Woes mount for oil firms in Ecuador

No one said running a multinational company was easy. But for energy firms that depend on the steady flow of oil and gas from remote, often unstable, parts of the world, just keeping the pipelines secure can be a feat.

In eastern Ecuador,oil companies face daily threats - from kidnappings of workers to sabotage of installations. Tuesday, hundreds of protesters seized a pumping station, causing state-run Petroecuador to shut down one of its two main pipelines.

In August, oil opponents brought almost all of Ecuador's oil production to a halt. Protesters invaded oil camps, destroyed equipment, and blocked highways, prompting the defense minister to threaten force to stop them. One oil executive says he knows of 19 kidnappings of oil-industry workers in recent years.

Protecting oil installations here calls for robust security measures, but recently publicized contracts mapping oil industry ties to the Ecuadorean military have raised concerns in a country where populism runs deep and three presidents in the past decade have been forced out of office amid popular unrest.

The contracts highlight the troubles facing many multinational energy companies as they seek to diversify drilling sources away from the Middle East and into countries where extractive industries have been linked to environmental and human rights concerns. Critics here say the rarely seen documents - some of which detail company mandates for soldiers to conduct countersurveillance operations on the local population - are proof that Ecuador's military is a private army for oil firms.

"If you cut through the clinical language of the contracts, what you have are agreements that allow American companies to spy on the lawful activities of local citizens in foreign countries," said Steven Donziger, a US attorney working on behalf of groups in the region that are opposed to oil drilling.

Oil companies stress that the contracts are legal, and say they reflect the realities of operating expensive facilities in dangerous places.

The documents, some marked classified and negotiated in secret, were released in late November in connection with lawsuits here, and all have either expired or were nullified by a Dec. 8 decision by the Ecuadorean military.

The military and 16 multinational oil firms, including US-based companies Kerr-McGee, Burlington, and Occidental Petroleum, signed one contract that was dated July 2001 and marked classified. It established "terms of collaboration and coordination of actions to guarantee the security of the oil installations and of the personnel that work in them," to include the control of arms, explosives, and undocumented persons in areas of oil operations. It also instituted communication networks and required military personnel to periodically update oil firms on army activities.

Another contract marked classified and signed in April 2001 by California-based Occidental Petroleum required soldiers "to carry out armed patrols and checks of undocumented individuals" within the company's operating area. It also mandated that soldiers "plan, execute, and supervise counterintelligence operations to prevent acts of sabotage and vandalism."

Counterintelligence operations in Latin America have long been linked to human rights violations, says Keith Slack, a senior analyst for Oxfam. "That Occidental contracted with the military to do this near its installations seems fraught with potential for abuse."

Scott Pegg, a political scientist at Indiana University-Purdue University Indianapolis, says these kinds of agreements are not unusual, but "seeing them or having copies of them is extremely rare."

Mr. Pegg said he found the reference to counterintelligence atypical. "It's not so much that it is done, but that it would be openly and explicitly put in writing as part of a contract," he says.

An Occidental spokesman stressed that the contracts were legal and that the 2001 agreement was nullified by a 2004 amendment that was more in keeping with the company's human rights policy. The amended agreement contained no references to counterintelligence operations or requirements that patrols be armed. It also put limitations on the use of force and barred the military from deploying personnel credibly implicated in human rights abuses, according to the spokesman.

Another contract required US-based Chevron Corp. to build a villa on an Ecuadorean military base located near Lago Agrio, a notoriously dangerous jungle outpost where an environmental lawsuit against the company has been under way since 2003. Texaco, which merged with Chevron in 2001, operated as a minority partner in a government oil consortium there from 1964 to 1992, and is being sued here for environmental damage.

Lawyers representing indigenous groups say Texaco dumped 18 billion gallons of pollutants into the environment during its stay, causing an environmental and public-health crisis. Chevron claims Texaco's operations were ultimately controlled by the Ecuadorean government, that it used industry-accepted practices at the time, and carried out a multimillion-dollar remediation that was approved by Ecuadorean officials in 1998.

In November, groups supporting the plaintiffs presented allegations to the Organization of American States (OAS) that lawyers suing Chevron are being spied on and intimidated by Ecuadorean military personnel, and suggested the oil firm was pulling the strings. Both the United Nations and the OAS have requested that Ecuadorean authorities address the plaintiffs' claims.

Chevron spokesman Jeff Moore denies the accusations. "This is a very dangerous region and we take very seriously not only the safety and security of our employees and contractors, but also everyone else participating in the trial," says Mr. Moore.

But some Ecuadoreans say the military is respected for having peacefully overseen many tumultuous political transitions.

Randy Borman, the son of white missionaries who was raised with the Cofan indigenous group, has led his tribe on armed raids against oil firms.

He says rogue officers "on the take" sometimes cause problems, but that soldiers often side with indigenous groups.

"In our dealings, the oil companies would often bring in the military as backup for their position, but most of the time, if we treated them properly, [the soldiers] wound up on our side."

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