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ECGD releases BTC Pipeline assessment documents

The ECGD also released an analysis of local environmental laws which are more stringent that those required under the specially-negotiated legal regime for the the pipeline and from which BTC Co, the project developer, is exempt from any liability if violated. BTC Co has always claimed that the standards it negotiated were an improvement on host government standards.

BPU Doc 1 BPU Review of BTC Pipeline Project 3 Dec 03
BPU Doc 2 Extract from minutes of 29 Dec 03
BPU Doc 3 Legal opinion on potential breaches of local environmental law 6 Aug 03

The note below summarises some of the concerns raised by these now disclosed materials.

At the Tribunal Hearing, the ECGD also confirmed that the BPU undertakes NO analysis of the conflict risks of the projects it assesses, nor any analsyis of the financial risks arising from any enviropnmental or social impacts.

In cross examination, Steven Dodgson of ECGD stated:

Q: We have seen in the evidence of both yourself and Mr Allwood that the role of BPU is to assist the environmental, social and human rights impacts of a project; does that include assessment of political or security or conflict related risk?

A. No.

Q. Does the BPU [assess] the financial aspects of a project?

A. No.

Q. Does it have a role in calculating financial risk?

A. No.

Q. Does it have a role in underwriting projects?

A. No.

NOTE ON THE DISCLOSED DOCUMENTS

1. Memorandum from ECA Environmental Sub-Group, “BTC: Potential Breaches of Local Environmental Law”

This consists of the legal advice obtained by ECGD from its lawyers in Azerbaijan, Georgia and Turkey. It was disclosed because it had already been shared with BP and was not therefore legally privileged.

Under the Intergovernmental Agreement and Host Government Agreements for the project, BP was exempt from all local laws other than the constitution of the three countries through which the pipeline passes. BP has argued that the exemptions that it obtained were justified since they resulted in higher environmental standards for the project.

The document lists a range of existing environmental legislation that is “ . . . ‘more stringent than’ the environmental standards set out in the IGA [Inter-Governmental Agreement] and HGAs [Host Government Agreements] and therefore inapplicable to the BTC Project” . In effect, BP can violate the laws with impunity. The laws in question relate inter alia to surface and groundwater pollution, the protection of natural areas, the restoration of land and natural resources following construction, damage to human health, soil erosion, and wetland protection. The exemptions for Turkey included exemption from the enabling legislation for Turkey’s obligations under the international Convention on Wetlands of International Importance especially as Waterfowl Habitat (the Ramsar Convention).

In effect, BP sought and obtained exemptions to a range of environmental laws and accompanying standards that were more stringent than those applied to the pipeline project.

Such exemptions are not covered by BP’s Human Rights Undertaking (under which it promises not to enforce the HGA's stabilisation clauses to claim exemptions from future environmental and human rights legislation). BP is thus free to violate the exempted laws with impunity for the entire contract period of the pipeline.

2. Is the location of Ceyhan Oil Terminal - in breach of international standards?

The Ceyhan Oil Terminal is a major infrastructure development, intended to handle over one million barrels of highly toxic crude oil a day. International standards, including those applicable under the project’s bespoke legal regime, require that its location be justified on environmental grounds, having assessed all possible alternative locations.

During the Information Tribunal hearings, the ECGD disclosed in open court that: “ . . . the actual location option was not left entirely open as it should have been but was constrained by the Turkish Government's insistence that it should be located within the Bay of Iskenderun and therefore there is a criticism of the Turkish Government that it is not meeting international EIA standards.”

The ECGD also disclosed a passage from its own internal assessment of the project’s compliance with international standards: “The BPU [the ECGD’s Business Principles Unit] concurs with MM [Mott MacDonald, the Lenders Group’s consultant] that, based on a review of the EIA [Environmental Impact Assessment] report, insufficient information had been provided to justify the location of the terminal. However the information provided in the SLIP [Supplementary Lenders Information Pack] goes some way to correct this”.

Both disclosures raise serious questions over BP’s claim that the project met international standards, including those required under the legal regime for the project. Although Turkey was perfectly entitled to insist that the terminal be sited in the Bay of Iskenderun, international standards for Environmental Impact Assessment [EIA] placed a duty on BP (as project developer) to keep the location open until all alternatives had been assessed. BP failed to do this. In addition, it also failed to disclose that it had derogated from international EIA standards – despite such standards being incorporated into the legal regime for the project.

BP’s failure to disclose its derogation from such international standards also brings into question the adequacy of its consulation process on the EIA, since stakeholders were not fully informed of the basis on which the location of the Ceyhan oil terminal had been decided.