Report reveals deadly U.S. government-funded coal project
By Doug Norlen, Economic Policy program, senior program manager
LA Times reporter Shashank Bengali describes the environmental, social and human rights damage inflicted by Reliance Power’s massive 3,960 megawatt Sasan Ultra Mega coal-fired power plant and mine in India in his recent article, “India’s coal-fueled economy taking a toll on environment and rural villagers.” The project’s devastating impacts, which have been independently documented by Indian and U.S. non-governmental organizations, include forest and farmland destruction, toxic local air and water pollution, broken promises to displaced communities, and even fatalities.
Export-Import Bank cover-up of Sasan deaths
The article was the second indictment of the Sasan coal project in the last month. In late September, the U.S. government issued an Inspection Report of the project’s compliance with environmental and social policy requirements of the Export-Import Bank of the U.S. Ex-Im Bank is a federal trade promotion agency that provided $650 million in financing for the project beginning in 2010. The Inspection Report, which was prepared by Ex-Im Bank’s Inspector General, reveals Ex-Im Bank’s and Reliance’s gross negligence in the case of Sasan.
The most shocking detail in the report is the revelation that at least 19 fatalities have occurred at the project. The fatalities were so alarming that in February 2015 Ex-Im Bank Chairman Fred Hochberg wrote a private letter to the CEO of Reliance, calling the deaths “tragic and absolutely unacceptable.” Hochberg may have found these deaths unacceptable, but he also apparently made sure that news of these deaths stayed under wraps, since the release of the Inspection Report is the first time these fatalities were publicly revealed.
Congress has mandated Ex-Im Bank to publicly release “environmental assessments and supplemental environmental reports required to be submitted to the Bank, including remediation or mitigation plans and procedures, and related monitoring reports.” Therefore, Ex-Im Bank should have released environmental and social monitoring reports on Sasan, which if complete and accurate, would have revealed these 19 deaths, among other harmful impacts. And even after advocacy organizations repeatedly requested Sasan monitoring reports, the agency refused to disclose those monitoring documents that cover the period of the fatalities.
This case is not an aberration — the Bank has an abysmal record of releasing such monitoring reports. Since the requirement has gone into effect, Ex-Im Bank has publicly released monitoring reports for only three of at least 40 projects to which this requirement applies. The Ex-Im Bank Inspector General is so far no help in this compliance matter; despite repeated instances in which NGOs brought this to the Inspector General’s attention, the Sasan Inspection Report calls for more complete and prompt submission of project monitoring reports to Ex-Im Bank — but it says absolutely nothing about the Bank’s failure to comply with the Congressionally required public disclosure of these reports.
Meanwhile, the Inspection Report finds that Ex-Im Bank “[s]hould develop a strategy to take stronger actions against projects, such as Sasan, with serious or repeat healthy and safety violations.”
Despite the grave impacts of the Sasan project, in response Ex-Im Bank management only commits to “evaluate the need” to improve monitoring and reporting, while avoiding any commitment to greater penalties for recidivist policy violators.
Cultural and professional competence in question
“We have been fighting against the practices of Indian companies for years. We didn’t think we would have to fight a U.S. bank too.” said activist Awadhesh Kumar to the LA Times.
In evaluating the Sasan Project, the Ex-Im Bank Inspectors took a trip to the project area in October 2014 — a trip that revealed their shocking lack of cultural sensitivity and understanding of internationally accepted practice for gathering compliance information from project-affected communities. Prior to and during the Inspector’s field visit to the project area, U.S. and Indian non-governmental organizations repeatedly informed the Inspectors that given the cultural context of the region, and internationally accepted practice, they should organize meetings with communities in the village setting. The Inspectors were also informed that meetings arranged and attended by company officials would not generate complete and accurate information from affected villagers due to fears of harassment, intimidation and violence. However, the Inspectors refused to attend meetings in the village setting, falsely labeling them as gatherings that “appeared to be planned as political rallies or protests.” Instead, our Indian colleagues inform us, the Inspectors would only meet with a few representatives of the villages in a business hotel frequented by company personnel who could easily loiter in the hotel lobby to see which community members came to meet with the Inspectors — putting a chilling effect on the submission of evidence from villagers who feared reprisal. In the end, as the Inspection Report documents, the project-affected persons decided not to discuss their concerns with the Inspectors and cancelled the site visits to the resettlement villages and coal ash pond. Little wonder, given the vulnerable position in which the Inspectors had placed them.
After its failed field investigation, the Office of Inspector General goes on to blame the victims. The Inspection Report incorrectly infers that NGOs should be the ones to evaluate and hold Sasan and Ex-Im Bank accountable for complying with environmental policies. The Report incorrectly states that NGOs “were either unwilling to provide or did not have evidence to substantiate their grievances,” and “did not want to discuss or confirm the process for land acquisition and pricing for resettlement, and therefore the OIG was not able to substantiate the specific grievances about violations of environmental and social policies that have been raised by non-governmental groups.”
NGOs dispute this account, and indeed the Sasan Inspection Report itself footnotes one of several NGO reports provided to the OIG that substantiate these concerns. This is precisely the Inspector General’s responsibility; and the core purpose of the Inspection Report was to independently “assess Ex-Im Bank’s compliance with its environmental policies and procedures.” The Report recites the titles of some applicable policies but does not in any way independently analyze project compliance with these policies, and instead relies on the findings of a supposedly independent “outside environmental consultant” that was hired by the project sponsor Reliance, and approved by Ex-Im Bank “to monitor the project’s environmental performance and level of compliance.” To base a compliance investigation on information provided by a consultant hired, paid for and approved by the entities whose compliance is being evaluated is to fail at conducting an independent inspection.
Ex-Im Bank itself has never done a decent job in addressing concerns posed by NGOs and communities harmed by the agency’s projects. As the Inspector General report points out, “Ex-Im Bank lacks a formal process for receiving, processing and tracking the resolution of complaints.” It recommends that the Bank:
Establish a formal process for responding to complaints. Guidelines detailing how to submit a complaint should be in writing and include what information is required, how the submission is processed and a timeline for the process. The timeline should include registering, acknowledging, forwarding and responding to complaints. The complaint should be addressed to a specific person designated as an overall coordinator for the Bank. In the interest of transparency and ease of filing complaints, OIG suggests that the complaint process be posted on the Ex-Im Bank’s website reflecting best practices outlined above.
In response, Ex-Im Bank’s management has agreed, stating that it will establish a team to work with its Office of General Counsel to develop and launch a formal and more effective process for addressing and responding to outside complaints about environmental and social project performance. For NGOs who have for many years demanded that Ex-Im Bank establish an independent accountability mechanism, this could be good news. However, it remains to be seen whether the new process the Bank establishes is robust and independent of management or merely another ineffective part of the agency website.
Who is responsible for the Sasan debacle?
As the Inspector General’s report points out, the Sasan project is rife with problems, from serious financial concerns (including a $1.45 billion cost overrun) to grave human health risks. In fact, on June 24, 2010, the Bank’s Board, led by Fred Hochberg, voted to withhold financing for the deal, on the basis that that the carbon emissions from the coal-fired power plant were too high (the first time the Bank had done so).
Yet soon afterwards, the Bank changed its tune. President Obama had a town hall meeting scheduled in Racine, WI, near the Milwaukee headquarters of Bucyrus, a potential U.S. exporter who wanted to sell Reliance Energy mining equipment for Sasan (Bucyrus has since been acquired by Caterpillar Inc.). In an effort to appear to be doing something for the local economy, the White House and the Wisconsin Congressional delegation pressured Ex-Im Bank to flip-flop on the decision. As Friends of the Earth’s Michelle Chan wrote at the time, “literally hours before Air Force One was scheduled to land in Wisconsin, Ex-Im Bank invited Reliance Energy to resubmit its application.”
It appears that the Bank tried to put the best face on this carbon bomb of a project by getting Reliance to promise to build more renewable projects as well. Reliance’s new application was accompanied by a Memorandum of Understanding committing the company to support 250 megawatts of renewable energy sourced by US companies — a miniscule amount when compared with the Bank’s simultaneous support for the 3,960 megawatt Sasan power plant. According to the Inspection Report, Reliance Power has met 140 megawatts of this intended requirement through the 40MW Dhursar Solar PV project and the 100 MW Rajasthan Solar CSP project. Yet, documents reveal that the Dhursar Solar PV project company was incorporated on September 8, 2010 and Rajasthan Sun Technique Energy was awarded the Rajasthan Solar CSP project in December 2010, a very short time after the MOU was signed. These projects were probably well in the works anyway — meaning that Ex-Im Bank violated its carbon policy, funded a dangerous and fatal project, and likely didn’t do anything to help the climate.
So who is responsible for the Sasan debacle? The White House is responsible for forcing a bad project into the unwilling hands of Ex-Im Bank. But Hochberg is responsible for the subsequent cover-up of fatalities and other harmful project impacts.
Recommendations are not enough
The Office of Inspector General’s Inspection was welcomed by NGOs yet was an ultimately flawed attempt to fully evaluate the compliance of Sasan and Ex-Im Bank with the agency’s environmental, social and human rights policies. NGOs demand that the case be re-opened. Since the Office of Inspector General lacks the cultural and environmental expertise or capacity, and new independent team should be formed and be staffed with experts with sufficient professional background in environmental and social compliance matters.
Despite the shortcomings of the Inspector General’s Office and the conduct of the Sasan Inspection field trip, the Inspection Report contains some useful recommendations, and it was critical in exposing the 19 tragic deaths that occurred at the project. Important questions now include:
- Will there be further investigation into the deaths?
- Will those responsible be held accountable?
- Will the families of those killed and others who have been displaced be adequately compensated?
- Will Ex-Im Bank begin to disclose project monitoring reports?
- Will its management take recommendations in the Inspector General’s Inspection Report seriously?
- Will it fundamentally change the kinds of projects it supports and the way it conducts business?
 Report of the Project Financing of Sasan Power Limited, Office of the Inspector General of the United States, pg 38, available here.
 The Export-Import Bank Reauthorization Act of 2006, Sec. 18, Environmental Matters. This requirement has been transposed into the Export-Import Bank Charter and the agency’s Environment and Social Due Diligence Procedures and Guidelines.
 Ex-Im Bank has publicly disclosed some project impact assessment documents that were generated prior to the Bank financing of Sasan, but not post-approval monitoring reports covering the period of the fatalities.
 In the past Ex-Im Bank provided links on its website to some post-approval environmental and social monitoring documents for only three projects, the Oyu Tolgoi mine in Mongolia, the Peru LNG project, and PNG LNG, a Liquid Natural Gas project in Papua New Guinea. However, the Bank’s website now only provides links to some post-approval environmental and social monitoring documents for Oyu Tolgoi and Peru LNG. Repeated requests from NGOs for post-approval project monitoring documents on Sasan, the Kusile coal fired power plant in South Africa and many others have been ignored. See Section 3, listing of Major Category A transactions for which financing has been approved since 2008, available here.
 Supra note 1, at pg 41
 October 7, 2014 letter from seven NGOs to Export-Import Bank Acting Inspector General Michael McCarthy.
 October 28, 2014 letter from two Indian NGOs to Export-Import Bank Acting Inspector General Michael McCarthy (on file with author).
 Supra note 1 at pg 42
 Ibid at pg 41
 Ibid at pg 13
 Ibid at pg 30–33
 Ibid at pg 32
 Ibid at pg 42
 Ibid at pg 53–54
 Ex-Im Bank applauded for decision on Sasan, June 30, 2010, Business Standard, available here.
 As Obama visits Wisconsin, Ex-Im Bank reopens mining equipment sale, June 30, 2010, The Wall Street Journal, available here.
 US Taxpayer-Funded Bank, Under Pressure from Obama Administration, Gives Green Light to Dirty Coal Plant in India, Chan, Michelle, The Huffington Post, July 15, 2010, available here.
 Supra note 1 at pg 10
 Draft Environmental and Social Impact Assessment, Dahanu Solar Power Project, Draft Social and Environmental Impact Assessment, at pg 1–11, September, 2011, available here.
 Reliance Power commissions 100 MW solar CSP project in Rajasthan, The Economic Times, November 11, 2014, available here.