December 28, 2004
Ms. Kate Watters
Development Coordinator [sic] Crude Accountability
PO Box 2345
Alexandria, VA 22301
Dear Ms. Watters,
IFC’s team visited the Karachaganak field in October this year as part of our annual supervision work. They prepared responses to the questions from your September 24, 2004 letter, which are printed below in italics.
1. The Karachaganak field may have serious trans-boundary impacts. Air pollution from the Karachaganak Field may impact communities in Russia as the winds from Karachaganak blow toward towns and villages on the other side of the border, including Ilyek, where residents are concerned about air pollution and subsequent health impacts that they attribute to Karachaganak. Water pollution from the Karachaganak Field has the potential to pollute the Ural River, which flows into the Caspian Sea and provides key spawning grounds for the endangered Beluga (and other types of) sturgeon. An accident involving water contamination could be devastating to the Ural, and, ultimately, the Caspian Sea. We find no evidence in the official documentation of this project demonstrating that an adequate environmental impact assessment of these concerns, including assessment of trans-boundary risks, was undertaken.
IFC Response: The air monitoring results for the surrounding villages do not indicate the presence of a harmful level of ambient pollutants. The nearest Russian village is Zatonnoye which is 12.5 km away from the field border.
The quality of air in the surrounding villages is monitored daily by various parties. An independent contractor monitors the quality of ambient air in the villages by taking samples four times a day. Furthermore, KPO sends its own state-of-the-art mobile monitoring units to the same eight villages closest to the field, in addition to several layers of air monitoring within the field. Monitoring results for the villages, published locally and distributed free of charge to the villagers in the field area, do not indicate the presence of harmful concentrations of pollutants in the air.
Contamination of the Ural River from pollutants emanating from the Karachaganak Field is a virtual impossibility as the river is roughly 65 km from the field. KPO regularly (monthly) monitors the water in 25 wells within the field boundaries as well as 12 wells in 12 villages around the field. No adverse change in the water quality has been detected.
Possible pollution of the Ural River from the pipeline is also unlikely. IFC, in accordance with its International Waterways Policy, notified all Caspian riparian states of the Project and specifically about the pipeline crossing the Ural River. However it should be noted that the likely hood of a spill from the Ural River impacting the fisheries of the Caspian Sea is extremely unlikely. The Ural River is 998 meters wide where the pipeline crosses it. The pipeline was installed by directional drill so that it lies 30 to 50 feet below the bottom surface of the river. In addition, the actual thickness of the pipe wall is higher than normal for extra safety. Block valves have been installed on each side of the river and if a pressure drop is sensed by the leak detection, equipment can be shut off manually or remotely very quickly, thus limiting the amount of oil available for a spill. The operator carries out routine inspection and maintenance program for the pipeline and safety devices.
In order for an impact to the Caspian Sea to occur, the pipeline would have to rupture between the block valves installed on either side of the river; oil would have to migrate from 30-50 feet below the river bed up through the covering strata to reach the waters of the Ural River. The oil would then have to travel south on the Ural River for 500 km to reach the Caspian Sea without adhering to the sides of the river and/or breaking down as it normally does in addition to defeating spill containment measures.
2. Ongoing gas flaring from the field–including on the ground–appears to be in violation of the World Bank’s efforts to reduce flaring, particularly through its Global Gas Flaring Reduction Partnership.
IFC Response: The flaring in the field is the result of the following activities:
(a) Testing of wells: 99% of the wells used or worked over by KPO are connected to the testing flowlines and are not flared during the testing period. A minor portion (1%) of the wells, including dew-point wells and newly-drilled wells, are not connected to flowlines and are therefore tested in the traditional manner using flaring. However, KPO applies and receives each year the Nature Use Permit from Kazakhstan’s environmental authorities, who approve such planned well testing activities, provided that the overall level of pollutants in ambient air does not exceed Kazakh law regulations;
(b) Flash gas flaring: Every facility has the ability to flare a certain amount of flash gas. This is standard industry practice and a necessary safety feature. KPO has installed additional flash gas compressors and thus completely eliminated excess gas flaring from Unit 3 (inherited Soviet-era facility). Other facilities (KPC and Unit 2) flare gas on an as-needed basis, especially during the ongoing performance and capacity tests of the newly commissioned facilities, which is also common industry practice. Althoughunplanned and in excess of the planned levels of emissions from the field, there have been no exceedances recorded at the SPZ [Sanitary Protection Zone] boundary or in the 10 villages adjacent to the field with the exception of two villages, one in each. There was an insignificant NO2 exceedance of 1.1 MPC recorded in Berezovka village on January 2, 2004. The second instance of NO2 exceedance of 2.4 MPC was recorded in Karachaganak village on February 25, 2004; and
(c) Commissioning and operation of the methanol regenerator at Unit 3 will significantly reduce the flaring of the water methanol mixture at the horizontal flare. The methanol will be recycled and the treated water will be injected into a disposal well. The associated condensate will be recovered and recycled.
KPO uses the Super Green Burner to reduce the amount of emitted pollutants during the flaring. While the use of the Super Green Burner will not reduce the volume of flaring, it will reduce the amount of harmful pollutants that are emitted during the flaring. The Super Green Burner uses compressed air to create a more effective flare pattern that allows for a more complete combustion of petroleum products, giving smokeless and fallout-free burn. Because of the excess of air and the high temperature of combustion, the Super Green Burner reduces the amounts of soot, carbon monoxide (CO), H2S, methane, and mercaptans to very low levels. The technology reduces soot to essentially zero.
3. Publicly available information regarding the potential risk to ground water and, therefore, the drinking water in the village of Berezovka, is inadequate. According to Berezovka residents, the quality of drinking water in the village has deteriorated significantly in the past year. The water has a definite salty taste, and has become quite unpleasant to drink. Villagers are concerned about the chemical content of the water.
(a) The project performs well testing for groundwater and surface water within the field from 25 wells on a regular basis;
(b) In addition, 12 wells within the villages are tested and analyzed for groundwater and surface water quality and the reports indicated no contamination resulting from the field. However, most, if not all villages (including Berezovka), suffer from the deterioration of the Soviet-era water distribution infrastructure that is leaking, rusted and in need of repair; and
(c) the project is self-contained for liquid waste–industrial liquid waste is contained either in lined polygons or lined ponds so that it cannot leach in to the ground and is never discharged to surface waters.
While we understand that the results discussed above are not published in the local newspapers, we nonetheless cannot link the deterioration in the [sic] Berezovka’s drinking water to KPO’s activities. We would welcome the publishing of this information.
4. Residents of the village of Berezovka have informed Crude Accountability that the Karachaganak field has caused negative health impacts in their community. According to data complied by the villagers in Berezovka, forty-five percent of the population suffers from chronic health problems (see attached data).
IFC Response: Crude Accountability and Ms. Svetlana Anosova have indicated to IFC that the overall health situation in the village is poor, according to Ms. Anosova’s door-to-door survey of the residents in the village. While many medical studies with results to the contrary have been done in this and other villages both during KarachaganakGazprom and KPO’s operatorship, we understand that many of them have not been published. A recent West Kazakhstan Oblast (WKO) medical study is supposed to be published and explained to the villagers of Berezovka, though it should be noted that 225 villagers reportedly refused to be examined by the 14 or so doctors sent by the local government to carry out the health study.
However, because we remain concerned about Berezovka villagers’ health and their perception of the field’s risk to it, we would appreciate if you could help us understand exactly what kind of scientific methodology Ms. Anosova used when conducting the mentioned study and deriving the link between the health of the residents and the field activities.
5. Unlike other situations that the IFC may have experienced, where residents resist resettlement, residents of Berezovka seek relocation from their village to a safer, healthier spot because of the environmental health risks associated with air and water pollution from the Karachaganak Field. Villagers are exposed to continuous atmospheric emissions and live in constant fear of an accident at the field, which would lead to injury, illness or death. While there have been discussions with IFC staff about whether the project comports with Kazakhstan’s resettlement requirements, there has not been adequate discussion about what the IFC’s safeguard policies can do to ensure its involvement in Karachaganak results in a “do no harm” outcome.
IFC Response: As IFC indicated to you and Ms. Svetlana Anosova in the past, IFC’s policy is not to advocate resettlement even if it can be demonstrated that the project is negatively impacting a community. Before recommending such a drastic measure, IFC would demand that the Project operator ceases whatever activity was producing such negative impact. Only if this step would not be possible to carry out would we then consider the resettlement option. However, in this case, your claims are not supported by evidence given by the various providers of monitoring results and IFC cannot find support in claims that this project is doing harm to the village of Berezovka. This is consistent with the application of IFC’s safeguard policies and the “do-no-harm” philosophy.
6. Residents of Berezovka filmed constant night-time flaring and burning at the Karachaganak field in July 2004. According to the villagers–and as evidenced in film coverage that we have obtained–flares and fires burned for several nights in a row, causing concern that an accident had occurred at the Karachaganak Field. Villagers reported hearing loud booming noises and crackling sounds coming from the Field. The village was provided with no information about these events during that time. When KPO management and local authorities were asked about the flaring and fires by Crude Accountability during a trip to western Kazakhstan in August, we received conflicting answers. KPO management stated that they believed they may have flared a couple of wells; local authorities stated that KPO had significantly exceeded its flaring quota for the month, but “had paid the fine.” While KPO’s own documentation (charts hanging on the wall at the entry to the KPO headquarters in Aksai) indicated that flaring had exceeded the monthly allowance by at least a factor of two, we were unable to obtain concrete information about the nature of the violation. No one provided information about the composition of the flares or excess toxics burned.
IFC Response: The flaring that was observed was due to the performance of an “acid job or workover and intervention job” on well 626 which is located approximately 8 kms from Berezovka village. Acid stimulation is one of the primary methods for improving productivity of oil, gas, injection, and disposal wells. The acid job consists of pumping a mixture including acid into the wellbore to remove built-up material that inhibits the ability of oil and gas to flow to the surface. Before the well can be hooked back up to the flowlines and put back in to normal production, it has to be cleaned up producing hydrocarbons. Since the well is not connected to the flow line this material is flared until the quality of production is such that it can be re-connected. The duration of the clean-up period varies from well to well, but could last several days in some cases. KPO’s Ecology control group (ECG) have to issue a permit before well flaring can commence. ECG also monitor the flaring activity taking air samples down wind of the flair to monitor pollution levels and ensure that these are within acceptable levels.
The question of emission exceedances has been addressed in greater detail in the response to your introductory questions/statements above.
7. The environmental impact assessment for Karachaganak provides calculations for possible oil and gas condensate spills of up to 30,000 tons. The Field Loss Prevention Manager at KPO, Mike Smith, informed us (although we were unable to find these figures documented) that KPO was prepared for a spill of only up to 8,000 tons. Therefore, in the event of an accident at the field, oil could contaminate the Ural River through the Berezovka River, which flows through the Karachaganak Field.
IFC Response: We understand from KPO that you were told that a maximum 8,000 tones of oil could be present between the pipeline block valves, while your question relates to the potential field spill. In the unlikely event of a leak in the pipeline, the valves upstream and downstream of the leak would be closed and pumping stopped where appropriate, therefore limiting the maximum amount of oil that could spill to the volume of that held between the valves. IT is not expected that all inventory between the block valves would be released because oil can remain in sections of the pipe that are lower in elevation than the rupture point and also because of spill containment actions that would be taken by KPO. KPO is fully prepared to respond to a spill of the maximum possible quantity of 8,000 tones of oil.
8. Environmental Atmospheric Monitoring conducted by KPO through its mobile monitoring system provides inadequate time for evacuation from Berezovka in the event of an industrial accident. The mobile environmental monitoring center was set up on the northern edge of the village during the third week of August 2004 to monitor emissions from the Field. However, any toxic exposure at the location of the mobile monitor would reach the village before an emergency response system could be activated.
IFC Response: There are several layers of air emission monitoring performed as a line of protection for the villages. An exceedance in emissions great enough to impact the communities would first be noted at the source and secondly by emissions monitors in the field and finally by the mobile air monitoring lab in Berezovka. The village alarm can be activated based upon any of these monitoring points. The mobile air monitoring lab was indeed stationed in the village of Berezovka as part of a program to collect data from all villages around the Karachaganak field during the start up of KPC and Unit 2 throughout the summer. The lab staff were also instructed to encourage villagers to go inside and observe the equipment in use and to ask questions. It is our impression, based on the discussion with villagers in Berezovka and other communities, that many took this opportunity to learn about air monitoring and how results are obtained. In addition, the villagers from Berezovka requested that the mobile unit be placed inside of the village although the optimal measuring point as determined by KPO was between Berezovka and Unit 2. The mobile lab’s staff complied with the request.
Primary monitoring for Berezovka and other villages is conducted by the Environmental Monitoring Station (EMS) 2 located two km north of Berezovka and five km south of Unit 2. Pre-set gas concentration levels at EMS 2 automatically sound an alarm at the Emergency Communication Centre in the Field Administration Building to commence evacuation process. There are four such Environmental Monitoring Stations in the field, fully automated, operating 24 hours per day.
9. According to KPO executives, an emergency evacuation plan for the village of Berezovka should be in place and understood by each resident. KPO claims that the responsibility for an evacuation plan rests with the local akim (village administration), and it claims to have consulted with the village akim about it. Yet, residents of the village do not know what this plan is. The villagers’ expectation is that KPO will bring in buses to evacuate them from the village. When we spoke with the KPO Field Loss Prevention Manager, he stated that KPO had no plans to evacuate the village in the event of an emergency and, furthermore, they did not have enough buses to evacuate the village. He suggested that a new informational brochure should be prepared for the village akim. Villagers have not been trained in emergency evacuation measures in the event of an accident. We believe that that an emergency response plan should ensure that each home in the village of Berezovka is equipped with gas masks in the event of an accident in order to ensure maximum safety. This is not the case. Gas masks dating from 1979, which are stored in canvas bags, are locked in a walk-in closet in one of the school buildings. There are fewer than 100 masks–entirely inadequate for a population of 1286 residents.
IFC Response: Although the civil defense plan is in the government’s domain of responsibility, KPO has provided Berezovka as well as other villages in the area with emergency response training, and explained the lines of responsibility and evacuation routes. KPO has documented such training sessions as well as the drills conducted in the area. The KPO Emergency Response Team visited Berezovka 58 times in 2002, 63 times in 2004, and 34 times in 2004. In addition to checking the alarm and communications equipment during such visits, KPO specialists participated in community meetings and discussions, explained to the people what the role was of the alarm equipment and what actions KPO was taking to ensure that field operations and communities are safe. Examples of meetings concerning health and safety are listed below, demonstrating that KPO has been liaising with the communities, including Berezovka, on this topic.
- Village of Berezovka, October 21, 2002 – Burlin Authorities and KPO conducted an emergency response drill at the field facilities. Berezovka residents participated in this training exercise. KPO Alarm and Information System was used during the drill, surrogate evacuation of Berezovka was conducted, messengers/couriers assigned to certain blocks were involved, police and health service, and mass media;
- Village of Berezovka, July 8, 2003 – Gidromet conducted air sampling at the request and with the involvement of villagers. Sampling locations were suggested by villagers;
- Villager of Berezovka, July and August 2003 – WKO SES experts were involved to analyze and determine water quality, etc.
- Village of Berezovka, July 2003 – Akims, village officials, and officials from the Burlin Akimat. After the visit, a workshop was held at the Pilot Camp, which was attended by KPO’s Deputy Director dealing with HSE issues as well as other KPO specialists. The workshop discussed safety issues for the surrounding villages, role and use of the alarm system and community relations routes;
- October 29, 2003 – Command Post Exercise was conducted to respond to a simulated emergency in the field. Residents of the Zharsuat village participated in the exercise, during which KPO Alarm and Information System was used and the community was evacuated. Police, health service, messengers, and KPO’s vehicles were used. Observers during the exercises were as follows: WKO Deputy Akim, Burlin Deputy Akim, a representative of the Orenburg Oblast Civil Defence [sic] and Emergency Department, and Akims of Berezovka, Priuralnoye, Karachaganak, Uspenovka and other surrounding villages, as well as mass media. Before the drill, Zharsuat villagers were given an induction course explaining the purpose and procedures of the forthcoming drill; and
- June 28, 2004 – a tactical exercise was conducted at the Karachaganak field with the involvement of Zhanatalap villagers. KPO Alarm and Information System was used during the exercise. KPO provided vehicles for evacuating villagers to a safe area. Before the exercise, Zhanatalap villagers were given an induction course explaining the purpose and procedures of the forthcoming drill. The following parties were involved in the exercise: Deputy Chairman of the RoK Emergency Committee, Burlin Akim, Akims of the surrounding villages, a representative of the Orenburg Oblast Civil Defense and Emergency Department, as well as Raion, Oblast and National mass media.
When IFC visited the village of Uspenovka, some 14 km away from the field in October 2004, IFC staff queried the gathered residents about the emergency evacuation plans and routes. They seemed to have a very clear understanding of the plans, the transportation modes and responsibility for different tasks They told IFC’s team that the village is subdivided into sections, with a tractor or another large vehicle assigned to each section fore transportation along pre-determined routes. It is therefore unclear to IFC how it is that the 15 or so interviewed Uspenovka villagers have a correct understanding of the evacuation plan, the lines of responsibility and the associated transportation while Berezovka villagers apparently lack such understanding? The Emergency Evacuation Plan for each village is described in the government’s Approved Civil Defense Plan. It is our understanding that KPO is not responsible for providing gas masks or evacuation vehicles–the village authorities (or local government) are responsible for these, as well as for the dissemination of information about the evacuation plan and for testing the plan.
10. According to an interview in the Uralsk Weekly with Alexander Potiakin, Deputy in the Ecology Committee of the Uralsk Oblast Ecology Department, data from the Uralsk Oblast Ecology Department demonstrates that during the first half of 2004, KPO paid 300 million Tenge (approximately 2.2 million US Dollars) in environmental fines for atmospheric emissions exceeding permitted levels. According to the article, this was “because KPO does not comply with environmental measures and delays undertaking repair work.” Alla Zlobina, “The Suffocating Smell of Money,” Uralsk Weekly, August 19, 2004, p. 9.
IFC Response: Please refer to question #2 for the planned vs. unplanned emissions mechanism, which does not result in the breach of the constant air quality levels in Kazakhstan. For specifics on the fines, please refer to either KPO of the Uralsk Oblast Ecology.
11. When Crude Accountability asked KPO to indicate the boundaries of the Karachaganak Field and the boundaries of the newly revised Sanitary Protection Zone (SPZ) in August 2004, staff were told that the boundaries were difficult to delineate, and that it was impossible to demonstrate exactly where the boundaries of the SPZ lie. How is it possible that the SPZ boundaries are fluid? And how can local residents be expected to respect and understand them, when KPO will not indicate their precise location on a map?
IFC Response: It is difficult for IFC to speak on KPO’s behalf, but both the field borders and the SPZ are well delineated and marked by GPS points on maps that can be seen in every village around the field. The Akim of Berezovka has one in his office.
12. Does the IFC monitor whether atmospheric emissions from KPO comply with its policies, including maximum emissions levels? If an IFC project sponsor violates host country law with respect to emissions levels, is that also a violation of IFC policy? If IFC determines that KPO has violated its policies with regard to its own emission limits or compliance with host country laws, what is it doing to ameliorate this situation?
IFC Response: IFC expects all of our projects to comply with host country requirements and with IFC safeguard policies and guidelines. IFC regularly reviews KPO’s weekly and monthly reports, detailing cumulative emissions vs. the planned and budgeted emissions throughout the year. Once a year, IFC and BMT Cordah–and internationally recognized, independent consultancy retained to certify the project’s compliance with IFCs policies and guidelines, visit the field and review in detail all monitoring results, as well as KPO’s Environmental Management Plan (EMP) and other Project’s environmental and social documentation. Based on the 2003 review and on the October 2004 visit (although the review is not yet complete), IFC cannot find support in claims of the Project’s non-compliance with IFC’s policies and guidelines. If IFC determined that the Project was not in compliance, IFC would ask KPO to put in place appropriate corrective measures. This is our world-wide practice and Karachaganak would not be an exception.
13. IFC should sponsor a transparent independent audit of the activities at the Karachaganak Field, including a confirmation of the basis for the reduction of the Sanitary Protection Zone, which was 5 km until December 25, 2003, when it was reduced to approximately 3 km (it varies from location to location) by the Kazakhstan Ministry of Health. Environmental and health impacts should be considered in the audit for the communities surrounding the field, including Berezovka. The results of this independent audit should be made publicly available in both Russian and English.
IFC Response: IFC’s team has discussed this topic with you and your colleagues previously. Please refer to our letter of July 16, 2003 in which we explained our views on the Sanitary Protection Zone (IFC). IFC will not launch an audit of a government’s decision.
14. The IFC’s involuntary resettlement policy states, “Development Projects that displace people involuntarily generally give rise to severe economic, social and environmental problems.” Ironically, the severe economic, social and environmental problems that the Berezovka villagers involuntarily suffer from the Karachaganak field are what cause the community to seek resettlement. Compliance with the IFC’s policies on Involuntary Resettlement and other safeguard policies should be determined with regard to this project. Crude Accountability requests copies of the IFC’s documentation determining the environmental impacts of the Karachaganak Field on the health of the residents of Tungush and Berezovka at the time the IFC’s decision to provide the loan to the project.
IFC Response: IFC sees involuntary resettlement as a last resort. If there are any cases of proven contamination or pollution, the first step would be to correct the situation through clean up or pollution abatement rather than solve the problem through mass relocation. At the time of appraisal, there was no indication that any village would move nor any reason for any village to move. The evidence presented to us demonstrates that any economic, social and environmental problems that the villagers may be suffering from do not stem from the Karachaganak field but from other conditions.
Because of confidentiality constraints, IFC is not at liberty to release internal documents other than those already posted in the IFC InfoShop.
15. The IFC should arrange to have copies of all environmentally relevant information and documents from the Karachaganak project made immediately available to the villagers in Russian. These documents include the environmental section of the Karachaganak PSA, quarterly environmental reports from KPO, and information about flaring and accidents at the field. Crude Accountability also requests that copies of each of these documents be made available to our organization.
IFC Response: The development of the Karachaganak field was discussed in four public sessions over the course of two years (1998-2000) in various communities around the field and along the export pipeline. IFC published the Project’s Environmental Impact Assessments (EIAs) in English and locally in Russian for 60 days starting in March 2002. The English copies are still available on IFC’s website. In addition, IFC’s team personally delivered the Russian copies of all disclosed environmental documentation to Ms. Anosova in Berezovka in October 2003. Air monitoring results are published weekly and distributed free of charge to the communities, in addition to the charts on display in every Akim’s office. We understand from KPO that Crude Accountability has requested and received additional environmental documents upon its visit to the field including:
The Executive Summary of the Environmental Impact Assessment (EIA), entitled Environmental and Social Status of the Karachaganak Oil and Gas Condensate Field, dated March 20, 2002;
The Environmental Acton Plan (EAC), dated March 2002 entitled EAP Karachaganak Petroleum Operating b.v.;
The Public Consultation and Disclosure Plan (PCDP), dated March 20, 2002 entitled PCDP KPO b.v.;
Karachaganak Development EIA prepared by Kazecology, 1998;
Karachaganak Development Project, Phase II, EIA on 24″ Oil Pipeline Bolshoi Chagan-Atyrau, 2002;
Evaluation of the Environmental Impact of Constructing and Operating the KPC Access Railway, prepared by Kazecology, 1998;
Waste Management Complex EIA, 1998;
KPC 3×40 MW Electric Power Plant, EIA vol 1, 2000;
EIA of the construction and operation of the KPC-Bolshoi Chagan Condensate Pipeline, prepared by Kazecology (no date available); and
Environmental Monitoring of “Karachaganak-Bolshoi Chagan” pipeline, August 2001.
As we explained before, IFC cannot make available the environmental or any other section of the Final Production Sharing Agreement (FPSA) that the Project shareholders signed with the Government of Kazakhstan due to its confidential nature and IFC’s customary confidential undertaking with our client Lukoil.
Oil, Gas, Mining and Chemicals Department
Cc: Mr. Paulo Campelli, General Director, KPO
Mr. Cameron Crawford, Operations Director, KPO
Ms. Meg Taylor, Vice President, IFC/MIGA Compliance Advisor/Ombudsman