April 7, 2005
The company Karachaganak Petroleum Operating (KPO, B.V.) has become the worldwide record holder for environmental fines among companies engaged in field development.
The region’s environmental authorities have applied the strictest standards of environmental legislation to KPO, B.V. and have refused to allow the company to pollute the environment.
Due to systematic violations of environmental law, the company was denied a license to conduct work of a dangerous nature. Without the license, the company cannot obtain permission to pollute the environment, permission that is provided on an annual basis to all industrial enterprises.
The quiet opposition by regional environmental authorities to foreign companies developing the field has gone on for over a year. In 2002 Karachaganak’s investors were denied permission to pollute the environment; then investors paid four million dollars in fines to the local authorities. Last year, in spite of systematic failure to comply with environmental legislation, regional environmental authorities demonstrated their loyalty and issued KPO the fundamental environmental document. Of seven environmental conditions which the investors were required to fulfill, only two were completely fulfilled, two were fulfilled in part, and the company completely failed to fulfill the other three conditions. For that reason, this year KPO received a rejection from the environmental authorities.
The consortium’s deadline for obtaining permission for environmental pollution was March 31, 2005. Now, for the duration of one year, environmental pollution connected with the enormous oil and gas production will be considered illegal and for that, KPO will pay tenfold in environmental fines to the local budget.
“They failed to fulfill their promises,” Robert Suerbayev, Head of the Regional Environmental Department, comments. “Environmental measures at the Karachaganak Field are conducted according to the residual principle.”
“At the present time, there is no facility for the storage of toxic waste on the Field. This is the primary complaint of the regional environmental authority,” says Robert Suerbaev. KPO’s leadership has been talking about the facility’s construction for over a year. During this period one hundred sixty tons (!) of unprocessed category 3-4 toxic waste have been stored on the territory of the Field. The situation threatens to become an environmental catastrophe in the Ural River, as the Field is located in its watershed. If a large flood were to occur, all of the Karachaganak waste, including oil wastes, would flow directly into the Ural. However, the building of the waste facility has dragged on unnecessarily. The environmental authority stated that KPO set aside 15 million dollars for the resolution of this problem. Last year KPO set aside 5 million dollars for all their environmental activities. But, according to Ecology Department data, only 80 percent of this money was used.
The relationship of the company to the environment of Western Kazakhstan Oblast and the health of Kazakhstani citizens is clearly demonstrated by the figures. Last year, KPO became the record holder in environmental fines, lawsuits and payments among all companies worldwide engaged in field development. The numbers are deserving of the Guinness Book of World Records. In 2004, the company paid the treasury of Western Kazakhstan Oblast 2 billion 100 thousand tenge. (This is more than fifteen million dollars. By comparison: according to the Production Sharing Agreement, KPO is required to pay ten million dollars a year to the Kazakhstani government for social development in Western Kazakhstan Oblast.) In the first three months of this year, KPO has paid almost a billion tenge in environmental fines. The last lawsuit, which was brought against the company by the Regional Ecology Department, was for a sum of 138 million tenge and was brought about because the company discarded effluent into the reservoir without permission from the Ecology Department. It is interesting that in the midst of all this environmental mismanagement, KPO has spent significant resources on a PR campaign in the local and national mass media about its achievements in environmental activities.
Karachaganak Petroleum Operating has broken the record for the amount of toxic chemical emissions in the air–56.6 thousand tons in 2004.
It is clear, the Ecology Department states, that this year’s volume of emissions will be no less. They connect this with the protracted start-up work at KPC (the Karachaganak Processing Complex) and GP-2. It is no secret that the Gas Processing Complex, which was built by the Arab company, SSS-Saipem, is not working at full capacity. To date, a full two years after the celebrated opening with the President of the country, KPC is still not operating at full project capacity.
This entire situation resulted in one additional interesting occurrence. For the first time in the history of the Kazakhstan Ecology Department, the Ecology Department of Western Kazakhstan Oblast has taken the second place in state structures, after the tax committee, in terms of the enormous amount of resources given to it in the local and national budgets.
“I cannot say that KPO ignores our legislation,” says Robert Suerbaev. “They do not fully understand that environmental protection measures must be built before industrial measures. As long as their relationship to environmental protection does not change, they will continue to pay us large sums of money.”
However, damage to nature and human health can never be measured in money.
Translation by Crude Accountability