Brazil oil spill prompts charges

Federal prosecutors filed criminal charges against 17 Chevron and Transocean company executives on Wednesday for an oil leak in the Atlantic, a move deemed outrageous by those targeted but applauded by environmentalists.

Prosecutors accused the executives of environmental crimes, of misleading Brazil's oil regulator about safety plans and of not providing accurate information in the wake of the spill.

At least 416,000 litres of oil seeped through cracks on the ocean floor near a Chevron Corp. appraisal well off the Rio de Janeiro coast in November. The well drilled by Transocean Ltd. has since been sealed, but a small amount of seepage reappeared in recent days, raising concern the damage is not yet over.

The federal prosecutors' office in Rio de Janeiro said in an emailed statement that the two companies and 17 of its executives have been charged with "crimes against the environment." Executives could face up to 31 years in prison. A judge will decide if the case will go to trial, which would be a lengthy process given the number of defendants, the complexity of the case and the Brazilian legal system's room for numerous appeals.

"These charges are outrageous and without merit. Once all the facts are fully examined, they will demonstrate that Chevron and its employees responded appropriately and responsibly to the incident," said Chevron spokesman Kurt Glaubitz.

"Chevron will vigorously defend the company and its employees."

Prosecutor Eduardo Santos de Oliveira, however, said that "Chevron and Transocean have caused a contamination bomb with a prolonged effect."

Charges could spook other firms

The charges come as Brazil works feverishly to develop massive offshore oil fields discovered in recent years, discoveries that hold upward of 50 billion barrels of oil and that officials are counting on catapulting the nation permanently into developed-world status.

Some fear that the tough stance against Chevron will discourage much-needed foreign investment into developing the fields. While Brazil's state-controlled oil company Petrobras is considered by many as the globe's leading developer of offshore finds, the sheer volume of the oil reserves means the company cannot fully produce them alone.

"If you start locking up executives, people back in other oil companies like Shell, BP, ENI and anyone else with a concession in Brazil will notice and become wary," Eric Smith, an offshore oil expert at Tulane University in New Orleans.

But others think there is simply too much money to be made in Brazil's oil bonanza to scare off companies, and say this case doesn't reflect a newly aggressive attitude toward Big Oil.

"I don't see this as reflecting an anti-foreign company stance by the government nor do I think it will be seen as such by investors," said Christopher Garman, U.S.-based Eurasia Group consulting firm. "I don't see this having an impact on the interest of investors investing in Brazil."

Garman noted that Brazil's prosecutors are independent of interference from the government and that President Dilma Rousseff, herself a former chairwoman of the board of directors at Petrobras, remains committed to filling Brazil's coffers with oil revenue.

Among those charged Wednesday with environmental crimes are six Americans, five Brazilians, two French and Australian nationals, one British citizen and one Canadian. They include the heads of the Brazilian subsidiaries of both Chevron and Transocean.

George Buck, chief operating officer for Chevron's Brazilian division and three other Chevron executives have also been charged with providing authorities with a "deceptive" emergency plan and "altering documents delivered to government officials," according to prosecutors' statement. It didn't provide more details.

"The leak affected the region's maritime ecosystem, could lead to the extinction of species and jeopardize the area's economy," the statement said.

Prosecutors want fines, assets seized

Prosecutors asked that that all the assets of those charged be seized, that each person be fined $555,555 and each company $5.6 million US. A judge ruled late last week that none of the executives could leave Brazil.

Chevron said after the November leak that it had underestimated the pressure in an underwater reservoir, so that crude rushed up a bore hole and eventually escape into the surrounding seabed some 370 kilometres off Rio's coast. The oil escaped through at least seven narrow fissures on the ocean floor, all within 50 metres of the well head.

"Everything indicates that Chevron was imprudent and that area should not have been developed," said Carlos Minc, the environment minister for Rio de Janeiro state. "The porous seabed has dozens of fissures and faults through which oil seeps."

Minc stressed that the geographic studies of the area of the appraisal well required extreme caution and extra safety measures.

Asked if the government was overreacting because Chevron is a foreign company, Minc said: "I don't think it (the reaction) was excessively rigorous."

He said Petrobras has also been fined for leaks.

"I do not see any 'Chavismo' here," he said referring to Venezuelan President Hugo Chavez's contentious relationship with foreign oil companies.

'They knew they were drilling in a high-pressure area and that the walls of the well could not withstand that pressure.' Prosecutor Eduardo Santos de Oliveira

Rousseff said in a Wednesday speech that foreign oil companies operating in Brazil must "abide by the safety regulations and know they must stay within security limits and sometimes below security limits but never go beyond them."

Rousseff spoke at the inauguration of Magda Chambriard as president of Brazil's National Petroleum Agency. She did not mention either Chevron or Transocean.

Oliveira said the two companies failed to adopt procedures to contain the leak. He wrote that those expected to face charges didn't halt drilling operations soon enough and that when questioned they said the risks involved "were acceptable."

Oliveira says Chevron and Transocean "altered the truth" in documents presented to authorities, such as the number of ships deployed to contain the leak.

"The reckless operation that led to the environmental damage was planned or approved by all (the 17)," Oliveira. "They knew they were drilling in a high-pressure area and that the walls of the well could not withstand that pressure."

Transocean owned the Deepwater Horizon rig that oil company BP PLC was leasing at the time of last year'sGulf of Mexico oil spill, the largest in U.S. history and one that dwarfs the Brazilian leak. At its peak, BP's Macondo well was spewing more than 7.5 million litres a day.

Brazil itself has had bigger oil spills than this one.

In 2000, crude spewed from a broken pipeline at the Reduc refinery in Rio de Janeiro's scenic Guanabara Bay, spewing at least 1.3 million litres into the water. Just a few months later, more than 3.8 million litres of crude burst from a pipeline operated by state-controlled oil company Petrobras into a river in southern Brazil.

Brazil's worst oil disaster was in 1975, when an oil tanker from Iraq dumped more than 30 million gallons of crude into the bay and caused Rio's famous beaches to be closed for nearly three weeks.