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Harken Lost Controversial Battle For Oil Exploration

December 24, 2004

IT was a suspenseful year for anti-oilexploration groups in their ongoing politicaland legal battle against the companyHarken Costa Rica Holdings, but by year’send they claimed victory.Last year, the company submitted andwithdrew a request for international arbitration,seeking a $57 billion settlementfor losses relating to the rejection of itsenvironmental impact-study by governmentofficials from the NationalTechnical Secretariat of the Environment(SETENA).In January, government officials begannegotiating a settlement with the U.S. representativesof Harken Costa Rica, whichhad been awarded oil exploration rights offthe Caribbean coast.IN March, disregarding warnings fromthe U.S. Embassy in San José that endingnegotiations would negatively affectCosta Rica’s business climate and makeU.S. companies think twice about investinghere, the Environment and EnergyMinistry (MINAE) announced therewould be no settlement with Harken.The government told Harken to take tocourt its claim it had invested $11 millionin preliminary work. Costa Rican authoritiesestimated the investment at around $3million.Brent Abadie, president of Louisiana-basedMKJ Xploration Inc., a majorityshareholder in Harken, said he did notthink a Costa Rican judge could make anunbiased decision, so the company wantedto take the dispute to an international court.IN August, as oil prices reached arecord high of $48 a barrel, the CitizenAction Party (PAC) and EnvironmentMinister Carlos Manuel Rodríguez calledfor legislation guaranteeing the demand forpetroleum will never bring drilling to thecountry.Rodríguez, PAC legislators and severalenvironmental groups warned theCentral American Free-Trade Agreementwith the United States (CAFTA) wouldallow U.S. oil exploration in Costa Ricaif it is approved, because the activity isneither specified nor omitted fromCAFTA.In addition, environmentalistsclaimed President Pacheco’s moratoriumwould be limited to his term and CAFTAwould make it impossible to make permanentthe ban on oil exploration anddrilling.THESE claims were dismissed byCosta Rica’s Vice-Minister of ForeignTrade, Gabriela Llobet, who said inSeptember CAFTA would not prohibit thecountry from reforming its environmentallegislation.Llobet said oil exploration companiesmust obtain government permits, and evenif these are granted, they must conduct anenvironmental-impact study and obtainSETENA’s approval before they can beginoperations.October brought a Sala IV rulingallowing the government to rescind its contractwith Harken, after justices ruledagainst Harken’s late 2003 lawsuit againstMINAE. The company had accusedMINAE of not notifying it when the governmenthad started the process of nullifyingthe contract.According to Rodríguez, the rulingallows MINAE to begin the administrativeprocess of canceling Harken’s contract.

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