March 14, 2004
Mr. Jean Lemierre
President
European Bank for Reconstruction and Development (EBRD)
One Exchange Square
London, EC2A 2EH
FAX: 00 44 207 338 6100
Kyosuke Shinozawa
Governor
Japan Bank for International Cooperation
1-4-1, Ohtemachi, Chiyoda-ku
Tokyo 100-8144
Japan
Fax +81 3(5218)3955
Philip Merrill
President and Chairman
Export-Import Bank of the U.S.
Washington, D.C. Office
811 Vermont Ave., NW
Washington, DC 20571
USA
Patrick Crawford
Chief Executive Officer
Export Credit Guarantee Department, UK
1 Canada Square
London, E14 5DX
United Kingdon
fax: +44 (0)207 860 2437
RE: International Scientific Review Panel Findings on Sakhalin II Impacts on Western
Gray Whales.
Dear Sirs,
We write concerning the recent International Scientific Review Panel (ISRP) report on
Sakhalin II project impacts on the critically endangered Western Gray Whale1. The
ISRP, commissioned at your urging by the World Conservation Union, contains findings
that must compel your institutions to decline financing for Sakhalin II in its current
design.
1
Impacts of Sakhalin II Phase II on Western North Pacific Gray Whales and Related Biodiversity: Report
of the Independent Scientific Review Panel: http://www.iucn.org/themes/business/
The ISRP report concludes that Royal Dutch/Shell’s Sakhalin II and other oil and gas
projects off the North East coast of Sakhalin Island threaten the Western Gray Whale
population with extinction. The ISRP found that:
“[E]xisting and planned large-scale offshore oil and gas activities pose
potentially catastrophic threats to the population.”
And,
"The most precautionary approach would be to suspend present operations and
delay further development of the oil and gas reserves in the vicinity of the gray
whale feeding grounds off Sakhalin, and especially the critical nearshore feeding
ground that is used preferentially by mothers and calves."
The ISRP report details how Sakhalin II increases the critically endangered western gray
whales' risk of extinction through construction and operation impacts including ship
collisions, oil spills, and noise. The panel points out that the loss of one additional adult
female per year “would be sufficient to drive the population towards extinction with high
probability.”
These and other findings of the ISRP report demonstrate that the Sakhalin II project
violates the environmental policies to which your institutions and project sponsors are
committed for all projects and on this project in particular. These include the
environmental policies of the European Bank for Reconstruction and Development
(EBRD), of the Export Credit Agencies of the US, UK and Japan, and of the World Bank
Group’s International Finance Corporation.2 This includes, inter alia, violations of
policies related to the protection of natural habitats; required analysis of alternatives;
adequate environmental assessment, and adherence to the precautionary approach.3
Key Findings of the ISRP: The major findings of the ISRP include:
 SEIC has not presented an overall assessment of the cumulative impacts of noise,
sediment, collision and spills on the gray whale population over the lifetime of the
project;
 The timing of decisions on platform and pipeline siting indicates that they were
made without full knowledge of the risks to the gray whale feeding area;
 The current operations of removing oil by tanker during the summer months are
high risk and should be suspended;
2
See documented commitments of EBRD and Export Credit Agencies in Preliminary Evaluation of
Conformity Sakhalin II, Phase 2 and the Environmental Standards of the World Bank (WB) and
International Finance Corporation (IFC) By Pacific Environment—January 2004
3
IFC OP 4.04 Natural Habitats; IFC OP 4.01 and IFC OP 4.04 requirements for analysis of alternatives;
EBRD Environmental Annex Annex 2 requirement for analysis of alternatives, IFC OP 4.01 on scope and
detail of environmental assessment; EBRD Environmental Procedures 2.3.3 on scope and detail of
Environmental Investigation; IFC OP 4.01 on Precautionary Principle; EBRD Environmental Policy II.6.


The mitigation measures and oil spill response plans are not based on rigorous
science and therefore cannot ensure protection of the gray whales;
There is still a lack of understanding regarding the behaviour of the whales, and
more significantly regarding the potential impact of oil and gas operations on the
whales.
Violation of policies for endangered species: IFC’s Operational Policy 4.04 Natural
Habitats states that “IFC does not support projects that, in IFC’s opinion, involve the
significant conversion or degradation of critical natural habitats.” This policy defines
“critical natural habitats” as “areas with known high suitability for bio-diversity
conservation; and sites that are critical for rare, vulnerable, migratory, or endangered
species.” This certainly includes habitat for the critically endangered Western Gray
Whale. The policy defines “degradation” as “modification of a critical or other natural
habitat that substantially reduces the habitat's ability to maintain viable populations of
its native species.” Thus, the ISRP finding that existing and planned large-scale offshore
oil and gas projects including Sakhalin II pose potentially catastrophic threats to the
population demonstrates a prima facie violation of this policy.
Violations of required assessment of alternatives: IFC and EBRD policies require
thorough, systematic, quantifiable assessment of alternatives. However, Sakhalin II has
never seriously considered alternative locations for the Piltun-Astokhskoye B (PA-B)
platform, which is currently proposed to be built adjacent to the Western Gray Whales
only feeding habitat. The ISRP found that the project’s Comparative Environmental
Assessment (CEA), which represents “the culmination of extensive design, survey,
monitoring and modelling work begun by SEIC” contains no systematic or quantifiable
analysis of alternative PA-B platform location:
The CEA does not specify why this particular site was selected or
whether additional geological, technological, ecological and economic
constraints were taken into account.
And,
Regarding the proposed location of the PA-B platform, “it appears that the site
was chosen prior to analysis of spill trajectories. If so, then risks to key areas
such as the nearshore foraging habitat for gray whales were not understood and
considered in the site selection process”.
The ISRP also concludes:
"Clearly, from the perspective of gray whale conservation, the further away the
platform is from the foraging grounds the better."
Violations of requirements on scope and detail of environmental assessment: IFC
environmental policies and procedures state that an Environmental Assessment report’s
“scope and level of detail should be commensurate with the project's potential impacts.”
Similarly, EBRD’s Environmental Procedures state “[t]he detail and scope of an EIA
depends upon the likely type and extent of a project’s environmental effects and the
sensitivity of the locations affected.” The EBRD Environmental Procedures state that if
the EIA “process and / or documentation are deficient, the Project Sponsor will be
required to carry out additional work to comply with the Bank’s requirements.”
The potential for Sakhalin II to cause the extinction of the Western Gray Whale indicates
that the scope and level of detail of the project’s Environmental, Social, Health Impact
Assessment (ESHIA) and associated analysis is high. The lack of proper analyses led the
EBRD in 2003 to deem the ESHIA “unfit for purpose.” Sakhalin Energy’s Comparative
Environmental Assessment is intended to address some of these shortcomings for offshore portions of the project. Yet, the ISRP report refers repeatedly to "information
gaps" associated with the CEA and other information provided and states:
"The Panel was precluded by a lack of information and specificity from
completing a comprehensive review of a number of important Sakhalin II Phase 2
elements."
The ISRP also states:
“Descriptions of analytical methods for [oil spill] trajectory analyses in the CEA
are inadequate. As noted above, the CEA does not present model results for risks
and trajectories for a broad range of spill volumes, and presents only cursory
analytical results. This circumstance hinders the task of evaluating potential
effects of the Project on western gray whales.”
“The CEA did not model the worst-case scenario, i.e. that of a platform blowout,
but such modelling is essential for a thorough and unbiased assessment of risk.
The risks associated with such a low-probability event may exceed considerably
those from the spills that were modelled.”
“The CEA did not model spills occurring during winter months when weather
conditions may be more severe than those modelled (10-year averages for spring,
summer and autumn) and when the sea may be covered with ice.”
“The CEA did not model the effects of spills and accidents on gray whales and
their habitat as a result of an accumulation of leaks, spills and accidents over the
lifetime of Phase 2. Such an exercise is essential to a thorough and balanced
assessment.”
“[T]he potential for smothering of benthic communities by sedimentation has not
been adequately described in the CEA or the EIAs.”
“Once again, from the perspective of gray whale conservation, the available
information precludes a conclusive assessment of the effects on primary feeding
habitat. The CEA and other documents do not adequately reflect the
uncertainty that exists and in many cases reflect an overly optimistic view.”
“The CEA does not address any potential ecological effect from the construction
of the pipeline landfall and no mitigation is proposed.”
Regarding noise impacts, “Some temporary displacement of WGW from prime
feeding areas is a probable effect of Sakhalin II Phase 2”
Regarding noise impacts, SEIC “ consistently interpret uncertain data
optimistically and thus may seriously underestimate the nature of threats posed by
the operations and hence the requisite mitigation measures.”
Regarding noise impacts, “Without further details on SEIC’s plans, the Panel is
unable to evaluate the efficacy of the monitoring and mitigation measures
proposed”
Regarding the potential for collisions, “the proposed mitigation measures are
unlikely to be adequate to prevent collisions entirely. For that reason and because
any mortality in addition to that already experienced by this population would
jeopardise recovery, a precautionary approach to risk assessment and mitigation
is required.”
“The collision risk to gray whales posed by this new traffic was not addressed
with any degree of rigour in the documents received from SEIC.”
Regarding oil spill accidents, “the apparent lack of attention to gas associated
risks is a serious shortcoming of plans for Sakhalin II Phase 2”
“[W]hales are not normally affected by oil carpets and will avoid polluted areas,
and that the potential effects of oil will be of short duration (<1 month) and
moderate severity are not supported by available data”.
Regarding the impact of a potential oil spill, “[a] precautionary interpretation of
those studies suggests that oil spills directly affecting preferred feeding areas
could reduce food availability to feeding whales over an extended time period,
with unknown but potentially serious consequences for fitness and population
growth in the whale population.”
Regarding the weakness of SEIC modeling for oil spills, “[The] effects of spills
and accidents on gray whales and their habitat as a result of an accumulation of
leaks, spills and accidents over the lifetime of Phase 2. Such an exercise is
essential to a thorough and balanced assessment”.
Regarding SEIC’s proposed response to potential oil spills, “none of the response
strategies assigns sufficient priority to nearshore gray whale feeding habitat”.
These information gaps prevent the adequate assessment of potential impacts of Sakhalin
II, none the least of which are EBRD and IFC requirements related to the assessment of
cumulative impacts.
Violation of the Precautionary Principle: The ISRP findings reinforce the fact that the
Sakhalin II project fails to comply with EBRD and IFC policies related to the
precautionary principle. For example, OP 4.04.1: states:
“IFC supports, and expects project sponsors to apply, a precautionary approach
to natural resource management to ensure opportunities for environmentally
sustainable development.”
Similarly, EBRD’s Environmental Policy states:
“The Bank “supports a precautionary approach to the management and
sustainable use of natural biodiversity resources (such as wildlife, fisheries and
forest products) and will seek to ensure that its operations include measures to
safeguard, and, where possible, enhance natural habitats and the biodiversity
they support.”
The ISRP report states:
"The most precautionary approach would be to suspend present operations and
delay further development of the oil and gas reserves in the vicinity of the gray
whale feeding grounds off Sakhalin, and especially the critical near shore feeding
ground that is used preferentially by mothers and calves."
Yet, Royal Dutch/Shell’s unwillingness to properly analyze risks and impacts to the
Western Gray Whale, and its unwillingness to take necessary measures to protect the
whale (typified by its unwillingness to relocate the PA-B platform) indicate a blatant
disregard for the precautionary approach. This represents a blatant violation of EBRD’s
and IFC’s environmental policies and procedures.
Decline financing for Sakhalin II:
The EBRD Environmental Policy states:
The EBRD also clearly establishes the principle that a proposed project can be
rejected on environmental grounds, when there are major environmental
problems, or when a proposed project fails to address environmental issues in a
satisfactory way.
Export Credit Agencies considering financing for Sakhalin II have similar institutional
prerogatives. EBRD’s determination that the Sakhalin II ESHIA is “unfit for purpose”
demonstrates that the Sakhalin II project is a clear candidate for this rejection. The ISRP
report provides your institutions with additional expert opinion to support such a
conclusion. This includes the determination that the Sakhalin II project threatens the
Western Gray Whale population with extinction; that to do so is a violation of EBRD and
IFC policies; that the supplementary analysis is incomplete and misleading, and that the
Comparative Impact Assessment and other environmental assessments remain unfit for
purpose. Thus, we agree with the ISRP recommendation that the precautionary approach
calls for the suspension of present operations and delay of further development of the oil
and gas reserves in the vicinity of the gray whale feeding grounds.
We call on Royal Dutch/Shell to immediately halt oil production at its existing Molipak
platform and to delay a proposed platform and associated pipeline construction until it
can demonstrate that these activities will not lead to the extinction of the western gray
whale population.
We also call upon your institutions to decline financing for Sakhalin II in its current
design. Public banks should not finance projects that could drive the western gray whale
population into extinction.
Sincerely,
Dmitry Lisitsyn
Chair
Sakhalin Environment Watch
Igor Chestin
Director
WWF-Russia
David Gordon
Executive Director
Pacific Environment
Petr Hlobil
Campaigns Coordinator
CEE Bankwatch Network
Joel Reynolds
Director, Marine Mammal Protection Project
Natural Resources Defense Council
Huub Scheele
Both ENDS
Environment and Development Service for NGOs
Maria Vorontsova
Director, Russia Office
International Fund for Animal Welfare
Tokiharu Okazaki
Executive Director
Friends of the Earth – Japan
Greg Muttitt
Project Co-Director
PLATFORM
Donald Pols
Teamleader Climate and Energy
Milieudefensie/Friends of the Earth Netherlands
Elizabeth Bast
International Policy Analyst
Friends of the Earth - US