By Jeb Blount and Joshua Schneyer
Brazil/New York - A
Brazilian federal prosecutor filed criminal charges on Wednesday against
Chevron and drill-rig operator Transocean for a November oil spill,
raising the stakes in a legal saga that has added to Chevron's woes in
Latin America and could slow Brazil's offshore oil boom.
Prosecutor Eduardo Santos de
Oliveira also filed criminal charges against 17 local executives and
employees at Chevron and Transocean, owner of the world's largest oil
rig fleet. Among the defendants is George Buck, 46, a U.S. national in
charge of Chevron's operations in
Brazil, the prosecutor's office said in a statement.
"The
spilling of oil affected the entire maritime ecosystem, possibly
pushing some species to extinction, and caused impacts on economic
activity in the region," Santos de Oliveira, a prosecutor in the oil
district of Campos de Goytacazes, said in the filing. "The employees of
Chevron and Transocean caused a contamination time bomb of prolonged
effect."
The charges stem from a
3,000-barrel leak in the Frade field, about 120 km (75 miles) off the
coast of Rio de Janeiro state. They include: failure to realize
protocols to contain the leak; failure to take steps to kill the well
and stop the drilling process; breach of licenses, legal norms and
regulation, including altering documents; and failure to meet legal and
contractual duties.
Chevron and Transocean strongly disputed the charges.
"These
charges are outrageous and without merit," Chevron said in a statement.
"Once all the facts are fully examined, they will demonstrate that
Chevron and its employees responded appropriately and responsibly to the
incident."
Transocean "strongly disagrees with the indictments," said spokesman Guy Cantwell.
Chevron
said it stopped the leak in four days. None of the oil that leaked into
the Atlantic reached shore or interfered with marine life, it said.
In
November, the same prosecutor filed an $11 billion civil lawsuit over
the spill, the largest environmental suit in Brazil's history. Chevron
has already been fined around 200 million reais in fines ($110 million)
for the spill by environmental and oil regulators.
Chevron's
shares dropped 1.1 percent to $107.91 on Wednesday, to their lowest in
nearly a month. Transocean's US-traded shares dropped 1.1 percent to
$56.77.
Observers warned that the
criminal charges could spook foreign companies attracted to Brazil's
offshore oil boom and slow development of more than 50 billion barrels
of reserves discovered here since 2007.
"These
charges are being used by those who want to shut out foreign investment
and vilify foreign companies," said Adriano Pires, head of energy think
tank Brazilian Infrastructure Institute, and a former oil regulator.
The
Chevron leak was less than 0.1 percent of the size of the 4
million-barrel BP oil disaster in the Gulf of Mexico in 2010. Transocean
also owned the rig in that spill. Past Brazilian oil spills by
state-run Petrobras, including some larger ones, have never prompted
criminal charges.
Chevron's
troubles in Brazil could force it to rethink its Latin American
strategies. A shortage of trained workers, engineers and equipment have
driven up costs in Brazil and Chevron faces an $18 billion environmental
verdict in Ecuador.
Oliveira's
filings allege that Transocean's Sedco 706 rig, which drilled the well
that leaked, had "grave" equipment failures that were detected by
Brazil's national petroleum agency, the ANP.
In
addition to Buck, prosecutors leveled criminal charges against other
Chevron and Transocean employees, including five other Americans, five
Brazilians, two Frenchmen, two Australians, a Canadian and a Briton. Among them was Guilherme Dantas Rocha Coelho, 38, the Brazilian head of
Transocean's operations in the country.
All
were ordered to turn in their passports last Saturday and remain in the
country. Each individual will be required to post 1 million reais
($550,000) bail and each company 10 million reais ($5.5 million) to
ensure payment of future fines.
JAIL TIME UNLIKELY
Prison
sentences could be as lengthy as 31 years, the filings said. Oliveira
told Reuters in January that jail terms for the oil workers would be
unlikely and a "last resort." On Wednesday, however, he said the
executives should be jailed.
"Yes, I
want them to serve the full time and if they don't it won't be for any
lack of effort by the Federal Prosecutors' Office," he said at a news
conference in Rio de Janeiro.
Under
Brazilian law, a judge must examine the charges and determine whether
to proceed with formal indictments, a process that could take days or
weeks. Either way, Chevron and Transocean likely face years of legal
action in Brazil, one of the world's most promising oil frontiers.
Few individuals or companies have ever been convicted of environmental crimes in Brazil, and fewer have gone to jail.
ROUSSEFF WARNS OIL COMPANIES
The
charges come less than a week after Chevron asked for and received
permission to temporarily stop production at Frade after finding new
seeps on the sea floor. It was producing 61,500 barrels a day, down from
about 80,000 before the November spill.
Chevron
has spent more than $2 billion developing Frade, Brazil's largest
foreign-operated field in which the No. 2 U.S. oil company owns a 52
percent stake. Brazil's Petrobras owns 30 percent and a Japanese group
led by Inpex and Sojitz owns 18 percent.
The
prosecutor alleges that Chevron and Transocean ignored signs that their
drilling could blast through rock and the seabed as they tapped into a
high-pressure reservoir in an area whose faults and fissures made it
prone to an underground blowout. Chevron has said it encountered
reservoir pressure levels far above those in previous wells.
Chevron
has downplayed the potential for further environmental damage from the
Frade incident, but has pledged to carry out a study of the field's
geology before asking regulators to resume production. Prosecutors said
there could be further leakage, citing evidence of damage to the oil
reservoir. A technical report by ANP has not been made public.
Chevron
said on Wednesday that oil from the new seabed seep differs chemically
from crude spilled in November, and that the two leaks are unrelated.
Prosecutors allege the newest leak, measured at less than a barrel of
oil, is a worrisome complication of the earlier spill. Brazilian
President Dilma Rousseff, a former energy minister who also served as
chairwoman of the Petrobras board, warned oil companies on Wednesday
that they must strictly follow security procedures in Brazil. "On this
question there can be no exceptions to being within safety limits and
knowing them, to never test them and never go beyond them," she said in
Rio at the swearing in ceremony for the new head of oil regulator ANP.