Chevron agreement: new compromises

The Ivano-Frankivsk Oblast Council’s refusal to approve the government-Chevron agreement on Oleske shale gas field production sharing is a sign of democracy in Ukraine, the US Ambassador to Ukraine, Geoffrey Pyatt, said in an Ukraina TV channel program, commenting on the councilors’ decision. “It’s a sign of the health of Ukrainian democracy – that the oblast governments, the oblast councils are asking questions about the agreements,” he emphasized. Pyatt agreed that this kind of projects have to be conducted in “an environmentally sensitive way” and added that the US has good experience in this. In his words, there are similar debates on the local level in the United States, too. At the same time, he hopes that the agreement on the extraction of shale gas in the Oleske field will be “an important and continuing driver of employment,” as was the case in the US.

This statement could be viewed as a usual diplomatic step of a newly-appointed ambassador who does not yet know about all the subtleties of the Ukrainian situation and, hence, does not give a more specific comment. But it is not so. Suffice it to recall that Pyatt is quite competent in energy matters, for he worked from August 2007 as deputy head of the US diplomatic mission at the International Atomic Energy Agency (IAEA). So, he knows only too well the fine points of Ukraine’s energy situation.

On the other hand, one question still remains unanswered: why did the Ivano-Frankivsk councilors refuse to approve the governmental bill and what awaits the latter? The Day asked Vasyl POPOVYCH, Svoboda faction head in the Ivano-Frankivsk Oblast Council, to give a more detailed comment on this.

Why did the councilors not approve the central government’s version of the resolution? What was the motivation?

“The [central] government was not prepared for a dialogue with the local council. The oblast council set up a working group which studied this question for a month and registered 148 proposals and remarks about the agreement. But the government has not yet commented on even one of these amendments, let alone accepted them. In other words, they have not altered the agreement even by one percent, as far as our amendments are concerned.”

Could you name the most essential criticisms which the government failed to accept?

“The most essential criticisms were about the interests of the local communities on whose territories shale gas will be extracted. This agreement totally disregards the interests of local communities. It only says about furnishing an annual 500 million dollars for socioeconomic development at the discretion of Chevron. We are not satisfied with this kind of humanitarian aid. We are raising a concrete claim. Particularly, there is a suspicious company, Nadra Oleska, which is to receive 10 percent of the profit. We want the oblast to receive a proper percentage of the profit. This would be a concrete, normal, and businesslike approach to the matter rather than humanitarian aid.”

And how much do you think local communities should receive – 10 percent?

“We asked them to include an oblast firm into this agreement and guarantee it as certain percentage. We know that we will have no big preferences, but we still want to hear the government, even though it is not prepared for a constructive dialogue with us.”

In other words, the councilors took this stand because the interests of local councils were not taken into account?

“Yes, this is one of the aspects. The other one is environmental risks. There is no clearly defined mechanism to prevent or eliminate ecological risks. The agreement does not say where the drilling wastes, such as water, will be stored. We don’t have a place for storing this water. We have problems today with the Dobrovsky quarry in Kalush, where there are cracks and leakage of chemical agents. The wastes question is veiled and not clearly defined in the agreement which is valid, incidentally, for 50 years.”

Were there any other criticisms?

“There were some legal aspects. Gas extraction is to cover a half of the oblast – over 6,000 kilometers. Every district will have almost 100 percent of its area drilled. We have a densely populated territory, and this raises the question of a fresh water reserve, for this drilling and hydraulic fracturing suggests that shale gas is even below the aquifer, and we run the risk of having no fresh water. This is very important for the oblast.”

Has there been any reaction to this decision of the oblast council?

“There has been no reaction so far. But there is another interesting fact. Just before the session, councilors were given a third option about this matter. What sounds very absurd is the first item – to approve the agreement – followed by such ephemeral proposals as inviting Chevron to sign a socioeconomic contract. Is not it absurd that Chevron may or may not sign it? There are other items, too. This was an attempt to eyewash the councilors.”

When do you expect to discuss this matter again, for it is not the end of the shale gas epic?

“Indeed, there has been no ‘yes’ or ‘no’ vote on this. Our working group has sent the agreement with 148 amendments back to Kyiv. I read a comment of Minister Stavytsky in the Internet, in which he said that there was nothing to be afraid of and the agreement should be rewritten. He said they would get back to this question in September 2013 and submit it to the upcoming parliamentary session.”

But why, knowing all these risks and having no answers to the questions asked, the councilors only sent the agreement back to be revised instead of banning it?

“There is a political aspect in the shale gas issue, and the current leadership is playing on this: whoever opposes shale gas lobbies Gazprom. So to oppose shale gas means to be branded as Gazprom agent.”

Only because of this?

“This was my motivation. After all, if all the 148 criticisms or at least a half of them are taken into account, this will be an altogether different picture. At present, when the current version of the agreement looks more influential than the Ukrainian law, the situation seems to be very dangerous in the next 50 years.”

And what is the safe term for which the agreement should be signed?

“The process is going on, science is developing, and the gas extraction method the agreement prescribes for 50 years may be changing, improving, and becoming safer because scientists are working on this. Poland is planning to use a different method of shale gas production, while Chevron suggests the methods of hydraulic fracturing (what is poured into the ground is a water solution and some unknown chemical elements whose impact on the environment and people is not exactly known).”