Ecuador is getting a
new oil pipeline and Canada leads the list of beneficiaries in the deal.
There is no doubt that this pipeline is good business for foreign oil
interests like EnCana of Calgary. It may even be good business for the
Ecuadorian state. What is not clear is whether it’s good for Ecuadorian
citizens, their environment, or indeed for conscientious Canadians.
Foreign oil interests in Ecuador have been clamouring for a second pipeline
to ship their exports since 1989. In February of 2001, the OCP Consortium
of six international oil companies and an Argentine construction company
signed a contract with the Ecuadorian government to build the US$1.2 billion
pipeline. The OCP (Heavy Crude Pipeline) is slated to ship 450,000 barrels
per day. Consortium members currently pay a tariff to ship through the
state-owned pipeline, built by Texaco in 1972 and devolved to PetroEcuador,
the state owned company in 1992. After the completion of the OCP, they
will pay themselves.
EnCana is the largest shareholder in the Consortium with 31.4% interest
and is Ecuador’s largest foreign investor. Last year, Alberta Energy
declared US$6.3 billion in global net revenues and shipped over 18 million
barrels of crude from its Ecuadorian holdings. EnCana plans to double
this production to 36 million barrels in time for the opening of the OCP
in mid 2003.
President Gustavo Noboa accepted the deal because it will allow Ecuador to more than double its current export production. The state loses the transport fee but, the pro-OCP argument goes, gains from increased investment in the country (an estimated $2.5 billion over the next 2 years), increased income tax from the Consortium and all of its members, and the ability to ship more of its own reserves – PetroEcuador even gets a preferential rate to use the OCP and will own the pipeline in 2023.
There are a few catches however. To get the promised investment and
export income, Ecuador has to ransom its biodiversity and suppress local
opposition to foreign oil interests whenever and however necessary.
Nature for Ransom
One of the hotspots of resistance to the pipeline is Mindo Nambillo Cloudforest
Reserve where concerned citizens were living in tree camps to prevent
OCP construction earlier this year. Many national and international environmental
organizations do not oppose the pipeline per se, but argue that it should
have gone south around Quito to avoid Mindo.
The Hamilton born Director of Environment and Community Relations for
OCP, Ray Kohut, says “the southern route is impossible and also
impacts the Important Bird Area of which Mindo is a part.” What
Mr. Kohut does not make clear is that the southern region is mostly deforested
and not considered critical by conservationists. In contrast, Mindo lies
within the Choco forest, one of the world’s most biodiverse areas
and home to 450 species of birds, ten of which are globally threatened.
The Ecuadorian Committee for the Route of Least Impact argues that a further
50 species of Canadian migratory birds depend on forests in the path of
the OCP. In a letter to Gwyn Morgan, President of Alberta Energy/EnCana,
they compare the OCP to “building a pipeline through the heart of
the Whooping Crane staging areas in Alberta or through pristine areas
of Banff or Jasper National Parks.”
Canadian Ian Davidson, Head of the Americas Division of Birdlife International,
points out that the OCP Environmental Impact Assessment (EIA) only properly
evaluated the northern route. “This isn’t normal,” he
says, “usually you analyze 2 or 3 routes in a project of this type
before deciding on the best one. This process would not be acceptable
in North America, or in most European countries where many of the consortium
members reside.”
Mr. Kohut defends the EIA, “You have to do an impact study over
something. So we looked at different routes and decided that this is the
best one.” In response to allegations that the company hired to
do the assessment, Entrix International, was influenced by OCP’s
preferences, Mr. Kohut used a very interesting analogy, “You have
a situation in this world – let me give you an example – accounting
auditors. Enron hires Arthur Anderson to do its study, you have to pay
somebody to audit your books. Arthur Anderson then has to do an audit,
thoroughly independent, and give it then to the company who shares with
the shareholders and with the board. That’s true everywhere in the
world – auditors are paid by somebody.” That particular conflict
of interest ended with both companies’ demise. Coincidentally, Entrix
also worked for Enron doing an EIA on Enron’s pipeline in Bolivia.
The study was so flawed that Enron eventually had to contract another
firm despite the fact that Entrix approved its choice of route through
Bolivia’s sensitive Dry Chaco Forest. Finally, Williams International
originally bid to construct the pipeline and offered to take a southern
route for half the cost. They did not think it was impossible to avoid
Mindo.
Construction at Mindo was halted in March by the Ministry of the Environment
for failure to comply with regulations. Construction was already stalled
by the rainy season so this wasn’t a major inconvenience for the
OCP. They also managed to rid themselves of the protestors with an army
raid on the tree camp in late March. Seventeen people were taken into
custody by a force of 60 soldiers and transported to Quito in OCP buses.
They were not properly fed or given the right to a telephone call on the
first day. The case was brought before the office of the Mayor of Quito
on the charge that the arrest was unlawful. In a powerful plea for justice,
the lawyer for their case, Julio Cesar Trujillo said “these young
people were defending the patrimony of the human race against a company
whose only interest is money.” After hours of testimony and moving
statements by the captives, the office of Mayor Paco Moncayo decided in
their favour and released them.
Construction has since resumed in Mindo, but local environmentalists are
vigilant. They have recently questioned Ecuador’s Minister of the
Environment, Lourdes Luque, if she had approved the use of heavy bulldozers
in the area since it was not part of the OCP EIA or their Management Plan.
The environmental license they received from the government in February
of 2001 only permits the use of equipment outlined in these documents.
The OCP had no comment on the matter. Human Costs
On February 18 of this year, the people of the Amazonian province of Sucumbíos
took to the streets to protest the way the OCP has dealt with them. They
will have to live with Amazonas Platform, the storage and initial pumping
station of the OCP. Only 600m from existing settlement and in the path
of expansion of Lago Agrio, the province’s largest city, Amazonas
Platform is where heavy crude will be heated for transport. Máximo
Abad, twice-elected mayor of Lago, has opposed the location of the platform
since day one, “this installation will be a source of constant noise
and chemical pollution and presents a clear risk to the population of
this city.” The OCP argues that its decision was based purely on
‘technical merit.’ Softspoken Abad fears that it was chosen
so that the people of Lago would form a “human shield” against
possible terrorist attack and he wants the OCP to pay a higher price for
this luxury.
Orellana Province residents joined the strike a week later. Like Sucumbíos,
Orellana is an oil producing region whose natives are tired of “living
like beggars in a bag of gold.” Residents of both areas have insufficient
potable water, electricity cuts for up to eight hours a day (from diesel
burning generators) and few paved roads while oil supplies 42% of national
revenues. Protestors blocked roads and pressured oil workers to shut down
facilities. President Noboa declared a state of emergency, ordering his
army to quell the protest. The government reports one civilian death and
EnCana spokesman Alan Boras in Calgary concurs, but the District Attorney
of Sucumbíos, Luis Bermeo, insists that 3 people are dead –
two of them children who died from asphyxiation in teargas attacks. Both
EnCana and OCP claim that the protests have nothing to do with them.
Nice Guys or the Least of All Evils
As lead investor in Ecuador’s latest oil project, EnCana/Alberta
is proud of their environmental and community relations record in Sucumbíos
Province. They sponsor their own NGO, ÑanPaz meaning ‘path
of peace.’ “The success of Alberta Energy and ÑanPaz
in northeast Ecuador will provide a model for social responsibility,”
according to President Morgan. Their neighbours beg to differ.
According to Segundo Coello, head of ÑanPaz, Alberta has followed
the model of their predecessors in the region, City Investing and Pacalta,
by investing in the “power of the chequebook.”
Luis Merino is the municipal Director of Environment in Tarapoa where
field headquarters of EnCana are located. The former biology professor
sees his role as “helping local people and the local environment
defend themselves from ‘the Company.’” He explains how
EnCana works, “when a farm is contaminated by their installations,
they simply buy it – cheap. If a school gets in their way, they
buy all the farms in the area until there are no students left. And if
local people protest, they are harassed by the army.” He can relate
case after case of injustice, intimidation and chequebook development
involving the all-powerful triumvirate of EnCana/Alberta, ÑanPaz
and the Ecuadorian Armed Forces.
In Aguas Negras, a small farming village in the heart of Alberta/EnCana
territory, the leader of the peasant organization, Bolivar Chavez, has
consistently been a thorn in the side of the Company. He has criticized
the work of ÑanPaz in his community and organized strikes to get
the Company’s attention. In August 2001, he and his grown children
were working in their fields when they noticed that they had attracted
the attention of Company private security forces. Alberta’s paramilitary
patrol the area in sand coloured jumpsuits, bandanas and dark sunglasses
– lending otherwise bucolic rural scenes a ‘Desert Storm’
aura. The guards called in the Army. When Chavez refused to allow them
to take his two sons into custody, they started shooting. “There
were so many shots that the neighbours thought someone was killing a snake,”
reports Irma Chavez who tried to shield her brothers and father. The elder
Chavez decided to press charges against the army and the Company for harassment.
Within hours of filing the charge, Company community relations people
visited Irma to apologize, “we made a mistake because your father
is new around here and you all had machetes.” The Chavez’s
have been farming this land for 15 years and here, everyone has machetes.
When Mr. Chavez refused to drop the charges, Fernando Quintero, Chief
of Community Relations for Alberta told Irma “go ahead with the
case, we are much richer than you and you will die poor pursuing it.”
Bolivar Chavez finally accepted $3,610 from Alberta’s security firm
to drop the charges.
The peasant organization of Aguas Negras runs a model integrated farm,
rice and coffee mills for their members. They recently received a pigsty
and a paintjob for their coop from ÑanPaz. They are very proud
of what they have accomplished here but attribute little of their success
to ÑanPaz or the Company. “We have learned that the only
way to get something from them is to demand results before signing,”
says the local mill operator. They are referring to the fact that ÑanPaz
was restructured by the Company last year and now has the mandate of seeking
more outside funding. To get this funding, they must prove that there
are beneficiaries for their projects – that requires signatures.
One such donor is the Canadian Ecuadorian Fund for Development (CEFD),
a unique organization that takes money Ecuadorian businesses would usually
pay to Canadian businesses to purchase technology and uses it to promote
sustainable development among Ecuador’s poorest. Canadian businesses
are paid by CIDA from public funds for their products. In this way, public
aid monies are used to sponsor both Canadian and Ecuadorian enterprises.
ÑanPaz received $270,000 from the Fund in 1998 for Aguas Negras
and renewed this grant for another 3 years this spring.
Gustavo Paredes, Project Manager of the CEFD has the job of reviewing
ÑanPaz’s application for funding. “Any organization
receiving CEFD money must have the full participation of the people,”
he says. “Our projects are approved by the Canadian Embassy and
we visit them every three months to monitor their progress.” While
Mr. Paredes is aware of the close connection between ÑanPaz and
EnCana and knows of the potential for conflict of interest, he was ‘surprised’
to hear of local dissatisfaction with ÑanPaz. “We have met
with ÑanPaz and their beneficiaries often and never hear complaints.”
He admits that CEFD monitors have never met the farmers in the absence
of ÑanPaz personnel. Given that Mr. Paredes was not surprised to
here of the threat local peasants feel from EnCana’s security forces
and the Ecuadorian military, this may be considered a gross ethical oversight
in the use of Canadian public monies.
Canadian oil interests have a long history in Ecuador, dating back to
the Canadian acquisition of UK based City Investing. One knows when one
has entered Canadian controlled Tarapoa Block because of the always polite
signage proclaiming Alberta’s respect for its workers and neighbours
and the speed control signs on the dirt roads (these may be the only roads
in Ecuador with speed limits regularly posted). Many oil critics concede
that the Canadians are not the worst of the oil pack here, but they are
far from operating as transparently and responsibly as Canadian standards
would demand or as their own signs proclaim. As primary shareholder in
the OCP Consortium, and with their own man now in charge - Andy Patterson
of EnCana took over the OCP in August 2002 - the responsibility for continued
abuses in their concession and along the length of the new pipeline falls
squarely on their shoulders.
Endless Contradictions
The new pipeline was supposed to usher in another oil boom for cash-strapped
and debt-burdened Ecuador. Now, the private companies, including EnCana
are threatening to withhold the promised investment pending the settlement
of a tax issue. The privates claim that they are entitled to a rebate
on Value Added Tax charged for shipping oil to port. This rebate has been
withheld since August 2001, costing EnCana US$70 million in revenues.
The privates have threatened to go to the WTO for a settlement on this
issue but so far, the government is not budging. The state company, PetroEcuador,
says that many of the privates owe substantial sums in unpaid shipping
fees in the state pipeline so perhaps they will countersue.
In September 2002, Robert Goodland,
former Chief of the Environmental Department of the World Bank, completed
an independent report for Amazon Watch and Environmental Defense. He was
asked to evaluate the OCP’s claims that it was adhering to World
Bank guidelines. As a tropical ecologist and the author of many of the
“Social & Environmental Safeguard Policies” the Bank upholds,
he was well-suited to the task. After field research in Ecuador in August,
he concluded that the OCP is non-compliant in four critical areas: Operational
Policies on Environmental Assessment; Natural Habitats; Involuntary Resettlement;
and, Indigenous Peoples.
EnCana is now North America’s biggest independent gas and oil producer.
It is also part of Ethical Funds’ Portfolios including the Balanced
Fund, Growth Fund and Canadian Equity Fund. In the US, Citizens’
Global Equity and International Growth Funds have holdings in EnCana.
The idea behind these investment portfolios is that companies must meet
basic criteria in terms of their commitment to sound environmental practice
and sustainability in order to qualify. It would seem that even the rather
lax guidelines of the World Bank, never known as a bastion of tree-huggers,
eludes EnCana’s pet project in Ecuador. Recently, the Globe and
Mail compared President and CEO Gwyn Morgan to a ‘Meat Cleaver’
in his opposition to Canada’s ratification of the Kyoto Protocal.
If EnCana’s environmentalism qualifies as ‘leading edge’
as required by Ethical Funds, one wonders if the bar shouldn’t be
set a little higher.
As a closing thought, the combined volume of both oil pipelines working
to capacity is 900,000 bpd. PetroEcuador says the country has proven reserves
of nearly 4 billion barrels and possible reserves of 6 billion barrels.
That means that Ecuador will run out of oil in 12 to 18 years –
two years short of when the OCP becomes Ecuadorian property. In the meantime,
a lot of people, many of them Canadian, will make a lot of money from
Ecuador’s single most important resource but how much of this wealth
will benefit Ecuador?
This article is based on research and interviews conducted in Ecuador
and Canada from January to October 2002..
© Dr. Leslie Jermyn and the
The Global Aware Cooperative
Contact cooperative@globalaware.org
