The Hypocrisy of Brazil's Chevron Oil Spill Example

NEW YORK ( TheStreet) -- I spent a year living in an apartment that overlooked Guanabara Bay in Rio de Janeiro. It featured the picture postcard view of Sugarloaf Mountain, but another view too: An unending, year-long parade of oil rigs being floated out into the open waters of the Atlantic Ocean.

As the pre-salt boom in Brazil's offshore oil industry took shape in 2007, I had a front row seat (literally). Local papers like O Globo had some fun with the story, too, as the eye-popping statistics came in on how much oil might be trapped beneath the ocean and Brazil came of sudden age as an oil giant: Venezuela's Hugo Chavez began referring to former Brazilian president Lula as "Sheikh Lula" and an image along those lines appeared in print.

Now the ugly side of the pre-salt Brazilian oil boom has been exposed. The spill that occurred late last year in Chevron's ( CVX) Frade field has resulted in an increasingly hostile battle pitting the oil giant and rig operator Transocean ( RIG) against the Brazilian federal government.

The latest development is the barring of 17 Chevron and Transocean officials implicated in the spill from leaving Brazil as they face criminal charges.

The decision to hold the oil executives captive can't be a surprise given the rhetoric that has developed over this oil spill. The Brazilian government is already trying to exact $11 billion in penalties from Chevron for a spill that was equal to 3,000 barrels of oil.

To put the $11 billion proposed fine in perspective, it would work out to something like $4 million per barrel of oil spilled. That compares with a maximum fine -- if BP ( BP) is proven to be grossly negligent -- of $4,300 per barrel in the Macondo spill. BP is looking at between $17 billion to $21 billion in total fines if it is proven grossly negligent. The BP spill has been estimated at 3.2 million barrels versus the Chevron spill at 3,000 barrels.

Western oil companies need to be held accountable for environmental violations, and flagrant disregard for good drilling practices. I don't think many people would disagree with that view, not even Chevron's CEO John Watson, who said on the company's last conference call that the best defense for an oil major operating in today's regulatory environment post-Macondo disaster is pretty simple: "Don't put oil in the water."

There were reports late last week of a new oil sheen around the Frade field, too, exacerbating Chevron's difficulties.

However, unless Brazil's national oil company Petrobras is ready to fund all of the exploration itself, Brazil needs the help of deep-pocketed Western partners and will have to find some legal middle ground that allows relationships to exist without the legal fears leading all Western companies to shy away.

Is a U.S. government policy that would fine BP a fraction of what Brazil is after in the Chevron spill too easy on Big Oil, or is Brazil being too harsh as it attempts to set reasonable environmental protections and operating parameters for drillers as it develops its pre-salt oil finds?

The market doesn't seem too interested in the legal questions related to the Chevron Frade spill, at least not yet, with Chevron shares remaining near a 52-week high and in the green on Monday.

The answer is probably somewhere in between the two extremes. However, as someone who watched the pre-salt boom in Brazil literally take shape from my window, that's not even the question that first comes to mind when I think of what's going on in Rio's waters.

There is one very simple image from my time in Brazil that I can't get around in trying to make sense of the line in the sand (or pre-salt) drawn by the Brazilian government. Every day when I would leave my apartment for a swim, the important weather reading wasn't the temperature or precipitation, but where the sea of garbage that floated from beach to beach across the city of Rio had decided to concentrate for the day.

Depending on the wind, the flow of the ocean and the runoff from the open sewage canals that run down the hillsides from the unregulated, impoverished favelas of Rio, any given Rio beach might be "closed" for the day, unless a swimmer enjoyed stroking through the man-made seaweed of plastic bags and all sorts of garbage, not even to mention the chemically-colored foams that would ride the waves into shore.

In some respects, the government of Rio de Janeiro State has an innovative pollution policy, and Rio is a city where the level of pollution and poverty makes innovation a requirement.

Teams of impoverished citizens and street children take to Rio's business district each night to root through the garbage for recyclable items and pile two-wheeled carts high -- they are paid by the municipality for the work. The largest landfill in Rio also employs an entire community to sift the recyclables from the unrecoverable refuse, a community that can be seen at work in the documentary film, Wasteland, which details Brazilian artist Vik Muniz's effort enlisting this community for an art project constructed from garbage. Rio is a city where the municipal budget each year includes a line item for the millions spent on cleaning city center streets of human urine.

Rio does a lot in fighting a difficult battle against pollution. The approach of the World Cup and Olympics will only make the city want to look even better on the world stage.

I would never suggest that oil companies should not be held accountable for environmental damage and unsafe drilling practices, either. However, as the Brazilian government throws the book at Chevron, it would be nice if the government of Rio state and the federal "pollution" hawks in Brasilia took a moment or two to consider that Rio's waters and beaches have been polluted for a long time, long before Chevron arrived to drill, and in a way that impacts the city and its citizens on a daily basis.

It would be wise for Brazilians to have a national dialogue about pollution that goes beyond making villains of oil companies. It's not just the impoverished communities in Rio where pollution begins and ends. I've seen far too many rich Brazilians on the streets of the wealthy beach enclaves that seem to forget that something called a garbage can was ever invented.

There was one Rio elderly gentleman profiled in local Rio papers who had spent decades walking from end to end on a Rio beach every day cleaning up as much of the garbage that accumulated as he was able to gather himself.

As a person who lived in Brazil and cares about the cleanliness of its waters, this is the best example of what Brazil needs to do, and it's a little disheartening that I never saw as much zeal for solving the everyday water pollution problems as this one man displayed as I've seen in the last few months from the Brazilian government concerning 3,000 barrels of oil.

Two wrongs don't make a right, but there are plenty of wrongs in this situation.

-- Written by Eric Rosenbaum from New York.

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