MercoPress. South Atlantic News Agency

Chevron reaches negotiated settlement in Brazil oil spill case after two year legal battle

Brazilian prosecutors sought 18 billion dollars in damages for a 3.600-barrel leak in 2011

A Brazilian federal judge on Tuesday dismissed a lawsuit against US oil company Chevron Corp after approving a negotiated settlement, a decision that closes a nearly two-year legal battle over an oil spill in November 2011.

Brazilian prosecutors sought 40 billion Reais (18 billion dollars) in damages from Chevron and offshore drilling contractor Transocean Ltd for a 3.600-barrel leak in the Frade offshore oil field Chevron operates northeast of Rio de Janeiro. Prosecutors also filed criminal charges against the companies and 17 of their employees. A judge rejected those charges, but prosecutors are appealing.

The dismissal came after Judge Raffaele Felice Pirro of the federal court in Rio de Janeiro accepted an “adjustment of conduct” deal with Chevron that commits the company to spending about 300 million Reais (135 million dollars) in compensatory activities. Chevron and the government agencies that signed the accord said Transocean had no responsibility for the spill.

The case, the largest-ever environmental lawsuit in Brazilian history, raised questions about the cost of doing business in the nation's high-risk oil business and the ability of prosecutors to assess proper penalties.

While the spill caused no discernible environmental damage, was dispersed within days, never came within 100 kilometres off shore and resulted in no injuries, Chevron and its partners had to stop producing for about a year and a half. Brazilian petroleum regulator ANP fined Chevron for failing to follow drilling plans, but absolved the company of negligence.

The damages sought were many times larger than those US courts awarded plaintiffs against operator BP Plc in the much larger 2010 Deepwater Horizon spill, which fouled beaches, damaged fisheries and killed 11 people in the Gulf of Mexico.

Chevron owns 52% of Frade and is the field operator. Brazil's Petrobras owns 30% and Frade Japão, a joint venture between Japanese trading companies Sojitz Corp and Inpex Corp, owns 18%.