Gas pipeline in Brazil seen as a model

As more firms look to drill in the Amazon, observers say one project properly balances the needs of the people and the environment.

Deep in the middle of the Amazonian rain forest, buses whisk men in orange work suits off to help lay down a pipeline that is today one of the region's most remote energy infrastructure projects.

It's enough to make even the most moderate environmentalist blanch.

But after years of opposition, a plan to transport gas 400 miles from its source at a clearing called Urucu, passing 80 species of rare orchids on its way to the Amazonas state capital of Manaus, has been met with reserved praise, even from hard-core activists.

The project by the Brazilian state-controlled company Petrobras is emerging as a model for reducing environmental and social impact, say many observers. And it comes as dozens of other oil companies are looking to explore an expanse that, while among the world's most biologically diverse, also happens to be the largest unexplored region with hydrocarbon potential after Antarctica.

"Prior to the discovery at Urucu, all petroleum produced in South America came from oil fields close to the Andes. But Urucu is situated more than 1,000 miles to the east … and everything in between must now be considered to have hydrocarbon production potential," says Tim Killeen a senior researcher at Conservation International. "If this is not done right, we are going to lose the most important part of the most important forest on the planet."

The Urucu pipeline project is especially key since it comes at a time when Latin American leaders are looking toward energy integration projects – such as Venezuelan President Hugo Chávez's "Pipeline of the South," the 5,000-mile, $20 billion pipeline that would transport gas across the entire continent – plans that some have compared to the cutting up of the American West to lay down railways.

Here in Manacapuru, 50 miles west of Manaus, small fishing boats ply the Solimoes River. Young men blare calypso music as an afternoon fades, old men play dominoes along the riverwalk. For them, the pipeline, which will pass near the town to eventually provide electricity to the 1.5 million residents of Manaus, represents a balance between preserving the forest and providing for the basic needs of their population.

That sentiment was expressed by Brazilian President Luiz Inácio Lula da Silva when he approved the pipeline in 2004. "If people want development that preserves the environment, we have to have energy," he was quoted as saying. "It's no good people saying the Amazon has to be the sanctuary of humanity and forget there are 20 million people living there."

For residents of Manacapuru, where simple homes are built on stilts and 75 percent of residents drink untreated water, the pipeline's greatest benefit has been the 4,000 local jobs created. Petrobras agreed to hire three-quarters of its workforce from the local community.

But during the construction of megaprojects, often the immediate benefits give way to long-term damage. One of the biggest threats when such pipelines are built is the permanent access roads that parallel them: Roads not only contribute to deforestation but lead to population influxes that strain social services. But for this project Petrobras has built hardly any permanent roads, depending instead on boats and helicopters to bring in supplies and the workforce. "That is a highlight," says Virgilio Mauricio Viana, the environmental secretary of the state of Amazonas, in an interview in Manaus.

The 260,000 residents who live along the pipeline's path were invited to local meetings in each of seven affected municipalities. Stuart Pimm, a conservation ecologist at Duke University in Durham, N.C. who studies oil exploration in the Amazon, says that environmental assessments should always be done by independent authorities, but too often are contracted by the oil firms.

Mr. Viana says the state pushed Petrobras to carry out an independent environmental study with the local university, and then simplified the language into a document copied 5,000 times and distributed to locals.

As compensation, Petrobras agreed to build seven secondary branch pipelines, adding over $30 million to the $1.3 billion price of the project, so that local communities can also use cleaner gas, instead of diesel fuel, for electricity. They also awarded the state government a $21 million grant for social services, such as jobs training, potable water, and free healthcare services.

Viana says that the company was willing to take on additional costs, in part, to overcome years of opposition that had delayed the pipeline's construction. But in an age when local residents are presenting class-action lawsuits over oil spills – such as in Ecuador – and demanding greater compensation for natural resources, big oil companies have no choice but to respond.

That is why, observers say, Urucu is such an important template. Exploration plans for the region are dramatic, as oil prices stay high and demand from places such as China and India grows. In Brazil, Petrobras plans to build another pipeline and has plans to explore hydrocarbons farther west. In Peru, 70 percent of the most pristine Amazon forest is zoned for oil and gas. "In western Amazon countries, we are concerned by the large areas of land that are now open to oil and gas exploration," says Mr. Pimm.

"The majors have learned that it is good business to manage environmental issues with great attention and detail. They learned from past mistakes," Mr. Killeen says. "The smaller companies are less subject to the pressures of the market place; many are unknown entities and there is reason to be skeptical of their commitment to environmental issues."

Petrobras officials say they will provide gas to Manaus by the spring of 2008.

Still, there are some groups that refuse the Manaus pipeline construction altogether, says Thadeu Melo, a spokesperson for Greenpeace's Amazon Campaign. The Brazilian government recently granted preliminary approval to two massive hydroelectric dams in the region, and environmentalists are concerned about soy farming spreading into the forest. "The solution is better than we have now," Mr. Melo says. "But it is not the best. We still claim cleaner and renewable sources of energy for developing Brazil."

But Urucu could provide a demonstration effect in the region, pushing residents to demand more from state-run oil companies and multinationals that invest in the area, says Mark London, coauthor of the recent book "The Last Forest" and one of the first journalists to report on the conflict between development and preservation of the region in 1980. People might ask, he says, "Why can't you have environmentally smart projects like Urucu in Peru, Ecuador, and Colombia?"

Even if done responsibly, though, oil discoveries will have lasting effects on the region. When asked if she supports the pipeline, Adele Schwartz Benzaken, the director of a local hospital in Manaus who is studying the rise in prostitution along the pipeline, takes a long time to answer. "I'm not against it," she says finally.

"But," she adds, "Maybe the towns will have more money, but at the cost of more prostitution? Things are built, at the same time other things are destroyed."