CRUDE ACCOUNTABILITY LETTER TO MR. RASHAD KALDANY
September 24, 2004
Mr. Rashad Kaldany
Director
Oil, Gas, Mining and Chemicals Department
International Finance Corporation
World Bank Group
2121 Pennsylvania Ave., NW
Washington, DC 20433
rkaldany@nullifc.org
Dear Mr. Kaldany:
I am writing on behalf of Crude Accountability, an international environmental nongovernmental organization (NGO), to express our concerns with regard to the current activities at the Karachaganak Oil and Gas Condensate Field, which is operated by Karachaganak Petroleum Operating, B.V. (KPO), a consortium comprising British Gas, ENI/Agip, Chevron Texaco and LUKoil. The IFC provided $150 million in loans to LUKoil for the development of the field.
As you know, part of the IFC’s mission is to help reduce poverty and improve peoples’ lives. As part of the World Bank Group, your shared principles and practices include “promoting sustainable projects…that are…environmentally and socially sustainable.” In addition, your transactions should be “transparent, accountable and equitable,” and “honest, open and fair in…dealings with…local communities.” Finally, the IFC states that it has “a core commitment to sustainable development by ensuring…projects attain high environmental and social standards, consulting with local communities…and listening actively and responding to stakeholders and their concerns.”
Considering these points and working closely with the community of Berezovka–the village closest to the Karachaganak field–Crude Accountability submits that this project may be in violation of IFC/World Bank principles and standards on the following points:
- The Karachaganak field may have serious trans-boundary impacts. Air pollution from the Karachaganak Field may impact communities in Russia as the winds from Karachaganak blow toward towns and villages on the other side of the border, including Ilyek, where residents are concerned about air pollution and subsequent health impacts that they attribute to Karachaganak. Water pollution from the Karachaganak Field has the potential to pollute the Ural River, which flows into the Caspian Sea and provides key spawning grounds for the endangered Beluga (and other types of) sturgeon. An accident involving water contamination could be devastating to the Ural, and, ultimately, the Caspian Sea. We find no evidence in the official documentation of this project demonstrating that an adequate environmental impact assessment of these concerns, including assessment of trans-boundary risks, was undertaken.
- Ongoing gas flaring from the field–including on the ground–appears to be in violation of the World Bank’s efforts to reduce flaring, particularly through its Global Gas Flaring Reduction Partnership.
- Publicly available information regarding the potential risk to ground water and, therefore, the drinking water in the village of Berezovka, is inadequate. According to Berezovka residents, the quality of drinking water in the village has deteriorated significantly in the past year. The water has a definite salty taste, and has become quite unpleasant to drink. Villagers are concerned about the chemical content of the water.
- Residents of the village of Berezovka have informed Crude Accountability that the Karachaganak field has caused negative health impacts in their community. According to data complied by the villagers in Berezovka, forty-five percent of the population suffers from chronic health problems (see attached data).
- Unlike other situations that the IFC may have experienced, where residents resist resettlement, residents of Berezovka seek relocation from their village to a safer, healthier spot because of the environmental health risks associated with air and water pollution from the Karachaganak Field. Villagers are exposed to continuous atmospheric emissions and live in constant fear of an accident at the field, which would lead to injury, illness or death. While there have been discussions with IFC staff about whether the project comports with Kazakhstan’s resettlement requirements, there has not been adequate discussion about what the IFC’s safeguard policies can do to ensure its involvement in Karachaganak results in a “do no harm” outcome.
The following examples illustrate, in part, the basis for our concerns:
- Residents of Berezovka filmed constant night-time flaring and burning at the Karachaganak field in July 2004. According to the villagers–and as evidenced in film coverage that we have obtained–flares and fires burned for several nights in a row, causing concern that an accident had occurred at the Karachaganak Field. Villagers reported hearing loud booming noises and crackling sounds coming from the Field. The village was provided with no information about these events during that time. When KPO management and local authorities were asked about the flaring and fires by Crude Accountability during a trip to western Kazakhstan in August, we received conflicting answers. KPO management stated that they believed they may have flared a couple of wells; local authorities stated that KPO had significantly exceeded its flaring quota for the month, but “had paid the fine.” While KPO’s own documentation (charts hanging on the wall at the entry to the KPO headquarters in Aksai) indicated that flaring had exceeded the monthly allowance by at least a factor of two, we were unable to obtain concrete information about the nature of the violation. No one provided information about the composition of the flares or excess toxics burned.
- The environmental impact assessment for Karachaganak provides calculations for possible oil and gas condensate spills of up to 30,000 tons. The Field Loss Prevention Manager at KPO, Mike Smith, informed us (although we were unable to find these figures documented) that KPO was prepared for a spill of only up to 8,000 tons. Therefore, in the event of an accident at the field, oil could contaminate the Ural River through the Berezovka River, which flows through the Karachaganak Field.
- Environmental Atmospheric Monitoring conducted by KPO through its mobile monitoring system provides inadequate time for evacuation from Berezovka in the event of an industrial accident. The mobile environmental monitoring center was set up on the northern edge of the village during the third week of August 2004 to monitor emissions from the Field. However, any toxic exposure at the location of the mobile monitor would reach the village before an emergency response system could be activated.
- According to KPO executives, an emergency evacuation plan for the village of Berezovka should be in place and understood by each resident. KPO claims that the responsibility for an evacuation plan rests with the local akim (village administration), and it claims to have consulted with the village akim about it. Yet, residents of the village do not know what this plan is. The villagers’ expectation is that KPO will bring in buses to evacuate them from the village. When we spoke with the KPO Field Loss Prevention Manager, he stated that KPO had no plans to evacuate the village in the event of an emergency and, furthermore, they did not have enough buses to evacuate the village. He suggested that a new informational brochure should be prepared for the village akim. Villagers have not been trained in emergency evacuation measures in the event of an accident. We believe that that an emergency response plan should ensure that each home in the village of Berezovka is equipped with gas masks in the event of an accident in order to ensure maximum safety. This is not the case. Gas masks dating from 1979, which are stored in canvas bags, are locked in a walk-in closet in one of the school buildings. There are fewer than 100 masks–entirely inadequate for a population of 1286 residents.
- According to an interview in the Uralsk Weekly with Alexander Potiakin, Deputy in the Ecology Committee of the Uralsk Oblast Ecology Department, data from the Uralsk Oblast Ecology Department demonstrates that during the first half of 2004, KPO paid 300 million Tenge (approximately 2.2 million US Dollars) in environmental fines for atmospheric emissions exceeding permitted levels. According to the article, this was “because KPO does not comply with environmental measures and delays undertaking repair work.” Alla Zlobina, “The Suffocating Smell of Money,” Uralsk Weekly, August 19, 2004, p. 9.
- When Crude Accountability asked KPO to indicate the boundaries of the Karachaganak Field and the boundaries of the newly revised Sanitary Protection Zone (SPZ) in August 2004, staff were told that the boundaries were difficult to delineate, and that it was impossible to demonstrate exactly where the boundaries of the SPZ lie. How is it possible that the SPZ boundaries are fluid? And how can local residents be expected to respect and understand them, when KPO will not indicate their precise location on a map?
Based on this information, Crude Accountability respectfully requests the following:
- Does the IFC monitor whether atmospheric emissions from KPO comply with its policies, including maximum emissions levels? If an IFC project sponsor violates host country law with respect to emissions levels, is that also a violation of IFC policy? If IFC determines that KPO has violated its policies with regard to its own emission limits or compliance with host country laws, what is it doing to ameliorate this situation?
- IFC should sponsor a transparent independent audit of the activities at the Karachaganak Field, including a confirmation of the basis for the reduction of the Sanitary Protection Zone, which was 5 km until December 25, 2003, when it was reduced to approximately 3 km (it varies from location to location) by the Kazakhstan Ministry of Health. Environmental and health impacts should be considered in the audit for the communities surrounding the field, including Berezovka. The results of this independent audit should be made publicly available in both Russian and English.
- The IFC’s involuntary resettlement policy states, “Development Projects that displace people involuntarily generally give rise to severe economic, social and environmental problems.” Ironically, the severe economic, social and environmental problems that the Berezovka villagers involuntarily suffer from the Karachaganak field are what cause the community to seek resettlement. Compliance with the IFC’s policies on Involuntary Resettlement and other safeguard policies should be determined with regard to this project. Crude Accountability requests copies of the IFC’s documentation determining the environmental impacts of the Karachaganak Field on the health of the residents of Tungush and Berezovka at the time the IFC’s decision to provide the loan to the project.
- The IFC should arrange to have copies of all environmentally relevant information and documents from the Karachaganak project made immediately available to the villagers in Russian. These documents include the environmental section of the Karachaganak PSA, quarterly environmental reports from KPO, and information about flaring and accidents at the field. Crude Accountability also requests that copies of each of these documents be made available to our organization.
Thank you for your attention to this matter. I look forward to hearing from you soon.
Best regards,
Kate Watters
Executive Director
Cc: Paulo Campelli, General Director, KPO
Cameron Crawford, Operations Director, KPO
Tolebai Adylov, Kazakhstan Ministry of Environment
Robert Khamitovich Suerbayev, West Kazakhstan Regional Territorial Department of Environment Protection, Oblast Ecology, Uralsk
Meg Taylor, Vice President, IFC/MIGA Compliance Advisor/Ombudsman