Chevron Brazil faces criminal oil-spill charges, reinstated on appeal

Fri Apr 4, 2014 12:06am EDT

* Charges had been dropped in 2013 after a settlement

* Chevron, 11 employees the subject of reopened case

* Oil agency approves Chevron restart of offshore wells

By Jeb Blount

RIO DE JANEIRO, April 4 (Reuters) - Brazilian judges ordered a criminal prosecution of Chevron Corp. and 11 employees over an oil spill in Nov. 2011, in a process reinstated more than a year after being thrown out following a settlement with the government.

An appeals panel made the 2-to-1 decision in October, but kept it quiet as judges reviewed Chevron's challenges to their ruling, Brazil's public prosecutor's office, which oppposed the dismissal, said on Wednesday.

Chevron confirmed the ruling late on Thursday.

The case is likely to revive concern over the speed and security of Brazilian legal rulings.

The same prosecutor's office that drew up a settlement to help get the charges dropped is now working to re-open the criminal part of the case. Similar, and even larger, spills by other companies in Brazil have not led to criminal charges.

"The prosecutors are trying to show that the defendants' arguments that there is no proof of an environmental crime are wrong," the prosecutors said in a statement.

Prosecutors say their evidence shows the defendants are responsible for environmental pollution.

These pollution routes include the spilling of residues, unauthorized extraction of mineral resources, irregular operations with the potential to pollute, damage to public assets and other crimes, prosecutors said in their statement.

Chevron "continues to believe that the complaint is without merit," the San Ramon, California-based company said in an e-mail, adding that it intended to fight the ruling.

The prosecutors are not trying to reinstate charges against employees of Chevron's drilling contractor Transocean Ltd , who were named in the original indictment.

From the beginning Chevron has said it took full responsibility for the accident. The defendants face up to three decades in jail if convicted.

The case now returns to the 10th Federal Criminal Court in Rio de Janeiro. That court threw out the case in January 2013 shortly after Chevron agreed to about $150 million in remedial actions and signed an adjustment-of-conduct accord with prosecutors and Brazil's environment agency over the spill.

The spill in the Frade field northeast of Rio de Janeiro leaked an estimated 4,600 barrels of oil into the ocean, less than 1 percent of the giant and deadly Deepwater Horizon spill in the Gulf of Mexico in 2010.

The spill that Brazil's petroleum regulator said had caused no discernible environmental damage, injuries or deaths was also the subject of a controversial civil lawsuit seeking nearly $20 billion in damages. Prosecutors dropped that case in October.

Chevron and its partners in Frade had to stop producing for about a year and a half. Brazilian petroleum regulator ANP fined Chevron for failing to follow drilling plans, but absolved it of negligence.

"We are confident that once all the facts are fully examined, they will demonstrate that the company responded appropriately and responsibly to the incident and that there is no damage to the environment or risk to human health associated with the incident," Chevron said in the statement.

The ANP agreed on March 31 to let Chevron restart all its production wells at Frade, Chevron said in a statement.

A year ago, the ANP authorized Chevron to start four wells, from which its daily production in February stood at 17,279 barrels of oil and natural gas, about a quarter of 2011 peak output before the spill.

Chevron officials were not immediately available to say how many production wells the company has at Frade.

Chevron is still barred from operating water-injection wells at Frade, which are used to boost reservoir production. The ANP fears such wells may cause oil leaks through seabed fissures.

Chevron owns 52 percent of Frade. Brazil's state-run Petroleo Brasileiro SA owns 30 percent and Frade Japao, a joint venture between Japanese trading houses Inpex Corp and Sojitz Corp, owns 18 percent.

(Editing by Clarence Fernandez)