Chalillo Dam

Complaint to Auditor-General’s Commissioner on Environment and Sustainable Development

Probe International

December 4, 2001

Re: CIDA’s support for the Chalillo dam


Commissioner of the Environment and Sustainable Development
Office of the Auditor General of Canada
Attn: Petitions
240 Sparks Street
Ottawa, Ontario
K1A 0G6

Petition re: Canadian International Development Agency’s involvement in the Chalillo hydro scheme in Belize

1. Background Information

CIDA, the Canadian International Development Agency, is backing plans by Fortis, Inc., a Newfoundland based power company and real estate developer, to build a hydro dam on a remote stretch of the Macal River in the Central American country of Belize.

If completed, the Chalillo hydro dam will flood almost 1,000 hectares of rainforest habitat that scientists believe is critical to the survival of rare and endangered Central American wildlife, including tapirs, jaguars, crocodiles, howler monkeys, and scarlet macaws, fewer than 200 of which remain in Belize. Many of the project area’s wildlife species are already extinct in other parts of Central America.

The Chalillo dam would fracture the Meso-American Biological Corridor, a vast tract of forest stretching from Mexico to Panama, recognized by the nations of Central America as critical for migration routes and breeding grounds for predatory cats, and migratory birds. The 50-metre high dam would also submerge several unexplored Maya settlements, which has alarmed Belize’s Maya communities and leading archaeologists.

The destruction this dam would cause could be avoided. Independent analysis shows that it would be cheaper to import electricity from Mexico than to build Chalillo. Cogeneration using sugar and citrus waste by-products is another more reliable and economical alternative. But Fortis has monopoly power over Belizean electricity consumers, which allows Fortis to charge Belizeans monopoly prices to ensure a profit.

(For further analysis of why Fortis’s scheme is a bad deal for Belizean ratepayers, see my article, “Belize needs a free energy market, not more dams,” National Post, October 31, 2001. Attached)

Probe International, together with citizens groups in Atlantic Canada, Belize, and the United States, and some of the world’s leading wildlife experts, are united in demanding this hydro scheme be stopped. The International Union for Conservation of Nature (which includes among its government and NGO members, the Canadian International Development Agency) resolved last year at its World Conservation Congress in Jordan that Fortis should scrap its plans for the dam unless it can show that the wildlife habitat would not be significantly harmed. Thousands of ordinary citizens across the continent have already sent letters, postcards, e-mails, and faxes of protests to Fortis and the Canadian government.

Despite growing public concern about the proposed Chalillo dam, Fortis is set to start building in early 2002, pending final approval from Belize’s environmental authorities. 1.1 Canada’s Involvement in Macal River Hydro Development

Using the Access to Information Act, Probe International discovered that CIDA agreed last June to grant almost $250,000 to AMEC (formerly Agra), the world’s third largest engineering firm, to prepare a “project justification report” and an environmental impact assessment for the Chalillo dam (referred to by CIDA as the Chalillo Environmental Impact Assessment (EIA)). AMEC is a well-known hydro proponent in the business of operating hydro dams for utilities in the Caribbean and Latin America. AMEC’s client is the Belize Electric Company, a private hydro dam operator owned by Fortis which sells its output to Belize Electricity, also majority-owned by Fortis.

Fortis is a billion dollar power company and real estate developer based in St. John’s Newfoundland. Fortis bought a majority stake in Belize Electricity, the country’s national electric utility in late 1999. In January, 2001, Fortis bought a majority stake in the Belize Electric Company (BECOL). BECOL has monopoly water rights to the Macal river and its tributaries, and wants to build the 7.3-MW Chalillo dam, not primarily for hydropower production, but to store water for its underperforming hydro facility further downstream, known as Mollejon. BECOL will then use the water from Chalillo to boost production at Mollejon, and sell its additional output to Belize Electricity.

AMEC subsidiary Agra CI Power has been involved in planning hydro development along the Macal River for the last decade. In 1999, Agra CI Power produced an EIA for Belize Electricity which was rejected by the Belize authorities as biased and incomplete.

1.2 Chronology of the Chalillo Dam Environmental Impact Assessment (EIA) (official correspondence attached)

June 2000 – CIDA signed a contract with Agra (now AMEC) to produce the Chalillo dam EIA for $249,378 (including nine deliverables: 1) project justification report, 2) water quality report, 3) social gender analysis, 4) wildlife study preliminary report, 5) auxiliary infrastructure report, 6) risk assessment and preliminary project management plan, 7) wildlife study preliminary report, 8) environmental impact assessment report and final project management plan, and 9) financial meetings report. The contract indicates that all reports were scheduled to be completed by mid-May 2001. (Contract File No. E4936K060358, obtained by Probe International using the Access to Information Act.)
December 2000 – The Montreal-based AGRA Monenco submitted its project justification report, its water quality analysis report, and its social gender analysis report to CIDA. (Letter to CIA from Paul Courteau, AGRA Monenco, December 2000, obtained by Probe using the Access to Information Act.)
April 2001 – Following complaints from Probe and other environmental groups about its ongoing secrecy, CIDA disclosed that the agency was negotiating with AMEC “to support a public consultations process” in Belize and that “details of CIDA’s contribution to the public consultation process [would] be available once the agreement with AMEC has been amended.”
August 28, 2001 – AMEC submitted its “Macal River Upstream Storage Facility [Chalillo] Environmental Impact Assessment” to CIDA and to Belize’s Department of Environment for review by an appointed committee, the National Environmental Appraisal Committee.
November 9, 2001 – Belize’s National Environmental Appraisal Committee granted a conditional clearance to the Belize Electric Company (Fortis) to proceed with the dam, pending the completion of an environmental compliance plan, to include detailed mitigation measures, timeframe, and budget. Note that AMEC was obliged to complete such a plan under the terms of its contract with CIDA and failed to do so.
November 13, 2001 – The Belize environment ministry announces that the National Environmental Appraisal Committee will hold public hearings to present the Chalillo dam EIA and the committee’s decisions to the public. No timeframe is provided.

Citizens groups are currently challenging the committee’s decision as “illegal”, accusing the committee of ramming the EIA through approval without public hearings, as required under Belize’s environmental law. The Belize alliance of conservation groups, BACONGO, complained that the CIDA-funded consultants, AMEC, and the government committee dismissed the findings of their own wildlife consultants, that the dam would cause a “significant and irreversible reduction in biodiversity in Belize.” BACONGO further reports that the committee failed to distribute to its members detailed submissions about the EIA’s failings from experts, including the Costa Rican office of the World Conservation Union, Belize-based geologist Brian Holland, and Canadian archaeologist Dr. Elizabeth Graham.

November 14, 2001 – Records obtained by Probe International using the Access to Information Act, indicate that CIDA has disbursed $466,234 to AMEC for the Chalillo environmental impact assessment as of November 8, 2001.

2. Probe’s Assessment of the Problem

On October 12, 2001, Probe International submitted its complaints about the CIDA-funded EIA to Foreign Affairs Minister John Manley, CIDA Minister Maria Minna, and CIDA’s industrial cooperation program staff. Based on our review of the CIDA EIA, experts’ submissions to the National Environmental Appraisal Committee in Belize, and the grievances expressed by Belizeans (including conservation and development NGOs, Macal river residents, and business operators), we recommend that Canada withdraw support for this project. All the evidence suggests that the costs and risks associated with the Chalillo dam clearly outweigh any benefits that might accrue from the dam, and that the project will cause irreparable damage to Belize’s environment and cultural heritage.

We asked the minister responsible for CIDA to take responsibility for the EIA commissioned and financed by CIDA, to review all the complaints related to the EIA, to disclose all documents related to the EIA, and to withdraw all support for AMEC. We also asked the minister to assure Canadians that no more public funds will be used for the Chalillo project, by issuing a public statement.

Our complaints are presented in further detail as follows:
· CIDA has funded a biased and incomplete EIA that does not provide a sound basis for a) the dam’s engineering and design or b) an investment decision

The Chalillo EIA fails to substantiate the proponents’ claim that the Chalillo dam is “technically and economically viable.” The document is grossly misleading and incomplete in its assessment of the dam, and as such, does not provide a sound basis for the dam’s engineering and design, or for an investment decision. The AMEC report is a flimsy justification of a foregone conclusion that the Chalillo dam should be built, that buries the key findings and recommendations of its wildlife consultants in an appendix of its main report.

The most egregious failings of the CIDA-funded EIA are as follows:
AMEC ignores the key recommendation made by its wildlife consultants, the Natural History Museum of London, that the Chalillo dam not be built. “Based on the rarity of the habitat to be inundated, and the dependence on this habitat by several endangered species,” the Natural History Museum states, “the ‘No Build’ option is highly recommended as the most suitable and appropriate option for the long-term viability and conservation of wildlife in Belize.” The British wildlife consultants based their recommendation on 15 years of research in the Macal River valley and concluded that the dam would cause a “significant and irreversible reduction of biodiversity in Belize.” In a follow-up letter to the Belize authorities, Lieutenant Colonel Alistair Rogers, a senior scientist and contributor to the Natural History Museum report, writes: “It is absolutely clear that constructing a dam at Chalillo would cause major, irreversible, negative environmental impacts of national and international significance – and that no effective mitigation measures would be possible.”

AMEC’s projections of a reliable power output from the Chalillo dam are based on hydrological records that are incomplete and unreliable. As such, there is a significant risk that the dam will fail to perform as expected and that Belize ratepayers will be burdened with the cost of the dam, plus the cost of alternative power supplies in the dry season – as is the case with an existing hydro facility further downstream.

AMEC failed to conduct the geotechnical surveys needed to assess the risk that extensive karst (soluble rock) formations in the project area will drain water out of the reservoir and render the project useless. AMEC acknowledges that these karst landforms (i.e., sinkholes and underground caves) are a significant factor in assessing the technical and financial viability of the Chalillo project, but inexplicably fails to conduct the necessary surveys.

AMEC provides no evidence to substantiate the claim that Chalillo is a least-cost generating option for Belize. AMEC’s claim that the cost of power production at Chalillo is six US cents per kilowatt-hour is unsubstantiated. An August 24, 2001 letter from AMEC’s client, Belize Electricity Company, to Belize’s National Environment Appraisal Committee, indicates that Chalillo power will cost ratepayers 8.65 US cents per kilowatt-hour. At this price, the alternatives – bagasse-fired cogeneration, gas-fired off-peak power from neighbouring Mexico, and high-efficiency gas turbines or diesel units installed in Belize – are competitive. In fact, Belize could purchase off-peak power from Mexico for half the price of Chalillo power but AMEC rules this out. In order to conclude that the alternatives are not competitive, AMEC compared the dam’s production cost (six US cents per kilowatt-hour) and not the actual price of Chalillo power (8.65 US cents per kilowatt-hour) to the alternatives. This is not a legitimate comparison: AMEC’s conclusion is patently false and does not serve the interests of Belizean ratepayers.

AMEC failed to conduct a proper archaeological survey of Maya sites in the project area, as required under Belize’s antiquities law. “It is unthinkable,” writes renowned Canadian archaeologist Elizabeth Graham, Royal Ontario Museum associate and director of the London Institute of Archaeology, that such large-scale construction would be planned without the requisite surveys” in an area containing some of the richest and most complex Maya sites. (Letter from Dr. Graham to the National Environmental Appraisal Committee)

AMEC failed to prepare an environmental management plan even though this was a requirement of the CIDA contract. The June 2000 contract between CIDA and AMEC stipulates that AMEC is required to produce a final project management plan which should “evaluate environmental risks, elaborate an emergency plan, propose mitigation measures, specify entities responsible for monitoring, suggest means of complementing existing capabilities and evaluate the costs of monitoring and of implementing the project management plan.”

AMEC’s geological assessment is fundamentally incorrect and fails to provide a sound basis for the design and engineering of the Chalillo dam. The rocks present in the project area are not correctly identified by AMEC, and the structural geology of the dam site has not been evaluated with regard to faults and bedrock integrity. According to Mr. Brian Holland, Technical Director, Belize Minerals Limited, if the Chalillo dam is built without revising the geological maps submitted by AMEC, upon which the engineering and design of the dam is based, there is potential for bedrock movement or seismic activity, which “could result in fracturing of the concrete portion of the dam and potentially, a catastrophic failure of the dam.”

· CIDA’s secrecy has thwarted an open and rigorous review of the Chalillo dam

CIDA has thwarted an open and rigorous review of the Chalillo dam in Belize, and public debate about Canada’s involvement, by putting a multinational corporation’s alleged need for confidentiality before the public’s right to know. The only possible reason for confidentiality has been to protect proponents of the dam from criticism, delays, increased costs, and competition from cheaper power producers, by short-circuiting public review and debate in Belize and elsewhere in Central America and North America.

The Canadian government’s contribution to the Chalillo hydro project would have remained secret in Canada had citizens in Belize not alerted Probe International to the involvement of Canadian hydro consultants. Because CIDA’s public relations department refused to provide any information about its involvement, Probe International had to resort to Canada’s Access to Information Act to find out how CIDA was involved in the project.

Once Probe International confirmed that CIDA was involved, the agency has defended its secrecy surrounding the Chalillo EIA, by arguing that it has no legal obligation to disclose any details about the Chalillo EIA and EIA process, either under the Access to Information Act or Canada’s Environmental Assessment Act.

In September, CIDA informed Probe International that the Chalillo Environmental Impact Assessment (EIA) is available for a cost of $271.60 or we could review it at no cost at the CIDA office in Ottawa. CIDA refused to make the EIA available on its web site or on CD-ROM to facilitate widespread distribution and review. CIDA further noted that it is “in the process of reviewing the report to ensure that the terms and conditions agreed to by AMEC in its Contribution Agreement with CIDA have been met.” Probe International argued that any federally-funded EIA should be automatically available to the public and obtained a copy via citizens groups in Belize.

In October, CIDA minister Maria Minna informed us that the agency was reviewing the Chalillo dam EIA and “should be able to complete this process by mid-October.” At that time, “the Agency will be able to confirm whether the Report is in conformity with the requirements of the Contribution Agreement signed between CIDA and AMEC.”

Through subsequent Access to Information requests, Probe has confirmed that AMEC’s project justification and preliminary environmental assessment reports were completed in December 2000 but this was not disclosed in Belize until August 2001. And in April 2001, CIDA informed us that it was negotiating with AMEC to fund a public consultation program but, ironically, CIDA refuses to release details of its contribution to the public consultation work.

CIDA’s secrecy is indefensible. Environmental impact assessments serve an important public policy and decision-making function. They are intended to inform decision makers, in this case the Belize government, and the public, about a project’s potential environmental effects and risks before they occur, and as early as possible in a project’s planning stages. Environmental assessments, by definition, require effective public input and participation so that all information about potential environmental effects and risks can be reflected in the final environmental assessment document.
· CIDA’s choice of consultant for conducting an environmental assessment has no credibility

CIDA has insisted that it is neither a proponent nor an opponent of the Chalillo hydro scheme but that by funding AMEC it is helping Belize make an informed decision about its energy options. But the agency’s claim of impartiality is a pretense and a gross misrepresentation of the government’s role.

The agency’s primary purpose in funding AMEC is stated right in its contract with AMEC, which stipulates that: “The Firm [AMEC] shall seek to interest the client [Belize Electric Company] in assigning implementation of the Project to the Firm [AMEC]. . . .” CIDA’s purpose, in other words, is to help AMEC win contracts to build the Chalillo dam. Nowhere in the CIDA-Agra contract does it mention assisting Belize with an informed decision about its energy options. Furthermore, the EIA AMEC has produced rules out all alternatives to the dam without any valid supporting analysis.

Had CIDA wanted to finance an impartial assessment of the dam’s social and environmental effects it would have commissioned a company with no vested interest in the project, and with some expertise in Central American wildlife, Maya ruins, and karst geology. Instead, CIDA hired AMEC, a known hydro proponent, with no experience whatsoever with the impacts of large dams on tropical wildlife. AMEC then hired the British Natural History Museum to conduct a wildlife impact assessment but then promptly buried its recommendations in an appendix of the main report. The main report concludes only that all environmental impacts will be manageable – a conclusion not supported by AMEC’s wildlife consultants. Given CIDA’s sustainable development mandate, its failure to insist upon an open and transparent process for conducting an EIA, one that would facilitate public participation over the course of AMEC’s year-long assessment, warrants investigation. CIDA could have done this by following CEAA guidelines, which would have obliged the agency to do the following: give public notice (in Canada) that an environmental assessment for a project in Belize is underway, disclose the terms of reference, post the environmental assessment in CIDA’s public registry, invite public comments (and/or direct public comments to the Belize authorities), and have an independent advisory panel in Canada review the EIA and deliver its findings to the Belize authorities.
· CIDA failed to promote and ensure effective public participation in the EIA process

Citizens groups in Belize report that AMEC’s public consultation program was a public relations exercise and does not constitute public hearings as required under Belize law. AMEC’s consultation program, led by a sociology student, consisted of 1) a “perception study” aimed at finding out what citizens along the Macal river already knew about the proposed hydro scheme; and 2) three one-day information seminars held in May 2001, aimed at disseminating information about the project. The groups report that the content and process for public consultations was inadequate as follows: the seminars organized by AMEC, were held after the “project justification report” and most of the other environmental assessment documents had already been completed; questions arising at the three seminars are not addressed by AMEC in its final EIA document nor has there been any public review of the EIA since its completion; only some of the people living downstream of the dam were consulted by AMEC, and only as passive beneficiaries. Further to this, AMEC failed to identify potential victims of the dam, in terms of disruptions to water supplies, navigation, property, and livelihoods. It failed to identify potential victims based on their rights and interests vested in the Macal river – as residents and business operators with property rights along the river that would entitle them to demand compensation from the developers in the event of damages.
· CIDA abdicated responsibility for a federally-funded EIA

In an effort to deflect public criticism, the minister responsible for CIDA, Maria Minna, insists that by funding AMEC her agency is “helping Belize acquire the necessary environmental information it needs to make an informed decision.”

This response is totally inadequate. Given that CIDA is in the business of funding EIAs for projects overseas, the agency has a responsibility – in keeping with the agency’s sustainable development mandate – to ensure that the EIAs it commissions and finances serve an informed decision and not, as in this case, help Canadian proponents ram through a project by without adequate planning and public debate.

Probe’s position is that the public has not been served by CIDA’s secrecy and mishandling of the EIA process, in particular its refusal to enable effective public input in the year-long assessment process by AMEC. Rather than contribute to an informed decision-making process, CIDA’s involvement has had the opposite effect: By keeping the entire assessment process under wraps since last June, CIDA has helped the proponents short-circuit public input and debate in Belize. CIDA cannot claim to be “helping Belize” having abdicating responsibility for ensuring that the EIA it commissioned and financed is subject to public scrutiny and oversight. In effect, CIDA has thwarted an open and honest assessment and decision making process in Belize by refusing to make all details pertaining to the EIA publicly available from the outset and by keeping the entire year-long EIA process under wraps for as long as possible.
· CIDA has failed to uphold the spirit and intent of Canada’s Environmental Assessment Act

According to CIDA’s industrial cooperation program Director-General, Paul Hitschfield, CIDA was under no obligation to follow the Act in the case of Chalillo because “CIDA’s intent was to contribute funding only for the purpose of preparation of reports, analyses and plans which would include data relevant to an assessment of the environmental impact of the dam.”

The CIDA-Agra contract does not specify how CIDA will ensure compliance with Canada’s Environmental Assessment Act, saying only that CIDA “has made a determination on a course of action to be followed in order to comply with the CEAA.”

Under the CEAA, whenever a federal agency (CIDA) provides financial assistance for the purpose of enabling a “project” to be carried out, the agency is obliged to comply with the procedures set out in the Act. The Act, in other words, is “triggered.” A “project” is defined in the Act as “an undertaking in relation to a physical work or to a physical activity.”

In effect, CIDA’s industrial cooperation program has exempted itself from complying with Canada’s Environmental Assessment Act (CEAA) on the grounds that the agency isn’t financing the dam’s construction. In so doing, CIDA has contravened Canada’s Environmental Assessment Act (CEAA), which was established so that federal decision-makers can assess the environmental effects of projects that involve the federal government (in this case CIDA claims that by commissioning AMEC to conduct an EIA it is assisting decision makers in Belize). The primary objectives of this Act are to facilitate public participation in the EIA process and to identify environmental impacts as early as possible in the EIA process before any irreversible decisions are taken.

3. Petition Request

We ask that the Ministry responsible for CIDA review all the evidence submitted by AMEC, Probe International, and others, and then set Canada’s record straight.

3.1 We ask that CIDA do the following:
· End the secrecy surrounding the Chalillo Dam EIA. Ensure that all information pertaining to the Chalillo Dam EIA be disclosed without further delay.
· Withdraw all support for the Chalillo dam and assure Canadians that no more public funds will be used for this project, by issuing a public statement.
· Disclose all CIDA-funded EIAs – including all records produced by, submitted to, and collected by CIDA with respect to an EIA – by posting on CIDA’s public registry.

3.2 We ask that the Auditor-General’s Office of Canada investigate:
· CIDA’s conflict of interest which has CIDA’s industrial cooperation program protecting its corporate clients from scrutiny rather than upholding the Canadian public’s right to know how CIDA is spending taxpayers’ money, and the right of citizens in developing countries to participate in Canadian-funded environmental impact assessments;
· the effectiveness and public accountability of CIDA grant-making to AMEC and other Canadian multinationals. (CIDA has granted approximately $59 million to AMEC and its subsidiaries since 1987, according to records obtained by Probe International using Canada’s Access to Information Act.)


Categories: Chalillo Dam, Odious Debts

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