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Brazil Tries to Lay Down the Law With Chevron
An overreaction, or the response of a government that has learned from the mistakes of others?
Either way, Brazil has been aggressive about a 110,000-gallon oil spill last November, as well as a current leak, from a deepwater drilling rig 230 miles off the coast of Rio de Janeiro. The rig is controlled by oil giant Chevron Corp. and managed with its partner, Transocean Ltd. According to the head of the federal police's environmental affairs division, Chevron and Transocean insisted on drilling at an excessive pressure.
Following the spill, Brazilian authorities suspended Chevron's drilling activities, denied it access to new offshore fields and seized the passports of 17 company executives. "There is no doubt that the departure of these individuals from our country, at this time, would pose a serious risk to the (spill) investigation, and the possible enforcement of a criminal law," said Judge Vlamir Magalhaes, who signed the seizure order.
Federal prosecutors sued Chevron for $11 billion late last year, claiming social and environmental damages caused by the spill. So far, the oil giant has been fined more than $30 million and has been prohibited from exploring new oil fields in Brazil.
The current leak is tiny compared with the November spill, not to mention the devastating spill caused when a drilling rig failed in the Gulf of Mexico in 2010. Yet Brazilian officials appear to be irked by Chevron's response to last year's spill. According to Brazilian authorities, the company tried to minimize the actual damage and suggested that the leak was only the result of a geological miscalculation rather than an operational error.
Some of Brazil's oil fields lie in almost 7,000 feet of water and under 16,000 feet of sand, salt and rock. Getting oil securely up the surface is a risky endeavor. The question isn't whether there will be accidents. There will be. The issue is whether Brazil is satisfied that the companies operating in its coastal waters have plans in place to cope and the systems in place to assure accountability.
If Chevron is forced to abandon its Brazilian venture, the cost could approach $2.5 billion. Calculating the costs and benefits for Brazil is harder: Balancing a commitment to the environment with the need to develop natural resources and spur growth that helps lift more of its 210 million people out of poverty.
(Mayara Vilas Boas is on the staff of Bloomberg View. Follow her on Twitter.)
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