[an error occurred while processing this directive] Imperiled Riches—Threatened Rainforests [an error occurred while processing this directive] Mining operations at the Rio Huaypetue gold mine in Peru. (Photo by R. Butler) [an error occurred while processing this directive] [an error occurred while processing this directive] OIL EXTRACTION: The Impact Oil Production in the Rainforest
[an error occurred while processing this directive] The extraction of oil is responsible for the deforestation, degradation, and destruction of lands across the globe. The oil extraction process results in the release of toxic drilling by-products into local rivers, while broken pipelines and leakage result in persistent oil spillage. In addition, the construction of roads for accessing remote oil sites opens wild lands to colonists and land developers.

[an error occurred while processing this directive] Some of the world's most promising oil and gas deposits lie deep in tropical rainforests. While these fossil fuels can be extracted in an environmentally-friendly way, governments and oil companies usually opt for expediency over consideration for the environment or the interests of local people most affected by production.

One of the best known and extreme case studies of oil exploitation in the rainforest is in Ecuador, where the U.S. oil giant, Texaco (later Chevron-Texaco), seriously degraded an ecosystem over a generation. The firm's oil operations affected the lives of thousands of indigenous peoples and settlers.

The Ecuadorean Oriente, located on the western edge of the Amazon rainforest, is considered the most biodiverse place on Earth. Before Texaco entered in 1967, the region was home to several indigenous groups including the Huaroni people. Some of these Huaroni were among the few remaining indigenous peoples on Earth living fully in their traditional ways.

Oil Pipeline in the Rainforest of Ecuador. The suit against Chevron By the close of 2005 the case against Chevron-Texaco, now Chevron Corporation, was still being fought in U.S. courts and was beginning to become an issue for shareholders in the oil company. Facing a six- billion dollar liability, the company has also seen shareholders file three new resolutions asking Chevron’s management to take various steps to protect human rights, the environment, and shareholder interests. The United Nations has also gotten involved in the case, calling on the Ecuadorian government to guarantee the safety of lawyers and leaders involved in the lawsuit after a series of threats. According to an update by Amazon Watch, an organization tracking the suit, the case is not going particularly well for Chevron: The escalating shareholder concern comes as Chevron’s defense faces significant hurdles in the lawsuit in Ecuador. Water and soil samples submitted to the court by both the plaintiffs and Chevron from all 18 well sites inspected by the court overwhelmingly have shown illegal levels of toxic contamination, often by orders of magnitude. The legal case is the first time a transnational oil company has been subjected to legal jurisdiction in the courts of a developing nation for massive environmental damage. A New York court has already confirmed the Ecuadorian ruling will be enforceable in the United States, where Chevron’s operations are based.... ...Citing a June, 2004 Supreme Court ruling upholding the 1789 Alien Torts Act, the resolution also warns Chevron executives that, in "a post-Enron environment", they could be found personally liable in a U.S. court for human rights abuses committed abroad, such as those in the Ecuadorian rainforest. Excerpt from a December Amazon Watch news release

Over the past three decades, the Oriente has suffered serious degradation and deforestation. Oil spills (green groups allege Texaco dumped more than 20 billion gallons of toxic drilling by-products into local waterways and spilled more than 17 million gallons of crude) and clearing for access roads, exploration, and production activities have damaged the surrounding rainforest and adversely affected the lives of local people. As of the mid-1990s, lands once used for farming lay bare and hundreds of waste pits remained. In August 1992, a pipeline rupture caused a 275,000-gallon (1.04 million L) spill which caused the Rio Napo to run black for days and forced downstream Peru and Brazil to declare national states of emergency for the affected regions.

Originally it appeared that Texaco might pull out of the Oriente without reparations to the people whose environment was so seriously degraded, but widespread protests by indigenous peoples, environmentalists, and human-rights organizations forced Texaco into negotiations. Texaco projected its clean-up costs at a moderate US$5-10 million.

In response to the insufficient clean-up gesture, along with widespread environmental degradation and serious health problems among local peoples, a class-action lawuit was filed against Texaco in the United States on behalf of 30,000 people affected by the oil company's operations. Previous suits against Texaco filed in Ecuador failed due to Texaco's political influence with the Ecuadorean judiciary.

The exploitation of oil in the Ecuadorean Amazon serves as a particularly negative example of oil development projects in the rainforest. Typically, the oil company cuts roads through the forest in order to carry out operations. These roads are followed by transient settlers who colonize and damage the surrounding forest through slash-and-burn agriculture, the introduction of domestic animals, hunting, the collection of fuelwood, and often the introduction of foreign disease to local forest dwellers. Besides the opening of oil roads, oil companies like Texaco burn off by-product natural gas in the open air, a process known as flaring. The flames, besides adding pollutants to the atmosphere, can cause fires that destroy more forest and threaten the lives of locals. In the late 1990s, such gas burning at an Occidental well in Bangladesh was cited as the cause behind a large forest fire.

The oil extraction process can be messy and destructive. Spills result from burst pipelines and toxic drilling by-products may be dumped directly into local creeks and rivers. Some of the more toxic chemicals are stored in open waste pits and may pollute the surrounding lands and waterways. For security reasons, oil operations may have military involvement.

Oil spills are of tremendous concern in the rainforest. A severe oil spill could have a devastating impact given the variety of river systems—from floating meadows to swamp forest to oxbow lakes to sand bars—that would be affected. The Exxon Valdez oil spill was difficult enough to clean up even though it was limited to rocky beaches; addressing a similar-sized spill in the Amazon would be magnitudes more complicated.

Oil producing tropical countries Primary oil production for most of these countries is offshore. Colombia, Ecuador, Peru, Bolivia, and Nigeria have substantial oil operations in rainforest areas. World Rank Country Oil Production barrels per day Date of Estimate 6 Mexico 3,460,000 2004 11 Venezuela 2,600,000 2004 12 Nigeria 2,356,000 2004 17 Brazil 1,788,000 2004 21 Angola 980,000 2004 22 Indonesia 971,000 2003 24 Malaysia 785,000 2004 30 Colombia 531,100 2004 32 Ecuador 523,000 2004 34 Vietnam 359,400 2004 35 Equatorial Guinea 350,000 2004 39 Gabon 264,900 2004 40 Congo, Rep. of 227,000 2004 41 Thailand 225,000 2004 42 Brunei 204,000 2003 49 Peru 95,500 2004 50 Cameroon 94,000 2004 59 Papua New Guinea 46,200 2004 63 Bolivia 39,000 2004 The table include only countries with significant tropical forest. source: CIA World Factbook

Indigenous and local peoples often gain the least from oil extraction, but stand to lose the most. For the impact on their homes, culture, environment, and health, these people generally see little in the form of compensation from the government or oil companies. For example the Ogoni tribesmen in Nigeria have seen little revenue from Shell's activities in the Niger River delta and have mostly relied on sabotage of oil installations to collect oil-spill compensation from Shell. It is meretricious to say oil companies are solely responsible for fleecing locals out of their deserved oil revenues. In many cases, oil companies pay their agreed-upon fees and royalties, which end up in the hands of corrupt government bureaucrats before they can be distributed to the communities. Corruption and oil often go hand in hand.

Despite booming demand for oil and gas, the vast majority of ordinary citizens see little benefit from oil-production activities. In fact, developing countries with large oil reserves have some of the highest debts in the world.

During the 1970s when oil prices were extraordinarily high and real interest rates low, many oil-exporting countries looked much wealthier than they actually were and took out large loans from foreign banks. The loans were used to sponsor costly, often economically inefficient development projects. In the 1980s the creditworthiness of these developing countries collapsed with oil prices, and the debt of many oilexporters skyrocketing. For example, the national debt of Ecuador has rapidly accelerated since the beginning of the oil boom in the early 1970s. In 1970, the national debt stood at US$256.2 million, but by 2005 the debt had swollen to $16.8 billion.

The sudden inflow of oil can further affect a developing economy by producing a sharp appreciation in the domestic currency which can make non-oil sectors like agriculture and manufacturing less competitive on world markets, thus leaving oil to dominate the economy. The country then becomes vulnerable to wild price swings in the commodity market.

Over-reliance on oil can also impact the government's responsiveness to its citizens. Michael Ross, an associate professor of political science at the University of California at Los Angeles, believes that oil-rich countries do less to help their poor than do countries without oil and are plagued with lower literacy rates, score lower on measures like the UN's "Human Development Index," and have higher child mortality and malnutrition. How is this possible? The Economist explains, "Unlike agriculture, the oil sector employs few unskilled people. The inherent volatility of commodity prices hurts the poor the most, as they are least able to hedge their risks. And because the resource is concentrated, the resulting wealth passes through only a few hands—and so is more susceptible to misdirection." Since oil revenues are sometimes funneled directly to rulers, governments have little need to raise revenues through taxes and be accountable to their citizens.

Political and economic considerations aside, oil conglomerates are easy targets for environmentalists. Their operations are highly conspicuous and create a dramatic impact on the local economy and the local social conditions. Since local communities reap few benefits from oil development, while shouldering the bulk of the social and environmental costs, it is easy to see why the contribution of oil development to environmental devastation is often overstated.


Review questions:

• How do oil operations impact the rainforest?
• How can oil development actually hurt an economy?

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