Philip Merrill, Chairman
Export-Import Bank of the U.S.
811 Vermont Avenue NW, Suite 1215
Washington DC 20571

RE: Suspend funding for Phase 2 of the Sakhalin II Oil and Gas Project!

Dear Mr. Merrill,

I am deeply concerned that Shell's proposal for Phase 2 of the Sakhalin II Oil and Gas Project does not come close to meeting the highest industry standards for protection of endangered species, the environment and traditional local economies. Phase 2 unnecessarily and irresponsibly threatens the pristine and fragile marine environment around Russia's Sakhalin Island, and particularly threatens the critically endangered Western Grey Whale as well as the saffron cod, herring and salmon fisheries, on which Sakhalin's indigenous Nivkh people depend. I strongly urge that the Bank withhold all funding for this disastrous project until Shell agrees to major changes that will mitigate its impact.

Shell's plans include gouging open ditches across streams for their pipeline instead of building elevated pipelines that bridge these water crossings as was done in Alaska and on most modern pipeline projects. They plan to dredge, install and operate a new offshore oil platform next to key whale habitat and to build platform-to-shore pipelines on the sea floor, right through the vital benthic feeding grounds of the Western Grey Whale. These proposals violate Russia's Law on Protection of the Animal World as well as the World Bank Natural Habitats Policy. Russian ichtyological expert M.E. Vinogradov warns that "without designing special measures for grey whale conservation, the continuation of the Sakhalin II project can lead to extinction of this unique population."

Also, Shell plans to build an onshore pipeline that will cross 44 seismic faults (compared to the Alaska pipeline which crosses three). A quake of 7.6 on the Richter Scale killed 2,000 people in northern Sakhalin just 8 years ago and ruptured several oil pipelines, causing some 200 oil spills. Yet Shell plans to build an underground pipeline using technology that has not been tested in such earthquake-prone terrain. Shell's leak-detection equipment is also far less sensitive than the system used in Alaska, risking the possibility that small leaks could go unnoticed until large amounts of oil have leached into the soil, watershed and drinking water supply.

I strongly support a coalition of 50 environmental organizations in Russia, the U.S., Europe and Japan, who demand that the Bank withhold financing for Phase 2 until Shell's Sakhalin Energy consortium agrees to:

1. Alter its off-shore platform and pipeline plans to avoid grey whale habitat and to ensure zero negative impact on the Western Grey Whale;
2. Build elevated bridges for onshore pipelines over all salmon spawning streams;
3. Build onshore pipelines above ground on earthquake-flex support systems; and
4. Accept full financial liability for clean-up and compensation for any oil spill, with a guarantee from Ex-Im Bank and EBRD.

I urge you to stop all financing for this project until the above demands are agreed to and fully guaranteed.

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