How Texaco’s gamble to find oil reserves in the Ecuadorian jungle set the stage for a fierce battle in the courts of Manhattan and downfall of a social activist lawyer.
Law of the Jungle (Random House, 2014), by Paul M. Barrett, reveals the story of a lawyer’s obsession with righting the wrongs perpetrated by a major U.S. oil company accused of polluting the Amazonian rainforest over a 30-year period, destroying the lives of poor peasants and indigenous tribe members. In the following excerpt from Chapter 4, “Production,” Barrett gives us the history of Texaco’s beginnings in the Ecuadorian jungle.
In the early 1960s, Texaco Inc. retained ambitions for the Ecuadorian rain forest long since abandoned by rival oil companies. Standard Oil of New Jersey, a spin-off of the old Rockefeller monopoly, had poked around for decades with little to show for its investment. Shell packed up in 1950, the last of the majors to leave. Since then, the Ecuadorian jungle east of the Andes, known as the Oriente, had “remained virtually abandoned,” according to an internal Texaco memo. As far as oil riches were concerned, Ecuadorian president Galo Plaza Lasso famously declared during this period, “el Oriente es un mito,” a myth.
Texaco disagreed. Headquartered in the gleaming Art Deco Chrysler Building in New York City, the company had a defiant reputation inherited from its founder, Joseph “Buckskin Joe” Cullinan. A refugee from Standard Oil who struck it rich on the Gulf Coast of Texas at the turn of the twentieth century, Cullinan started the Texas Company to take advantage of a legendary gusher called Spindletop. Plentiful crude sold for just three cents a barrel; unregulated extraction spewed so much contamination that drinkable water commanded five cents a cup. With financial backing from New York’s Lapham brothers and a steel magnate named John “Bet-a-Million” Gates, Cullinan built a network of pipelines, refineries, and train connections that transported cheap Gulf Coast oil to customers up north. The Texas Company thrived on expanding demand for gasoline to power a new phenomenon called the automobile.
To Cullinan’s great displeasure, his financiers shifted management activities to New York. An Irish immigrant, he lectured that the company’s “attitude and activities were branded with the name Texas and Texas ideals”—but to no avail. Cullinan eventually lost the power struggle and was ousted. In his later years, he flew a skull-and-crossbones flag over the Petroleum Building in Houston “as a warning to privilege and oppression.”
The Texas Company, which changed its name to Texaco in the 1950s, became a creature of New York. An aloof outsider in its own industry, it was the only oil major that did not participate in a trade group called the All-American Wildcatters Association. Rival executives of the good ol’ boy persuasion referred to Texaco as “the meanest company in the world.” The buttoned-down men in the Chrysler Building could afford to be arrogant. By mid-century, they ran the largest oil producer in the United States and claimed to have the rights to more oil in the ground than any competitor.
Texaco management didn’t care that others had given up on Ecuador. The company had discovered crude in southeastern Colombia, and there seemed no logical reason why the political demarcation running invisibly beneath the rain forest canopy should preclude additional finds in northeastern Ecuador. Based on this hope, Texaco representatives signed a contract in March 1964 with the military junta that ruled in Quito. The deal awarded the American company the right to search for oil on more than 3.5 million acres, later augmented by an additional 4 million acres. This territory, larger than the state of Maryland, turned out to contain the choicest oil reserves in the Oriente.
In the mid-1960s, the region lacked roads, towns, and airfields, making it difficult to develop. The jungle had reclaimed mule paths and work camps from the rubber-trading era. After descending via rope ladders dangling from helicopters, workers used machetes and chain saws to clear brush and trees. It was these aerial arrivals that brought Texaco employees into contact with rain forest residents like young Emergildo Criollo of the Cofán.
The cross-cultural encounters did not always proceed amicably. Other tribes, such as the Huaorani, who lived to the south, greeted oil explorers at spear point. In response, Texaco subcontractors sent fixed-wing planes over contested areas and occasionally tossed down sticks of lighted dynamite, according to Giovanni Rosanía Schiavone, an Ecuadorian geologist who worked in the industry for thirty years. Decades later, he described the dynamite drops in a credible, confessional tone. “These were bombs to scare away the indígenas,” he said, “so they would not interfere with the seismic surveys.” In retrospect, Rosanía recognized the callousness of this conduct. At the time, terrorizing Indians seemed of no consequence.
Working by hand, industry “doodlebugging” teams cut miles of three-yard-wide trails through the jungle. They drilled hundred-foot holes to bury their charges. Carefully sequenced explosions were charted by field seismographs, which confirmed subsurface formations containing oil. Improved drilling technology allowed Texaco to explore deeper and more effectively than Shell had in the 1940s.
On March 29, 1967, Texaco’s exertions paid off. “In a remote wildcat in the jungle country of northern Ecuador,” the trade publication Oil & Gas Journal reported, the company “hit the jackpot.” In its internal history, Texaco recounted: “5,000,000 Ecuadorians heard with enormous jubilation the expected and sensational news: OIL HAD GUSHED IN THE EAST!”
It seems unlikely that the nation’s entire population, much of which in the 1960s was beyond the reach of radio and television, received instantaneous word of the Lago Agrio breakthrough. Nevertheless, for Ecuador, it was an event of historic proportion. On its inaugural day, the Lago Agrio No. 1 well “tossed” 2,730 barrels. By the end of the year, Texaco had drilled four wells roughly twenty miles south of the border with Colombia. Together they produced 8,000 barrels a day, and there was hope that the Oriente reserves held far more.
Two decades after the Oriente had been written off as devoid of accessible oil, Ecuador’s leading conservative newspaper, El Universo, applauded Texaco’s success. Fabulous oil prospects in eastern Ecuador, the paper announced. “The spreading highways will bring civilization, the land will be better cultivated, the virgin pastures will enable domesticated livestock to graze, and primitive man will in one way or another be integrated into the life of today.” Soon after Lago Agrio No. 1 began producing, the country’s president, Otto Arosemena Gómez, arrived for an official visit. Max E. Crawford, the president and chief executive officer of Texaco’s Latin American subsidiary, hosted the head of state and his son, Otto Jr., for an inspection of the four-story Lago Agrio derrick in a clearing surrounded by thick vegetation. The men wore white short-sleeved shirts and Indian-style necklaces woven from bird feathers, although photographs of the occasion reveal no actual Indians in attendance.
Ecuador, Arosemena recognized, could not get at its valuable oil without the help of multinationals and their money. On April 7, 1968, the president’s picture appeared in an eight-page advertising supplement in the New York Times: “Welcome to Ecuador! The Country That Makes Business a Pleasure.” For his color portrait, Arosemena wore a dark business suit with pink pin stripes and matching polka-dot tie and pocket square. “Ecuadorians know the rich potential of their land,” he wrote in an open letter. “But as men devoted to work and orderly processes, they also see the possibilities of tapping the potential limited by the scarcity of capital. Hence the extension of the invitation to the foreign businessman and investor to place his faith, invest, work, and construct for Ecuador.” The invitation might as well have been addressed directly to Texaco’s boardroom in the Chrysler Building.
And the oil company RSVP’d enthusiastically in the affirmative. “Wherever a wheel turns or an engine throbs, we must have energy,” the narrator of a 1970 Texaco promotional film intoned. The corporate documentary showed a car pulling into a suburban Texaco station. “Petroleum,” the narrator continued, “where do they find it? How do they go?” The answer, illustrated by images of lush Ecuadorian foliage: “Anywhere and everywhere, and always with a gamble.”
In 1972, when oil began to flow through a newly constructed pipeline from Lago Agrio to the Pacific coast, the tiny republic celebrated. A symbolic first barrel of crude, contained in a traditional wooden cask, was paraded through the streets of Quito atop a small army tank. Soldiers in ceremonial nineteenth-century uniforms marched with troops in modern camouflage. An open military truck near the rear of the procession bore a group of stone-faced Indians (who showed no sign of enjoying the occasion). The city’s Catholic bishop sprinkled the first barrel with holy water. Spectators surged forward, seeking to touch the hallowed cask. Parents held out cups to receive a drop or two, which they daubed on their children’s foreheads. After all the hoopla and speeches, the government placed the first barrel on an altar at the National Military Academy.
Reprinted from Law of the Jungle: The $19 Billion Legal Battle Over Oil in the Rain Forest and the Lawyer Who’d Stop at Nothing to Win Copyright © 2014 by Paul Barrett. Published by Crown Publishers, an imprint of Random House LLC.