Canada Pension Plan

CPP Investment Board urged to abandon controversial Chilean transmission scheme

Juan Pablo Orrego S.
Patagonia Defense Council
May 15, 2009

Mr David Denison
President and CEO
CPP Investment Board
Toronto, Ontario

Mr. Denison:

We are writing on behalf of the “Patagonia Defense Council” (“Consejo de Defensa de la Patagonia” – CDP), a diverse coalition of 58 organizations from Chile, USA, Canada, Spain and Italy, who have assumed the mission of defending the environmental integrity of Chilean Patagonia threatened by a mega hydroelectric project, called HidroAysén, and the associated transmissions lines.

Chilean Patagonia has been defined as an ecosystemic mosaic. In few temperate-cold regions of the world today it is possible to find such rates of biodiversity (flora, fauna and ecosystems) and endemism. Its beauty is legendary; its unique landscapes represent an extraordinary natural capital that grows just by conserving and protecting it. Patagonia is also home of a unique culture rich in identity, values and traditions. For the local
inhabitants Patagonia is a ‘life reserve’, and their aspiration is to keep developing their region’s potential insuring that it offers a high quality of life on the basis of the conservation of its pioneer culture, its environmental attributes and territorial integrity.

Regarding the HidroAysén hydroelectric project:

a) Generation component: five hydroelectric dams (2,750 MW; 18,400 GWh/y; 6,000 hectares flooding area); two in the Baker River and three in the Pascua River, with an estimated cost of US$ 3 Bn., planned by HidroAysén, a consortium conformed by Endesa-Chile (51%), (subsidiary of Endesa-Spain, 92% controlled by Enel-Italy), and the Chilean company Colbún (49%). HidroAysén submitted an EIA in August 2008 for their project. Thirty-two public services which reviewed the EIA found that it presented insufficient and erroneous information, and made 3,000+ critical observations; citizen’s made another 11,000. The company has announced that they will answer these observations in August 2009 through an “addenda” to the EIA.

b) Transmission component: a 1,500 miles long, continuous electricity transmission system; 6,000 towers; 22,700 hectares potentially affected; with an estimated cost of US$2 Bn., planned by the Chilean company Transelec owned by Canada’s Brookfield Asset Management, and a consortium of Canadian partners including the Canada Pension Plan Investment Board, the British Columbia Investment Management Corporation and the Public Sector Pension Investment Board. No EIA has been presented for the transmission line.

It has to be noted that 100% of the electricity that would be generated in Patagonia at an extremely high cost for it, would be transported 1,500 miles away to supply large industries around Santiago, Chile’s capital, a city with very high levels of contamination and pollution, and mining north of Santiago. None of the nine regions that would be crossed by the transmission line would receive any electricity from the HidroAysén project, so, they would pay for HidroAysén’s externalities without internalizing any important benefit.

Briefly, fundamental issues regarding the HidroAysén project that have be considered by all interested parties or stakeholders:

1) Patagonia’s Incalculable Environmental Value. Chilean Patagonia, which is being proposed for Humanity’s Heritage status before UNESCO, is located between 43º 38´ and 56º 30’ South Latitude. It is home to one of the largest reserves of sweet water in the world, frozen in the North and South Ice Fields –4,200 km2 and 13,000 km2 (80% in Chile, 20% in Argentina)– respectively. 90% of Chile’s glaciers are located here. This macro-bioregion has an incalculable biodiversity value with numerous endemic species of flora and fauna, many with of them with conservation problems, which have found refuge in Patagonia, among which can be mentioned 34 land and aquatic mammals, 40 birds, 7 reptiles, 11 amphibians, and 21 fish. Some of these endangered species are national emblems: the Huemul, a large andean deer only found in the southernmost regions of Chile (only 3,000 individuals left) and Argentina; the Pudú, an endemic miniature deer, and the Cóndor, the world’s largest flying bird. The tourism potential of Patagonia, directly dependent on its exceptional natural resources and environmental attributes, is one of the productive activities which would be severely degraded by the building of the dams and associated transmission lines. A study done in 2008 by a team of experts of the University of Chile estimated that, just in the Aysén Region, with the building of HidroAysén, the losses for the tourism business would ascend to US$ 40 M a year, considering the actual inflow of tourists. The losses would be much higher if one considers that tourism is just beginning to be developed and promoted in Chilean Patagonia, and that extraordinary parks are in advanced stages of implementation precisely within the direct area of influence of the hydroelectric projects and the associated transmission lines. According to the study, with HidroAysén, at least 70% of the tourists would cease visiting the area, and the total loss for Aysén’s local economy would exceed by 261% the eventual regional benefits of the HidroAysén project.

2) Opposition to the HidroAysén project. Through three official surveys with national coverage, Chileans have clearly expressed that they reject the plans to dam Patagonia. In April 2008, a ‘CERC’ survey found that 53% of the Chilean people disapproved the dams in Patagonia; in June 2008 the ‘Fundación Futuro’ survey found that 52.8% of the interviewed opposed the degradation of Patagonia; recently, in April 2009, the IPSOS survey found that 57.6 % of Chileans do not agree with the mega hydroelectric project in Patagonia and the associated transmission lines. The opposition has grown from Patagonia. In November 2007 more than 120 Patagonian people –women, men and elders– organized a horse ride for 9 days, crossing 320 kilometers from the watershed of the Baker River to the regional capital, Coyhaique, where they delivered to the regional authorities a document expressing their rejection of the HidroAysén project and its potential consequences. Many other local demonstrations against HidroAysén have taken place during the last three years and most of the critical 11,000 observations about the EIA come from Aysén. To this has to be added the fact that almost 20,000 persons have become part of the “Patagonia Without Dams” Campaign through the portal, and that there is a growing global community of 90 facebook groups, a network of more than 105.340 citizen’s of the world concerned with the fate of Chilean Patagonia. CDP’s international partners have also organized important actions with a global scope, such as International Rivers (USA) initiative that resulted in that 220
letters from citizens of USA, Canada, New Zealand, Australia, Netherlands, Spain, Germany, Switzerland and United Kingdom were addressed to the head of the Matte group (Colbún – CMPC), Eliodoro Matte, asking Colbún to renounce their participation in the HidroAysén project in Chilean Patagonia; such as Natural Resource Defense Council (USA) posting Chilean Patagonia as a Biogem in their web-page which has resulted in important cyberactivism actions; both IR and NRDC have contributed to the realization of energy studies that demonstrate that the HydroAysén project is unnecessary. Probe International (Canada) is questioning the participation of a Canadian investment consortium in the buiding of the HydroAysén project transmission line. Spanish and Italian organizations –Ingeniería Sin Fronteras-Cataluña, Paz con Dignidad, Greenpeace, Ecologistas en Acción, Setem, Campagna per la Riforma della Banca Mondiale, Fondazione Culturale Responsabilita Etica, Valori– are actively engaged in questioning the participation of European companies and financial agencies in the HydroAysén project.

3) Governance Issues. Under the pressure of large sectors of the Chilean society, and the need to comply with OECDs recommendations regarding Environmental Performance, Chile’s government is at the moment intent in a deep modification of the country’s environmental institution and legislation, which includes the creation of an Environmental Ministry, an Environmental Evaluation Service and a Monitoring Agency. This is the result of a negative evaluation of the actual system where decision-making is not transparent, political rather than technical, and overtly influenced by the proponents of projects being evaluated; where the proponents of a project have too much influence on the EIAs done by consultancy firms contracted by the proponents themselves without the mediation of a state agency to insure its quality and equanimity; where, consequently, large projects that have been approved through the actual EIA system have had serious unforeseen negative impacts; where projects can be reductively evaluated by parts (such as the generation component and the transmission component of a large hydroelectric plant); and where public participation, including the directly and indirectly affected, is limited to 60 days regardless of the scale and complexity of projects, and whose observations are absolutely non-binding, among many other problems. (There is at the moment a lawsuit against the environmental authority asking for the annulment of HidroAysén’s EIA process on the grounds that 60 days does not permit an adequate participation of the public given the scale of the project and the 10,500 pages and technical complexity of the EIA). There is ample consensus in Chile that the actual EIA system does not guarantee a fair process to all stakeholders, particularly to the most affected by the building of large infrastructure projects. The problems of environmental governance are leading to serious governance problems in general due to the negative impacts of projects authorized under Chile’s actual environmental legislation, institution, and through the actual EIA system. All this has led to the public’s loss of confidence in the system, and in the public services involved,
with the result that the public’s reaction has become one of opposing most projects on principle, perceiving that to a great extent the population and environment pay the costs, the externalities, of developments while companies internalize important profits.

4) Excessive Concentration in the Energy and Water Sectors. Endesa-Chile and Colbún have the control of Chile’s electrical market. Between both companies they concentrate 74% of generation in the Central Interconnected Grid (SIC) that supplies 93% of the Chilean population. If HidroAysén was approved, this duopoly would dominate more than 80% of generation in the SIC, making the regulation of the energy sector very difficult for the State, creating serious problems in terms of free competition, distorting the market and price fixation in the sector. Further, the installation of HidroAysén’s 2,750 MW would act as a deterrent for the deployment of renewable sources of energy precisely when the conditions have been set for the participation of other companies with renewable energies portfolios, such as solar, wind and geothermal. The problem of excessive concentration in the energy sector is compounded by the fact that Endesa-Chile, subsidiary of Endesa-Spain, today controlled by Enel, also monopolizes 80% of Chile’s non-consumptive water rights (for hydroelectric development) and 96% of the same rights in the Aysén Region, so that virtually no competition can exist for sustainable, small-scale, run-of-the-river hydroelectric development in Chilean Patagonia. This unprecedented concentration in the energy and water sector of energy and water, practically in the hands of one company, ENDESA, creates serious problems for democratic governance in Chile. This excessive concentration of financial and social power inevitably co-opts politics, politicians, media, academia, and the courts of justice.

5) Unity of the Generation and Transmission Components of the Hidroaysén Project. It is evident that the generation and transmission components of a large hydroelectric project conform an integrated whole. One cannot operate without the other. Both are indispensable for each other. Given this total interrelation, the members of the CDP consider that the parties responsible for the generation component of the HidroAysén project are also responsible for the transmission component, and vice-versa. The serious flaws in Chile’s Environmental Legislation result in the nonsensical situation that, regarding a project such as HidroAysén, the generation component has to be evaluated separately from the transmission component because the proponents are different. Of course, this means that the real scope of the impacts of the HidroAysén project –the sum and synergy of the impacts of the hydro dams and of all the associated transmission lines–, cannot be properly evaluated. As said, in August 2008 HidroAysén presented to the Environmental Authority an EIA that encompasses only the generation component of the project. The 1,500 mile-long transmission line, crossing 9 administrative regions of Chile, and 64 counties, with 6,000 towers 50-70 meters high, with an underlying service lane more than 100 meters wide, that would affect thousands of properties, and 14 legally natural protected areas, is not included in the EIA. On August 28th, 2008, a member of the CDP, FIMA (Attorneys for the Environment) presented a Declarative Legal Action before the 28th Civil Tribunal in Santiago, Chile, asking for the suspension of the EIA until an adequate study, which includes the transmission line, is presented, so that the real environmental impact of the project as a whole can be properly evaluated. The sentence is pending, but on January 16th, 2009 the Tribunal resolved to make an inquiry, both into the nature of the Hidroaysén project, and about if the project comprises only the hydroelectric dams, or if it includes the transmission lines, as well as regarding the active legitimation of the claimants. It is important to point out that if the generation component starts to be built, the EIA for the transmission line, the work of the pertinent public services as well as the participation of the public will make absolutely no sense, since the transmission line would become an accomplished fact (fait accompli). Even the courts of justice would be neutralized since they could not rule against a feature of the hydroelectric project which would render useless the generation component already authorized and under construction. The advancement of the generation component isolated from the transmission component is generating a very odd and risky juridical situation. CDP‘s lawyers are studying the matter, and this could lead to a public right annulment lawsuit regarding the EIAs of both the generation and transmission components of the HidroAysén project.

6) HidroAysén Project High Physical Risks. a) Patagonia is a geologically young and unstable region. The North and South Ice Fields, that cover 17.000 km2, are the last continental remnants of the last ice-age. The main valleys still conserve the wide glacial u-shape, and the rivers have just begun carving the v-shaped typical fluvial morphology on these young valleys. The whole Aysén Region where the hydroelectric project is situated has been declared a seismic region. Patagonia is cut across by very important geological faultlines, particularly a main longitudinal one, “Liquiñe-Ofqui”, considered the second most active in South America. On April 21st, 2007, a 6.2 Richter scale earthquake, accompanied by a tsunami, hit the region at the Aysén fjord, leaving behind 10 casualties. It is an established fact that large dams can induce earthquakes (Reservoir Induced Seismicity – RIS). In spite of the seismicity in the Aysén Region, and the presence of faultlines, RIS was not considered in Hidroaysén’s EIA; b) On the 1st of May 2008, in the Palena Province, northern part of Chilean Patagonia, the Chaitén volcano erupted, destroying the Chaitén village, forcing the evacuation of 9,000 persons. The volcano continues active.

The projected corridor for the transmission line of the HidroAysén project passes by the lower slopes of the Chaitén volcano. If the transmission line had been in place, an important section of it would have been destroyed. It is hard to imagine the severity of the energy crisis that would have hit Chile’s main electrical grid (SIC) which supplies 93% of Chile’s population, with the sudden loss of HidroAysén’s 2,750 MW for an undetermined period of time; c) In the Patagonian watersheds targeted for dams, Glacial Lake Outburst Floods (Glofs) have been occurring at an unprecedented rate. Four Glofs events have occurred in the watershed of the Baker River over the last 11 months, when in the past they used to recur over decades, a fact that has been directly linked by the experts, to climate change and increasing glacier melt. The Glofs have meant rises of up to 4 meters of the levels of the waters of the Baker River, and sudden flow increases, from 573 m3/s to 3.008 m3/s. The consequences have been flooded fields, loss of cattle, and impacts on infrastructure, such as roads and bridges, as far 40 kilometers downstream from the inflow of the glofs’ waters into the Baker River. All this has occurred within the influence area of the two dams planned in the Baker River by HidroAysén; d) In fact, the issue about security around large dams is globally a growing concern. The 45,000 large dams that exist worldwide were built without considering the erratic hydrology that is being generated by climate change, so that most of them today should be considered risky. Recently, people downstream from dams in the valley of the Biobío River in Chile, as well as in the Henan Province in China, for example have lost their lives and livelihoods due to floods related to a faulty operation of the hydroelectric dams. With the earthquakes, volcanic eruption and glofs, the HidroAysén dams would put at risk the population of Aysén located downstream from the dams, as well as 93% of Chile’s population, due to the high probability of failures of the dams and transmission lines; e) Finally, there is a human factor that also adds important risk to the HidroAysén project. If the project is imposed to the country basically through corporative and political lobby, there are going to be uncountable people in strong disapproval. Disapproval which is accumulating due to several very emblematic cases of projects that are perceived by the public as imposed through lobby, which have supposedly been properly evaluated through EIAs, but have nevertheless had severe negative impacts, such as the Ralco dam in the Biobío River, the Pascua Lama gold mine, the Arauco cellulose pulp-mill, and others. These concrete cases are creating a build up of resentment and discontent in the Chilean population. A project such as HidroAysén with 5 large hydroelectric dams in a remote but cherished area of Chile, and which needs a 1,500 mile long transmission line crossing 9 regions, 64 counties, thousands of properties, including lands of indigenous communities, and 14 protected areas, will be extremely vulnerable to this human factor.

7) Demand before the Secretariat of the Commission for Environmental Cooperation of the Free Trade Agreement Chile-Canada. A demand has been presented by a lawyer acting for the CDP on June 12th, 2008, before the Secretariat of the Commission for Environmental Cooperation, Chile-Canada, in Ottawa, where the CDP requests that the Environmental Treaty signed in 1991 between Chile and Argentina is effectively enforced, denouncing “a persistent pattern of non-compliance of sectorial legislation by the Chilean State.” This, given that the Electricity and Fuels Agency (SEC) of the Chilean Government granted Endesa a provisional electrical concession for carrying out studies for the hydroelectric projects in the rivers Pascua and Baker, without considering the Additional Specific Protocol about Shared Water Resources, of the Chile-Argentina Environmental Treaty (1991), which establishes the bi-national requisite of developing “General Plans for the Utilization of Shared Watersheds” prior to their intervention from any of the two sides of the border. As of today, these plans do not exist, and in clear violation of the Special Protocol there is a EIA underway for damming both the Baker and Pascua despite that both rivers are shared water resources, and that their basins are bi-national. This issue can generate conflicts between Chile and Argentina, as well as with Canada, since in the Chile-Canada agreement, both countries make a binding agreement regarding honoring all their environmental commitments. On December 23d, 2008, CDP’s demand was admitted to process by the Canadian Secretariat which has informed that it will call in an Expert’s Panel to start an inquiry, extend a request for information from the Chilean State, and proceed to the elaboration of a case file.

8) Energy-Wise, HidroAysén is unnecessary. A recent study done by energy experts which only considers Chile’s main grid, the Central Interconnected System (SIC), which supplies 93% of Chile’s population, and into which the electricity from Hydroaysén would be downloaded, and which doesn’t consider the HydroAysén project– clearly demonstrates that HidroAysén is unnecessary. According to this study, in Chile, right now, several companies are planning numerous non-conventional renewable energy projects, as well as conventional plants with which to amply supply the SIC’s energy demand of 22.375 MW projected by the National Energy Commission for the year 2025. The scenario evaluated by the experts for the period 2009-2025 considers the actual installed capacity in the SIC of 9.118 MW, plus another 13.962 MW which will be installed by plants already approved, plus the capacity of other projects which are now in the environmental evaluation process, totaling 23.080 MW, which exceeds the demand projected by the CNE. Even more, when the potentials of efficient use and of renewable sources projected to the year 2025 (always within the SIC) –2.719 MW and 4.565 MW, respectively– are incorporated to this scenario, the numbers are categorical: they clearly show that Chile does not need to keep building large hydroelectric dams to satisfy its energy needs, that Chile does not need HidroAysén to have the energy necessary for its present and future development.

With all due respect, the organizations associated in the “Council for the Defense of Patagonia” (CDP), call on ENEL and all of ENEL’s stakeholders to renounce to the HidroAysén project for the reasons briefly delineated above. We are fully aware that HidroAysén is not a project that has been conceived and moved along by ENEL, and precisely for that reason we call upon ENEL to land in Chile and South America as a force of positive change regarding energy development in our continent. Projects like HidroAysén are anachronistic, outdated, harmful and unnecessary.

The Environmental Treaty signed between Chile and Argentina in 1991 constitutes Chilean internal fully applicable legislation and, for this reason, it was expressly incorporated as an applicable norm in regards of the “Environmental Cooperation Chile-Canada Agreement” signed in parallel to the Free Trade Agreement (TLC) subscribed by Chile and Canada in 1997 for the promotion of development and environmental cooperation. CDP’s demand, then, is fully congruent with the objectives of the TLC, which contemplates a special procedure for “petitions relative to the application of the environmental legislation” which can be initiated by any interested person or non-governmental organization.

“Is HydroAysén necessary? – An analysis of Chile’s Energy Future”, Stephen Hall & Associates, Roberto Román, Universidad de Chile – May 2009. 7 conclusion that the only wrong reason behind the intentions to dam Chilean Patagonia is the fact that Endesa-Chile-Spain, and now ENEL, have captured massive water rights in the rivers of Patagonia and would like to use them for profitable commercial reasons. Nevertheless, the severe impacts that this utilization would provoke should seriously be taken in consideration, as well as the fact that these water rights were absolutely improperly acquired during the military regime, or on the first months of 1990, when Chile was just returning to democracy with great difficulties, so that these water rights were registered at zero cost and in the total absence of a democratic process. There is ample consensus in Chile regarding this situation, and a growing social movement for the nationalization, or recovery of our country’s waters, so that this vital and strategic resource remains under the control of the Chilean State.

We are very interested in ENEL’s non-conventional renewable energy portfolio and have expectations that ENEL’s presence in our continent will contribute to a much needed change towards modernity, sustainability and a much more equitable society comparable to Europe’s best examples.

Juan Pablo Orrego S.
Director – Ecosistemas
International Coordinator – CDP
José M. Infante 1960 p. 2 – Ñuñoa – Santiago – Chile
Tel: (56 2) 494 0233 – 458 4776
Fax: (56 2) 204 6958
Mob.: (56 9) 9 349 9236

Cc: Patricia Adams, Grainne Ryder – Probe Internacional
Michele Dapri, Valter Serrentino, Licia Veronesi – Intesa San Paolo
Giorgio Capurru – UniCredit Group
Carlo de Masi, Masimo Saotta – Flaey CISL
Marina Migliorato, Andrea Falessi – ENEL
Antoni Ballabriga, A. Beatriz Alonso, Tomás Conde – BBVA
Borja Baselga – Santander
Anni Joh – SETEM
Antonio Tricarico, Andrea Baranes – CRBM

write your own letter to the CPPIB urging them to abandon this environmentally and economically controversial project


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