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					                                                                                                      November, 2006
                                      Consulting & Research Services
                  Environmental Services – Information Technology – Corporate Social Responsibility

     Cooperating with Nature: Going Beyond What Is Done
                Lessons for New Pipeline Projects in East Asia ?

 “Eurasian Pipelines and East Asia : A Path to Integration or a Marriage of Convenience ? “

School of International and Public Affairs, Columbia University – New York City, Nov. 30, 2006
                                   Prepared and presented by nomadéis:

                                   Nicolas DUTREIX, Founding Partner
                           +33 (0)6 62 28 39 17;

                                 & Christine LIO SOON SHUN, Consultant
                               +33 (0)6 66 99 51 97;
Introduction                                                                      2

   Impact Assessments (IA) long accepted toolkit for regulating social /
   environmental effects of development projects (scope, identify, assess, monitor);

   Limitation of IA implementation in many under-regulated countries in Central
   Europe / East Asia;

   Oil and gas pipelines: Environmental / economic / social issues;

   Efforts to address them (corporations, governments, NGOs) : mitigation measures
   / protests & actions;

   Going beyond: model for an Ultimate Economic Impact Assessment (UEIA) given
   that pipelines projects are irreversible.

By developing an UEIA, the goal is to support business projects which promote long-
term regional sustainable development, protect the citizens and legitimize corporate-
led globalization.
Major underlying trends                                                            3

       1 Growing needs in primary energy transfers


    Intensification of                       Increased interest in environmental
4                                        2
    community concerns                       protection

        3   Globalization of NGOs’ protests & influence

In the hydrocarbon industry, an area plagued by environmental and social damages,
there is a discrepancy between ineffective voluntary mechanisms and compulsory
long-term sustainable development policies.
Impacts of oil and gas pipelines                                                                           4

Long term                                                                                         Significance
                            Pipeline breaks                          Transport    Removal of
                                & leaks                            infrastructure    flora
                               (human error,                Social
                           accidents or sabotage)       infrastructure
                                                                                   Land take
                   Land                                                                             Negative
               reinstatement        Immigration
                                     of other ethnic
                                         groups                 Local
Duration                                                      employment                 Visual
of impact                                                                       Security
                                                                               maintenance          Positive

                                            Noise                                   Land take
                                          generation                              compensation

Short term
             Exceptional                            Occurrence                       Systematic
Positive impacts must be weighed against negative consequences. A controversial
point is that even foreseen benefits of pipelines may not fulfill expectations…
 Construction phase: Possible impacts / mitigations                                                                 5
                      Causes                    Potential impact - Effects                 Mitigation measures
                     Excavation                     Soil erosion, landslides
                                                                                                 erosion control

                Removal of flora along              Vegetation clearance                      Restricted conversion
Environmental    pipeline right of way           Habitat loss and modification           Restoration of degraded habitats

                                                                                         Work outside spawning season,
                                                      Wildlife disturbance
                                                                                         designed suspension systems
                   River crossing
                                            Presence of bedload sediment in water,
                                                                                                River restoration
                                                  affecting spawning areas

                   Employment of          Beneficial creation of jobs associated with
  Economic                                                                               Employment of local workforce
                     workforce                             pipelines

                                         Compensation of village land and land owners    Adequate level of compensation
                      Land take
                                         Land owners lose access to land permanently            Informed consent

   Social           Traffic from           Villages are subject to traffic dangers and
                                                                                             Rehabilitation of roads
                 construction trucks                 noise, damage to road
                   Heavy machine            Possible damage to sites of historical,
                                                                                         Cultural sponsoring / rerouting
                     operations                     archaeological value
Operational phase: Possible impacts / mitigations                                                              6

                     Causes                  Potential impact - Effects                  Mitigation measures

                                        Soil and groundwater (including drinking
Environmental    Pipeline breaks &
                                                    water) pollution
                leaks (human error,                                                    Oil spill response plan with
                     accidents,                                                        well defined accountabilities
                 sabotage, natural    “Reputational” risk, damage to local economy
                   disasters, etc.)        (fishing, agriculture, tourism, etc.)
                   Disregard for        Misappropriation of land compensation,
                   domestic law             hinders economic development
                (corruption, human                                                             CSR actions
                 rights violations,      Human rights violations engaged in by
    Social                            security forces or regular police (executions,
                                          beatings, imprisonment without trial)

Beyond potential accidents, pipelines pose a threat, not just to health and nature, but
also to alternative development opportunities.
NGOs’ critics on pipelines and mitigation measures                                   7

                                                            • Adequate routing
                                                        1   • Corruption
                   Decision process                         • Consultation process
                                                            • IA methodology

                                                            • Impact on natural resources
                  Local environnent                     2   • Flora & fauna preservation
                                                            • Soil pollution
                                                            • Threats to health
                                                            • Project footprint
                                                            • Respect of cultural heritage

                      Indigenous                            • Respect of human rights
                     communities                            • Information process
                                                            • Compensation system
                                                            • Resettlement issues
                                                            • Job creation

NGOs’ concerns are of three kinds: (1) Good governance during the project design;
(2) Prevention of environmental damage; (3) Respect for local communities’ rights.
Examples of issues highlighted by NGOs                                                                             8

Preserving flora
   Mangroves play a vital role in stabilizing soil and
retaining coastlines and in providing important
habitat for fish and other marine animals.
  An oil spill off the coast of Panama leaked 50,000
barrels of oil into a mangrove area and killed
vegetation along 20 miles of coastline.

                                                         Preserving archaeological sites
                                                           Archaeological sites are an important source of
                                                         knowledge in the fields of history, culture and art.
                                                            The BTC pipeline crosses the Gobustan Cultural
                                                         Reserve (Azerbaijan) for 900 meters. The area is one of
                                                         the major and most ancient museums of rock engravings
                                                         (petroglyphs) in the world. These prehistoric art
                                                         monuments reflect culture, economy, world outlook,
                                                         customs and traditions of ancient Azerbaijan people.
Examples of issues highlighted by NGOs                                                                                  9

 Employment of local workforce
   Pipeline projects are meant to create job opportunities in a
    On the Baku-Supsa project, local workforce’s expectations
 did not materialize. Only a few residents of some villages have
 been employed, on low wages and with unfavourable

                                                     Lack of transparency in IA
                                                        Honestly disclosing the process and results of a project’s IA
                                                     strengthens the legitimacy of corporate decision making.
                                                        The results of the Sakhalin II project’s IA have not fully
                                                     disclosed the entire environmental consequences, especially
                                                     concerning impact of river crossings in areas where salmons

Most NGOs’ critics turn out to be legitimate, but NGOs’ way to protest is generally one-
off and check-list based while effective results would require a more integrated and
comprehensive approach.
Going beyond what is done: From IA to UEIA                                          10

   In developed countries Impact Assessment Studies are mandatory whereas in
   under regulated countries they are not.

   However, many IFIs now require the submission of IAS prior to financing projects
   (WB, EBRD).

   IAs are a tool to regulate corporations’ operations abroad and to set international
   environmental and social binding standards on those corporations.

   Going beyond IAs: how to effectively guarantee corporate compliance with
   sustainable regional development ?

   UEIA as a tool to plan the long term development of a region: Systematic study of
   feasible economic alternatives to pipeline projects.

How does a region ultimately want to use its land and develop its local economy ?
Going beyond what is done: UEIA tenets & process                           11

1. Involve the public;

2. Identify relevant alternative economic options;

3. Identify definitions, methods and guidelines;

4. Internalize the UEIA in decision making;

5. Select competent and upright UEIA practitioners;

6. Employ data with integrity;

7. Transparency (process and results).

This framework is centered on the state’s responsibility to safeguard its own
population and resources – Supplemented by international monitoring mechanisms.
Going beyond what is done: UEIA shortcomings and hopes 12

   New concept – No examples (starting point for discussion)


   Promotion of a consensual approach and bridge the gap between NGOs’
   voluntarism and compulsory development policies.

   Shortcomings :

   Recurrent IAs shortcomings (biased experts, lack of precise data, non pragmatic
   approach, weak at prediction, lack of time, etc.)

To be successful UEIA also need to be supported by a strong political will and the
ability to properly plan a regional development on the basis of the resulting
Thank you for your attention !                                                          13
 nomadeis is a Paris based consulting firm providing tailor-made services. Since it was
 created 5 years ago, nomadeis has conducted 35 missions in 25 countries for its French
 and international clients: Veolia Environment, Hewlett Packard, Microsoft, ESSILOR, United
 Nations Agencies …

 Key areas of expertise and capabilities :

    Contact : Nicolas DUTREIX, Founding Partner                   nomadeis
               +33 (0)6 62 28 39 17                               4, rue Massenet
                            75116 Paris, France