Colombia Sues Marathon Company

BOGOTA, COLOMBIA Marathon Oil has recently kicked up a controversy in Colombia, South America, sullying the company's reputation and ruining the career of a leading Colombian politician.

The Ohio-based multinational company, owned by U.S. Steel, received lucrative coal contracts last December from the Colombian government. Columbia granted Marathon 30-year rights to the La Jagua fields in the northeastern region. The 12,500-acre concession contains an estimated 200 million tons of coal reserves, worth a potential $10 billion.

But Marathon may see these coal riches slip through its fingers. Currently, the state coal company and a former minister of mines are seeking to nullify Marathon's contracts, filing two separate suits before Colombia's Council of State -- the nation's highest judicial body. The suits claim that Marathon did not abide by government requirements when its signed the coal contracts.

Under Colombian law, coal concessions - which were nationalized in 1979 - can be legally granted to private companies only if the firms can prove extensive prior mining activities on the lands for which contracts are sought. The Colombian government is then supposed to verify the fact of such mining before it approves any contract agreements.

Neither of these two requirements were met in the case of Marathon's contracts, according to revelations which began this summer in the Bogota daily, El Tiempo.

During consideration of Marathon's contract proposal for La Jagua concessions, Colombia's Minister of Mines, Rodado Noriega, failed to send inspectors to check Marathon's mines to see if the company had actual production in place as required.

Noriega later excused his apparent negligence by claiming that the ministry's department of mining development had okayed the contracts.

Noriega, however, may have been warned that Marathon's contract application contained some problems. Jorge Eduardo Cock Londono, then manager of the state coal company, Carbocol, said he warned Noreiga of the imprudence of granting the concession to Marathon. Noriega denies receiving such a warning.

But this June, in order to "resolve the interminable polemics" surrounding the case, Noriega agreed to visit the Marathon mining site. He discovered that there was "no extensive mining or installation of mining equipment." Indeed, exploration was hardly under way, with some half-dozen workers collecting rock samples with two picks and wheelbarrow.

Because of Marathon's evident nonfulfillment of contract stipulations, Noriega filed suit with the Council of State to nullify the company's contracts, and Carbocol followed with a similar suit.

Meanwhile, Marathon representatives are nowhere to be found in Colombia. The U.S. Embassy and the Colombian-American Chamber of Commerce state that Marathon has no offices in Colombia.

(Reached at Marathon's headquarters in Findlay, Ohio, the company's manager of media relations denied the company had done anything improper. "We feel confident that we have complied with all applicable rules, regulations and laws" concerning the La Jagua concessions, said Bill Ryder, adding that the Colombian court "challenge is without merit. ")

One consequence of the Marathon affair has been to halt Rodado Noriega's political career. President Belisario Betancur fired him from the post of governor of the department of Atlantico after the Marathon scandal broke.

A disciplinary investigation of Rodado Noriega's conduct will begin in the Colombian Congress in October. Its aim, said Senators Dagoberto Charry Rivas and Alvaro Aradjo Cotes, is to "make an example" of Rodado Noriega for other potentially negligent government officials. Rodado Noriega "badly managed the interests of the nation" in the Marathon affair, claims Carlos Martinez Simahan, the current minister of mines.

Another effect of the Marathon scandal may be to alter the foreign investment for mineral projects in Colombia.

The Marathon policy scandal comes at a time when Colombia's dealings with multinational coal companies are increasingly a source of popular criticism. Colombia holds approximately two-thirds of Latin America's coal reserves, and has opted for signing contracts with major multinational firms to boost its coal exports.

In 1980, the government reached an agreement with Exxon for the development of the country's largest coal venture - the Cerrejon project. But the Exxon deal, like the Marathon case, raised questions in Colombia about how aggressively the government negotiated the contract (see MM, December 1980). More recently, Exxon has been facing additional troubles with the Colombians at the Cerrejon, with repeated complaints that Exxon discriminates against Colombian labor and suppliers. These protests have caused the Ministry of Mines to propose contract modifications that will oblige Exxon to hire more Colombian technicians and award minor construction contracts to Colombian firms.

The troubles with Exxon, when added to those surrounding Marathon, have brought to the fore the issue of Colombia's mining policy. If Colombia's Council of State goes ahead and cancels Marathon's contract - a decision is expected by the end of the year - then the climate for foreign mining in Colombia may turn chilly.

Colombia's president Bentancur, who took office in August, has already sounded the nationalist's horn. In the Marathon case, Bentacur has promised he "will act with diligence in defense of the interests of the country."

Lore Croghan is an American journalist working in Bogota.