Environmental Impact Assessment of BTC oil pipeline
A critical review
first published 1 October 2003
The Baku Ceyhan Campaign, of which The Corner House is a part, carried out a detailed study of the Environmental Impact Assessment for the Turkish section of BP's Caspian oil pipeline, and found 173 violations of international standards, including the World Bank's own lending policies. (Scroll to bottom of page for links to each chapter.)
In 2003, the BTC Consortium, a coalition of 11 oil companies led by BP, applied for public funding (or what BP chief executive John Browne called "free public money"1 from the World Bank's International Finance Corporation (IFC), which lends to private sector companies; the European Bank for Reconstruction and Development (EBRD); and several export credit agencies (ECAs), including the UK's ECGD, to finance the construction of its Baku-Tbilisi-Ceyhan (BTC) pipeline taking oil from the Caspian Sea to the Mediterranean.
On 11 June 2003, the IFC and the EBRD approved the project's Environmental Impact Assessment (EIA)2 and Resettlement Action Plan (RAP),3 carried out by several consultancy companies, including Environmental Resources Management (ERM), for BTC Co, and released them for a 120-day period of public consultation.
A general requirement of the Business Principles adopted by the UK's Export Credits Guarantee Department (ECGD) was that support for the BTC project would be conditional upon the project complying with the environmental and other safeguard policies of the International Finance Corporation (IFC) and with the laws of the three countries involved (Azerbaijan, Georgia and Turkey), including the BTC project's legal framework.
The Corner House and its colleagues carried out a detailed Review of the BTC's EIA and RAP for the Turkey section of the pipeline. It assessed the EIA against the World Bank's operational policies and safeguards (particularly those on consultation with affected people; resettlement of affected people; cultural heritage; environmental assessment; and assessment of alternatives to the project as proposed). It also assessed the proposed pipeline against other standards to which the BTC project had committed itself under the legal framework it established for the pipeline (the Host Government Agreements, Intergovernmental Agreement and Lump Sum Turnkey Agreement4).
The Review found that the BTC project broke World Bank standards and the legal framework on multiple counts. It found at least 173 violations of international standards; under the legal agreements governing the BTC project, such violations constitute potential breaches of host country law.
- The BTC project violates every relevant World Bank safeguard policy on multiple counts.
- Many of the claims made in the EIA are misleading and unsupportable. For example, BTC claims to have conducted comprehensive consultation exercises, yet those exercises lasted little more than two months in total and fewer than 2 per cent of people were consulted face-to-face.
- To keep to the project's construction timetable, emergency powers were invoked to acquire the land more quickly, violating World Bank policy Operational Directive 4.30 on Involuntary Resettlement.
- BTC Co. will not apply the World Bank's Operational Directive 4.20, Indigenous Peoples, specifically aimed at safeguarding the interests of minority groups. Kurdish people in Turkey meet every one of the criteria for applying OD 4.20; not applying the policy leaves ethnic minority groups vulnerable to multiple socio-political difficulties connected to the BTC project.
- The legal framework for the project potentially breaches Turkey's obligations under international human rights and environmental law. The Host Government Agreements (HGAs) conflict with Turkey's accession agreements with the European Commission (to which Turkey must comply before joining the European Union), and with the OECD's Guidelines on Multinational Enterprises. Funding for the BTC project may therefore breach the World Bank's Memorandum of Understanding with the European Commission on finance for accession countries.
A supplementary Appendix evaluated the pipeline's compliance with the Equator Principles, which require projects supported by private banks (rather than those funded with public money such as EBRD and IFC) to comply with International Finance Corporation (IFC) policies and host country laws.
The groups urged these potential funders to delay making any decision on financing the pipeline "until major changes have been made to the project's design and implementation so that it complies with World Bank policies, host country law and, at this stage, Turkey's international obligations." The Review stated that funding should not be granted unless the rights of and benefits due to affected people (such as the requirement of the World Bank Resettlement policy to ensure that affected land users receive negotiated compensation payments prior to construction) were observed in full, retroactively as well as in future operations.
The IFC issued a generic response once its consultation was over, noting that it had "received numerous letters of concern that asked for a delay in the financing or that IFC did not finance the BTC pipeline project at all" and prepared a response, dated 27 October 2003, "that is meant to address common themes that have been raised by various organizations".
When ECGD invited further comments on the BTC pipeline, The Corner House and its colleagues sent ECGD on 10 November 2003 more information about breaches of the World Bank's policy on involuntary resettlement along the entire length of the pipeline and serious allegations of malpractice in the construction operations in Turkey and Georgia, including faulty welding being passed as satisfactory. Their letter was accompanied by 11 Appendices.
Review of BTC Environmental Impact Assessment (Turkey Section)
Subsequent Annexes sent to ECGD in November 2003
1Quoted in Corzine, R., "Wisdom of Baku pipeline queried", Financial Times, 4 November 1998, p.4.
2An Environmental Impact Assessment (EIA) is a common requirement of funders and planners before supporting any major infrastructure project. It assesses the potential impacts, both positive and negative, that a proposed project might have on the "environment", understood to encompass not only "natural" aspects but social and economic ones as well.
3When proposed projects need to acquire land where people live or farm and from which they would be displaced or economically disadvantaged if the project goes ahead, a Resettlement Action Plan (RAP) sets out a plan to ensure that the livelihoods of those affected will be restored, generally through compensation.
4The Host Government Agreements (HGAs) are private contracts signed between the BTC consortium and each of the three host country governments (Azerbaijan, Georgia and Turkey). They override all existing national laws (other than the constitutions of the three countries), thereby bypassing national social, environmental and other domestic legislation and give effective sovereignty to BP and its partners over the pipeline route. The Intergovernmental Agreement is an international treaty between the three countries (Azerbaijan, Georgia and Turkey).
The Lump Sum Turnkey Agreement is the contract signed between the BTC consortium and BOTAS, the Turkish state pipeline company, to build and operate the pipeline in Turkey.