing for 18 years and has spawned a documentary film, "Crude," and a Vanity Fair cover story, not to mention frenzied allegations of fraud and corruption.

Asked how he managed the burden, Zambrano replied, "With a lot of work."

Now, with his ruling on appeal and Chevron desperately seeking to prevent its enforcement in courts around the world, some might be forgiven for thinking the case is reaching its final stages.

Based on how contentious the case has become, that's probably not a wise assumption.

Boomtown

Lago Agrio was hewn out of the jungle during the early oil boom following Texaco Petroleum Corp.'s arrival in the mid-1960s. Buildings were not so much constructed as thrown together.

Little has changed since.

It retains the feel of a bustling, overtly masculine boomtown, right down to the large building sporting pictures of scantily clad women and a sign that reads, in Spanish, "House of Appointments."

The influence of the oil industry can be seen everywhere, from the pipelines running along the side of the road to facilities for processing crude.

The wells themselves -- many of which are still operating, overseen by the state-owned oil company, Petroecuador -- are dotted around the surrounding area, often reachable only by gravel tracks.

While the discovery of oil paved the way for an influx of workers and settlers encouraged by the Ecuadorean government to occupy plots near newly built roads, it also had a considerable impact on the environment. The effects were felt most keenly by the local indigenous communities.

On that, both Chevron, which acquired Texaco and its legal obligations in 2001, and the plaintiffs could possibly concur. But it is about the only point they might even be close to agreeing on.

The areas of contention in the litigation are almost countless.

They include: what sites Texaco was responsible for remediating after it ceased all operations in 1992, whether it actually did the remediation it said it would to the necessary standard, and the location of waste pits near wells where drilling mud and some oil from the initial testing of each well's production volume were discarded.

Some of the pits, topped with a thick coat of oil open to the elements, have been sitting largely untouched since they were first dug in the 1970s.

Then there is the raging debate over what impact the pollution -- including wastewater from drilling operations -- has had on human health and whether Chevron should pay damages relating to that too.

Further complicating the matter is the fact that for most of the time Texaco was operating in Ecuador it was part of a consortium working alongside Petroecuador, which has not been sued. Who bears responsibility and for what has become an intriguing puzzle.

PR war

Opinion locally is uniformly against Texaco, according to Victor Gomez, a radio journalist in Lago Agrio who has followed the case.

"The general feeling is that Texaco is guilty and it has to pay up for the damages," Gomez said. "People are aware that this is an important case, they know that the whole world was waiting for this ruling."

The public relations battle has played itself out in multiple ways, not least in the rival tours that the two sides give of the disputed sites for the benefit of reporters.

The plaintiffs lead what has been dubbed the Toxic Tour (or, even more snappily, the Toxitour), while Chevron has what could perhaps be called the Teflon Tour, since the company says none of the allegations stick.

The itinerary is highly selective, with considerable effort given to debunking the other side's arguments.

The plaintiffs' tour focuses on arresting visuals and charged emotions, with Donald Moncayo, a local member of the Amazon Defense Coalition, taking reporters to one site that Texaco said it had remediated.

On a tour earlier this month, he eased an augur into the soil near a remediated pit, dug down, and then triumphantly displayed large chunks of semi-solid oil.

"That's why the judge finds them guilty," Moncayo said.

Chevron spokesman James Craig, took a more detached approach on his tour, on which he is accompanied by several bodyguards.

Referencing paperwork he brought with him, he gave Chevron's version of the history of each site and put great store by the 1995 agreement that Texaco signed with Ecuador that described which areas it would remediate.

In 1998, the Ecuadorean government signed off on a final release in which it agreed that the remediation had been completed (the plaintiffs say the agreement only released Texaco from its obligations to the government and does not affect third-party claims).

Craig also seeks to highlight what Chevron believes are inconsistencies in the case by visiting sites he says Chevron has been found responsible for even though Petroecuador has remediated them or is in the process of doing so.

"Things aren't always as they seem," he said.

Legitimacy at issue

With the case on appeal in Ecuador, the future is far from certain.

A panel of three judges has been selected and, almost predictably, Chevron has challenged the selection process.

"We don't have a lot of confidence in the court's ability to properly adjudicate this case," Craig said.

The plaintiffs, equally predictably, are critical of Chevron's tactics.

"It's the same tired old song just a different dance," Ecuadorean attorney Pablo Fajardo said.

While Chevron maintains that courts in Ecuador are particularly hostile, it has had better luck in the United States.

The company has already won a preliminary injunction from U.S. District Judge Lewis Kaplan of the Southern District of New York that would prevent the plaintiffs from enforcing the ruling in U.S. courts and possibly elsewhere.

Events in New York are a reminder that the case is, in effect, made in America.

It was Cristobal Bonifaz, an Ecuadorean lawyer based in Massachusetts, who first had the idea to file suit on behalf of indigenous plaintiffs. The suit was filed in New York in 1993.

U.S. law firms have bankrolled the plaintiffs for years, even after the case in New York was dismissed and refiled in Ecuador in 2003.

It seemed they were on the verge of success when Chevron started to succeed in its efforts to undermine the case thanks, ironically, to the release of "Crude," the documentary film that was intended to help the plaintiffs.

Via court-ordered discovery overseen by Kaplan, Chevron obtained outtakes from the movie that showed American lawyer Steven Donziger making unwise comments about the Ecuadorean legal system.

Among other things, Donziger emphasized the need to pressure the judicial system in Ecuador to rule in favor of the plaintiffs.

"We believe they make decisions based on who they fear the most, not based on what the law should dictate," he said in one scene.

That and other evidence, including indications that the plaintiffs influenced an independent report submitted by a court-appointed expert, prompted Chevron to file a federal racketeering suit against the plaintiffs' legal team.

Kaplan then issued his preliminary injunction preventing enforcement of Zambrano's ruling overseas.

Much to the despair of the plaintiffs, Kaplan has appeared to have some sympathy for Chevron's contention that the entire case is an extortion racket made possible by a failing court system in Ecuador that is constantly subjected to political pressures from the government.

From the plaintiffs' perspective, the appeal in Ecuador -- which could yet end up before the nation's highest court -- could be the easy part.

Then, there is the uphill battle of enforcing the judgment overseas, a route the plaintiffs have to take because Chevron has no assets in Ecuador. That could go on for years.

'I haven't felt pressured'

In Zambrano's office, incongruously located on the fourth floor of a shopping mall, the only sunlight comes from a small window up near the ceiling.

Zambrano, watching his words carefully, was reluctant to comment on the facts of the case while it is on appeal.

That is because the case could yet return to him.

He tells curious reporters they are welcome to look at the files -- all 2,067 -- if they want all their questions answered.

But his demeanor does not suggest he is concerned much with what is being said about him and the Ecuadorean court system in a courtroom in New York.

"We judges have to stick to the technicalities of it, as far as we can," he said. "There's no doubt it's received attention at an international level, but I haven't felt pressured or affected because this is what we do on a daily basis."

Independent journalist Irene Caselli contributed.