The Camisea project: developing legal frameworks for avoiding social and environmental conflicts in sensitive areas.

• Author: Gonzalez, Giancarlo Guardia

1. INTRODUCTION II. THE CAMISEA PROJECT III. FRAMEWORK IV. PREVENTATIVE PROVISIONS A. Legal Framework B. Previous Evaluation C. Environmental Impact Assessment Provisions 1. Effects 2. Environmental Management Plan D. Citizen Participation E. Land Use Covenants F. Canon G. Multiple EnvironmentaI Authorities 1. Ministry of Energy and Mines 2. The Supervisory Organism of Investment in energy and Mines 3. National Institute for the Assessment of Natural Resources 4. Other Entities V. CONCLUSION I. INTRODUCTION

   The Camisea field in Cusco, Peru is one of the most important nonassociated natural gas reserves in Latin America. (1) The contract for the exploitation of this field was executed in 2000, and its production stage began in August 2004 (the Project). (2) Camisea is located in the Peruvian forest. (3) People who reside in the area of the Project are "Native Communities," whose members live in accordance with centuries-old customs, (4) and small groups in voluntary isolation who do not want to have contact with other cultures or populations. (5) From an environmental point of view, Camisea is located in a hot spot of biodiversity. (6) Except for small areas used by the Native Communities, Camisea is a tropical forest that has never been interfered with by human hand. (7) Finally, a small part of the Project--Block 88--is located in the buffer area of a wildlife reserve. (8)

   With these elements, it is easy to call Camisea a sensitive area in both social and environmental terms. This Article provides an overview of the legal efforts made by the different stakeholders involved in the Project (government, licensees, and private actors, among others) to develop Camisea in harmony with the population and avoid damage to the environment.

2. THE CAMISEA PROJECT

   The Camisea Project involves two different stages. The first stage includes the construction of the facilities required to produce gas in Block 88; to separate the natural gas from the associated natural gas liquids (NGL); to transport the natural gas to Lima (where it is consumed); and to transport the NGL to a processing plant on the Peruvian coast in order to produce propane, butane, natural gasoline, and diesel. (9) The next stage involves the development of a second field (Block 56) near Camisea, the expansion of the natural gas transportation system, and the construction of a liquefaction plant. (10) The two stages of the Project have an approximate cost of five billion dollars. (11)

   This Article focuses on the first stage of the Project and in particular the production facilities located in the Camisea area. These facilities include the following activities: (1) constructing and operating a gas separation and condensation plant (Malvinas Plant); (2) drilling four wells for gas extraction at four platforms; (3) constructing and operating pipelines from the drilling platforms to the Malvinas Plant; and (4) performing 3D seismic surveys over an area of 1200 square kilometers. (12)

   According to the last reports of reserves, the Camisea field has approximately 8.7 trillion cubic feet (TCF) of natural gas and 547 million barrels of associated natural gas liquids (propane, butane, and condensate). (13) The Peruvian Government granted the rights to exploit these reserves to the joint venture formed by Pluspetrol (Argentina), Hunt Oil Company (USA), SK Corporation (Korea), Repsol (Spain), Tecpetrol (Argentina), and Sonatrach (Algeria) (the Licensees). (14) These rights have been granted through a license agreement, which basically allows exploitation of the reserves in exchange for a royalty to be paid to the Peruvian Government (37% of the sales made by the consortium). (15) Exploitation rights are valid for forty years, and Pluspetrol has been appointed as operator of the contract. (16)

   The wells are located in four platforms--San Martin 1, San Martin 3, Cashiriari 1, and Cashiriari 3. (17) Two of them began their operations in 2004, and the other ones will initiate their activities this year. (18) A mixture of natural gas and NGL is transported from these platforms to the Malvinas Plant by approximately fifteen miles of pipeline. (19) Neither platforms nor pipelines cross a town, but they are within territories of the Native Communities. (20)

   The Malvinas Plant has been built on the right bank of the Urubamba River. (21) Its installations are projected to produce 11.3 million cubic meters of gas per day and 165 cubic meters of liquid natural gas (NGL) per hour. (22) The plant is designed for growth and will be able to increase gas production to 22.6 million cubic meters per day and to 330 cubic meters of (NGL) per hour. (23) The Malvinas Plant is the starting point of the transportation system, which consists of two pipelines, respectively 336 miles and 460 miles long, that transport the natural gas and the NGL to the coast. (24)

3. FRAMEWORK

   There are several mechanisms included in the Peruvian legal framework to avoid environmental damage and prevent social conflicts. These mechanisms could be classified in two categories: preventative and reactive. The preventative ones obviously try to avoid the generation of an adverse environmental impact and the generation of a social conflict. The reactive ones propose to stop the adverse impact or to find a solution for the conflict.

   The main reactive mechanisms are administrative procedures against petroleum companies before the environmental agencies in charge of supervising oil and gas operations, (25) and civil and criminal actions. (26) However, the preventative mechanisms make Camisea an interesting case study. The following sections will analyze preventative provisions and their contribution to a successful development of the Project.

4. PREVENTATIVE PROVISIONS

   1. Legal Framework

      The Peruvian legal framework includes a wide range of laws designed to prevent environmental damage and regulate social conflict. These laws include, among others, provisions regarding quality of water and land, maximum limits for gaseous emissions, protection of forestry and wildlife resources, protection of biodiversity, management of solid wastes, creation of ecologically protected zones and wildlife reserves, and public participation. (27)

      In addition, the General Environmental Law includes the principles on which all the regulations and policies regarding environmental matters are based. (28) Among such principles are the right to live in a healthy environment, the right to public access to information, the right to participate in environmental policies, the search for sustainable growth, the principle of prevention (that environmental regulations should be eminently preventative), and the internalization of cost and environmental liability. (29)

      Moreover, there are specific regulations governing environmental matters related to hydrocarbon activities. The Regulations for the Environmental Protection in Hydrocarbon Activities regulates the approval of environmental impact assessments for hydrocarbon projects. (30) It also includes several specific technical provisions that aim to: (1) prevent environmental damage; (2) regulate waste management; (3) limit areas that can be used by platforms; (4) restore affected areas; and (5) protect people involved in hydrocarbon projects by implementing contingency plans, community relation plans, and other preventative measures to safeguard against well blowouts. (31)

      Therefore, the existence of clear rules regarding what must be accomplished by natural resource projects have contributed to the proper development of the Project, not only because the legal framework includes several specific provisions to achieve adequate environmental standards but also because Licensees know of the rules applicable to their operations before beginning operations.

   2. Previous Evaluation

      Environmental studies are probably the most important tool to secure environmental protections and social harmony. Thus, according to the General Environmental Law and the National System for Evaluation of Environmental Assessments Law, (32) it is not possible to begin the development of a public or private project that could generate a negative impact on the environment unless an environmental study regarding such project has been duly approved by the competent authority. (33)

      This principle is included in the Regulations for Environmental Protection in Hydrocarbon Activities, which regulates environmental matters related to such activities. (34) In accordance with the statute, prior to the execution of a hydrocarbon project, it is necessary to present an Environmental Impact Assessment (EIA). (35) Only when the General Directorate of Environmental Affairs of the Ministry of Energy and Mines approves such a study is it possible to initiate the execution of a project. (36)

      The EIA must include the following: (1) a baseline study describing the natural resources of the location, including geographical, social, economic, and cultural aspects of the populations located in the Project's area of influence; (2) a detailed description of the proposed project; (3) a description and technical assessment of the foreseeable short and longterm effects of each of the hydrocarbon activities on the physical and social environment; (4) an Environmental Management Plan containing preventative measures to avoid any environmental damage and social conflict; (37) and (5) a Closure Plan describing the activities that will be executed at the end of the project in order to restore the environment. (38)

      It is necessary to emphasize that the EIA must include a Community Relations Plan describing companies' policies to receive and manage opinions and suggestions from people located in the project's area and to achieve a harmonic relationship with that population. (39)

   3. Environmental Impact Assessment Provisions

      1. Effects

         To understand measures adopted by the Licensees to prevent environmental damages, this section will review the potential...