TED Case Studies
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I. Identification
"The lake has died and there is no life since the oil spill", said an Uru Morato woman a few weeks after an oil spill in the Desaguadero River. The oil spill in Western Bolivia last February may prove to be an important wake up call to the government, international organizations, and corporate sector about the environmental and cultural impacts of the oil and gas industries in that country. The purpose of this case study is to assess the cultural and environmental impact of the spill, as well as the possible repercussions of this accident on future pipeline projects in Bolivia and the Mercosur region, in general. As we will see, the negative effects of the spill on the environment go beyond the threat to various species of birds and fish. It also involves the rights of indigenous peoples to survive and keep their own culture alive.
The facts
On February 1, 2000, around 29,000 barrels of refined crude oil and mixed gasoline spilled into the Desaguadero River in the Southwestern region of Bolivia. The cause: a flash flood that broke the Sica Sica-Arica pipeline that goes from Bolivia to Chile, from where the oil is shipped to the United States.
Transredes, the operator of the pipeline controlled by Royal Dutch/Shell Group and Enron Development Corp., was accused of negligence -by some local groups- for turning the pump off more than 20 hours after the accident occurred and for not taking adequate preventive measures, in the first place. Furthermore, the company refused to provide data about the spill volume and composition of the crude, which made it harder to evaluate the extent of contamination. The Oil Daily quoted government officials as saying the oil slick covered 1.5 million acres along a 95-mile stretch of the Desaguadero River.
The Desaguadero flows out of Lake Titicaca, the world's highest navigable lake at 12,500 feet (3,800 meters) above the sea-level, and is used by indigenous communities to irrigate their crops of potatoes, barley, beans and quinoa. The River also feeds the Uru Uru and Poopo lakes, important stopovers for migratory birds and home to pink flamingos. Various indigenous groups also live, farm and hunt near the lakes. One of those groups is the Uru Morato, a 5,000-year-old Aymara community who live around Lake Poopo and have had their food source threatened by the oil spill.
According to news reports, two months after the spill, the Uru Morato were forced by "pending starvation" from the loss of their life sustaining waterfowl and fish, to march 135 kilometers to the city of Oruro. There, they would discuss with government officials and representatives of Transredes how the lake would be restored to its original state, and how they would get their food supply in the interim. The Uru Morato, around 600 people, said they depended on Lake Poopo for their survival, and expressed their fear of losing their culture, land and history, reported a Bolivian national newspaper.
Transredes, the administrator of the pipeline, claimed that the remote parts of Lake Poopo, where the Uru Morato live, were not contaminated by the oil spill. And thus, the Uru Morato left Oruro empty handed. Transredes, instead, publicized its cleanup efforts, claiming to have brought U.S. specialists who would apply high technology in the clean up effort.
Econet Alerts, however, also reported that a similar situation occurred with the Uru-Irohito, located at the north of Lake Poopo. There, the indigenous community was also experiencing the same problems as their cousins in the south -no birds or fish to eat. They too were very fearful of losing their culture, land and history, and only wanted their lake to be restored to "how it was before".
The reaction
As a response to the situation, on March 27, 2000, the Bolivian Forum for Environment and Development and Amazon Watch asked the Inter-American Development Bank (IDB) to reevaluate its funding of the construction of a new pipeline by Transredes in Bolivia because of fear of further irresponsible environmental management. This new pipeline -known as the Yacuiba pipeline- will connect the Bolivia-Brazil main pipeline to Argentina.
"Several cases of negligence from Shell and Enron in Bolivia demonstrate that the IDB should not finance these irresponsible corporations," said Patricia Molina, a representative of FOBOMADE, in a press conference in New Orleans. She also pointed out that Transredes only began to respond to the oil spill eight days after it began even though the company's extensive public relations campaign began immediately to downplay the disaster.
Molina added that while Transredes claimed to have brought 200 North American specialists to apply high technology for the clean up, local monitoring groups reported that the cleaning process had consisted of manual collection in plastic bags, using local people, and that the bags had been transferred to highly permeable soils in the Pumping Station in Sica Sica and were being decomposed by the sun, risking leakage into this region's important aquifer.
As a result of this situation, a group named "Friends of Poopo" was born. This citizen advocacy group -based in the U.S.- supports indigenous people affected by the Desaguadero spill, and tries to raise both awareness about the situation and support for the Uru Morato people, who do not have access to electricity, post office or telephone.
Background and scope
To better understand the importance of the Desaguadero River in its full environmental context, we have to look at its geographic background and scope within a larger space: the TDPS System. The TDPS region was the center of the Tiwanacu culture, one of the most advanced of the pre-Columbian period and part of the Inca empire until a little less than a century before the arrival of the Spaniards.
According to the Organization of American States, the TDPS System is an endorheic basin located in the Andes, between Bolivia and Peru, at an elevation of more than 3,600 meters above sea level. It covers an area of 143,900 km2 and it consists of the hydrographic basins of Lake Titicaca, which occupies 39% of the area, and of the Desaguadero River, which together with Lake Poopó covers 38%, and the Coipasa Salt Marsh basin, which accounts for the rest. The area encompasses the Subregion of Puno, Peru, and the Bolivian departments of La Paz and Oruro. Lake Titicaca covers 8,400 km2 and performs a regulating function within the system. The Desaguadero River links Titicaca Lake to lakes Uru Uru and Poopó. The average surface area of those lakes, at 3,686 meters above sea level, is 3,191 km2.
Ecosystems
The ecosystem of the basin is that of the puna, a formation of stiff grasses and leathery-leaved scrub, with stands of queñoa and other trees in sheltered locations. The features and flora of the puna change with the climate, however, turning bleaker and sparser as the climate becomes drier and colder.
The most typical fauna of these ecosystems are the condor and the flamingo, among the birds; the llama, the alpaca, the vicuña, and the guanaco, among the camellias; and the world's largest known frog. A wide variety of other species of birds, mammals, and other groups are also present, some of them in danger of extinction.
Also, the special conditions created by Lake Titicaca and other lakes of the altiplano have given rise to a unique aquatic vegetation, among which the reed banks are particularly important both ecologically and economically. The lakes provide habitats for a great variety of aquatic birds, many of them migratory, and some native fishes that still retain a certain commercial importance.
Status to date
On August, 2000, Transredes and the Uru Moratos agreed that two separate teams, one from the Llapallapani community and the other from Transredes, will assess the environmental conditions of Lake Poopo to determine the degree of contamination.
While a professor at the University of Oruro will evaluate the samples on behalf of the Uru Moratos, Transredes will have a Canadian company to do its own evaluation. Later, both reports will be compared and a final decision regarding the responsibility of Transredes on the degree of contamination of the river will be made. At this point, we only know that an environmental evaluation would be presented anytime soon.
Mauricio Rios I. December, 2000.
Photographs by Katarin A. Parizek. All rights reserved.
From what we have already described, there still might be some pending sanctions (fines) by the Bolivian government against Enron Corp. and Dutch/Shell Group if negligence in the prevention and handling of the oil spill is proven. A court case on negligence could be based on two main arguments: lack of preventive measures to avoid the spill, and a slow reaction time to stop and clean up the spill. The Sustainable Development Ministry is expected to ensure that there is an equilibrium between economic development and protection of the environment and resources for future generations.
Last reports concerning the legal status of the case (July 27, 2000) opened the possibility of a civil suit, by which a judge will determine the amount Transredes will have to pay to the Bolivian State for all the damages done to the river. The reason for advancing a civil suit is that the existing Environmental Law in Bolivia does not allow the Ministry of Sustainable Development to effectively punish companies for environmental wrongdoing (except for a symbolic $US 30,000 fine), and thus depends on the outcome of a civil suit in order to do it. Furthermore, a criminal suit based on the argument of negligence in the maintenance of the pipeline is also possible. According to the Superintendent of Energy, the lack of maintenance of the pipeline is the main accusation against Transredes for the spill could have been avoided since a technical audit in 1999 already established that the Desaguadero pipeline had to be urgently repaired. And it was not.
Nevertheless, an executive summary of the Organization of American States (OAS) points out that in Bolivia the legal framework concerning the environment is diffuse and outdated, although laws on water, forests, fauna, protected areas, and air are currently being updated. These laws, though, are primarily sectorial, with an emphasis on the sector's development over the environmental protection.
In its institutional approach, on the other hand, the existing Bolivian system is recent and seems well designed at the national level, not only because environmental action is addressed at the ministerial level but also because it is closely tied to the national planning system. However, no corresponding reorganization or coordination mechanisms seem to have been introduced at the regional and municipal levels.
As part of the capitalization process of the six major state-run companies in Bolivia, Enron Development Corp. and Shell International Gas Ltd. won the bid, on December 1996, for the capitalization of the transportation segment of the Bolivian state oil and gas company, Yacimientos Petroliferos Fiscales Bolivianos (YPFB). The license will last 40 years.
Enron and Shell jointly acquired a 50 percent stake in all of the transportation assets of YPFB, including its ownership in 1,655 miles of existing natural gas pipelines and 1,438 miles of existing oil/liquids pipelines throughout Bolivian territory, plus ownership in the Bolivia-Brazil Pipeline Project, with a bid of U.S.$263,5 million, according to a press release from Enron Corp.
a. Geographic Domain: South America [SAME]
b. Geographic Site: Western South America
c. Geographic Impact: Bolivia
Source: Magellan Maps
Indigenous community Uru Morato claims that the spill has threatened its food supply, and therefore the survival of its people and culture. Apparently, neither government officials nor the oil companies have shown a major concern for the plight of the Uru Morato, a 5,000-year-old Aymara community that lives in isolation, with no access to modern communication means.
IV. Trade Clustersa. Directly Related to Product: Yes, oil
b. Indirectly Related to Product: Yes, maintenance of a pipeline
c. Not Related to Product: No
d. Related to Process: Yes, pollution of land and river
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Currency |
1 Boliviano ($B)=100 centavos |
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Market Exchange Rate |
US$ 1= $B 6.1406 |
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Gross Domestic Product (GDP at market exchange rates,1999E) |
US$7.92 billion |
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Real GDP Growth Rate |
(1999E)=1.9% (2000E)=4.8% |
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Inflation rate (consumer prices) |
(1999E)=3.4% (2000E)=6.2% |
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Current Account Balance (1999E) |
-US$750 million |
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Merchandise Exports (2000E) |
US$1.3 billion |
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Merchandise Imports (2000E) |
US$2.1 billion |
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Major Export Products |
Minerals, natural gas, soybeans, wood, coffee, jewelry |
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Major Import Products |
Capital goods, chemicals, petroleum, foodstuffs |
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Major Trading Partners |
United States, Argentina, Brazil, Japan |
"Bolivia, with its large oil and natural gas potential, is becoming an increasingly important link in South American energy trade. With many new natural gas fields being discovered and the Bolivia-Brazil pipeline, Bolivia is on its way to becoming a key center for energy resources for Central and South America", reads a report of the U.S. Department of Energy. This illustrates the important role of the gas and oil industries in the Bolivian economy, especially the gas one. But since our case focus on an oil spill, we will concentrate on the oil sector.
According to a study of the oil industry, Bolivia's total oil reserves in 1999 were around 131.9 million of proven barrels and additional 60 million of probable barrels. Bolivia is relatively self sufficient in oil because it generally produces more than what it consumes. In 1999, for example, Bolivia produced about 40,000 barrels of crude oil per day, and consumed an estimated 38,000 barrels per day. In 1998, consumption was around 35,000 barrels per day. According to the Ministry of Mines and Energy, most crude oil production in Bolivia is for domestic consumption except for a relatively small amount, which is exported to Chile, through the Sica Sica - Arica pipeline, which is the subject of our case study. The value of crude oil exported to Chile is U.S.$ 30,296 for the year 1998.
On the other hand, Chile imported oil for a value of U.S.$ 845,185 during the same year. Chile produces around 17,000 barrels per day, and its consumption in 1999 was 250,000 barrels per day, with domestic production comprising only 7 percent of total consumption. Oil and gas distribution has been liberalized in Chile, allowing free access for imported petroleum products. Chile's main sources of oil imports are Nigeria, Gabon, and Venezuela.
Furthermore, according to data from the International Trade Centre Databases, the United States is the leading importer of oil, with a value of US$ 40,734,048 for the year 1998. Japan and Germany are the next two biggest oil importers. The three major exporters of oil are Saudi Arabia, Norway and the Russian Federation.
V. Environment ClustersThe environment has long been a cause of concern in Bolivia, a country not only known for its natural resources but also for its diverse climates, fauna and flora, which make up unique ecosystems. As the oil and gas industries further develop and become one of the key engines of the Bolivian economy, environmental groups are starting to raise their concerns about the construction of other pipelines, especially by corporations that have not demonstrated a responsible environmental management.
Enron, Shell and Transredes, for example, are building a new 390 mile pipeline in Bolivia that has "brought serious environmental and social problems " to local communities living along its path. They have so far experienced, "pollution of local water resources, degradation of local roads, soil and air pollution...", according to the report "A World Class Disaster: The Case of the Bolivia-Cuiaba Pipeline, a Report on the Failures of Enron international to Comply with Bolivian Environmental Laws and OPIC Loan Conditions in the Construction of the Lateral Ipias-Cuiaba Gas Pipeline". (December 8, 1999)
Activists have been pressuring the US Overseas Private Investment Corporation to pull it's support of the Cuiaba Pipeline Project. However, Enron has stated that it will proceed with the project, whether or not it gets OPIC funding, reported the Financial Times of London on July 15, 1999.
As a result, Environmental NGOs such as Friends of the Earth, World Wildlife Fund,and Amazon Watch are opposing the construction by Enron Corp. of a second natural gas pipeline from Bolivia to Matto Grosso do Sul in western Brazil, because the route of the pipeline passes through some of the world's last great wilderness, made up of both wetlands and dry tropical forests. Likewise, the construction of another $120 million gas pipeline between Bolivia and Brazil through the Forest of the Chiquitania is also under fire from environmentalists who claim the forest is one of the last intact dry tropical forests in the world. "This 610-kilometer San Miguel-Cuiaba pipeline will transport 2.5 mil cu m (0.71 Bcf/d) per day of natural gas. Local environmental groups claim the project's environmental impact assessment was insufficient and was prepared in exchange for money. These environmental groups, as well as city governments, civic committees and three provincial environmental forums have declared their opposition to pipeline construction and are demanding an alternate route", says a report of the U.S. Energy Department.
In the case of the Desaguadero River and Lakes Poopo and Uru Uru, though, the oil spill might only be one among other factors that contribute to the deterioration of the environment in that area. An executive summary of the Organization of American States (OAS) explains that heavy metals generated by the mining and the smelting plants around Oruro are creating physical and chemical pollution of lakes Poopo and Uru Uru and the lower course of the Desaguadero River. Tin, Cadmium, lead, mercury, nickel, cobalt, chrome and arsenic have been found in concentrations exceeding the permissible limits for human consumption in both lakes.
A master plan
In order to address some of these environmental problems, between 1989 and 1993 the Governments of Bolivia and Peru drew up a Binational Master Plan for Integral Development of the Lake Titicaca, Desaguadero River, Poopó, and Coipasa Salt Marsh System (TDPS System).
An environmental assessment of the TDPS System shows that the pressure exerted by the population on the natural resources of this area of the altiplano has led to a "serious degradation of its various ecosystems", and calls for concrete measures to conserve resources, improve the living standard of the inhabitants, and facilitate the implementation of the various water engineering works envisaged in the Master Plan Director.
The OAS document also established that "The TDPS region is characterized by overlapping cultural and economic systems in which a vast agrarian subsistence economy exists side by side with agricultural sectors directed at regional and national markets and with a mining industry looking abroad. The impact on natural resources has varied, but in every case their consumption and depletion are not included in the costs of production.(...)".
Among the species that might have been affected by the oil spill in the Desaguadero River, we can mention the following ones:
Birds: pink flamingos, wild ducks, geese, condor
Fish: Silversides
Native species of fish: Karache, ispi, mauri, and boga
Camellias: Llama, alpaca, vicuna, and the guanaco
A wide variety of other species of aquatic migratory birds, mammals, and other groups also live in the area, and some of them might be in danger of extinction. There is also a unique aquatic vegetation; the reed banks are particularly important both ecologically and economically.
VI. Other Factors The story of the Uru Morato indigenous community is a clear sign that the energy trade can have serious effects on culture. In this case, the oil spill has a negative impact on the habitat, not only threatening the lives of fauna and flora but also of people.
The Muratos live by the margins of the Poopo Lake, around three communities: Llapallapani, Villa Ñeque and Puñaqa, which together conform 115 families. The lake hosts a great variety of birds, and once a year, the Uru Moratos collect the eggs for trade and their own consumption. The feather of the birds are used to make the Uru's clothing.
Since the spill, according to EcoNet reports, the Uru Morato "have not seen a single fish or bird on their lake and are in danger of starvation. For the first time in thousands of years, the flamingos did not return to lay their eggs alongside Lake Poopo." The Urus, also known to inhabit floating islands, build some of their utensils from a small tree called "morato", and from the aquatic alga they extract some fruits to prepare one of their main dietary ingredient known as "pito".
"The Uru Morato survived the invasion of the Aymara, Inca and Spanish colonists, but globalization is what will kill them," observes journalist Tamara Stenn de Choque, and one of the founders of the organization "Friends of Poopo".
The Desaguadero River is part of the TDPS system, which also includes Peruvian territory
The Uru Morato community has the right to preserve its own culture and life style, if it wishes to do so. Any threat to their way of living and to their basic needs for survival, such as access to food and water sources, must be considered a violation of their basic human rights.
Web-sites
Energy Information Administration; Economic Overview. www.eia.doe.gov
Enron Development Corp. www.enron.com
The Organization of American States (OAS). Executive Summary. www.oas.org
Department of Energy's energy report. www.doe.gov
The Oil Daily. Feb, 2000 www.theoildaily
Drillbits@Tailings, June, 2000
News reports
Reuters News Agency. Feb, 2000
Oil Spill Intelligence Report. Feb-March, 2000
The Associated Press (AP).
"Incidents". Feb, 2000
Environment News Service (ENS)
Jatha News Agency. October, 2000
The Financial Times (London). July, 1999
