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Costa Rica: Offshore Oil Drilling Scrapped

by David BoddigerLatinamerica Press
May 15th, 2002

Environmentalists are praising Costa Rica's Ministry of the Environment and Energy for turning down a request from a US oil company to drill for oil along the Caribbean coast.

The ministry's National Technical Secretariat (SETENA) rejected the environmental impact study presented by MKJ Xplorations, a member of the US-based Harken Costa Rican Holdings, citing more than 50 legal and environmental problems.

Costa Rican law requires that environmental impact studies be approved before offshore drilling can get underway. Harken is appealing the decision, which blocks its request to drill off the coast of Moín, in the Caribbean coastal province of Limón.

"This is a very positive development, because it strengthens (Costa Rica's) environmental image," said Oil Watch Costa Rica spokesperson Mauricio Alvarez.

SETENA's 55-point decision, made in late-February, said that Harken's study contained technical errors and incomplete data and could have a negative impact on local flora and fauna, as well as a negative social and economic impact.

"Oil exploration leads to a great uncertainty regarding environmental risk ... and represents a possible threat to the consolidation of a Meso-American Biological Corridor. Such an activity contradicts Costa Rica's image as a leader in the field of conservation of natural resources," stated SETENA.

Alvarez explained that by ruling against the impact study, SETENA set a precedent that when in doubt, Costa Rica will decide in favor of the environment.

The decision was the culmination of a two-year review process in which SETENA consulted dozens of scientists, scholars, environmentalists, representatives of the tourism sector, local fishermen and civil, religious and indigenous leaders. Harken had presented its study in July 2000.

Company officials maintain that the project is safe.

"We were disappointed by the decision," said Harken President Brent Abadie. "SETENA accepted opinions from organizations and individuals who are not properly qualified and registered according to Costa Rican law. The decision appears to be politically motivated."

Anti-Petroleum Action (ADELA), a Costa Rican anti-oil umbrella organization made up of 60 local organizations, has been one of the leading critics of the government's policy toward foreign oil investment. In a recent press release, ADELA disagreed with company statements stating, "(SETENA) has acted with the utmost scientific rigor, putting the people of Costa Rican and their environment first."

Environment Minister Elizabeth Odio had 60 days to rule on the appeal, effective once all of the 220 participants in the process are notified. As of March, no one had been formally notified, leading Alvarez to speculate that the issue will be left to the incoming administration of President-elect Abel Pacheco, who will asume power on May 10.

Pacheco has appointed Carlos Manuel Rodríguez, a 42-year-old attorney and nephew of outgoing President Miguel Angel Rodríguez, as the next environment minister.

During the presidential campaign, both Pacheco of the Christian Social Unity Party and National Liberation Party candidate Rolando Araya said that they did not support turning Costa Rica into an "Oil Republic."

At the heart of ongoing debate is the highly criticized 1994 Hydrocarbons Law passed during former President Rafael Calderón's government (1990-1994). The law divided the country into 27 oil and natural gas exploration blocks, including some that encroach on indigenous reserves and nationally protected land. The blocks were opened to bidding by foreign companies in 1997.

In 1998, four of these blocks -- located along the Atlantic Coast -- were granted to MKJ Xplorations, based in Louisiana. In November 1998, Harken Energy Corporation of Dallas, Texas, acquired 80 percent of concession rights from MKJ, giving it offshore exploring rights to 1.4 million acres and doubling Harken's access to Latin American exploration sites.

After SETENA approved an initial environmental impact study in March 1999, Harken Costa Rica Holdings, that includes the two oil companies, formally signed a contract with the government for further exploration. Seismic testing was conducted between October and December 1999.

But widespread public protest over opening Costa Rica to foreign oil interests prompted a wave of legal challenges that froze efforts by Harken Energy and Denver-based Mallon Resources Corp., which had been awarded six exploration blocks in April, 2000. Following the legal delays, Harken Energy reduced its holdings by 40 percent in 2001.

Oil advocates and opponents agree that the law sends mixed signals to investors, and have called on the incoming Legislative Assembly, which will be seated May 8, to reform or repeal the law. Parts of the law have already been ruled unconstitutional by the Supreme Court.

In December 2001, the court ruled that the process of granting concessions was unconstitutional. And in February, the court decided that another clause in the law violated Art. 50 of the constitution, which guarantees Costa Ricans the right to live in a healthy environment. The ruling also required environmental impact studies be conducted before concessions are granted.

Although it appears that the court's ruling are not retroactive and cannot be applied to concessions already granted, officials from both Mallon and Harken Energy are waiting for the judges to further clarify their ruling.

The SETENA decision, however, went beyond just local law, drawing on international agreements signed by the Costa Rican government. One such agreement was the Declaration of Rio on Development and the Environment, signed at the UN Environmental Summit in 1992.

Alvarez said the government is to blame for the problem. He said Costa Rican environmental policy has reflected a double standard during the last decade, with government officials talking about environmental protection while allowing unchecked exploration of mining, logging and oil drilling.

"I don't think this is the fault of the oil companies or the anti-oil protestors. The government is to blame for lacking a clear policy," said Alvarez.





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