UNCLASSIFIED UNCLASSIFIED - Page l n a @ ACTION WHA-00 AID-00 CIAE-00 CTME-00 NP-00 CEA-01 DODE-00 DOEE-00 ITCE-o·o DOTE-00 SRPP-00 EXME-00 EUR-00 FAAE-00 EB-00 E-00 FRB-00 H-01 TEDE-00 INR-00 IO-00 AC-01 NSAE-00 NSCE-00 VCE-00 NEA-00 OIG-03 OMB-01 OPIC-01 PA-00 OIC-02 P-00 SSO-00 STR-00 ACE-00 SP-00 EPAE-00 ECA-00 PMB-00 DSCC-00 PRM-00 NFAT-00 SAS-00 013W -----------------5CF9D3 291919Z 38 P 291805Z APR 03 FM AMEMBASSY LIMA TO SECSTATE WASHDC PRIORITY 0813 RELEASED DEPT OF TREASURY WASHDC INFO USDOC WASHDC AMEMBASSY BRASILIA AMEMBASSY SANTIAGO AMEMBASSY BOGOTA AMEMBASSY LA PAZ AMEMBASSY QUITO AMEMBASSY CARACAS AMEMBASSY BRUSSELS AMEMBASSY SEOUL AMEMBASSY BUENOS AIRES AMEMBASSY ALGIERS INFO INL-00 DS-00 UTED-00 ITC-01 NSF-01 PM-00 TEST-00 DRL-01 LOG-00 DINT-00 EAP-00 VC-00 L-00 OES-00 PRS-00 USIE-00 G-00 IN FULL UNCLAS SECTION 01 OF 09 LIMA 002127 TREASURY FORK KOZLOFF ALSO FOR OASIA INL STATE PLEASE PASS TO USAID - CJOHNSON BRASILIA FOR HUB - DOWDY SANTIAGO FOR BERNARD LINK E O 12958 N A TAGS ENRG SENV EINV ECON PGOV PE SUBJECT USG TEAM EXAMINES ENVIRONMENTAL AND SOCIAL IMPACTS OF HIGH-PROFILE CAMISEA GAS PROJECT IN PERU REF A LIMA 406 B 02 LIMA 5582 AND PREVIOUS 1 SUMMARY AND INTRODUCTION A TEAM OF TREASURY AND USAID ENVIRONMENTAL EXPERTS SPENT TWO WEEKS IN PERU ASSESSING ENVIRONMENTAL AND SOCIAL IMPACTS OF PERU 1 S MAMMOTH 1 5 BILLION DOLLAR CAMISEA NATURAL GAS PROJECT · KEITH KOZLOFF SENIOR ENVIRONMENTAL ADVISOR AT THE U S TREASURY n a UNCLASSIFIED UNITED STATES DEPARTMENT OF STATE REVIEW AUTHORITY NORMAN M BOUTON DATE CASE ID 27 JAN 2004 200302345 Pag» UNCLASSIFIED 1- UNCLASSIFIED UNCLASSIFIED n a Page 2 DEPARTMENT LESLIE JOHNSTON SENIOR ENVIRONMENTAL POLICY ADVISER ECONOMIC GROWTH AGRICULTURE AND TRADE BUREAU AT USAID WASHINGTON AND VICTOR BULLEN REGIONAL ENVIRONMENTAL ADVISER FOR USAID LA'PAZ REVIEWED THE PROJECT TO PREPARE RECOMMENDATIONS FOR THE USG POSITION ON WHETHER TO SUPPORT IDB FINANCING FOR THE PROJECT 2 THE CAMISEA PROJECT INVOLVES TWO CONSORTIA ONE FOR 11 UPSTREAM 11 AND ONE FOR DOWNSTREAM 11 DEVELOPMENT THE UPSTREAM PORTION INCLUDES WELLS AND PROCESSING FACILITIES AT THE 1200-SQUARE KILOMETER NATURAL GAS FIELD IN RAINFORE T AREAS OF THE CUZCO REGION AND A GAS FRACTIONATION PLANT AND SEA LOADING FACILITIES AT PISCO PARACAS ON THE COAST THE DOWNSTREAM PORTION OF THE PROJECT INCLUDES DUAL GAS AND LIQUID PIPELINES FROM THE GAS FIELD TO PISCO PARACAS A CONTINUATION OF THE PIPELINE UP THE COAST TO LIMA AND GAS DISTRIBUTION SYSTEM FOR THE LIMA METROPOLITAN AREA 3 BETWEEN MARCH 27 AND APRIL 11 THE USG TEAM ASSESSED MOST PORTIONS OF THE PROJECT INCLUDING THE NATURAL GAS FIELD AND WELL PLATFORM THE PIPELINE RIGHT-OF-WAY AND THE COASTAL AREA WHERE THE FRACTIONATION PLANT AND MARINE TERMINAL ARE TO BE BUILT THE TEAM MET WITH LOCAL COMMUNITIES AFFECTED BY THE PROJECT PERUVIAN GOVERNMENT OFFICIALS NGOS AND CONSORTIUM STAFF TO DEVELOP A BROADER UNDERSTANDING OF THE COMPLEX ISSUES AND TRADEOFFS INVOLVED IN CQMPLETING AND OPERATING THE CAMISEA PROJECT MEETINGS VARIED IN NATURE FROM INFORMATION GATHERING-ONLY TO PROVIDING FEEDBACK TO THE GOP AND CONSORTIA ON KEY ISSUES 4 KEY ISSUES DISCUSSED DURING THE VISIT INCLUD D A SOCIAL IMPACTS ON INDIGENOUS COMMUNITIES B POTENTIAL COLONIST MIGRATION INTO PROTECTED AREAS C EROSION AND REVEGETATION ALONG THE PIPELINE ROUTE D IMPACTS ON BIODIVERSITY IN THE GAS FIELD AREA E POTENTIAL IMPACTS OF THE FRACTIONATION PLANT AND MARINE LOADING FACILITY ON PARACAS NATIONAL MARINE RESERVE F THE NEED FOR SOCIAL AND ENVIRONMENTAL FUNDS TO REDRESS PROJECT IMPACTS G POLICY ISSUES AROUND INTERACTION BETWEEN COMMUNITIES AND CONSORTIA H THE NEED FOR GREATER AND BETTER PROJECT MONITORING AND TRANSPARENCY AND I APPROPRIATE MANAGEMENT OF DEVELOPMENT BENEFITS END SUMMARY AD INTRODUCTION CAMISEA PROJECT OVERVIEW 5 THE CAMISEA PROJECT IS DIVIDED INTO TWO FINANCIAL AND ORGANIZATIONAL COMPONENTS THE UPSTREAM COMPONENT INCLUDES DEVELOPMENT OF A 1200-SQUARE KILOMETER BLOCK BLOCK 88 OF NATURAL GAS FIELDS LOCATED IN PRIMARY TROPICAL FOREST AREAS n a UNCLASSIFIED UNCLASSIFIED Pag» UNCLASSIFIED UNCLASSIFIED n a Page 3 OF CUZCO REGION 80 PERCENT OF WHICH OVERLAPS THE NAHUAKUGAPAKORI INDIGENOUS RESERVE PLUS A FRACTIONAT ION PLANT FOR SEPARATING LIQUIDS ASSOCIATED WITH GAS INTO COMMERCIAL PRODUCTS - AND MARINE TERMINAL WITHIN THE BUFFER ZONE OF PARACAS RESERVE PERU'S ONLY NATIONAL MARINE PARK THE DOWNSTREAM COMPONENT INCLUDES THE DEVELOPMENT OF DUAL PIPELINES ONE FOR NATURAL GAS 714 KM AND ONE FOR LIQUIDS 540 KM RUNNING PARALLEL FROM THE CAMISEA FIELD TO THE COASTAL AREA OF PARACAS THE NATURAL GAS PIPELINE WILL THEN TURN NORTH FOR DOMESTIC DISTRIBUTION IN LIMA AND CALLAO WHILE THE LIQUIDS PIPELINE WILL CONNECT TO THE FRACTIONATION PLANT AND MARINE TERMINAL 6 THE UPSTREAM CONSORTIUM IS LED BY PLUSPETROL ARGENTINA 36 PERCENT OWNERSHIP AND INCLUDES HUNT OIL U S 36 PERCENT SK SOUTH KOREAN 18 PERCENT AND TECPETROL ARGENTINE 10 PERCENT THE DOWNSTREAM CONSORTIUM LIMA 00002127 002 OF 009 CLUDES HUNT OIL 19 PERCENT PLUSPETROL 19 PERCENT SK 9 5 PERCENT SONATRACH ALGERIA 11 PERCENT TRACTEBEL BELGIUM 8 PERCENT AND GYM PERUVIAN 2 PERCENT TRACTEBEL HAS A CONTRACT FOR DISTRIBUTION OF GAS IN LIMA UNTIL THE DOMESTIC MARKET FOR NATURAL GAS IS DEVELOPED THE MAJORITY OF REVENUE WILL COME FROM EXPORT OF LIQUID PRODUCTS NAFTA BUTANE AND PROPANE 7 PLUSPETROL HAS DEVELOPED ONE NATURAL GAS WELL PLATFORM IN BLOCK 88 OUTSIDE OF THE NAHUA-KUGAPAKORI RESERVE WITH CONSTRUCTION ON A SECOND WELL PLATFORM WITHIN THE RESERVE SCHEDULE TO START IN MAY 2003 TGP HAS COMPLETED OVER 70 PERCENT OF THE PIPELINE THE GOP GRANTED CONDITIONAL APPROVAL ON APRIL 10 2003 OF THE ENVIRONMENTAL IMPACT ASSESSMENT FOR CONSTRUCTION OF THE FRACTIONATION PLANT WHILE CONDUCTING FURTHER ANALYSIS BEFORE GRANTING CONDITIONAL APPROVAL FOR-THE UNDERSEA PIPELINE AND MARINE TERMINAL COMPLETION OF THE ENTIRE CAMISEA PROJECT IS SCHEDULED FOR AUGUST 2004 8 TGP IS THE POTENTIAL RECIPIENT OF A $75 MILLION IDB LOAN FOR PIPELINE CONSTRUCTION INTENDED TO LEVERAGE $315 MILLION IN ADDITIONAL PRIVATE SECTOR LENDING THE UPSTREAM CONSORTIUM SEEKS FINANCING THROUGH EXIM THE USG TEAM VISITED ALL PORTIONS OF THE PROJECT EXCEPT THEI GAS DISTRIBUTION SYSTEM KEY CAMISEA PROJECT ISSUES _n a UNCLASSIFIED UNCLASSIFIED Pag» UNCLASSIFIED UNCLASSIFIED n a Page 4 9 THE USG TEAM ·EXAMINED THE FOLLOWING KEY ISSUES DURING THE VISIT A SOCIAL IMPACTS ON INDIGENOUS COMMUNITIES ABOUT 80 PERCENT OF THE NATURAL GAS CONCESSION INCLUDING THREE ADDITIONAL WELL SITES TO BE DEVELOPED ARE LOCATED WITHIN THE NAHUA-KUGAPAKORI INDIGENOUS RESERVE BLOCK 88 AND THE NAHUA-KUGAPAKORI INDIGENOUS RESERVE CONTAIN AT LEAST 22 NATIVE COMMUNITIES BUT IT IS UNCLEAR WHETHER NON-CONTACTED PEOPLES LIVE WITHIN THE AREA THERE IS LITTLE INDEPENDENT INFORMATION TO DETERMINE THE EXTENT OF LAND AND NATURAL RESOURCE USE BY NON-CONTACTED PEOPLES WITHIN BLOCK 88 AND CONSEQUENTLY THE IMPACT OF THE PROJECT ON THEIR LIVELIHOOD REPORTED IMPACTS ON THESE GROUPS RANGE FROM DISEASE TRANSMISSION TO MOVEMENT OUT OF THE AREA B COLONIST MIGRATION TO DATE NATURAL BARRIERS HAVE IMPEDED MIGRATION OF OUTSIDERS INTO THE NAHUA-KUGAPAKORI INDIGENOUS RESERVE SOME GROUPS RAISED CONCERNS THAT THE PIPELINE COULD ACT AS A CONDUIT FOR MIGRATION OF COLONISTS FROM OTHER PARTS OF CUZCO DEPARTMENT IN THE TROPICAL PRIMARY AND C EROSION AND REVEGETATION SECONDARY FORESTS AND SIERRA SEGMENTS OF THE PIPELINE EROSION HAS OCCURRED LEADING TO LANDSLIDES SEDIMENT DEPOSITION IN WATER SOURCES - RESULTING IN POTABLE WATER CONTAMINATION - AND LOSS OF TOPSOIL FOR REVEGETATION D BIODIVERSITY IMPACTS BLOCK 88 LIES WITHIN THE SOUTHWEST AMAZON ECOREGION AND IS ONE OF WORLD WILDLIFE FUND'S 200 GLOBAL PRIORITY BIODIVERSITY HOTSPOTS THE PIPELINE TRAVERSES SECTIONS OF THE YUNGAS MONTANE CLOUD FOREST AND PUNAS OF THE VILCABAMBA-AMBORO CORRIDOR CONSIDERED A TROPICAL ANDES 11 BIODIVERSITY HOTSPOT BY CONSERVATION INTERNATIONAL INADEQUATE BIODIVERSITY BASELINE DATA AND MONITORING HAS RAISED QUESTIONS AS TO THE IMPACT OF THE PROJECT ON THESE FOREST SYSTEMS THE FRACTIONATION PLANT E PARACAS NATIONAL MARINE RESERVE AND MARINE TERMINAL ARE PLANNED TO BE SITED WITHIN THE BUFFER ZONE OF PERU'S ONLY NATIONAL MARINE RESERVE AND A DESIGNATED RAMSAR SITE WETLAND OF INTERNATIONAL IMPORTANCE LIMA 00002127 003 OF 009 PROCESS AND PLUSPETROL'S PURCHASE AND REZONING OF LAND AS WELL AS A LACK OF BIODIVERSITY BASELINE DATA AND MONITORING AND LEGALITY OF THE RECENTLY ISSUED CONDITIONAL ENVIRONMENTAL IMPACT ASSESSMENT n a UNCLASSIFIED UNCLASSIFIED - Pag» UNCLASSIFIED UNCLASSIFIED n a Page 5 F ENVIRONMENTAL AND SOCIAL FUNDS THE TEAM DISCUSSED THE NEED TO DEVELOP FUNDS TO OFFSET THE LOSS AND DEGRADATION OF PRIMARY TROPICAL FOREST AND MONTANE CLOUD FOREST RESULTING FROM THE RIGHT-OF-WAY ROW MALVINAS SITE FLOW LINES AND WELL PLATFORMS AND TO MITIGATE SOCIAL IMPACTS ON NONCONTACTED PEOPLES WITHIN THE NAHUA-KUGAPAKORI INDIGENOUS RESERVE G INTERACTION BETWEEN COMMUNITIES AND CONSORTIA THE CONSORTIA INTERACTS WITH COMMUNITIES IN A NUMBER OF WAYS INCLUDING INFORMING THEM OF UPCOMING PROJECT ACTIVITIES NEGOTIATING COMPENSATION FOR THOSE ACTIVITIES OFFERING COMPENSATION WHEN ADVERSE IMPACTS OCCUR AND PROVIDING EMPLOYMENT OPPORTUNITIES SOME INTERACTIONS BETWEEN THE CONSORTIA AND COMMUNITIES HAVE BEEN NON-TRANSPARENT AND COMPROMISED BY UNEQUAL INFORMATION LEGAL AND TECHNICAL SKILLS H · PROJECT MONITORING AND INFORMATION DISCLOSURE SEVERAL MECHANISMS HAVE BEEN ESTABLISHED FOR PROJECT MONITORING HOWEVER THERE ARE PROBLEMS WITH THESE MECHANISMS INCLUDING INCONSISTENCY IN HOW MONITORING REPORTS ARE MADE PUBLIC LACK OF FIELD STAFF TO RESOLVE DISAGREEMENTS BETWEEN THE CONSORTIA AND LOCAL COMMUNITIES AND THE LACK OF A CLEAR MECHANISM UNDER WHICH STAKEHOLDERS CAN ACCESS MONITORING REPORTS AND DETERMINE WHETHER IDENTIFIED PROBLEMS HAD BEEN RESOLVED I DEVELOPMENT BENEFITS THE CUZCO REGIONAL GOVERNMENT WILL RECEIVE 50 PERCENT OF THE ROYALTIES FROM THE CAMISEA PROJECT NOTE IT IS NOT CLEAR HOWEVER IF THE REGIONAL GOVERNMENT HAS ADEQUATE REVENUE MANAGEMENT AND PLANNING CAPACITY TO HANDLE THE LARGE INFLOWS OF REVENUES IT WILL RECEIVE END NOTE LOCAL OFFICIALS IN THE PARACAS PISCO AREA ALSO ARE SEEKING A SHARE OF CAMISEA ROYALTIES INDIGENOUS COMMUNITY MEETINGS 10 MEETINGS WERE HELD WITH TWO COMMUNITIES THAT HAVE BEEN DIRECTLY IMPACTED BY THE PROJECT BOTH COMMUNITIES ARE LEGALLY RECOGNIZED MACHIGUENGA SETTLEMENTS AND COMPOSED OF ABOUT 80 FAMILIES AT THE MEETINGS THE USG TEAM GATHERED INFORMATION ABOUT LOCAL IMPACTS OF THE PROJECT 11 THE SEGAKIATO COMMUNITY LOCATED NEXT TO BLOCK 88 ON THE CAMISEA RIVER HAS RECEIVED COMPENSATION AND MONTHLY RENT FOR THE USE OF THEIR LANDS FROM PLUSPETROL IT RECEIVED ASSISTANCE FROM CECONAMA ONE OF THREE FEDERATIONS OF INDIGENOUS COMMUNITIES IN NEGOTIATING AGREEMENTS ALTHOUGH n a UNCLASSIFIED UNCLASSIFIED - Pag» UNCLASSIFIED UNCLASSIFIED n a Page 6 RELATIONS WITH PLUSPETROL APPEAR GENERALLY POSITIVE CONCERNS WERE RAISED OVER THE SLOW PACE OF COMMUNITY IMPROVEMENT PROJECTS POTABLE WATER SYSTEM MORE MEDICINES AND HOUSING IMPROVEMENTS B POTENTIAL FUTURE HEALTH IMPACTS OF THE PROJECT AND INCREASED BOAT TRAFFIC AND C MOVEMENT OF LARGE GAME OUT OF THE AREA AND POSSIBLE PROJECT IMPACTS ON FISH POPULATIONS A 12 THE SHIMAA COMMUNITY LOCATED ALONG THE DOWNSTREAM COMPONENT IS AFFECTED BY THE PIPELINE RIGHT-OF-WAY WHICH PASSES THROUGH ITS LAND AND SEPARATES ONE HOUSE FROM THE SETTLEMENT SHIMAA MEMBERS FEEL THEY ARE TREATED FAIRLY BY TGP HOWEVER THEY HAVE SOME CONCERNS WHICH MAY STEM FROM INADEQUATE COMMUNICATION BY THE CONSORTIA LIMA 00002127 004 OF 009 EE AND YUCCA CROPS AND C LOSS OF KEPASHI PALMS RESULTING FROM INADEQUATE EROSION CONTROL MEASURES DURING THE RAINY SEASON THE COMMUNITY IS SEEKING TO RELOCATE THREE FAMILIES WHO WANT TO MOVE AWAY FROM THE ROW AS WELL AS ITS SCHOOL ALTHOUGH THE SCHOOL IS ALREADY OVER 300 METERS FROM THE ROW RECENTLY THE COMMUNITY HAS RECEIVED ASSISTANCE FROM COMARU A FEDERATION OF INDIGENOUS COMMUNITIES WHEN NEGOTIATING WITH TGP FOR COMPENSATION FOR ROW EASEMENTS GOVERNMENT MEETINGS LOCAL ' 13 THE USG TEAM MET SAN ANDRS MAYOR HERNAN CARVAJAL SAN ANDRES IS A SMALL MUNICIPALITY LOCATED WITHIN THE PARACAS BUFFER ZONE AND NORTH OF THE FRACTIONATION PLANT SITE ROUGHLY 90 PERCENT OF THE LOCAL ECONOMY IS RELATED TO FISHING SO IMPACTS FROM CONSTRUCTION AND OFFSHORE LOADING OF GAS PRODUCTS SPILLS ACCIDENTS WOULD AFFECT THE TOWN CARVAJAL WAS INITIALLY OPPOSED TO THE PROJECT OVER CONCERN FOR PROTECTING PARACAS BAY BUT NOW SUPPORTS IT GIVEN HIS EXPECTATIONS OF REVENUES FLOWING FROM THE PROJECT FOR LOCAL SOCIAL AND ENVIRONMENTAL IMPROVEMENTS 14 PISCO MAYOR DIEGO MOLINA HIGHLIGHTED THE NEED TO MANAGE BOTH PARACAS' NATURAL RESOURCES AND THE NATURAL GAS DEVELOPMENT IN AN INTEGRATED AND BALANCED WAY DUE TO ECOLOGICAL SENSITIVITIES OF THE PARACAS UFFER ZONE THE n a UNCLASSIFIED Pag» UNCLASSIFIED - i - UNCLASSIFIED UNCLASSIFIED n a r Page 7 LOCATION OF THE FRACTIONATION PLANT AND OFFSHORE FACILITY ARE CONCERNS HIS FOCUS IS SUSTAINABLE REGIONAL DEVELOPMENT AND THE NEED TO PROTECT NATURAL RESOURCES TO MAINTAIN FISHING AND DEVELOP TOURISM MOLINA SAID HE WOULD LIKE ASSURANCES OF NO ADDITIONAL INDUSTRIAL DEVELOPMENT WITHIN THE BUFFER ZONE NGO MEETINGS IN LIMA 15 THE TEAM BEGAN WITH THE ASOCIACIN_ PRO DERECHOS HUMANOS ASSOCIATION FOR HUMAN RIGHTS APRODEH APRODEH IS CONCERNED WITH THE IMPACTS ON THE NON-CONTACTED PEOPLES OF BLOCK 88 DEVELOPMENT ACTIVITES WITHIN THE NAHUA-KUGAPAKORI INDIGENOUS RESERVE -- DISRUPTION OF CULTURE AND LIVELIHOODS THREAT OF CONTAGIOUS DISEASES AND FORCED CONTACT BY EITHER CONSORTIUM OR ·COLONISTS INITIALLY OPPOSED TO THE PROJECT APRODEH RECENTLY PROVIDED IDB WITH SPECIFIC LOAN CONDITIONS IT FAVORS FOR THE LOAN TO PROCEED A MAINTAINING TERRITORIAL INTEGRITY OF ISOLATED INDIGENOUS COMMUNITIES B ESTABLISHMENT OF AN INDIGENOUS COMMUNITY MONITORING PROGRAM WITH PARTICIPATION OF LOCAL PEOPLES C STRENGTHENING OF GOP ENVIRONMENTAL AND INDIGENOUS PEOPLES OVERSIGHT CAPABILITIES AND D STRENGTHENING PROTECTION OF THE NAHUA-KUGAPAKORI INDIGENOUS RESERVE THROUGH THE CREATION OF A PERMANENT MULTIETHNIC RESERVE APRODEH WOULD CONSIDER LEGAL ACTION TO HALT THE PROJECT IF IT IS NOT SATISFIED WITH GOP PROGRESS WITH MONITORING AND OVERSIGHT FUNCTIONS 16 CATHERINE ROSS AMAZON PROGRAMS COORDINATOR AND MARTIN SCURRAH REGIONAL DIRECTOR BOTH OF OXFAM AMERICA SAID OXFAM'S PRIMARY INTEREST REGARDING CAMISEA IS TO DEFEND THE RIGHTS AND ENSURE THE LIVELIHOOD OF THE INDIGENOUS PEOPLES AFFECTED BY THE PROJECT OXFAM'S KEY ISSUES INCLUDE INDEPENDENT MONITORING OF PROJECT IMPACT ON INDIGENOUS GROUPS UNBIASED NFORMATION COLLECTION AND PUBLIC DISSEMINATION AN EFFECTIVE PROJECT OMBUDSMAN AND SOCIAL LIMA 00002127 005 OF 009 PRESIDENT OF THE CENTRO PARA EL DESARROLLO DEL INDGENA AMAZNICO CENTER FOR THE DEVELOPMENT OF THE INDIGENOUS AMAZON CEDIA SAID CEDIA'S PRIMARY INTEREST IN CAMISEA CONCERNS THE NAHUA-KUGAPAKORI INDIGENOUS RESERVE CEDIA FEELS THAT PRIOR TO DEVELOPMENT n a UNCLASSIFIED UNCLASSIFIED Pag» UNCLASSIFIED UNCLASSIFIED Page 8 n a OF THE NATURAL GAS FIELDS AND OPENING OF OTHER WELL SITES WITHIN THE RESERVE ADDITIONAL STUDIES SHOULD DETERMINE HOW w NON-CONTACTED PEOPLE ARE USING LAND AND FOREST RESOURCES CEDIA ALSO SEEKS INCREASED HEALTH MONITORING AND STRENGTHENING OF GOP INDIGENOUS RIGHTS ORGANIZATION CONAPA THE NATIONAL COMMISSION FOR ANDEAN AMAZONIAN AND AFROPERUVIAN PEOPLES 18 ERIK MENESES CAMISEA COORDINATOR AT CONSERVATION INTERNATIONAL CI TOLD THE TEAM CI'S PRIMARY CONCERNS INCLUDE INADEQUATE BIODIVERSITY AND SOCIAL MONITORING EROSION ALONG THE PIPELINE ACCESS ALONG THE ROW FOR COLONISTS AND THE POTENTIAL USE OF INVASIVE SPECIES FOR REVEGETATION CI RECOMMENDS THAT A STRONG BIODIVERSITY MONITORING SYSTEM BE IN PLACE BEFORE THE OTHER DRILLING PLATFORMS IN BLOCK 88 ARE DEVELOPED CI IS CONCERNED ABOUT THE PARACAS RESERVE BUT IS RESIGNED TO THE FACT THAT THE DECISIONS TO SITE THE FRACTIONATION PLANT AND MARINE TERMINAL HAVE BEEN MADE CI ALSO FEARS THAT ROYALTIES FROM CAMISEA FOR CUZCO'S REGIONAL GOVERNMENT COULD FUND ROADS FOR EXTRACTIVE INDUSTRIES WITHOUT CONCERN FOR MITIGATION OF ENVIRONMENTAL IMPACTS 19 ISABEL CALLE AND ISABEL LAPENA OF THE SOCIEDAD PERUANA DE DERECHO AMBIENTAL PERUVIAN ENVIRONMENTAL LAW SOCIETY SPDA FOCUSED ON THE POTENTIAL CONFLICT OF INTEREST WITHIN THE COMMUNITY MONITORING PROGRAM AS FINANCING COMES FROM PLUSPETROL THE LACK OF PUBLIC ACCESS TO MONITORING REPORTS THE LACK OF FIELD EXPERIENCE WITH INDIGENOUS OR NATURAL RESOURCE ISSUES IN THE PROJECT OMBUDSMAN OfFICE THE LACK OF INTERNAL COORDINATION AND ORGANIZATION WITHIN TGP AND THE NON-TRANSPARENT SELECTION PROCESS FOR SITING THE PARACAS FRACTIONATION PLANT 20 EDGAR MARAVI COUNTRY DIRECTOR AND JUAN CARLOS RIVEROS SOUTHEAST AMAZON ECOREGIONAL COORDINATOR BOTH OF WWF SAID WWF IS CONCERNED ABOUT BIODIVERSITY LOSS AND POTENTIAL COLONIZATION ALONG THE ROW AND FAVORS COMPLETE CLOSURE OF THE ROW VERSUS THE PLUGS PROPOSED BY THE COMPANY WWF OPPOSES THE PARACAS SITE FOR THE FRACTIONATION PLANT AND OFFSHORE FACILITY CITING LACK OF TRANSPARENCY IN THE SITE SELECTION PROCESS ALSO WWF BELIEVES THE RAMSAR CONVENTION OBLIGATES PERU AS A SIGNATORY TO PRECLUDE THE PARACAS BUFFER ZONE AS THE SITE FOR THESE FACILITIES 21 JORGE UGAZ GOMEZ DIRECTOR OF PROJECTS AT PRONATURALEZA ·A PERUVIAN ENVIRONMENTAL NGO EXPLAINED HOW PRONATURALEZA RUNS THE COMMUNITY MONITORING PROGRAM IN BLOCK 88 WITH FUNDING PROVIDED BY PLUSPETROL PRONATURALEZA n a UNCLASSIFIED Pag» UNCLASSIFIED UNCLASSIFIED UNCLASSIFIED n a Page 9 PROVIDES QUARTERLY MONITORING REPORTS TO PLUSPETROL THE GOP 1 S INTER-INSTITUTIONAL TECHNICAL COORDINATION GROUP FOR CAMISEA GTCI AND A COORDINATING COMMITTEE'COMPOSED OF THE THREE INDIGENOUS FEDERATIONS GTCI PROVIDES ALL REPORTS TO OSINERG THE GOP ENERGY REGULATORY AGENCY PRONATURALEZA TRAINS COMMUNITY MONITORS WHO ACCOMPANY TECHNICAL MONITORS TO THE FIELD AND KEEP RECORD 0 ALL ACTIVITIES ACTING AS AN EARLY WARNING SYSTEM THE GROUP VISITS SITES ON A MONTHLY BASIS AND CONDUCTS WORKING TRAINING MEETINGS WITH COMMUNITY MONITORS 22 BEATRIZ HUERTAS AND TERESITA ANTAZA LOPEZ OF AIDES P INTER-ETHNIC ASSOCIATION FOR THE DEVELOPMENT OF THE PERUVIAN RAINFOREST RAISED ISSUES RELATING TO INDIGENOUS GROUPS -- HEALTH IMPACTS FROM ACTIVITIES ASSOCIATED WITH THE PROJECT AND DISEASE TRANSMISSION BY COMPANY WORKERS AND LIMA 00002127 006 OF 009 T ADDITIONAL DATA FROM THE HEALTH MINISTRY THE GROUP FEELS THAT CONAPA THE GOP'S NATIONAL COMMISSION FOR ANDEAN AMAZONIAN AND AFRO-PERUVIAN PEOPLES SHOULD BE STRENGTHENED BY PROVIDING IT WITH DECISION-MAKING AND IMPLEMENTATION AUTHORITY AIDESEP CONSIDERS THIS A CRITICAL STEP TO PROVIDE NECESSARY SAFEGUARDS FOR NON-CONTACTED AND INDIGENOUS PEOPLES CONAPA GRAPPLES WITH THE PROJECT 23 THE TEAM MET ALEJANDRO ROBLES RECAVARREN AND FRANCISCO MOZA CASTILLEJO OF CONAPA TO REVIEW THE ORGANIZATION'S STATUS AND ITS ROLE WITHI THE CAMISEA PROJECT CONAPA'S MAIN OBJECTIVE IS TO PROVIDE ADVICE TO INDIGENOUS PEOPLES AND IS PRESIDED OVER BY PERUVIAN FIRST LADY ELIANE KARP CONAPA PLANS TO VISIT BLOCK 88 TO A DETERMINE THE STATUS OF CONDITIONS OF NON-CONTACTED PEOPLE WITH RESPECT TO THE PROJECT AND B TO ENSURE THAT IMPACT OF THE CAMISEA PROJECT IS MINIMAL THE TRIP IS EXPECTED TO GENERATE CONCLUSIONS AND RECOMMENDATIONS FOR CONTINUED DEVELOPMENT OF THE GAS FIELDS PROJECT OMBUDSMAN LACKS RESOURCES EXPERIENCE 24 CARLOS FOSCA AND CESAR GUZMAN BARRON OF THE DEFENSORIA DE CAMISEA UNIVERSIDAD CATOLICA PROJECT OMBUDSMAN SAID THE OFFICE WAS CREATED ONLY FOUR MONTHS AGO AND IS NOT YET FUNCTIONING THE OFFICE HAS NO FIELD PRESENCE ALTHOUGH REGULAR TRIPS TO THE SITE ARE PLANNED DEFENSORIA STAFF n a UNCLASSIFIED UNCLASSIFIED Pag» UNCLASSIFIED UNCLASSIFIED Page 10 n a RECOGNIZE THEY LACK EXPERIENCE AND PLAN TO BRING AN OMBUDSMAN FROM GASBOL BOLIVIA TO SHARE THE BOLIVIAN EXPERIENCE A COMMUNICATION STRATEGY AND A DIAGNOSTIC STUDY OF POTENTIAL CONFLICTS WILL BE DEVELOPED TO PREPARE CAMISEA CONFLICT PREVENTION AND RESOLUTION PROCEDURES THE OFFICE PLANS TO WORK CLOSELY WITH LOCAL ORGANIZATIONS IN CUZCO GOP ENVIRONMENT AGENCIES SUPPORT PARACAS SITE 25 GUSTAVO SU REZ DE FEITAS DIRECTOR GENERAL FOR PROTECTED AREAS AT INRENA THE NATIONAL NATURAL RESOURCES INSTITUTE DISCUSSED SEVERAL ISSUES WITH THE TEAM THE PARACAS SITE FOR THE FRACTIONATION PLANT AND MARINE TERMINAL CONSERVATION OFFSETS INCLUDING MANAGEMENT OF OTISHI NATIONAL PARK AND COMMUNAL RESERVES AND CREATION OF MANATONI NATIONAL SANCTUARY MONITORING FOR COLONISTS ALONG THE ROW AND REFORESTATION DR SUAREZ IS SATISFIED THE FRACTIONATION PLANT AND MARINE TERMINAL CAN BE LOCATED WITHIN THE BUFFER ZONE OF THE PARACAS RESERVE WITH MINIMUM RISK IF BEST PRACTICES TECHNOLOGIES AND PRECAUTIONARY MEASURES ARE USED INRENA SEEKS TO USE THIS PPORTUNITY TO CLEAN-UP THE FISHMEAL PLANTS THAT CURRENTLY POSE THE GREATEST THREAT TO THE RESERVE INRENA RECOMMENDS THAT GAS REVENUES SUPPORT A $26 MILLION FUND FOR THE PARACAS RESERVE OVER THE 30-YEAR LIFE OF THE PROJECT INRENA WANTS THE CONSORTIUM TO REFOREST THE FULL 12 KM OF ROW CROSSING THE MACHIGUENGA COMMUNAL RESERVE TO PREVENT COLONIZATION 26 MARIA LUISA DEL RIO MISPIRETA NATURAL RESOURCES DIRECTOR AT THE NATIONAL COUNCIL ON THE ENVIRONMENT CONSEJO NACIONAL DEL AMBIENTE CONAM TOLD THE TEAM CONAM IS COMMITTED TO WORKING ON BIODIVERSITY MONITORING OF THE PROJECT ALTHOUGH ADEQUATE INDICATORS HAVE NOT BEEN DEVELOPED SHE EXPLAINED THAT CONAM DOES NOT HAVE A LARGE TECHNICAL STAFF AND SERVES AS A COORDINATING AND CONVENING MECHANISM WHEN ISSUES ARE NOT RESOLVED BETWEEN VARIOUS MINISTRIES CONAM HAS ONLY MADE ONE HIGH LEVEL VISIT TO THE FIELD OSINERG EXPLAINS ITS PROJECT SUPERVISORY FUNCTION LIMA 00002127 007 OF 009 ISEA UNIT CHIEF OF OSINERG THE GOP ENERGY REGULATORY AGENCY OSINERG'S ROLE IN ENERGY PROJECTS IS TO ENSURE CORPORATE COMPLIANCE WITH A APPLICABLE LAWS B SIGNED ENVIRONMENTAL AND SOCIAL STUDIES AND C CONTRACTS THE AGENCY HAS 16 FIELD STAFF n a UNCLASSIFIED UNCLASSIFIED Pag» UNCLASSIFIEDuNcLAssIFIEo n a Page 11 DEVOTED FULL TIME TO THE CAMISEA PROJECT THESE TECHNICAL EXPERTS SPEND 20 DAYS MONTHLY IN THE FIELD WITH SEPARATE ASSIGNED SECTIONS OF THE PROJECT FIELD STAFF REVIEW COMPANY PROGRESS COLLECT INFORMATION AND COMPLAINTS FROM COMMUNITIES AND PREPARE MONTHLY PROJECT REPORTS THESE ARE COMBINED INTO A CONSOLIDATED MONTHLY REPORT WHICH WILL SHORTLY BE MADE PUBLIC 28 OSINERG SANC IONS NON-COMPLIANCE THROUGH A PROCESS THAT INCLUDES FINES CURRENTLY THERE ARE SIX SANCTION CASES UNDERWAY REGARDING CAMISEA ONE WHERE A $1 MILLION FINE HAS BEEN LEVIED AGAINST TGP WHICH IS APPEALING THE FINE ONE CASE WHERE A DECISION FINE WILL BE ISSUED SHORTLY AND FOUR CASES UNDER INVESTIGATION AUTHORIZED FINE LIMITS HAVE BEEN INCREASED FROM ABOUT $500 000 TO OVER $10 MILLION WHICH SHOULD PROVIDE GREATER LEVERAGE TO ENSURE COMPLIANCE WITH PROJECT REQUIREMENTS MINISTRYr OF ENERGY AND MINES DISCUSSION 29 THE TEAM THEN MET PEDRO REYES GTCI COORDINATOR AND JULIO BONELLI DIRECTOR GENERAL FOR ENVIRONMENTAL AFFAIRS BOTH AT THE MINISTRY OF ENERGY AND MINES MEM GTCI IS THE MULTI-AGENCY GOP GROUP ESTABLISHED TO OVERSEE THE CAMISEA PROJECT AT THIS MEETING THE TEAM PROVIDED GOP WITH ITS INITIAL IMPRESSIONS REGARDING ISSUES THAT NEEDED TO BE ADDRESSED FOR THE USG TO FAVORABLY CONSIDER THE IDB LOAN REYES SAID THAT ON PUBLIC DISCLOSURE MEM FOLLOWS GOP TRANSPARENCY REQUIREMENTS AND IS ESTABLISHING A GTCI WEBSITE THAT SHOULD BE OPERATING SHORTLY 30 ON PROJECT MONITORING GTCI SUPPORTS OSINERG AND ALSO VISITS PROJECT SITES MONTHLY GTCI RECOGNIZES THE LACK OF INDEPENDENT SOCIAL MONITORING AND IS DEVELOPING A GENERAL PROTOCOL FOR AVOIDING CONTACT WITH THE INDIGENOUS GROUPS GTCI DEFENDED THE COMMUNITY MONITORING SYSTEM RUN BY PRONATURALEZA 31· GTCI PROPOSES AN INDEPENDENT CAMISEA FUNDING- MECHANISM WITH A BOARD COMPRISED OF COMMUNITY REPRESENTATIVES CONSORTIA OFFICIALS NGOS AND THE GOP GTCI IS STILL DISCUSSING THE STRUCTURE OF THE MECHANISM WHICH WOULD FUND ENVIRONMENTAL AND SOCIAL PROJECTS SEPARATELY FUNDING WOULD COME FROM CAMISEA PROJECT ROYALTIES DIRECT CONSORTIUM PAYMENTS NGO DONATIONS AND MULTILATERALS GTCI HOPES TO BE READY TO FUND PROJECTS BY JUNE-JULY 2004 AS PROJECT CONSTRUCTION FINISHES 32 ON HEALTH ISSUES MEM IS USING IDB RESOURCES TO n a UNCLASSIFIED UNCLASSIFIED Pag» UNCLASSIFIED UNCLASSIFIED n a Page 12 ESTABLISH HEALTH POSTS STRENGTHEN VACCINATION PROGRAMS AND PROVIDE MORE MEDICINES TO INDIGENOUS GROUPS 33 THE USG TEAM DISCUSSED THE CAPABILITY OF THE NEW PROJECT OMBUDSMAN TO FUNCTION EFFECTIVELY PARTICULARLY GIVEN ITS LATE ENTRY INTO THE PROJECT AND LACK OF RELEVANT EXPERIENCE MEM AND GTCI ARE ALREADY WORKING ON PROJECTRELATED DISPUTES IN THE REGION AND TOGETHER WITH THE NATIONAL OMBUDSMAN WILL ADVISE THE OMBUDSMAN OFFICE MINISTER TOUTS PROJECT IMPORTANCE 34 MINISTER OF ENERGY AND MINES JAIME QUIJANDRIA AND VICEMINISTER FOR ENERGY CARLOS GARAYCOCHEA EMPHASIZED THE MACROECONOMIC IMPORTANCE OF CAMISEA FOR PERU STRESSING THAT THE COUNTRY CANNOT CONTINUE TO IMPORT $500-700 MILLION YEAR LIMA 00002127 008 OF 009 ION LOWERING ENERGY COSTS AND COULD EVENTUALLY REDUCE AIR POLLUTION IN LIMA BY REPLACING DIESEL TRANSPQRT WITH CLEANER-BURNING GAS VEHICLES THE MINISTER SAID THAT AFTER 3-5 YEARS THE PROJECT SHOULD HAVE A FUNDAMENTAL IMPACT ON PERU'S ECONOMY HE REAFFIRMED THAT THE MINISTRY FAVORS STRONG ENVIRONMENTAL MONITORING FOR THE PROJECT AND SAID HE IS COMPLETELY OPEN TO SHARING INFORMATION WITH THE USG ON CAMISEA MINISTRY OF HEALTH INVOLVEMENT LIMITED 35 THE TEAM MET WITH THE DR LUIS SUAREZ OFFICE OF EPIDEMIOLOGY-MINISTRY OF HEALTH MH IN THIS MEETING WHICH INCLUDED SEVEN STAFFERS THE USG ASKED THE GROUP'S VIEWS ON FOUR ISSUES A ALLEGATIONS OF SOME NGOS THAT THERE HAS BEEN A SPIKE IN THE CASES OF CHILD MORTALITY IN'BLOCK 88 AND ADJACENT AREAS HOW TO PROTECT NON-CONTACTED PEOPLE B C PLANS TO MONITOR NATIVE COMMUNITIES' HEALTH CONDITIONS AND D THE MINISTRY'S ROLE IN REVIEWING THE COMPANY'S OPERATION AND PREVENTATIVE PROTOCOLS MINISTRY STAFF SAID IT HAS BEEN DIFFICULT FOR-THEM TO ASSESS THE HEALTH SITUATION OF ALL THE COMMUNITIES IN THE AREA BECAUSE OF THE DIFFICULTY OF ESTABLISHING CONTACT WITH THEM THERE WAS CONFIRMATION HOWEVER THAT THE CAUSE OF DEATH OF TWO CHILDREN IN OCT-NOV 2002 WAS THE FLU THE STAFF SAID n a UNCLASSIFIED UNCLASSIFIED Pag» UNCLASSIFIED UNCLASSIFIED Page 13· n a THAT WHILE THE COMPANY MIGHT BE ENFORCING ITS PROTOCOL FOR ITS PERSONNEL NOT TO CONTACT THE NATIVE COMMUNITIES OUTSIDERS HAVE COME INTO THE AREA ANYWAY SOME ARE PEOPLE WHO LIVE IN THE AREA WHILE OTHERS ARE FROM THE CUZCO HIGHLANDS BOTH ARE POTENTIAL CARRIERS OF DISEASES AGAINST WHICH NATIVE COMMUNITIES HAVE NO IMMUNITY MINISTRY STAFF SAID THAT THEIR OFFICE HAD NOT REVIEWED THE COMPANY'S PROTOCOL BUT MAYBE ANOTHER OFFICE HAD DONE SO LOCAL IDB REPRESENTATIVE MEETING 36 IN A MEETING WITH_VLADIMIR RADOVIC IDB COUNTRY REPRESENTATIVE FOR PERU THE TEAM RELATED INITIAL IMPRESSIONS REGARDING MIXED PROGRESS ON IMPLEMENTATION OF THE- IDB'S INSTITUTIONAL STRENGTHENING PROJECT THE TEAM ALSO ASKED RADOVIC ABOUT OPTIONS AVAILABLE TO THE IDB FOR ENSURING COMPLIANCE WITH SOCIAL AND ENVIRONMENTAL SAFEGUARDS BY CAMISEA PROJECT SPONSORS RADOVIC AGREED THAT IT MAY BE POSSIBLE TO DISBURSE IDB FUNDS IN TRANCHES TO GUARANTEE PROGRESS ON KEY ISSUES MARATHON SESSION WITH THE CONSORTIUM THE TEAM HELD A -LENGTHY MEETING WITH A LARGE GROUP OF PROJECT SPONSORS REPRESENTATIVES OF PLUSPETROL TGP TECHINT HUNT AND CONSORTIUM CONSULTANT ERM THE USG TEAM DISCUSSED A SET OF PROJECT ERFORMANCE BENCHMARKS WITHIN THE SPONSORS' AUTHORITY RELATED TO ENVIRONMENTAL AND SOCIAL SAFEGUARDS CONSORTIUM REPRESENTATIVES RESPONDED TO EACH PROPOSED BENCHMARK BY ASSERTING THAT IT HAD ALREADY BEEN MET -IS PLANNED TO BE MET NEEDS TO BE MODIFIED OR NEEDS TO BE CLARIFIED THE MEETING RESULTED IN SEVERAL ITEMS FOR FOLLOW-UP ACTIONS BY THE PROJECT SPONSORS OR USG TEAM THESE INCLUDE 37 ASSESSING CUMULATIVE AND SECONDARY IMPACTS OF THE PROJECT B STRENGTHENING THE TERMS OF REFERENCE FOR IDB'S MONITOR C IDENTIFYING OPTIONS FOR DESIGN OF ENVIRONMENTAL AND SOCIAL FUNDS D RESOLVING UNCERTAINTY OVER IMPACTS ON INDIGENOUS GROUPS A LIMA 00002127 009 OF 009 IMPROVING THE USG UNDERSTANDING OF THE PROCESS FOR· SELECTING THE PARACAS SITE AND G IMPROVING THE USG UNDERSTANDING OF MEASURES TO CLOSE THE ROW AND CONTROL EROSION n a Pag» UNCLASSIFIED UNCLASSIFIED ____ - • • •• 'µJ•• UNCLASSIFIED UNCLASSIFIED n a « Page 14 SOME OF THESE ISSUES WERE DISCUSSED IN SUBSEQUENT MEETINGS WITH PROJECT SPONSORS OUTBRIEF WITH AMBASSADOR 38 AT A MEETING WITH THE AMBASSADOR AND DCM THE TEAM STATED ITS GENERAL CONCLUSION THAT THE PROJECT IS NOT YET READY TO BE BROUGHT TO THE IDB BOARD FOR CONSIDERATION KOZLOFF MENTIONED HOW FUTURE DISCUSSIONS BETWEEN THE USG AND PROJECT SPONSORS THE GOVERNMENT OF PERU AND FINANCIAL INSTITUTIONS WILL BE IMPORTANT IN DETERMINING WHETHER OUTSTANDING ENVIRONMENTAL AND SOCIAL ISSUES CAN BE ADEQUATELY ADDRESSED THE AMBASSADOR RESPONDED THAT THE EMBASSY STANDS READY TO ASSIST IN THIS PROCESS COMMENT 39 SINCE RETURNING TO WASHINGTON MEMBERS OF THE USG TEAM HAVE MET WITH IDB STAFF NGOS AND REPRESENTATIVES OF THE DOWNSTREAM CONSORTIUM BASED ON INFORMATION OBTAINED DURING THE SITE VISIT THE TEAM IS PREPARING A SET OF RECOMMENDATIONS FOR IMPROVING THE PROJECT BEFORE IT IS BROUGHT TO THE IDB BOARD FOR CONSIDERATION THE RECOMMENDATIONS WILL LIKELY ADDRESS THE FOLLOWING ISSUES A IMPACTS ON INDIGENOUS PEOPLES IN THE NAHUA-KUGAPAKORI INDIGENOUS RESERVE B POTENTIAL COLONIST MIGRATION C MANAGEMENT OF SOCIAL AND ENVIRONMENTAL FUNDS D ONITORING E THE OMBUDSMAN'S OFFICE F DIRECT AND INDIRECT IMPACTS ON THE REGION'S UNIQUE AND GLOBALLY IMPORTANT BIODIVERSITY G EROSION AND REVEGETATION ALONG THE ROW AND H SITE SELECTION OF THE FRACTIONATION PLANT AND MARINE FACILITY THESE RECOMMENDATIONS WILL BE CIRCULATED FOR DISCUSSION AMONG INTERESTED USG AGENCIES AS WELL AS TO KEY PROJECT DECISION-MAKERS PROJECT SPONSORS THE GOP AND FINANCIAL INSTITUTIONS TREASURY WILL TAKE INTO ACCOUNT RESPONSES TO THESE RECOMMENDATIONS ITS OVERALL DUE DILIGENCE PROCESS AND INPUT FROM OTHER AGENCIES IN DEVELOPING A FORMAL POSITION ON IDB FINANCING FOR THE CAMISEA PROJECT NOTE THIS CABLE WAS CO-DRAFTED WITH TREASURY AND USAID DAWSON n a UNCLASSIFIED UNCLASSIFIED Pag»