Another day, another Amazon oil spill

PetroPerú tries its hand at environmental devastation. Environmental Health News writes it up in English:

On the last day of June, Roger Mangía Vega watched an oil slick and a mass of dead fish float past this tiny Kukama Indian community and into the Marañón River, a major tributary of the Amazon.

Community leaders called the emergency number for Petroperu, the state-run operator of the 845-kilometer pipeline that pumps crude oil from the Amazon over the Andes Mountains to a port on Peru’s northern coast.

By late afternoon, Mangía and a handful of his neighbors – contracted by the company and wearing only ordinary clothing – were up to their necks in oily water, searching for a leak in the pipe. Villagers, who depend on fish for subsistence and income, estimated that they had seen between two and seven tons of dead fish floating in lagoons and littering the landscape.

“It was the most horrible thing I’ve seen in my life – the amount of oil, the huge number of dead fish and my Kukama brothers working without the necessary protection,” said Ander Ordóñez Mozombite, an environmental monitor for an indigenous community group called Acodecospat who visited the site a few days later.

Read it all here.

And on July 2, PetroEcuador had a freakishly similar situation. Amazon Watch offers the details:

El Niño: A destabilizing force in N. South America

El Niño causes droughts in northern South America, killing cattle, harming water-dependent wildlife and forests, and slashing hydroelectricity output. It is often followed by La Niña. That’s not to say that floods only happen in La Niña years or droughts only happen with El Niño, but rather that the converse is true: La Niña years almost always bring floods and El Niño almost always brings drought to northern South America, and other disruptive effects elsewhere.

1988 La Niña Hurricanes Joan and Gilbert both affected northern South America, as did August flooding from the Magdalena river in Colombia to Ciudad Guayana, Venezuela.

1997-98 El Niño drought throughout northern Andes, cutting Peru’s growth by 2.8 percentage points and causing damages in Ecuador equal to 15 percent of GDP. Foreknowledge helped little.

1999 La Niña Caused the Vargas Tragedy, which may have killed 20,000 people in Venezuela, in December 1999.

2007-10 El Niño  drought that slashed power production in Venezuela, forcing the country to import fuel oil and food, slow output from the steel and aluminum industries, and start water and power rationing that never went away. Caracas reservoirs almost dried up.

2011 La Niña Catastrophic flooding in Colombia.

Click for interactive chart

El Niño may well break the lengthy drought in Chile which would be mostly a good thing for humans, cattle, sheep, lettuce, glaciers and mining projects. (Click that link if you want to learn some good Chilean Spanish.) But further north, it could start another 2- or 3-year cycle of climatic instability. I hope the region is better-prepared now than it was a few years ago for this predictable chaos.

======UPDATE April 28=====

Thomas O’Donnell writes in with the following, which is so substantive that I am just going to put it here in the post as I don’t want it to be missed.

Colombia announced they are shutting off the gas pipeline to Venezuela, citing expected upcoming El Niño shortages of water for hydroelectric production; so, they have to save their gas (the contract allows this in the face of ‘acts of God’). Meanwhile, the contract is ending (June?) and the pipeline is scheduled to be reversed in Sept. after a new contract is negotiated. Of course, this won’t happen as Venezuela has no gas to send to Colombia However, although people say the cutoff is because Venezuela might not be paying for the gas (which is of course likely), meanwhile, I am told by people who know the gas sector and Zulia well that in fact the El Niño explanation Colombia gives is a very real issue.

So, on top of all the other deep troubles in the west of Venezuela (Zulia and Tachira) face, presages serious shortages of gas for cooking and for electrical generation there. So, as you say, many effects of the swings in weather cycles… but esp. on top of a totally dysfunctional Venezuelan state that’s certainly not prepared whatsoever. Recall all the preoccupation with exactly how many meters and centimeters behind the damn at Guri a few years back? Here we go again!

Guri, as it happens, is in much better shape than it was in the 2010 El Niño, which followed showed up while Venezuela was still in a drought that started with the 2007 El Niño. But this is a great illustration of the kind of disruption that happens even with the kind of climate variability that is well within the historic norm.

Now think about how this bodes for climate changes that exceed historic norms.

Venezuela fuel imports update: the derroche continues

Venezuela is buying ever more finished motor fuel from the USA. In January, it bought a record 113,000 barrels a day of the stuff. Meanwhile, it halted purchases of MTBE and special naphthas, which I previously referred to as the “good” imports. It’s grim.

Source: US EIA

Comments on Chevron-Ecuador in Argentina

An informed observer sends this in:

I love the subsidiaries argument. As in, this thing belongs to me, but when you want to take it away from me, it doesn’t belong to me, it belongs to something that belongs to me, therefore you can’t take it from me. I’m a bit disappointed this has been taken at face value.

… Pretty quick turnaround for a decision of that magnitude. And pretty lame that the judge said “If you want to appeal this decision, take it back to Ecuador, because that’s where we go the order from.” Seems flimsy. A pretty big fight for Argentina, which already has some nasty fights on the horizon anyway.

But I kinda want to think this will eventually make Chevron uncomfortable. Best case scenario would be at some point they’d stumble across a legal regulation that says they have to provision some part of this, which means they have to put it on their books, which gets investors talking about it, which means it gets interesting. I’m guessing we’ll never get to that.

Speaking of subsidiaries, here’s a link to Chevron’s annual report to the US securities regulator. I can’t find the part where they say “those 27,000 barrels a day of oil equivalent we’re producing in Argentina, we shouldn’t count those cause they really aren’t ours, they belong to a subsidiary that has nothing to do with us, really guv.” However I do see that the company makes some rather lawyerly terms, and I wonder if this is what they are going to rely on: “Although each subsidiary of Chevron is responsible for its own affairs, Chevron Corporation manages its investments in these subsidiaries and their affiliates.” I certainly don’t know Argentina corporations law, so I have no idea how all this plays out. The only clear winner I see is Buenos Aires law firms and their caterers.

Oh also, you can see how important the market thinks this is: CVX stock has moved with XOM, its closest competitor, for last 2 days. No obvious news-driven divergence, just CVX winning by a bit.

More notes on Chevron-Ecuador in Argentina

A few items for the record.

Statement from James Craig, Chevron’s US-based spokesman on this issue (sent by e-mail):

“Chevron Corp., the Lago Agrio judgment debtor, has no assets in Argentina. All operations in Argentina are conducted by subsidiaries that have nothing to do with the plaintiffs’ fraud in Ecuador. The plaintiffs’ lawyers have no legal right to embargo subsidiary assets in Argentina and should not be allowed to disrupt Argentina’s pursuit of its important energy resources.

“The Ecuador judgment is a product of bribery, fraud, and it is illegitimate. We do not believe that the Ecuador judgment is enforceable in any court that observes the rule of law.”

Amazon Defense Coalition statement:

In a major blow to Chevron’s effort to avoid paying a historic $19 billion environmental judgment in Ecuador, an Argentine judge today signed the first of what is expected to be many orders freezing billions of dollars of assets owned by the U.S. oil company.

The order, signed by Judge Adrian Elcuj Miranda of the Commercial Court of Justice in Buenos Aries, freezes almost all Chevron assets in Argentina pending enforcement of the Ecuador judgment. The embargo applies to 100% of Chevron’s capital in Argentina, 100% of dividends, all of Chevron’s stake in pipeline operator Oleoductos del Valle SA, 40% of Chevron’s oil sales to Argentine refineries, and 40% of the money Chevron has deposited in Argentine banks, said Enrique Bruchou, the lawyer who represents the indigenous and farmer communities in Ecuador who brought the lawsuit.

Argentina vs. Chevron: It’s $19 billion worth of on

Remember how Ecuadorian rain forest villagers won an $18 billion judgment against Chevron Corp. because Texaco polluted the Amazon back in the day? Never mind that the Chevron still says they discharged all their responsibilities long ago and the trial judge was corrupt. Never mind because they got the venue they asked for, they lost the case, and they have spent the last year acting as though no judgment existed. For the most part, that strategy worked fine. No US court was about to seize their assets, at least no time soon. A court case in Canada to enforce the Ecuador judgment promises to be sloow, only with more os. Some have suggested that Chevron try Venezuela, but Venezuela is more dependent on Chevron than vice versa — so that’s not going to happen. But Argentina well, we shall see.

Reuters, take it away:

Argentine judge puts embargo on Chevron assets-lawyer

Nov 7 (Reuters) – An argentine judge has put an embargo on $19 billion in Chevron Corp assets in the South American country over an environmental damages suit in Ecuador, a lawyer for the plaintiffs told reporters on Wednesday.

And that’s the whole article, for now.

For those of you in North America, an “embargo” in South American law is usually pretty much the same as an asset freeze. The company can still use its stuff, but can’t sell it or give it away. I’m sure we’ll all have much more to learn about the term over the next few weeks.

UPDATING WITH CHEVRON STATEMENT:
Bloomberg now has this, from Chevron:

Chevron is unaware of either a filing by the plaintiffs or a court order in Argentina, James Craig, a spokesman for the San Ramon, California-based company said in an e-mailed response to questions.

“The plaintiffs’ lawyers have no legal right to embargo subsidiary assets in Argentina and should not be allowed to disrupt Argentina’s pursuit of its important energy resources,” he said. “The Ecuador judgment is a product of bribery, fraud, and it is illegitimate.”

Just how well does Venezuela get on with Chevron? Very.

A couple days ago, Raúl Gallegos published a decent little column about how Chevron is, if not betting on a Hugo Chávez reelection, at least setting itself up for a long, happy relationship with the Bolivarian Republic.

Chevron has no illusions about how Venezuela works. It first set up shop there in the 1920s, when strongmen showed heavier hands than Chavez. Scores of populist governments and two oil-industry nationalizations later Chevron is still pumping crude. And when PDVSA asked for a couple of billion to invest in Boscan, a jointly-run field Chevron first came across in the 1940s, the oil major obliged. The 13-year loan is costing PDVSA Libor plus 4.5 percent, far less than the 11 percent that its 2027 bonds pay.

I quibble with a bit of the column, but basically, he’s right. Chevron in Venezuela is now too big to nationalize.

I had thought Repsol fell into the same category. But maybe not. Check out this article from last night.

Venezuela President Hugo Chavez warned Repsol SA (REP) to “think carefully” about taking action against Argentina after it nationalized its YPF SA (YPFD) unit, indicating the Spanish company may face ramifications in Venezuela.

“They have a lot of investment here in Venezuela,” Chavez said on state television after holding a meeting with Argentine Planning Minister Julio De Vido in Caracas. “What happens there in Argentina affects what happens here.”

What jumps out here is that Chávez has never made any similar threats against Chevron over its $18 billion debt to ostensible ally Ecuador. If you haven’t followed that whole story, here’s an article, the plaintiff’s version and the company’s version, but long story short, Chevron was sued in the US for polluting Ecuador. It got the case moved to Ecuador, apparently thinking courts there would be friendlier. Courts there ruled against the company and ordered a huge amount of compensation. Chevron insists that the rulings were flawed by corruption, though I think it’s fair to ask, if they were worried about corruption, why did they get the case moved to Ecuador? The whole thing is a mess.

If Chávez were ideological, you’d think that the anti-Chevron campaigners would find open ears in Venezuela, and would even now be auctioning off the Boscan oilfield to pay the Ecuador debts. Instead, I don’t think Chávez has ever mentioned the case. And Chevron is piling in ever more billions of dollars.

Those of you who think politics has anything to do with ideas might be surprised by this. Please learn.