Thursday, May 9, 2013

Indonesia Jails Chevron Contractor in Contested Case

Case involving award-winning project was originally dismissed by another court

The director of a company that carried out an award-winning bioremediation project for Chevron Pacific Indonesia has been ordered imprisoned for five years for causing more than US$3 million in state losses in a case almost universally condemned as trumped up in Indonesia's worsening investment climate.

Ricksy Prematury, the director of Green Planet Indonesia (GPI), a company hired by Chevron to carry out environmental cleanup projects on its behalf in Sumatra, was also fined Rp200 million (US$20,000) by the Jakarta Anti-Corruption Court or required to spend another two months in jail. The court also ordered GPI to pay back the US$3.089 million within a month or face a threat to have the state confiscate the company's assets.

The case has been percolating through the Indonesian court system for months, much to the dismay of multinational investors, company officials, diplomats and others, who fear it was politically motivated and an example of lower-level officials harassing multinationals for financial or political gain. It was originally dismissed by the South Jakarta District Court in December 2012, which ruled that the attorney general's office did not have sufficient evidence to pursue it and ordered it dropped. The attorney general's office, considered one of the government's most corrupt institutions, ignored the order.

Much of the case rested on testimony by a bioremediation expert, Edison Effendi, who charged that GPI had ignored some processes in neutralizing the polluted soil. However, Chevron Indonesia contested Effendi's testimony and that of two other witnesses from Effendi's consulting firm, pointing out that he had lost two earlier tenders to handle bioremediation projects for Chevron.

Taken together with rising regulatory uncertainty, delayed contract approvals and a general climate of rising nationalism in the resource sector, oil industry executives have said billions of dollars in investment is already being delayed in the country.

Andrew White, managing director of the American Chamber of Commerce in Indonesia, told the Financial Times: "It's wrong on so many levels," he said. "Here is a company with a verifiable project that has won many awards. It seems the attorney general was determined to bring a case against this company. If this can happen to Chevron it could happen to anybody."

Chevron has said the project met all government standards for compliance and also has yet to earn the company a dollar of remuneration under the cost recovery scheme. The state, however, claimed that Chevron had received a US$23.3 million cost recovery budget from the now-defunct upstream oil and gas regulator BPMigas. Earlier during the trial, prosecutors said the cost recovery budget was used to pay for what they called a "fictitious" bioremediation project.

Citing, among other factors, "the continued criminalization of oil and gas activities," Chevron told government regulators last year that it reserves the right to reduce its investment in Indonesia, a move that would lead to lower production if there were substantial negative changes to the country's investment climate.

Multinational oil and gas executives from a number of companies have repeatedly cited the remediation prosecution as an example of the government allowing and perhaps even encouraging the harassment of multinational energy companies as part of a strategy to lower the involvement of foreign companies in the sector. Oil and gas companies provide nearly a third of Indonesia's state budget revenue.

The prosecutor had originally requested that the court sentence Prematury to 12 years in prison and fine him Rp1 billion or spend another six months in jail. GPI was also found to be in violation of a government regulation issued in 1999 on Hazardous and Poisonous Waste Management and another government regulation issued in 2009 on Environment Protection and Management.

Sofaldi, one of three judges on the Anti-Corruption panel dissented, saying he believed the bioremediation project had been completed by GPI, and that GPI did not necessarily need a permit from the government to handle the project because it was up to Chevron Indonesia to obtain the document.

The judge also raised questions over Effendi's testing, which he said was done in an unverified laboratory seemingly established just for that purpose.

"The result is invalid and unscientific, moreover if used as basis for a verdict," Sofialdi said, adding that Prematury should be freed from all charges.

Herlan bin Ompo, president director of PT Sumigita Jaya, another company that carried out a bioremediation project for Chevron Pacific, told the news site that the sample tested was taken on April 9, 2012, but tested only two months later, on June 13, well beyond the recommended 14-day limit. He is a suspect in the same case. Asia Sentinel

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