A drilling rig is seen in the Loma Campana Vaca Muerta shale oil and gas drilling site, owned by Argentina's state-controlled energy company YPF, in the Patagonian province of Neuquen, Argentina. Photo by: REUTERS / Juliana Castill

The board of directors of the Overseas Private Investment Corporation has a stark decision to make at its final meeting before officially transitioning to the new U.S. International Development Finance Corporation.

Two major fracking projects in Argentina, totalling $450 million in U.S. taxpayer financing, will be up for consideration.

OPIC’s board could reject these proposals and ride off into the sunset as a global leader in clean energy. Or, it could recklessly close its eyes to the climate crisis and approve the projects, leaving the agency with a tarnished environmental legacy and a long shadow cast over DFC.

If approved at a meeting on Sept.11, these high-risk projects would expedite climate disaster, violate the rights of nearby communities­ — including those of indigenous peoples — jeopardize public health, pollute water and land ecosystems, and saddle investors and Argentinians with unnecessary financial and political risk.

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These mammoth projects would be located in an area of Patagonia known as Vaca Muerta, which means “dead cow” in Spanish and contains some of the world’s largest shale oil and gas reserves. The projects would entail drilling and completing 110 wells, developing and operating midstream facilities to process and transport unconventional oil and gas, and revamping existing facilities to support new production.

OPIC has also signed a letter of interest with Argentina that includes an additional $350 million to finance a gas pipeline. That is a total of $800 million in scarce development finance dollars dedicated to funding fossil fuels in Argentina, an upper-middle-income country, as the world faces a climate emergency.

For the world to have a 50% chance of staying within internationally agreed limits for global warming, no new fossil fuel plants could be built after 2017.

Oxford study

Last November, the U.S. government’s National Climate Assessment found that more frequent and extreme weather events are already severely damaging the environment and economy at a cost of tens of billions of dollars while increasing harm to human health and loss of life. Meanwhile, a 2016 Oxford study found that for the world to have a 50% chance of staying within internationally agreed limits for global warming, no new fossil fuel plants could be built after 2017.

Exploited to their maximum potential, Argentina’s unconventional gas reserves could eat up 11.4% of the world’s remaining carbon budget required to keep global temperature rise to below 1.5 degrees Celsius.

OPIC is a development finance institution, but the Vaca Muerta fracking projects represent the antithesis of sustainable development. Fracking uses and contaminates vast amounts of water, pollutes the air and land, depends on toxic chemicals that harm human health and wildlife, and is linked to earthquakes.

It is not surprising that the U.N. Committee on Economic, Social, and Cultural Rights has urged Argentina to reconsider the exploitation of Vaca Muerta because of its social and environmental impacts.

Moreover, plans to frack Vaca Muerta are on very shaky financial ground. Because of the high risk, global oil and gas companies are relying on unsustainable government subsidies to exploit fossil fuels in a country plagued by macroeconomic instability and incredible debt.

According to Tom Sanzillo, finance director at the Institute for Energy Economics and Financial Analysis and co-author of a highly critical 2019 report, “The Vaca Muerta extraction plan promises subsidies that are unaffordable, relies on a financially weak Argentine business team … Over the last six years, foreign investors have signed agreements with the biggest names in the oil and gas business, but progress is slow, commitments are thin and future plans unrealistic.”

OPIC should not be in the business of financing fracking in Argentina, or anywhere else. But putting aside the odious climate, environmental, and human rights consequences of these projects, the process by which these proposals arrived at OPIC’s board has itself been defective. The environmental and social impact assessment, or ESIA, accompanying the Vaca Muerta projects is grossly flawed and in clear violation of OPIC policy, as well as Argentinian and international law.

Among its many shortcomings, the ESIA provides no alternatives analysis, radically fails to appropriately assess greenhouse gas emissions, lacks appropriate public consultation, and presents a thoroughly incomplete analysis of the projects’ harmful impacts. Concerns about potential conflicts of interest and other improprieties raise further questions about OPIC’s due diligence.

The ESIA also falls grotesquely short in protecting the rights of indigenous peoples, erroneously claiming that no indigenous populations have even been identified within or near the projects’ sites. This is especially egregious given the very recent history of conflict of local communities of indigenous peoples with oil and gas companies. Especially with regard to indigenous Mapuche communities whose territories encompass Vaca Muerta, Argentina’s government has been criminalizing social protest to intimidate and eliminate resistance to fracking projects.

The ESIA cannot possibly provide an adequate basis for OPIC’s board to decide on the approval of these high-risk projects.

Ultimately, fracking is a noxious industry that has destroyed lives, livelihoods, and communities in the U.S. The U.S. government should not be in the business of exporting this socially and environmentally devastating practice to other countries. OPIC’s board of directors has only one choice when it meets on Sept. 11: reject the two proposed fracking projects in Argentina.

About the authors

  • Unnamed

    Karen Orenstein

    Karen Orenstein is the deputy director of the economic policy program at Friends of the Earth, where she oversees work on international public finance. Karen specializes in climate finance — to ensure the provision and effective use of funds from countries in the Global North for those in the Global South to take climate action rooted in science, justice and fairness.
  • Mari%25cc%2581a marta di paola %25e2%2580%2593 coordinadora en economi%25cc%2581a y poli%25cc%2581tica ambiental 150x150

    María Marta Di Paola

    María Marta Di Paola is director of research at the Fundación Ambiente y Recursos Natural in Argentina. She has worked on issues related to economics and the environment for 10 years, including in fossil fuel subsidies, analysis of the National Budget for Climate Change, and impact of the investments of international financial institutions in energy works.