Crude Standards

The dubious ethics of Alberta’s international oil empire

By Alison Azer

For Sudanese-born Morris Yoll, the drive into downtown Calgary was once a comforting reminder that he was a long way from the brutal civil war he left behind. Now, driving up Macleod Trail he winces at the sight of the name Talisman in lights over what was once known as the Lindsay Park Sports Centre. Until last October, Talisman was operating in war-torn southern Sudan, just 45 kilometres from his family’s village. Yoll was one of the first to push for a boycott of the newly named centre. “Why are we idolizing corporations just because they are the biggest bidders on naming rights for public spaces?” He is one among many who saw Talisman’s $10-million donation as community penance for its questionable involvement in Sudan.

Yoll is right about one thing. Evidence of the energy industry’s generosity is highly visible in Alberta. Hospitals, charities, sports centres and universities are reaping the rewards of the industry’s good times. Jobs abound, dividends stream in, and energy industry-sponsored community events enrich our lives. But where has the money for these acts of good corporate citizenship come from?

Alberta’s energy companies are entering some of the most repressive and corrupt countries in the world— Indonesia, Russia, Yemen, Iraq, Angola, Libya, Congo, Ecuador and Colombia. The sun doesn’t set on Alberta’s oil empire.

This raises questions about the ethics of doing business with unsavoury governments. Is oil fuelling more than the Alberta advantage? Is oil fuelling civil conflict, human rights abuses and environmental destruction? If not, Albertans can enjoy the benefits of global energy expansion with a clear conscience. But if it is, will we demand that our oil companies adhere to the same ethical standards abroad as they do at home?

Alberta’s major energy companies are pursuing international  exploration  opportunities  at  an  unprecedented pace. Just as expansion opportunities at home were becoming less inviting, the economic climate of the 1990s—with its emphasis on trade liberalization and privatization—created a welcoming environment for energy companies willing to invest abroad. And Canadian companies, with their reputation as technical experts in remote and inhospitable locations, are frequently courted for international projects. Foreign energy companies with more capital brawn than technical brain pursue Canadian firms as partners of choice in multinational oil consortia.

The Canadian government supports this expansion. Team Canada trade missions promote the energy companies, presenting the skills of Canadian oil and gas to investment-hungry governments. Companies seeking to do business abroad also receive support from Export Development Canada (EDC), a federal Crown corporation. In 1999, the EDC provided over $1-billion in insurance and lending support to Canada’s oil and gas industry.

Outsiders to the oil and gas industry often ask why many of the substantial reserves are in countries—such as Colombia, Sudan and Iraq—that are plagued by civil war, poverty, environmental devastation, HIV/AIDS and child prostitution, and why many of the leaders are corrupt despots with multiple Swiss bank accounts and  fleets of private helicopters. According to a former executive at the Canadian Association of Petroleum Producers, the distribution of global oil and gas is but an “unfortunate meeting of geography and geophysics.”

Not all observers, however, see the coexistence of resource extraction and human rights abuses as a benign coincidence. According to a report from Amnesty International: “Foreign companies are turning a blind eye to the human rights violations committed by government security forces and their allied troops in the name of protecting the security of oil-producing areas. The silence of powerful oil companies in the face of injustice and human rights violations is not neutral.”

Many humanitarian organizations believe that the royalties paid by energy companies to host governments help keep repressive regimes in power. Human Rights Watch’s website [www.hrw.org] states, “While these companies are private actors not bound by international human rights treaties…they nonetheless have a moral duty to avoid complicity in human rights violations by state agents.”

Environmental organizations are no less concerned about the impact of oil development. Greenpeace and the Sierra Club, for example, warn of the damage caused by gas flaring, pollution of water sources, offshore dumping of obsolete oil platforms, and oil spills.

While many of Alberta’s energy companies are becoming more environmentally aware, few subject potential foreign ventures to rigorous sociopolitical scrutiny. Caught in  a crossfire between repressive governments and local insurgents, corruption and environmental destruction, some companies do pull up stakes, but most stay put—building impenetrable compounds, paying their employees handsomely, and politely overlooking the practices of the regimes they are supporting with royalty dollars.

ENBRIDGE IN COLOMBIA

In October, the Virginia-based Control Risks Group ran its “Kidnap and Extortion Incident Management” course in Calgary. As Colombia is the kidnap capital of the world, Enbridge would have done well to send representatives to this first Canadian offering of the course.

The company is a major player in Colombia, with a 24.7 per cent stake in the OCENSA crude oil pipeline, which spans 675 kilometres from the oil fields in the Andes to the Caribbean coast. It is the largest pipeline in Colombia, transporting upwards of 500,000 barrels of crude each day. Oil is Colombia’s leading (legal) export, and OCENSA carries 60 per cent of it.

Colombia is in the midst of a brutal civil war. Since 1990, 35,000 Colombians have been killed and two million have disappeared in a horrific escalation of political violence involving government forces, paramilitary death squads and armed insurgents.

Colombia’s major oil reserves lie in rebel strongholds, and pipelines traverse some of the country’s most war- torn regions. Kidnapping and pipeline sabotage have become common. According to Control Risks Group, there have been 6,498 kidnappings for ransom in Colombia since 1991, with 1,092 occurring in 2001 alone.

Alex Neve, secretary-general of Amnesty International Canada, has some strong advice for energy companies operating in Colombia: “Whenever resource companies operate in areas of conflict like Colombia, the potential for directly or indirectly contributing to human rights abuses is very real. This obligates oil companies to scrupulously ensure that civilians have not been forcibly removed from lands in order to clear the way for oil developments and to put in place security arrangements for company property that are firmly in keeping with human rights standards. Companies must not only refrain from being part of the problem, they should aspire to be part of the solution.

The Colombian government, however, isn’t keen on having foreign corporations intimately involved in its policies. Instead, the government has instituted a producer’s levy of $1 (U.S.) per barrel. Called a “war tax” by human rights observers, the fee is collected by the government and allocated to military resources, such as Colombia’s repressive armed forces. British Petroleum, a major operator in Colombia, has publicly admitted to paying the war  tax.

Compared to companies like BP, Enbridge has attracted relatively little attention for its role in the OCENSA pipeline. Still, concerns over its involvement with the Colombian regime are being raised, and not just by the perennially critical voices of human rights organizations. Last year, two investment companies—Meritas Mutual Funds and Real Assets—prepared a shareholder resolution calling on Enbridge to “adopt measures to avoid complicity in human rights abuses.” Deb Abbey, CEO of Vancouver-based Real Assets, wrote in a Meritas press release that “as investors, we were very concerned about potential human rights risks arising from Enbridge’s operations in Colombia. We were especially concerned that security providers for the company may be associated with the Colombian paramilitaries.”

Enbridge CEO Patrick Daniel persuaded the investment companies to withdraw the resolution by signing the Voluntary Principles on Security and Human Rights,a resolution prepared in 2000 by the British and American governments in consultation with respresentatives from the extraction industries and non-governmental organizations. At Enbridge’s annual general meeting last May, Daniel went even further by publicly committing to an independent review of the company’s Colombian operations. Kai Alderson of Real Assets says he is “pleased with the progress made with Enbridge since we withdrew our shareholder resolution. They are definitely moving ahead to address our concerns.”

For now, it seems, Enbridge can enjoy both its operations in Colombia and its reputation as a good, ethical corporate citizen in Canada. In 2001 the company contributed $3-million to Canadian charities such as Calgary’s Festival of Trees and the Families-in-Transition program.

But communities along the OCENSA pipeline aren’t receiving this kind of charitable support. Enbridge spokesperson Jim Rennie says, “The challenge arises from the fact that Enbridge is contracted by OCENSA, which has strict rules over what information can be made public.

This includes information on community relations.” This grey area leaves some Colombian-Canadians asking how Enbridge is able to extract $35-million in earnings from Colombia without contributing to the lives of people who earn, on average, less than $3,500 a year. Manuel Rozental, of the Canada/Colombia Solidarity Campaign, says it is “obvious that companies like Enbridge behave one way in Canada and in an opposite way in Colombia. Their intention is to extract maximum profit at minimum cost.”

ENCANA IN ECUADOR

Legend has it that Gwyn Morgan, CEO of Alberta Energy Company (now merged with PanCanadian as EnCana), adopted the flexible and jolly Gumby as the company’s mascot. Each employee was given a miniature Gumby and encouraged to visualize the company’s share price growing with the ease of Gumby’s flexibility. These days, however, conservationists are calling upon Morgan to adopt a new corporate symbol—the Black-Breasted Puffleg. They fear the construction of Ecuador’s Oleoducto de Crudos Pesados (OCP) heavy-crude pipeline—of which AEC Ecuador owns 31.4 per cent, making it the largest private sector oil producer in the country—will bring the bird to extinction.

The 500-kilometre pipeline will cross pristine ecological sanctuaries that are home to over 450 bird species, 10 per cent of which are endangered. It will also pass through an area prone to landslides and earthquakes that could trigger oil spills onto farmland and groundwater. Adding to fears of ecological damage are concerns over the relocation of indigenous communities whose land straddles the pipeline’s path. (The safety of the workers is also a concern. In 1999 eight pipeline operators were kidnapped in Ecuador. The men, employed by a company under contract to AEC, were held hostage for three months until a $3.5-million ransom was paid.)

The  project  has  raised  the  ire  of  environmentalists and human rights activists, some of whom have taken to squatting  in  the Andean  canopies  of  the  Mindo- Nambillo Cloudforest Reserve in an attempt to halt construction. According to the New Internationalist, “the tree-sitters protested peacefully” and were “armed with nothing more than the tents, candles, food and clothes they had walked in with.” Ecuador’s former president Gustavo Noboa deployed soldiers to stop the protesters, pledging, “I’m not going to let anyone screw with the country. I’ll give them war!”

But Noboa’s reaction is understandable. With economic misery, hyperinflation, punishing unemployment and natural disasters on one hand, and pressure from the International Monetary Fund (IMF) and the World Trade Organization to become investor-friendly on the other, Ecuador has had little choice but to sell its oil reserves to the highest bidders.

Ironically, the IMF’s companion organization, the World Bank, has quietly voiced concerns over the OCP pipeline. In a letter to the head of the project, the World Bank’s top environmental official, Ian Johnson, warned that the pipeline, “if constructed or operated in an inadequate manner, would pose serious environ- mental risks to a World Bank-supported conservation project in the region.”

Despite the World Bank’s concerns, Ecuador’s government recently presented EnCana with the “Ministry of Environment Award” in recognition of the company’s environmental initiatives. It is not clear, however, whether this award is a simply a mutually beneficial public relations exercise that creates the impression of an investor-friendly Ecuador and an environmentally responsible EnCana.

TALISMAN IN SUDAN

Sudan is comprised of two groups: the government- ruled Muslim people in the north and the independence-seeking Christian and animist people in the south. The civil war between the groups has left an estimated two million dead and more than four million displaced.

In October of 1998, Talisman Energy acquired a 25 per cent share in both the Greater Nile Petroleum Operating Company (GNPOC) and the 1,500-kilometre pipeline that runs from the oil fields of Sudan to the Red Sea. By early 2001, company president Jim Buckee was talking about looking for an escape route out of Sudan. At the time, Talisman’s shares were trading at a rumored 15 per cent “Sudanese discount,” and the U.S. Congress had drafted a bill that would push companies operating in Sudan off U.S. stock exchanges. In late October 2002, Talisman finally succumbed to the financial pressure the controversy had created and announced the sale of its 25 per cent interest in GNPOC to India’s state oil and gas company for $1.2-billion for what Buckee called an “after-tax accounting gain of approximately C$340-million.”

To be sure, the civil war started long before Talisman entered Sudan, but many observers believe that oil is fuelling the latest and most brutal phase of the conflict. The Canadian government had concerns, too. It sent a delegation led by John Harker to determine the link between oil and conflict in Sudan. Harker’s report, made public in February 2000, concluded, “The evidence we gathered, including the testimony of those directly involved, directs us to conclude that oil is exacerbating conflict in Sudan.”

Around the same time, the United Nations began asking why southern Sudanese were being cleared off their land to make way for the pipeline. Other concerns soon followed, including claims that Talisman was granting the Sudanese army access to company infrastructure such as airstrips for military purposes. In its 2001 Corporate Social Responsibility Report, Talisman acknowledged that “there has been an increase in the use of the airstrips at Heglig and Unity by the Sudan military. We have advocated to the Government of Sudan that the…airstrips should not be used for offensive purposes.”

Talisman, dogged by negative publicity over its Sudanese holdings, became synonymous with corporate complicity in human rights abuses. Yet the company maintains it was improving the lives of the Sudanese.

Spokesperson David Mann said, “Our consortium invested over $2-million (U.S.) last year, building schools, hospitals and water wells for the Sudanese. We believe in constructive engagement, meaning that peace will come through trade, investment and the establishment of a middle class.” When Buckee announced that Talisman was selling its stake in GNPOC, he maintained that his company’s presence had been good for the people of Sudan.

Albertans can all too easily enjoy the rewards of the international adventures of our successful and philanthropic energy companies at home while ignoring the questionable ethics that are being practised abroad. More and more, though, we are making the connection between the social and economic dividends of energy companies and their involvement with dubious regimes around the world. If we act on this knowledge, the oil industry might be forced to adhere to a higher ethical standard—one that balances people, principles and the planet with petroleum.

Alison Azer’s research as the 2001–2002 Public Policy Fellow for the Sheldon M. Chumir Foundation for Ethics in Leadership was on corporate social responsibility in Alberta’s oil and gas  industry.

 

 

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