THE BACKGROUND

As oil fields and pipelines are far removed from population centres, it is hardly surprising that most people hear virtually no news about them. Where details are conveyed, usually as business news, the brief and bland style is intended to elicit little curiosity, far less concern. Yet through activist groups and the Internet, an increasing number of people are becoming gradually aware of the scale of environmental destruction the oil industry inflicts on the earth in weakly regulated developing countries.

The links between oil consumption and consumer behaviour such as driving energy- inefficient vehicles are coming into sharper focus. Besides petrol, oil, liquid petroleum gas (LPG) and petrochemicals, oil is frequently used to manufacture artificial fibres, fertilisers, pesticides, medicines, glass and insulation. Natural alternatives include measures such as running diesel vehicles on biodiesel, a fuel largely made from waste vegetable oil.

In the South American country of Ecuador, from 1971 until 1991, Texaco (now ChevronTexaco) extracted huge volumes of oil in the eastern Amazon region using substandard technology, dumping drilling wastes into the waterways.

To transport the oil, in the early 70's Texaco constructed a pipeline known as SOTE
which crosses the country roughly east-to-west. Controlled since 1992 by the Ecuadorian government, it has experienced 68 oil spills totalling millions of gallons of crude oil. The activist group Amazon Watch estimates these oil and toxic spills to be the equivalent of two Exxon Valdez disasters. A total of 2.5 million acres of rainforest was lost due to company's operations. Today there are at least 350 toxic waste pits, and cancer rates are exploding.

One of the damage-control measures taken by the previous Noboa government was to pay the Washington DC-based PR firm Black, Kelly, Scruggs and Healey US $180,000 to tackle the resulting image problem.

In response to Ecuador's mammoth external debt, currently standing at US $15 billion, the IMF saw what it viewed as a solution in the doubling of Ecuador's oil production capacity, which as part of an economic bailout package would require a new pipeline. The IMF package, known as the Economic Transformation Law, also requires the opening of all sectors in the country's oil development industry to private corporations.

In February 2001, the government signed a contract with an international consortium for the construction, ownership, and operation of a new pipeline called OCP or Oleoducto de Crudos Pesados (Heavy Crude Pipeline). It later gave the go-ahead for construction in June 2001 with a completion goal of mid-2003.

The IMF insists that 80% of Ecuador's new oil earnings must be used to service the debt (with another 10% to go into a fund to hedge against the price of oil). Some critics believe that oil production is likely to increase rather than lower the debt, which since 1972, prior to the construction of SOTE, has spiralled from US $217 million to $15 billion today.

The route of the new pipeline starts at Lago Agrio in the eastern Amazon basin, where the Terminal Amazonas oil installation is to be built. From there, it runs for 314 miles (503km) over the geologically unstable Andes range, to refineries at Balao near the port of Esmeraldas on the Pacific coast. The key market will be the US, particularly California.

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OCP CONSORTIUM MEMBERS

EnCana (Canada, 31.4%)
Repsol-YPF (Spain, 25.6%)
Petrobras (Brazil, 15%)
Occidental Petroleum (US, 12.2%)
ENI-AGIP (Italy, 7.5%)
Techint (Argentina, 4.1%)
Perenco (France/UK, 4%)

The original US consortium member Kerr McGee sold its share to Perenco in September 2002, possibly as a result of escalating criticism of the project.
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OCP'S FINANCIAL BACKING

The main financial backer is the Westdeutsche Landesbank, which is 43.3% owned by the German state of North Rhine Westphalia. Its US $900 million, 17-year loan has catalysed protests at West LB offices throughout the world. A full list of banks involved in the financing is:

ABB Credit Company (Switzerland, now part of GE Commercial Finance in the US) - US $35 million
Banca Nazionale del Lavoro (Italy) - US $50 million
Banco Bilbao Vizcaya Argentaria (BBVA) (Spain) - US $150 million
Banco Espírito Santo (Portugal) - US $5 million
Bank of Scotland (UK)
Caja Madrid (Spain) - US $50 million
UniCredito Italiano (Italy) - US $10 million
Westdeutsche Landesbank (WestLB) - US $900 million

West LB has publicly stated that compliance with World Bank environmental guidelines is an 'indispensable condition of any engagement' with the OCP. However, a report written by Robert Goodland, chief of the Environment Department of the World Bank for 25 years, was released in September 2002 by environment groups in Germany and the US. It found substantial non-compliance with World Bank environmental and social criteria, with key criticisms including threats to biodiversity, risks to indigenous peoples, and the forced resettlement of affected populations.

On November 7th 2002, two Vice-Presidents of the World Bank wrote to OCP's president (Andy Patterson of EnCana), requesting that it should either stop claiming compliance with World Bank standards or obtain independent verification of compliance. This has so far not occurred.

In May 2001, a coalition of groups including the World Rainforest Movement, Greenpeace, Friends of the Earth, Rainforest Action Network and Amazon Watch - send a letter to Citibank and Deutsche Bank, calling on both institutions to refrain from disbursing or making additional loans to the pipeline project. These banks were also urged not to finance new oil production facilities in pristine and culturally sensitive areas of the Ecuadorian Amazon.

In September 2002, Energy Intelligence Group drew attention to a US $180 million tax dispute between OCP and the Ecuadorian Government. Then in October, Moody's, one of the two financial rating agencies for the project, downgraded the OCP's investment rating to borderline junk status (Baa3), citing growing environmental, political and economic risks. In mid-April 2003, Moody's withdrew its credit rating altogether, thereby threatening further pipeline construction on insurance grounds.

Recently the international campaign has been focusing on the project's backers and financial status. In December 2002, forty NGOs from eight countries met in Germany to demand the withdrawal of financial support from the OCP.

Although the cost specified in the contract was estimated at US $1.1 billion, delays from numerous environmental and social controversies have put the OCP nearly US $200 million over budget. Any delay beyond the end of July 2003 will add further to costs.
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THE PIPELINE'S ENVIRONMENTAL IMPACTS

Ecuador has been identified as one of the world's mega-diverse countries. With only 0.2% of the planet's land area it is estimated to contain 10% of all known species. For this reason, projects such as the OCP stand to impact heavily on the Ecuador's natural environment.

At the start, in May 2000 an Environmental Impact Assessment (EIA) was carried out by a company called Entrix Ecuador, whose president is OCP's environmental co-coordinator. It was therefore not a great surprise when the pipeline's EIA was deemed inadequate by a team of local and international scientists specialising in Ecuador's biodiversity recruited by the OCP consortium to evaluate aspects of the assessment. An ornithologist called Paul Greenfield pointed to serious dangers of extinction for endemic and threatened species.

In addition, the EIA never fully assessed or disclosed the full long-term impacts on ecologically and culturally sensitive areas, including the oil production areas that would effectively be opened up to exploitation.

Rather than running alongside the existing SOTE pipeline, an option preferred by a coalition of dozens of experts and groups called El Comite Pro Ruta Menor Impacto (the Committee for the Route of Least Impact), a northern route was chosen for the OCP. This was a little strange given a critical report about the north route from the Smithsonian Institution, and the extra cost of building new access roads. The north route crosses steep mountainous terrain with sharp ridges, including regions of high biodiversity and ecotourism activity.

The steep slopes on the sides of the Andes experience heavy rainfall, likely to result in landslides that could cause the OCP pipeline to rupture, with disastrous consequences.
Earlier this month, the existing SOTE pipeline was ruptured, probably by the repeated passage of OCP machinery. Between 8,000 and 10,000 barrels of crude oil was spilt into the Sucus-San Juan River, later entering the lake that provides Quito's water supply.

Other natural hazards facing the pipeline include earthquakes from numerous fault lines, and volcanic eruptions. In November 2002, the Reventador volcano located 93 kilometres east of Quito erupted, damaging equipment and nearly one kilometre worth of pipeline that was yet to be buried.

Some of political violence across the border in neighbouring Colombia could spill over into Ecuador with severe environmental consequences. The existing SOTE pipeline has already been sabotaged several times; in one incident in 2000, eight people died in a passing bus, and another 19 were injured.

Unfortunately, in Ecuador the status of National Park signifies very little; Ecuador's environmental laws are usually vaguely written and rarely enforced by government agencies. The new pipeline cuts through seven legally protected national parks and reserves, including the cloud forest of the Choco-Andean Corridor Project, a World Bank Global Environment Facility Biosphere Reserve. In a letter dated December 19th 2001 to then OCP President Herman Lara, the World Bank expressed its 'deep concern' over the impacts of the pipeline on this reserve. The Bank has voiced concern regarding this reserve to the consortium on at least three occasions.

Critics believe that the inevitable pipeline leaks and ruptures will cause ecological disaster by spilling oil into threatened forest ecosystems. Other long-term impacts include the likelihood of colonisation by settlers along the pipeline's route, leading to further deforestation. Although most of the pipeline will be going underground, critics believe this could lead to underground oil leakage and contamination of groundwater.

A UNIQUE CLOUDFOREST RESERVE

Of all the areas that lie on the pipeline's route, the Mindo Nambillo Cloud Forest Reserve, located about 25 miles north of the capital Quito, is probably the most ecologically significant, A mecca for birdwatchers, it contains several threatened and endangered Andean habitats, including subtropical Choco and Montane Cloud Forest. Choco, a zone that runs along the coasts of Panama, Colombia and Ecuador, has some of the world's richest biodiversity.

The Mindo area has an impressive biodiversity and high degree of endemism among plants, reptiles, amphibians, butterflies and birds. Of the 450 bird species found there, about 46 are endangered, and Birdlife International considers it to be the most important bird sanctuary in Latin America.

In Ecuador, Environmental Impact Assessments and mitigation plans are rarely adhered to, and promises from the consortium that it would use start-of-the-art construction technology and the 'highest environmental standards' in the Mindo region were met with scepticism by local communities and environment groups.

The pipeline route runs for miles along a fragile ridgeline called Guarumos Ridge, where heavy machinery was used on the steep and narrow slope causing a number of landslides. In this region, an oil spill could affect either of two river systems - the Mindo River to the north, a major source of drinking water for surrounding communities, and the Alambi basin to the south.

Mindo is home to a burgeoning ecotourism industry that was threatened by the pipeline's construction, and a property on the Guarumos Ridge that lay in the pipeline's path was bought by wilderness guides and ecotourist businesses. The pipeline was later built illegally through this property.

Some Mindo residents and overseas environmentalists began a tree-sit on the land in Jan 2002, to be violently evicted by police two months later. International blockaders, including Julia Butterfly Hill, famous for occupying a Californian redwood tree for two years, were deported, while five of the community members faced charges of sabotage and terrorism against the state.

In January 2003, Ecuador's newly elected environment minister Edgar Isch suspended construction work on parts of the pipeline near Mindo. His judgment was that trees, plants, and local species habitats had been damaged in breach of the consortium's licence. However, this order was lifted a few days later.

SOCIAL IMPACTS

In rural areas, many small farms have been affected by pipeline construction, with damage to crops, grazing lands and water supplies. Many landholders (particularly in the Lago Agrio area) were reportedly pressured, blackmailed or threatened into signing agreements with the consortium. Some of those who refused were, according to their own accounts, forced off their land by the Ecuadorian military at OCP's request and given nothing.

The arrival of some of the project's five thousand construction workers has had a heavy impact on some small rural communities, with problems such as violence, alcohol and prostitution. Coupled with this is a total lack of consultation with affected communities, in violation of Ecuador's constitution. Instead, the environment group Acción Ecológica has been holding ongoing workshops for communities to be affected, highlighting the likely impacts of increased oil drilling.

The Afro-Ecuadorians of the coastal Esmeraldas region are experiencing high rates of cancer, plus respiratory, skin and stomach illness due to ongoing air, water and land contamination. However, the highest cancer rates are found in Ecuador's Amazon region.

In March 2003, as part of a presentation for the North Rhine Westphalia state parliament, Robert Goodland, the World Bank ex-environment chief, stated that oil spills have already begun, poisoning village water supplies. He also called on West LB to end to illegal arrests, and massive police assaults on communities such as the indigenous people in Sarayacu.

BROAD AND SUSTAINED OPPOSITION

Opposition to the pipeline is united across a wide spectrum, including citizens, indigenous groups, environment groups, businesses and landowners. Unlike in the West, protection of the environment, particularly for indigenous peoples, is a matter of life or death rather than a 'luxury'. In Ecuador, the freedom to protest is not assured, and some peaceful demonstrations have resulted in deaths, injuries and many arrests.

In August 2001, nine female environmentalists were violently assaulted after attempting a peaceful sit-in at the OCP offices in Quito. At this event, company security guards destroyed TV stations' cameras and seized journalists' photographic equipment. One journalist from Quito's El Universo paper was reportedly locked in a room and beaten by OCP employees.

Over February to March 2002 thousands of striking OCP workers and local residents in the northern Ecuadorian Amazon were attacked by the country's armed forces, leaving according to unofficial reports four dead, and hundreds wounded. Numerous other grassroots protests and blockades have taken place around the country.

THE AMAZON PREPARES ITSELF FOR AN OIL BOOM

The OCP is likely to drive further oil exploration in the Ecuadorian Amazon rainforests. A projected pipeline capacity of up to 450,000 barrels per day will require hundreds of new oil wells, each with its own service roads and flow lines.

Unfortunately for the environment, it is believed that most of the heavy crude deposits to be tapped by consortium members lie underneath lie under national parks, wildlife reserves and indigenous territories. Parts of Ecuador's Amazon region have already been designated as oil blocks, and others are proposed. Specific protected areas at risk include the Yasuni National Park, Limoncocha, Pañacocha and the Cuyabeno Wildlife Reserve.

Of great concern is Block 20, lying alongside the border with Peru. Estimated to contain Ecuador's largest reserves and heavy crude, this falls within boundaries of the Yasuni National Park, a UNESCO World Biosphere Reserve that already has a number of active oil wells. In May 2000, the Argentinean company Perez Companc (now owned by Petrobras) discovered about three hundred million barrels' worth of proven oil reserves in a nearly 500,000 acre (200,000 hectare) area called Block 31, most of which lies in the Yasuni National Park.

The auctioning off of several more oil blocks is expected in 2003. To some people these areas are squares on a map, but to others these represent virgin forest, and are often home to indigenous tribes. The Indians who live there are the Achuar, Shuar, Huaorani, Quichua, Shiwiar and Zapara - most of whom are opposed to oil development on their land.

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PANACOCHA - A TREASURE WORTH PROTECTING

The roughly rectangular box known as Block 15 includes a 140,000-acre (56,000 hectare) primary rainforest reserve called Pañacocha, where the Block's operator Occidental Petroleum has already carried out seismic testing and exploratory drilling.

Pañacocha contains flooded forest and black lagoon systems. It lies between two huge protected areas, the Yasuni National Park and Cuyabeno Wildlife Reserve, and is home to jaguars, ocelots, and nine monkey species. There are more than five hundred bird species and a large number of the endangered pink Amazon River Dolphin. Due to its slow-moving aquatic system, an oil spill would permanently linger, spreading slowly across the flooded region.

Over 1998-9, a coalition of environment groups pulled together by Australia's Rainforest Information Centre raised the money to buy 120 acres and an ecotourist backpacker lodge that was for sale, as a foothold towards protecting the entire area. …………………………………………………………………………………………

TAKE ACTION!

1) In March this year, Ecuadorian activist filmmaker Juan Pablo Barragan produced a 35-minute film about the OCP, entitled Amazon Oil Pipeline - Pollution, Corruption and Poverty. Reflecting the nationalities of companies that are members of the consortium, this is available in English, German, Spanish, Italian, Portuguese and French. Following screenings of the video, letters are being written to OCP member oil companies, West LB and other banks, Ecuador's president, and the IMF. Please contact the Rainforest Information Centre (details at the end) for a copy of this video to screen for your organisation, community or friends.

2) Please write to the US office of German Bank West LB asking them to pull out of the OCP project due to non-compliance with World Bank standards, and demand repayment of the US $900 million dollars they have loaned to the pipeline project.

West LB, Regional Head of Structured Finance Americas, Mr. Manfred Knoll, 1211 Avenue of the Americas, New York, NY 10036, USA
Ph: +1 212 852 6250
Fax: +1 212 852 6232
E-mails: manfred_knoll@westlb.com
rod_fraser@westlb.com
presse@westlb.de
poststelle@stk.nrw.de

3) Please write to EnCana, a Canadian oil company with the biggest stake in OCP:

Gwyn Morgan, Chief Executive Officer, EnCana Corporation, PO Box 2850, Calgary, Alberta T2P 2S5, Canada
Phone: +1 403 645 2000
Fax: +1 403 645 3400
Emails: gwyn.morgan@encana.com
andy.patterson@encana.com
dick.wilson@encana.com
fernandobenalcazar@aec.ca

4) Please write to the President of Ecuador, with copies to the Minister of
Energy and to Acción Ecológica, demanding:

a) Cancellation of the contract between the Ecuadorian government and the OCP
consortium because of human rights violations and environmental impacts.
b) That Ecuador declare a moratorium on the expansion of the oil frontier that is
threatening protected areas and indigenous territories.

Presidente Lucio Gutiérrez, Despacho Presidencial, Calle García Moreno y Chile,
Quito, Ecuador
Ph: +593 22 580833
Fax: +593 22 580748
Email: karina.giler@presidencia.gov.ec

Ing. Carlos Arboleda Heredia, Ministro de Energías y Minas, Calle Juan León Mera y Orellana, Ed. Ministerio de Obras Públicas, Quito, Ecuador
Ph: +593 22 553043
Fax: +593 22 906350

Acción Ecológica: natwe@uio.satnet.net

5) Please contact the International Monetary Fund (IMF) to request that they cancel Ecuador's debt in exchange for Ecuador protecting the Amazon forests and indigenous people.

International Monetary Fund, Attn. Horst Koehler, Managing Director,
700 19th Street, NW, Washington, DC 20431, USA
Ph: +1 202 623 7300
Fax: +1 202 623 6278
Emails: hkoehler@imf.org
publicaffairs@imf.org

Anoop Singh, Director of the Western Hemisphere Department, IMF
Ph: +1 202 623 6222
Fax: +1 202 623 7499
Email: asingh@imf.org

CONTACTS

Amazon Watch, 2350 Chumash Rd, Malibu, CA 90265, USA
Ph: +1 310 456 9158
Fax: +1 310 456 9138
Email: amazon@amazonwatch.org
Website: www.amazonwatch.org/megaprojects/ocp_ecuad.html

Rainforest Information Centre, PO Box 368, Lismore, NSW 2480, Australia
Ph: +61 2 6621 8505 / 6621 3294
Email: johnseed1@ozemail.com.au
Website:
www.rainforestinfo.org.au/ocp/welcome.htm (Good for updates and action alerts)

Acción Ecológica, Alejandro de Valdez, N24 33 y Av. La Gasca, Quito, Ecuador
Ph: +593 22 547516
Fax: +593 22 527583
Email: amazonia@accionecologica.org
Website: www.accionecologica.org/petroleo.htm (Spanish only)