Energy Issues in Peru and the Andes:Energy Issues in Peru and the Andes:Environmental and Social AspectsEnvironmental and Social Aspects

George Washington UniversityGeorge Washington University

January 28, 2005January 28, 2005

Dr. Robert H. MontgomeryHead, Environmental and Social Unit

Private Sector DepartmentInter-American Development Bank

Framework - Context

Peru offers tremendous oil and gas opportunities with Peru offers tremendous oil and gas opportunities with potential very significant positive benefits to Peru civil potential very significant positive benefits to Peru civil societysociety

Projects are often located in areas of sensitive Projects are often located in areas of sensitive environmental habitats (e.g., rainforests, etc.) and environmental habitats (e.g., rainforests, etc.) and social conditions (e.g., indigenous peoples, social conditions (e.g., indigenous peoples, extremely poor rural communities), therefore extremely poor rural communities), therefore potential significant environmental and social risks potential significant environmental and social risks (impacts, financial, reputation)(impacts, financial, reputation)

Framework - Context

Philosophical IssuesPhilosophical Issues

Should oil and gas development occur in areas of highly Should oil and gas development occur in areas of highly sensitive/special environmental or social conditionssensitive/special environmental or social conditions

Site selection for oil and gas processing and exportation Site selection for oil and gas processing and exportation facilities facilities

Participation of local communities in project benefitsParticipation of local communities in project benefits

Multiple stakeholders with varying capacityMultiple stakeholders with varying capacity

Past practices and history of Peruvian oil and gas Past practices and history of Peruvian oil and gas developmentdevelopment

Framework - Context

Lack of credibility and trust by civil society with Lack of credibility and trust by civil society with governmental and private sector entities, therefore governmental and private sector entities, therefore how to establish comfort that project is acceptablehow to establish comfort that project is acceptable

Potential lack of baseline data for some Potential lack of baseline data for some environmental and social factorsenvironmental and social factors

The Camisea Project experienceThe Camisea Project experience

Therefore: Therefore:

High Benefit – High Risk – High DemandsHigh Benefit – High Risk – High Demands

Key Actions Needed

Strategic thinking to evaluate all impacts and issues, Strategic thinking to evaluate all impacts and issues, in particular attempt to develop and implement in particular attempt to develop and implement innovative solutions to those difficult or controversial innovative solutions to those difficult or controversial issues where often there is mixed responsibilities -- issues where often there is mixed responsibilities -- “Look beyond project”“Look beyond project”

Explore opportunities to leverage the project to Explore opportunities to leverage the project to create positive benefits and address broader issuescreate positive benefits and address broader issues

Key Actions Needed

Demonstrate leadership and commitment by:Demonstrate leadership and commitment by:

Establishing the necessary environmental and social Establishing the necessary environmental and social requirements with appropriate supervision and requirements with appropriate supervision and monitoring programs, indicators and enforcement monitoring programs, indicators and enforcement mechanismsmechanisms

Establishing the appropriate and necessary Establishing the appropriate and necessary partnerships and agreementspartnerships and agreements

Adequately addressing issues (in particular Adequately addressing issues (in particular unanticipated) that arise during project implementationunanticipated) that arise during project implementation

Taking potential reputation riskTaking potential reputation risk

Key Actions Needed

Implement a proactive communication program toImplement a proactive communication program to

Provide quality and credible informationProvide quality and credible information

Establish civil society participationEstablish civil society participation

Build consensusBuild consensus

Respond to concerns raisedRespond to concerns raised

Approach for Managing Environmental and Social Aspects

The The “Right” Attitude and Commitment of Senior “Right” Attitude and Commitment of Senior Management Management in terms of managing environmental, social, in terms of managing environmental, social, health and safety and labor issueshealth and safety and labor issues

Environmental SustainabilityEnvironmental Sustainability

Corporate Social ResponsibilityCorporate Social Responsibility

““Beyond the Minimum”Beyond the Minimum”

Provide adequate resourcesProvide adequate resources

Commitment to resolve problems and issues when they Commitment to resolve problems and issues when they arise – AND they will arisearise – AND they will arise

Approach for Managing Environmental and Social Aspects (cont.)

Establish the Establish the Proper Project FrameworkProper Project Framework

Strategic Thinking – expanded vision and analysis of impacts Strategic Thinking – expanded vision and analysis of impacts and risks, especially related to indirect and cumulative impactsand risks, especially related to indirect and cumulative impacts

Leverage the Opportunity (Project)Leverage the Opportunity (Project)

Standards and Guidelines to MeetStandards and Guidelines to Meet

Use Use “Proper” Advice“Proper” Advice

Qualified Senior-level ESHS Company StaffQualified Senior-level ESHS Company Staff ConsultantsConsultants Strategic thinkingStrategic thinking

Implement a Implement a Social Communication ProgramSocial Communication Program

Adequate and timely ongoing information disclosureAdequate and timely ongoing information disclosure

Early and continued open/transparent dialogue Early and continued open/transparent dialogue throughout the life of the project, not just prior to throughout the life of the project, not just prior to project initiationproject initiation

““Participation” versus “Consultation”Participation” versus “Consultation”

Pro-active versus Re-activePro-active versus Re-active

Approach for Managing Environmental and Social Aspects (cont.)

Develop Develop “Quality” Documentation“Quality” Documentation

Technically correct and completeTechnically correct and complete

Level commensurate with project characteristics (e.g., Level commensurate with project characteristics (e.g., international standards or even state-of-art when international standards or even state-of-art when appropriate)appropriate)

EIA – adequate baseline data, alternative analysis, indirect EIA – adequate baseline data, alternative analysis, indirect and cumulative impactsand cumulative impacts

ESMP, HSP, Contingency/Emergency Plan - both ESMP, HSP, Contingency/Emergency Plan - both conceptual (e.g., EIA) and detailed/operationalconceptual (e.g., EIA) and detailed/operational

““You get what you pay for”You get what you pay for”

Approach for Managing Environmental and Social Aspects (cont.)

Ensure Mitigation Ensure Mitigation of all project direct, indirect and of all project direct, indirect and cumulative environmental, social, health and safety cumulative environmental, social, health and safety and labor impacts and risksand labor impacts and risks

ComplianceCompliance by ALL contractors and sub-contractorsby ALL contractors and sub-contractors

Includes impacts NOT originally estimated/anticipated Includes impacts NOT originally estimated/anticipated but identified subsequently during project executionbut identified subsequently during project execution

Undefined, unclear or mixed responsibilities – Use Undefined, unclear or mixed responsibilities – Use “Best Efforts” to work with others (e.g., government, “Best Efforts” to work with others (e.g., government, other companies) to mitigate those indirect and/or other companies) to mitigate those indirect and/or cumulative impacts that the company (sponsor) can cumulative impacts that the company (sponsor) can NOT implementNOT implement

Approach for Managing Environmental and Social Aspects (cont.)

Implement Implement “Proper” Supervision/Monitoring“Proper” Supervision/Monitoring of of environmental and social requirements and aspects environmental and social requirements and aspects during life of projectduring life of project

InternalInternal

Independent and TransparentIndependent and Transparent

Results to all relevant stakeholders (including public)Results to all relevant stakeholders (including public)

Feedback System to ensure timely solutions to correct Feedback System to ensure timely solutions to correct issuesissues

Complaint Resolution ProcessComplaint Resolution Process

Approach for Managing Environmental and Social Aspects (cont.)

Implement Implement Corporate Social ResponsibilityCorporate Social Responsibility

““Positive” environmental and social impactsPositive” environmental and social impacts

Support to community, workers, etc.Support to community, workers, etc.

Focus on efforts on poverty reduction, social Focus on efforts on poverty reduction, social development and opportunities, environmental development and opportunities, environmental enhancements, sustainable economic developmentenhancements, sustainable economic development

Promote return of project benefits to communities Promote return of project benefits to communities where project is located (e.g., Environmental, Social where project is located (e.g., Environmental, Social and Economic Fund, etc.)and Economic Fund, etc.)

Approach for Managing Environmental and Social Aspects (cont.)