Prosecutors seeking $10B from Chevron for leak

[December 15, 2011]  SAO PAULO (AP) -- 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.

[Associated Press; By BRADLEY BROOKS]

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