Sakhalin controversy prompts call for ethical code for EIA

NGO warning on close client-consultant relationships

Consultants employed to produce environmental impact assessments (EIA) should be bound by an ethical code of conduct in order to reduce the risk that they cave into pressure from clients and downplay the negative impacts of proposed developments, argues an international NGO. The call from US-based Pacific Environment follows controversy surrounding an environmental assessment of plans for the second phase of the Sakhalin oil and gas development on the east coast of Russia (EA Newslink 31/08/08).

Pacific Environment says that too often environmental consultants allow the close relationships that develop with their clients to threaten the integrity of the EIAs they produce, but a code of conduct could be drafted to strengthen consultants’ commitment to independence. “There needs to be an ethical code of conduct for consultants. The legal and medical professions have codes of conduct and EIA practitioners need one too,” Doug Norlen, Pacific Environment’s policy director, told Environment Analyst.

AEA’s mammoth report on the potential environmental impacts posed by Sakhalin II is the latest example of environmental consultants allowing an EIA to be influenced excessively by a client, according to the campaign group. An “independent environmental report” by the UK consultancy was published last autumn and was used by finance institutions to help them decide whether to invest in the project.

Pacific Environment accuses AEA of allowing oil giant Shell, one of the companies behind Sakhalin II, to “stage manage the editing of the ‘independent’ report”. It argues that AEA “sacrificed [its] independence as an environmental consultancy” by allowing Shell too much influence over the final report. “Banks are supposed to base their decisions on independent information about the health, safety and environmental impacts of projects, but Shell participated in editing sessions – it called the meetings – and so on,” says Doug Norlen. “As far as we’re concerned this invalidates AEA’s report and its use by the banks to make decisions about whether to fund Sakhalin II.”

Although Pacific Environment stops short of alleging that Shell put pressure on AEA to remove potentially damaging conclusions from its report, Mr Norlen suggests Shell sought “to downplay and to obfuscate” the environmental risks posed by he development. Email correspondence between a UK government agency and Shell obtained by another NGO, WWF UK, through a Freedom of Information Act request, suggests the government agency may also have been concerned about Shell’s interference in AEA’s report.

While Doug Norlen accepts the appointment of AEA by Sakhalin Energy Investment Company (SEIC) – a consortium which includes Shell – to produce the EIA, he argues that the relationship between client and consultancy became much too close. “Paying for the report is one thing, stage managing the editing process is another. It’s astonishing and it debunks the notion that the banks are using independent information as the basis for their decisions.”

AEA denies that the independence of its report was in any way undermined by the involvement of Shell or any other party. According to a spokesperson for AEA, the consultancy “stands by its final report as providing an accurate, balanced, and independent view of the overall project.” SEIC and “all the banks as well” offered comments and suggestions on the text of AEA’s draft report, adds the spokesperson. “These suggestions covered both issues of fact and presentation [and] AEA was willing to consider both types of comment, but without any commitment to accept them. AEA maintained ownership of the report. In some cases it accepted suggestions and in some cases it rejected them.”

Another issue emphasised by AEA is the effort and skill involved in preparing the report, which required six years of investigation and continuous presence on Sakhalin Island by its project team for more than two years, as well as 4,500 man days of review. Shell has also denied Pacific Environment’s allegations.

Doug Norlen acknowledges that AEA staff investigated the environmental impacts of the project properly. “I imagine there were some very committed people working for AEA on this project, but the process was flawed. AEA and the lenders have fallen prey to the argument that Shell will mend its ways. They say, ‘yes, there have been a lot of environmental violations but Shell has plans to mitigate these’. Some of these violations can’t be fixed and Shell has repeatedly violated its own mitigation plans.”

Since publication of AEA’s environmental report on Sakhalin II more than $5 billion in investment has been secured for what will be the world’s largest integrated oil and gas development. SEIC claims the project is the largest privately-financed development ever and will be the first to export oil from Russia to Asia. The size and location of the development guarantees considerable environmental risk, including threats to the already critically endangered Western Gray Whale and to wild salmon populations that spawn in the region. The risk of oil spills over ice should not be underestimated, warns Doug Norlen.

Although several banks agreed to fund Sakhalin II following publication of AEA’s environmental report, using it as part of their due diligence process, others have chosen not to fund the project, for various reasons. Those that have funded the scheme include Equator Principles signatories Credit Suisse, Standard Chartered and Mizuho Bank, as well as the Bank of Tokyo-Mitsubishi UFJ, Sumitomo Mitsui Bank Corporation, BNP Paribas and the Japan Bank for International Cooperation. Together, these organisations have committed $5.3 billion.

Organisations that elected against becoming involved in Sakhalin II include the UK Export Credit Guarantee Department (ECGD), the European Bank for Reconstruction and Development (EBRD) and The Export-Import Bank of the United States. Along with Pacific Environment, WWF has also campaigned against Sakhalin II and put pressure on ECGD and EBRD to count themselves out as funders.

The controversy surrounding Sakhalin II’s environmental report is reminiscent of protests about work done by ERM on the environmental and social impact assessment of the planned Baku-Ceyhan oil pipeline in 2003. Green campaigners argued that the potential impacts identified in ERM’s report were “severely flawed” and intimated that the consultancy had vested interests in supporting the project, which was partly funded by one of its major global clients BP.

IEMA accreditation

In the UK, the Institute of Environmental Assessment (IEMA) hosts a register for EIA practitioners which requires individuals to adhere to a professional code of practice, but the scheme remains voluntary. The IEMA also runs a quality accreditation scheme for organisations that are judged to produce environmental (impact) statements to best practice standards. At present, 41 organisations out of the many hundreds of firms around the country offering EIA services are listed as IEMA Registered Environmental Impact Assessors. AEA is not on the corporate register at the current time.

• EIA practitioners register
• EA Newslink 31 August 2008