Press Release by Russian NGO
"Legal judgment reveals Sakhalin 2's flawed green credentials"

January 19, 2005

Yuzhno-Sakhalinsk, Sakhalin Island -- The Shell-led Sakhalin Energy consortium has suffered a setback to its USD 10 billion Sakhalin 2 project following a decision this week from the Yuzhno-Sakhalinsk city court to cancel a positive state ecological expertise for a temporary jetty connected to the project's liquid natural gas (LNG) plant in Sakhalin Island's Aniva Bay. The court ruled further against two decisions of the Sakhalin Department of Natural Resources regarding the conducting of the state ecological expertise and the Department's approval of the results. The court decision has yet to come into force but Sakhalin Energy faces the prospect of remedying the jetty construction in line with Russian legislation and undergoing a further environmental assessment.

The case was brought in March 2004 by several citizens of Yuzhno-Sakhalinsk and Sakhalin Environment Watch, a local NGO, who were concerned about serious violations [1] which took place during the preparation of the state ecological expertise and during the formulation of its conclusions. The group of experts involved, which lacked a specialist on water and biological resources, conducted the state ecological expertise in two weeks, ten times faster than is the norm. In June 2004 and unannounced, the Sakhalin Department of Natural Resources approved the experts' results and allowed the implementation phase of the project to begin. During the legal proceeedings it emerged that following this approval some project details were altered: the timetable of seabed deepening, land dumping, additional losses from construction activities, channels for fish added.

The construction of a jetty for equipment loading in Aniva Bay, near the village of Prigorodnoe, is part of Sakhalin Energy's LNG plant development. As a result of associated seabed deepening works and soil dumping (expected to total one million tons) in the middle of the bay, this part of the Sakhalin 2 project is already having serious impacts on the key fishing waters in and around Aniva Bay.

The defendants, the Sakhalin Department of Natural Resources and Sakhalin Energy, were fully aware of public concerns about the likely impacts of the construction works on Aniva Bay. In May 2003, Sakhalin Environment Watch prepared a critical report on the fishery values of Aniva Bay. However, the defendants argued in court that the 'violations of procedure' could not influence the legitimacy of the state ecological expertise's conclusions. The defendants also disputed the right of citizens and NGOs to defend their rights in court. During the court case more than ten appeals were submitted to the court and since the beginning of the trial members of the jury were changed three times.

Dmitry Lisitsyn of Sakhalin Environment Watch commented:

"This is a tremendous victory which confirms the rights of citizens to be properly informed and consulted in hazardous projects of this magnitude. The state authorities must now accept this judgment and stop the project activities in Aniva Bay to allow for improvements to be made after which a fresh analysis can be carried out, this time in compliance with the law and with full public participation. The muddy legal waters have been cleaned up, now it's time for the same in the bay itself. We will be making the case to the experts that the dredging work involved with the project should take place outwith the April-October salmon migration season and that the harmful soil dumping should be moved out of Aniva Bay to the deep waters of the Okhotsk Sea."

The legal position of the claimants was prepared by 'Ekodal' NGO. Irina Bogdan, director of Ekodal, represented the interests of the claimants during the court case. Sakhalin Environment Watch was represented by Oleg Shestakov, lawyer of 'Tsyvilist' JV.

*Notes for editors:
1. Many important criteria that a state ecological expertise should conform to were not fulfilled:

- a complex assessment of impacts imposed by the project and other activities
- accounting for environmental security measures
- the information provided for experts should be comprehensive and reliable
- the experts involved should be independent
- the conclusions of the state ecological expertise should be impartial, based on scientific facts and formulated in accordance with the law
- the process should be public, with the participation of NGOs and with public opinion adequately taken into account.