NJ Exxon Settlement Revives Criticism of Controversial Environmental Firm

Stratus Consulting pegged NJ cleanup costs at $8.9 billion, but critics point to its troubled history

April 28, 2015

An environmental consulting firm that has admitted involvement in a fraud-ridden environmental lawsuit is back in the spotlight for its role in New Jersey’s efforts to recoup environmental damages from Exxon-Mobil.

The NJ Department of Environmental Protection hired Colorado-based Stratus Consulting to estimate environmental damages associated with the oil company’s refinery operations in the Garden State after the state sued Exxon in 2004.

Stratus’ damage estimate, $8.9 billion, built expectations for a massive judgment against the oil company. Since New Jersey moved toward a $225 million settlement with Exxon last month, some environmentalists have alleged a giveaway to the company.

The high damage estimate built up expectations when the state was probably never going to win such large concessions from the company.

"They're a victim of their own hyperbole," industry attorney Steve Picco told National Public Radio of the state’s initial damage estimate. "Had they not claimed this was a billion-dollar lawsuit, I think everybody would have been happy."

Gov. Chris Christie (R.), whom state Democrats have criticized for the deal, seemed to concur with that assessment.

"The state sued 10 years ago and just put a number on it, $8.9 billion," Christie has said of Stratus’ estimate. "There was no basis in fact for that $8.9 billion. People can sue for anything they want to sue for."

Exxon insists that Stratus’ damage claims are wildly inflated, a charge Stratus rejects. However, the back and forth has revived the consulting firm’s role in a previous scandal: the fraudulently obtained multi-billion-dollar judgment against Chevron in favor of the state of Ecuador.

A team of plaintiffs helmed by U.S. attorney Steven Donziger hired Stratus in 2007 to conduct environmental testing of areas of the Ecuadorian Amazon contaminated by oil extraction years before.

The testing was part of Donziger’s decades-long legal battle against oil giant Chevron, which resulted in an $18 billion judgment against the oil company in Ecuadorian court in 2011. That judgment relied in large measure on a report by a neutral court expert estimating remediation costs for sites operated by Texaco, which was acquired by Chevron in 2000.

Subsequent revelations in a U.S. court, where Chevron successfully sued Donziger and others involved in the lawsuit, revealed that Stratus had actually written the court expert’s report, at Donziger’s behest, and conspired with that expert to present it as his own.

Donziger worked "to make sure that [Stratus] produced the expansive dollar figure he was hoping for," according to Bloomberg BusinessWeek reporter Paul Barrett’s book Law of the Jungle, an exhaustive account of the Chevron trial and its aftermath.

Barrett said he had not examined the Exxon case, but that Stratus’ involvement in it raises red flags.

"I haven't personally reported on the New Jersey contamination case, but any thoughtful spectator has to be skeptical about the role of Stratus Consulting in any major pollution dispute," Barrett said in an email.

"In the Chevron litigation, senior Stratus executives with Ph.D.s admitted they'd done shoddy, unreliable work. Those supposed experts disavowed their analysis in the Chevron case, and a federal judge in New York later ruled that Stratus played an important part in a racketeering conspiracy targeting Chevron," Barrett explained.

"With a record like that, Stratus's credibility will—and ought to—remain under a cloud."

Exxon has pointed to Stratus’ record in Ecuador in an attempt to undermine the $8.9 billion figure. Like its Ecuadorian remediation estimates, the company wrote on its website, "Stratus’s report in our case has no scientific or economic foundation, nor does the $8.9 billion number it generated."

The firm stands by its work and says Exxon is trying to evade its responsibility to clean up pollution in New Jersey.

"Stratus Consulting conducted an analysis that applied sound damage assessment methods in a manner that properly reflected New Jersey law and the previous decisions in this case," said Caroline Broder, a spokeswoman for ABT Associates, which merged with Stratus in February.

"At the recent trial, Exxon had the opportunity to dispute the work performed by Stratus Consulting and the New Jersey Department of Environmental Protection," Broder said in an emailed statement. "Stratus Consulting defended its work during the trial and continues to stand by the work it performed on behalf of the State."

Critics of the firm say Stratus’ work is inherently biased toward large claims of environmental damages.

"The organization has a lot of specialists in ‘non-market valuation’ or, as normal people call it, ‘made-up numbers’," said industry lobbyist Michael McKenna in an email. "They have too many economists and not enough actual scientists for my taste," he said.

McKenna described Stratus’ work as inherently political.

"There are a lot of EPA alums, a lot of employees who specialize in selling people on the idea that climate change is a legitimately pressing and urgent issue which can only be solved by the government," McKenna said.

The Competitive Enterprise Institute, a free market think tank that works on environmental and energy policy, criticized the Obama administration when it continued awarding contracts to Stratus after the firm admitted to its role in doctoring court studies in Ecuador.

The firm defended its record in a 2012 letter to then-EPA administrator Lisa Jackson.

"The organizations attacking Stratus Consulting and Dr. [Ann] Maest are repeating unfounded and patently false allegations made by Chevron during its ongoing legal dispute over environmental pollution damage in the Amazon rainforest," Stratus president and CEO Joshua Lipton wrote to Jackson.

However, in April 2013, Maest and her Stratus colleague Doug Beltman admitted their roles in producing the damage estimate presented to the Ecuadorian court as the work of a neutral expert.

Lipton’s letter to Jackson also contained what would become a startling admission.

"Work on [the Chevron trial] was similar to the type of environmental assessments Stratus Consulting has routinely performed for its U.S. federal and state government clients over the past two decades," he told Jackson.

Even after it admitted its role in the Chevron trial, Stratus’ government contracts continued. In 2015 alone, it has been awarded contracts by the Environmental Protection Agency, the U.S. Fish and Wildlife Service, and the National Oceanic and Atmospheric Administration.

CEI suggested that Congress should investigate the firm’s work for the EPA.

"I would like to suggest that it would be appropriate for your subcommittee to investigate Stratus Consulting’s contracts with the EPA and other federal agencies with an eye to exposing similar fraudulent conduct," wrote CEI’s Myron Ebell in a 2013 letter to members of the House Oversight and Government Reform Committee.

An EPA spokeswoman said the agency "follows all federal acquisition statutes and regulations in regards to awarding and administering Agency contracts."

A NOAA spokesman said, "We are confident in the accuracy of the firm’s work for the agency."

Of the three, only FWS said it would examine its relationship with the firm.

"While we are not currently in a position to comment on the specifics of the Service’s current contracts with Stratus Consulting, we are looking in to the matter," a spokesman said. "The Service is committed to a fair, open, and transparent contracting process that meets all federal standards, which includes ensuring the integrity of our contractors."