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RIA Novosti (Moscow): Sakhalin 2 is under a legal siege

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Sakhalin 2 may be stopped in its tracks – by the courts
16:11 | 15/ 09/ 2006

MOSCOW. (RIA Novosti commentator Tatyana Sinitsyna) – Sakhalin 2 is under a legal siege.

The Federal Service for the Oversight of Natural Resources has filed an action with Moscow’s Presnensky Court demanding the revocation of Order No. 600 of Russia’s Ministry of Natural Resources, dated July 15, 2003, approving feasibility studies for the Piltun-Astokhsky and Lunsky license areas. It concerns Phase 2 of the project.

The federal service received important information in August. Its deputy head, Oleg Mitvol, explained that according to Far Eastern scientists from the Russian Academy, natural conditions on Sakhalin had been poorly examined, and continued construction of pipelines now threatens to damage the area along the route in many locations. Inspectors also discovered that the laying of the pipe caused landslides and put at risk the forest stands in the Firsovsky district belonging to the Dolinsky forestry enterprise.

In its claim, the Federal Service for the Oversight of Natural Resources also cites the failure of Sakhalin 2 operators to follow the recommendations of the State Environmental Expert Commission and to abide by the findings of its feasibility studies. It cites the anti-erosion measures, which failed to meet terrain requirements.

In a paperwork audit last summer, federal service inspectors also recorded license violations on water use. The project’s Molikpaq platform, for example, exceeded norms for effluent discharges, which also contained elevated amounts of oil products. On top of everything else, there have been regular delays in reporting water use.

The list of complaints has provided sufficient grounds for going to court. Mind you, this is not the first attack by Russian environmentalists on the Sakhalin Energy Investment Company, the operator of Sakhalin 2. Four years ago, 50 Russian and foreign watchdogs joined forces to sue the Ministry of Natural Resources for giving the go-ahead to Phase 2 of Sakhalin 2. They claimed that with the state’s connivance, the oil company was threatening both Sakhalin and the entire region with an environmental disaster. The trial has been plodding along ever since. Now it has a companion suit, initiated by the state.

Some details about the defendant: Sakhalin Energy is owned by three industrial corporations: the Netherlands’ Shell (which controls more than 50% of the stock), and Japan’s Mitsui and Mitsubishi. The project, which began in 1996, is, along with Sakhalin 1, the first instance of Russia’s cooperation with overseas companies based on the production-sharing agreement. It triggered the large-scale development of the territory’s oil and gas wealth.

While the oil company is caught up in the euphoria of the boom, the environmentalists are pointing to negative effects of its oil and gas projects in the nearby part of the Sea of Okhotsk. Game-fish populations, they say, have decreased, while gray whales, a rare species, whose feeding grounds are nearby, are seeing a dramatic drop in their number of young. The environmentalists believe the investors are behaving improperly, acting on the principle that “if after us no grass grows, what does it matter to us?” “We are not against developing Sakhalin for oil, but we want the same environmental techniques to be applied as in the laying of a similar pipeline in Alaska,” say legal experts.

What did they do in Alaska? They laid 1,200 km of pipe at a cost of $20 billion. Russia, on the other hand, was offered a poor man’s scheme: 900 km for $850 million, with no environmental frills. That means that pipes are strung along in ditches dug up by bulldozers as the crow flies. As a result, more than a thousand creeks and streams, spawning grounds for fish since time immemorial, will be crossed and muddied. So why could Russia not afford a non-invasive version of the industrial project? Its environmental war chest is full enough.

Although the environmental reasons cited in the federal service’s claim are weighty and convincing, the foreign press is seeking to put a political slant on the situation. “Russia exercises aggressive control over its resources,” trumpets the Japanese press. “Royal Dutch Shell is under pressure in Russia, and it may lose its license,” Europe worries. The conclusion drawn is crystal-clear: the Russian government wants to handicap foreign companies in its energy sector.

But the situation has pragmatic implications. Russia may indeed want to have some other approaches to the problems of the Sakhalin shelf that are more in line with economic realities and national interests. Legal regulations drawn up in the 1990s were dictated by an economic crisis and low hydrocarbon prices. Today it is clear that resources must be tapped differently, bearing in mind the environmental component. Russia wants an honest partnership, and this includes respect for the commitments made by corporations and the laws of the country. After all, foreigners have been invited here not just to work, but to multiply their capital.  

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