Global Policy Forum

By James V. Grimaldi

Two Texas energy companies, both closely tied to the Bush White House, are lining up administration support for nearly $900 million in public financing for a Peruvian natural gas project that will cut through one of the world's most pristine tropical rain forests.

A top priority of Peruvian officials, who see it as key to energy independence, the Camisea project has encountered fierce opposition. Worldwide environmental groups and some members of Congress argue that the massive extraction and pipeline project will destroy the rain forest and the lifestyle of its indigenous people.

The project backers' quest for financial support from U.S. development banks will test the political pull of the Texas companies, Hunt Oil Co. and Halliburton Co., which have longstanding ties to the Bush-Cheney administration and the Republican Party. Next month, Hunt Vice President Steve Suellentrop is set to accompany Commerce Secretary Don Evans on a trade mission to Peru, where President Bush traveled in March to promote Andean trade.

An international consortium, led by the Dallas-based Hunt, Argentina's Pluspetrol and Peru's Tecgas, began work earlier this year on the $1.6 billion project in the southeastern part of Peru's Amazon basin. Hunt brought in Halliburton's Kellogg Brown & Root unit to engineer a proposed next phase, a $1 billion plant from which Hunt hopes to export liquid natural gas to the United States by 2006.

The controversy surrounding the project highlights the conflict between Bush's energy policy, which advocates mining fossil fuels globally, and U.S. environmental safeguards, which detractors say the administration plays down. Government spokesmen say that no decisions have been made on public financing and that a careful review is underway.

Under federal regulations, projects receiving backing from the Export-Import Bank of the United States and the Inter-American Development Bank must pass rigorous reviews to ensure that they will not threaten rare natural habitats.

But officials reviewing the Camisea loan applications, who asked not to be identified, say the project is proceeding despite warnings that it might run afoul of international environmental standards. Independent reviews commissioned by project developers also have noted numerous problems, including fuel spills, unauthorized pipeline route diversions, and destructive erosion and landslides.

This month, Peru's energy ministry fined the pipeline consortium $1 million for clearing too much land, including parts of a protected nature preserve, and building unauthorized access roads. The companies have appealed.

Concerns about the project have recently generated interest on Capitol Hill. Staffers for Sens. Patrick Leahy, D-Vt., James Jeffords, I-Vt., and Dianne Feinstein, D-Calif., have met with representatives of various concerned environmental groups, from the measured World Wildlife Fund to the activist Friends of the Earth.

"Even a carefully designed and well-managed project -- which this, so far, is not -- will cause permanent harm," said Leahy, the lead Democrat on the committee that gives U.S. funds to the Inter-American Development Bank and the Export-Import Bank. "If it goes ahead, far more needs to be done to mitigate the damage."

Hunt and Halliburton declined to comment. A White House spokeswoman said the decision is up to the two agencies reviewing the loan applications.

The project envisions 21 wells from four drilling platforms over two fields, heliports, worker camps, sludge pits, and water and waste disposal facilities. A gas-and-liquid separation plant is being built amid the forest. Two pipelines, 700 and 335 miles long, will cross the Andes before forking toward Lima and the Paracas National Reserve, Peru's only marine sanctuary.

Ultimately, the sponsors hope to provide natural gas to the West Coast of the United States through a terminal in Baja California, Mexico, potentially feeding the lucrative California market.

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