FORREST SAWYER Picture this, it�s 30 years ago. Engineers believe there�s oil in a sensitive area of the Amazon rain forest, where native peoples are still living. A Third World government with no tough environmental laws cuts a deal with a huge American oil company, the company to provide equipment and expertise, the government to get most of the profits, and the profits total billions. By the time the company left, the venture had spilled more oil than the Exxon Valdez, more than 400 toxic pits were scattered around and the company had cut another deal. Cleanup operations that came to $40 million, turn over the aging oil wells to the government and leave with no further obligation.
It certainly sounds like something Hollywood might cook up, but this story is very real. The country is Ecuador, the oil company is Texaco and the native peoples who say their lives have been devastated are right now before an American court demanding that Texaco pay for all the alleged harm. But remember, the Ecuadorian government participated in the venture and officials agreed to let Texaco walk away, which means that even if the claims of environmental damage are true, it may be that at least under Ecuadorian law, no one is legally responsible.
Should a US court require an American company to pay for something that happened in another country with that government�s full knowledge and no laws broken? As we tell this story over the next two nights, you decide for yourself.
Tonight, a look at the destruction Texaco�s critics are claiming. Here�s Nightline�s Dave Marash.

FILM NARRATOR If oil were down there, it had been locked deep in the earth for millions of years.

DAVE MARASH, ABCNEWS (VO) It was the early 1970s and the Texaco subsidiary called Texpet (ph) was beginning to produce oil in Ecuador�s Amazon region.

FILM NARRATOR Thrusting a steel finger downward, probing deeper and deeper for the oil that might be beneath us.

MARGARITA YEPES (PH), FORMER SOCIAL WORKER We didn�t know anything about oil. We only knew it was good economically for the country.

DAVE MARASH (VO) Former Texpet social worker Margarita Yepes remembers when production actually began in 1972.

MARGARITA YEPES There was a rumor that putting oil on the head prevented baldness and so the workers would smear it on their heads and people here who had parents that are old gave it to them to prevent pain and to cure their arthritis.

FILM NARRATOR For the first time in our history, there were roads across the Andes and into the Amazon jungle.

DAVE MARASH (VO) Back then, Ecuador�s oil story was a romance of bringing civilization to the savages.

FILM NARRATOR Jungle Indians, curious spectators, came to see what we were doing.

DAVE MARASH (VO) It was an adventure, making mountains and jungles bend to man�s hand.

FILM NARRATOR The pipeline would snake across peaks so steep you could hardly scale them.

DAVE MARASH (VO) But from today�s point of view, those accomplishments are dwarfed by anxieties. Meet Yuri, barely four years old and already marked by the burden of oil pollution, so goes the narration of this investigative report from Ecuador�s Ecuavisa television network. It continues, these families live less than 300 meters from an oil well. The water they drink is polluted with toxic chemicals. So the oil adventures are gone and so, too, the romances about petroleum development and the indigenous peoples of the Amazon. They�ve been replaced by protests and by lawsuits. (on camera) The biggest problem with Ecuador�s oil is where most of it comes from, the region called Oriente, east of the Andes Mountains in the upper reaches of the Amazon Basin, the world�s single biggest reservoir of fresh water and the planet�s number one living museum of natural history. (VO) Step to the bank of the Rio Napo, one of the biggest tributaries of the Amazon, and you feel like you�re at the beginning of the world. On every side, something is being born. The very light is alive, suddenly shifting from dense canopied shadow to white hot fragments of unfiltered sun. Trees push up past other trees, leaves brush over other leaves, insects devour other insects and native people cling to the land, to the forest, the old structures and tools, the old ways of earning survival.
From another perspective, you feel you�re witnessing the end of the world. Columns of smoke, pillars of fire, gleaming pools of waste. The smoke plumes from every direction, from the middle distance to the very edges of the horizon. They�re fewer, but they�re easier to spot, those flares where natural gas, an unwanted byproduct of oil production, is burned off. And spotted among the flames and smoke trails, the reflecting surfaces of hundreds of waste pits, open ponds of crude oil grinning in the tropical sun.
This Amazon paradise is as pocked and chipped and scratched as dinnerware at a greasy spoon. Everywhere on the ground there are the pipelines, 300 miles of big pipeline connecting the oil fields of Lago Agrio with the Pacific coast, 250 miles or more of smaller subsidiary pipes connecting wells and pump houses and refineries, crossing towns and fields and front yards. And alongside almost every pipeline, a road.

JUDY KIMERLING, ENVIRONMENTAL ATTORNEY When Texaco built the pipeline, it built a road in order to build and service the pipeline. This road leads to deforestation because it provides means of access into previously inaccessible forests. So colonists follow the road into the forest and cut the trees to plant crops and pasture.

DAVE MARASH (VO) Judy Kimerling is a lawyer who teaches at the City University of New York Queens College. She used to prosecute polluters at places like Love Canal. Then she visited the Amazon and wrote a book, �Amazon Crude,� attacking what she says developers have done, encouraged by successive Ecuadorian governments and led by an American oil giant, to the Amazon forest.

JUDY KIMERLING When he sticks a hole in the ground, you can see that the ground water is carrying this petroleum.

DAVE MARASH (VO) Every pipeline and every road, every plot and pasture burned out of the forest is a slash across the face, a cut into the heart of Amazonia.

JUDY KIMERLING When Texaco built roads, they blocked many, many streams and so this disrupts the natural drainage patterns of the water. You can have areas that were previously dry become swampy, swampy areas that dry out. Road building across streams also blocks the migration of fish.

DAVE MARASH (VO) And where does this leave the people of Ecuador�s Oriente? You can guess.

JUDY KIMERLING People live from the forest, they live from the water. And so when you destroy the environment, you destroy their food and water supply.

DAVE MARASH (VO) And that�s when nothing is going wrong. When the oil industry is working perfectly, it can only limit the damage it does to the Amazon. But when things do go wrong, when fires break out or more commonly when pipelines crack or rupture from earthquakes or corrosion or human error, the damage can be devastating. There have been roughly 30 major spills from the main trans�Ecuadorian pipeline alone, dumping an estimated 16.8 million gallons of oil over nearly 20 years. Here�s a comparison. That�s half again as much as was spilled by the infamous Exxon Valdez.

MARGARITA YEPES I think if we could go back and if we had magical powers to say what would happen, we would say let�s not have any oil in Ecuador.

DAVE MARASH (VO) From the beginning, one company dominated oil development in Ecuador, Texaco they call it. Then, Texaco left and legally and metaphorically washed its hands of Ecuador.

FORREST SAWYER Texaco is emphatic in saying it played by all the rules in Ecuador and for that matter, there is no evidence of lasting damage. A closer look, when we come back.

(Commercial Break)

DAVE MARASH (VO) Texaco looks back on its two decades in Ecuador and says it created no long�term damage, either to the environment of the Amazon or to the health of its people. But critics paint a very different picture.

LUIS YANZA, PRESIDENT AMAZON DEFENSE FRONT This pool was built by Texaco at the time of their operations here in the Ecuadorian Amazon.

DAVE MARASH (VO) Almost everywhere there�s an oil well in the Oriente there�s a waste pit nearby. Roughly 400 waste pits were built by Texaco during the 18 years it dominated Ecuador�s oil industry. Texaco says it has cleaned up 268 of them, but not this one.

LUIS YANZA Sadly, this and other pools are not included in the remedial plan that the government signed with Texaco.

DAVE MARASH (VO) It ought to be, says environmental activist Luis Yanza, because Texaco built it and left behind a literal black hole swallowing up local livestock.

LUIS YANZA Small animals, chickens, birds, they fall into the pools and die. Same as pigs. This is the biggest problem.

DAVE MARASH (VO) Yanza says fumes from the surface and underground seepage from the waste pits have affected larger animals as well.

LUIS YANZA In the case of cows, cattle, there�s a high rate of miscarriage.

DAVE MARASH (VO) Increases have also been reported in the rate of spontaneous abortion among the people who live near these waste pits. And what is in the waste pits?

LUIS YANZA In general, heavy metals, polycyclic aromatic hydrocarbons, which are the most notorious contaminants in these types of pools.

DAVE MARASH Nice, huh? Well, there are hundreds of these temporary well pits all over Oriente Province and they�re ugly and they�re toxic in their own right, but they raise an even more serious question, where does all of this stuff go? (VO) Victor Guerrero traced a path as clear as bloodstains on a carpet from the waste pit to a nearby river.

VICTOR GUERRERO, COMMUNITY PRESIDENT Well, this water can�t be used. Animals large and small die. Everything has disappeared because of the contamination of the water. Also, almost all the species of fish do not exist. This is the result of contamination, of the chemicals which come out of these pipes.

DAVE MARASH (VO) Guerrero says many people have given up bathing in this river. But they�ve got nowhere else to wash their clothes.

VICTOR GUERRERO So they contract this fungus. This river is completely destroyed. It�s useless. It�ll take a thousand years to bring it back to what it used to be.

DAVE MARASH (VO) Guerrero says this operation is part of the legacy left by Texaco. But today the company has no legal responsibility to clean it up. In 1995, the Ecuadorian government released Texaco from all cleanup responsibilities for any facilities that had stayed in operation after June 1990, when Texaco ceased operating in the oil fields, no matter who had originally brought the technology to the Amazon or who built the systems that critics say were all but guaranteed to pollute the environment.

JORGE ALBAN, SUBSECRETARY OF THE ENVIRONMENT The officials that signed the agreement should have been judged and sanctioned. The millions and millions of barrels, the water mixed with the crude, the inadequate sorting systems that were dumped in the Amazon rivers, in the swamps and soils of the Amazon, none of that has been considered.

DAVE MARASH (VO) The present government hates that �95 agreement, but they admit ...

JORGE ALBAN It is a legal contract. It is not within the powers of a minister, of a subsecretary, to break it.

DAVE MARASH (VO) So they�re stuck with it, just as they�re stuck with a cleanup they can neither execute nor afford. (on camera) By far, the most important question about the oil boom is has it affected health, and not just the health of the Amazon forest or farm animals, but human health. What little research has been done has mostly been based here, at the hospital in a city called Lago Agrio.

DR CARLOS TERRAN One of the first things we found is that cancer shows up in the communities where petroleum is present.

DAVE MARASH (VO) Dr Carlos Terran participated in a study that compared the things that killed people or made them sick in areas affected by oil and those in areas still oil free.

DR CARLOS TERRAN In the contaminated communities, respiratory problems are three times as common. Asthma and other problems such as bronchitis, bronchialitis and pneumonia are more common where there�s contamination.

DAVE MARASH (VO) Dr Terran also found another health problem.

DR CARLOS TERRAN Spontaneous abortions are two to three times greater in the contaminated communities than in communities where there is no contamination.

DAVE MARASH (VO) Many community and health activists of the Oriente see medical problems growing as new spills spread crude oil and other waste products across the region.

MANUEL SILVA, HEALTH ACTIVIST Skin infections caused by bathing in water that contains hydrocarbons. We have also seen respiratory infections from breathing the dust in the air which contains heavy metallic sediment. There are chronic infections which we suspect could be cancer.

DAVE MARASH (VO) Health activist Manuel Silva helped us find this brand new spill.

MANUEL SILVA This is one of the spills that constantly appear in the Amazon because the technology in the pipe is obsolete. This pipe is 25 years old.

DAVE MARASH (VO) Texaco may have put in most of these pipelines, but as this aging equipment reaches the end of its run, under that 1995 cleanup agreement, they�re somebody else�s problem, Petro Ecuador, the national oil company that succeeded Texaco as operator.

MANUEL SILVA A lot of bad administrators exist in our country. They made a bad deal. Texaco fooled the Ecuadorian government and now they�re happy. They�ve left Petro Ecuador with responsibility. We are on a time bomb.

DAVE MARASH (VO) Several time bombs, critics contend. There�s the aging infrastructure, serious problems in public health and then a neutron time bomb affecting indigenous peoples, evidence that illness and environmental loss have devastated some of the tribes of the Oriente. Since oil production began, the Cofan tribe is believed to have declined from 15,000 to less than 1,000 and the Tetetes (ph) tribe is reported to have disappeared entirely.
I�m Dave Marash for Nightline in Shushufindi, Ecuador. (ph)

FORREST SAWYER In a moment we will talk with Dave Marash about who is responsible for dealing with this mess.

(Commercial Break)

FORREST SAWYER Actually, it�s quite a report, Dave, and I imagine that Texaco has got a lot to say about all of this.

DAVE MARASH It does, although it�s somewhat constrained in what it can say because this is a case before the courts. But basically what Texaco says is number one, we followed the laws of Ecuador and number two, we collaborated with and conformed to the policies of the governments of Ecuador and then three, we did a lot of good. We made a lot of money for ourselves, but we made much more for Ecuador and that that money has translated into better infrastructure and, they say, even better health for the people of Ecuador.

FORREST SAWYER But here�s the central question. Just how much damage and how long lasting is whatever damage was done to that environment and to the people?

DAVE MARASH Texaco cites studies that say there is no lasting damage. There are other studies that show or that claim to show that there has been lasting damage both to the environment and to the health of the people who are living there.

FORREST SAWYER And that is a question that the court is going to have to decide. That�s the central issue?

DAVE MARASH Yes, and the relative culpability, if any, of Texaco or the government of Ecuador or the successor to Texaco as the operator of the oil fields of Ecuador, which is the national oil company of Ecuador, Petro Ecuador.

FORREST SAWYER Now, it�s the native peoples who are seeking some kind of relief in the courts. Now, why wouldn�t they also challenge the government of Ecuador? After all, it was the government of Ecuador which was a majority partner in this venture.

DAVE MARASH Very simply, the same reason that Willie Sutton went to banks, the money is not in the possession of the government of Ecuador but it is in the possession of the corporate strength of Texaco.

FORREST SAWYER And here is the other conundrum. The government of Ecuador seems to support the lawsuit which attacks their former partner.

DAVE MARASH They�re caught square in the middle. The government of Ecuador that signed an exit agreement with Texaco for cleaning up actually opposed the lawsuit. But the two succeeding governments of Ecuador support the lawsuit, for obvious political reasons. These are citizens of Ecuador suing a foreign power, Texaco, so you�ve got to go with your own people. On the other hand, economically Ecuador absolutely has to have an oil industry if it is to get out of one of the largest national debts in the world.

FORREST SAWYER Well, it has certainly turned into quite a legal battle and you�re going to talk a lot about that in part two of your report tomorrow night.
Dave Marash, thanks very much.

DAVE MARASH Thanks, Forrest.

FORREST SAWYER I�ll be back in just a moment.

(Commercial Break)

FORREST SAWYER At the beginning of our broadcast, I told you about the native peoples who are taking their case to an American court. It is a class action suit on behalf of 25,000 residents of Ecuador filed against Texaco. At stake, a billion dollars in claimed damages. Two weeks ago, a federal appeals court ruled the suit should go forward, either in this country or Ecuador. So where does the legal and moral responsibility lie in a case like this? That�s our report tomorrow night.

For tonight, I�m Forrest Sawyer in Washington. For all of us here at ABCNEWS, good night.