Estimation of Environmental Damages from Mining Pollution on River Systems

Introduction

Pollution, in general, can cause damages on natural resource systems which provide valuable though unpriced services to society. Oftentimes, the harmful effects of pollution are not considered by the polluter in decision-making, thus creating excessive environmental externalities. To estimate the externalities generated by pollution, it is necessary to develop economic measures of values of the environmental and resource services provided by the affected resource systems. The estimation process is undertaken primarily to provide inputs to the information base supporting public resource and environmental management decisions. One of these decisions that is of primary relevance to this study has to do with determining the natural resource damage liability of responsible parties in pollution cases, which can be used as basis for damage compensation to affected parties.

Mining pollution has historically been a major source of degradation of natural resource systems such as river, coastal, and air (USEPA 1995). For this reason, mining, as an economic activity, is subject to major environmental regulations worldwide, including the Philippines. Unfortunately, the current information on mining externalities is insufficient to be useful for policy setting. This study was undertaken partly to partly fill this information gap, particularly in the development of policy instruments which require information on social costs of mining, and partly to assist in the formulation of guidelines on damage assessment and compensation for the mining sector. A case study of an accident-induced mining pollution was implemented.

The Mining Accident

Marinduque Island is located about 170 kilometers south of Manila. It has a total land area of 959.2 km2 (see Map 1). Administratively, it is one of 11 provinces of Region IV or the Southern Luzon region. The provincial population in 1995 was 199,910, with almost one-fourth (44,609) of the population residing in Boac, the provincial capital.

The Marcopper Mining Corporation (MMC) had been engaged in copper open-pit mining in the municipality of Sta. Cruz, Marinduque since the early 1970s. When the mining operation moved from the Mt. Tapian to the San Antonio mine site in 1989, the drainage tunnel in the Tapian Pit was plugged with concrete so the pit could serve as disposal pond for the mine tailings. In August 1995, seepage was discovered in the drainage tunnel, which consequently ruptured on 24 March 1996, discharging mine tailings into the Makulapnit-Boac River system (henceforth referred to as Boac River), initially at a rate of 5-10 cubic meters per second (see Map 2).

The incident resulted in the release and deposition of some 1.6 million cubic meters of tailings along the 27-km span of the river system and the coastal areas near the river mouth west of the island-province. The impact on the river ecosystem was extensive. The devastating effects of the pollution on the river and coastal ecosystems were of such magnitude that a UN assessment mission declared the accident an environmental disaster (UNDP 1996). Boac River was left virtually dead. The onrush of tailings downstream displaced the river water, which in turn flooded low-lying areas, destroying crop farms and vegetable gardens along the banks and clogging the irrigation waterways to ricefields. Road sections straddling the river were damaged, temporarily isolating some barangays (villages) and affecting trade and access to services. All these impacts adversely affected the local residents in Boac whose livelihood activities were river-dependent.

The Boac River

The Boac River is a major river system in Marinduque and has traditionally been used for a variety of purposes by the population residing in towns along the river. The tailings spill not only had a significant visual impact on the quality of the river, but also resulted in the total loss of the river-based sources of livelihood as well as of other non-economic uses such as recreation.

During its pre-release condition, the Boac River was an important source of subsistence food for the local population such as fish, shrimps, and snails. Some of the local population engaged in river fishing as a secondary occupation. A significant amount of vegetables was being grown along the river banks, both for commercial sale and subsistence consumption. Another important source of household income from the river was its use for commercial laundry services. Some of the local population also engaged in gravel and sand quarrying in the river banks. The river was also a transport route used to haul agricultural crops upstream to the Boac town market.

The river's nonmarket uses included being a source of recreational opportunities for the local residents, especially children. Some of these activities included swimming, fishing, strolling along the river banks, and picnicking. The river has also been used as a receptacle of both industry and household wastes. Other household uses of the river included bathing, washing clothes, work implements and dishes, watering gardens, and maintenance of livestock.

Damage Valuation Approaches

1] Contingent valuation. Contingent valuation as an approach to benefit/damage estimation involves soliciting responses to hypothetical questions regarding the value people place on environmental amenities. The most commonly used hypothetical questions ask people for the value they place on a specified change in an environmental amenity or the maximum amount they would be willing to pay for the change to occur (Freeman 1993). A variation is the question on how much compensation people are willing to accept to endure or risk an environmental dis-amenity. These two measures, willingness to pay (WTP) and willingness to accept compensation (WAC), when aggregated over the population concerned, can provide a value of the resource as an asset.

2] Travel cost. The travel cost method, which is extensively used to value recreational goods and services, requires data on people's observed visitation behavior to a recreational site. From these data, a demand curve for use of the site is derived. Then, the total amount of consumer surplus may be estimated. The estimated consumer surplus is a measure of the recreational value of the resource and is used as basis for estimating park entrance fees and related charges for use of a recreational site. However, the value of changes in the quality of a recreational site or changes in the quality of the flow of recreational services is better measured through a variant of the travel cost -- the random utility model, which does a "better job of capturing the role of site characteristics in influencing the decisions about whether to participate in recreation and the choice of a site to visit" (Freeman 1993).

3] Hedonic property value. One potential valuation approach to measure the value of lost services of the river is the application of hedonic pricing using changes in property values as a measure of pollution damage. The method is a surrogate-market approach which assumes that purchasers of property reveal their attitude to a bundle of attributes, including environmental, by their willingness to pay (Dixon et al. 1994). Through multiple regression analysis, the environmental attribute coefficient, after controlling for other attributes, is used to predict changes in property values given changes in environmental quality. The approach requires extensive data on the selling prices of individual properties as well as on their physical characteristics (e.g., location, size, distance to an environmental amenity).

4]Restoration Cost. In addition to the discounted foregone use values of the river, an alternative measure of natural resource damages in the Marinduque mining accident is the cost of restoring or rehabilitating the river to its pre-release condition. In the U.S., the estimate of the cost of restoring an injured natural resource to its pre-damage state is favored as basis for compensatory damages by the U.S. Court of Appeals over an estimate of the reduction in value of the flow services of the injured resource. The argument is that monetary values as a measure of the value of a public asset is an understatement of its social value (Smith 1996).

Impact on Fishing

Coastal fishing. A total of 35 sample households (15%) from three barangays (Laylay, Pili and Balogo) were engaged in coastal fishing. The initial income losses experienced by coastal fishermen immediately after the accident were due to the pervasive fear of the local people of eating fish caught from the coastal waters near the river outlet. For a couple of months after the spill, fish was avoided as stories of alleged food poisoning spread and the seawater remained discolored by tailings silt. Whatever fish was caught at that time was bought at depressed prices. Unfortunately, data to validate this observation were not collected in the survey.

Later, however, coastal fishers reported a real reduction in their fish catch which resulted in foregone annual average income losses averaging P17,938 per household. The average monthly income loss for those who used non-motorized boats (n=31) was higher at P1,830 than for those with motorized boats (n=4) at P1,410. This result was expected since fishers with motorized boats can fish farther offshore to avoid the pollution and to the extent that their catch revenue could offset the added fuel cost. Thus, they were likely to suffer less than the non-motorized boat fishers who did not have similar options.

Short-term Mitigation Activities in the Boac River and Affected Communities

Immediately after the accident, Marcopper and government agencies conducted relief operations and dispatched medical missions to affected communities. The Marcopper Environmental Guarantee Fund (EGF) compensation mechanism was activated with the formation of a Committee and Secretariat to oversee the fund's dispensation, most of which was allotted for damage compensation payments and construction of core and evacuation centers (see Section 8.6). In addition, Marcopper spent funds outside the EGF for infrastructure-related activities such as road repair and construction of new access roads to remote barangays isolated by floods. Relief and medical missions were dispatched to the affected areas immediately following the accident.

Long-term River Rehabilitation/Restoration Options

Table 13 summarizes the seven options addressing the tailings deposition in the rehabilitation of the Boac River, namely: (1) landfill, (2) haul to Tapian Pit, (3) pump, (4) coastal reclaim, (5) settling basis, (6) deep ocean disposal either by river or settling basin, (7) dredged channel, with corresponding estimated costs. Each option was evaluated by those concerned on technical, social, and economic grounds. The construction of the dredged channel had actually been completed at the time of the study; however, the option to redredge the channel was being evaluated. Assuming the redredging would cost the same as the original dredging and that it will address the tailings deposition adequately, this activity appears to be the least costly among the options. The cost, however, excluded the externalities from the redredging activities such as lower fish productivity and others.

Conclusion

The study makes the following prescriptions:

1. Guidelines for the conduct of a systematic natural resource damage assessment (NRDA) for events resulting in release of hazardous substances to the environment should be formulated. These should include the three stages in damage assessment, which are injury determination, quantification of effects, and damage determination. In the first two stages, the Philippine EIS System, which is fully institutionalized, should provide the physical, technical, and even economic data required. In the damage determination stage, the guidelines should prescribe the range of valuation methods for valuing foregone natural resource services applicable in different pollution cases.
   
   
2. Government policy on the nature and extent of liability of polluters for injury on natural resource systems should be clearly defined. Moreover, the efficiency implications of alternative liability rules should be considered in the formulation of liability-cum-compensation policies.

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Barrick Gold Rains Money on Chile's Huasco Valley ($60 million usd) what will Kinross Gold & Geocom Resources pay for the Futaleufu River Valley?

Gold Mining Company Creates US$60 Million Fund to Quiet Protests in the Huasco Valley

(July 12, 2005) In an effort to calm environmental concerns brewing because of the construction of the planned Pascua Lama gold mine, the Canadian transnational Barrick Gold Corporation has signed a protocol agreement with the Huasco Valley Board of Overseers addressing environmental issues such as the drainage of acidic waters and the effects of relocating nearby glaciers.

The Pascua Lama mine, which straddles Chile’s Region III and Argentina’s San Juan Province, has reserves of 17.6 million ounces of gold and silver deposits and is meant to begin operations in 2009.

In the unpublished agreement signed June 30, the company Minera Nevada, an affiliate of Barrick, commits to providing funding of US$60 million to address negative concerns regarding the construction of the mine and ongoing environmental problems. The $60 million will be doled out at US$3 million per year for the next 20 years.

Kinross Gold Mining Company Creates US$_ _ _ Million Fund to Quiet Protests in the Futaleufu Valley
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The money will be used to provide compensation packages to cover indirect effects that could result from the mining, according to Huasco Valley Board of Overseers executive Iván Pavletic. In this sense, the money would be directed at water infrastructure projects, investment, and ends that will be established by the local Board of Overseers.

Barrick will also carry out environmental evaluations of the drainage of acidic water caused by the mine and the relocation of three glaciers in the Andes Mountains that will be necessary for accessing the open-pit mine.

Barrick’s original plan was to transfer 300,000 cubic meters of ice with a 20-hectare surface area from the glaciers that surround the deposits (ST, March 31).

To mitigate ecological impact and prevent ice from melting, Barrick hopes to transfer the three glaciers, Toro 1, Toro 2, and Esperanza, to an area with similar surface characteristics and elevation by merging the three into a larger glacier, Guanaco (ST, June 1).

Glacier specialists from France, contacted by the Board of Overseers, are expected to arrive in Chile today, Tuesday, to begin studies on the glacier relocation, as outlined in the protocol agreement. Barrick will also fund this study.

Although environmental organizations are primarily focused on the effects of glacier relocation, it is not the principal environmental concern being addressed in the protocol agreement. Instead, Pavletic says, the acidic water drainage is much more important.

Because this project involves the exploitation of a mountain and the creation of sterile deposits, there is an effect on the mountain range’s drainage system of water, rain, and water from snow, Pavletic says. The level of acidity is already high in the Huasco River, and will naturally be higher with the drainage of water from the mine. In the agreement, Barrick promises to look into the best way to prevent contamination of the river.

Earlier this year, farmers in Region III protested the Pascua Lama gold mine because they fear the water supply they rely on for irrigation will become contaminated (ST, March 7).

Barrick has said that the water contaminated by the mine that flows into the valley will undergo a cleaning procedure and will arrive purified in the San Félix Valley. (ST, June 1)

The Huasco Valley Board of Overseers is likely Barrick’s most important counterpart because it is aligned with 2000 farmers that use the Huasco River and its tributaries. And at the moment, this is very important for the Huasco Valley, where people are experiencing an economic upswing with the construction of the Santa Juana reservoir, which has increased horticultural production of olives and the exportation of grapes and olive oil.

In the agreement, Pavletic says Barrick proposes a series of mitigating measures. There is talk of an Andean reservoir at the base of the Carmen River, a system of 30 automatic water-quality monitoring stations, and the construction of a retainer wall for filtration of acidic drainage in underground water from the mouth of the Estrecho River.

Pavletic says the report does not resolve all of the issues that still exist with the mine and the future of the water balance, the treatment of acidic waters, and the glaciological impacts.

However, he admits that this is a historic landmark. Barrick’s commitment to spend over US$60 million will begin with the arrival of French glaciologists this week.

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In Chile, Precious Lands Often Go for a Pittance - Barrick Gold Corporation Pays $19 Dollars for 20,000 Acres

SANTIAGO, Chile -- The mountainous terrain of northern Chile is studded with precious metals, a natural cache that for years has had investors angling for land rights.

So when the world's largest gold mining company targeted about 20,000 acres owned by Rodolfo Villar, a mineral speculator, he signed a contract. Only later, he said, did he realize how much the company had agreed to pay him:

About $19.

Villar, who regularly grabs local land rights if he thinks they might be worth something, said he thought the deal was worth $1 million, not an amount that proved to be less than the cost of a bus ticket from Santiago back to his house. Additionally, the finer points of the contract stipulated that he would be fined $95,000 if he tried to obtain rights to any other parcels in the surrounding area.

Villar sued the company, Canada's Barrick Gold Corp., arguing that he had been deceived. This year, a Chilean judge ruled in his favor, saying that the company had essentially swindled Villar, and ordered the lands returned to him.

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