Meg Taylor
Compliance Advisor Ombudsman
International Finance Corporation
MSN F 11k-1116
2121 Pennsylvania Avenue, NW
Washington, DC 20433
May 9, 2008
Dear Ms. Taylor:
On behalf of the Berezovka Initiative Group, Crude Accountability and the Ecological Society Green Salvation submit this complaint to the CAO regarding the IFC’s 2002 investment of $150,000 to Lukoil Overseas Karachaganak, B.V. at the Karachaganak Oil and Gas Condensate Field in Western Kazakhstan Oblast, Kazakhstan (project number 9953). (Please see Attachment CAO1, a letter from Ms. Svetlana Anosova to Crude Accountability providing authority to submit the complaint on behalf of the Berezovka Initiative Group and a letter from Ms. Anosova to Green Salvation providing the same authority, and a document providing Power of Attorney to Green Salvation.) Lukoil Overseas Karachaganak B.V. is a member of the consortium, Karachaganak Petroleum Operating, B.V., which has been operating the Karachaganak Field since 1998. Lukoil has a 15 percent share in the consortium, along with British Gas and ENI, each of which have a 32.5 percent share, and Chevron, which holds a 20 percent share.
As detailed below, we maintain that the Lukoil Overseas Karachaganak B.V. Project is in violation of both Kazakhstani legislation and the IFC’s policy on involuntary relocation, and request that the CAO investigate our concerns. Because the project was financed in 2002, the current social and environmental performance standards do not apply to this project; rather the previous standards, including Operational Directive 4.30, Involuntary Relocation, appear to be the standards by which the IFC must operate with regard to the Karachaganak Field.
The Sanitary Protection Zone
The village of Berezovka—home to approximately 1300 residents—is located within the five-kilometer Sanitary Protection Zone (SPZ), which, in accordance with Kazakhstani law, is in place around the Karachaganak Field. As such, the residents of the village, in accordance with Kazakhstani law and the standards of the IFC (Operational Directive 4.30, June 1, 1990), should have been relocated to a safe and environmentally clean location in a timely fashion following the decision to finance the project by the IFC Board of Directors. Two previous complaints have been submitted to the CAO on behalf of or by the residents of the village, each of which included concerns about the SPZ.
According to Kazakhstani law, an enterprise such as the Karachaganak Field must have an SPZ of no less than five kilometers. The Environmental Assessment conducted by Bechtel and Kazekologiya Center in 2002, as well as the Ombudsman’s report on the first complaint filed by the Berezovka Initiative Group, recognizes the Kazakhstani legislation, which states, “According to the ‘Sanitary standards for the design of industrial installation,’ at installations producing natural gas containing high levels of hydrogen sulphide (over 2-3%) and mercaptans, the size of the standard (minimum) sanitary protection zone must be not less than 5000m.” (See Attachment CAO2, Environmental Assessment, 14 Basis for Sizing of the Sanitary Protection Zone Around Karachaganak Field, 14.1 Standard (Minimum) Sanitary Protection Zone, page 41.) Levels of hydrogen sulfide at the Karachaganak Field exceed these limits, as stated by the CAO report (See Attachment CAO2, CAO Karachaganak Assessment Report, April 15, 2005, page 13).
Relevant Kazakhstani Legislation and Decrees
The hydrogen sulfide levels recorded by the CAO in its report are confirmed in Kazakhstani governmental documentation, which also addressed the issue of the SPZ:
1). In accordance with the sanitary norms for projects at industrial sites (SNP No. 1.01.001-94) which were in effect in 2002 for “enterprises for extraction of natural gas with a high level of hydrogen sulfide (greater than 2-3 percent) and mercaptans, the size of the sanitary protection zone should not be less than five thousand meters.” (See Attachment CAO3: Section “Extraction and Development of Metallic and Nonmetallic Ores” Class 1 “Sanitary Protection Zone Size No less than 1000 Meters”, Point 3, Notes, p. 78.)
2). Decree No. 669, June 18, 2004, by the Government of the Republic of Kazakhstan, states that oil and gas extracted at the Karachaganak Field contains hydrogen sulfide at levels of 3-5 percent. The Karachaganak Field is one of the largest oil and gas condensate fields in the world, and it has high levels of heavy hydrocarbons containing hydrogen sulfide, sour gas, paraffin and mercaptans. “The startup and operation of the Karachaganak field is accompanied by intensive pollution of the environment; therefore the question of the size of the SPZ has paramount public health significance.” (See Attachment CAO4:1) Decree 669, excerpt, and 2) Republican Sanitary Epidemiological Center, Conclusion of the Sanitary Epidemiological Expertise for Project No. 672 “Projection the Public Service and Amenities of the SPZ of the Karachaganak Oil and Gas Condensate Field”, No. 41-2/9/9661, page 2, December 24, 2004. The attachment includes pages 1 and 2 of this document.)
3). According to the Conclusion of the Ministry of Health of the Republic of Kazakhstan, No.7-14-256 on February 4, 2002, the Sanitary Protection Zone at the Karachaganak Oil and Gas Condensate Field was established at a minimum of five thousand meters from the edge of the field. (See Attachment CAO5, Letter of MOOS, No.2-2-1-42/1146, March 4, 2005, page 1.) As a result, the village of Berezovka was located within the SPZ of the Karachaganak Field. In accordance with the legislation of the Republic of Kazakhstan, the residents of Berezovka should have been relocated from the SPZ to a safe location.
IFC Involvement and Violation of Kazakhstani Legislation and the Aarhus Convention
When the IFC’s Board of Directors decided to finance this project in 2002, the SPZ was designated as five kilometers, and the Kazakhstani government informed the residents of the villages of Tungush and Berezovka, which were located at three and five kilometers, respectively, from the field, that they would be located to a safe and environmentally clean location. (See Attachment CAO5a, Letter from the Ministry of Natural Resources and Environmental Protection No. 02-05-09/1639, May 29, 2002.)
Furthermore, the Akimat (regional authority) for Western Kazakhstan Oblast (WKO) raised the question of relocating the residents of the villages of Tungush and Berezovka before the Government of the Republic of Kazakhstan more than once. On June 18, 2001, the Ministry of Natural Resources and Environmental Protection confirmed the inadmissibility of the presence of the villages of Tungush and Berezovka within the boundary of SPZ of the Karachaganak Field and supported the proposal of the WKO Akimat to relocate the villagers to a safe location (Attachment CAO6 Letter of WKO TUOOS No. 285 from February 8, 2008). In April 2001, Prime Minister K.K. Tokaev, who was visiting the field, stated that relocation of the village was under consideration. (See Attachment CAO6 Deputy inquiry No. 5-12-k/s-1857, April 24, 2002.)
The residents of Tungush were relocated in 2003, but the residents of Berezovka continue to live in dangerous proximity to the Karachaganak Field.
Instead of relocating the residents of Berezovka, as of January 1, 2004, the size of the SPZ was reduced from 5000 meters to 3000-3840 meters, on the basis of the Conclusion of the Senior State Sanitary Doctor of the Republic of Kazakhstan in an Addendum to the Project “Sanitary Protection Zone of the Karachaganak Oil and Gas Condensate Field,” December 25, 2003. (See Attachment CAO7 Conclusion of the Main State Sanitary Doctor of the Republic of Kazakhstan No.07-2, January 16, 2004, pp. 1, 3.) As a result, the village of Berezovka found itself outside the borders of the newly determined SPZ. The reduction of the SPZ was officially based on the statement that KPO “introduced progressive technology into production and partially changed the technological process” (See Attachment CAO8 Letter of the Ministry of Health of the Republic of Kazakhstan No. 07-21-8056, September 1, 2006, pp. 1,2.).
The reduction of the SPZ, the introduction of progressive technology at the field and the partial change of the technological process at KPO were done without a state environmental assessment, without informing the local residents, without considering their opinions, and without their participation in the decision-making process (See Attachment CAO9 Letter of MOOS No.3-2-2-12/2834, January 25, 2005). This is a violation of Articles 3.2, 3.3, 3.9, 4 and 6 of the Aarhus Convention and Articles 15 and 36 of the Republic of Kazakhstan’s 1997 Law “On Environmental Assessment.”
On March 27, 2006, the General Prosecutor of the Republic of Kazakhstan filed Protest No. 7/194-05, stating that the decision by the Senior State Sanitary Doctor of the Republic of Kazakhstan to reduce the SPZ around the Karachaganak Field on December 25, 2003 was illegal, and repealing the decision.
On April 1, 2006, the decision of the Senior State Sanitary Doctor of the Republic of Kazakhstan was withdrawn and a committee was created to conduct atmospheric research in the population points around the field and to assess the basis for determining the size of the SPZ (See Attachment CAO10 Letter of KGSEN No. 07-21-622, May 13, 2006).
In accordance with the reversal of the above-cited decision of the Senior State Sanitary Doctor, the size of the SPZ is five thousand meters. (See Attachment CAO11, Letter of KGSEN No.07-21-1456, October 24, 2007, and Attachment CAO11a, Letter of KGSEN No. 07-21-696, May 4, 2008.) Therefore it follows that the village of Berezovka is again located within the border of the SPZ of the Karachaganak Field.
IFC Involuntary Resettlement Policy
When the IFC financed the Karachaganak project in 2002, the SPZ was 5 kilometers, which meant, according to Kazakhstani law, anyone living inside the zone must be resettled. Therefore, the IFC’s involuntary resettlement policy (Operational Directive 4.30) should have been activated immediately.
According to the Operational Directive, 4.30, Involuntary Resettlement, paragraph 1, “Any operation that involves land acquisition or is screened as a Category A or B project for environmental assessment purposes should be reviewed for potential resettlement requirements early in the project cycle.” The Environmental Assessment published in March 2002 contains no reference to a review for potential resettlement.
Operational Directive 4.30 is explicit about the types of activity that should be undertaken to ensure proper involuntary relocation, including the provision of shelter, infrastructure and social services (paragraph 19); environmental protection and management (paragraph 20); resettlement planning, including a detailed resettlement plan, timetable, and budget (paragraph 4); an implementation schedule, monitoring and evaluation (paragraphs 21 and 22); and processing and documentation (paragraphs 27, 28, 29 and 30). OD 4.30 states specifically, “The full costs of resettlement should be identified and included in the total cost of the main investment project, regardless of financing source. The costs of resettlement should also be treated as a charge against the economic benefits of the investment project that causes the relocation.” Finally, OD 4.30 states, “Submission to the Bank of a time-bound resettlement plan and budget that conforms to Bank policy is a condition of initiating appraisal for projects involving resettlement…” (Paragraph 30)
Operational Directive 4.30 is also explicit about distinct roles for the World Bank Group and for the borrower. The directive states, “The responsibility for resettlement rests with the borrower. The organizational framework for managing resettlement must be developed during preparation and adequate resources provided to the responsible institutions.” (Paragraph 6, OD 4.30)
Paragraph 8 of OD 4.30 states the involuntarily resettled should “be able to choose from a number of acceptable resettlement alternatives.” This option was not provided to the Tungush residents who were relocated in 2004; the IFC must ensure that the mistakes made with Tungush are not repeated in the relocation of Berezovka.
Paragraph 7 of OD 4.30 states, “Most displaced people prefer to move as part of a preexisting community, neighborhood, or kinship group.” In 2005, Crude Accountability and the Berezovka Initiative Group conducted a sociological survey in partnership with sociologists from Moscow State University, which showed that over ninety percent of the Berezovka population wanted to be relocated because of the environmental dangers in the village. Of those ninety percent, over sixty percent wanted to be relocated together. (See Attachment CAO12, “The Residents of the Village of Berezovka, Kazakhstan Consider Resettlement Necessary Given the Harmful State of the Environment, November 2005”.)
Regarding the responsibilities of the World Bank, OD 4.30 is equally explicit: “the bank supports borrowers’ efforts through (a) assistance in designing and assessing resettlement policy, strategies, laws, regulations, and specific plans; (b) financing technical assistance to strengthen the capacity of agencies responsible for resettlement; and (c) direct financing of the investment costs of resettlement. The Bank may sometimes finance resettlement even though it has not financed the main investment that made displacement and resettlement necessary (para.26).” (Paragraph 23)
The IFC has failed to undertake any of these activities regarding involuntary relocation at Karachaganak. In fact, in previous correspondence with the IFC and the CAO, the institution has repeatedly stated it has no responsibility for relocation at Karachaganak; rather, this is the responsibility of the Kazakhstani government.
Appeal
According to our reading of the documentation, this project was in violation of OD 4.30 when it was approved and when the financing was provided for the project. It is again in violation of OD 4.30 as “in accordance with the conclusion from February 4, 2002, the sanitary protection zone of the field is 5000 meters.” (See Attachment CAO11a, Letter No. 07-21-696 from KGSEN to Green Salvation, May 4, 2008.)
The residents of Berezovka should be relocated in accordance with World Bank standards in a timely fashion, and should be awarded compensation for the severe environmental, social and personal damage they have suffered in the six years since the IFC provided the $150 million loan to Lukoil Overseas Karachaganak BV.
The residents of Berezovka have been complaining to the World Bank Group since 2003 about the illegal reduction of the SPZ, about the ongoing violation of their human right to live in a clean and healthy environment, and about the toxic emissions polluting their community from the Karachaganak Field.
They have repeatedly communicated (in written form and in person) with the CAO; with INT; with the project team in the Department of Oil, Gas, Chemicals and Mining; and with the US, Kazakhstani, and Russian Executive Directors of the World Bank. They have written to the President of the Bank and they have engaged with the CEO and other staff of KPO without any concrete positive results. They have also engaged their government in an ongoing effort to reinstate the SPZ and attain relocation for their community.
It is time for the IFC to take seriously the demands of the villagers of Berezovka to address the human rights abuses taking place at the Karachaganak Field by relocating them to a safe and environmentally clean location in a manner that complies with World Bank Operational Directive 4.30.
OD 4.30 states, “Involuntary resettlement may cause severe long-term hardship, impoverishment, and environmental damage unless appropriate measures are carefully planned and carried out.” The IFC’s failure to implement its own involuntary resettlement directive at Karachaganak has resulted in precisely this damage in Berezovka: long-term hardship, impoverishment and environmental damage have plagued the residents of the village for six long years as their wishes were ignored, their demands were swept under the rug, and the IFC failed to fulfill its responsibilities to the affected community.
The residents of Berezovka demand compensation, not only for their loss of home, income, land and community, but also for the hardships—mental, physical, emotional and environmental—that they have endured since 2002. They demand that the IFC, working together with the appropriate state bodies of Kazakhstan and with the management of KPO, compensate them at full cost for their homes, livelihoods, health and well-being; assist them with the move and support them during the transition period in the resettlement site; assist in their efforts to improve their former living standards, income earning capacity, and production levels; and pay particular attention to the needs of the poorest to be resettled, including the elderly, women and young families. (Paragraph 3, OD 4.30)
We, the undersigned, appeal to the CAO to address this complaint immediately, to ensure that the residents of Berezovka are relocated in a timely fashion and that the IFC finally complies with its own standards at the Karachaganak Field.
Sincerely yours,
Kate Watters Sergey Solyanik
Executive Director Co-Chair
Crude Accountability Green Salvation
P.O. Box 2345 050000, Republic of Kazakhstan
Alexandria, VA 22301 Almaty
Tel./Fax: 703-299-0854 58 Shagabutdinov St, Apt. 28
Email: kate@nullcrudeaccountability.org Tel: +7-727-253-6256
Web: https://crudeaccountability.org Email: grsalmati@nullmail.ru
Web: http://www.greensalvation.org