Mining operations at the Rio Huaypetue gold mine in Peru. Click image for more information. (Photo by R. Butler)
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OIL EXTRACTION: The Impact Oil Production in the Rainforest
By Rhett Butler | Last updated July 27, 2012
The extraction of oil is responsible for the deforestation, degradation, and environmental devastation of lands across the globe. The oil extraction process results in the release of toxic drilling by-products into local rivers, while broken pipelines and leakage result in persistent oil spillage. In addition, the construction of roads for accessing remote oil sites opens remote lands to colonists and land developers.
Some of the world's most promising oil and gas deposits lie deep in tropical rainforests, especially in the Western Amazon. With oil at historically high prices, the incentive to develop oil resources has never been greater.
While hydrocarbons can be extracted at a relatively low direct cost to tropical rainforests, governments and oil companies have traditionally opted for expediency over consideration for the environment or the interests of local people most affected by production. One of the most egregious examples of this comes from eastern Ecuador, where U.S. oil giant Texaco (owned by Chevron since 2001) laid waste to an area of rainforest renowned for its wildlife. The firm's operations also affected the lives of thousands of indigenous people and settlers.
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Oil Pipeline in the Rainforest of Ecuador.
The suit against Chevron
In 2011 a court of Ecuador found Chevron liable for damages caused by Texaco. The judge ordered the oil giant to pay more than $8 billion in damages. Chevron is appealing the verdict.
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The Ecuadorean Oriente, located on the western edge of the Amazon rainforest, is considered the most biodiverse place on Earth. Before Texaco entered in 1967, the region was home to several indigenous groups including the Huaroni people. Some of these Huaroni were among the few remaining indigenous peoples on Earth living fully in their traditional ways.
Between the late 1960s and the early 1990s the Oriente suffered serious degradation and deforestation from oil spills and clearing for access roads, exploration, and production activities. Green groups allege that Texaco dumped more than 20 billion gallons of toxic drilling by-products into local waterways and spilled some 17 million gallons of crude. A 1992 spill was so large that it caused the Rio Napo to run black for days and forced downstream Peru and Brazil to declare states of emergency for the affected regions.
Texaco sold its operations to Ecuador's state oil company Petroecuador in 1992. It left considerable damage, including hundreds of toxic waste pits. Protests by environmentalists and indigenous groups led Texaco to offer $5-10 million for clean up. In response, a class-action lawsuit was filed against Texaco in the United States on behalf of 30,000 people affected by the oil company's operations. The lawsuit continues today but has morphed into a complex and controversial case with serious transgressions by both sides.
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Oil and gas blocks in the western Amazon. Solid yellow indicates blocks already leased out to companies. Hashed yellow indicates proposed blocks or blocks still in the negotiation phase. Protected areas shown are those considered strictly protected by the IUCN (categories I to III). Image modified from Finer at al (2008) Oil and Gas Projects in the Western Amazon: Threats to Wilderness, Biodiversity, and Indigenous Peoples.
A 2008 study published in Environmental Research Letters found that 41 percent of the Peruvian Amazon was covered by 52 active oil and gas concessions, nearly six times as much land as was covered in 2003.
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The development of oil in the Ecuadorean Amazon is a particularly poignant example, but it is no means unusual for oil projects in rainforests. Typically, an oil company cuts access roads through the forest. These roads are followed by transient settlers who colonize and damage the surrounding forest through slash-and-burn agriculture, the introduction of domestic animals, hunting, and the collection of fuelwood. Oil companies sometimes "flare" or burn natural gas that is a by-product of drilling. The flames, which burn in the open air, contribute both to local air pollution and increase the risk of forest fires.
The oil extraction process can be messy and destructive. Spills result from burst pipelines and toxic drilling by-products may be dumped directly into local creeks and rivers. Some of the more toxic chemicals are stored in open waste pits and may pollute the surrounding lands and waterways. Oil spills can wreak havoc on rivers and aquatic ecosystems, while clean-up efforts are complicated by the complexity of tropical river systems, which may include floating meadows, swamp forest, oxbow lakes, flooded forest, and sand bars.
Indigenous and local people have historically failed to see many benefits from oil extraction, but have borne many of the costs in the form of pollution and displacement. Conflict may be exacerbated by the presence of security forces, either private or linked to the military. Lacking what they consider fair compensation, local people may resort to sabotage of oil installations to collect oil-spill compensation. In fact the current chaos in the Niger river delta in Nigeria has roots in opposition to Shell's drilling operations.
But it's inaccurate to assert oil companies are solely responsible for fleecing locals out of oil revenues. At times, oil companies pay their agreed-upon fees and royalties, which end up in the hands of corrupt government bureaucrats before they can be distributed to the communities. Corruption and the oil business often go hand in hand.
Oil producing tropical countries
Primary oil production for most of these countries is offshore. Brazil, Colombia, Ecuador, Peru, Bolivia, and Nigeria have substantial oil operations in rainforest areas.
World
Rank
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Country | Oil Production
barrels per day | Date of
Estimate |
| 6 | Mexico | 3,460,000 | 2004 |
| 11 | Venezuela | 2,600,000 | 2004 |
| 12 | Nigeria | 2,356,000 | 2004 |
| | 17 | Brazil | 1,788,000 | 2004 |
| 21 | Angola | 980,000 | 2004 |
| | 22 | Indonesia | 971,000 | 2003 |
| | 24 | Malaysia | 785,000 | 2004 |
| | 30 | Colombia | 531,100 | 2004 |
| | 32 | Ecuador | 523,000 | 2004 |
| | 34 | Vietnam | 359,400 | 2004 |
| | 35 | Equatorial Guinea | 350,000 | 2004 |
| | 39 | Gabon | 264,900 | 2004 |
| | 40 | Congo, Rep. of | 227,000 | 2004 |
| | 41 | Thailand | 225,000 | 2004 |
| | 42 | Brunei | 204,000 | 2003 |
| | 49 | Peru | 95,500 | 2004 |
| | 50 | Cameroon | 94,000 | 2004 |
| | 59 | Papua New Guinea | 46,200 | 2004 |
| 63 | Bolivia | 39,000 | 2004 |
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The table include only countries with significant tropical forest.
source: CIA World Factbook
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Despite booming demand for oil and gas, the benefits of oil production accrue to few people in most tropical countries. In fact, some countries with large oil reserves have struggled with some of the highest debts in the world.
During the 1970s when oil prices were extraordinarily high and real interest rates low, many oil-exporting countries looked much wealthier than they actually were and took out large loans from foreign banks. The loans were used to sponsor costly development projects. In the 1980s the creditworthiness of these developing countries collapsed with oil prices, and the debt of many oil exporters skyrocketed. For example, the national debt of Ecuador rapidly accelerated since the beginning of the oil boom in the early 1970s. In 1970, the national debt stood at US$256.2 million, but by 2005 the debt had swollen to $16.8 billion.
The sudden inflow of oil can further affect a developing economy by producing a sharp appreciation in the domestic currency which can make non-oil sectors like agriculture and manufacturing less competitive on world markets, thus leaving oil to dominate the economy. The country then becomes vulnerable to wild price swings in the commodity market.
Over-reliance on oil can also impact the government's responsiveness to its citizens. Michael Ross, an associate professor of political science at the University of California at Los Angeles, has argued that oil-rich countries do less to help their poor than do countries without oil and are plagued with lower literacy rates, score lower on measures like the UN's "Human Development Index," and have higher child mortality and malnutrition. How is this possible? An article in The Economist explains, "Unlike agriculture, the oil sector employs few unskilled people. The inherent volatility of commodity prices hurts the poor the most, as they are least able to hedge their risks. And because the resource is concentrated, the resulting wealth passes through only a few hands—and so is more susceptible to misdirection." Since oil revenues are sometimes funneled directly to rulers, governments have little need to raise revenues through taxes and be accountable to their citizens.
Political and economic considerations aside, oil conglomerates are easy targets for environmentalists. Their operations are highly conspicuous and create a dramatic impact on the local economy and the local social conditions. Since local communities reap few benefits from oil development, while shouldering the bulk of the social and environmental costs, it is easy to see why the contribution of oil development to environmental devastation is often overstated.
Articles on rainforest oil development >>
Review questions:
- How do oil operations impact the rainforest?
- How can oil development actually hurt an economy?
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WEEKLY NEWSLETTER
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Recent news
Top Indonesian official calls out misinformation in environmental campaign
(05/20/2013) Indonesia's top REDD+ official confirmed there is no plan to open 1.2 million hectares of forest in Sumatra's Aceh Province, calling into question numbers used by environmentalists in their bid to stop reclassification of the province's forest land.
In landmark ruling, Indonesia's indigenous people win right to millions of hectares of forest
(05/17/2013) In a landmark ruling, Indonesia's Constitutional Court has invalidated the Indonesian government's claim to millions of hectares of forest land, potentially giving indigenous and local communities the right to manage their customary forests, reports Mongabay-Indonesia. In a review of a 1999 forestry law, the court ruled that customary forests should not be classified as "State Forest Areas". The move is significant because Indonesia's central government has control over the country's vast forest estate, effectively enabling agencies like the Ministry of Forestry to grant large concessions to companies for logging and plantations even if the area has been managed for generations by local people.
NGO: conflict of interests behind Peruvian highway proposal in the Amazon
(05/16/2013) As Peru's legislature debates the merits of building the Purús highway through the Amazon rainforest, a new report by Global Witness alleges that the project has been aggressively pushed by those with a financial stake in opening up the remote area to logging and mining. Roads built in the Amazon lead to spikes in deforestation, mining, poaching and other extractive activities as remote areas become suddenly accessible. The road in question would cut through parts of the Peruvian Amazon rich in biodiversity and home to indigenous tribes who have chosen to live in "voluntary isolation."
Analysis: Indonesia renews moratorium on logging, palm plantations
(05/16/2013) Indonesia’s President Susilo Bambang Yudhoyono made a bold and courageous decision this week to extend the country’s forest moratorium. With this decision, which aims to prevent new clearing of primary forests and peat lands for another two years, the government could help protect valuable forests and drive sustainable development.
Indonesia officially extends forestry moratorium
(05/15/2013) The Indonesian government has officially extended its moratorium on new logging and plantation concessions in 65 million hectares of forests and peatlands for another two years. The move, which had been expected, was announced Wednesday by Indonesian President Susilo Bambang Yudhoyono.
More news on logging
More rainforest news
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(01/02/2012) A possibly ground-breaking idea has been kept on life support after Ecuador revealed its Yasuni-ITT Initiative had raked in $116 million before the end of the year, breaking the $100 million mark that Ecuador said it needed to keep the program alive. Ecuador is proposing to not drill for an estimated 850 million barrels of oil in the Ishpingo-Tambococha-Tiputinin (ITT) blocs of Yasuni National Park if the international community pledges $3.6 billion to a United Nations Development Fund (UNDF), or about half of what the oil is currently worth. The Yasuni-ITT Initiative would preserve arguably the most biodiverse region on Earth from oil exploitation, safeguard indigenous populations, and keep an estimated 410 million tons of CO2 out of the atmosphere. However, the initiative is not without its detractors, some arguing the program is little more than blackmail; meanwhile proponents say it could prove an effective way to combat climate change, deforestation, and mass extinction.
(09/22/2011) A new map highlights the importance of conserving Yasuni National Park as the most biodiverse ecosystem in the Western Hemisphere, and maybe even on Earth. Scientists released the map to coincide with the United National General Assembly in support of a first-of-its-kind initiative to save the park from oil exploration through international donations to offset revenue loss. Known as the Yasuni-ITT Initiative, the plan, if successful, would protect a 200,000 hectare bloc in Yasuni National Park from oil drilling in return for a trust fund of over $3 billion.
(07/13/2011) On Sunday morning children swimming in the Mashiria River in the Peruvian Amazon noticed oil floating on the water. A pipeline owned by Maple Energy had ruptured in Block 31-E, polluting the Mashiria River which is used by the Shipibo indigenous community in Nuevo Sucre for fishing and drinking water. In response to the spill, Maple Energy's local operator—Dublin incorporate transnational—hired 32 Shipibo community members to clean up the spills using only rags and buckets.
(03/03/2011) A new report has uncovered 90 oil spills by Pluspetrol in northern Peru's Amazon rainforest over the past 3 years. Covering two oil blocs—1-AB and 8—the report, complied by the Federation of Indigenous Communities of the Corrientes River (FECONACO), recorded 18 major oil spills in just the last year. "A week after the landmark ruling against Chevron in Ecuador for $9 billion of
damage from operations in the 1970's and 80's, this new report highlights
the ongoing devastation caused by the oil industry on the fragile Amazon
ecosystem and the people that live there," said Atossa Soltani, Executive
Director at Amazon Watch, in a press release.
(11/23/2010) Ecuador's big idea—potentially Earth-rattling—goes something like this: the international community pays the small South American nation not to drill for nearly a billion barrels of oil in a massive block of Yasuni National Park. While Ecuador receives hundred of millions in an UN-backed fund, what does the international community receive? Arguably the world's most biodiverse rainforest is saved from oil extraction, two indigenous tribes' requests to be left uncontacted are respected, and some 400 million metric tons of CO2 is not emitted from burning the oil. In other words, the international community is being asked to put money where its mouth is on climate change, indigenous rights, and biodiversity loss. David Romo Vallejo, professor at the University of San Francisco Quito and co-director of Tiputini research station in Yasuni, recently told mongabay.com in an interview that this is "the best proposal so far made to ensure the protection of this incredible site."
(05/24/2010) Perupetro, the Peruvian government's oil and gas corporate leasing body, announced last week that it will open an additional 25 lots for oil and gas exploration in the Amazon covering an area of 10 million hectares (nearly 25 million acres). Peru's national Amazon indigenous group, AIDESEP, criticized the move calling it a 'new threat' to Peru's indigenous group. According to Amazon Watch these new lots mean that 75 percent of the Peruvian Amazon is now open to oil and gas exploration and drilling.
