Chevron Ecuador issue: Chevron wins court victory against Ecuador

In the ongoing court battle between Chevron and the Country of Ecuador, Chevron won a court victory against Ecuador today. According to Reuters, A U.S. District Court Judge in U.S. District Court for the Southern District of New York, granted Chevron the right to pursue an order to have via Ecuador to complete environmental cleanup work it and the state-run Petroecuador Oil Company were to have done when it took over oil production from Chevron-Texaco in 1992. Chevron will seek to have this done under the "U.S. - Ecuador Bilateral Investment Treaty."

In a statement sent to this blogger, Chevron said...

Chevron is pleased that the Bilateral Investment Treaty arbitration can proceed. Chevron is seeking to hold Ecuador and its government owned oil company, PetroEcuador, to the promise they made to complete the environmental cleanup of the Amazon. Texaco Petroleum did its share of the cleanup as promised, and PetroEcuador now needs to own up to its promises and address the environmental problems wrongly being blamed on Chevron. Only the international arbitration panel can bring Ecuador to the table and compel PetroEcuador to do the right thing and clean up its oil fields. With today's decision, we are one step closer to making that a reality

The court ruling has huge implications for Ecuador's oil production strategy. First, Ecuador has pursued a course of oil nationalization since 1990, but during that time has failed to make timely improvements in oil production facilities or adequately clean up oil spills. There have been over 100 oil spills in the Amazon Delta region since 1992.

Ecuador has embarked on a systemic removal of American oil companies. The most recent major example being Occidental Petroleum in 2007, where Ecuador literally kicked out Occidental from its property siting a breach of contract. Ecuadorians then had fist fights over the left over luxury cars.

When Ecuadorian President Rafael Correa came to power in January of 2007, he had pressures from two sides. First, Ecuador's environmental activists wanted more attention to cleanup of the Amazon, but state officials wanted to continue the nationalization of petroleum production. Correa crafted the perfect head-fake strategy: ask for money from oil companies to clean up the impacted areas of Ecuador, but continue and expand state oil production. Causing Chevron to pay billions for a cleanup project it was only partially responsible for was part of the strategy. The U.S. Court's decision has wrecked that approach.

Much of the opposition to Correa from activists has been muted by Ecuador's horrible treatment of the press. Teleamazonas, a TV station that reported that a natural gas exploitation on Puna Island could cause the suspension of fishing for up to six months, was shut down in December of 2009 for three days, according to The Committee to Protect Journalists. In 2008, a local journalist working to point to corruption in the judicial system was jailed for 10-months.

Ecuador has worked to keep quiet its mishandling of oil production and the resultant environmental damage, while encouraging the media and using the courts to force American and foreign oil companies to pay for the oil-related mess Ecuador caused, and fooling American activists groups into helping Ecuador's government nationalize its oil production. Today's ruling will have a major impact in altering that course of behavior.

Stay tuned.