To address regulatory weaknesses amid the rapid expansion of Bolivia’s oil and gas industry, the World Bank plans to loan the nation approximately $4.8 million to strengthen institutional oversight.

Since Bolivia allowed partial privatization of the hydrocarbon industry in 1997, investment in the sector has grown rapidly, reaching $800 million a year, or about ten times what the former national oil company, YPFB, had invested. The growth has strained the government’s ability to ensure energy projects meet environmental and social standards.

Compounding those difficulties are overlapping agency duties, poor coordination between central and regional officials and a lack of expertise on the part of local authorities. Further, many regulations are unclear, leaving legal vacuums. And while nonprofit groups and local governments seek a say in how the oil and gas industry is regulated, the law as yet does not give them one.

Spurring the World Bank initiative was the 1997-98 construction of a pipeline across eastern Bolivia to carry natural gas to Brazil, says Andrea Silverman, the Bank’s program director in Bolivia.

“There was an awareness that putting in this major gas pipeline would produce more incentives for the exploration of gas reserves,” she says. “There was a concern on the part of the World Bank that strengthening the sector in terms of environmental management needed to be done.”

The supervisory system’s weaknesses became apparent again on Jan. 30 of this year, when an oil pipeline rupture polluted the Desaguadero River, which drains Lake Titicaca. “The ideal thing would have been to have two [government environmental] people there to monitor the company’s cleanup,” says Monica Castro, a consultant to the Vice-Ministry of Energy and Hydrocarbons’ environmental unit.

But that didn’t happen. The environmental unit has just eight technicians to oversee 200 new projects annually, as well as hundreds of ongoing ones. Says Castro: “It was a case in which lack of resources made the work more difficult.”

One of the World Bank credit’s primary purposes will be to develop ways to tighten Bolivia’s environmental impact assessment law, for which there is a general rule but no regulations, Silverman says.

Although the credit awaits the formal approval of the Bolivian Congress, a small portion of it already has been released and a group of consultants has begun writing regulations that the environmental unit of the Energy and Hydrocarbons Vice-Ministry will propose to the country’s Sustainable Development Ministry.

According to the World Bank’s appraisal of the project, other goals of the loan include increasing coordination between various levels of government and stakeholders, boosting the number and expertise of local environmental consultants, creating “best practices” guidelines, and establishing consistent ground rules for negotiations between energy companies and indigenous groups.

Castro says the environmental unit also plans to give social groups and local governments a formal role in the oversight of hydrocarbon projects. An Inter-Institutional Technical Coordinating Council (CCTI) has been formed, for instance, to oversee the work of the unit’s consultants. It includes representatives of the government, indigenous groups, NGOs and industry.

Victor Hugo Ayala, a hydrocarbon vice-ministry official, says a key will be whether members will be able to work effectively together and achieve consensus. “It is a high-risk [loan],” he says.

But Veronica López, environmental management coordinator for the Environmental Defense League (Lidema), a nonprofit here that has a representative on the committee, says the council will be successful if it receives adequate government support.

“The committee’s validity depends on how the vice-ministry responds,” she says.

The World Bank and Inter-American Development Bank have other capacity-strengthening and pollution-management programs underway in Bolivia.

The World Bank’s Environment, Industry and Mining Project, initiated in 1995, has, among other things, examined options for mitigating pollution from mine tailings, according to Carlos Barragán, who has worked on the project as a representative of Comibol, the state mining corporation.

However, that program has suffered delays, in part because of a scandal in which some Comibol officials allegedly paid themselves double salaries. Although the salaries did not come from World Bank funds, the ensuing scandal damaged the program’s image.