SETBACK FOR ALCOA SMELTER IN TRINIDAD

UNCLAS SECTION 01 OF 03 PORT OF SPAIN 000021

SIPDIS

SENSITIVE

SIPDIS

SAN JOSE FOR REGIONAL ENVIRONMENTAL HUB

E.O. 12958: N/A
TAGS: EINV EMIN SENV TD
SUBJECT: SETBACK FOR ALCOA SMELTER IN TRINIDAD

REF: A) POS 847; B) 05 POS 2064

SENSITIVE BUT UNCLASSIFIED - HANDLE ACCORDINGLY


1. (SBU) SUMMARY: After months of controversy about plans to
construct aluminum smelters in Trinidad and a day-long national
symposium to discuss the development of a national aluminum
industry, Prime Minister Manning announced Christmas Eve that the
GOTT was discontinuing plans for the industrial estate where Alcoa's
proposed US$1.5 billion aluminum smelter was to be located.
Instead, the GOTT would accelerate construction of an offshore
industrial estate, to include aluminum smelters and downstream
industry. While this move could be viewed as a response to public
pressure, other statements and actions by government ministers have
only reinforced a perception of GOTT indifference to public opinion
and a lack of transparency in decision making on major projects.
The vehemence of public debate over aluminum may also foreshadow
increased opposition to future industrial projects in T&T. In the
wake of these events, the fate of Alcoa's proposed investment in
Trinidad appears less certain, while prospects for the smaller
Alutrint smelter, a GOTT joint venture involving a Venezuelan
partner and Chinese construction, appear secure. END SUMMARY.


2. (U) Proposals to construct two aluminum smelters in Trinidad's
southwestern peninsula (see reftels) have generated increasing
public debate in recent months. While Prime Minister Patrick
Manning and Energy Minister Lenny Saith as well as previous
governments have consistently promoted the idea of aluminum as a way
to use Trinidad and Tobago's natural gas to stimulate downstream
manufacturing, opposition politicians and environmental activists
have directed intense criticism at Alcoa's plan to construct a
341,000 metric ton per year facility at a cost of US$1.5 billion in
the sparsely populated rural village of Chatham, an opposition UNC
party stronghold. A smaller facility to be operated by Alutrint, a
60/40 joint venture between the GOTT and the Venezuelan firm Sural,
with participation from the China National Machinery and Equipment
Import Corporation, and constructed in the traditionally industrial
village of La Brea, a ruling PNM party district, has by comparison
all but escaped criticism.

--------------
Goodbye Chatham, Hello Otaheite
--------------

3. (U) In his yearly Christmas Day message, Prime Minister Manning
announced that while the smelter symposium held two weeks earlier
had provided support for the government position that aluminum
smelters would present no unmanageable environmental risks, plans
for an industrial estate at Chatham village have been abandoned.
Instead, GOTT would "accelerate development of a new industrial
estate offshore Otaheite Bank" that could include aluminum smelters
and other aluminum-based industry. Several days later Energy
Minister Lenny Saith backtracked on whether the planned Otaheite
estate would include aluminum, saying that it was only one of
several possible alternative sites for Alcoa's proposed smelter.
Alcoa representatives expressed disappointment with the decision to
abandon the Chatham site, as new feasibility and environmental
studies would need to be conducted, but have not officially
commented on their plans. Moreover, the plan for an Otaheite
estate, which calls for the construction of a 4000-acre island on
reclaimed land in the Gulf of Paria, connected to shore by a
causeway, would impose a significant delay on Alcoa and is not
guaranteed to be controversy-free, as local fisherman have already
initiated protests against the construction.

--------------
The Smelter Symposium
--------------


4. (U) Prime Minister Manning's announcement on the site change came
at the end of an eventful month of smelter-related events. On
Wednesday, December 6, the South Trinidad Chamber of Industry and
Commerce, in conjunction with the National Energy Corporation (NEC),
the University of the West Indies (UWI) and the University of
Trinidad and Tobago (UTT) hosted a one-day "Symposium on the
Aluminum Industry in Trinidad and Tobago" in response to growing
public debate about the construction of up to three (and in some
reports four) aluminum smelters in Trinidad. The South Chamber
invited 350 selected stakeholders, "inclusive of the broadest range
of views" to attend the symposium, and TV and radio stations
provided full live coverage of the event.


5. (U) Most commentators credited the South Chamber for organizing a
fair and balanced meeting. Several international technical experts
presented information meant to reassure the public that
technological measures exist to address any environmental and health

PORT OF SP 00000021 002 OF 003


concerns. Meanwhile, local professors offered cautious views,
questioning whether aluminum was the best economic use of T&T's
natural gas resources; proposing alternative industries in the area,
such as eco-tourism or raising buffalypso (Trinidadian water
buffalo); and emphasizing the need to ensure community development
if a smelter is constructed.

--------------
"Let the bacchanal begin!"
--------------


6. (U) When the live audience grew restless with the string of
technical experts in the afternoon session and called for an
opportunity to air their views, the symposium organizers cancelled
the final presentation, a planned videoconference with USEPA experts
on air quality standards, and opened the floor for comment. Upon
hearing this, panelist and UWI Professor Dennis Pantin said "Yes! No
more technology, let the bacchanal begin!" - apparently giving voice
to the feelings of many of the audience members.


7. (U) Smelter opponents in the audience proceeded to dominate the
last two hours of the symposium. As in much of the debate prior to
the symposium, while some opposed aluminum smelters in general,
opposition to the planned Alcoa smelter in Chatham was far more
vocal. Some audience members voiced cynicism towards the assurances
of the technical experts, pooh-poohing studies that have shown that
health hazards can be managed with modern technology. Many also
doubted the EMA's capacity to conduct an adequate Environmental
Impact Assessment (EIA) prior to smelter construction or monitor
emissions in accordance with international standards during smelter
operations.

--------------
Real Government Outreach?
--------------


8. (U) While pre-symposium fears that only government "propaganda"
would be heard at the symposium were alleviated, questions remain
about what the government intended to achieve by holding the
symposium. Prime Minister Manning's government has drawn criticism
for its lack of public outreach and consultation and the perception
of government disregard for public opinion on this issue. In a
speech to local business owners on the day before the symposium,
Prime Minister Manning appeared to validate perceptions of
high-handedness when he stated that the symposium was held only to
provide the public with "all the facts" and denied that it was meant
to serve as a public consultation. He did not say that the smelters
were a "done deal" as some critics claimed, but he did express
confidence in the "rectitude of our cause" and asserted that so far
no questions had been raised that the government had not considered
before opting to establish an aluminum industry.


9. (U) Media commentary also has criticized Prime Minister Manning
for a lack of transparency in the GOTT's negotiations with Alcoa.
Many have called for disclosure of the price negotiated for the
natural gas that Trinidad will provide to power the Alcoa smelter,
in order to permit a transparent cost-benefit analysis of whether
aluminum smelters are an optimal use for T&T's gas reserves.
However, the Prime Minister has maintained that rules of commercial
confidentiality apply in this situation. Furthermore, the Prime

SIPDIS
Minister's decision to cancel the planned industrial estate at
Chatham also has provoked intense speculation, as his Christmas Eve
speech to the nation provided no clear reasoning behind the
decision.

--------------
Will There Be An Alcoa Smelter?
--------------


10. In recent remarks to the press, Alcoa's Wade Hughes, Director
of Public Strategy, stated that the smelter project may not proceed
if the "commercial arrangements" cannot be negotiated, i.e. the
price of the natural gas, in current negotiations between Alcoa and
GOTT on a new Memorandum of Intent. Responding to recent statements
by Prime Minister Manning that the environmental issue was not open
for negotiation, Hughes added that Alcoa knows how to build and
safely operate its facilities, so meeting environmental standards
has never been an issue.


11. (SBU) COMMENT: Government officials have stated in the aftermath
of the symposium that they still intend to develop an aluminum
industry in Trinidad. Whether Alcoa will be part of this industry
is less clear. Recent comments by Alcoa and the government and the
government's abandonment of the Chatham industrial estate raise the
prospect that commercial negotiations could fail, prompting Alcoa to

PORT OF SP 00000021 003 OF 003


withdraw its proposal. The Alutrint smelter project, which is 60
percent GOTT and 40 percent Venezuelan owned and will use Chinese
technology, has not faced similar scrutiny or public protest and
looks likely to proceed as planned.


12. (SBU) COMMENT CONT'.: The public protests that accompanied
Alcoa's smelter proposal have no precedent in Trinidad's long
history of industrial development, as many academics during and
after the symposium have pointed out. Taking inspiration from
foreign environmentalists' protests against another Alcoa project in
Iceland, a small but vocal group of domestic activists succeeded in
dominating media coverage and reversing GOTT policy. While the
symposium appears to have dampened some of the concern raised about
environmental and health impacts, the fundamental policy question -
how best to use T&T's hydrocarbon reserves - continues to resonate.
There are also growing calls for a national sustainable development
framework, especially in reference to "mega-projects," and greater
public involvement in determining the path of Trinidad's
development. While the GOTT remains committed to capital-intensive
projects, including petrochemicals, steel, and plastics, that would
use T&T's energy resources to establish a foundation for downstream
manufacturing, the smelter debate may represent only the start of a
more contentious road for the current government, which faces
elections before the end of the upcoming year, and Trinidad's future
onshore industrial development. END COMMENT.





AUSTIN