Mitigating the Social Impact of Oil Operations

1. Mitigating the Social Impact of Oil Operations 18th World Energy Conference Eleodoro Mayorga Alba World Bank October 22, 2001

2. Background • Exploration & Production projects are increasingly taking place in fragile areas. • Indigenous people, more aware of their land property and cultural rights, are demanding a larger share of oil revenues. • Protection of the environment is key in ensuring the survival of indigenous societies. • The industry is actively engaged in understanding the indigenous peoples’ rights and aspirations, and their impact on new projects.

3. International progress • The ILO Convention 169 calls governments to consult new measures, regional plans and specific projects that could impact indigenous people, and sets up ways and means for their participation. • The Bank Group is reviewing its policy on indigenous people (IP). Our new O.P. 4-10 has three objectives: • identify, in consultation with IP, their development needs, • provide for their participation in all the phases of a project and, • avoid/minimize potentially adverse effects.

4. Indigenous people’s concerns • Industry operations are perceived as an intrusion to their habitat, • …. but also, as an opportunity to obtain goods and services that states are not providing them. • IP lack information on environmental risks, legal rights and potential benefits related to oil and gas operations.

5. The Oil Industry’s response • Major international companies are coming up with innovative ways to formulate, implement and monitor agreements with local communities. • These practices should be applied worldwide, including local/small companies not yet subject to the same spotlight as the major companies.

6. Emerging Best Practices • A good number of case studies on “emerging best practices” are now available. • NGOs are actively involved in disseminating best practices, offering an independent monitoring capacity to ensure their implementation. A discussion on “best practices” must deal with these topics:

7. 1. Consultation and Participation • A wider process of participation: • of all stakeholders, in particular the impacted population • from early exploration to field abandonment, • leading to sustainable development of local population. • The process is an important part of Environmental Impact Assessments. • It should be started by the Government, prior to licensing of exploration blocks. • It should lead to agreements that could be adapted and monitored during the entire project.

8. 2. Sharing of Benefits “Compensations” for the use of lands, “Indemnification” for losses and damages to property, “A share of the benefits” from the exploitation of resources. • In most countries, IP do not own the underground resources, thus have no direct rights to the benefits. • However, national laws usually grant oil provinces a share of the benefits: • The distribution of royalties is a subject of disputes. • Revenues rarely arrive to the indigenous communities living close to the operation sites. • Delays in land titling and the lack of local capacity to design and execute projects using royalties, are serious constraints.

9. Sharing of Benefits • The way benefits are shared in different countries illustrates: • the relation between central governments, provinces and traditional landowners. • the need for effective social mapping, • the importance of a consensus to balance different development objectives.

10. 3. Governance and Human Rights • Governments must commit to provide security in areas of operation, to fight corruption, and to respect human rights. • Companies’ human rights policies should: • avoid all discrimination in gender, religion or ethnic groups; • provide fair working conditions, and ensure health and safety programs are applied by contractors and sub-contractors; • respect the rights of free association and collective bargaining; • provide for independent monitoring.

11. 4. Private Social Investments • Beyond compensations, companies implement Community Relation Plans (CRP) including health, education, infrastructure and sustainable development projects. • Partnerships based on objectives and responsibilities shared by all parties are essential. • CRP should be complementary to government and regional development plans and effectively contribute to the protection of the social and cultural heritage of indigenous peoples.

12. 5. Improved Environmental and Social Regulations • All stakeholders recognize the need for “rules of the game”, establishing rights and responsibilities. • New rules must: • allow an effective participation and economic benefits for IP. • define representation rights and roles/responsibilities of all parties. • deal with past environmental liabilities. • provide for rapid conflicts resolution and consensus building. • permit supervision of companies’ practices related to communities. Efforts to improve regulations need to take place at national and regional level

13. Progress in Latin America • A comparison of regulatory frameworks of the countries sharing the Amazonian basin made in 1998 provided recommendations for opening a tri-partite regional dialogue. • Governments, industry and IP are jointly carrying out a work program aiming at improving relations and mutual knowledge, and to designing and enforcing better environmental and social regulations. • At the national level, Peru, Bolivia and recently Ecuador are developing - by consensus- guidelines and regulations for operations in indigenous lands.

14. A role for the World Bank • To be an honest broker and convenor of the interested parties. • Main-streaming the implementation of “emerging best practices” in Bank operations, thus providing funds to governments willing to: • develop and enforce new regulations, and • build institutional capacity. • Support initiatives to disseminate “best practices” world-wide.

15. More information • On the World Bank indigenous policy: • www. worldbank.org/indigenous • On the “Best Practices”: • www.worldbank.org/ogsimpact • On the Program “Población, Energía y Ambiente”: • www.olade.org.ec/redeap/