[Marxism] Natural gas pipeline threat to Amazon rainforest

[Louis Proyect <lnp3@xxxxxxxxx>]

Gas From the Rain Forest
Pipeline Backers See Energy Potential, but Opponents See Environmental Peril

By David B. Ottaway
Washington Post Staff Writer
Friday, April 21, 2006; D01

Backers of a multibillion-dollar proposal to ship vast stores of liquid
natural gas from Peru's Amazonian rain forest to the United States are
seeking Bush administration support for international financing, but
environmental questions are complicating the bid.

Leading the project is Hunt Oil Co., a private Texas firm whose owner has
close ties to President Bush. It is seeking administration backing for as
much as $800 million from the District-based Inter-American Development
Bank, which has already agreed to consider it. If approved, it would be the
largest project the bank has financed in Latin America. In addition, the
project's backers say they intend to ask for financial help from the U.S.
Export-Import Bank, a federal agency.

The Hunt-led project involves an investment of $2.7 billion to build a
pipeline, a gas liquefaction plant, marine terminal and other facilities to
export 4.4 million tons of liquid natural gas annually. The bank is
required to investigate its environmental impact before voting on it.

The Inter-American bank, however, is already looking into problems with an
earlier phase of the project -- two gas pipelines it helped finance in 2003
with a $75 million loan. Hunt Oil has a stake in the consortium operating
the lines, which were built by an Argentine company.

The pipelines carry gas 340 miles through the rain forest from Peru's
Camisea Field, snaking across the 14,000-foot Andes Mountains to Pisco, a
coastal fishing village south of the capital, Lima. One line carrying
natural gas then extends on to Lima.

Since December 2004, there have been five leaks in the second natural gas
liquids line, spilling thousands of barrels into pristine rivers and
killing the fish upon which indigenous communities depend for their
livelihood. The latest spill occurred March 4 and led to an explosion and
fire that injured two residents.

Under pressure from U.S. and Peruvian environmental groups, the bank last
month issued a statement saying it was "deeply concerned" about the
pipeline's initial performance. The bank said it would conduct an "expanded
review and analysis of the project design and construction" of the pipeline
and perform another environmental study of the project.

The project has also been criticized by Ollanta Humala, the leading
candidate in Peru's presidential race, who in an April 4 interview with an
Argentine newspaper said the pipeline was "like Gruyere cheese, full of
holes." He called for a revision of the contract with the pipeline's
operators and higher royalty payments to the government.

Environmental groups say the problems with the pipelines illustrate the
dangers of conducting such operations in the rain forest. Besides the
spills, which the groups contend are the result of shoddy construction and
defective materials, environmentalists point to a Peruvian government
report that the gas development project is harming the once-isolated
indigenous people living near the gas field and along the lines.

The report from the state Office of the People's Defender said 17 deaths
among them could be attributed to influenza brought by contact with outside
workers. "The diseases contracted by these groups due to contact with the
company's workers could be catastrophic," said the report, citing syphilis,
influenza, diarrhea and respiratory ailments.

There are about 11,500 indigenous people living either in the gas
concession areas or along the pipelines, according to Amazon Alliance, one
of the environmental groups opposing the project. Last fall, local
residents at one point along the line blockaded the Urubamba River for
several weeks to keep company workers out in protest, according to the
alliance.

Even as the pressure builds among environmental opponents, a spokeswoman
for Dallas-based Hunt Oil said efforts already are underway to gain the
Bush administration's support for financing for the next phase.

The company's chief executive, Ray L. Hunt, has been a major financial
backer for President Bush, his father and other Republican candidates.
Jeanne Phillips, Hunt Oil's senior vice president for corporate and
international affairs, headed Bush's 2005 inaugural committee after serving
two years as Bush's ambassador to the Paris-based Organization for Economic
Cooperation and Development.

"There is a lot of dialogue with stakeholders inside the U.S. government,"
Phillips said. "We're doing everything we can to assure them this project
is worthy of U.S. support."

Hunt was finance chairman of the Republicans' Victory 2000 Committee and is
a member of the National Petroleum Council, an advisory group to Secretary
of Energy Samuel W. Bodman, as well as Bush's Foreign Intelligence Advisory
Board. Together with his wife, Nancy, and his companies, Hunt has
contributed about $1 million to President Bush and other Republican
campaign committees since 1998.

Still, Hunt's political credentials did not prove strong enough to win U.S.
support three years ago for financing of the pipelines, in which Hunt holds
a smaller stake than in the new proposal. The Bush administration delegate
at the Inter-American bank refused to support the financing, and the
Export-Import Bank turned down the project.

Market conditions have changed radically since then, with a domestic
natural gas shortage focusing attention on foreign sources. Since the last
vote, the administration has also appointed a new executive director to the
Inter-American bank, Hector E. Morales Jr., who has publicly called for the
bank to play a more active role in facilitating Latin America's gas exports
to the United States.

Hunt, which holds a 50 percent share in the new project, Peru LNG, plans to
seek $400 million in loans from the Inter-American bank directly, as well
as the bank's help in facilitating up to $400 million from private
commercial banks. Hunt's partners in the project are SK Corp. of South
Korea and Repsol YPF of Spain.

The company has not yet formally submitted applications at either the
Inter-American bank or the Export-Import Bank, but officials at both
institutions said preliminary discussions were underway.

Company spokeswoman Phillips said she did not anticipate any problems with
the environmental impact study because the project was "not in an
environmentally sensitive area." But environmental groups say the planned
export terminal in Paracas Bay poses a threat to Peru's only marine reserve
there.

A coalition of environmental groups wrote to Hunt in December condemning
his company's failures to prevent "unnecessary harm" to the local people
and the tropical rain forest by failing to use certain advanced drilling
technology to minimize the number of wells. The coalition includes Amazon
Watch, Amazon Alliance, Environmental Defense, Friends of the Earth, Oxfam
America and the World Wildlife Fund.

Steve Suellentrop, the official in charge of Hunt's liquid natural gas
projects, said the consortium had addressed all issues raised by the
indigenous people and that "the alleged impact is much greater than the
real impact."

"Nobody was directly impacted," he said. "Maybe indirect."

Suellentrop said the consortium operating the field, in which Hunt holds a
25 percent interest, had used "directional drilling" techniques, which he
said were similar to the "extended reach drilling" advocated by
environmental groups.

The Peruvian energy regulatory authority has so far imposed five fines
totaling $2.8 million on Transportadora de Gas del Peru, the Argentine
company that operates the pipeline, though the company has so far not paid
any of them.

The company has, however, sent food to several affected communities and is
building fish farms to compensate for their losses due to river pollution.
It has also adopted a $25 million plan to reduce the risk of more spills.

A California-based nonprofit engineering consultancy, E-Tech International,
hired by the environmental coalition issued a report in February alleging
that the first four leaks were the result of poor quality pipes, shoddy
workmanship and inadequate soil stabilization under parts of the pipeline.
It warned of "a high potential for future ruptures" at half a dozen other
locations.

The Argentine builder has denied the allegations but launched its own new
inspection of the pipeline, while Peru's Congress has ordered a full-scale
investigation into the causes of the leaks.

Robert Montgomery, who heads the environmental unit in the Inter-American
bank's private sector department, said that "most" of the new pipelines
recently built in Latin America had not experienced similar problems but
that the Peru line was "somewhat unique" because it was built along
mountain ridges to avoid populated areas.

At a February meeting at the bank's District headquarters, the president of
the Argentine pipeline operator, Ricardo Markous, blamed the spills on
heavy rainfall and landslides and said all the pipe was brand new and built
specifically for the Peru project. On March 10, the company issued a
100-page point-by-point rebuttal of the E-Tech report, including documents
tracking the history of the 188,000 tons of pipe used in the project.

But the report also pointed out that the complicated geography of the
pipeline route made it "impossible to assure that there will not occur any
incidents that might affect the system."

Staff researcher Alice Crites contributed to this report.

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