Environmental impacts of the Endesa El Porton Dam in the Puelo River Basin

GENERAL IMPACTS OF THE EL PORTÓN DAM IN THE PUELO RIVER BASIN
GEOAUSTRAL REPORT ~ JUNE 2007

This report investigates the situation currently facing the Puelo River watershed in southern Chile, where the Spanish energy company Endesa has proposed the construction of a dam and 12,000+ acre reservoir. This report provides: background on Chile’s Water Code and the bodies that govern water use; an analysis of Chile’s current energy ‘crisis’; an overview of the Chilean energy matrix and comparative consumption by sector; and detailed treatment of the Puelo River watershed and anticipated impacts (environmental, socio-economic, geopolitical, and geologic) of the proposed dam. The report also briefly discusses proposed hydroelectric projects in other watersheds of Patagonia. It concludes with a corporate history of Endesa, an analysis of the company’s role in domestic and international markets, and a review of its environmental legacy.

INTRODUCTION
On April 17, 2006, the Spanish energy company Endesa announced its intentions to build a dam in southern Chile’s Puelo River watershed and to assert the company’s water rights to the basin (Santiago’s Las Ultimas Noticias newspaper, 4/17/06). The proposed project calls for the construction of a 300-foot dam and the formation of a reservoir of over 5,000 ha (over 12,000 acres) to produce energy for consumption in the north of Chile.

1. BACKGROUND

Chile’s Andean-Patagonian watersheds have been threatened by proposed dams for years, but the issue has now come to the forefront due to energy speculation. Historically, rights to waters designated as ‘free’ for agricultural or energy use have been regulated by Chile’s Water Code, which is administered by the General Water Administration (in Spanish, Dirección General de Aguas or DGA) under the Ministry of Public Works. The DGA’s mission is to administer, regulate, and supervise the appropriate use of freshwaters, streams, continental and subsurface waters for multiple purposes that include agriculture, mining, and real estate. Unfortunately, the DGA has also been responsible for the poor use and mismanagement of Chile’s watersheds.

The process of obtaining water rights in Chile is open to nearly all individuals or legal entities who comply with the flexible laws of Chile’s water sector. While the Water Code itself is straightforward, it demonstrates a marked bias in favor of water speculation and privatization. While the law allows for impacted or injured parties to oppose petitions to obtain water rights, opposition is not usually welcomed. Although the current Water Code has attempted to prohibit speculation on requested water rights, the ambiguity of the law and its inclination towards privatization have granted large corporations unrestricted access to the use of continental waters. The Water Code is further limited by the fact that the Spanish energy company Endesa España retains rights to more than 80% of Chile’s rivers and has the resources to pay for permits to continue plans to dam Patagonia’s rivers.

2. CHILE’S ENERGY CRISIS

Chile’s supposed energy crisis is a result of 1) the reduction of gas imports from Argentina and 2) the Bolivian government’s statement to share “not one gas molecule with Chile”. Rising consumption and higher energy needs for the country’s steadily growing economy have spurred the government to develop an energy matrix with the goal of bringing Chile to a state of complete energy independence. Daily demand in Chile is 20 million cubic meters of natural gas, or the equivalent of 20% of Argentina’s total daily consumption.

It should be noted that Chile’s energy situation is considered a ‘crisis’ only from the perspective of energy sources. The fundamental problem is the inefficient use of energy and a system that favors energy excess and waste. To be precise, there is currently no crisis; the creation of a ‘crisis’ is solely a mechanism to satisfy the energy demands of transnational mining companies from the north of Chile. This is corroborated by the fact that most of the consumers and plants are located in the north as well as by the high present cost of crude oil derivatives. From 2005-2007, Canadian Transelec – the corporation with the largest network of energy transport lines in Chile – invested in increasing the capacity of its high-tension lines in Chile to support higher energy flow between Puerto Montt and Tal Tal, where the greatest distribution centers and consumption of mining corporations are located. Additionally, the Puerto Montt substation, which acts as a means of access to the circuit (switch) for the interconnecting electrical system (SIC) from the southern part of the country, was equipped with three CER reactors (Compensación Estática de Reactivos) that function with radioactive elements. Local and national authorities have neglected to investigate this reactor system.

For years, gas shortages from Argentina have coincided with attempts by transnational and Chilean corporations to appropriate Patagonia’s rivers and generate lucrative business deals with mining companies from northern Chile.

Distribution of energy consumption in Chile’s energy matrix is outlined by sector in Table 1. This information was published in July 2005 by Chile’s National Statistics Institute, Subdepartment of Statistics Related to Industry, Mining, Improvements, and Energy (Anuario Estadístico Sector Eléctrico 2004):

Table 1 demonstrates that two economic sectors (mining and industry) are alone responsible for consuming over 70% of Chile’s energy matrix. For the most part, these do not reflect state-owned companies but rather transnationals that do not pay taxes or produce jobs from a natural resource that belongs to all Chileans.

Chile’s citizens consume only 17% of energy (through the residential sector), yet – through the damming of Patagonia’s natural resources – are expected to subsidize the energy consumption of Chile’s wealthy mining and industrial interests.

The current structure of free market economics and the matrix utilized is based on providing the incentive for energy consumption, rather than for efficient energy use. Thus, in the context of excessive consumption and a perceived energy crisis, large energy corporations have taken the opportunity to plan the development of hydroelectric plants, under the premise that in a “problem country”, the lack of energy verges on a national emergency. Although the companies promote reservoirs and hydroelectric stations as clean energy, these technologies have never been clean. They are a significant contributor to global warming, generate millions of tons of methane and carbon dioxide, and are statistically proven to pollute more than electro-thermal stations.

The objective of energy companies such as Endesa and Colbun and mining companies like Xstrata (formerly Falcon Bridge) is to gain control of Patagonian waters to establish highly lucrative business.

They are not above manipulating the citizenry and “selling a green image” of their efforts or presenting commercial interests as altruistic while simultaneously seeking political support through influence-peddling. In technical plans, investigations to exempt their projects are also riddled with irregularities, and environmental consultants are hired to demonstrate that dams are beneficial to the environment. Sociologists and psychologists are employed to target communities that may be in resistance to a proposed development. The companies promote the social benefits that will result from corporate plans to exploit the region’s natural resources and do not acknowledge the social costs to be incurred by Patagonia’s inhabitants. They fail to communicate that the prime economic benefit of proposed development is corporate, while the prime cost to be borne is social.

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When Ice Turns to Water

Glacial melting poses potentially costly problems for Peru and Bolivia

FOR centuries, the run-off from the glaciers atop the spectacular snow-capped mountains of the Carabaya range has watered the pastures where alpacas graze around the small town of Macusani. More recently, the mountains have provided the town with drinking water and hydroelectricity, as well as hopes of attracting tourists to one of Peru's poorest areas. But in Carabaya, as across the Andes, the glaciers are melting fast. Their impending disappearance has large, and possibly catastrophic, implications for the country's economy and for human life.

Peru is home to the world's biggest expanse of tropical glaciers. Of the 2,500 square kilometres (965 square miles) of glaciers in the four countries of the tropical Andes—Bolivia, Colombia, Ecuador and Peru—70% are in Peru and 20% in Bolivia. The last comprehensive satellite survey by Peru's National Environmental Council, carried out in 1997, found that the area covered by glaciers had shrunk by 22% since the early 1960s. In the Carabaya range, they had receded by 32%.

Partial surveys by geologists suggest that the rate at which the glaciers are melting has speeded up over the past decade. The glacier at Pastoruri, in the Cordillera Blanca range north of Lima, shrank by more than 40% between 1995 and 2006, with the loss of ice caves popular with tourists, according to Marco Zapata, a glaciologist at the government's Natural Resources Institute. He reckons it will be gone by 2015. That is the fate that has already overtaken many smaller glaciers in Bolivia, and that of Cotacachi in Ecuador. Chacaltaya, above Bolivia's capital, La Paz, has almost disappeared; it is the site of the country's only ski resort, whose future is now uncertain.

“We are already experiencing the effects of global warming,” says Nancy Rossel, the mayor of Macusani. To those who doubt its existence, she offers to show them pictures taken ten years ago of Allinccapac, the mountain above the town, and “they can see how far the glaciers have receded.” A report by a team from the World Bank published last month in the bulletin of the American Geophysical Union (AGU), a scientific association based in Washington, DC, confirms most of the mayor's fears. It predicts that many of the lower glaciers in the Andes will be gone in the next decade or so, and that glacial runoff may dry up altogether within 20 years. It also paints a troubling picture of the future impact on water and power supplies.

One danger is that as the ice melts, newly formed lakes may send water cascading down mountainsides, triggering mudslides that are potentially lethal for the villages below. Another is that if there are no glaciers to regulate water flow, flood will alternate with drought.

That is a particular worry for Peru. After decades of migration from the Andes, two out of three Peruvians now live on its desert coast. Lima, with 8m people, is the world's second largest city located in a desert, after Cairo. Big irrigation projects have made the desert bloom and enabled an agro-export boom. Yet most of Peru's fresh water lies east of the Andes. Water for both irrigation and human consumption from the short, coastal rivers will become more irregular.

The government says it needs to spend about $4.5 billion to bring domestic potable-water coverage up from its current level of 78% to the regional norm of over 90%. Billions more will be needed to divert water along tunnels beneath the Andes if glacial melting accelerates.

Another problem is that more than 70% of Peru's electricity comes from hydroelectric dams sited on the glacier-fed rivers. If their flow becomes more irregular, so will power supply. Once the glaciers disappear, Peru will have to invest $1.5 billion a year in thermal generation, according to the AGU article.

Here is the full article.

Energy Crunch Threatens South American Nations

SANTIAGO, Chile — For Chile and Argentina, it was the frostiest of winters, and not just the reading on the thermometer.

During one of the coldest South American winters here in decades, neighboring Argentina cut at least 90 percent of the natural gas it sends to Chile 79 times along pipelines that connect the two countries.

Power plants and factories in this smoggy capital were forced to switch to diesel and fuel oil, which belch more air pollution and have nearly quadrupled the cost of producing electricity. Santiago reported its highest number of dangerous smog days in the past seven years.

Argentina’s actions have chilled relations between the two countries. But the impact of South America’s energy crisis is far broader. Across the region, concerns about energy are roiling national politics, generating tensions between neighbors and emerging as one of the biggest brakes to growth and integration.

Energy is the Achilles’ heel of the governments in Brazil, Argentina and Chile, which are struggling to maintain sufficient natural gas supplies after several years of strong economic growth.

“Bottlenecks in energy supply will be a critical policy concern in Latin America over the next two to five years,” said Christopher Garman, the Latin America director at Eurasia Group, a New York-based consulting firm.

Energy concerns are at the top of the agenda for the region’s incumbent leaders, most of whom have high popularity ratings, thanks mostly to buoyant economies riding a wave of higher commodity prices.

But the steady economic growth has only increased energy demand, while governments have failed for a decade to invest enough in natural gas exploration and new power plants to expand their energy supplies.

President Luiz Inácio Lula da Silva of Brazil is particularly preoccupied with the risk of power shortages that could occur as early as 2009, according to analysts. In an interview in September, he said the region’s gas woes were reason to support new hydroelectric power plants and projects to produce electricity from sugar cane. “I do not want to make Brazil dependent on gas,” he said.

The other alternative is to raise consumer prices or impose austerity measures, something politicians have been reluctant to do. History shows they can help sink a president.

When Brazil suffered an energy crunch in 2000, President Fernando Henrique Cardoso implored consumers to conserve, imposing penalties on those who did not. In the end, a major crisis was averted, but the government’s approval rating dropped by a third, and Mr. da Silva — not Mr. Cardoso’s chosen successor — was elected in 2002.

Néstor Kirchner, Argentina’s president, has steadfastly refused to raise his country’s gas and electricity prices, which are among the lowest in the world, ahead of the Oct. 28 election. Mr. Kirchner’s wife, Cristina Fernández de Kirchner, is the leading candidate to succeed him.

Instead, his government placed winter energy-use restrictions on industries and cut off its neighbor to the west, Chile.

Mr. Kirchner’s strategy has satisfied voters and kept Argentina’s economy humming, for now. But the low gas and power prices have scared away needed foreign investment in energy development and raised fears of runaway inflation.

Here is the full article.