Analysis of Compliance Oleoducto de Crudos Pesados(OCP) Project and the World Bank Environmental Policies and Guidelines Prepared for Amazon Watch by: Patricia B. Caffrey | Amazon Watch
Amazon Watch

Analysis of Compliance Oleoducto de Crudos Pesados(OCP) Project and the World Bank Environmental Policies and Guidelines Prepared for Amazon Watch by: Patricia B. Caffrey

November 20, 2001 | Report

I. BACKGROUND:

Purpose: The purpose of this analysis is to assess the level of compliance of the development process to date and the Environmental Impact Assessment (EIA) of the Oleoducto de Crudos Pesados Project (Project) to World Bank (WB) policies and guidelines on environmental assessment and natural habitats. The lending institution for the Project – Germany’s Westdeutsche Landesbank (WestLB), has expressed that the Project should comply with WB guidelines. The EIA states that the consultants used WB standards as a basis for preparing the EIA, specifically the 1994 guide on environmental assessment consultation and Operational Policy on Environmental Assessment 4.01. The Project is being scrutinized heavily at local and international levels because it is perceived that Project planners have not paid adequate attention to the mitigation of environmental issues related to the Project. Project infrastructure will impact globally outstanding biodiversity areas and important watersheds. It will also traverse geologically unstable terrain. It is estimated that the expanded oil storage and transport facilities will double oil exploration and production in the Amazon region of Ecuador. There is concern that the Project effectively prevent, mitigate or compensate for negative environmental impacts and there is doubt as to whether the EIA complies with WB environmental standards. It is hoped that the analysis will serve to guide Project decision-makers as they strive to achieve World Bank standards and effectively prevent or mitigate negative environmental impacts. It is also expected that this analysis will encourage WestLB to conduct due diligence to ensure that World Bank standards are met. Brief descriptions are presented of the Project and the relevant WB policies followed by observations related to compliance.

Brief Description of the OCP Project :

The OCP Project includes construction of an oil pipeline, two terminal stations, three heating and pumping stations and two pressure reduction stations. The pipeline will be 500 kilometers long and will have the capacity to transport approximately 450,000 barrels of crude oil per day between the Amazonas Terminal located in the eastern Ecuadorian Amazon and the OCP Marine Terminal in Esmeraldas on the coast of Ecuador. The planned pipeline route will follow the SOTE oil pipeline right of way (ROW) between Lago Agrio until before Quito, near Papallacta. The ROW will then follow a northern variant from the SOTE ROW climbing up over the Andes mountains to the north of Quito and will re-connect to the SOTE ROW in La Union. The SOTE ROW will then be followed until San Mateo at which point another variant from the SOTE ROW will be followed to the OCP Marine Terminal. The new Amazonas Terminal, located in Lago Agrio, will have a storage capacity of 1,250,000 barrels. The initial pumping station, located near the Amazonas Terminal, will include energy generation facilities, heaters to heat the oil, pumps, and facilities to control oil pressure and volume. The intermediate pumping stations will be located in Lumbaqui, near Baeza, and in Papallacta. These stations will include facilities similar to the Amazonas pumping station. Two pressure reduction stations will be located in Monopungu (Nono) and near Puerto Quito. These stations will include energy generation facilities and facilities to control pressure and volume. The OCP Marine Terminal, separate from the SOTE Balao Terminal, will have the capacity to store 3,750,000 barrels and will measure the oil transported by the OCP. The OCP Marine Terminal will include tanks to store the oil, facilities to transfer oil to offshore cisterns and a system for controlling oil spills. The pipeline network will be operated and maintained by the following systems; control panels located at stations and within individual departments, an Automated Data Collection and Control System (SCADA), leak detector system, telecommunication system, instrumentation and measuring systems.

Brief Description of World Bank Policies for Environmental Assessment and Natural Habitats:

The World Bank’s “Natural Habitat” Policy (OP 4.04) prohibits WB involvement in projects which involve significant conversion or degradation of critical natural habitats . These include: existing protected areas and adjoining or linked areas or resources on which the protected areas depend; and sites identified as meriting protection. Secondly, where natural habitats outside protected areas are within a project’s area of influence, the project must not convert them significantly unless:
·1. There are no feasible alternatives
·2. The environmental assessment demonstrates the benefits substantially outweigh the costs
·3. Mitigation measures acceptable to the WB are implemented, which would normally include support for one or more compensatory protected areas that are ecologically similar to, and no smaller than, the natural habitats adversely affected by the project

The World Bank’s Environmental Assessment Policy (OP 4.01) requires that the environmental assessment accurately identify the breadth, depth and type of analysis based on the nature, scale and potential impacts. Environmental assessments are classified into different categories based on complexity, scale and level of impact, ranging from the largest and most complex – Category A, to the smallest and least complex – Category D. Category A projects require strategic analysis (rigorous analysis of alternatives and regional or sectoral plans), extensive consultation, increased technical input and detailed environmental management plans. For all categories the environmental assessment should take into account global environmental aspects on biodiversity and institutional capabilities related to environmental and social aspects. Natural and social aspects should be considered in an integrated way. The World Bank favors preventive measures over mitigatory or compensatory measures.

II. OBSERVATIONS:

1. Faulty assessment of the conservation value of affected natural areas

The EIA treated the analysis of biodiversity of affected natural habitats poorly, rendering the baseline inadequate for assessing and mitigating potential impacts of the Project to the biodiversity of these areas and their related ecosystems. The baseline analysis is confined largely to the making of lists of species found in the area of influence of the Project during a very limited timeframe. It is weak on population structure and dynamics of the studied species. Fauna was studied within an extremely limited area where relatively undisturbed natural habitats were encountered within the 2 km. width along the pipeline and within a limited time period – 3 days in each observation site, which would not yield the information required to do an accurate diagnosis of species population structure and dynamics. The baseline studies of fauna and flora were insufficient to be able to understand the status of conservation of biodiversity and natural resources, their uses and threats, and ecosystem functions and values (distribution, richness, diversity of habitats, patchiness, connectivity/fragmentation of habitats and ecosystems, corridors, carrying capacity and community dynamics) of the affected natural habitats along the pipeline route. World Bank guidelines require comprehensive ecological assessments in all affected natural habitats . Without such an assessment it is difficult to define actions that will effectively mitigate or compensate for biodiversity loss.

The WB definition of degradation of a natural habit is the modification of a habitat that substantially reduces the habitat’s ability to maintain viable populations of native species . The limited area of influence, time period for the EIA’s studies and secondary information did not yield the information necessary to do an analysis of viable species populations therefore, degradation of natural habitats according to WB guidelines cannot be assessed accurately.

Due to the deficient assessment of biodiversity and conservation status it is very likely that some natural habitats within the area of influence of the Project were not identified and will not be treated by the Environmental Management Plan (EMP) to mitigate or compensate for adverse affects of the Project. Only three natural areas were identified as “sensitive” areas requiring special mitigation measures in the EMP. These three areas would be considered critical natural habitats according to WB criteria because of the fact that they are protected areas where threatened, endangered and endemic species are found. It is therefore reasonable to conclude that the Project would be considered a Category A project by the World Bank. The EIA states in Annex IV that due to the complexity and scale of the Project it would most likely be considered by the World Bank to be a Category A Project.

Reviewing the status of conservation and biodiversity of the ecosystems affected will also indicate that it is very likely that some natural and critical natural habitats, as defined by WB criteria, were overlooked in the baseline analysis and not identified for appropriate treatment. The Project traverses 7 protected areas and the buffer zones of 4 protected areas that would be classified as having Category I – VI levels of protection according to IUCN criteria. According to WB OP 4.04 all protected areas that fall within the IUCN classification of categories I – VI level of protection are considered critical natural habitats which require Category A treatment in the environmental assessment process .

Another indicator of the importance and sensitivity of the biodiversity in the natural habitats affected by the Project is the fact that most of them are classified as part of ecosystems targeted by international conservation organizations as global priorities for conservation because of their high level of biodiversity and vulnerable or critically threatened conservation status. The Project traverses five ecoregions (Upper Amazon Rivers and Streams, Northern Andean Paramo, Napo Moist Forests, Northern Andean Montane Forests & Choco-Darien Moist Forests) that have been targeted by World Wildlife Fund’s (WWF) Global 200 Ecoregion Campaign for priority conservation worldwide. In a similar manner, Conservation International has prioritized ecosystems for conservation globally focusing their resources on an even narrower group of priority areas – twelve worldwide, called “hotspots” for conservation. The Project impacts two of the twelve “hotspots” – the Andes and Chocó-Darien, coinciding with WWF’s conservation priorities in the region . Another prominent international conservation organization – BirdLife International, has prioritized global areas for bird conservation that fall within the same high biodiversity ecoregions and “hotspots” and will be directly impacted by the Project – the Important Bird Area (IBA) Mindo and Endemic Bird Areas (EBAs) traversing Chocó, North Central Andes, Central Andean Paramo, Tumbesian and Colombian Inter-Andean Slopes regions . The World Bank is supporting the establishment of an ecological corridor (Chocó-Andean Corridor) in the Chocó and Northern Andes through the Global Environmental Facility. The Chocó-Andean Corridor project document describes the biodiversity and conservation status in the area that will also be impacted by the OCP pipeline as follows: “For its biodiversity and deforestation pressure, the region is ranked among the first 5 of the 18 biodiversity hotspots of the world (Myers, 1988). For bird fauna, it is considered the earth’s highest bird endemism area (Terborgh & Winter, 1982). The rich biodiversity of the area is at risk. The rate of regional deforestation is even higher than the national annual rate of 2.3% (Salazar et al., 1998). At such rate, irreversible destruction of the biodiversity could happen within the next 40 years.”

Conservationists agree that there are few places on the earth that parallel the biodiversity that one finds in the ecosystems impacted by the Project, particularly the Chocó and the Northern Andes. It is very likely that because of the high biodiversity value of the ecosystems affected by the Project, the WB would have classified the Project as Category A requiring the borrowers to do a more rigorous analysis of project alternatives, conduct a regional or sectoral assessment and include stronger mitigation measures that address cumulative and associated impacts to these ecosystems, including conservation measures.

2. Insufficient consideration of cumulative, upstream and downstream impacts.

The EIA does not assess nor propose effective ways of mitigating cumulative negative impacts such as unplanned developments induced by the Project (e.g., colonization, conversion and degradation of natural habitats-in particular protected areas in the Amazon, contamination, etc. that may be caused by new feeder pipelines, access roads, oil wells to feed the new pipeline). The World Bank’s Policy 4.01, Annex A, defines the project area of influence as the area likely to be affected by the project, including all its ancillary aspects, infrastructure, as well as unplanned developments induced by the project (e.g., spontaneous settlement, logging, increased oil exploration and production or shifting agriculture along access roads).

The EIA observes that where the proposed pipeline route will follow the SOTE route, there are clear signs of negative cumulative environmental impacts induced by opening up primary natural habitats for the SOTE pipeline. Plans for mitigation where the proposed pipeline diverts from the SOTE route and traverses well conserved natural habitats, may not effectively mitigate negative impacts induced by opening up the right of way and putting in new access roads. The special mitigation plans that are proposed for the three “sensitive” natural areas – which have included the strongest measures along the proposed route – stipulate temporary access roads that are partially restored following construction. However, at the end of the construction phase, a minimum of 4-meter wide grass path will be left along the length of the route. This stipulation does not ensure that the areas are “closed off” to human access over the long-term.

The OCP Project will have the capacity to transport 390,000 to 450,000 barrels of crude oil per day from the eastern rainforests of Ecuador. Current heavy crude production is 150,000 barrels per day. Oil activities currently impact approximately 20 % of the Ecuadorian Amazon. It is predicted that with the OCP Project, oil exploration and production from the Ecuadorian Amazon will double considerably impacting at least an additional 20 % . The increased activity will require additional feeder pipelines and access roads in protected areas, seismic activity, additional oil wells, related services and influx of people. The OCP consortium projects that approximately 600 kms. of feeder pipelines, additional pumping stations and many new oil wells will be constructed in the Amazon to feed the OCP pipeline. Plans for exploring additional reserves are of particular concern because new oil development is planned within 4 very important protected areas in the Ecuadorian Amazon including Yasuni National Park, Cuyabeno Wildlife Reserve, Limoncocha Reserve, and Pañacocha Reserve. The EIA has not considered these upstream impacts nor has it considered downstream impacts resulting from the increased capacity to heat, store and transport oil such as air pollution.

The globally outstanding importance of the biodiversity areas impacted coupled with the significant scale, complexity and risk associated with the Project would have classified this Project as a Category A project by the WB. Further substantiating that the WB would have considered this a Category A Project and have required a regional or sectoral analysis is a World Bank report for an Environmental Management Technical Assistance Project in Ecuador which states that hydrocarbon exploration, production, transport and refining is one of the most important production activities which have a major impact on the environment and sites some of the potential environmental planning and management problems in the Ecuadorian Amazon: unsustainable renewable resource use, the environmental impact of petroleum exploration and production, the lack of ecologically and culturally sensitive regional development planning, and the need for improved community level organization . The WB requires that all Category A projects include a regional or sectoral analysis as part of the environmental assessment process. Such an analysis would improve the ability of policy makers and Project decision-makers to reduce and mitigate long-term cumulative and associated impacts of the Project. Without a regional or sectoral analysis, it will be difficult to prevent, mitigate or compensate for cumulative and associated negative impacts of a project of this scale.

3. Analysis of alternatives does not present clear economic comparisons.

In the case of Category A projects, the analysis of alternatives should be rigorous using economic values for comparing costs/benefits and including an alternative “without the project”. The more rigorous analysis is also part of a regional or sectoral assessment. The EIA did not include an analysis of project alternatives. It did include analyses of alternative routes and variants, however the analysis comparing the alternative routes and variants does not present economic values of projected costs. Lack of cost figures makes it difficult to compare between alternatives and variants and justify the pre-selected route.

4. Failure to “screen” and “scope” for the appropriate level of analysis and key issues for the EIA may have resulted in the underestimation of the scale, complexity and potential impact of the Project.

World Bank guidelines recommend that “screening” and “scoping” be conducted prior to finalizing the terms of reference for the EIA . Adequate “scoping” and “screening” attempts to identify the appropriate extent, type and significant issues for the environmental assessment. It is not clear from the EIA whether there was analysis and discussion regarding identifying the appropriate level of analysis and significant issues prior to designing the EIA. The World Bank “screens” projects into a classification system, categories A to D, to establish the appropriate level, based on project type, location, sensitivity and scale, which helps define the extent and type of the assessment. “Scoping”, through involving the appropriate experts, government officials and affected community groups and NGOs prior to finalizing the terms of reference for the EIA, could have ensured that the EIA addressed adequately the significant environmental issues. Local groups and NGOs were not consulted prior to finalizing the terms of reference for the EIA. The current EIA has not adequately assessed potential biodiversity impacts, cumulative impacts or associated impacts largely because the extent of the Project was underestimated through lack of proper “screening” and identification of key potential impact issues through “scoping”.

5. Lack of prevention of negative environmental impacts on critical natural habitats. Mitigation and conservation measures are inadequate to offset potential negative impacts to biodiversity.

The World Bank Operational Policy 4.01 favors prevention of negative environmental impacts over mitigation and compensation, particularly where critical natural habitats may be affected. The analysis of alternative routes did try to minimize the impact on “sensitive areas” by eliminating several alternatives because the Project would traverse protected areas. However, the selected route will directly impact important protected areas. The Environmental Management Plan (EMP) proposes to mitigate negative environmental impacts with no plans to prevent or compensate for negative impacts on biodiversity. The lack of prevention and compensation for biodiversity loss is of particular concern along the northern variant where Project planners have decided to traverse critical natural habitats.

OCP Project environmental mitigation measures as defined in the EMP of the EIA appear insufficient to mitigate conversion or degradation of natural habitats along the proposed pipeline route and from associated impacts related to increased oil production in protected areas of the Amazon over the long-term. The baseline does not give a complete understanding of the state of conservation and biodiversity within the affected ecosystems. Therefore, it is difficult to assess the level of potential impact of the Project on biodiversity and define effective mitigation plans. The EMP defines mitigation plans – particularly for the 3 “sensitive” natural areas – that may be effective in the short-term but are insufficient for the long-term. Mitigation actions for direct impact of the construction in these “sensitive” areas include efforts to reduce the platform, control erosion and access during construction, and minimize use of heavy equipment. Mitigation actions for long-term mitigation include re-vegetation, monitoring of flora and fauna along the pipeline and efforts to collect rare plant species for science. Actions to control access are reduced to reporting on human intrusion.

Although the EIA did not establish a complete baseline of the biodiversity of the ecosystems that will be affected, it is known that the biodiversity values for several of the ecosystems are very high and are in a vulnerable to critical state of conservation. WB guidelines and policies strive to mitigate or compensate for any biodiversity loss or degradation of natural habitat by supporting conservation efforts in the impacted habitats and/or compensating for them – perhaps by supporting conservation efforts in other still intact parts of the ecosystem. The World Bank’s Natural Habitat Policy OP 4.04 encourages mitigation measures where natural areas are adversely impacted. These measures include supporting conservation efforts to remove the negative impact or compensate for the loss of the natural habitat. As one World Bank biodiversity expert, Dr. George Ledec, explained in a presentation at the 2000 Annual Meeting of the International Association for Impact Assessment; “The quick bottom line under the Natural Habit Policy is projects must not damage critical natural habitats and should seek to avoid or minimize damage to other natural habitats. If such damage is necessary and justified, it must be adequately mitigated, typically through compensatory protected areas under the same project.” The mitigation actions described in the EMP would not be considered conservation efforts that would restore or compensate for biodiversity loss.

6. Deficient consultation with civil society and absent mechanisms in the EMP to encourage participation of civil society in the implementation, monitoring and evaluation of the Project.

World Bank environmental assessment policy requires adequate consultation with communities and NGOs affected by the Project . Ecuadorian Law also requires adequate consultation with stakeholders. Category A projects require consultation prior to finalization of the terms of reference for the EIA and prior to finalization of the EIA. Appropriate summaries of the project should be made readily available at public locations for these groups with sufficient lead-time prior to the consultation. Also according to WB standards, consultation should not be confined to a presentation of the project. The consultation process should include an in depth analysis and discussion of potential impacts that may affect the people concerned and possible ways to mitigate those impacts . The author contacted several civil society groups that will be affected by the Project and asked if they felt that they had been consulted adequately throughout the EIA process. They answered that they didn’t feel that the consultation process had been adequate . They also indicated that the civil society groups were not consulted over the terms of reference for the EIA or in a “scoping” process. The draft copy of the EIA (an extremely long and cumbersome document) was made available fifteen days prior to end of the public comment period which most people did not consider sufficient time to study and understand the report. Additionally, the EMP lacks mechanisms to encourage the participation of civil society in the planning, implementation, evaluation and monitoring of the Project.

7. Lack of analysis of institutional capacity for environmental and social management. Inadequate measures planned to develop and improve local institutional capacity.

The World Bank recommends that an EIA, particularly for a Category A project, include an analysis of local institutional capacity in environmental planning and management. If the local capacity is deficient, actions should be defined in the EMP and resources allocated to develop local institutional capacity to ensure that the EMP is implemented as planned and is effective . Analysis of local institutional capacity is lacking in the EIA and in the EMP.

About the Author
“Patricia Caffrey recently relocated to the Washington, D.C. area after working in Santa Cruz, Bolivia from January 1998 to June 2001 as the director and Country Representative for the World Wildlife Fund (WWF) in Bolivia. While in Bolivia she advocated for improved social and environmental accountability of the hydrocarbon industry and engaged corporations to improve performance. She headed several ecoregional projects to strengthen the management of protected areas, promotion of sustainable forest management and improved natural resource management practices and environmental education. She has lived for the past twenty years in Africa, Central America and Bolivia directing community-based development and conservation programs for various non-profit organizations.”

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