Beginning tomorrow and over the next few weeks, the World Bank and other lenders will be voting, apparently in favor, on a package worth more than $1 billion to support a controversial pipeline project in Peru. The primary company that would benefit from that money is Hunt Oil, which is headed by Ray Hunt, a Texas oilman who raised huge sums for the Bush/Cheney campaigns and who reportedly has given $35 million for the upcoming Bush Presidential Library. Hunt Oil has recently generated controversy of its own, by signing what the New York Times called a “legally questionable” exploration deal with Iraqi Kurds.
The Hunt-led project would “build a pipeline, a gas liquefaction plant, marine terminal and other facilities to export 4.4 million tons of liquid natural gas annually,” according to a 2006 story in the Washington Post. The pipeline would ship liquid natural gas that originates in the Camisea Field of Peru’s Amazonian rain forest and send it to Mexico and from there, possibly, to U.S. markets.
The Inter-American Development Bank (IDB), in which the U.S. holds a thirty percent stake, will vote tomorrow on up to $900 million in loans for the Hunt Oil project. The U.S. Export-Import Bank (Ex-Im) decides Thursday whether to allocate several hundred million dollars worth of support, and the World Bank will vote on a similar amount in January. The IDB already backed an earlier phase of the Camisea project, which has been plagued by problems. Among the troubles, the Post said, were the spilling of “thousands of barrels into pristine rivers and killing the fish upon which indigenous communities depend for their livelihood.”
A number of Peruvian and American groups—including Environmental Defense, Oxfam America, and World Wildlife Fund—are asking for further evaluation of the project before multilateral loans are approved. They point to three broad areas of concern. First are social and environmental issues, as the project runs through a spectacular stretch of the Amazon that is home to 12,000 indigenous people. “The lenders have sold themselves cheap and are not setting high enough standards for their participation,” said Aaron Goldzimer of Environmental Defense.
Similar concerns were expressed in a December 12 letter to Ex-Im from Senator Patrick Leahy of Vermont–chairman of the subcommittee which monitors Ex-Im and approves the U.S. contribution to the IDB and World Bank—and his House counterpart, Congresswoman Nita Lowey of New York. They wrote:
It is…our understanding that there are unfulfilled commitments and serious failures, risks and concerns still pending from the first phase of the project. These include a lack of fully independent monitoring; ongoing corruption investigations…new planned infrastructure in the Nahua Kugapakori Reserve which may violate previous commitments; a government audit released last month that identified significant problems with pipeline construction…and significant impacts on local culture, human health, fisheries and biodiversity that have not been adequately assessed much less addressed.
Second, the Peruvian government of President Alan Garcia has embarked on an aggressive campaign to dismantle the country’s already weak social and environmental institutions. The government recently fired nearly all the directors of a federal environmental authority, and replaced them with political hacks. (Sound familiar?) Garcia recently axed the country’s superintendent of protected areas when he voiced objections to a proposal that would opened up a large swath of the Bahuaja Sonene National Park for energy exploration.
Garcia has been attacking critics of domestic energy projects as commies and pro-poverty advocates. Meanwhile, the entire Peruvian Amazon has been divided into concessions for oil and gas development. Two years ago, only 15 percent of the Amazon had been parceled out for energy development. Garcia will undoubtedly take multilateral bank support for the Hunt project as a stamp of approval for his approach and use it to further steamroll his domestic opponents.
Lastly, the economic benefits of the project for Hunt Oil are quite clear but far more dubious in the case of Peru. In their letter to Ex-Imp, Leahy and Lowey said they were concerned that Peru did not have sufficient gas reserves to meet both long-term export requirements and domestic demand. What that means is that Peru might well pay more for energy imports down the road than it gets now for its exports. Glenn Jenkins, founder of the Program on Investment Appraisal and Management at the Harvard Institute for International Development, prepared an economic analysis of the project for Environmental Defense. He concluded that massive new reserves are discovered, Peru would be worse off from an economic perspective if the project proceeds.
Back in 2003, the Ex-Im, surprisingly, rejected support for the first phase of the project on environmental grounds, and the Bush administration abstained during the IDB vote. Ray Hunt and his company have been aggressively lobbying in Washington to make sure the administration supports the proposed multilateral funding this time around. Early indications are that the company has succeeded and that the IDB, Ex-Im and World Bank will end up approving support.