Pay developing nations for eco-disasters

The $20 billion put aside by BP to pay for the effects of the Gulf oil spill contrasts with the lack of accountability of big firms that cause environmental harm in developing countries.

Martin Khor

IN a widely publicised move in June, the United States' President Barack Obama succeeded in getting the oil company BP to set aside $20 billion into a fund to meet claims for compensating losses arising from the Gulf of Mexico oil spill.

It is extraordinary that a giant company has been pressurised by a government to agree to pay so much. The funds will be used to meet claims for economic losses of local people in the Gulf Coast states whose incomes have been lost due to the spill (for example, the tourist business has collapsed) and to pay the cost for the environmental clean-up.

Another $100-million fund will be set up to pay workers laid off due to suspension of offshore drilling. BP will also suspend paying dividends so that there is enough cash for the new funds.

A US Congress committee also grilled the CEO of BP Tony Hayward for seven hours.

Obama's move and BP's agreement to compensate were clearly the result of the growing anger of Americans at both BP and the government, which had lax or absent implementation of safety regulations.

Americans are angry that it has taken so many months to fix the problem. Meanwhile 11 oil workers died in the rig explosion, a lot of marine life will perish and many thousands of local people will have their livelihoods damaged.

It may indeed be the United States' worst-ever environmental disaster. But there have been much worse ecological catastrophes in developing countries, caused by giant companies, many of them American.

Many more lives were lost and livelihoods damaged, and the environmental cost has been higher. But little if any compensation has been paid by these companies. And the governments of the countries in which the companies are headquartered have turned a blind eye.

Bhopal, India

The most outstanding case is that of Bhopal in which the emission of poisonous gas from a factory in that Indian town in 1984 affected half a million people, killed 2,300 people immediately, with another 15,000 to 30,000 dying subsequently and many thousands of others maimed seriously. Even now the land and water in the vicinity continue to be contaminated with toxic chemicals that affect human health.

The factory was then owned by the US company Union Carbide, which in 2001 was taken over by Dow Chemical. The Bhopal factory was sold to a local firm in 1992.

Union Carbide never accepted responsibility for the disaster, and neither has Dow. An arrest warrant for Union Carbide's then chairman Warren Anderson was issued in India but he has not been brought to trial.

Union Carbide paid $470 million in a deal in 1989 with the Indian government, but this is a small amount, given the enormous numbers of people who died, were injured and continue to suffer.

On 7 June this year, an Indian court found seven former executives of the Indian subsidiary of the company guilty of negligence and they were given sentences of two years' jail, which are being appealed against. According to reports from India, the Bhopal residents and their supporters are dismayed by such a light sentence, and they are still waiting for proper compensation.

However, the court case and perhaps Obama's actions on BP have spurred new actions in India.

The Indian government on 24 June announced enhanced compensation to the victims, an environmental clean-up plan, and new efforts to extradite Anderson to face court action in India.

The government is also exploring the possibility of new legal action to reconsider the $470 million fixed earlier in an out-of-court settlement between the government and Union Carbide, and later approved by the Supreme Court. A curative petition may be filed in the Supreme Court to seek higher consideration.

Ecuador oil dumping in forest

A second case is that of Ecuador, whose Amazon region was contaminated by oil and oil waste in amounts far larger than the Gulf oil spill so far. The oil and waste was discharged by Texaco (bought over by Chevron in 2001) when it operated an oil concession in 1964-1990.

The New York Times in May 2009 reported indigenous people resident in the area saying that toxic chemicals had leaked into their soils, groundwater and streams, and that their children had died from the poisoning. It cited a report of an expert (contested by the company) who estimated that 1,400 people had died of cancer because of oil contamination.

The indigenous groups have taken a court case against Chevron for $27 billon in damages. They accuse Chevron of dumping more than 345 million gallons of crude oil into the rainforest. Chevron is also said to have dumped 18.5 billion gallons of toxic waste in pits in the forests.

Experts sympathetic to the local people claim that the disaster has devastated their lands, income and health to a degree far larger than the BP spill in the Gulf.

US Congressman James P McGovern, the vice-chairman of the House Rules Committee, visited Ecuador in 2009 and is reported to have written to Obama that 'the degradation and contamination left behind by [Chevron] in a poor part of the world made me angry and ashamed. I also saw the infrastructure Texaco/Chevron created that allowed the wholesale dumping of formation water and other highly toxic materials directly into the Amazon and its waters.'

Niger Delta oil contamination

A third case is that of the Niger Delta in Nigeria, in which oil is extracted by Shell, Exxon and other giant companies.

An article in The Observer, entitled 'Nigeria's agony dwarfs the Gulf oil spill: The US and Europe ignore it', describes how oil spilt from pipelines and other sources has contaminated swamps, rivers, forests and farmlands in the region.

'In fact, more oil is spilled from the delta's network of terminals, pipes, pumping stations and oil platforms every year than has been lost in the Gulf of Mexico,' wrote John Vidal.

A report by environmental groups calculated in 2006 that up to 1.5 million tons of oil - 50 times the pollution unleashed in the Exxon Valdez tanker disaster in Alaska - has been spilled in the delta over the past half-century. Last year human rights group Amnesty International calculated that the equivalent of at least nine million barrels of oil was spilled and accused the oil companies of a human rights outrage.

On 1 May a ruptured ExxonMobil pipeline spilled more than a million gallons into the delta over seven days and thick balls of tar are being washed up along the coast. Local people blame the oil pollution for the fall in life expectancy in the rural communities to a little above 40 years.

According to the writer Ben Ikari, 'This kind of spill happens all the time in the delta. The oil companies just ignore it. When I see the efforts that are being made in the US I feel a great sense of sadness at the double standards.'

'We see frantic efforts being made to stop the spill in the US,' said Nnimo Bassey, Nigerian head of Friends of the Earth International. But in Nigeria, oil companies largely ignore their spills, cover them up and destroy people's livelihood and environments. The Gulf spill can be seen as a metaphor for what is happening daily in the oilfields of Nigeria and other parts of Africa.

Compensation must be accountable

These cases show a big contrast between what the US administration is doing to hold a multinational company financially accountable, and how similar companies that cause ecological catastrophes in developing countries are able to get away either freely or with grossly inadequate pay-outs.

What the US administration and Congress are doing to get BP to compensate for the environmental and economic damage it is causing is commendable and should be supported.

Developing countries should learn a lesson from the US and take similar action in line with the 'polluter pays' principle.

And just as importantly, the governments of the home countries of the multinationals should also act to make their companies accountable for their actions when they operate in other countries, and to compensate adequately when they cause environmental damage.

There should be an international understanding or agreement among the governments to the effect that they will support one another to obtain redress from companies to compensate for the environmental damage they cause.                                       

Martin Khor is Executive Director of the South Centre, an intergovernmental policy think-tank of developing countries, and former Director of the Third World Network.

*Third World Resurgence No. 238/239, June-July 2010, pp 2-3