PACIFIC ENVIRONMENT
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Your tax dollars at work: Shell Oil's Sakhalin II project, located in close proximity to the habitat of the endangered Western Pacific Grey Whale. This destructive project has received support from several public finance institutions, including one from the U.S.
Following the Money: Pacific Environment’s Responsible Finance Campaign What do oil and gas projects, dams, mines, roads through pristine forests, and chemical factories in the third world have in common? Ghastly environmental destruction exported to the developing world might be the first thing that comes to mind. But there’s something else you might not have thought of: It’s likely that you are supporting these environmentally devastating projects with your tax dollars. For years, American and other multinational corporations doing dirty business overseas have had an unwitting ally in you, the taxpayer. Most of the world’s easily accessible oil, natural gas, forests and fish—the low-hanging fruit—have already been exploited, forcing companies to take on much more financially, politically and environmentally risky extractive projects in third world countries. But the risks of these dubious projects are usually too much for private companies to shoulder alone. That’s where obscure public finance institutions like the Export-Import Bank (Ex-Im), Overseas Private Investment Corporation (OPIC), International Finance Corporation (IFC), and others come in. These banks shift project risks to taxpayers by providing public financing and insurance for companies that undertake shaky deals in places where environmental and
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social standards often take a back seat to corruption and cronyism, and where community involvement in decision-making is frowned upon. As part of Pacific Environment’s broader mission to protect the Pacific Rim’s wild places, our Responsible Finance Campaign holds these public banks accountable to local communities and the environment. The lesson we’ve learned over the years is simple: Harmful extractive projects in the developing world rarely go forward without large sums of money from public and private banks. Block or change the flow of this financing and you get miraculous results: the worst projects can be blocked; many projects can be greatly improved; and local people can have a greater say in decisions that affect their lives.
Project Monitoring When we hear that a large extractive or industrial project has been proposed for a developing country, one of the first things we ask is, “Who’s financing it?” If we find public financing will play a role, we begin a dialogue with the bank involved to assure that the public’s money is being used to support the best environmental protection and human rights practices. If the project is not up to best standards, we appeal to the bank’s responsibility to the public interest, and ask for the necessary improvements. We also make sure that people in the affected community have a seat at the head of the decision-making table. And if the bank won’t budge, we work with partners in both the local community and in the bank’s home country to apply political pressure to stop or fundamentally change the project.
Working Globally to Halt the Race to the Bottom Pacific Environment is one of the founding members of the international “ECA-Watch” campaign, a global network of organizations and citizens’ groups working to reform Export Credit Agencies (ECAs), like the U.S.backed Overseas Private Investment Corporation (OPIC) and Export-Import Bank (Ex-Im Bank). ECAs provide approximately twice as much funding for harmful extractive projects in the developing world than the betterknown World Bank Group.
ECA-Watch works to ensure that all the world’s ECAs apply adequate environmental and human rights standards before being allowed to award their largesse to the multinational corporations. By creating international standards, we hope to end the “race to the bottom,” where a multinational corporation “shops around” for the ECA with the least environmental and human rights requirements.
Case Example: Shell’s Sakhalin II Oil and Gas Project In 1994, a consortium now led by Shell made a deal with the Russian government to extract offshore oil and gas deposits at Sakhalin Island, in the country’s Far East. Called Sakhalin II, the project is being built through the feeding habitat of the most critically endangered grey whale population in the world. In addition, a 400-mile island-long pipeline that Shell hopes to build will trench through 1,100 waterways, including an estimated 200 wild salmon spawning streams. Pacific Environment is working with our local partners and international allies to force Shell to adopt the highest global environmental standards for the project or abandon it. We’re pressing Ex-Im Bank and the European Bank for Reconstruction and Development (EBRD) to withhold funding for the project until Shell agrees to fundamental design improvements. We’re bringing local partner organizations from Sakhalin Island to meet with the public banks’ representatives. We’re sponsoring independent expert analysis. We’re generating media attention and Congressional concern. And we’re catalyzing public action campaigns, flooding the banks with thousands of postcards from activists around the world. In the spring of 2004, the EBRD announced that the Sakhalin II Environmental Impact Assessment was “not fit for purpose,” a bank euphemism for lousy. The bank said they are not satisfied with the answers Shell has given them and they promised not to finance the project until they are. Shell responded by suspending the construction of undersea pipelines that would encroach on the 100 remaining gray whales only feeding habitat until independent experts assess impacts and consider alternative routes. This stands as an example of how pressure on a project’s investors can result in significant changes in the project.
To find out how you can help build the Responsible Finance movement, contact Doug Norlen at 202/785-8700 x31, or dnorlen@pacificenvironment.org.