Brazil prosecutor targets oil giants

                                                                                   Prosecutor Eduardo Santos de Oliveira

A Brazilian federal prosecutor has launched a second $10.9bn lawsuit against US oil company Chevron and drilling company Transocean following the discovery of a second leak in the offshore Frade oil field earlier this month.

The new lawsuit, announced on Tuesday by the federal public prosecutor's office, is prosecutor Eduardo Santos de Oliveira's second  civil case against the companies in less  than five months.                   

The case also seeks to prevent Chevron and Transocean from operating in Brazil, transferring Brazilian profits overseas, obtaining government-backed finance and moving equipment from the country, the statement said.

The prosecutor's office said that Santos de Oliveira also planned to investigate Brazilian national oil regulator ANP and environmental protection agency Ibama over their handling of the November spill and latest leak, discovered on March 4, at the Frade field, northeast of Rio de Janeiro.

"The second leak is as serious or more serious than the first, so the damages have to be in the same category," de Oliveira told Reuters. "While they are not a simple mathematical calculation, they are not symbolic either."

Chevron and Transocean's activities may have damaged the Frade reservoir, making it impossible to produce from the field, denying Brazil its right to royalties on a public resource, Santos de Oliveira added.

Santos de Oliveira has called last year's estimated 3,000-barrel spill one of Brazil's worst-ever ecological disasters, although the leak amounted to less than 0.1 per cent of BP's 2010 Deepwater Horizon disaster in the Gulf of Mexico.

Chevron said the March leak, which led to the latest lawsuit, resulted in a spillage of just two barrels. Unlike in the Gulf of Mexico, no Chevron oil came near the coast.

BP last month agreed to pay out $7.8bn to more than 100,000 people who said they were hurt by US spill in which 11 people died and about 4.9bn barrels were leaked over three months.

Cases 'arbitrary' and 'irresponsible'

Both Chevron and Transocean have said they have done nothing wrong, that they are innocent of any crimes and will defend their employees against civil and criminal charges.

"Transocean acted responsibly appropriately and quickly, putting safety first. We'll continue to strongly defend our company, our people and the quality of our services," Transocean, the world's largest drill rig operator said in a statement.

"The filing of the second lawsuit is another in a series of outrageous actions brought by the same district attorney who previously filed both a criminal and civil case, all of which are without merit," Chevron said in a statement, calling the $10.9bn figure “arbitrary”.

The size of the damages have also caught the attention of politicians close to Brazilian President Dilma Rousseff's government.

Jorge Viana, a senator from Rousseff's Workers' Party and one of the country's leading environmentalists, said the damages being sought were "irresponsible" and if applied to all companies working in the country could lead to the shutdown of Brazil's oil industry.

The industry generates revenue worth more than 10 per cent of gross domestic product in Brazil, the world's sixth-largest economy.

A Brazilian federal prosecutor has launched a second $10.9bn lawsuit against US oil company Chevron and drilling company Transocean following the discovery of a second leak in the offshore Frade oil field earlier this month.

The new lawsuit, announced on Tuesday by the federal public prosecutor's office, is prosecutor Eduardo Santos de Oliveira's second civil case against the companies in less than five months.

The case also seeks to prevent Chevron and Transocean from operating in Brazil, transferring Brazilian profits overseas, obtaining government-backed finance and moving equipment from the country, the statement said.

The prosecutor's office said that Santos de Oliveira also planned to investigate Brazilian national oil regulator ANP and environmental protection agency Ibama over their handling of the November spill and latest leak, discovered on March 4, at the Frade field, northeast of Rio de Janeiro.

"The second leak is as serious or more serious than the first, so the damages have to be in the same category," de Oliveira told Reuters. "While they are not a simple mathematical calculation, they are not symbolic either."

Chevron and Transocean's activities may have damaged the Frade reservoir, making it impossible to produce from the field, denying Brazil its right to royalties on a public resource, Santos de Oliveira added.

Santos de Oliveira has called last year's estimated 3,000-barrel spill one of Brazil's worst-ever ecological disasters, although the leak amounted to less than 0.1 per cent of BP's 2010 Deepwater Horizon disaster in the Gulf of Mexico.

Chevron said the March leak, which led to the latest lawsuit, resulted in a spillage of just two barrels. Unlike in the Gulf of Mexico, no Chevron oil came near the coast.

BP last month agreed to pay out $7.8bn to more than 100,000 people who said they were hurt by US spill in which 11 people died and about 4.9bn barrels were leaked over three months.

Cases 'arbitrary' and 'irresponsible'

Both Chevron and Transocean have said they have done nothing wrong, that they are innocent of any crimes and will defend their employees against civil and criminal charges.

"Transocean acted responsibly appropriately and quickly, putting safety first. We'll continue to strongly defend our company, our people and the quality of our services," Transocean, the world's largest drill rig operator said in a statement.

"The filing of the second lawsuit is another in a series of outrageous actions brought by the same district attorney who previously filed both a criminal and civil case, all of which are without merit," Chevron said in a statement, calling the $10.9bn figure “arbitrary”.

The size of the damages have also caught the attention of politicians close to Brazilian President Dilma Rousseff's government.

Jorge Viana, a senator from Rousseff's Workers' Party and one of the country's leading environmentalists, said the damages being sought were "irresponsible" and if applied to all companies working in the country could lead to the shutdown of Brazil's oil industry.

The industry generates revenue worth more than 10 per cent of gross domestic product in Brazil, the world's sixth-largest economy.

                 Will criminal charges slow Brazil's oil rush?



The discovery of vast reserves of pre-salt oil - some 50 billion barrels of it - off the coast of Brazil is supposed to create a boom for the nation as Western oil companies, together with their vast cash stockpiles and superior technology, rushed in to take their slice of the pie.

But now the Brazilian authorities are pitting themselves against two US oil companies, Chevron and Transocean, following a relatively small oil spill last November at the Frade field some 360km from Rio de Janeiro's coast.

The accident cracked geological structures in the reservoir and oil will continue leaking from the field until it is emptied. So far it has leaked up to 3,000 barrels of oil - which is considered as a small leak compared to many others.

But just last week, the same well started seeping oil once again, prompting Chevron to temporarily suspend all production.

As a result, 17 managers from the two companies have had their passports revoked, and they are likely to face criminal charges. Prosecutors will allege that the companies should not have drilled the deep-water well that leaked, and that they knew of the risks.

There has been an outcry against the regulations, which some say are inconsistent.

Marcelo Lins, a journalist with Globo News TV, believes Brazil is in a delicate position, because the country is hosting the Rio+20 United Nations Convention on Sustainable Development in June and it is very important for the government takes a stand on these issues.

Lins is also the producer of a film in which he predicted the Chevron oil spill before it happened. He says:

"Chevron was not careful enough … perhaps using too much pressure in it drilling may have caused the first spill four months ago. I don’t think we can expect a prison mandate but should be seeing some huge fines to send a sign of alert to big companies coming to exploit oil in Brazil."

So will harsh penalties against Chevron discourage it and other oil companies from drilling off the coast of Brazil? And is there such a thing as too much regulation?

To answer these questions Inside Story America talks to Thomas Pyle, president of the Institute for Energy Research; Marcelo Lins, a journalist with Globo News TV in Brazil, and the producer of a film in which he predicted the Chevron oil spill before it happened; and finally Diane MacEachern, an author on environmental issues and former consultant for the Environmental Protection Agency.

"If Brazil overplays it hand with respect to the regulations, and more importantly the inconsistencies there, they will send a chilling effect to the industry... It is up to the Brazilians to decide for themsleves how they will fuel the next period of growth. They are the sixth-largest economy in the world."