Enron Gets OK For Bolivia Gas Pipeline

by Jim Lobe

The bank said the project, which will finance the construction of the Yabog gas pipeline, will boost the country's exports while also meeting internal demand. The Andean Development Corporation is also providing $88 million in co-financing for the pipeline.

The project is designed to double the capacity of the existing Transredes pipeline so it can transport more than a million cubic feet of gas a day by 2004, by adding parallel sections and refurbishing and expanding compression stations along the pipeline's route from Santa Cruz, Bolivia, to Argentina.

The approval outraged environmental groups that have been calling on the IDB for months to reject the funding requests.

"U.S. tax dollars should not be used for the destruction of pristine tropical forests," said Atossi Soltani, executive director of California-based Amazon Watch.

"The IDB's rejection of this loan was crucial in signaling to Enron and others that they can no longer count on public coffers to underwrite the devastation of globally treasured ecosystems. Obviously, they're not interested in sending that message."

In anticipation of the vote, Amazon Watch, as well as Friends of the Earth (FoE) and the Washington-based Institute for Policy Studies (IPS), released a report and video detailing the ongoing impacts of Enron and Shell's Cuiaba and Bolivia-Brazil pipelines.

The report, based on on-site inspections of the pipelines, found that prevention and mitigation measures promised by the two energy giants had failed to curtail what it called "egregious social and environmental impacts that continue to this day, and, in many cases, are intensifying."

It concluded that the decision to build the pipelines through the Chiquitano Forest -- the most intact dry tropical forest in the world -- wreaked widespread damage that had been compounded by a botched conservation program.

And despite promises by the companies, the project, which was backed by a $200 million loan to Enron by the federal U.S. Overseas Private Investment Corporation (OPIC), failed to prevent illegal hunting and logging along the pipeline route, leading to rapid deforestation in the area.

Shortly after Enron declared bankruptcy one year ago, OPIC, Enron's largest public funder, cancelled the loan.

The report also found that the companies had failed to provide some 38 Chiquitano and Ayoreo indigenous communities along the pipeline route with land titles or long-term compensation for the loss of livelihood resulting from the project.

It also discovered that the recently re-opened Don Mario Gold Mine, located in the Chiquitano Forest and partially owned by Bolivian President Gonzalo Sanchez de Lozada, was siphoning off gas from the pipeline for its own use despite specific commitments from the companies that it would not take place.

Sanchez de Lozada lobbied personally for the project when he visited the IDB last month. He has been an ardent supporter of plans to exploit Bolivia's gas reserves by exporting them to energy-poor countries.

"Prior to construction of the Cuiaba pipeline three years ago, OPIC, Enron and Shell pledged that pipeline out-take valves would not be built in the Chiquitano Forest," said John Sohn, an expert with FoE. "We warned that new extensions of the pipeline through the forest would be disastrous as they would allow a number of industrial projects to pop up in a sensitive ecological area."

"Now, that is exactly what has happened," he added.

The report also found that the pipelines had a social impact: exacerbating inequality and increasing social conflict in the region.

With the same companies behind Bolivia's request for IDB money to develop the Yabog pipeline, the groups insisted that the bank would be "negligent" if it approved the project, which will disturb the ecology even though the right-of-way is the same as the existing pipeline.

In early December, the groups sent a letter to the Treasury Department, which represents the United States on the IDB's executive board, calling for Washington to strongly oppose the project. The letter cited the November report and another study by the Chiquitano Indigenous Organization and the Bolivian NGO CEADES that cited unresolved issues in 16 affected indigenous communities.

As a result, the United States, which holds 30 percent of the voting power in the IDB, decided to abstain on the loan vote, but that was not enough to defeat it.

"The whole thing seems cooked," said Derrick Hindery of Amazon Watch. "It really smells of stealthy maneuvering on the part of the U.S. executive director's office so that the U.S. could save face by abstaining while knowing that the loan would still be approved."

Before the vote, the IDB said it would consider the request with an open mind.

"We don't automatically consider that a past inadequate performance means that the companies are not capable of rectifying those deficiencies," an IDB spokesman told IPS before the vote. "All development projects have impacts, and the question is whether the mitigation measures are sufficient to protect communities and the environment."

The groups also strongly oppose a second planned pipeline in Peru, the Camisea Project, which they say is just as flawed as Yabog and the two other pipelines. Both the IDB and the U.S. Export-Import Bank are currently considering financing that project.