By Jeb Blount
RIO DE JANEIRO, Oct 1 (Reuters) - A Brazilian federal judge dismissed a lawsuit against No. 2 U.S. oil company Chevron Corp after approving a negotiated settlement, a decision that closes a nearly two-year legal battle over a November 2011 oil spill.
Brazilian prosecutors had sought 40 billion reais ($18 billion) in damages from Chevron and offshore drilling contractor Transocean Ltd for a 3,600-barrel leak in the Frade offshore oil field, which Chevron operates, northeast of Rio de Janeiro.
Prosecutors also filed criminal charges against the companies and 17 of their employees. A judge rejected those charges, but prosecutors are appealing.
The dismissal came after Judge Raffaele Felice Pirro of the federal court in Rio de Janeiro accepted an "adjustment of conduct" deal with Chevron that commits the company to spending about 300 million reais in compensatory activities. Chevron and the government agencies that signed the accord said Transocean had no responsibility for the spill.
The case, the largest-ever environmental lawsuit in Brazilian history, raised questions about the cost of doing business in the nation's high-risk oil business and the ability of prosecutors to assess proper penalties.
While the spill caused no discernible environmental damage, was dispersed within days, never came within 100 kilometers (62 miles) of shore, and resulted in no injuries, Chevron and its partners had to stop output for about a year and a half. Brazil's petroleum regulator fined the company for failing to follow drilling plans but absolved Chevron of negligence.
The damages sought were many times larger than those U.S. courts awarded plaintiffs against operator BP Plc in the much larger 2010 Deepwater Horizon spill, which fouled beaches, damaged fisheries and killed 11 people in the Gulf of Mexico.
Chevron owns 52 percent of the Frade field, Brazil's state-run oil company Petroleo Brasileiro SA owns 30 percent and a Frade Japão, a joint venture between Japanese trading companies Sojitz Corp and Inpex Corp, owns 18 percent. Petrobras, Sojitz and Inpex were never named in the civil or criminal lawsuits.
Prosecutors in Rio de Janeiro and officials at Chevron and Transocean were not immediately available for comment.
Shares of Chevron were down 0.2 percent at $121.27 on the New York Stock Exchange, while Transocean rose 0.6 percent to $44.77.