Tag Archives: acid mine drainage

Mozambique, Michigan, and the SEC Complaint Against Rio Tinto

Chinde_Rusting_boats

Rusting boats at the port of Chinde, where Rio Tinto proposed to barge Riversdale coal via the Zambezi River.

Yesterday, the Securities and Exchange Commission brought a complaint in New York City against Rio Tinto, charging Tom Albanese, the former CEO of Rio Tinto, and Guy Elliott, his Chief Financial Officer, with fraud. According to the complaint, Albanese and Elliott actively misled the Rio Tinto board, audit committee, auditors, and the investing public about their acquisition of the Riversdale coal business in Mozambique in 2011.

The fraud that Albanese and Elliott are accused of perpetrating looks awfully familiar to those who have followed the development of Eagle Mine and the controversy over County Road 595. Having noticed the parallel between Mozambique and Michigan back in 2013, when Tom Albanese was forced to step down, I now have to wonder whether prosecutors will take the company’s representations around the Eagle Mine into account when building their case.

In Mozambique, they told investors, coal would be transported by barge to the Indian Ocean port of Chinde. Although their technical advisors “highlighted the ‘showstopping’ risks” associated with the barging proposals before the acquisition, Albanese and Elliott blundered recklessly ahead. Then eight months later, the Mozambique government denied Rio Tinto a permit to transport the coal by barge down the Zambezi River. Suddenly, the coal business they had acquired for $3.7 billion appeared to be worth a negative $680 million. According to the SEC’s complaint, Albanese and Elliott “concealed and glossed over” the fact that they had no viable haul route for the 30 million tons per year they projected in their business plans, and misled investors as they raised $5.5 billion in US debt offerings.

In that very same period, Rio Tinto was also promoting Eagle Mine to investors and promising economic renewal in the Upper Peninsula, though they had not yet secured a transportation route — a haul route — for Eagle’s sulfide ore. In Michigan, it appears, the company took the same cavalier attitude toward planning and risk that the SEC complaint says got them into trouble in Mozambique.

Way back in 2005, John Cherry, who was then a Kennecott Minerals project manager and is now President and CEO of the Polymet project in Minnesota, characterized Eagle as a “direct ship” operation, “meaning that the rock would not be processed on site, thereby avoiding the storage of highly toxic debris left over, called tailings.” Presumably this is what Michigan DEQ’s Robert McCann had in mind in 2007, when he told The Blade that Kennecott’s permit “would require them to keep the ores underground, put them in covered rail cars, and ship them to Ontario for processing”; the Marquette Monthly told roughly the same story that year, only now there were trucks in the picture: “ore would be transported by truck and rail to a processing site in Ontario.” This seems to have been nothing more than a cover story.

Everything changed in 2008, when Rio Tinto bought the Humboldt Mill. Those permit requirements the DEQ’s McCann touted back in 2005? They were quickly abandoned. Covered rail cars come into the picture only after the ore is crushed, ground into a slurry, floated and rendered into concentrate at Humboldt Mill. A glossy 2010 company publication promoting Eagle Mine includes not a single word about how Rio Tinto and Kennecott plan to travel the 30 kilometers from mine to mill: “Happily, processing of the nickel and copper can take place in Humboldt, around 30 kilometres [sic] away, at a previously abandoned iron ore plant.” By 2011, the company had “considered more than a half dozen transportation routes” from mine to mill, according to a Marquette Mining Journal article by John Pepin published in February of that year, but they still had no viable haul route.

A good prosecutor with a rigorous and thorough discovery process would probably be able to determine whether the evasions and misrepresentations perpetuated on the public over the Eagle Mine haul route also amounted to fraud, or were part of a larger pattern of deliberately misleading statements. It’s clear Rio Tinto never came clean — and perhaps never really had a firm plan — on mine to mill transport at Eagle before it sold the works to Lundin Mining in June of 2013 and decamped. As long as regulators in Michigan continued to be more accommodating than those in Mozambique, the company seems to have been content to let the people of Marquette County fight out the haul route issue among themselves.

Dialogue at the Rock

Wisconsin Department of Natural Resources aerial photo of Flambeau Mine, after reclamation.

Wisconsin Department of Natural Resources aerial photo of Flambeau Mine, after reclamation.


Bill Rose, Professor Emeritus at Michigan Technological University, hopes the big rock brought over to the university from Eagle Mine — three and a half tons of nickel-copper sulfide, suffused with platinum and rare elements — will be a site for respectful gatherings. Rose says he wants to get beyond divisive and fruitless “bickering” over mining, and hopes for “constructive dialogue about mining, its opportunities and threats.” That’s a conversation many people in the Upper Peninsula have been trying, and mostly failing, to have for more than a decade.

Building dialogue about mining is notoriously difficult, even in the friendliest jurisdictions. Part of the trouble — but only part of the trouble — is that companies come to the table having invested enormous amounts of capital (and usually in a panic to service their debt and start delivering for shareholders). They are focused on the short term and the near horizon. It’s not surprising they often refuse to listen, listen badly, or try to co-opt the dialogue from the outset; and that puts people on guard. Public participation usually gets kettled to “public comment” periods overseen by a government agency or sham community forums (like the ones Rio Tinto tried to stage in the Marquette area back around 2012 and 2013). Before too long, ordinary people realize decisions about the place they live are being made elsewhere, without them.

Professor Rose says he wants “the public to participate,” but it’s unclear from his remarks (as reported) exactly he means by that, or how far beyond gawking at the big rock and marveling at new mining technology he and his colleagues want public participation to extend. Where does his invitation lead? The dialogue about mining seems to be already set within a familiar public relations narrative that is rushing toward conclusions.

This narrative features the idea that sulfide mining can now cover its tracks through reclamation and water treatment, leaving no lasting effects. So Dean Wayne Pennington (who was on hand to announce the revival of a mining engineering as a degree program at MTU) expressed confidence that new mining methods will “ensure that no legacy situations are left for future generations.” In this context, “legacy” is code for water pollution. Examples of sulfide mining’s toxic legacy are not hard to find. Some examples of “no legacy” mining would have helped Pennington’s case.

The stock example from Eagle Mine public relations — which has also been used in promoting the Polymet project in Minnesota — is the Flambeau Mine near Ladysmith, Wisconsin. Flambeau is a Rio Tinto/Kennecott project advertised as a sulfide mining reclamation success story, despite repeated litigation over less than satisfactory water quality results. The mining company won in the courts, but Flambeau remains controversial.

For his part, Rose likened “mining with environmental responsibility” to dentistry. That is not supposed to make you squirm in your chair; it’s meant to reassure people that new technology will be sufficient to address environmental concerns about sulfide mining. It also goes further, portraying mining as therapeutic — an extraction necessary to relieve pain and maintain health. Before the conversation even gets underway, we are being asked to accept technology as a proxy for responsibility and to see mining as a way of caring for the earth.

This is the story created around the big rock at Michigan Tech: the greening of mining and the benevolent power of technology. Mining is being naturalized here — made part of or partner to nature; nature, the earth itself is being remade and reclaimed by new mining technology. This theme emerged again with a new twist at the dedication ceremony, when Michigan Geological Survey Director John Yellich stood beside the big boulder to push for a new geological survey.

Yellich started out praising the “infrastructure” of the UP: “we have electrical, we have internet access and we have roads better than what [they] were.” But in a confusing turn, he moved quickly — in the same breath — from talking about mining-friendly infrastructure to talking about “people coming in and enjoying what we have here in the UP.” Yellich was obviously trying to find a way to finish his statement for the TV cameras, and end on a positive note; so he played the Peninsulam Amœnam card, and talked about mining in language ordinarily reserved for tourism.

For a brief moment, we were asked to imagine that haul roads (a continuing source of controversy and litigation around the Eagle Mine project) were scenic lakeside byways for Sunday drivers or winding paths through a quiet wood, and that UP tourism would benefit directly from further mining development.

It appears this new dialogue about mining is already off to a confusing, false start.

An Updated Map of Lake Superior Mining

Basin_mines_3-15-13
The Great Lakes Indian Fish and Wildlife Commission has produced this updated map of Lake Superior mining. Since I’ve written about an earlier version of this map (here, but see also here and here and here) and I plan to write about Lake Superior mining moving forward, I thought it would be useful to share it.

This March 15, 2013 version of the map [pdf] includes more detail and definition as we see new projects come online and exploration and leasing continue apace.

Notice how much more detail we have in this version around Duluth and Hibbing, in the southwestern corner of Superior. Taconite and iron yield to copper and nickel as the trail of exploration moves north. On the south shore of Superior, in Michigan’s Upper Peninsula, the Kennecott Eagle Copper Mine on the Yellow Dog Plains, along with White Pine and Orvana Copperwood, are now properly identified.

Claims and leases have turned much of this area, from L’Anse Bay to Marquette and over to Deer Lake, pink. The new mining runs right up to the edge of the watershed area that stretches from the Carp River to St. Mary’s River.

The densest concentration of leasing and mining claims remains on the Canadian side, on the northwestern shore of Superior, from Thunder Bay toward Lake Nipigon. Gold and rare mineral exploration predominate.

“Areas of Concern” singled out by the Lake Superior Mining Committee in 2010 are unchanged, on both the Canadian and the U.S. sides of the lake; and yet we see mineral exploration and new mining claims right around these areas.

It’s tempting to look at what’s happening around Lake Superior right now and make alarming conjectures about what might happen, three or five or ten years down the road. Nobody knows how many full-blown big mining operations will develop from all this exploration and activity. But it’s clear from this map that new mining is already putting significant pressure on Lake Superior.

Polluting the Future — A Question of Human Rights

Last week, the organization Earthworks released Polluting The Future, a report focusing on “the staggering amount of our nation’s water supplies that are perpetually polluted by mining” and the “rapidly escalating national dilemma” of perpetual mine management.

Perpetual is the key word here. Forty existing hardrock mines pollute 17-27 billion gallons of water per year, “and will do so in perpetuity,” for hundreds if not thousands of years. Include other mines likely to contribute to the problem, and take into account four new big mining projects currently being proposed, and the number jumps: to 37-47 billion gallons of polluted water every year. Pour that all into 8 oz water bottles and stack them one on top of the other and you can go to the moon and back about 100 times.

When Earthworks adds up the cost of treating this perpetual pollution, the figure is staggering: 62 to 73 billion dollars a year. That’s one very powerful way to talk about the social cost of mining — a cost that the mining companies (many of them foreign-based multinationals) are passing directly to the American public. The EPA “questions the ability of businesses to sustain” treatment and management efforts for the required length of time. That’s putting it mildly. As Earthworks points out, “most corporations have existed for far fewer than 100 years… Mining corporations simply won’t be around to manage water treatment that will continue for thousands of years.” They are passing along the true costs of their operations to all of us, for generations to come.

I was hoping to find some discussion of the proposed mining on Lake Superior. It’s a subject I’ve blogged about before — here and here, for instance — and I’m trying to put together a documentary project on the subject as well. So I was left wondering where the Rio Tinto / Kennecott Eagle Mine and the many other new mining projects around the perimeter of Lake Superior fit in the scheme Earthworks presents here.

It seems largely to be a question of scale. It may be easier for the mind to grasp the horror of open-pit projects with a “high risk for perpetual pollution” due to acid mine drainage, but acid mine drainage is also one risk of the sulfide mining projects about to be staged in and around the watershed of one of the world’s largest freshwater lakes — Lake Superior. Again, the report singles out the Pebble Mine in Alaska, another Rio Tinto project, to talk about the threat that mine poses to “the nation’s largest wild salmon fishery”; but the new mining in Michigan’s Upper Peninsula threatens the natural habitat of the coaster brook trout, the Salmon Trout River in northern Marquette County. So there are a couple of ways to make connections between the mining around Lake Superior and Polluting the Future.

Then there are the policy recommendations in this report — which range from enforcement of the Clean Water Act to other legislative and regulatory changes to hold companies accountable. Those all deserve careful consideration. What’s missing for me is something that came out of another report issued last week, this one by the United Nations Office of the High Commissioner for Human Rights. At the end of a ten day mission to assess the state of business and human rights in the United States, the UN delegation “noted the allegations of significant human rights impacts of surface mining, particularly the rights to health and water, and the deep divisions between stakeholders on the most effective ways of assessing and addressing the impacts.” (Significantly, for those who have followed the controversy over the Eagle Mine project, the UN team also looked at “the rights of Native Americans, particularly as regards the lack of free, prior and informed consent for projects affecting them and sites of cultural and religious significance to them.”)

So I would like to talk about the Earthworks report in this human rights context. The discussion might start with the very first sentence of the report, which characterizes water as “a scarce and precious asset.” The word “asset” makes me a little uneasy (but I would have to defer on this to people like Jeremy J. Schmidt, who together with Dan Shrubsole just put out a paper on the ethics and the politics entailed in the words we use about water). Think, for a moment, about how this discussion of perpetual pollution for immediate profit might be reframed as a human rights discussion. Or at least how the two perspectives — the environmental perspective and the human rights perspective — are complementary, and more powerful when taken together. The problem isn’t just that freshwater is a precious asset in increasingly high demand and short supply; it’s that when we permit big mining projects to pollute our water for generations to come, we are also failing to protect the human rights of our children and our children’s children, and so on, in perpetuity.