San José, Costa Rica, since 1956

Oil Controversy Heats Up

AS some government officials this week threatenedactions to combat rising oil prices, the CitizenAction Party (PAC) and the Environment Ministercalled for legislation guaranteeing the demand forpetroleum will never bring drilling to Tico soil.Oil prices yesterday reached a record high of $48a barrel. While this prompted Environment andEnergy Minister Carlos Manuel Rodríguez toannounce an upcoming campaign urging the responsibleuse of gasoline in Costa Rica, demand for crudehas hardly decreased in China and the United States.With this in mind, Rodríguez, PAC congressmanRodrigo Alberto Carazo and various environmentalgroups are warning that the Central American Free-Trade Agreement with the United States (CAFTA), ifapproved, would open the door for U.S. oil explorationin Costa Rica.AFTER President Abel Pacheco took office in2002, he signed a moratorium declaring Costa Ricaoff limits to offshore oil exploration. But not only issuch a decree limited to Pacheco’s term, the Presidentis contradicting his own policy by supportingCAFTA, according to José Villalta, PAC environmentaladvisor.Environment Minister Rodríguez agreed.“Oil has always been a political thing. The policieschange with politicians,” he said during a publicforum on oil exploration and CAFTA at theLegislative Assembly Wednesday night.“For me it is very clear that COMEX (the ForeignTrade Ministry) violated the resolution to have no oil exploration (when they negotiatedCAFTA),” he continued.Although invited, COMEX representativesdid not attend Wednesday’s forum.OIL exploration would be allowedunder CAFTA because the activity is classifiedas a service, according to opponents. Allservices not specifically excluded fromCAFTA are included as part of the agreementand subject to all of the agreement’srules on trade in services and investment.Under the agreement, participatingcountries cannot limit the number of companiesthat provide a service or limit theamount of that service they provide. This,opponents claim, makes unlimited oil explorationand extraction possible in Costa Rica.Oil exploration is neither specified noromitted from CAFTA. Official lettersbetween Foreign Trade Minister AlbertoTrejos and U.S. Trade RepresentativeRobert Zoellick regarding the CAFTA text,for example, acknowledge Costa Rica’s“indefinite ban on strip or open-pit miningactivities.”Another letter states that sportsbook andonline gambling activities, which are illegalin the United States but legal in Costa Rica,will not be affected by the agreement.The Letter on Extraction, Generationand Refining reads, “The extraction of naturalresources (mining), electricity generation,refining of crude oil and its derivatives,hunting, and fishing shall not be consideredas services for purposes of the Agreement.”However, no mention is made of crude oilexploration and extraction.CAFTA does say each country has theright to establish its own environmentalregulations (TT, June 4). It permits membernations to adopt “whatever legislationnecessary to protect the lives and health ofits people” as long as that legislation is theonly way to go about protecting them,Villalta said.But before such emergency legislation isnecessary, Citizen Action members,Minister Rodríguez and environmentalistsare hoping to pass a permanent moratoriumon oil exploration.Their bill, which is barely in commission,would reform articles of the HydrocarbonLaw and must be passed beforeCAFTA is approved if it is to take effect,they claim.According to interpretations of CAFTAmade by environmentalists and opponents ofthe trade pact, once CAFTA goes into effect,existing laws will only be able to bereformed if the changes made are compatiblewith the terms of CAFTA, and not if theycontradict them.“Free-trade agreements are clear thatchanges to the law cannot affect the spirit offree commerce. Therefore, establishing regulationsfor an activity that has been deregulatedsince 1994 (with the country’s hydrocarbonlaw) is a step backward in theprocess of economic liberalization,” accordingto the anti-oil exploration groupOilwatch.One of the first articles of theHydrocarbon Law declares oil exploration amatter of national interest. This, leaders atWednesday’s meeting said, orients CostaRican legislation toward oil exploration.Passing reforms to this legislation beforeCAFTA is voted on in the LegislativeAssembly will be difficult, Carazo admitted.Things there “move at a pace and inefficiencythat is unimaginable,” he said.ANTI-OIL exploration groups worrythat multinational firms, namely HarkenCosta Rica Holdings LLC, will benefit fromthe potential opening of Costa Rica’s oilexploration market under CAFTA.In 2002 the government of Costa Rica,under former president Miguel AngelRodríguez, forged a contract with Harkenthat granted oil exploration and drillingrights off the coast of the Caribbeanprovince of Limón.Under a roar of protest by the community,the Environment Ministry’s TechnicalSecretariat (SETENA) rejected the environmentalimpact study. This stopped the oilcompany from continuing with its activities(TT, Oct. 10, 2003).Costa Rican officials consideredHarken’s non-compliance with environmentalimpact study requirements to be a breachof contract. However Harken disputed thisand filed a request for international arbitration,seeking $57 billion in damages – aboutfour times Costa Rica’s gross domestic product.THE request was later withdrawn andHarken entered settlement negotiations withthe government in January (TT, Jan. 16).However negotiations were ended when theparties disputed whether Harken investmentwas $3 million or $11 million (TT, March19).Harken still claims rights to the concession,and awaits a decision on an injunctionfiled with the Constitutional Chamber of theSupreme Court (Sala IV) in late 2003.Environmentalists believe Harken will waituntil next administration to continue its battle,as a matter of strategy.When negotiations were cut off, RobertToricelli, a former U.S. senator and negotiatorfor U.S.-based Harken Energy, a minorityshareholder of Harken Costa Rica, saidthe decision was bad business for CostaRica.He said it could lead to the UnitedStates’ rejection of CAFTA.(Tico Times reporter Fabían Borges contributedto this article.)

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