OCIAL DEVELOPMENT PAPERS F ~N VRC NM t L -,-,h D S O C.; A L U S TA i J AB 1 F DE V E i V P M ENT NET WVO R K Paper Number 31 July 1999 BPXC's Operations in Casanare, Colombia: Factoring social concerns into development decisionmaking Aidan Davy Kathryn McPhail Favian Sandoval Moreno THE WORLD BANK Social Development Papers Paper Number 31 July 1999 BPXC's Operations in Casanare, Colombia: Factoring social concerns into development decisionmaking Aidan Davy Kathryn McPhail Favian Sandoval Moreno This publication was developed and produced by the Social Development Family of the World Bank. The Environment, Rural Development, and Social Development Families are part of the Environmentally and Socially Sustainable Development (ESSD) Network. The Social Development Family is made up of World Bank staff working on social issues. Papers in the Social Development series are not formal publications of the World Bank. They are published informally and circulated to encourage discussion and comment within the development community. The findings, interpretations, judgments, and conclusions expressed in this paper are those of the author(s) and should not be attributed to the World Bank, to its affiliated organizations, or to members of the Board of Executive Directors or the governments they represent. Copies of this paper are available from: Social Development The World Bank 1818 H Street, N.W. Washington, D.C. 20433 USA Fax: 202-522-3247 E-mail: sdpublications@worldbank.org Contents Executive Summary 1 1. Introduction 7 Aims and Objectives 7 Approach 8 Project Location 8 Main Issues to Factor into the Evaluation 9 Route Map to the Report 9 2. An Evolving Social and Environmental Context 11 Description of BPXC's Operations 11 The Envirorunental Context of BPXC's Operations 13 The Social Context of BPXC's Operations 13 Key Stakeholders and Their Interactions 13 The Evolving Demographic and Socioeconomic Context 16 Conflict in Casanare 19 3. An Evolving Regulatory, Policy and Management Framework 21 Regulation of the Petroleum Sector, 1987-1998 21 Royalty Allocation and its Impact on Casanare 22 BPXC's Approach to Managing Social Issues, 1987-1997 25 An Evolving Corporate Policy 25 Evolving Objectives of BPXC's Social Programs 2 7 Responsibilities for Implementing Policy and Staffing 27 Approach to Developing Community Investment Programs and Projects 28 4. Evaluation Findings 29 Integrating Social Concerns: An Enabling Environment 29 Capacity for Planning, Implementation, and Stewardship of Royalties 30 Social Responsibility within BPXC 31 Relevance of Policy and Programs to Casanare 32 Policy and Programs: Creating Dependency or Fostering Independence? 33 Royalty Distribution: A Role for BPXC? 33 Casanare 2000: Shared Vision or Tunnel Vision? 34 BPXC's Capacity to Deliver on Policy Commitments 35 i Learning from Experience 36 Environmental and Social Assessment Processes within BPXC 36 Security and Social Interaction: Striking a Balance 38 Community Perspectives: BPXC's Social Investments and Royalties 39 BPXC's Social Investments 39 Participation in Royalties 41 5. Conclusions and Recommendations 43 Main Conclusions of the Evaluation 43 Recommendations for National Government and Authorities in Casanare 44 Conduct National Dialogues 44 Delineate Institutional Responsibilities and Strengthen Regional Capacity 44 Support Regional and Sectoral Environmental and Social Assessment 45 Promote Departmental Peace and Development 45 Recommendations for BPXC in Casanare 45 Align Corporate Policies with Regional Development Plans 45 Develop a Performance Contract with Development Partners 45 Actively Monitor Devolution of Community Affairs 46 Strengthen Efforts to Promote Human Rights 46 Recommendations for Civil Society in Casanare 47 Strengthen Public Involvement in Planning 47 Strengthen Procedures for Transparency 47 Seek Partnerships with NGOs and Promote Transparency 47 Actively Participate in Monitoring and Evaluation 47 Annex 1. List of Interviewees 48 Table 1. Demographic and Socioeconomic Information for Casanare 17 Boxes 1. Provisions for Public Involvement in Colombia 22 2. Corporate Learning within BP 26 Figures 1. BPXC's Evolving Regulatory and Policy Framework for Social Aspects 3 2. Map: Location of Local Communities and BPXC's Operations 10 3. Milestones of Project Development 12 4. Stakeholder Dynamics in Casanare 14 5. The System for Allocating Royalties 23 6. Income from Royalties 24 7. Areas of Investment Supported by Income from Royalties 31 8. BPXC's Response to Expectations at Community, Municipal, and Regional Levels 34 ii Executive Summary In 1987 British Petroleum Exploration In attempting to evaluate how BPXC Colombia (BPXC) began exploring for oil in a integrated social concerns into remote part of Colombia which only recently development decisions, the important was designated the Department of Casanare, factors to consider are: the stakeholders in 1991. The capacity of the Casanare (and the interplay among them), the government for planning, managing chronology of decisionmaking, and the finances, and maintaining law and order was social, political, and corporate contexts very weak. The lifestyle of most of its people throughout project development. In broad was far less advanced than the more terms the four stakeholder groups of developed parts of Colombia, with education interest are corporate employees, levels below the national average. Yet within representatives of government agencies, ten years, Casanare's oil-related royalty conmmunity representatives, and local income would exceed that of any other nongovernmental organizations (NGOs). department in Colombia. For the most part, BPXC's community The expectation of economic opportunities affairs activities have been progressive, far resulted in large-scale inmigration that reaching, and beneficial to both the resulted in a growing disaffection in local corporation and the community. This is a communities. The injection of cash into the significant endorsement of the company's local economy and the presence of approach, given the difficult circumstances contractors fueled corruption and extortion, in which it has been operating. Perhaps its causing civil conflicts to escalate. The violent most remarkable achievement has been to activities of both guerrilla and paramilitary obtain from communities a "license to groups still affects all elements of society in operate," which paved the way for a major Casanare, casting a shadow of intimidation industrial development to be implemented, among its communities and impeding its although it remains to be seen whether this social and economic progress. In the midst of license can be maintained. this complex web of expectations, impacts, and opportunities, BPXC consciously The company will also acknowledge attempted to define and redefine its social that its involvement with communities and responsibilities to stakeholders. How BPXC other stakeholders has not always resulted achieved its objectives, including the in mutual benefit, or the perception of evolution of its social policies and programs mutual benefit. In other cases, BPXC has despite various obstacles, lies at the heart of been criticized for investments or other this evaluation. interventions some view as inadequate. 1 BPXC's Operations in Casanare, Colombia More significantly, BPXC risks being Environmental and Social Assessments associated with a "lost" developmental opportunity if local governments are unable Prior to 1993 BPXC and other oil and gas to manage locally accrued revenues for companies were obliged to produce sustainable social and economic numerous environmental assessments (EA) development, or if their efforts to do so are for specific activities (over 80 in the case of overshadowed by violence. BPXC), without producing an overall statement of the likely cumulative direct and Enabling Socially Responsible Behavior indirect impacts of all planned actions. This by Corporations piecemeal bureaucratic approach was unsatisfactory for the company and the Although the National Constitution of regulatory authorities, and it provided little 1991 strongly emphasizes the rights of assurance of environmental and social Colombian citizens to benefit from protection. development and participate in decisionmaking, there are no specific In 1991 the company instigated a provisions relating to the social comprehensive environmental pre-diagnosis responsibilities of private sector entities. The for the Cusiana project. This exercise was Colombian government has been intended to provide the kind of progressive in allocating royalties. A large environmental and social overview that the proportion of the 20 percent royalty on piecemeal approach required by regulation production is returned to provide social could never deliver. The decision by BPXC benefits to the communities directly to undertake this work is commendable. impacted (via the departmental and municipal authorities in which oil Although the information available was production takes place). A sound practice, limited, the pre-diagnosis produced valuable in theory. The development impact of the information. For example, it accurately royalties, however, depends on the predicted the limited importance of direct recipient's capacity for planning and impacts compared with indirect impacts management within its territory. And such as inmigration and the lack of social Casanare has an extremely limited capacity. and economic structures to accommodate it. The pre-diagnosis also helped to shape The production wells and two central BPXC's social policies and programs. Some processing facilities are located in the of the predictions made in the pre-diagnosis municipalities of Tauramena and Aguazul. were not acted upon (in particular the In 1996 alone the royalties from oil strategic issues of royalties). production in Casanare, Aguazul and Tauramena were CP$77.7 million, CP$10.7 Some of BPXC's recent work on million and CP$12.1 million respectively. environmental assessment (EA) and social Potential development opportunities have assessment (SA) go well beyond the legal been constrained, however, by such factors requirements which were strengthened in as lack of coordination among territorial 1993 by the enactment of Law 99 (figure 1). bodies (and capacity for planning), failure to For example, the recently completed assign all royalties to priority areas (such as environmental and social studies of health and education), and lack of proposed operations in Piedemonte used accountability. sustainable regional development as an organizing principle for assessing impacts 2 Executive Summary and developing mitigation measures. BPXC and incorporated this commitment into its adopted a participatory approach social policy. In the sensitive area of human throughout, involving a high level of rights, BPXC has promoted such important involvement with interested and affected initiatives as conflict management training parties. The end product, and the process by for 800 leaders from across the 19 which it had been achieved, are both highly municipalities of Casanare. commendable. The main criticism of the 1993 policy is in Relevance of BPXC's Social Policy and the somewhat narrow definition of the Programs project's area of influence as the immediate areas of exploration and production activity. Since 1993 BPXC has had a robust This was somewhat divisive among Community Affairs Policy that has been communities, because those living beyond periodically reviewed and updated (figure the area of influence were unable to benefit 1). To a large extent BPXC's original policy from BPXC-supported development and related programs were timely and initiatives. However, BPXC recognized this locally appropriate. In making the transition from exploration to full-scale Figure 1. BPXCs Evolving Regulatory and Policy production, the company Framework for Social Aspects developed a coherent framework for the disparate activities that it had 1990 1992 1994 1996 1998 previously supported. In I : I i I I I t l particular, the appointment of a field-based Community Regulatory developments Affairs team in 1992 shifted Constitution Law 99 (Dec'93) 0 0 Law 149 (Royalties) the interaction with stakeholders from mitigating imnpacts to actively attempting Evolving social policy within BPXC to promote local development gsBPXCsCommunityAffairsPolicy * Casanare 2000* Revised'98poIcy * (figure 1). The 1993 policy and programs provided a Social investment objectives and approaches sound basis for managing Impact management Managing expectations Regional devebpment| expectations at the community level and creating trust and dialogue. Employment opportunities Numbers of Community Affairs staff with the company and its 3 6 8 12 16 30* 34* 4 contractors were of major concern to stakeholders. 4 Within the limits of the law, Community Affaim team established (May 1992) and often at great cost to the company, BPXC has sought to l l l l l l l l l l maximize employment 1990 1992 1994 1996 1998 maxin-dze employment opportunities for local people with considerable success, 16 forSDLAandthe restforOcensa 3 BPXC's Operations in Casanare, Colombia problem, and in its policy of 1996 expanded to obtain input from the territorial support to regional as well as local authorities or civil society. Still, many of the programs, creating mechanisms through principles, aspirations, and approaches which benefits could be more broadly outlined in Casanare 2000 are still relevant. shared. The challenge is to obtain departmental and municipal ownership of the vision it As early as 1992 the company helped presents and to find effective mechanisms to communities to diagnose their development deliver the objectives. This is all the more needs and priorities. This helped to ensure challenging at a time when the that programs were relevant, created a responsibility for community affairs is being forum for discussion, and improved the devolved to line managers and the numbers prospects for success in the follow-up of community affairs staff is being reduced development projects. The company's (figure 1). insistence on cofinancing with municipalities and on community This challenge is also complicated by contributions was also a progressive attempt community perspectives on the effectiveness to improve the sustainability of community of BPXC's social investment strategy. While development initiatives. most beneficiaries of BPXC's community projects interviewed did acknowledge the BPXC might be criticized, however, for benefits of BPXC's involvement, they failing to adopt a strategic development typically viewed BPXC's contribution as perspective earlier on. The Cusiana obligatory and as inadequate retribution for environmental pre-diagnosis highlighted the the disruption related to oil production. failure of territorial authorities in the Given that BPXC's budget for community neighboring Department of Arauca to affairs of US$6 million is a fraction of the benefit from royalties and the consequent royalty-related earnings in the department escalation in conflict. It also identified weak (which totaled almost US$100 million in institutional capacity for planning, 1997), the real opportunity for sustainable management of royalties, etc. BPXC development in Casanare lies in harnessing appeared unable to help territorial these revenues more effectively. authorities manage royalties in an equitable and transparent way. In its defense, the Recommendations company is rightly sensitive about appearing to meddle in the affairs of state. To become more actively involved at the The company also supported preparation of strategic level BPXC must balance many development plans and provided training conflicting considerations: its de facto for municipal and departmental personnel, capacity to provide leadership and technical but frequent changes in administration skills coupled with its reluctance to interfere diluted the long-term benefits of such with the affairs of state, the difficulty of efforts. developing institutional capacity when the employees change every time there is an The strategic perspective that the pre- election, and the risk to BPXC's reputation diagnosis of Cusiana recommended for of failing to act or from failure as a result of BPXC was reflected in Casanare 2000: undertaking the wrong actions. BPXC's strategic vision for how the department could benefit from oil revenues One overall conclusion the evaluation in a sustainable manner. Casanare 2000 clearly points out is that if the goal is to involved tremendous effort and vision at the sustain the benefits from BPXC's social corporate level, but BPXC made little effort investments, to promote better stewardship 4 Executive Summary of the substantial incomes generated by It is recommended that government royalties and to overcome the constraints to provide additional support to upstream social and economic development resulting sector planning activities for environmental from increased violence, effective and social assessments. Finally, mechanisms partnerships need to be developed between should be explored to strengthen incentives government, BPXC, and civil society. for companies to invest in communities. For example, government might enable Government companies to offset a proportion of the costs of social investments in the early stages of It is crucial to reinforce the framework projects against taxes on future profits for transparency and accountability in the (assuming that projects proceed to allocation of royalties. This is best addressed implementation). at the national level. The starting point could be to begin a dialogue among BPXC government, oil and mining companies, and civil society to discuss how oil revenues can Despite BPXC's intensive efforts in be distributed in an equitable and Casanare at the local level, its reputation transparent way. This dialogue may also remains at risk if the opportunities extend to the "wealth and violence" issue by presented by royalties are not realized. In building support for public-private devising Casanare 2000, the company development interventions and reducing the outlined an appropriate sustainable credibility of guerrillas. development strategy for Casanare, but stopped short of obtaining buy-in from the The problem of poor institutional other important development partners. capacity is pervasive in Casanare and has diluted the development impact of royalties It is recommended that BPXC develop a and of BPXC's social programs. Given the "performance contract' with its link between poor capacity and electoral development partners (government and civil cycles, this issue also needs to be addressed society), using Casanare 2000 as a starting at a national level, with involvement by the point for discussion. The partners should territorial authorities. The objective should agree on objectives, programs, and be to strengthen implementation capacity institutional responsibilities and and continuity, particularly at the accountabilities for each party. The departmental and municipal levels. Ideally, performance contract should identify this will involve reinforcing existing indicators to measure the success of territorial bodies and other organizations, programs (based on outcomes) and rather than creating new entities. responsibilities for monitoring. The undercurrent of violence in Casanare Clearly there are risks to BPXC using this severely constrains the ability of Casanare to approach. However, these risks could be realize its development potential. There is partially mitigated by parallel approaches to also a need to more effectively involve civil capacity development (described above) and society in development planning. The by strong involvement from civil society in creation of a citizens network (comprising developing any performance contract to groups and individuals with a stake in the ensure continuity beyond electoral cycles. development of Casanare) could feed into BPXC should also carefully monitor the the development planning process and in devolution of responsibility for community parallel, help to resolve conflict between affairs so that it does not compromise this or opposing factions. other ongoing community activities. 5 BPXC's Operations in Casanare, Colombia Civil Society more actively involved in promoting transparency in the planning and The territorial authorities should take implementation of projects. In particular, measures to ensure that civil society is more the mechanism for citizen's participation actively involved in development planning (Citizen's Auditing) could be more widely using existing mechanisms such as the invoked for controlling the management of Departmental and Territorial Planning public services. Councils. In parallel, there is a need for territorial authorities to improve Finally, the potential for NGOs and local transparency in the selection, communities to actively participate in implementation and financing of projects. monitoring should be explored with government and BPXC. Such monitoring Local NGOs should seek opportunities for should use clearly specified indicators to partnership with international NGOs so that track changes in incomes, living standards, they can match up complementary skills and environmental quality, with links to and draw from the experience of similar action plans for corrective measures where projects elsewhere. They should also become necessary. 6 1. Introduction As BP Exploration Colombia's (BPXCs) employees, representatives of relevant operations' in Casanare approach government agencies (dealing with oil and maximum production of almost 500,000 gas developments, social infrastructure, barrels per day (bpd), the extent and scale of planning, etc.), local community the company's activities is immediately representatives, and nongovernmental apparent. It is easy to forget that just over a organizations who have been actively decade ago the company had no presence in involved with some aspect of the project on Casanare and no oil production the ground or in monitoring development infrastructure, and that construction of the activities. The intention was to engage each Cusiana central processing facility only of the four stakeholdqr groups to obtain commenced in 1993 once the commerciality their perspectives and insights. of the oil reserves had been declared. Like many large-scale infrastructure Aims and Objectives developments, the project has evolved in a series of incremental stages, starting with The overall aim of the evaluation was to exploration and punctuated by periods of develop an understanding of the intense construction activity, involving up to institutional and social context of the 7,000 workers. In evaluating the interaction project, as the basis for a detailed between BPXC and its stakeholders, it is exploration of how BPXC factored social critically important not to lose sight of this concerns into the development of its incremental development. operations in Casanare. The evaluation will be used to help ground-truth some of the While the evaluation centered on BPXC's conclusions derived from earlier work on operations, it was implicitly assumed that the factors influencing corporate social socially responsible investment decisions in responsibility,2 and to develop training Casanare would necessitate partnerships modules to disseminate knowledge to key among government, company, and civil stakeholder groups. The specific objectives society. Therefore the evaluation focused on were to answer the following questions: the project stakeholders, the interplay among them, the chronology of corporate * What were the prevailing corporate (and decisionmaking, the extent of stakeholder government) objectives with respect to involvement, and the social, political, and the social aspects of BPXC's operations corporate cultural context throughout throughout the past decade? project development. In broad terms the four stakeholder groups are corporate * What were the motivations behind 7 BPXC's Operations in Casanare, Colombia corporate commitments to addressing 1). Due to security constraints, the team had social concerns? limited direct access to communities. Consequently, a local NGO (CEMILLA - El * What were the approaches to addressing Centro MicroEmpresarial Del Llano) was social concerns? contracted to capture additional community * perspectives on a limited number of BPXC's * How were obstacles to socially community investment activities. Those responsible behavior overcome, and findings have been factored into this report. what was the nature of these obstacles? Project Location * What level of effort was involved in managing social concerns, and what BPXC's activities in Colombia are located were the costs? some 125 km to the northeast of the capital, Bogota, in the Department of Casanare, * How did stakeholders measure the among the largest of Colombia's 32 results achieved against the objectives departments (figure 2). The company has (for example, of community entered into three association contracts with development initiatives)? the state owned oil company, Ecopetrol, and other associate partners to continue * How did the various stakeholders view exploration and produce oil in three the outcomes of the corporation's social geographically linked blocks (SDLA, interaction and initiatives? Tauramena, and Rio Chitamena). In addition, BPXC has association contracts for Approach two further adjoining blocks, Recetor and Piedmonte, where exploration is ongoing In advance of BPXC committing to an with other associate partners. These blocks evaluation of its operations, they reviewed are all situated in the Llanos foothills of the and agreed to a detailed guidance note that Andean mountain range in wester had been prepared by the World Bank.3 The Casanare, in a southeasterly to guidance note aimed to define the northwesterly orientation that runs parallel boundaries of the evaluations and clarify the to the Llanos. Culturally and ecologically, nature and extent of the issues to be the llanos have distinct characteristics that addressed. It also provided a basis for transcend both national and international reaching mutual agreement on the precise administrative boundaries. details of the evaluation and for framing the Casanare is one of the newest approach adopted by the evaluation team in departments in Colombia having been the field. assigned departmental status in 1991. This The evaluation visit to Bogota and partly reflects the remoteness of the region: Casanare took place over approximately it is cut-off from Bogota by the Andes. three weeks (from late February to early Administratively, Casanare is divided into March 1998) and involved a team of three 19 municipalities. The three municipalities people from the World Bank. The team that are most directly affected by BPXC's reviewed key project documents and held operations are Aguazul, Tauramena, and extensive interviews with government Yopal. The towns of Tauramena and representatives from the national, Aguazul are both within seven kilometers departmental, and municipal levels; BPXC of primary processing facilities, and they employees and representatives of Ecopetrol; have experienced rapid growth throughout and representatives of civil society (annex the past decade. The departmental capital, 8 Introduction Yopal, has also undergone dramatic growth In the midst of this complex and dynamic in the same period, although it has been less web of expectations, impacts, and directly impacted by oil-related opportunities, BPXC consciously attempted infrastructure. to define and redefine its social responsibilities to stakeholders and the Main Issues to Factor into the Evaluation objectives of its social programs. How BPXC pursued its objectives, including the In theory, the social and environmental evolution of its social policies and programs issues arising from the exploration and despite various obstacles, lies at the heart of development of large oil reserves are fairly this evaluation. generic. In practice, their assessment and management becomes complicated due to a Route Map to the Report host of unique circumstances that collectively make up the social and The report is divided into five main environmental context of a specific project. sections. The introduction describes the aims In Casanare, BPXC began exploring in an of the evaluation and locates BPXC's area that had not yet achieved departmental operations in the region. The second section autonomy and where institutional capacity explains how the project evolved over time for planning, managing finances, and and the changing social and environmental maintaining law and order was extremely context of BPXC's operations during this weak. Educational attainment was below period. The third section describes the the national average, particularly at the evolving regulatory, policy, and secondary level, and the majority of people management framework for social and lived a lifestyle far less advanced than the environmental issues relating to the project. "more developed" parts of Colombia. Yet Collectively, the first three sections set the within ten years, Casanare's departmental scene for the findings of the evaluation, income from oil-related royalty payments which are presented in section four. Finally, exceeded that of any other oil-producing conclusions and recommendations are department in Colombia. presented in section five. Even before the extent of the reserves was proven, the expectation of economic I BPXC is the appointed operator for a number of opportunities resulted in large-scale Association Contracts in the Department of inmigration to the area that had significant Casanare. For convenience, this report refers to socioeconomic and demographic impacts. BPXC throughout as a surrogate for specifying the Thisocioecono and dohemographic impactatns. partners in each Association (in which Ecopetrol, This in turn led to heightened expectations the state owned oil enterprise, always retains a 50 and disaffection on the part of local percent stake). communities, compounded by the fact that royalties were negligible until 1994. At the 2 Presented in World Bank Discussion Paper No. peak of construction in late 1996, BPXC's 384. Integrating Social Concerns into Private Sector operations required a workforce of almost Decisionmaking: A Review of Corporate Practices 7,000 people, but it rapidly declined in the Mining, Oil and Gas Sectors, 1998. thereafter. Like the neighboring department I Integrating Social Concerns into Private Sector of Arauca, oil-related incomes from royalties Decisionmaking: Guidance Notes for the and the presence of contractors fueled both Evaluation of Selected Projects. The guidance notes corruption and extortion. It also led to an include a schedule detailing the areas of interest to escalation of guerrilla-paramilitary-military be evaluated, specific questions to be explored, and conflicts and increased violence within to which of the four stakeholder groups questions Casanare. were to be addressed. 9 Figure 2. COLOMBIA LOCATION OF LOCAL 0H 0Cooa COMMUNITIES AND La OSa BPXC'S OPERATIONS o TOWNS AND VILLAGES * CENTRAL PROCESSING F~ACILITIES ®STATE CAPITAL --STATE BOUNDARIES Th. oep o& po..d by the mp D.., Lbitf o! whe WOd -k The he-,done -A-, denoeeo-en -,dJ ety e iek,, Gr-4, oy jrdgret a' helg-l -*,eeoy Isn-y, -y 0~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~10~ CPF~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~C. 2. An Evolving Social and Environmental Context This chapter provides a brief summary of averaged US$35 million. Exploration work BPXC's activities in Casanare over the past confirmed the extent of the reserves in two decade, outlining the relationship between separate fields totaled 1.6 billion barrels, BPXC and its association partners. It also namely Cusiana -the largest oil field in describes the evolving social and Colombia -and Cupiagua situated some 10 environmental conditions over the same kilometers to the north. This represents the period. largest oil discovery in Latin America during the past decade. Description of BPXCs Operations Commerciality was declared for the BPXC started exploring for oil and gas in Cusiana association contract (SDLA) in the Llanos foothills of the Eastem Andes in mid-1993, which was followed by 1987, beginning with the Santiago de las construction of the Central Processing Atalayas (SDLA) association contract Facility (CPF) at Cusiana some seven (figure 2). Its original geophysical and kilometers to the southwest of Tauramena. seismic surveys followed unsuccessful Commercial production commenced in exploration forays by a number of other October 1994 and reached 185,000 barrels companies dating back to the late 1950's. by the following year. During this Based on the results of initial seismic construction period, approximately 30 wells surveys, the first exploration well was were drilled (including production wells completed in early 1988 (Cusiana 1) and and gas and water re-injection wells), and produced some gas and condensate. 86 kilometers of flow lines were laid to Thereafter a series of wells were drilled to connect these wells to the CPF at Cusiana. determine the nature and extent of the In addition, the existing Central Llanos and reserves. Colombia pipelines were also upgraded to deliver the crude to an oil terminal at The geological stratigraphy in the Llanos Covenas on the Atlantic coast of Colombia. foothills is heavily faulted and fractured and therefore highly variable over relatively Construction began on the second phase short distances. In addition, the oil- of the Cusiana CPF in June 1995 and on the producing quartz sandstone formations are Cupiagua CPF in December 1995. During located at depths between 14,000 and 1996 work also commenced on the new 800 16,000 feet, which requires the application km Ocensa pipeline between Cusiana and of expensive advanced drilling technology. Covenas, which was completed in late 1997. The consequent cost of exploration wells The pipeline traverses the Andes at a 11 BPXC's Operations in Casanare, Colombia maximum height of 3,200 meters above sea level. The hgure 3. Mleslones of Project Devebpmert combined production from Cusina/Cupiagua was 450,000 at the end of 1998. Since 1997- affon begis commerciality was declared for the Cusiana field in 1993, BPXC Ddring of Csana and its partners have invested Eiapirot, pre-feesblifty, discoverywel US$6 billion in Casanare. Major andfeasibi*t is escoWtinue milestones in the development of operations in Casanare are . CusWina 4 .#raian wali summarized in figure 3. More 1M2Z conrms extent of reswves recently, BPXC has been Stit dates for constrLcton exploring in the Piedmonte of CPF I at wanaI block. In December 1997 it r1ase 4 Cannmerdcal;ydclared applied for Ecopetrol to declare - 1 the commerciality of the Volcanera-Florena-Pauto canmwerdaprxdiacn association contract: this was _ beghs at,usfaia granted in 1998. I(850WtpdbyLec'95) The function of the CPF's is i_ to separate oil from produced SEtndateifrcons-wtson CantctiwcUfpipdineto gas and water, so it can be sent of CF 2 at QCupagua & _ trinal at7Covwnacanplete to the pipeline and export nw/ptI?etoCwa systems. Almost all of the 1 billion cubic feet of gas P Canbinedaveape produced daily is re-injected at Prdonsvw4ng pwducfibnof4M0bp very high pressure to avoid the 330,00Obpd ig- from CPFI aidCPF2 environmental impacts of flaring and to maintain reservoir pressure. It is thereby available for future exploitation. A small system was introduced in 1974 under the fraction (approximately 20 million cubic feet terms of Colombian Government Decree per day) is fed to the Colombian National 2310. The aim is to facilitate private sector Gas Distribution System. Produced water is associates of the state-owned oil company, also re-injected, principally on Ecopetrol, to be involved in the exploration environmental grounds, following anti- for and development of state-owned oil corrosion treatment. The CPF's at Cusiana reserves. During the exploration phase, and Cupiagua produce sufficient light sweet Ecopetrol's associates assume all costs, crude to meet 20 percent of the which includes the costs of any social and requirements of the United States. environmental programs. If reserves are discovered and their commerciality declared Partners in the Santiago de las Atalayas by Ecopetrol, 50 percent of direct costs of (SDLA), Tauramena, and Rio Chitamena producer wells are reimbursed. Thereafter, association contracts are Ecopetrol (50 the associates benefit in proportion to the percent), BPXC-the appointed operator- size of their holding for a period of 22 years, (19 percent), Total (19 percent), and Triton after which all facilities and goods revert to (12 percent). The association contract the state at no cost. 12 An Evolving Social and Environmental Context Twenty percent of the oil produced is grazing. paid in kind to Ecopetrol which is then transferred to the regional governments and The plains are traversed by numerous the National Royalties Fund. Ecopetrol holds rivers (for example the Rio Meta) which a 50 percent stake in the association originate in the Andean highlands and contract; in addition, the total tax burden on foothills and flow in a southeasterly production amounts to approximately 45 direction to contribute to the Orinocco percent. The total government take of River. As recently as the 1950's these rivers production exceeds 85 percent. provided important trade routes. However, construction of the Bogota-Yopal highway, The Environmental Context of BPXC's combined with siltation of some rivers and Operations reduced water flows (related to deforestation), has diminished the The landscape of Casanare in the vicinity importance of these rivers for of BPXC's operations is topographically transportation. Each of the Municipalities of divided into two distinct categories: the Yopal, Aguazul, and Tauramena are located Andean foothills (between 200 and 1,000 within its own river basin: Yopal in the meters above sea level) and the plains basin of Rio Cravo Sur, Aguazul in the Rio (below 200 meters above sea level). The Unete basin, and Tauramena in the basin of climax ecosystems of the foothills encompass the Rio Cusiana. humid tropical woodlands and transition to very humid sub-montane woodland, The Social Context of BPXC's whereas the plains are characterized by Operations savannah formations. Natural or semi- natural vegetation is largely restricted to Key Stakeholders and Their Interactions inaccessible steeply sloping river valleys that Key stakeholders with an interest in do not readily lend themselves to BPXC's operations in Casanare are national agricultural conversion. Agriculture, authorities (such as the Ministry of Mines particularly cattle ranching, has had a and the National Royalties Fund), regional profound impact on the landscape. Since and local authorities (including the early 1970's agro-industrial operations departmental and municipal offices and like rice and palm oil production, oil-related Corporinoquia, a regional environmental activities, and increased human pressures authority), civil society and its related to inmigration have accelerated the representatives (such as village associations, loss of remaining natural habitats. church leaders and NGOs), and private sector commercial interests (represented by In terms of agricultural potential, the soils organizations such as ExpoCasanare and of the foothills are the most fertile within the Chambers of Commerce). Illegal armed project area and are suitable for a range of groups and providers of security to BPXC agricultural crops. This factor has (including the Colombian military and influenced the location of human police) complete the stakeholder landscape. settlements, with 11 of Casanare's 19 A schematic diagram of the dynamics municipal capitals located within this among stakeholders (centered on the relatively small fraction of the departmnent common interest of BPXC's operations) is (23 percent of the total area). This, in turn, presented in figure 4. This figure attempts to has influenced the distribution and density identify the main interactions among of roads and basic infrastructure. Soils of the stakeholders relevant to the evaluation plains are fragile and susceptible to erosion, (although it clearly omits many other and their potential is limited to cattle important interfaces). 13 BPXC's Operations in Casanare, Colombia Figure 4. Stakeholder Dynamics in Casanare The Hydrocarb onsDi rate o tdelegates monitoring o a i pnalr conrolove oi exloiatinkb h tt ad pyet t_o_ CAsthareifromteF (e the privt sthintheMs - NGOs * =NGs N (campaigning U o t c collaboration) § X , responible fork issn permivat suecttool assnore Ahe com e s n aciequty dAssociations s i 9mer9, t environmenta andsocialimactstudi (negotiation) g errs \ I~~~~~~nt/midation/Extortion/ The Hydrocarbons DirectoratheMiitry This lack of capacity is particularly oviinistry of Mines and Energy exerts overall important given the substantial royalty control over oil exploitation by the state and payments to Casanare from the FNR (see the private sector. Within the Ministry of chapter 3). Newly elected govemors are Environment, the Hydrocarbons Unit of the charged with producing a departmental Under-directorate of Permitting is development plan within four months of responsible for issuing permits, subject to oil assurning office. Since achieving companies submitting adequate departmental status in 1991, there have enviTonmental and social impact studies. To been five govemors with dffferent visions for faciNtate coordination between the Ministry the future of Casanare. The re aximum term of Environment and Ministry of Mines and governors rnay serve is three years, with no Energy, a Mining and Energ,v Environrnent opfion to seek re-election. Council (CAME) and Mining and Energy Environment Group (GAME) were So far it appears that no departmental established in 1995. Finally, at a national appointments in Casanar hre s been made level, the National Royalties Commission based on open compeition for appropriateby (FNC) administers the National Royalties skilled people, and therefore the prospects Fund (FNR). for developing institutional capacity and memory are low. Unlike some other At the regional level, the Departmental departments in Colombia, there is no civil Governor's office is based in YopaL the service to provide continuity between capital of Casanare. The governor's administrations. Notwithstanding the administration comprises political patchy history of departmental governance appointees, most of whom will have had in Casanare, the current incumbent appears little experience in planning or in managing to be committed to transparency and the finances of departmental authorities. sustainable development of the region. The 14 An Evolving Social and Environmental Context governor's office has considerable influence four months of taking office. The factors over certain aspects of BPXC's operations, that constrain the development of and the current governor views BPXC as a institutional capacity at the departmental potentially important partner for the level apply equally to mayoral development of a sustainable economy administrations. The Mayor's Office exerts within Casanare, unrelated to oil. few controls over the planning and development of oil-related infrastructure, Corporinoquia is an institution with but are important partners for BPXC responsibility for stewardship of regional supporting its social and community national resources of the Orinocco basin, development programs. one of six similar organizations covering other natural regions within Colombia. Its Civil society within Casanare is current administration is dedicated to the represented by village associations, workers' concept of sustainable development of the associations, church leaders, and NGOs. The region and has established policies and communities most directly affected by programs for the management of natural BPXC's operations and exploration over resources at the regional level. It is also time have been Aguazul, El Morro, responsible for monitoring certain Nunchia, Tauramena, and Yopal. conditions attached to permits issued by the Representatives of these communities Ministry of Environment to BPXC, for (including the mayors, village association example, licenses covering discharges to or presidents, and church leaders) have been abstractions from surface waters. In actively engaged with BPXC in developing practice, with just 10 technicians to monitor social mitigation/development programs. In an area that covers 20 percent of the land addition, NGOs active in the area-for within Colombia, it can only monitor on a example CEMILLA (a Centre for reactive basis. BPXC has worked in Microenterprise Development) and Minuto partnership with Corporinoquia on a de Dios (who are active in providing reforestation initiative and has also provided housing for the poor) -have developed financial assistance for a number of other partnerships with BPXC. In some instances, programs. these groups are strongly critical of certain aspects of BPXC's social programs. Of the 19 municipalities in Casanare, the three principally affected by BPXC's The perspective of many Casanarenos operations are Aguazul, Tauramena, and who have lived in the area since before oil Yopal (figure 2). The production wells and exploration began contrasts with that of central processing facility for Cusiana are inmigrants who view Casanare as a place of located in the Tauramena, whereas opportunity. Most Casanarenos depict a Cupiagua's CPF and production wells are in somewhat romantic view of life before oil Aguazul. Both municipalities have was discovered. They remember an experienced inmigration and disruption uncomplicated, sparsely populated agro- related to exploration and construction and ranching existence, where government both receive substantial royalty payments involvement and interference was minimal from Ecopetrol (chapter 3). Yopal, the and people had a high degree of self- department's capital, has also experienced determination. Disputes were resolved high levels of inmigration. The respective without legal recourse, and violence was populations of these municipalities are minimal (notwithstanding the recent history 15,000, 10,000, and 90,000 inhabitants. of conflict in the region since the late Municipalities are headed by mayors, who 1940's). They believe that the direct impacts must produce a development plan within of BPXC's presence, and more importantly 15 BPXC's Operations in Casanare, Colombia the indirect effects of inmigration from Population increases. Casanare's elsewhere in Colombia (in terms of social population nearly doubled between 1973 impacts such as prostitution, drunkenness, (89,000) and 1993 (175,500), the year of the violence, competition for land and resources last census. The growth rate was highest and related environmental degradation), between 1973 and 1985, with average has severely diminished their quality of life. annual increases of 4.2 percent. Between Their perception is that, on balance, the 1985 and 1993 the population grew at a social and environmental costs have more modest 2.2 percent per year. Over the outweighed the benefits. past 25 years the annual rate of growth of Casanare's population was 3.9 percent, far Private sector commercial interests higher than the national average of 2.4 include chambers of commerce, percent The current population is estimated ExpoCasanare, and contractors and at 230,000 inhabitants. suppliers to BPXC. These groups either directly benefit from providing goods and Population growth in the municipalities services to BPXC, indirectly benefit from the affected by oil exploration and production recent relative economic prosperity of the was among the highest in the department. area, or represent the business sector in Tauramena is located within 7 kilometers of Casanare. ExpoCasanare is a civil the Cusiana oilfield, and the Cupiagua association dedicated to the sustainable oilfield is a similar distance from Aguazul. economic development of the region Although Yopal produces no oil, it is an without dependence on oil-related incomes. important development center; as the BPXC has worked closely with capital of the department, it has better ExpoCasanare and with the chambers of infrastructure, basic services, and financial commerce on developing a sustainable and administrative capacity. Average economic platform. They have also worked annual rates of growth in Yopal (1973 to with contractors and suppliers on issues 1993), and in Tauramena and Aguazul such as employment of local people and (1985 and 1993) were 10 percent, 13 payment of local taxes. percent, and 8 percent respectively. Finally, illegally armed groups are active Between 1973 and 1993 Casanare within the area of BPXC's operations. underwent rapid urbanization, with urban Guerrilla groups are opposed to BPXC's populations increasing from 22 percent to operations, which they view as supportive 53 percent of all inhabitants. Urban growth of the government. They also attempt to rates in the department were more than extort finances from BPXC and its double the national average of 10 percent in contractors. Paramilitary groups also this period and were most significant in oil- operate in the area in opposition to the producing municipalities like Tauramena, guerrillas. The dynamics of the conflicts where the urban population increased from within Casanare are explained in more 15 percent in 1985 to 44 percent in 1993. In detail below. fact, inmigration due to the oil boom is confirmed by the presence of an increasingly The Evolving Demographic and young adult male population in Socioeconomic Context municipalities like Tauramena and Aguazul. Some basic demographic and socio- The main demographic changes in the economic information for the Department of department, particularly in its capital and in Casanare, presented in table 1, is discussed the oil-producing municipalities, can be in the following section. summarized in three trends: high rates of 16 An Evolving Social and Environmental Context Table 1. Demographic and Socioeconomic Information for Casanare Indicator Year Colombia Casanare Yopal Aguazul Tauramena Per capita income (CP$/yr) 1995 1,850,000 930,000 - - - Population 1973 - 89,000 - - - 1993 - 175,000 - - - Unemployment (%) 1995 9 5 - - - Infant mortality (per thousand live births) (%) 1995 21 36 - - - Primary education provision (%) 1995 85 114 - - - Secondary education provision (%) 1995 64 58 - - - Educational attainment (%) None 1973 - 35.6 31.3 - - 1993 - 15.0 11.5 - - Full primary 1973 - 5.4 6.7 - - 1993 - 15.2 15.2 - - Full secondary 1973 - 0.3 0.9 - 1993 - 3.9 6.1 - - Higher level education 1973 - 0.2 0.3 - - 1993 - 2.5 4.7 - - Urban population (%) 1973 59.2 22.3 45.5 32.7 12.2 1985 65.3 32.3 55.0 34.6 14.7 1993 68.9 53.3 74.4 66.7 44.3 Masculinity index 1973 - 107 102 109 111 1985 - 110 110 114 122 1993 - 109 105 116 128 Type of urban dwelling (%) House 1973 - - 94.6 96.3 99.2 1993 - - 80.1 74.8 85.6 Flat 1973 - - 2.4 2.7 0.0 1993 - - 7.1 5.4 0.5 Room 1973 - - 1.7 0.6 0.8 1993 - - 12.1 16.6 10.4 Urban households served 1973 - - 94.1 84.7 92.4 by water (%) 1993 - - 94.6 95.2 96.1 Urban households served 1973 - - 40.9 31.0 12.9 by sewers (%) 1993 - - 65.3 32.7 56.0 17 BPXC's Operations in Casanare, Colombia urban population growth, incTeases in the only municipality showing a relatively high young adult population, and high indexes of level of development. Of the 19 masculinity. Anecdotal reports of increased municipalities in the department, seven prostitution and drunkenness are consistent were rated as having average development, with these demographic changes. including Aguazul. Tauramena was categorized as poorly developed, but it did Health and education. Only very limited not benefit from oil revenues until 1993. information was readily available on the Significant investments in infrastructure health status of the population of Casanare. have occurred since that time. For example, However, infant mortality is high compared the urban population with sewers in with the rest of Colombia; the national Tauramena has increased from 12 to 56 mortality rate per thousand live births was percent (despite significant increases in 21 in 1993, compared with 36 in Casanare. population). One of the main negative However, infant vaccination programs have consequences of oil-boom-related covered 89 percent of the region's children, inmnigration has been a deterioration in the compared with the national average of 75 quality of housing in Tauramena and percent. Aguaul. Due to the subdivision of dwellings, people often live in one-room households. Education at the primary level is adequate in Casanare, at least in terms of Economic changes. The oil boom has not available schools. But only 58 percent of markedly improved overall employment in children are provided with places at the the region. However, it has significantly secondary level, which is below the national shifted labor distributions towards sectors average of 64 percent, but represents a great like services, commerce, and construction, improvement on the 1988 level of 22 and away from the farming sector. In 1973, percent. The population's overall only 2.6 percent of the employed population educational attainment is nonetheless very in Yopal worked in the oil sector, 67 percent low at all levels. As of 1993, 11 percent of worked in agriculture and cattle rearing, the population had received no education, and 26 percent in services, commerce, and and the percentages attaining full primary, construction. In 1993 the situation was secondary, and higher level education were radically different-with more than 60 15, 6, and 5 percent respectively. These percent employed in services, commerce, figures represented significant and construction and only 23 percent in improvements over much lower levels of farming activities. educational attainment in 1973. Despite these relatively low levels, unemployment in Despite the low level of employment Casanare was almost half the national creation by the oil industry, the rate of average of 9 percent in 1993, largely as a economic growth in Casanare between 1985 result of the oil boom. and 1993 (8.6 percent) was more than double the national average. There has also In 1994, the Governor's Office measured been a significant improvement in the the municipalities relative development creation of added value. According to a using indicators based on the status of study prepared by CRECE, a regional health, education, urban services, development think-tank, the contribution of infrastructure, public administration, and the oil industry to the added value in public participation in decisionmaking. The Casanare increased from 12 percent in 1985 results show that the municipalities located to 45 percent in 1993- a direct consequence at the Andean Watershed Ecosystem were of BPXC's operations. the least developed, and that Yopal was the 18 An Evolving Social and Environmental Context Conflict in Casanare popular support of peasants in some of the Casanare has not escaped the violence more rural areas, in some cases by acting as that has afflicted much of Colombia. In the a surrogate provider of government services. late 1940's and early 1950's, Los Llanos was They rely on extortion, robbery, and the locus of some of the most intense and kidnapping to obtain finances and more brutal internal conflict between liberals and recently have been linked to narco- conservatives in Colombia's history, known trafficking. Paramilitary groups typically as La Violencia. The origins of the current provide security to major landowners or leftist guerrilla groups can be traced to this other groups in society at risk from guerrilla period, and guerrilla groups have attack (including drug traffickers). Their maintained a presence in Los Llanos ever mode of operating typically involves since. The two main guerrilla groups collective massacre of peasants thought to currently active in Los Llanos are the FARC be sympathetic to guerrillas, leading to the (Fuerzas Armadas Revolucionarias de displacement of survivors, which is often Colombia) and the ELN (Ejercito de followed by a negotiated return. More Liberacion Nacional). The objectives of these recently, they have turned to selective leftist guerrilla groups, each with a different killings as a result of national and program for Marxist revolution, are broadly intemational outrage at some of the better- similar. Both are dedicated to overthrowing publicized massacres. the government, which they perceive as unrepresentative and dominated by the In conflict situations within Colombia (as traditional ruling classes. These guerrilla elsewhere), security is the main determinant groups are the dominant political and of property value. This sometimes leads to a security force in perhaps six of the 19 perverse symbiotic relationship between the municipalities in Casanare. guerrillas and paramilitaries. The guerrillas create risks (perceived and real); The ELN also have explicit objectives paramilitaries offer protective security and related to oil exploitation in Colombia and intimidate peasants; the peasants support favor the sustainable indigenous the guerrillas. The Army is involved in an management of oil reserves for the benefit of internal war with both of these groups, the nation. They are conceptually opposed although allegations of alliances between to the presence of foreign oil companies in the Army and paranilitary groups are general, and in particular they object to the thought to have had substance in some foreign-managed export of large volumes of situations. The latest US State Department crude oil. Their perspective is that it is report on human rights in Colombia for simply politically expeditious and fails to example, argues unequivocally that there maximize the benefits for the Colombian are close ties between the military and nation, for example through developing a paramilitary. national downstream oil industry. On this basis, the ELN actively try to control oil- The discovery of oil in Casanare has producing areas and were very active in the undoubtedly contributed to increased neighboring department of Arauca before conflict between these groups. In the oil production commenced in Casanare. neighboring Department of Arauca, the discovery of the Canon Limon oil field by The conflicts among guerrilla groups, Occidental in 1986 (and its related economic illegally armed paramilitary squads, and the activity and revenues) acted as a catalyst for Colombian Army tends to follow a larger-scale conflicts. It is widely accepted consistent pattern. Guerrillas retain the that guerrilla groups successfully extorted 19 BPXC's Operations in Casanare, Colombia money from certain contractors, which is stoppages based on threats to the lives of its thought to have exacerbated the numbers of employees and contractors, disruption of guerrilla attacks and related paramilitary drilling operations during sporadic attacks, and military actions. For example, the and very high security costs (including pipeline between Covenas and Canon support for the 16th Army Brigade that is Limon has been attacked once a week on based in Yopal). Additional, though less average since its construction. In Casanare, tangible, costs have arisen from the BPXC has publicly and consistently refused association of the company with the to pay "rent" to any illegally armed groups. violence between the illegal groups and the BPXC has paid the price in periodic work state's armed forces. 20 3. An Evolving Regulatory, Policy, and Management Framework The legal framework for managing social The National Code for Renewable and environmental issues related to Resources and Environmental Protection petroleum operations in Colombia has (Presidential Decree No. 2811 of 18.12.94) changed over the past decade. Over the established requirements for environmental same period, BPXC's policy and assessments in a range of project types, management practices relating to the social including oil activities. Under this system, aspects of its operations in Casanare have project proponents had to provide evolved. Perhaps the most significant factor INDERENA (the National Institute for in these changes has been the distribution of Natural Resources) with an Environmental royalties from oil production and the Impact Declaration based on an increasing importance of the contribution of Environmental Impact Assessment. royalties to departmental and municipal budgets. This system was superseded in 1993 (under Law 99 of December 22), with the This emphasis on distribution of royalties creation of the Ministry of Environment. arises from the authors' belief that This new ministry caused a restructuring of stewardship of royalties is central to the government institutions in charge of whether BPXC's social and community environmental management. Law 99 also involvement is perceived as having a lasting established an Enviromnental Permitting contribution to Casanare. This aspect is Process (Title VIII of Law 99), which is a discussed in greater detail in chapter 4. prerequisite for starting any productive project. The Hydrocarbons Unit of the Regulation of the Petroleum Sector, Under-directorate of Permitting (part of the 1987-1998 Ministry of Environment) is in charge of this process. To facilitate coordination between Like many other countries, Law 20 from the Ministry of Environment and the 1969 dictates that hydrocarbons and Ministry of Mines and Energy, the Mining mnineral resources are the exclusive property and Energy Environmental Council (CAME) of the Colombian Nation. The Hydrocarbons and Mining and Energy Environmental Directorate, part of the Ministry of Mines Group (GAME) were established in 1995. and Energy, is responsible for public and private activities related to oil and gas. In Finally, the progressive National 1974, the Association Contract system was Constitution of 1991 (and subsequent introduced to facilitate partnerships legislation) established a range of between private corporations and Ecopetrol, mechanisms for public participation in the the state-owned oil company (chapter 2). planning of private and public projects (box 21 BPXC's Operations in Casanare, Colombia 1). It also ruled that territorial bodies enhance the social well being of the (departments and municipalities) that communities directly impacted and society exploit non-renewable natural resources, as a whole. In practice, a fraction of including the sea and river harbors where revenues from the project accrue to the those resources or by-products are Department of Casanare and the transported, have the right to participate municipalities where oil production wells directly in royalties and compensation are located. Although not unique to schemes (Art. 360). Colombia, such progressive provisions have only been implemented in a few other Royalty Allocation and its Impact on countries, such as Bolivia. Casanare Royalties from hydrocarbon extraction The principle behind the royalties system represent 20 percent of production at well is that a proportion of the income from sites. The following distribution is made out resource exploitation should be used to from this percentage: Box 1. Provisions for Public Involvement in Colombia The Colombian Constitution of 1991 includes a participatory principle that obliges the State to further citizens' participation (Art. 1). This principle has been incorporated into Law 99/ 1993. Articles 69 and 70 of this law provide for any person to intervene in the procedures of environmental administration, through an Intervention Petition to the environmental authority. Article 72 provides for an Environmental Public Audience. This can be requested for any project that may cause environmental impacts and that requires an environmental permit (like petroleum projects). A public audience may be requested by any of the following: * Select political appointees (Procurador or his Environmental Delegate, Ombudsman, or the Minister of the Environment) * Select elected officials (Governors of departments or Mayors of municipalities) * At least one hundred persons * Three non-profit organizations. The public audience must take place at least 30 days before an environmental permit is issued, modified, or cancelled. It is also possible to carry out a public audience during the development of a project, once there is evidence of violations of the environmental requirements demanded in the permit. Article 74 provides that anyone may ask for information on issues that could produce pollution or that could harm people's health. In addition, any person can demand information about the amount of financial resources for environmental protection and their utilization. If exploitation of natural resources is going to take place within indigenous or black population areas, it must not affect their cultural, social, and economic integrity (Art. 76). Decisions on these issues must be taken after consultation with community representatives. Another mechanism for citizen's participation is Citizen's Auditing (Veedurfas Ciudadanas o Juntas de Vigilancia) to control the management of public services (Law 134/1994). After a process of community training supported by BPXC, this mechanism has been successfully used in supervising road construction projects in Casanare. 22 An Evolving Regulatory, Policy and Mgmt Framework * Producing Departments, 47.5 percent impacted territorial bodies. Territorial bodies * Producing Municipalities, 12.5 percent can submit proposals for priority projects to the Royalties National Commission for * Export Harbor's Municipalities, consideration (figure 5). It is important to 8.0 percent note that the royalties received by * Royalties National Fund, 32.0 percent departments and municipalities are subject to a sliding scale: after a certain level of As prescribed by Law 141, royalties must production, the incremental amount of be invested in priority projects (as identified royalties paid declines significantly. in development plans) and may not be used for operational expenses. Departments must The 8 percent royalty allocation to the invest 100 percent of royalties in priority Municipality of Covenas (where the export projects in the sectors of education, health, terminal is located) was not part of the water supply, and sewage systems. In the original agreement on distribution of same way, municipalities must invest all royalties, but was negotiated subsequently royalties in education, health, public in the Colombian Congress. This represents services, electricity, and sanitation. very substantial earnings, given that all the oil produced in Casanare and Arauca Producing departments and passes through Covenas. municipalities (or exporting municipalities) receive monthly payments in direct The contribution of royalties from BPXC's proportion to the percentages outlined operations to departmental and municipal above. The Royalties National Fund (FNR),1 incomes (particularly Tauramena and which is administered by the Royalties Aguazul) in Casanare has been very National Commission, receives the balance significant (figure 6). Prior to initial of resources not assigned to directly production at Cusiana, the 1992 Figure 5. The System for Allocating Royalties National Nabonal Royalties Royalties 32% NaiFund (FNR) Commission IF s/ T Oil export 20% of income Applyforfunding 8% terminal from production Disburse funds for piority project (Covenas to successful Municipality) Oil tlo ws applicants IF A .N , Territorial bodies 12.5% (Municipalities) *uijana (including producing and export tertitories) Aguazul Tauramena 47.5% (Department) Casanare * Oil production wells 23 BPXC's Operations in Casanare, Colombia departmental income from royalties was Income from national transfers and from CP$6.9 billion. This comprised contributions local taxes in Casanare (which are fairly from relatively low levels of oil production insignificant) have broadly kept pace with in seven municipalities and excluded an increases in royalties. However, royalties still additional CP$1.9 billion distributed among account for between 45 and 73 percent of the seven producing municipalities. Royalty the department's total income, which earnings increased dramatically mainly as a increased from less than CP$7 billion in result of initial production at Cusiana in 1992 to over CP$123 billion in 1997. 1993 (in the Municipality of Tauramena) and the commercial production beginning in Aguazul and Tauramena, where BPXC's late 1994. Between 1992 and 1997 royalty production wells are located, first received payments to the Department of Casanare royalties in 1991 and 1993 respectively. increased 12-fold (including payments to Incomes subsequently increased year-on- municipalities), from CP$8.8 billion to year, and in 1997 their respective royalty CP$106.8 billion. Despite the fact that incomes were CP$10.7 billion and CP$12.1 inflation averaged 20 percent over this billion (CP$22.8 billion in total). This period, this is still a dramatic increase. combined total represents over 70 percent of BPXC's operations accounted for royalties paid to the nine oil-producing approximately 78 percent of total royalties municipalities in Casanare in 1997. The in 1997 (in excess of CP$80 billion). The relative contribution of royalties to cumulative total of royalty payments from municipal incomes has also been important oil production in Casanare from 1992-1997 (ranging from 59 to 70 percent of total was CP$330 billion. income in Tauramena). The total income of Figure 6. Income from Royalties Figure 6a. Departmental and Municipal Income from RoyaKies, 1992-1997 100 c 80 1 Cas:nare o I Agu zul 1 ._ _ ~Tsraurmena I, - 60 -Ttl }/ 40 I np t°20- _ 1992 1993 1994 19G5 1996 1997 Figure 6b. Percentage of Total Income Derived from Royalties, 1991-1996 w 80 E o- 70 +Casanare c 60 _Aguazu- 50 ----Tauramena 40 4) 40 ..<,..Ypl/ e) 30 c 20 EL o 10 0 a- 1991 1992 1993 1994 1995 1996 24 An Evolving Regulatory, Policy and Mgmt Framework Aguazul and Tauramena also eclipses that BPXC's involvement with the community. of most other municipalities in Casanare. These principles included: For example, the total income of Yopal in 1995 was approximately half that of * Developing partnerships Tauramena, despite having a population approximately six times that of its richer * Developing relations of mutual benefit neighbor. with stakeholders It is important to remember that royalties * Complementing the activities of the state are not the only form of oil-related income in relation to infrastructure provision available to municipalities. Other sources of income include transportation taxes on * Evaluating the basic needs of pipelines (4 percent of the transportation communities as the basis for investment tariff) and taxes on oil-related industrial activity. In the Monterrey municipal budget * Promoting community participation in in 1998, these sources represented 24.5 d , r r percent percent and 34.8percent percent. developing investment proposals, and Royalties distributed among the non-oil Developing tripartite relationships producing municipalities (by the National (among tripartite stationd Royalties Fund) account for a further 13.3 (among communities, the state, and percent of Monterrey's budget. Thus, 72.6 private enterprises). percent of the current Monterrey budget The 1993 Community Affairs Policy also originates from other oil-related sources. defined BPXC's employment policy, stating BPXC's Approach to Managing Social that it would employ Colombian Nationals Cssues, A9871997 wherever possible and uphold laws concerning equal opportunities for all Colombians to work while attempting to maximize employment of local people. The Prior to 1993 there was no explicit policy policy included clauses in contractors' governing the social aspects of BPXC's contracts concerning preferential operations. Social issues were encompassed recruitment of locals. within an overarching corporate health, safety, and environmental (HSE) policy The social programs outlined in the stating that the company could do no harm policy aimed to provide greater investment to people or to the environment, and that it in the community, increased involvement must consult with "neighbors and public with local and national governments on interest groups." The first comprehensive such issues as planning, continual dialogue Community Affairs Policy, adopted in 1993, on proposed activities, managing local detailed BPXC's policies, programs, and expectations, and developing strong budgets. The policy defined the project's relationships with stakeholders based on area of influence (somewhat narrowly as mutual benefit. The programs were the immediate areas of oil exploration or designed to both improve people's living production). It summarized the socio- conditions (for example, through providing economic problems facing local communities basic infrastructure), while contributing to (some of which were exacerbated by BPXC's human development, with the common presence, such as increases in the cost of objectives of mitigating social impacts and living and poor infrastructure), and improving people's quality of life. The outlining the principles underpinning company made no distinction between these 25 BPXC's Operations in Casanare, Colombia two objectives; it viewed them as * Implementing and executing all social complementary. programs as part of the Casanare 2000 strategy (see below), with the The programs detailed in the 1993 policy participation of communities and were divided broadly into urban, rural, and governments support programs. Rural programs included projects in such areas as health, housing, * Increasing the reputation of the company reforestation, productive agriculture, and and facilitating development of its village-based projects responding to the operations basic needs of communities. Programs in the urban sector included microenterprise * Advising the companies and foundations initiatives, and the construction of roads, community housing, and recreational facilities. Finally, several support programs that complement activities in the rural and Box 2. Corporate Leaning within BP urban sectors were also promoted, such as The concept of corporate learning is central development planning, technlical and to how BP conducts all aspects of its operations. environmental education, institution The company has invested a great deal in strengthening, and the start of a foundation fostering a culture where information is readily to finance small-scale projects (Fundacion exchanged and freely available. The capacity of Amanacer). A budget was presented for the organization to learn from experience is these programs, which detailed anticipated evident in the evolution of its community affairs expenditure in each of the areas outlined policy, both in Casanare and corporate-wide. above for 1993 to 1996. It allocated US$2.9 million, US$4.3 million, US$6.4 million, and Prior to 1993 there was no explicit corporate US$5.5 million respectively. policy on community affairs, outside of a general commitment in the environrmental policy to do no harm to people or to the environment. The The 1993 policy was superseded in 1996, community affairs team in Casanare developed when BPXC published a detailed a robust policy with related programs that were Community Affairs Manual. The manual directly relevant to Casanare in 1992 and 1993, outlined the overall objectives of the and, as the benefits of the programs emerged, the company's Community Affairs Policy team communicated the lessons learned to the worldwide (box 2). These objectives were to corporate center in London. A number of staff earn and maintain a good reputation among from the community affairs teams participated stakeholders, encourage employees to use in peer-assisted reviews of other BP operations their talents for the benefit of communities, internationally (an internal peer review and help to create healthy economies. The mechanism within BP) and in internal three areas of focus to achieve these conferences on community affairs, which further objectiveas were idenstifie aseducation, helped to disseminate the benefits of the objectives were identified as education, approaches adopted in Casanare. environmental protection, and community development. The specific objectives of The experience from Casanare, and perhaps BPXC in Casanare were identified as: from other BP operations, prompted the corporate center to critically evaluate its * Complying with all the requirements of overarching corporate policy, which was licenses issued by the Ministry of subsequently strengthened. It is interesting to Enviromnment relating to compensation note that BPXC's 1996 revised Community Eor,anvi pron entrelationg to com sation oAffairs Policy is cast in the context of this for, and prevention or mitigation of, worldwide policy on community affairs. social impacts 26 An Evolving Regulatory, Policy and Mgmt Framework with which BPXC is involved on social impacts of exploration, with a view to matters-for example, Ocensa and the developing support for the company's Sunrise Foundation (Fundacion activities and establishing lines of Amanacer). communication (a reactive approach). Following the establishment of a community The principles underpinning the 1996 affairs team in May 1992, when the license policy were broadly similar to those outlined for the first CPF was sought, the aim in the policy of 1993. However, the strategy switched to managing the expectations of changed somewhat from programs local communities and to collaboratively categorized by sector (rural, urban, and developing a diagnosis of the needs of the support programs) to programs targeting communities affected (a more proactive three levels of development: the immediate approach). This objective is reflected in the impacts of the company's operations, the 1993 Community Affairs Policy. In 1996, a local communities nearest the operations, parallel approach was devised that and regional development initiatives. At combined the day-to-day interactions in the each of these levels, programs were three communities where BPXC was present developed to address four areas: hurnan with a regional development strategy (a development, institutional strengthening, strategic approach to support regional economic development, and infrastructure sustainable development). provision. The 1996 Manual also provided detailed guidance on the responsibilities of The shift in emphasis from managing community affairs personnel and on their local impacts or expectations to one of procedures. sustainable regional development supported by oil revenues (while recognizing the finite The company is currently revising its nature of the oil reserves) marked a strategy in Casanare. The expectation is that significant shift in policy. Casanare 2000: A this will emphasize devolving responsibility vision of the future, a publication of BPXC's, for community affairs to field-based provided a summary of this policy shift and operations managers, supported by fewer outlined a far-reaching social investment specialized Community Affairs personnel. strategy for developing the hydrocarbon To ensure that community affairs does not resources of Casanare. It also defined a become peripheral to front-line managers, strategy of integration with Casanare mechanisms for improved accountability which, with the support of the local will be instituted. In practice, community communities and authorities, was designed affairs will become one of the key areas that to enable people to take advantage of the form the basis for evaluating the socio-economic opportunities that oil and performance of managers (which in turn related developments offered. will influence remuneration packages and promotional prospects). This follows a Responsibilities for Implementing Policy similar approach to BPXC's apparently and Staffing successful devolution of the management of Prior to 1996, the overall responsibility HSE issues. for implementing the Community Affairs Policy was vested in the President of BPXC. Evolving Objectives of BPXC's Social In practice, the responsibility resided with Programs exploration managers until May 1992, The objectives underpinning BPXC's though even at this early stage the need for social and community programs have specialist advice on social issues was evolved over time. Originally, the main aim recognized and three such professionals was to manage the direct socioeconomic were employed by BPXC. The growing need 27 BPXC's Operations in Casanare, Colombia for specialist guidance on social matters led instances, there was a degree of local to the establishment of the Community resentment from those who had not Affairs Team in May of 1992. This team was benefited at what was perceived as "buying field based and autonomous from favors." operations. They provided a service to operations, particularly as the project The establishment of the Community moved into new areas and in response to Affairs team in May 1992 marked a specific concerns. However, the team also significant change in the way programs and developed and implemented the policy and projects were implemented. For example, a programs described above, many of which framework of programs was developed were not directly related to exploration or whereby individual investments could be production activities under implementation. made (as described above in the section of The team formalized its interaction with the policy developments). Community Affairs community in the 1993 policy discussed personnel then worked with communities above. directly impacted by BPXC to develop a diagnosis of their development needs. This In 1996 a BP Associate President was involved a series of iterations between appointed and based in Yopal to take communities and Community Affairs overall responsibility for community affairs. personnel (sometimes in the form of In practice, such issues occupied most of the workshops or public meetings). Association President's time, and this significantly raised the profile of community Once development priorities were affairs. The Community Affairs Team established, communities had to prepare a comprised 16 people (plus an additional 14- plan for individual projects, specifying 18 working on the Ocensa pipeline project). objectives, material requirements, and costs, This team developed the revised Community with input from either a BPXC specialist or Affairs Policy of 1996 and Casanare 2000. an appointed consultant. In almost all cases, Social aspects were factored into training for projects were submitted to the appropriate project managers and other staff, and the municipal authority for initial approval, as training budget for the Community Affairs BPXC's involvement was generally team was US$250,000. However, following contingent on the availability of counterpart the departure of the incumbent at the end of funding. Except in emergency situations, the 1997, a new post of Casanare Manager was company would not finance projects created, replacing that of the Associated without counterpart funding from President, with responsibility for both the municipalities and input from communities operational and community affairs (in the form of labor or materials). For each functions. At the time of writing, seven project, all parties (BPXC, the community, community affairs personnel are retained. and its municipality) had to sign an agreement detailing the responsibilities for Approach to Developing Community planning, implementing, and sustainably Investment Programs and Projects financing the project. Prior to 1992 most community investment initiatives were demand-driven ' In 1994 the FNR and the Royalties' National and ailned at mitigating the local impacts of Commission were created under Law 141, which operations, while enabling BPXC to regulates settlement and distribution of royalties. continue with exploration. Although many The Royalties' National Commission is a special individual investments may have been administrative unit of the Ministry of Energy and locally appropriate, they took place without Mines in charge of the administration and control any overall development strategy. In many of FNR's resources. 28 4. Evaluation Findings The evaluation aimed to address a range The first section of this chapter explores of inter-linked questions outlined in chapter the enabling environment for integrating 1. These questions relate to the enabling social concerns. The second critically environment for corporate social evaluates BPXC's policy and programs, and responsibility, BPXCs community affairs other aspects of interaction with policy and programs, and stakeholder communities (such as security provision and perceptions of the outcomes. Some of these assessment processes). And the final section questions have been partially addressed in presents community perspectives on the previous chapters. For example, BPXC's effectiveness of BPXC's community evolving policy and programs have been investment activities. outlined and obstacles to socially responsible behavior discussed (such as the conflict Integrating Social Concerns: An situation in Casanare and the general lack Enabling Environment of institutional capacity). This chapter attempts to provide answers to the An enabling environment encompasses outstanding questions of: the government incentives and the constitutional and regulatory provisions that * The enabling environment for factoring facilitate the factoring of social concerns into social concerns into the planning and planning and implementing resource implementation of resource development development projects. This would include, projects for example, regulatory provisions for public participation in decisionmaking, * The adequacy of BPXC's Community mechanisms for distribution of revenues to Affairs policy objectives, and whether those affected by the project, or incentives BPXC's programs met the stated for corporations to invest in communities. objectives The National Constitution of 1991 * Whether BPXC monitored the results of strongly emphasizes the fundamental rights its programs on the ground of Colombian citizens to participate in decisionmaking at various levels, and it has * The adequacy of BPXC's social and incorporated this principle into Law 99/ environmental assessment processes 1993 (box 1). However, the mechanisms for participation provided under Law 99 are * Stakeholder perceptions of the outcomes primarily administrative and/or judicial, as of BPXC's programs. they do not guarantee a community's right 29 BPXC's Operations in Casanare, Colombia to participate in the design of projects that environmental aspects resides with the could impact the environment (with the operator. exception of indigenous groups). Provisions for community participation are potentially Capacity for Planning Implementation, and more effective where environmental rules Stewardship of Royalties have been violated: once the law is broken, In a relatively sparsely populated it is possible for communities to intervene. department such as Casanare (250,000 inhabitants), the revenues earned from The Colombian constitution also royalties at both the departmental and emphasizes the fundamental rights of municipal levels are very significant. In 1996 citizens to benefit from development. The the royalties from oil production in system for allocating royalties from resource Casanare, Aguazul, and Tauramena were development projects, is a progressive CP$77.7 million, CP$10.7 million, and attempt to apportion benefits in an equitable CP$12.1 million respectively. The manner. The Government operates a anticipated development opportunities decentralized system (described in chapter created by royalties have been constrained 3) that aims to return a large proportion of by a number of factors. These include a lack the royalties to the communities directly of capacity for planning and impacted for social benefit, such as to health implementation of programs or projects and education. The remaining royalties are (chapter 3), a lack of coordination between also directed to similar programs elsewhere territorial bodies, failure to assign all in Colombia through the National Royalties royalties to priority areas, and a lack of Fund. However, for decentralization to be accountability in the allocation of royalties. effective, the capacity for planning and implementation of programs within the Since access to royalties for financing recipient territorial bodies must be adequate, priority projects is contingent on planning, which is not the case in Casanare. This the planning process is tremendously aspect is discussed in greater detail below. important at all levels. Law 152/1994, the Organic Law for Development Planning, Not surprisingly, the constitution establishes procedures for the preparation, contains no specific provisions relating to approval, execution, follow-up, and the social responsibilities of the private evaluation of all development plans. This sector. Although there are some government law rules that territorial development plans incentives aimed at promoting private sector must account for policies and strategies of investment in communities, these are also of the National Development Plan (Art. 32) limited relevance to BPXC or other resource and that departments and municipalities developers. Consequently, the high level of must coordinate on formulating programs front-end investment in communities (much and projects (Art. 39). However, there is a of which is directed to mitigating social lack of consistency within these bodies, impacts) is unrecoverable. particularly in terms of their planning schedules. For example, Yopal's Municipal The Association Contract system contains Plan was not factored into the 1998 no strong incentives for corporate social Departmental Plan, as it was incomplete responsibility. Until commerciality is and therefore not available for declared, the cost of social and consideration. environmental mitigation or investment is assumed by Ecopetrol's associates. Once Not all royalties are used for purposes commerciality has been declared, the overall that comply with the spirit of the definition responsibility for managing social and 30 Evaluation Findings of priority areas (figure 7). l For example, in progressive and far reaching in terms of 1995 the combined investment of royalties in their scope and aspirations, producing the priority areas of health and education in benefits for both the corporation and the Casanare, Aguazul, and Tauramena community. This is a significant amounted to only 11, 10, and 12 percent of endorsement of the company's approach, income from royalties. It is also widely given the difficult circumstances in which accepted that accountability for royalty- they have been operating: weak institutional related expenditure is inadequate. For capacity for planning and maintaining law example, the current Mayor of Aguazul is and order, heightened expectations and taking legal action against the former almost inevitable disaffection on the part of incumbent to recover funds that were local communities, high levels of allegedly misappropriated during the inmigration, and the escalation of guerrilla- construction of an aqueduct. Such incidents paramilitary-military conflicts. Perhaps the have contributed to a common perception of most remarkable achievement is that the minimal social benefits compared to the company managed to obtain a "license to enrichment of individuals. This perception is operate" from communities and exacerbated by the escalation in conflict implemented a major industrial between illegally armed groups and the development, despite these difficult military. circumstances. Social Responsibility within BPXC The community affairs budget of US$29 million between 1993 and 1997 financed a For the most part, it appears that BPXC's comprehensive and wide-ranging program Community Affairs activities have been of social investment activities designed to Figure 7. Areas of Investment Supported by Income from Royalties 45 - Casanare Priority Areas 40 ~~~~~~~~~~~~~--Health 345 . . EdEducation i 25 -s--- Housing 2 20 % . Non-Priority Areas 1 0 -i-- Planning 5 - Roads 1993 1994 1995 1996 --Pubicsservices A guazul - Tauramena 50 3 30 40 25 30 2 20 1 10 o0 o 1993 1994 1995 1996 1993 1994 1995 1996 31l BPXC's Operations in Casanare, Colombia meet expectations at the community level. stages of exploration, which limited the These were developed in a participatory ability of BPXC to invest more strategically. way with local communities and There was also a legitimate desire on the municipalities. However, as the company part of BPXC to limit expectations. In will acknowledge, its involvement with retrospect however, this targeted approach communities and other stakeholders has not was a source of disaffection and conflict, always resulted in mutual benefit, nor in the even if it served the short term-interests of perception of mutual benefit. In other cases, the company. BPXC could be criticized for investments or other interventions that are viewed by some To a large extent BPXC's 1993 policy and as too little or too late. related programs were timely and locally appropriate. In making the transition from Relevance of Policy and Programs to the relatively low-level of activity relating to Casanare exploration to full-scale production, the Whereas few companies have an explicit company made a considered attempt to policy dealing with social matters, BPXC has develop a coherent framework for the had a robust Community Affairs Policy disparate activities it had been supporting. dealing with interactions between the The appointment of a field-based company and its stakeholders in Casanare Community Affairs Manager and the since 1993. This policy also described in creation of a dedicated team in May 1992 some detail the structure of the company's marked a milestone in the company's social and community development interaction with stakeholders. This shifted programs and related budgetary policy from a reactive impact mitigation commitments. The evaluation sought to approach to a proactive attempt to explore whether the policy and programs contribute to local development, while were locally appropriate, whether they simultaneously managing the expectations tackled difficult issues such as human rights, surrounding the scaling-up of operations. and whether the policy (and consequently The 1993 policy and programs provided a the programs) had changed in response to sound basis for meeting expectations at the changing circumstances. The evaluation also community level and creating trust and measured the extent to which the policy and dialogue. programs were likely to create lasting sustainable benefits or whether they would Stakeholders were very concerned about foster dependency on the company (for employment opportunities with the example, as provider of aspects of social company and its contractors. Within the services). irmits of the law, and often at great cost to the company, BPXC has sought to maximize The fact that most of the social and employment opportunities for local people envir*omnental impacts of the project with considerable success-and made this occurred during exploration and conunitment an official social pohcy. For construction points to a need for planned example, in 1998 between 50 and 60 percent early up-front investment in mitigation of BPXC and contractors employees in projects and programs. Yet the tendency in Casanare were from Casanare. At the peak the initial stages of the project was for BPXC of construction activity, over 60 percent of and its contractors to support targeted the 7,000 workforce of BPXC and its investments to obtain access, which contractors were recruited locally, in line inevitably lead to inequities. It must be with BPXC's policy. As the demand for acknowledged that there were no labor has declined, many less-skilled assurances of eventual success in the early workers are employed on a rotational basis, 32 Evaluation Findings whereby all males seeking employment are doing, the company helped to ensure that its assigned two months of work per year. This programs were directly relevant to the spreads the benefit of oil-related income intended beneficiaries. By creating a forum more equitably, but it is costly for BPXC and for discussion with communities and its contractors who would prefer an fostering their independence, communities alternative system. gained better capacity to negotiate and plan, which in turn improved the prospects for The dynamics of conflict in Casanare and success of follow-up development projects. the escalation of conflict related to oil The company's insistence on cofinancing revenues already have been described. with municipalities and with community Despite the difficulties for BPXC in contributions (in the form of materials or developing programs related to human labor) was progressive for its time in looking rights, they have promoted some initiatives ahead to the sustainability of community in this important area. For example, they development initiatives. supported training in conflict management for 800 leaders from all 19 municipalities in However, a more serious criticism of Casanare (using a program developed by BPXC's social policy and programs lies in its Harvard University). In parallel, they failure to adopt a strategic development promoted ar. awareness program on perspective earlier. Despite the fact that respecting the rights of civilians for army, expectations had been raised at an early police, and security personnel assigned to stage, not just at the community level but guard BPXC's facilities. A new human also at the municipal and departmental rights peace and tolerance initiative was due levels, BPXC was slow to address strategic to be launched in early 1999. issues (figure 8). The company commissioned an Environmental Pre- The main criticism of the 1993 policy is in diagnosis of the Cusiana project in 1991 its definition of the project's area of from the National University of Colombia, influence to which programs were tied. This which aimed to provide an integrated was somewhat narrowly defined as the overview of the environmental and social project's immediate areas of exploration and aspects of the project. This study highlighted production. This issue became somewhat the importance of (1) sound stewardship of divisive among communities, because those royalties and (2) strategic planning, if the living beyond the area of influence were mistakes made in the neighboring unable to benefit from BPXC-supported Department of Arauca were to be avoided. development initiatives. BPXC was not slow In Arauca, revenues generated by to recognize this problem, however, which Occidental's Canon Limon project were was largely addressed by the improved reportedly squandered, and corruption, policy of 1996. It provides support for violence, and political killings increased. The regional and local programs, as well as study concluded that BPXC had an mechanisms for sharing benefits more important role to play in these two areas, broadly the departmental level. which is explored in more detail below. Policy and Programs: Creating Dependency Royalty Distribution: A Role for BPXC? or Fostering Independence? Royalty payments to Casanare have not As early as 1992 the company began had the profound or lasting impact on local helping communities to diagnose their development that was expected. It is development needs and priorities. In so debatable whether BPXC should have any role in the management of royalties. 33 BPXC's Operations in Casanare, Colombia Figure 8. BPXC's Response to Expectations at Community, Municipal, and Regional Levels Royalties from CPF 1 r------ prodution of 185 000 bpd , _ B~~~~~~PXCffnt'f Org's/ , = ~~~~~~Ndt'/lnstitut/onsl Regional Level Department - - - - - - - BPXCfLocalNGOs/ … t Muncipa ILevel MunicipaUtlas BPXC./ Villfage Aasaociations Community Level 1 , , ~,I A, 199 ,M, 1990 1992 * 1994 1996 1096 I.- First roYaltiuL~t$no from 10,000 bpd Tinkg Duffionof re ponsZ>, Arguably, by efficiently operating the In mitigation, such interventions are not Cusiana/Cupiagua fields and paying traditionally in the domain of private sector royalties on time to the National Royalties corporations, and the company is rightly Conumission for distribution, BPXC may be sensitive to accusations of meddling in regarded as having discharged its duties affairs of the state. BPXC has also funded admirably. However, the reality is that, consultants to support development plans at depending on how royalties contribute to both the departmental and municipal levels. Casanare's long-term development, BPXC It supported some training for personnel will be intimately associated with either a involved in planning and other aspects of development success or failure, and the governance, but frequent changes in related enhancement or deterioration in administration and a lack of continuity in social conditions. planning and other aspects diluted the long- term benefits of such efforts. It also Given the accuracy of the pre-diagnosis, collaborated with a local NGO on producing and the fact that royalties from BPXC's a booklet advising local people of their operations in 1995 totaled CP$70 million, constitutional right to demand transparency BPXC should have directed more effort from their elected representatives. Finally, it earlier to promoting transparency in the developed the publication Casanare 2000: A allocation of royalties and to developing the vision for the future. local capacity to manage royalties. The reputation of successive administrations of Casanare 2000: Shared Vision or Tunnel Casanare may be held to account locally, Vision? but BPs reputation will be either damaged The strategic perspective demanded of or enhanced locally, nationally, and BPXC by the 1992 pre-diagnosis of Cusiana internationally. Chapter 5 makes is reflected in the 1996 policy in Casanare recommendations on how the difficult issue 2000 (BPXCs strategic vision for the of royalties might be addressed. 34 Evaluation Findings department to benefit from oil revenues in a committed community affairs personnel. sustainable manner). The derivation of The policy and programns that this group Casanare 2000 involved tremendous effort developed and delivered have made an and vision at the corporate level. However, important contribution to the development Casanare 2000 was conceived almost of the project, and the social well-being of entirely by the company, with little local communities. The peak number of involvement (or buy-in) from the community affairs staff employed by BPXC departmental and municipal authorities or (32 in total) coincided with the greatest level civil society. Irrespective of how well of construction activity in 1997, including 14 conceived it may have been, two years after staff dedicated to Ocensa and related its conception, the lack of input from pipeline issues. However, the recent stakeholders has delayed the adoption and reorganization leaves just seven community implementation of Casanare 2000's strategic affairs staff within Casanare (at three dimension. Consequently, the company's different locations). This reflects the social investments appear as disparate company's strategy of devolving development initiatives rather than part of a responsibility for community affairs to strategic vision. operations managers, supported by fewer specialized community affairs personnel. Yet many of the principles, aspirations, and approaches outlined in Casanare 2000 While the intention is to ensure that are still relevant. The challenge is to obtain community affairs becomes of central departmental and municipal ownership of concern to managers (and a partial basis for the vision and to find effective mechanisms assessing their performance), BPXC needs to to deliver the objectives. This was partially manage the transition carefully. The skills achieved by the excellent work BPXC required to effectively communicate with undertook in developing the Environmental stakeholders (such as negotiation, cultural Management Plan for Piedmonte Phase I sensitivity, and conflict resolution) are (see section on environmental assessment acquired rather than innate. Community processes above). affairs work often involves intensive discussions of an iterative nature, What are the conflicting considerations particularly where the company's activities. BPXC must balance to become more actively extend to new areas, which takes time. involved at the strategic level? These include Granted, the company may subcontract to BPXC's reluctance to interfere with affairs of bring in expertise in community affairs on state and its de facto capacity to provide an as-needed basis. But this would require leadership and technical skills. There is also that the objectives of contractors be clearly the difficulty of developing institutional defined, in addition to the boundaries capacity when the employees of the within which they could negotiate on behalf institutions change every time there is an of the company. election, plus the risk to BPXC's reputation of failing to act or failing as a result of the The devolution of responsibility for wrong actions. Some suggestions on how community affairs also raises some questions BPXC might move forward are presented in about cross-functional responsibilities. If the the next chapter. company is to maintain or develop strategic community affairs objectives, there is a risk BPXC's Capacity to Deliver on Policy of these being regarded as unassigned, Commitments unfunded mandates, which would prove In the past, BPXC has been well served hard to deliver. Furthermore, there is a risk by a critical mass of competent and of reinforcing perceptions of a "siege 35 BPXC's Operations in Casanare, Colombia mentality" that became evident during the among others. The objective was to evaluate evaluation. One of the defining the impact of BPXC's social and community characteristics of the Community Affairs investment projects in order to improve the team (following its creation in 1993) was the development impact of BPXC's social accessibility of its personnel to their investment. Each of the 50 projects was constituents, which was facilitated by evaluated jointly with the intended having local offices in Tauramena, Yopal beneficiaries. Tabular summaries were and Aguazul. The movement of these offices prepared for each project summarizing: to within the fence-lines of the two CPF's, represented a symbolic retrenchment on the * The objectives of the project (from the part of BPXC. This was to some extent perspective of BPXC and the intended exacerbated by the departure of the beneficiaries) and the fulfillment of those Association President and subsequent objectives transfer of managerial responsibility for community affairs to the Operations The participants in the project (usually a Manager (where previously it had been community, the municipality in which 'independent' of operations). This prompts they were based, and BPXC), their the question whether, having restructured relative contributions, and the extent to and downsized the functional unit that was which participants fulfilled their instrumental in helping BPXC implement obligations the project, the company can continue to maintain a license to operate? * The degree to which projects had been completed in accordance with the Learning from Experience projected time frame and budget BP prides itself in being a learning * The extent to which projects had met the organization. This is clearly evident in other objectives of both the company and the aspects of its operations (such as the transfer community of advanced "horizontal" drilling technology developed in the UK to * A commentary on the reasons for Colombia), but to what extent does it apply success and failure of the project and itself to the social aspects of BPXC's lessons learned. operations in Casanare? The company has made a number of attempts to measures The evaluations showed that most results against achieved objectives and to projects had been successful due largely to learn from the outcomes. the participatory way they were designed, financed, and implemented. Evaluations At a strategic level, in 1997 BPXC also highlighted recurring difficulties, such comninssioned independent research into as the lack of capacity at the municipal level community attitudes towards the to deliver on commitments. That BPXC corporation and its operations within undertook these evaluations further Colombia. More substantively, BPXC illustrates the company's willingness to conducted a review of ten percent of learn from experience. projects that the company had partially supported based on a pre-diagnosis of the Environmental and Social Assessment development needs of communities p wi PXC (approximately 500 projects in total). These rocesses Wiin B included schools, health clinics, and local There are two milestones in Colombia's water supply and sanitation projects, 36 Evaluation Findings legislation regarding environmental and National University of Colombia in Bogota social impact assessments in oil activities: and was to be based on available information, supplemented by field visits by * National Code for Renewable Resources specialists. The proactive decision by BPXC and Environmental Protection to undertake this work is commendable. (Presidential Decree No. 2811 from December 18, 1974) Although based on the limited information available, the pre-diagnosis was * Law 99, dated December 22, 1993. excellent in many respects. For example, it accurately predicted the limited importance Between 1974 and 1993, Title X of the of direct impacts relative to those associated National Environment Code required the with inmigration, and it identified the promoters of oil projects and other incapacity of social and economic structures productive projects, to provide INDERENA to accommodate inmigration. The pre- (the National Institute for Natural diagnosis also highlighted the acute Resources) with an Environmental Impact institutional deficiencies in the department Declaration (based on an Environmental and recommended capacity development Impact Assessment which, in turn, was to for delivery of strategic programs (in areas be based on an approved terms of reference such as housing and health) rather than (TOR). As the capacity to develop TORs in local interventions. As mentioned INDERENA did not exist, BPXC and other previously, it also identified the potential oil companies simply submitted a TOR that benefits of royalties and the results of failing was rubber-stamped. These environmental to realize these benefits, as in neighboring assessments were invariably limited in scope Arauca. Clearly, the pre-diagnosis to specific activities such as seismic work or influenced the shaping of BPXC's 1993 drilling a specific exploration well. The policy and programs, many of which result was that oil and gas companies were responded to issues raised in the pre- obliged to produce numerous environmental diagnosis. However, some of the predictions assessments (over 80 in the case of BPXC) made in the pre-diagnosis were not acted for specific activities, without producing an upon (in particular the strategic issues of overall statement of the likely cumulative royalties, as discussed). direct and indirect impacts of all potential actions. This piecemeal, bureaucratic The introduction of Law 99 in 1993 approach was unsatisfactory for the strengthened the regulatory provisions for company, the regulatory authorities, and it environmental and social assessment provided little assurance of environmental (including requirements for analysis of and social protection. alternatives), along with the capacity of institutions to establish terms of reference, to In 1991, when exploration work review draft documents, etc. Some of indicated the prospect of a major BPXC's more recent work on environmental commercial reserve at Cusiana, the and social assessment go well beyond the company undertook an Environmental Pre- limits of legal requirements. For example, diagnosis for the Cusiana project as a the recently completed environmental and whole. This exercise was instigated by BPXC social studies relating to BPXC's proposed in the absence of any legal requirement, and operations in Piedemonte (Environmental was intended to provide the kind of Management Plan for Piedemonte Phase I) environmental and social overview the adopted a regional approach to assessing piecemeal approach would never deliver. impacts and developing mitigation The work was commissioned by the measures. BPXC adopted a participatory 37 BPXC's Operations in Casanare, Colombia approach throughout, involving a high level security guards provide static defense at the of involvement with interested and affected points of entry to these sites. parties (including those with responsibility for regional planning). BPXC's security arrangements have been severely criticized. Two high-profile Social mitigation and investment documentaries made by UK television programs were based on an in-depth companies (the BBC and World in Action) diagnosis of the socio-economic prompted parliamentary questions when circumstances with an overlay of the screened (both in the UK and Europe), projected socioeconomic impacts in all three generating a public relations problem for the affected municipalities. Consistent with the company. Some high-ranking employees of principles set out in Casanare 2000: A vision Colombian institutions also questioned the of the future, these programs were broadly efficacy of BPXC's security arrangements categorized as relating to human during evaluation interviews. The development, institutional strengthening, evaluation team is not in a position to regional economic development, and comment on specific issues raised in the infrastructure and basic sanitation services, documentaries, although neither could be with environmental components within described as presenting a balanced each of these categories. The end product, perspective. The fact remains however, that and the process by which it had been BPXCs security strategy is preventative and achieved, are both highly commendable. reactive. The legitimate objective of protecting personnel from attack and the Security and Social Interaction: Striking risk of kidnapping and consequent a Balance retrenchment of community affairs has led to perceptions of a siege mentality, which Experience from elsewhere in Colombia does little to foster relations between the led BPXC to correctly conclude that it would company and communities. Alegations of become the target of extortion attempts and alliances between the Army and attack from illegally armed groups. paramilitary groups elsewhere in Colombia Construction of the Canon Limon project have been repeated in Casanare; these may was disrupted by guerrilla attack, and the be unfounded, but nonetheless add to local pipeline from Arauca to Covenas has been disaffection and an association between the attacked on average once a week since it company and increased military presence in was commissioned. From the outset, BPXC the area. adopted a strong anti-intimidation policy to prevents the company from entering into One striking aspect emerging from the any dialogue or arrangement with guerrillas evaluation and follow-up community based or other illegal groups. In order to enforce work was the general reluctance of this policy and provide protection for its interviewees to comment on the issues of personnel and other assets, the company violence and human rights. This almost has adopted stringent security certainly reflects a sense of vulnerability on arrangements. A brigade of 3,000 soldiers is their part to speak out for fear of becoming based in Yopal, many of whom are detailed victims of the very subject they might to patrol the countryside surrounding articulate. Yet all the indications are that BPXC's production and exploration facilities violence is on the increase in Casanare2 and (for which the company is required to pay a has a profound adverse influence on the contribution). Armed police are stationed at development of the region and human lookout posts around the main production rights. This illustrates the difficulty for facilities at Cusiana and Cupiagua, and 'outsiders' to obtain an accurate picture of 38 Evaluation Findings the significance of these issues. It also points environmental education program, a to a need to address these issues in parallel sanitary landfill project, and an institutional with some of the institutional shortcomings strengthening program for improved described previously, if the development environmental management within potential of royalties are to be realized. Corporinoquia and municipal authorities. The evaluations focused on the relative roles BPXC is currently reviewing security of the three participants -government, arrangements. The challenge for the BPXC, and civil society -in planning, company is to explore alternative options for implementing, and managing the projects ensuring adequate security, while improving and on participants' perceptions of the the negative perception of its current outcomes. In addition to the specific security arrangements among stakeholders. projects, the evaluations captured more Furthermore, it is critical that security general perspectives on BPXC's activities considerations be balanced by the that are also presented. fundamental need to maintain close ties to the communities within the projects' area of The evaluation by CEMILLA concluded influence. that public participation in the planning stages of specific projects was often Community Perspectives: BPXC's Social minimal, but that it improved substantially Investments and Royalties during project implementation. Although most projects resulted from a participatory To obtain a more representative view of diagnosis of the development needs of community perspectives on BPXC's social communities (or other beneficiaries), investments, a local NGO (CEMILLA) was individuals with leadership skills often hired to evaluate five representative projects determined which particular needs received that BPXC had cofinanced. They were also attention through follow-up projects. In asked to present an overview of community terms of the processing of projects, a participation in the use of royalties. These recurring criticism was that information aspects are presented below. One of the was not always readily available, or that most striking findings to emerge from this intended beneficiaries were unaware of how work is the clear distinction that the people to access information to participate more of Casanare make between social actively. investments by BPXC, and social investments supported by royalties from the Some of the projects cofinanced with project. Despite the fact that royalties are a BPXC responded directly to long-standing direct result of BPXC's operations, their community concerns, such as the Aguazul social investment potential is viewed as sanitary Landfill Project, but community separate from the need for BPXC to invest in involvement was limited by virtue of the communities to mitigate the adverse social technological nature of the project. The and environmental impacts of the project. design criteria adopted for the landfill, This clearly has implication for BPXC and however, grossly underestimated the other potential investors in the oil sector in volume of wastes generated and the Colombia. numbers of inhabitants to be served (which increased as a consequence of inmigration BPXC's Social Investments and urbanization). There have also been The five projects included in the difficulties in financing the recurring costs of CEMILLA evaluation were a sanitation waste collection and disposal, as there is a project, an animal husbandry project, an lack of willingness to pay for the service. 39 BPXC's Operations in Casanare, Colombia Overall, the outcome is still largely positive select number of communities, however, led by mitigating potential pollution of the to tensions between the haves and have- Unete River (beside which the wastes were nots. previously dumped). With the benefit of hindsight however, increased participation In the specific case of the water and in the design phase might have highlighted sanitation project developed with the the issue of inmigration and explored the residents of the Rio Chiquito village, issue of willingness to pay for improved community participation was central to the waste collection and disposal. success of the project. Members of the community were closely involved in the In most cases, public involvement beyond design and implementation of the project. the implementation of the five projects For example, they identified a potential under evaluation was neither relevant nor water source and contributed labor in the was it perceived to be important by the first phase of the work. They also identified public (although the responsible authorities the need for improved sanitation (phase 2) did not always fulfill their obligations, and supplied all labor for construction of which suggests that a monitoring role for sanitary latrine systems. To ensure the the public might have been useful). In continued working of these systems, the general terms, the level of public community established a management participation in ongoing initiatives committee to oversee collection of a cofinanced by BPXC appeared to have maintenance fee. Perhaps most improved over time. encouragingly, the experience gained from this process stimulated the development of In the early days of exploration, it was and participation in other projects for the common for projects to be committed to and collective benefit of the community (for designed without accounting for local example, a community meeting hall and development needs and cultural health center). characteristics, as a means of "buying" access for exploration. The willingness of Overall, most of the evaluation BPXC and its contractors to subscribe to this participants saw the specific projects as approach was partly matched by a desire on delivering tangible, worthwhile benefits, the part of communities to maximize although it was not possible to evaluate the benefits from the presence of companies. long-term benefits of the educational aspects The communities recognized that of certain project. A commonly held view of contractors often had a limited local all BPXC's considerable efforts, however, is presence over a short-time frame and sought that they represent a partial (yet to maximize opportunities linked to their inadequate) retribution for the disruption presence. Neither party had a stake in resulting from oil production. These include developing long-term relationships of employment-related impacts (such as mutual benefit and both operated in a disproportionately high pay scales) that manner that served their short-term result in inmigration, increase land values, interests. As the extent of the reserves and and increase the cost of goods and services, the prospects for longer-term investment thereby promoting inflation. Other impacts became apparent, a shift towards cited include increased violence, participation of communities and municipal prostitution, alcoholism and drug abuse. governments took place (in line-with BPXC's policy). The earlier focus of attention on a This perception may be inevitable given 40 Evaluation Findings that communities have little faith in the minimal involvement of local contractors or capacity of government to deliver tangible professionals. Consequently, potential benefits, despite their improved access to employment related benefits are limited. finance as a result of royalties from the These national companies do not insist on project. Because of this community preferential employment for local perception, BPXC has become the focus of contractors or individuals, as provided for expectations that often overlap with the by the Casanarization policy of BPXC. The roles and responsibilities of government (for efficacy of this policy was challenged example, in such areas as health and however, as certification to the Trade Board education). Thus BPXC, rather than of Casanare is open to companies from government, has become the target of outside the region. Many are said to frustration and disappointment at the maintain a local office for the purposes of failure of government to deliver obtaining BPXC contracts, which does not improvements in quality of life. It is also imply that they have a long-term viewed as having contributed to social commitment to employment in the region. inequities, through its indirect influence in the distribution of royalties (see below). One recurring complaint amongst the civil authorities in Casanare (and others) Participation in Royalties relates to the 1993 Royalty's Law, which Although there is limited scope for public limits royalty earnings from production to involvement in decisionmaking related to 185,000 bpd for individual departments and private sector projects, there are a number 100,000 bpd for municipalities. This is of legally prescribed mechanisms whereby viewed as central government bias against civil society can participate in the planning Casanare, as it only affects the Cusiana and process in Colombia, which determines the Cupiagua fields (because of their high levels uses to which royalties are allocated. These of oil production). In practice, this reduces are consistent with the shift from a the potential departmental income from representative to a participatory democracy royalties by 60 percent (based on production embodied in the 1991 Constitution. For rates of 450,000 bpd). example, the Departmental Planning Council and the Territorial Planning Furthermore, through indirectly biasing Council are two mechanisms whereby civil the distribution of royalties, BPXC are society representatives (councilors) can viewed as having contributed to social contribute to planning (at the departmental inequities. This is because the communities and municipal level respectively). In some in the immediate area of BPXC's influence instances however, this participatory have benefited disproportionately from approach is viewed as hindering rather than projects cofinanced by BPXC and the enriching the planning process and the municipal authorities. Despite BPXC contributions of councilors has been extending the definition of the area of ignored. This may partly explain why influence of its operations in its revised royalties assigned to priority areas of social social policy of 1996, the oil producing investment are still directed to other municipal boundaries clearly demarcate the infrastructure projects (chapter 3). limits to royalty investments. This ignores the fact that nearby communities in non- Many of the large infrastructure projects producing municipalities perceive financed by royalties are designed and themselves to be equally affected by indirect constructed by national companies, with impacts such as inmigration and increased 41 BPXC's Operations in Casanare, Colombia violence, but unable to benefit to any great invest all royalties in education, health, public extent from royalties. services, electricity, and sanitation. 2 For example, this is supported by personal communication from Alejandro Reyes of the Departments must invest 100 percent of National University of Colombia. Increased royalties in priority projects in the sectors of violence also emerged as a key issue facing Casanare in an Oxfam sponsored workshop held education, health, water supply, and sewage systems. In the same way, municipalities must subsequent to the evaluation in July 1998. 42 5. Conclusions and Recommendations Main Conclusions of the Evaluation socially and environmentally responsible manner. It developed community affairs Explicit constitutional commitments to policies over an eight-year period that take distributing oil revenues to territorial bodies into account the dynarnics of the local and for public participation provide an situation, of corporate priorities, and of the important framework for ensuring the social transition from oil exploration to and environmental sustainability of private construction and production. Corporate sector investments. This legal framework is social policies are still rare among rare and could be usefully replicated in companies, even though they have been other countries, given the importance identified as critical to successfully accorded to the national regulatory integrating social concerns into private framework by companies.' sector decisionmaking. There is, however, little institutional BPXC has also implemented a capacity in Casanare at the departmental comprehensive program of activities and municipal levels to plan, manage, and designed to meet expectations at the implement projects that use the substantial community level in a participatory way, oil revenues for sustainable development. albeit with mixed results. Not all the This institutional vacuum has resulted in an approaches adopted in Casanare to develop enclave situation whereby BPXC, by default, a relationship of mutual benefit to the is the most important development actors in company and its stakeholders have been the region. The Cusiana and Cupiagua successful, but this does not detract from oilfields are the largest in Latin America, BPXCs willingness to "do the right thing." and Casanare is sparsely populated, so the development potential of royalties is Whereas BPXC has actively attempted to substantial. However, investment in the so- engage communities at the local level, the called priority areas of education, health, company has been slow to recognize that housing, and water supply, as mandated by successful implementation of strategic Law 149, has been limited. The pervasive policies and programs depends on the problems of corruption and violence have involvement of other stakeholders. This also hindered the social and economic accounts for Casanare 2000 being developed development of the department. in isolation from key actors such as the regional authorities. BPXC's ambivalence BPXC has made concerted efforts to about its role -not wanting to appear to develop its operations in Casanare in a domninate local political structures-is 43 BPXC's Operations in Casanare, Colombia another reason for this isolation. level, as the issue is relevant to all natural resource extraction projects throughout the BPXC's capacity to implement its social country. The starting point could be to begin strategy was well staffed and budgeted until a dialogue through national workshops that 1998, when the company embarked on a bring together government, civil society, and major restructuring exercise. Despite oil oil and mining companies to discuss how prices being at historical lows and both the revenues can be distributed in an equitable Cusiana and Cupiagua oilfields and transparent way. approaching full production, BPXC is likely to further increase exploration in Colombia This may also begin a process to help and thus face the challenges of working resolve the "wealth and violence" issue by with different commnunities in Casanare. building national and local support for Current plans call for allocating public-private development interventions. responsibility to line operational managers Such interventions could reduce the for social and community affairs. This will credibility of the local guerrilla factions and need careful monitoring to ensure that the paramilitaries, and thereby help to alleviate results achieved to date are not lost and that the security situation, which has proved to the challenges that lie ahead are properly be a disincentive to inward investment in managed. Colombia. One overall conclusion the evaluation Delineate Institutional Responsibilities and clearly points out is that if the goal is to Strengthen Regional Capacity sustain the benefits from BPXC's social The problem of poor institutional investments and to promote better capacity for development planning and stewardship of the substantial incomes project management is pervasive in generated by royalties, effective partnerships Casanare and has diluted the development need to be developed between govermnent, impact of royalties and of BPXC's social BPXC, and civil society. BPXC must move investments (particularly its efforts to build from an enclave situation to one where capacity). Within the framework of private sector dominance is counterbalanced objectives set out in the regional by a more robust regional development development plan, there is a need to identify capacity that includes the active which institutions (public sector, private participation of communities. This need for sector, and civil society, including effective partnerships is highlighted in the intemational NGOs) are best suited to recommendations outlined below, which are deliver which programs. Once institutional grouped under the headings of govemment, responsibilities are clearly delineated, the BPXC, and civil society. capacity of territorial authorities needs to be Recommendations for National gth Government and Authorities in Given the direct link between poor Casanare institutional capacity and the electoral cycles (combined with the lack of a Conduct National Dialogues professional civil service in Casanare), this If the development impact of royalties is issue also needs to be addressed at a to be optimized, it is crucial to reinforce the national level, with the involvement of the framework for decentralized planning and territorial authorities. The objective should to strive for transparency and account- be to strengthen implementation capacity ability. This is best addressed at the national and continuity, particularly at the 44 Conclusions and Recommendations departmental and municipal levels, so that establishing citizens priorities that should government is better able to deliver the transcend electoral cycles. services for which it is responsible, based on realistic planning horizons. Ideally, this will The citizens network could also facilitate involve reinforcement of existing territorial strengthening of civil society's capacity to bodies (and organizations such as participate in planning and for resolution of Corporinoquia), rather than the creation of conflict between traditionally opposed new entities. groups. Its development and implementation should draw upon Support Regional and Sectoral experience from the CINEP-SEAP managed Environmental and Social Assessment and World Bank sponsored Magdalena It is recommended that additional Medio Poverty Reduction Project, which has support be given to ongoing activities for similar objectives. If such an approach is to upstream sector planning for environmental prove successful, it must involve the active and social assessment. This has happened participation of all sectors of society. In this on an ad hoc basis in Casanare with the context, it may by possible to link it to the support of BPXC, sometimes at the Permanent Assembly of Civil Society that instigation of the company (as in the case of forms part of the peace discussions taking the 1992 Environmental Pre-diagnosis) and place at the national level. As part of this sometimes prompted by government (for process, Regional Working Groups are being example, the Unete River Basin convened that might provide the necessary Management Plan). Both of these cases of convening power to involve the relevant regional/sector planning could be used as parties. models to be replicated by government and by other companies in the natural resources Recommendations for BPXC in sector, providing that an adequate definition Casanare of the project area is first established. Align Corporate Policies with Regional Promote Departmental Peace and Development Plans Development In devising the concept of Casanare 2000, The undercurrent of violence in Casanare the company outlined the basis of an and related human rights abuses severely appropriate sustainable development constrains the ability of Casanare to realize strategy for the departmnent. However, they its development potential. In parallel, there stopped short of obtaining buy-in from the is a need to more effectively involve civil other important development partners. society in development planning and Gubernatorial and mayoral elections at the implementation within Casanare (as beginning of 1998 have brought new and provided for through mechanisms such as dynamic leadership to Casanare. A Territorial Planning Councils). One possible participatory departmental development approach to help address both these aspects plan has been designed, in part, around is to create a citizens network (comprising institutional partners such as BPXC, which groups and individuals with a stake in the should facilitate any attempt to align development of Casanare), that would feed policies. into the development planning process through existing channels to increase public Develop a Performance Contract with involvement in the planning process. This Development Partners would partly help to overcome institutional Once the institutional responsibilities shortcomings described above by have been delineated to achieve the 45 BPXC's Operations in Casanare, Colombia objectives outlined by regional and from civil society in developing any corporate goals, BPXC, together with other performance contract. To a limited extent, development partners (government and civil BPXC has successfully adopted this society) should develop an "institutional approach in developing the Environmental performance contract." The various Management Plan for Piedemonte Phase I stakeholders would agree on objectives, (chapter 4). programs, and institutional responsibilities, as well as the accountabilities of each party, BPXC should also carefully consider based upon comparative advantage. The where its comparative advantage lies in performance contract should identify assuming responsibilities under the terms of indicators to measure the success of the a "performance contract." For example, programs (based on outcomes) and the BPXC's talents in the areas of planning, responsibilities for monitoring. BP as a monitoring, and establishing clear corporation has utilized a results-based procedures for accountability might be management system with measurable goals applied to strengthening capacity at the to monitor performance for its commercial regional level. operations: it should move to adopt a similar approach for its community affairs strategy. Actively Monitor Devolution of Community Affairs One advantage of this approach is that There are risks as well as benefits to BPXC should be able to demonstrate that BPXC's devolution of responsibility for met its commitments, irrespective of the community affairs and the related reduction performance of its development partners. in dedicated community affairs personnel. Goals would be set and accountabilities These risks apply to BPXC's capacity to determined. This would also provide a develop and deliver strategic community framework for assessing where the gaps are affairs objectives and programs, and the and making plans to fill them. Despite related risks to its reputation. Consequently, BPXC's intensive efforts in Casanare at the it is recommended that BPXC carefully local level, its reputation remains at risk if monitor the impact of the devolution of the opportunities presented by royalties are community affairs work and the reduction not realized. Irrespective of whether it is fair of specialized personnel, taking corrective or appropriate to expect the company to action where necessary. In particular, it is assume responsibility for poor stewardship important to not to exacerbate and to of royalties that are managed and allocated somehow overcome the perceptions of a by others, the company needs to take the siege mentality that emerged from the lead on this issue. evaluation (chapter 4), which damage BPXC's credibility as a development partner. Clearly there are risks to BPXC in such an approach. One of the most important of Strengthen Efforts to Promote Human these is the inclination of successive Rights administrations (within the offices of the Tights , . . \ ~~~The links between violence, human rights governor, mayor, and Corporinoquia) to abuses and the failure of Casanare to realize heavily criticize the programs and its development potential has been approaches of their predecessors. However, mentioned previously. BPXC should these risks could at least be partially metoe rvosy.PCsol these risks could at least be partially continue its efforts in the difficult area of mitigated (and continuity beyond electoral human rights, such as the proposed Peace cycles ensured) by employing parallel and Tolerance Initiative to be launched in approaches to capacity development and 1999c In oaoig to also (described above), with strong involvement i s 46 Conclusions and Recommendations actively support and learn from the opportunities for partnership not only with recommended citizens network approach government and the private sector, but also outlined above. BPXC should be an with international NGOs that can bring to important partner in helping to promote bear complementary skills and experience such an initiative, which could greatly from similar projects elsewhere. enhance its own efforts in the area of human rights. There is also an opportunity for NGOs to become more actively involved in promoting Recommendations for Civil Society in transparency in the planning and Casanare implementation of projects. In particular, the mechanism for citizen's participation Strengthen Public Involvement in Planning (Citizen's Auditing) could be more widely The legal framework for public invoked for controlling the management of consultation as established under the 1991 public services. Constitution needs to be more systematically implemented by territorial authorities. More Actively Participate in Monitoring and could and should be done by the territorial Evaluaton authorities to ensure that civil society has The potential for NGOs and local opportunities to be effectively involved in communities to actively participate in development planning and project monitoring and evaluating publicly financed implementation, using existing mechanisms (and cofinanced) projects should be such as the Departmental and Territorial explored by both territorial authorities and Planning Councils. BPXC. Similarly, these groups should also be involved in the selection of indicators to Strengthen Procedures for Transparency assess the outcomes of these projects (in In parallel with the need to increase terms of changes in incomes, living public involvement in planning, there is a standards, environmental quality, etc), and need for territorial authorities to imnprove those indicators should be linked to action transparency in the selection plans for corrective measures where implementation and financing of projects. necessary. Involving NGOs and local Given the history of misuse of public money communities more actively in monitoring in Casanare (with adverse consequences for BPXC's environmental impacts would also social and economic development), it is help to establish trust between all parties, important that this aspect be addressed. and increase the credibility of BPXC's This applies not only to the allocation and monitoring efforts. use of money for specific projects, but to the process through which investment priorities are identified. I This was one of the recurring messages from Seek artneshipswithNGOs nd Prmote interviews conducted with companies in the Seek Partnerships with NGOs and Promote review which led to the World Bank publication Transparency Integrating Social Concerns into Private Sector Operational NGO's (such as CEMILLA Decisiorimaking: A Review of Corporate Practices and the Fundacion Amanecer) should seek in the Mining, Oil, and Gas Sectors. 47 Annex 1. List of Interviewees British Petroleum Exploration, Colombia DougWebb Presidente, BPXC Femando Villegas Gerente Asuntos Externos, Casanare John O'Reilly Asuntos P(blicos Alonzo Ortiz Gerente Asuntos con la Comunidad, Casanare Marco Vinicio Cardenas Gerente Medio Ambiente Jorge Guzman Asuntos Extemos Cupiagua Hector Merino Asuntos Extemos Cusiana Orfando ChocontA Medio Ambiente Cupiagua Edmund Baruque Cumplimiento, Medio Ambiente Juan Guillermo Bemal Gerente Casanarizaci6n Ivonne Castro Asuntos con el Gobierno, Yopal Ecopetrol Miguel Angel Santiago Gerente Relaciones Externas Herbert Gonzalez Relaciones Externas Francisco Rivera Relaciones Externas Luis Bernardo L6pez Etica Empresarial Ruth Novoa Relaciones External, Yopal Alvaro Franco Relaciones External, Yopal Others Julian Pertuz Ministerio de Minas y Energia Maria Isabel Escobar Asuntos con la Comunidad, OCENSA Carmen Elisa Fl6rez Investigadora, CEDE Universidad de los Andes Guillermo Acevedo Jefe Direcci6n Ambiental Sectorial, Ministerio del Medio Ambiente Cesar Buitrago Miristerio del Medio Ambiente Angela Maria Santos Minusterio delMedio Ambiente Mario Jaimes Ministerio del Medio Ambiente Alejandro Martinez Asociaci6n Colombiana del Petr6leo Luz elena Chamorro Unidad de Planificacion Regional y Urbana - Departamento National de Planeaci6n 48 Others (continued) Alejandro Reyes Investigador Instituto de Estudios Politicos - Universidad Nacional de Colombia Francisco de Roux Director, Programa de Desarrollo y Paz del Magdalena Medio Casanare Jorge Prieto Riveros Governador Departamento de Casanare Pedro Nel Calder6n Secretario Privado del Gobernador Santiago Marin Jefe de Planeacion, Departamento de Casanare Ana Joaquina Rivera Oficina Sectorial Maria Teresa Sinisterra Consultora Planeaci6n Departamental Oscar Galindo Asesor Alcaldia Municipal General Leonel G6mez E. Comandante Brigada 16, Ejercito Nacional Teniente Sandra Quintero Oficina de Derechos, Humanos Brigada 16 Ricardo Garcia CORPORINOQUIA BogotA Fernando Alvira Fedellanos Raul Granados Expocasanare Orlando Piragauta Ex-Director, CORPORINOQUIA Fabio Pinilla Ex-Contralor, Departamento de Casanare Padre Uriel Martinez Coordinador, REDEPAZ, Casanare Monsefior Olavio L6pez D. Obispo de Casanare Cesar Ivan Veloza Director, Fundaci6n Amanecer Kuis Tobian Programas Educativos Maria Consuelo Rodriguez Corporacion Minuto de Dios, Casanare Juan Carlos Quintero El Porvenir, Ecopetrol Miguel Alfonso P&rez Defensor del Pueblo Santiago Parra Director, CEMILLA Carlos Hernado Vargas Director, CORPORINOQUIA 49 COLOMBIA ~ ;0 1 C. DLOCATION OF LOCAL 0 .e o C ACOMMUNITIES AND Hato 8 a \X CwuIAX % A - u~~~~~~~~~~a w, LoOse BPXC'S OPERATIONS 0 TOWNS AND VILLAGES U CENTRAL PROCESSING FACILITIES ()STATE CAPITAL sC-- '- STATE BOUNDARIES gSobonolcirs V X G t \ % < XS>GOWSSA195 / VICHADA r;OT . (~~~~~~~~~~~~~~~~~~~~~Th bnndoat nkn, eonrnoon nd nyoter,oonnoo ;l ° 9 \ A V G a _9,) Mocolla de Gusfo l ) q E. v > . COMBIA,0 _~~~~~~~~~~~~~~thee n hi nopdo otn~, n hepor o Te ord oo sL < > />0Pore I t I nETA ; | t o ! 4 C_ 12 \ Santa Maroao_fho Guasirnoi ~ ~ ~ ~ ~ ~ RAUC 4t~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~. Z~~~~~~~~- 0~~~~~~~~~ of E M"M~~~BOAA ~ AANR E~~~~~~~~~~~~~~~~~MT $f0teXIn-o-AhnnITC. eSMracnnnneoooo L --~ 0 ~ x m f lt _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ __b y_ _ W_ _d _ _-k SO C IA L DE V E L O PM EN T Environmentally and Socially Sustainable Development Network The World Bank 1818 H Street, N.W. Washington, D.C. 20433 USA Fax: 202-522-3247 E-mail: sdpublications@worldbank.org t Z i I I I'