Brazil Oil Spill: Prosecutors Seeking $10.6 Billion In Damages From Chevron

SAO PAULO — Brazilian federal prosecutors said Wednesday they are seeking $10.6 billion in damages from U.S.-based Chevron Corp. because of environmental harm caused by an offshore oil leak.

The prosecutors are also asking a judge to order Chevron and Transocean Ltd., the drilling contractor for the well where the leak occurred in November, to halt all activities in Brazilian territory for an indefinite period.

"During an investigation, the attorney general's office found that Chevron and Transocean were not capable of controlling the damage caused by the spill of nearly 3,000 barrels of oil, proof of a lack of environmental planning and management by the companies," the statement read.

Chevron, in an emailed statement, said that it had received no notice of the action by the federal prosecutors and that Brazilian oil regulators had not contacted it about the issue.

"From the outset, Chevron responded responsibly to the incident at its Frade Field and has dealt transparently with all Brazilian authorities," the company said.

Most of Brazil's oil drilling is conducted offshore, and that is where Chevron's work is concentrated. The company does own lubricants manufacturing plants in Rio de Janeiro and Sao Paulo. It wasn't clear if these operations would be affected by any decision a judge might make on the federal prosecutor's requests.

Transocean said in a statement that it also had not received any official notice of the prosecutors' action. "At present, our rigs are operating in Brazilian waters and we continue to cooperate with the authorities," it added.

In late November, Brazil's National Petroleum Agency banned Chevron from any drilling activities in Brazil until an investigation into the leak was finished.

Brazil's Environment Ministry fined Chevron about $28 million, but has said the company could face further penalties. Chevron has not indicated if it will contest the fine in court, which it can do under Brazilian law.

The company was strongly criticized by officials at the ministry and also the petroleum regulatory agency for not fully sharing information about the spill in its early days and for not having the proper emergency equipment on hand to deal with the spill.

Oil started leaking at the site of a Chevron appraisal well Nov. 7, about 230 miles (370 kilometers) off the northeastern coast of Rio de Janeiro state.

George Buck, chief operating officer for Chevron's Brazilian division, has said the spill occurred because Chevron underestimated the pressure in an underwater reservoir.

He said in late November that this caused crude oil to rush up a bore hole and eventually escape into the surrounding seabed. The oil leaked out through at least seven narrow fissures on the ocean floor, all within 160 feet (50 meters) of the wellhead.

Both Chevron and Brazilian officials said in late November that the leak was under control, although some residual oil continues to seep from the site of the leak.

The work at the Frade field where the leak occurred is one of Chevron's biggest capital investments, according to the company's website, though details are not provided.

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Comments

[Vera Gottlieb]

10:28 AM on 12/16/2011

Good for you, Brazil! Don't let them get away!!!

[D-Driller]

02:03 AM on 12/16/2011

I enjoy reading some of the posts on here from uninformed layman. I would like to see ANYONE posting on here do a better job of trying to provide energy to the world from the harsh environments we are forced to drill in globally. Accidents happen. There will be an investigation, just like there is with any accident. If Chevron is found to be at fault, they will pay a fine. If you really want to help with drilling safety, go into the drilling field and use your extensive training deepwater offshore high-pressure drilling to make it safer! Better yet, brush up on your (I assume this is the level of education from the posters...) high school physics and chemistry, and work on renewables. But stop saying silly things like "Yeah, $10 Billion for 3000 bbls that didn't even come ashore is not enough!" or other such foolish phrases. The next time you get into a fender-bender in a parking lot, imagine if you had to pay millions - that would be the equivalent amount for the gas/oil/antifreeze that you caused to leak onto the ground. Accidents happen, folks. Go ahead, flame away at me in a pathetic, self-righteous style...

[Vera Gottlieb]

10:30 AM on 12/16/2011

Making excuses for those who are devastating our environment recklessly and don't even care about it? As long as money can be made...who cares, right?

[D-Driller]

11:08 AM on 12/16/2011

Were they reckless? Has that been proven? Was the spill "devestating"? Why the histrionics - there is no proof of devastation is there? How much of the spill was recovered? Is bankrupting a major American company reckless? How about making drilling so expensive that it shuts down across the world, bankrupting the American economy - is that reckless? We can't drill, we can't develop nuclear, we can't mine for the materials needed for solar cells and hybrid batteries, we can't mine for the materials needed for wind turbine production, we can't drill for gas feedstock used for plastic production for wind turbines, we have to take out dams instead of increase our hydrothermal, we can't cut down trees for wood-powered energy - where does it end? back to the Stone Age? THAT is reckless, Vera.

[D-Driller]

11:10 AM on 12/16/2011

WHoops - I meant hydroelectric. We can't drill for geothermal because that would entail "fracking"...

[Jeavany]

03:45 PM on 12/15/2011

While reading this article on my iPod a BP add appeared at the bottom of the screen. lol

[Kenz300]

03:02 PM on 12/15/2011

What part of DO NOT POLLUTE do they oil companies not understand?

They needs to stop spending all the money on TV and newspaper advertising telling us what wonderful companies they are and they need to spend the money on safety and environmental people, policies, procedures and equipment.

[jobscabin]

08:45 AM on 12/15/2011

Exxon waited 20 years to settle with Alaskans, and that was after the Bushes stacked the SCOTUS with "yes" men. Exxon's fine was reduced by nearly 90% by the activist conservative court.

[ken607]

08:13 AM on 12/15/2011

very small price to pay for the actual damage the oil comp did. and the villages that are destroyed and the cancer otherwise never know to the natives. not just in the ocean. bp is the biggest murderer in the world!!!!

[Realist2011]

06:13 AM on 12/15/2011

Obviously this country has made the decision that they will not take the US way out. I applaud them. When the penalties for stupidity become so onerous that the oil companies can't afford to take chances, they'll quit taking chances.

Here in the US we coddle the oil companies and as a result, we keep seeing pipeline spills and suffer the outrages we see in the Gulf. While it is extremely unfortunate, it's also very clear that only horrendously outsized penalties and significant regulation will be able to limit environmental damage.

[Slick Economist]

04:23 AM on 12/15/2011

The fine appears carefully calculated by the Rio prosecutors - half the level of BP's compensation pot from the Macondo oil spill in 2010 - and roughly the same as the total fines on Exxon for the Valdez spill in 1989 (in today's prices). In other words, the prosecutors are using the financial numbers to place our perception in this league.

Brazil is hosting the World Cup in 2014, Olympics in 2016, is a BRIC, one of the world's fastest growing economies and has a reputation for beaches, fun/carnival and tourism. That they have the brains, will and cunning to fire a proposed fine across Chevron's bows that has hit every news global service shows they are not to be messed with. Lets hope this gets resolved and future exploration and production is safer for both their workers and the environment.

In the meantime, follow the debate on oil spill costs here:
http://slickeconomist.wordpress.com

Slick Economist

[ken607]

08:15 AM on 12/15/2011

there is still oil in alaska from the exxon mess. they never clean up all the oil just pay a small fine and collect more profits at all of our expense.

[Andrew Harvey]

02:57 AM on 12/15/2011

What an absurd fine. I'd like to invite an oil company to spill oil in my backyard, so I can take them to court and sue the pants off of them.

Seriously, hundreds of times that amount of oil is released into the oceans from natural seepage every year, and has been for hundreds of thousands of years.

[andrewlgm]

08:26 AM on 12/15/2011

Natural seepage is minimal and we have human records over 30,000 years for oil seepage. But no seepage is as drastic on the environment as an oil spill which happens above the ON the oceans, covering large patches, blocking sun light, removing oxygen, directly covering animals, and leading to massive death tolls of marine animals.

For you to say that an oil spill is comparable to natural seepage is dishonest.

[ThinkCreeps]

10:16 AM on 12/15/2011

Chevron can't be expected to stop natural seepage. It can be expected not to spill.

If Chevron can make a case that its 3000 barrels is insignificant compared to the amount seeping locally, then they would have an argument that the impact of their spill was minor. In fact, it was not.

[Andrew Harvey]

08:07 PM on 12/15/2011

Its not a question of the cause, its a question of how much harm this is really doing.

3,000 barrels is not that big of a deal. It should be cleaned up, and they should probably pay a fine, but $10 billion is absurd

[Rich Cash]

02:11 AM on 12/15/2011

3,000 barrels of oil? 10.6 billion dollars to clean it up? What a frigging joke! Oil is selling at about $96.00 per barrel today. 3,000 barrels would be worth about $288,000. That means Brazil is seeking $3.5 million dollars in damages for each barrel of oil.

[ThinkCreeps]

10:19 AM on 12/15/2011

And thereby Brazil is making a clear point that they regard spilled oil off their coast as being much more valuable than the mere cost of the material.

If you throw acid into someone's face, you can expect to more punished more severely than just being forced to pay them the price of the acid.

[Ganeshari]

12:35 AM on 12/15/2011

Good, I hope they get it. And I can't wait until I can afford to buy an alternative fuel vehicle and not have to purchase gas ever again.

[Moose Luck 99]

12:31 AM on 12/15/2011

All oil companies suck LEGALIZE HEMP!!

http://aircrap.org/

[ThinkCreeps]

10:20 AM on 12/15/2011

I'm not sure that'll reduce the amount of spillage and fire during drilling.

[stripedbass7]

10:06 PM on 12/14/2011

Back to 76 for me. You werent notified ? yeah right. Your stations i liked the best, but this aptitude, is a Joke................ Clean it up & Be responsible by having measures ready.................... You want the profits yet Neglect "OUR EARTH"