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Peru Energy Project Saves Rainforest

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Defying conventional assumptions, a vast natural gas project has helped to protect 1.5 million hectares of rainforest in the Peruvian Amazon.

BY ROGER HAMILTON
IDBAmerica

There were fears that the spillover effects of drilling in the Peruvian Amazon would spread like an oil slick, obliterating forests and the cultures of the peoples that lived in them.

But in fact, something quite different happened.

"Just look at this!" exclaimed Joseph Milewski, environmental specialist with the Inter-American Development Bank, tracing the features on a large map tacked onto a wall of an ecolodge on the Lower Urubamba River. He read off the names of reserves, parks and sanctuaries: Otishi, Machiguenga, Asháninka, Megantoni, Nahua Kugapakori Nanti.

The map, produced by a group called the Center for the Development of Indigenous Amazon Peoples, shows a practically unbroken swath of protected areas, 1.5 million hectares in all. In the center a square outlined in red is superimposed on parts of several of the reserves: this is Block 88, the area in which the energy company Pluspetrol is extracting natural gas as part of the Camisea Natural Gas Project.

How can energy extraction coexist with rainforest preservation? The answer is complex and in many respects surprising. It is also vitally important for a future of increasing energy scarcity and inevitable pressures to develop hydrocarbon resources wherever they happen to be, including in the Amazon.

The issue is crucial for the Inter-American Development Bank, which helped finance the pipeline portion of the Camisea project with a loan for US$75 million and also provided a $5 million loan for strengthening government agencies that would oversee and regulate the private companies. The Bank decided to participate in Camisea because it believed that its involvement could help make it a better project. In many respects, this has been the case, particularly regarding efforts to protect the rainforest and the native communities that live in it.

As an engine of economic growth, Camisea has already made its mark. Since Camisea gas started flowing in 2004, the project is adding an annual percentage point to Peru’s gross domestic product. During the project’s 30-year lifetime, Peru’s trade balance will benefit by approximately $1.15 billion annually earned through the substitution of imports and an increase of exports by the Camisea companies.

At the same time, even former critics are acknowledging that Camisea is serving as a model for energy extraction in a sensitive cultural and environmental environment. The project is showing how how an extractive project that is well designed and carried out, with the right commitments from the companies and the government, can both boost the country’s economy and help create a model for development with environmental and social protection.

Camisea’s most visible environmental and social achievement has been the amount of land that has come under protection, or whose protection has been strengthened. The IDB’s five-year involvement in Camisea has provided clear evidence that hydrocarbon extraction is not just compatible with forest conservation. Rather, the gas project actually has been instrumental in achieving a wide range of conservation benefits.

In getting to this point, a great many challenges have had to be overcome. Peruvian government agencies had to create a new body of complex laws and regulations governing Camisea’s construction and operations and assemble the expertise needed to monitor and impose sanctions where necessary.

The companies faced their own challenges. Under close public scrutiny, they had to operate in a remote region known for months of unremitting rain, unstable soils, and constant logistical headaches. The liquid and natural gas would be piped over the Andes in two pipelines that would traverse nearly every major land formation in the country and a great variety of ecosystems. The gas line, 714 kilometers long, would serve consumers in the capital of Lima. The gas also would be used to generate electricity for distribution throughout the country. The 540-kilometer liquid gas line would end at a marine terminal for on-loading to export markets.

THE ISSUE OF LAND

Megaprojects can produce megaimpacts if not properly managed. Together, the Camisea firms and the Peruvian government, with the support of the IDB, have succeeded in avoiding where possible, and otherwise minimizing, the project’s negative side effects.

Camisea’s direct impacts were relatively straightforward and related mainly to the process of gas exploration, setting up a camp and refinery, and building a pipeline over the Andes. The private companies addressed these direct impacts by replanting vegetation on pipeline rights of way, sharply limiting contact between their employees and local people, and forgoing road construction in favor of less intrusive air and river transport, among other measures. On balance, they showed that a well-designed and managed gas project treads lightly on the environment when compared with other productive activities in the Amazon, such as growing soybeans, raising cattle and gold mining in the rivers.

But turning to Camisea’s long-term impacts, only the government—not the companies—had the authority and means to help ensure a sustainable future. Only a body of laws and public agencies capable of enforcing them could guarantee the rights of the people of the Lower Urubamba and provide them with social services on a permanent basis.

For native groups, the key issue was land security. Whether living in settled villages or as isolated migratory groups, indigenous peoples depend on their forests and rivers for sustenance, their spiritual beliefs and their identity. Their garden plots supply them with the staple cassava and other crops. They use their intimate knowledge of the forest for hunting and for gathering fruits, nuts, tubers and medicinal plants. They know where to find palm fronds for baskets and thatching, and clay for making hearth-fired pots. And most of all, their forests and rivers contain sacred places, many linked to creation myths.

“We must safeguard our land to ensure our survival,” Robert Guimarães, vice president of the Interethnic Association for the Development of the Peruvian Jungle, said at the 2006 IDB annual meeting held in Peru’s capital of Lima. “Our land is not simply a resource to be used,” he added. “Our relationship with our forests is spiritual.”

Before Camisea, some settlers had already established farmsteads in the Lower Urubamba, and their modest homesteads can be seen on bluffs overlooking the river. The indigenous people could do little to protect themselves against these incursions without the backing of government agencies to demarcate their land, provide legal titles and enforce the law. The government was in no position to exercise its authority in those fomer times. But today, largely as the result of Camisea, vast areas have been designated as parks and reserves, giving the indigenous peoples of the Lower Urubamba an unprecedented guarantee that they will be able to make their own decisions on how to safeguard their environment and protect their cultural identity in the years to come.

NEW PARKS AND RESERVES

One of the crown jewels of the Lower Urubamba’s protected areas is a 305,000-hectare spine of forested mountains called Otishi, accessible only to native inhabitants and wilderness-savvy adventurers. Before the Camisea project, the area had been identified as a potential national park after years of hard work and lobbying by nongovernmental organizations and local communities. But it was protected in name only, with no guards, no patrols and no formal demarcation of boundaries. The gas project triggered the park’s formal creation in 2003 and the establishment of a management plan.

With Otishi’s future assured, two major indigenous reserves were created on either side. On the park’s eastern flank is the 216,865-hectare Machiguenga Communal Reserve, and on the western flank, the Asháninka Communal Reserve, with 154,468 hectares. Both are named for the groups that are their predominant inhabitants. The two reserves have been demarcated and real protection is fast becoming a reality.

Another keystone area, the 458,000-hectare Nahua Kugapakori Nanti State Reserve, presented a special challenge. First, this is the ancestral land of the three peoples represented in its name. Many of these peoples now live in settled villages, but other groups continue to shun direct contact with the outside world. Simultaneously, the reserve includes 75 percent of Block 88, the site of Camisea’s gas fields. As a result, the main stakeholders—the Peruvian government, Pluspetrol and the local leaders—must walk a delicate tightrope of extracting gas without jeopardizing the rights of the native peoples.

The Nahua Kugapakori Nanti Reserve had been designated before the Camisea project. But its protection measures consisted of basically one sentence in one law. It took the urgency of the gas project and the participation of the IDB to give the reserve a solid legal standing and a real measure of protection.

Another area, the Megantoni National Sanctuary, was created as part of the IDB-funded social and environmental protection project. This swath of 215,865 hectares is crucial for a series of reasons: spiritual, cultural, topographic and biological.

According to creation mythologies, the mountains of Megantoni were the origin of the Machiguenga and other groups. When people today die, their souls may return to these same mountains. Although relatively few actually have visit Megantoni, those who do find it a place for cultural as well as spiritual renewal, where they can hunt, fish and gather plant products, including medicinal plants.

Megantoni also serves as a physical barrier, dividing the Andean cultures upstream from the Amazonian cultures downstream. In part thanks to these rugged mountains, relatively little migration into the Lower Urubamba region has taken place. The main route through the mountains is a channel cut by the Urubamba River called the Pongo de Mainique. Especially during the high-water season, its turbulent rapids and ominous whirlpools claim many boats and sometimes the lives of passengers.

Just as Megantoni divides human cultures it unites animal populations. On the east it abuts the vast Manú National Park, and on the west, the complex of national parks and reserves of which Otishi is the centerpiece. By linking these important natural areas, the sanctuary creates a very large interconnected corridor of protected land in which animals can roam and expand their gene pools, thereby helping to guarantee their survival in the face of future human encroachment.

In addition to these parks and reserves, a large number of indigenous communities occupy land that has been demarcated and titled, most of which lies along the Urubamba River and its tributaries. Along the river’s main stem, patches of land belong to settlers who also have been granted titles.

MAKING PROTECTION PERMANENT

With the support of the IDB, the government will continue to strengthen its presence in this formerly isolated region. The Bank is now preparing to finance a new project to support sustainable development of both indigenous and nonindigenous communities in the Lower Urubamba that will build on advances already made by local governments to support sustainable development. The new project also will help the central government to provide basic services such as health, sanitation and education, as well as identify infrastructure projects that would be financed by future royalties from energy revenues.

In a particularly significant development, the government is now taking ownership of the new development and protection measures. Starting in early 2007, every park and control post, staff salaries, and many other activities carried out by the indigenous affairs agency and environmental protection agency are being funded by line items in the central government budget. Previously, with the exception of funding for the parks, these activities were largely funded by resources from the IDB’s $5 million institutional strengthening loan.

Over time, the government of Peru government will deepen and broaden its institutional network into the Lower Urubamba, carrying out management plans for protected areas, enforcing the law, and providing services to even remote villages. While it will promote development, it will at the same time guarantee indigenous people the right to determine their future and how they wish to develop while protecting their cultural identity.

Republished with permission from IDBAmerica, the magazine of the Inter-American Development Bank.

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