When conservation crosses the law ... the WWF's logging scheme was hailed a successful example of eco-forestry. But the cutting of mangrove trees is illegal under PNG law. A project established by the World Wildlife Fund as a model of eco-forestry has proved a serious embarrassment to the international conservation group, Andy Rowell reports.

One of the World Wildlife Fund's (WWF) landmark eco-forestry projects in Papua New Guinea is "illegal", according to the international conservation organisation's documents. The story starts in the mid-'80s when geologists working for the American oil company Chevron found oil in a remote highland region.

For most of the 20th century, oil companies had searched the rugged and beautiful highlands of PNG looking for oil. As they cut through virgin forest and came face to face with previously uncontacted hill tribes, they were driven by the fact that the country's geology was similar to the Middle East's, where billions of barrels had been found.

They finally struck it lucky in 1985, and a consortium of oil companies, led by Chevron, and including BP, started to invest in a $1 billion project to drill 225 million barrels of oil. The oilmen knew they would have a public relations battle, because the country's rainforests are globally significant, because of their ecological biodiversity.

The oil would have to be piped 270 kilometres from PNG's Kutubu region, down the Kikori River to the Gulf of Papua, one of the last unique freshwater ecosystems in the Pacific. It would pass through virgin rainforest, home to more than 400 species of birds, the world's second largest butterfly and largest moth, and through globally important mangrove wetlands. The river basin is also home to some 40,000 people from 16 different ethnic groups.

As the letters of protest started, Chevron entered into negotiations with the US arm of the WWF, which was concerned about mitigating the environmental effects of oil development. Secret internal Chevron documents state that "WWF will act as a buffer for the joint venture against environmentally damaging activities in the region, and against international environmental criticism". The year after the first oil started flowing in 1992, Chevron finalised an agreement with the WWF to develop a "model integrated conservation and development project (ICDP) for the Kikori River Basin". The oil companies would provide funding of more than $1 million a year to the ICDP, initially for six years.

The central project would be eco-forestry. The thinking was simple. Industrial logging - facilitated by opening the area by the oil pipeline - was seen as the biggest threat to the region. If WWF could persuade local landowners to start up eco-forestry projects, hopefully this could provide an alternative to rampant deforestation.

The communities would be paid for their timber and the forests would be logged in a sustainable way. In November 1996, WWF established a profit-making company, called Kikori Pacific Limited (KPL), as an umbrella organisation. WWF hoped the company would one day become independently viable, but accepted it would initially depend on grant money channelled through WWF. KPL would mill logs from local companies owned by landowners and sell them to both the domestic and international markets. But WWF insiders say that right from the start the project was almost redundant. WWF found it could not source timber from many communities in the vicinity of the Chevron pipeline. The communities had signed agreements with industrial logging companies or were not interested in eco-forestry because they were already receiving financial benefits from the oil project.

So, at WWF's instruction, the project sourced much of its timber from a company called "Iviri Timbers". Unfortunately Iviri cuts mangrove forests, which under the country's Forestry Act is prohibited under the PNG logging code of practice and is hence illegal.

Despite this, WWF sought external funding for the project as a "conservation initiative of global significance" and as an eco-forestry enterprise which could be used as a model. Money was received from the US Macarthur Foundation, and the US State Department among others.

Meanwhile in 1998, WWF and the World Bank also joined forces to launch "a global Alliance for forest conservation and sustainable use". WWF secured more money for the Kikori project from the World Bank-affiliated International Finance Corporation and the Global Environmental Facility, which provided a $250,000, 10-year, low-interest loan. The Kikori project was funded because it was "developing sustainable strategies for preserving biodiversity". WWF underwrote the loan, being fully responsible for repaying the IFC, even if KPL fails.

However concern was growing within WWF about KPL's reliance on logs from illegally logged mangroves. In May 1999, the World Bank and WWF held a workshop on "Strategies for Sustainable Forestry" in PNG. One of the action plans was to "determine the susceptibility of fragile forest types to damage from small-scale forestry activities". A key area outlined for study was the "WWF Kikori logging operations in mangrove forests". But still the illegal logging was not stopped.

Publicly the story is different. WWF is trying to acquire accreditation for the Kikori timber from the international Forest Stewardship Council (FSC) which is central to the successful international marketing of KPL as a model "eco-forestry" project. The FSC is a non-profit, non-governmental organisation set up in 1993 to support environmentally sustainable forest stewardship and management, defined by a set of principles. It means that if you buy a FSC accredited piece of wood, you know that it has been grown in a sustainable way. Its head is Hank Cauley, who was the head of Kikori Pacific in the first years of its operation.

According to the IFC and internal WWF documents, Kikori Pacific last summer exported its first shipment to an Australian company called the Woodage, which specialises in sustainable timber. The destination for the wood was last year's Sydney Olympics. It was sold as "environmentally friendly", according to the WWF-US Web site. For some reason, the timber never made it to the Games. Also last summer, WWF launched a new report into PNG's forests, part funded by the World Bank and AusAID, Australia's overseas aid department. "For far too long, logging practices in our forests have been unsustainable and unfair," said WWF Country Manager Kilyali Kalit. "It's time for the small, community-run eco-forestry operations to be recognised for their economic and environmental contribution to PNG." A key recommendation was to "Ensure that the PNG logging code of practice is actively enforced". WWF also noted that "New Guinea mangrove forests are recognised as the most extensive in the world with many unusual species".

At the same time, an internal WWF report had been written into KPL. The review, primarily concerned with KPL's "financial crisis", was damning. It says KPL was "doomed to failure from the beginning". Its main conclusion was that: "KPL should stop logging mangroves. There are very few conservation benefits to be gained from continuing KPL's logging operations in mangroves. Logging of mangroves is contrary to the PNG logging code of practice. KPL's logging activities in mangrove forests are illegal".

The report added: "Since KPL's inception, a number of decisions have been made that, with the benefit of hindsight, have proven to be unwise". KPL's most "successful" source of logs had come from Iviri Timbers, which "sources it logs from mangroves. Under the PNG logging code of practice it is illegal to log mangroves. From its inception, one of the aims of KPL has been to obtain FSC certification. However, according to the national FSC principles and criteria for PNG, FSC-certified operations in PNG must conform with all national laws including the PNG logging code of practice. So regardless of how carefully the mangroves were logged, KPL would never be able to achieve FSC certification in this sense, KPL was doomed to failure from the beginning." The author noted: "A number of WWF staff privately expressed concerns about the fact that the Iviri Timbers operation is illegal." Some six months later, WWF has not stopped the illegal logging. Last week, the illegally logged timber was filmed floating down the Kikori River.

Externally it is business as usual. WWF and the World Bank say that KPL has a "triple bottom line, environmentally sound, socially just and financially viable". Jared Diamond, a WWFUS board member and Pulitzer Prize winner, is also unrepentant. Responding to the allegations he says that what is happening at Kikori is "sustainable logging of mangroves".

Diamond adds that, regardless of whether it is illegal "if it can be done on a sustainable basis then by all means do it".