Guatemalan Oil Debacle

The Houston-based oil exploration company Anadarko announced earlier this year that the company might expand its operations in Guatemala. What Anadarko's management did not explain was how serious the environmental costs of the expansion could be, although the destruction of vast areas of rainforest by past operations has led to condemnation by an international environmental tribunal, as well as a pending lawsuit before the country's Supreme Court.

Basic Resources International (BASIC), Anadarko's fully owned subsidiary, started drilling for oil in the Mayan Biosphere Reserve in northern Guatemala in 1985. Spanning nearly 2.1 million hectares, the reserve is an area of primary lowland tropical forests and expansive wetlands. It contains both important biological diversity and internationally renowned archeological treasures such as the Mayan Tikal ruins.

At the center of the reserve is the 340,000 hectare Laguna del Tigre National Park, established in 1990. The park contains the largest protected wetland in Central America and was recognized by the 1971 Ramsar Convention on Wetlands of International Importance, which the Guatemala government ratified in 1990.

Though oil drilling is not allowed in most parts of the Maya Biosphere Reserve, BASIC's 1985 contract was grandfathered into the reserve when it was created in 1990 and renewed in 1992.

The World Bank's corporate lending agency, the International Finance Corporation (IFC), has assisted Basic's expansion into the Biosphere Reserve, approving a $20 million loan to BASIC in 1993 to finance a 30 percent increase in oil production from the Reserve, as well as the construction of a pipeline.

BASIC argued that the pipeline would minimize the environmental impact of oil transportation, since it would not be subject to accidental spills and attacks from local guerillas the way oil trucks are. But environmental damage from the pipeline turned out to be extensive, environmentalists report. Built on a cement platform above ground, the pipeline was exposed to sabotage and failed to minimize spills.

The most severe environmental damage has followed from the clearcutting of primary rainforest to make room for the pipeline's maintenance road � a road that would not have been needed if the pipeline had been built along existing roads. BASIC's maintenance roads also have afforded increased access into the Reserve for settlements of landless peasants displaced by the recently ended civil war.

In 1996, BASIC asked for a second loan from the IFC for a second pipeline in the Reserve. By this time, the U.S.-based environmental group Conservation International (CI) had met several times with the IFC to protest the irregular approval process in connection with the first loan. The IFC had itself characterized the project as requiring a full environmental assessment by BASIC, as well as public participation in the planning and approval process. Yet according to CI, the environmental assessment carried out by BASIC was insufficient, and the IFC failed to guarantee adequate public consultation.

The IFC denied CI's allegations, but agreed to conduct a new joint field assessment (by BASIC, the IFC and CI) prior to approving the second loan. According to CI, the second assessment was also unsatisfactory, ignoring alternative routes for the new pipeline, and downplaying the adverse environmental impact of the increased access to the park.

CI asked the World Bank to postpone approval of the loan until it had fully assessed its likely consequences, or until BASIC agreed to fund environmental mitigation actions. However, after postponing twice without producing new assessment materials, the World Bank approved the new loan in July 1996.

According to the 1995 World Bank Natural Habitat Operational Policy, the Laguna del Tigre Park is a "critical natural habitat." The policy suggests that the Bank refrain from funding projects "involving the significant conversion of natural habitat," and that projects in general should not be funded unless "comprehensive analysis demonstrates that overall benefits from the project substantially outweigh the environmental costs."

By the time the IFC approved the loan for the second pipeline in 1996, BASIC had already started construction, essentially nullifying the World Bank's already dubious public consultation process.

In January 2000, the Guatemalan Human Rights Ombudsman denounced BASIC before the Guatemalan Supreme Court for violating the right to a clean environment by drilling in a protected area. In March, 50 citizens denounced BASIC before the Supreme Court for adversely affecting the rainforest and habitat in the reserve.

So far, neither of the cases has been ruled upon.

"I don't know if the courts are co-opted, corrupt or incompetent, but the fact of the matter is that BASIC's operations are illegal, and that the cases should have been ruled upon a long ago," says Magal" Rey Rosa of Madre Selva, a Guatemalan environmental group that has followed BASIC's operations from the beginning.

While the national cases have stalled, BASIC, Anadarko and the Guatemalan government became the subject of a Central American Water Tribunal case launched by Madre Selva in August. In September, the Tribunal called upon the Guatemalan government to immediately put a stop to BASIC's activities in the Maya Biosphere Reserve, and condemned Anadarko for ignoring the environmental consequences of its subsidiary's exploits. "Anadarko refused to be present at the hearing," says Magal" Rey Rosa. "This to me is not the action of a company that cares about the environment."

Perhaps anticipating that the Water Tribunal case would be taken seriously by the Guatemalan courts, a Bahamas-based branch of BASIC issued a response in which it claimed there was "no scientific basis" for the consideration of the Laguna del Tigre National Park as a site governed by the Ramsar Convention.

"Indeed, the interpretations on biological diversity are drawn from literature from regional studies and not specific studies of the area," the company contends. "Moreover, the Ramsar Convention Declaration establishes the sovereign right of the signatory States to decide on the use and management of the Ramsar site lands, as well as the States' right to substitute and/or modify the registered wetlands area, for reasons of public utility or need."

BASIC also downplays its contribution to opening up the reserve by pointing to other human activities and the fact that Texaco built the Naranjo-Xan highway through the reserve in 1980, five years before BASIC began operation.

BASIC's current contract will come up for renewal with the Guatemalan government in early 2001. Whether the mounting environmentalist and international pressure, and the growing evidence of the damage to the Biosphere, give government officials pause before renewing the contract remains to be seen.

Published in Multinational Monitor