Chevron: Brazilian Oil Spill (2011)

Controversy

Chevron Oil Company logo

Chevron Corporation is an American multinational energy corporation that is one o. Chevron started back in 1879 in Pico Canyon under the name Pacific Coast Oil Company. Domestic reserves were not able to satisfy the rapid growing demand of oil even with their new innovations such as pipelines and massive plants, Chevron sought out other ways to find other reserves from beyond our own shores. In 1932 they made their first international discovery in Saudi Arabia and didn’t slow down the exploration of oil reserves or the expansion of their company. By 1984 six oil industries merged under the Standard Oil Company but decided to go with the name that first appeared on their products in the 1930’s, which is now the Chevron Corporation we know today.
Today, Chevron Corporation led by CEO John S. Watson is ranked number 3 on the Fortune 500 list behind Wal-Mart and competitor Exxon Mobil. It spreads to over 180 countries making it one of the largest. The corporation consists of approximately 64,500 employees.
On November 8, 2011, there was an oil spill approximately 230 miles off the shore of Rio De Janeiro, Brazil in a Field operated by Chevron Corp. Chevron was drilling approximately 500 meters out of their designated drilling, after aggressively drilling in an illegal area, a drill bit punctured a reserve causing oil to leak heavily to the surface. Chevron noted that the spill was only 16,800 gallons to 27,300 gallons total and had 18 ships cleaning the spill while Brazilian officials argued that the spill was leaking anywhere from 8,400 to 13,800 gallons each day, which ended up being around 155,000 gallons before the leak was contained, and saw only one ship attempting to handle the spill on its own.

Stakeholders

John S. Watson, CEO of Chevron since 2010

After the oil spill in Rio De Janeiro, the ripple effect of this case made its way to numerous stakeholders, despite the minimal severity of the spill, many people were still outraged by Chevron’s mistakes. Starting with the internal stakeholders, the upper management of Chevron’s Brazil Subsidiary, more importantly George Buck the president of the Brazil subsidiary, the contracting drilling company Transocean, and other Chevron employees such as the upper management in the US branch of Chevron were all directly affected by the spill due to the loss of income after the drilling was shutdown. The contracting company Transocean, as well as Chevron’s, employees suffered from having their passports confiscated and were forced to stay in Brazil for the duration of the trial, and they also suffered from the loss of resources such as time and money they had to spend on the lawsuit. As for the external stakeholders, the people of Brazil and the Brazilian government were outraged by Chevron’s practices and frustrated with Chevron’s lack of transparency at the time of the incident. They were all directly affected by the illegal drilling, although the spill wasn’t truly devastating to the environment, Brazilians were not pleased by the fact that there was a foreign oil company coming into their waters to illegally explore their land and drill for oil that could’ve potentially caused a major catastrophe.

Individualism
Milton Friedman’s theory of individualism can be defined as maximizing profits for the stakeholders within the constraints of the law. Under this theory, Chevron’s actions would’ve been considered unethical due to the fact that Chevron was operating 500 meters outside of their designated area of drilling. Also due to the lack of cooperation with authorities when asked about the severity of the situation, Chevron underestimated that the well leaked at most 27,300 gallons and had eighteen ships working on cleaning up the sheen but after further investigation by Brazilian authorities led by Fabio Scliar, the oil well was leaking around 13,800 gallons each day and authorities only witnessed one ship attempting to clean the spill single-handedly. Although this spill was an accident that was blown way out of proportion, Chevron was still partaking in unlawful activities whether it was or was not motivated by unethical reasons.

Utilitarianism

155,000 gallons of oil spilled in Brazil

John Stewart Mill, a main contributor of Utilitarianism, believes that happiness is the only thing that matters and that customers should be maximized over one’s happiness. When applying Utilitarianism to this Case, the most important stakeholders would be everyone who wasn’t directly involved with the drilling so, in this case, the most significant stakeholders would be the Brazilian Government and its people, and all other branches of Chevron that weren’t directly associated with Brazil’s subsidiary. When deciding whether or not this case is ethical or not under this theory is hard to say because there is no clear evidence of what caused the mistake, whether it was an order by Chevron to illegally drill, a mistake caused by the drilling company or a mistake on both of their parts. Either way, Chevron’s actions were not ethical at first because they did not alert the authorities right away and they were not entirely transparent with the spill when Brazilian authorities discovered the spill and began interviewing representatives of Chevron. According to Fabio Scliar, head of FDP environmental affairs and lead investigator of the case, Chevron wasn’t very up front about the recent incident and stated that “They’ve been very resistant about providing information, and they were hesitant about allowing me to land on the platform,” Mr. Scliar said. “We had to be rather energetic with them about our requests.” (Romero, NY Times). Another issue was that George Buck’s interviews were found to be offensive due to his heavy reliance on translators and poor public relations skills. These public hearing weren’t creating any happiness because the people of Brazil didn’t fully understand the message Buck was trying to relay causing the people of Brazil even though Buck thought he made himself clear. The people of Brazil and its government viewed this case as an unwanted foreign company coming into their country making mistakes and creating unnecessary problems to the environment. As for the rest of Chevron, all upper management and other employees were forced to deal with yet another problem that damaged the company’s reputation even though they were not directly involved with the illegal drilling. On the contrary, The combined efforts of CEO John S. Watson and George Buck quickly gained control of the situation after all the commotion of the lawsuits and protests, Buck immediately acted on what he said he was going to do which was shutting down the drill site until the spill was controlled and cleaned, and agreeing to full cooperation with Brazilian officials attempting to maximize all external stakeholder’s and even Transocean’s happiness by taking full responsibility for their actions because they were simply following Chevron’s orders. After looking at the facts there is a mix of ethical and unethical actions when applying Mills’s theory of Utilitarianism.

Kantianism

Protestors simulating an oil spill, wearing the Chevron logo on their uniforms

Kantianism, a theory created by Immanuel Kant, says that people should act rationally and not to act inconsistently with their actions while also helping others make rational choices while respecting an individuals’ needs and differences, also that motivation should come from good will. In other words always act in ways that respect and honor individuals and their choices without lying, cheating, manipulating, or harm others to get your way. After applying Kantianism to this case it is easy to see that this case was unethical. According to Chevron’s website Chevron’s motto is, “Getting results the right way” and their vision is “At the heart of Chevron way is our vision… to be global energy most admired for its people, partnership and performance.” Also some of their core values consist of integrity, which they define as

"We are honest with others and ourselves. We meet the meet the highest ethical standards in all business. We do what we say we will do. We accept responsibility and hold ourselves accountable for our work and our actions" (Chevron)

Another one of Chevron’s core value is protecting people and the environment where they define that as

"We place the highest on health and safety of our workforce and protection of our assets and the environment. We aim to be admired for world class performance through disciplined application of our Operational Excellence Management System."

Chevron also lists other core values such as trust, ingenuity, partnership and high performance, which sounds excellent on paper but Brazilian Federal Police discovered that Chevron was aggressively drilling 3500 feet below the ocean floor, 500 meters or 1640 feet from where they were allowed to drill when the drill bit penetrated an oil reserve. After the bit puncture the reserve there were massive amounts of pressure that resulted with oil leaking into the ocean and floating to the surface. Chevron wasn’t completely transparent when they seemed to purposely underestimate the size of the oil sheen and also were overconfident in their clean up procedures when officials attempted to interview Chevron representatives. Chevron should have been completely honest right at the time of the incident to avoid appearing deceitful to the Brazilian authorities. In doing this, Chevron’s actions proved to be unethical under Kant’s theory.

Virtue Theory

Oil being stopped in the river flow to avoid intoxicated more water

Lastly, there is virtue theory, which is based on four components that consist of courage, honesty, temperance, and justice. The first component is courage, which can be defined as being able to take simple risks to make a stand to do the right thing. When applying the first component to this case Chevron wasn’t very courageous at first because it took weeks for officials to get real information from them which made it look like that Chevron was attempting to handle the situation internally to try and cover up the mess without the issue escalating. Whatever the motivation has Chevron had a responsibility to own up to their mistakes of drilling and misinforming immediately. The second component is honesty, which Chevron was not when it was drilling outside its designated zone and not alerting the proper authorities immediately when the drill punctured the well and wasn't prepared to contain the spill that leaked into the ocean. A next and last component that relates to this case is justice, which can be associated with hard work, good quality products, good ideas, and fair practices. One could argue that the oil drilling industry as a whole is unethical because drilling damages the environment and oil companies run the risk of having oil spills that can be devastating to the environment but in this case, Chevron failed to meet these requirements to be considered completely ethical. The unethical actions only lasted a few weeks and afterward one could argue that Chevron handled the case very professionally and acted ethically but due to the action of illegal drilling makes it hard to prove that they were acting one hundred percent ethically correct.

Justified Ethics Evaluation

In my opinion, I believe that the oil spill could have been avoided altogether. It is very unclear whether or not the spill was caused by Chevron ordering Transocean to drill 500 meters outside of their designated area or if it was caused by a mistake on Transocean’s part, regardless of who caused the spill, Chevron was at fault. Chevron should’ve been monitoring Transocean’s activity the entire time they were drilling to minimize the risk of causing an oil spill or should have at least alerted proper authorities rather than letting it be discovered by the Brazilian government; not to mention the entire incident could have been averted if Chevron wasn’t illegally drilling in the first place. After looking at all these theories and applying them to this case most would agree by the fact that Chevron’s original mistake proved to unethical under most of these views but once the dust settled and the issue was put into Chevron’s upper management’s hands they held true to their views and values by taking full responsibility and putting all other stakeholders before themselves.

References

"Chevronâ™s Brazil Unit Says Regulator ANP Shut in One Production Well." Chevron’s Brazil Unit Says Regulator ANP Shut in One Production Well. N.p., n.d. Web. 2 Oct. 2014. <http://www.chevron.com/chevron/pressreleases/article/12012011_chevronsbrazilunitsaysregulatoranpshutinoneproductionwell.news>.

Barret, P., & Millard, P. (n.d.). Chevron Brazil Spill Shows Drillers Still Trip in Crises. Retrieved November 16, 2014, from http://www.bloomberg.com/news/2012-05-10/chevron-brazil-spill-shows-drillers-still-trip-in-crises.html

The Power of Human Energy. (n.d.). Retrieved November 16, 2014, from <http://www.chevron.com/chevron/pressreleases/article/12012011_chevronsbrazilunitsaysregulatoranpshutinoneproductionwell.news>.

Romero, S. (2011, November 18). Brazil Officials Criticize Chevron Over Oil Spill. Retrieved November 16, 2014, from http://www.nytimes.com/2011/11/19/business/energy-environment/brazil-officials-criticize-chevron-over-oil-spill.html