SECOND PALM OIL SPILL RAISES CONCERNS

UNCLAS BOGOTA 003315 SENSITIVE SIPDIS OES FOR JBENFORADO; WHA/EPSC FOR FCORNIELLE; WHA/AND FOR RMERRIN E.O. 12958: N/A TAGS: SENV ENRG ECON CO SUBJECT: SECOND PALM OIL SPILL RAISES CONCERNS REF: BOGOTA 2331 ¶1. (SBU) SUMMARY: Two palm oil spills in the last four months on Colombia's northern coast have begun to raise concerns about industry procedures and the sector's safeguards. While the spills of the biodegradable material were limited in size and appear to have caused little environmental impact, palm oil producers worry they could damage the growing industry's reputation. A Ministry of Environment study of the spills is underway and could result in proposed new regulations and additional operating costs for industry. END SUMMARY. Isolated Incidents or Start of Pattern -------------- ¶2. (SBU) On April 24 and again on August 26, palm oil shipper Graneles Liquidos del Caribe-Terlinca experienced spills of refined palm oil at its plant near the northern coast city and tourist destination of Santa Marta. Terlinca serves as a logistics services company for palm oil exporters, but does not participate in palm oil production itself. The company provides loading, storage and handling services for producers in Colombia's interior, exporting up to 15,000 tons of palm oil a month or approximately 57 percent of Colombia's palm oil exports in 2007 according to industry statistics. ¶3. (SBU) The first spill, caused by a malfunctioning valve, totaled 90 tons and affected an estimated 120 square meters of coral reef, according to Francisco Arias Isaza of the Colombian Institute of Marine Regulations (INVEMAR). A significant amount of the palm oil also washed up on the tourist beach of Taganga, turning the sand temporarily red and closing it to public use for several days. The more recent spill, caused by a the collapse of a wall at the facility, totaled only 5 tons and did not reach either coral reefs or beaches, but raised concerns that Terlinca may not follow sufficiently strong safety procedures. Immediate Economic Impact Limited, but Image May Suffer -------------- -------------- ¶4. (SBU) Andres Castro, Sustainable Development Director at the Colombian Federation of Palm Growers (Fedepalma),told us the temporary operational suspensions at Terlinca have not disrupted palm oil exports from Colombia. (Note: Colombia is currently the world's fourth largest palm oil exporter according to Fedepalma statistics. End Note.) However, Castro said producers were now looking at shifting their product to alternative export terminals in Barranquilla and Cartagena. He added that the more significant impact of the two spills could be to the industry's image as a whole. ¶5. (SBU) Luis Alfredo Orozco, palm oil producer and president of a new USD 50 million palm oil-based biodiesel plant outside of Bogota, told us that, given previous controversies surrounding land issues and Colombia's palm industry, it is critical that the entire palm oil supply chain follow the strictest environmental and industrial safeguards. Anticipating increased regulation by the GOC, his company has put in place multiple-layer safety mechanisms at its palm oil refining and biodiesel production facility. He estimates the addition measures have added as much as USD 5 million to the price of the plant. More Regulation on the Way? -------------- ¶6. (SBU) While both incidents were limited to one facility and the company insists all the escaped material was biodegradable, the Ministry of Environment has launched a review of the spills and a group of Santa Marta citizens have filed a civil suit against Terlinca. Either process could lead to new regulations or court-ordered safeguards for the industry as a whole. The Ministry estimates the value of the two spills at approximately USD 1.6 million in commercial losses and clean-up costs, but depending its final findings the cost of any new regulations to industry could reach significantly higher. NICHOLS