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Cablegate: Second Palm Oil Spill Raises Concerns

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RR RUEHWEB

DE RUEHBO #3315 2491415
ZNR UUUUU ZZH
R 051415Z SEP 08
FM AMEMBASSY BOGOTA
TO RUEHC/SECSTATE WASHDC 4500
INFO RUEHBR/AMEMBASSY BRASILIA 8360
RUEHCV/AMEMBASSY CARACAS 0975
RUEHLP/AMEMBASSY LA PAZ SEP LIMA 6532
RUEHZP/AMEMBASSY PANAMA 2281
RUEHQT/AMEMBASSY QUITO 7213

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

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