BP gas field 'ravaged the rainforest'

The oil giant's green credentials take yet another battering as its subsidiary is sued in the US courts.

A small timber company has launched a multi-million-dollar damages suit against a subsidiary of BP, further denting the energy giant's "green" credentials.

In a court action launched in the US state of Delaware earlier this month, BP has been accused of despoiling a 70,000- acre area of largely virgin Argentinian rainforest earmarked for a "sustainable" hardwood harvesting project.

The action, lodged by the New York-based Candlewood Timber Group, which owns the area's timber rights, is the latest in a series of setbacks after attempts by Lord Browne, the BP chief executive, to rebrand BP as the world's most environmentally conscious oil company.

Major conservation groups have started to downgrade BP in their "green" ratings in favour of its rival Shell. Following allegations about poor safety standards at BP's controversial facilities in Alaska, WWF UK sold its 51,000 BP shares earlier this month. In January, the ethical stockbroker Henderson Global Investors dumped its BP shares for similar reasons.

And last week, the stockbroker Dresdner Kleinwort Wasserstein warned investors that BP's $6.75bn (£4.18bn) partnership deal in Russia's third largest oil company was "fraught with risk, especially to BP's green credentials". Tyumen, now partnered with BP, is said by experts to be the almost certain source of the oil that spilled on to the Spanish coast in the Prestige disaster last year.

The latest controversy has also involved Greenpeace, after BP officials claimed the group had endorsed its operations in the rainforest. A Greenpeace spokeswoman said this was entirely wrong. Although the group was helping run a scientific study in the area that was partly funded by BP, it had objected to the drilling.

Candlewood's US court action focuses on BP's involvement in a consortium drilling for gas in the San Pedrito Forest in the foothills of the Andes, called Pan American Energy (PAE), in which BP Argentina Exploration Co has a 60 per cent stake. The remaining 40 per cent is held by Bridas, a local company.

Set up by two experts on "green" forestry, Candlewood bought the local rights to thin out trees in order to market the hardwood timber to US and European buyers under the ecological accreditation label run by the Forestry Stewardship Council (FSC). It alleges that PAE breached its promise to "tread lightly" in the area by clear-felling large swaths of the forest, and dumping tonnes of excavated rock, soil and vegetation in the trees close to its wells. Candlewood claims this has seriously undermined its chances of winning FSC certification, and is expected to claim tens of millions of dollars in damages. "[The damage] is visible – not the kind of thing you would want in a forest which hasn't been touched by people," said Jeff Kossak, a company director.

But Richard Spies, PAE's chief executive officer, said the writ wrongly singled out BP, since the drilling operations were wholly his firm's responsibility. He also claimed the area of concern was less than 1 per cent of Candlewood's 70,000- acre holding. "The bulk of the claim that they're making is without merit," he said.

He confirmed that BP wrongly claimed Greenpeace had endorsed their drilling, but insisted that conservation NGOs, including Greenpeace, had been consulted about their operations.