Paper Number 31 July 1999 BPXCs Operations in Casanare, Colombia: Factoring social concerns into development decisionmaking Aidan Davy Kathryn McPhail Favian Sandoval Moreno Social Development Papers Paper Number 31 July 1999 BPXCs 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: [email protected] 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 BPXCs Operations 11 The Environmental Context of BPXCs Operations 13 The Social Context of BPXCs 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 BPXCs Approach to Managing Social Issues, 1987-1997 25 An Evolving Corporate Policy 25 Evolving Objectives of BPXCs Social Programs 27 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 BPXCs 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: BPXCs Social Investments and Royalties 39 BPXCs 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. BPXCs Evolving Regulatory and Policy Framework for Social Aspects 3 2. Map: Location of Local Communities and BPXCs 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. BPXCs 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, Casanares oil-related royalty community representatives, and local income would exceed that of any other nongovernmental organizations (NGOs). department in Colombia. For the most part, BPXCs 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 companys 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 BPXCs 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 recipients 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 BPXCs social policies and programs. Some processing facilities are located in the of the predictions made in the pre-diagnosis