Case Studies from the Americas
Published by the International Development Research Centre
PO Box 8500, Ottawa, ON, Canada K1G 3H9
© International Development Research Centre 1999
Legal deposit: 1st quarter 1999
National Library of Canada
ISBN 0-88936-828-7
The views expressed are those of the author(s) and do not necessarily represent those of the International Development Research Centre. Mention of a proprietary name does not constitute endorsement of the product and is given only for information. A microfiche edition is available.
The catalogue of IDRC Books may be consulted online at http://www.idrc.ca/index_e.html
This book may be consulted online at http://www.idrc.ca/books/focus.html
Mining and environment — the two do not seem to go together. Indeed, they seem almost antithetical. Whether one reads about small-scale gold mining in the Amazon or huge coal mines in North America, whether simple sand and gravel pits or complex metallurgical operations, the legacy of the mining industry appears to be destruction of land and pollution of air and water. Actually, of course, the situation is much more complex. True, mining always involves disruption of the environment, either at the surface with open-pit mines or underground with deep mines, and in most cases the mineral being sought makes up only a small part of the material that must be moved, with the result that vast quantities of waste must be handled. True too, for many years and in most parts of the world (the North no less than the South), mining was carried on with little regard for environmental protection — or for the health and safety of miners or for the culture and well-being of local communities. However, the picture of mining firms operating with little regard for nature or native is no longer accurate. Under some conditions, and in some corporations, and in some countries, protection of the environment, of miners, and of nearby communities has become nearly as much a concern as putting a rock in the box.
International Development Research Centre (IDRC) funding is based on the principle that solutions to problems in developing countries can only be found through research based in those countries. From this perspective, it is not so much the record of past destruction of the natural environment that is of interest, but the dynamics of a new business environment in which corporate decisions and government legislation work in tandem to avoid damages that are avoidable and to mitigate those that are not. Of course, there remain as many cases where the old conditions persist, and it is equally of interest to learn where and why this new business environment has not appeared.
The early conclusions of the Mining and Environment Research Network (MERN1) were striking: mining firms that are efficient in their main activity of extracting minerals from the Earth are also best at protecting the environment
1 Originally based at the Science Policy Research Unit, University of Sussex, Unite Kingdom; now based at the International Centre for the Environment, University of Bath, United Kingdom.
while doing so, a conclusion that suggests that, under the right conditions, the economics-environment trade-off is not so sharp as once thought. The further conclusion that environmental results are partially independent of the strength of mining legislation suggests the need for governments to take a more sophisticated approach to mining-environment policy. Corporate attitudes are changing; government policies are changing; civil society is changing: and the business environment that brings them all together is changing. The need for further research is almost self-evident.
IDRC's interest in mining in developing countries predates today's recognition of environmental values and its focus on mining-environment policy. During the 1980s, research projects funded by IDRC focused mainly on science and technology policy for mining or on measures to improve efficiency. With the partial exception of a couple of projects that investigated health conditions in Bolivian mines (in particular, the effects of living and working at high altitudes), environment was very much secondary. An explicit environmental project related to mining does not appear until 1991, and somewhat ironically the first such project was the Bolivian component in the initial phase of MERN, as described in Chapter 8 in this book. Other projects looked at the effects of mercury from gold mining. Closely related projects also began to be funded, including some that focused less on environmental problems per se than on conflicts that stemmed from the power of the mining industry to usurp what had been common-property resources. A good example was the dispute over water that occurred between Southern Peru Copper Company and the community of Ilo, just north of Peru's border with Chile. (That research project was undertaken by a community group called LABOR, which then argued its case successfully before the International Water Tribunal in The Hague.) Another line of research that was initiated about the same time involved the effects of macroeconomic conditions and policies in various Latin America countries on the linkage between environmental degradation and mineral operations.
If the analytical focus of mining research funded by IDRC changed from technical efficiency to environmental protection, the geographic focus did not. With the exception of a collection of projects that focused on artisanal mining (mainly for gems) in Africa and Asia, the projects have almost all involved Latin America. This emphasis is not surprising: IDRC's program in South America focuses on the Andean countries, and this region is, perhaps more than any other in the world, dependent on mining for economic health. This focus is likely to continue. As this book appears, IDRC is conducting an inventory of research and researchers on mining and environment in the continent. From this, it is hoped that a long-term strategy for a coordinated program of research, probably focusing on ecosystem health, will emerge. (Ecosystem health is a new approach that links the effects on human health that stem from adverse anthropogenic changes to the natural environment.) The objective would be to determine what changes in government or corporate policies and what forms of community involvement in decision making would do most to protect local and regional ecosystems and, therefore, human health.
For the time being, however, what is needed is analytically sound documentation of the extent and the effects of recent changes in the business environment, as reflected in corporate behaviour and government policy. This is done very effectively, and for a wide range of corporations and conditions, in this first book from MERN.
David B. Brooks
Chief Scientist
International Development Research Centre
Ottawa, Canada
This page intentionally left blank
The editor would like to extend particular thanks to Lisa Eisen, whose tireless and diligent editorial work was vital in preparing these chapters for publication. Special thanks are also due to Yvette Haine and Gavin Bridge for their help with the original manuscript. This book reflects the insight and hard work of many researchers and affiliates of the Mining and Environment Research Network (MERN) whose comments during MERN's annual research meetings contributed to the research contained within these pages. Finally, sincere thanks go to the staff of the International Development Research Centre, particularly to David Brooks, Bill Carman, Brent Herbert Copley, Amitav Rath, and Ann Whyte, for their hard work, from project development to completion.
This page intentionally left blank
This book describes a process of building research capacity in the area of mining and the environment. This process began in the mid-1980s in Latin America, when a number of policy researchers — working together within International Development Research Centre (IDRC)-supported projects on issues of competitiveness, production efficiency, and technological change — began observing a noticeable association between production inefficiencies and environmental damage.
This was at a time when countries such as Bolivia, Brazil, Chile, and Peru either had a poorly developed or nonexistent environmental regulatory regime or lacked the institutional capacity to implement environmental policy. An early observation, examined in detail in this book, was that environmental regulation seemed to fail as the prime determinant of good environmental practice. Environmental performance of firms seemed to differ as much within one regulatory regime as between different regulatory regimes. These observations suggested the need for empirical research at the firm and plant levels, both to describe the environmental practices observed and to check these against the types of operations, vintages of technology, and competitive situations of the minerals sectors of the Americas. Our rationale was to learn how to improve public policies and corporate strategies for the environment.
This research was unfolding in two interrelated contexts. First, many mineral-producing countries were entering a period of economic liberalization, with privatization of previously state-owned mining companies and investment regimes opening up to attract international mining firms. Second, an environmental imperative was fast emerging, with increasingly stringent environmental regulations; growing voice-of-society concerns; environmental conditions often being attached to credit and insurance for new or expanding mining operations; and environmental pressures appearing throughout the supply chain, as industry was increasingly demanding that its suppliers meet new environmental standards. It is also important to recognize that this research was conducted in the early 1990s, when the importance of such diagnostic work was first recognized and we urgently needed descriptive analysis to be able to draw policy lessons.
A collaborative framework was devised to undertake this research, and proposals for its funding were submitted to a number of key agencies with portfolios in environment and development. Seed funding from the Organisation for Economic Co-operation and Development (OECD) Development Centre and the Overseas Development Administration made it possible, in 1991, to establish the Mining and Environment Research Network (MERN), a collaborative project involving researchers from the following institutions: the University of São Paulo and the Centre for Mineral Technology (Centro de Tecnología Mineral) in Brazil; the Institute for Research on Public Health (Instituto de Salud Popular) and the Catholic University of Peru (Pontificia Universidad de la Católica del Perú) in Lima, Peru; the Centre for Studies in Mining and Development (Centro de Estudios Mineria y Desarrollo) in La Paz, Bolivia; and the Centre for Studies of Copper and Mining (Centra de Estudios del Cobre y de la Mineria) in Santiago, Chile. The collaborative research project developed and won the prestigious John D. and Catherine T. MacArthur Foundation Collaborative Studies competition in 1991. Together with complementary funding for the Bolivia project from IDRC, this launched the first phase of MERN, which is the subject of this book. MERN fast expanded to include a range of different types of interdisciplinary centres of excellence in mineral-producing developing and industrialized countries. The current list of members is summarized by institution and country in Table 1.
From the outset, MERN aimed to provide research analysis to inform environmental public policy and to help mining companies achieve environmental compliance and improve competitiveness in the context of growing environmental regulation and technological innovation (see Box 1). The international collaborative research program first set out to examine the relationship between environmental regulation, technical change, and competitiveness in the nonferrous-minerals industry. In particular, it investigated how the process of technological innovation and organizational change could be harnessed to prevent environmental degradation while enhancing productivity and sustainability.
The rationale for the international focus of the research effort, in the developing and industrialized countries, was the need to learn from the experience of more competitive and environmentally proactive firms while focusing on the challenges of achieving environmental best practice in each participating country. The reason for adopting a network approach, as opposed to working independently, was to build up an international pool of interdisciplinary research competence. In other words, research capacity-building was a goal of the network from the outset.
A number of environmental concerns made us decide to work collaboratively toward our research objectives. Our early research profiles were all in the area of minerals policy and technological change in the mining sector and in the countries where we worked; many of us had done field work in the Andean region. We were all increasingly observing environmental damage associated with minerals extraction or processing activities: Figure 1 shows the relationships between the mining process, its waste products, and the hazards they present. This relates to environmental impacts affecting the three environmental media of land, water, and air, as well as the effects on local communities. Although in each country and at each mine site, environmental damage differed, some common explanatory factors seemed to emerge. Some of these, we immediately recognized, flew in the face of conventional wisdom. Conventional wisdom maintains the pollution-haven thesis that suggests international firms locate their production activities where they can most easily externalize the environmental-damage costs of their
production, that is, in developing countries where environmental regulations are either limited or poorly enforced. However, an early, common observation explored in these studies was that environmental damage was not evenly distributed within the minerals sector of each developing country studied but that seemed to vary according to a number of other factors, such as type of mineral; vintage of technology; stage of investment; stage of operation; level of integration; effectiveness of environmental regulation and its enforcement; and socioeconomic context (including poverty in local communities and work-force education and training). Most of all, environmental performance varied according to the firm's inherent technological dynamism.
These studies are therefore unique in refusing to accept a priori conventional wisdom and seeking to investigate actual environmental performance and its determinants at the mine site and across a range of site-specific factors.
The intellectual benefits of working together in a network and collaborating across a range of research and dissemination activities were greater than they would have been as the sum of the efforts of each institution working alone. Our
Figure 1. The mining process and the environment. Source: Warhurst (1991a).
networking activities included the coordination of our efforts through an electronic database and information system. As we grew from an initial 6 institutions to 56, luckily so did information technology grow in sophistication. We now do most of our networking activities via electronic communication. The network produces a bulletin twice annually, and this contains progress reports from each group, policy updates, industry news, professional articles, and a conference calendar. We recently completed Bulletin No. 10; collectively, the bulletins record MERN's growth over the years.
Once a year, MERN meets for a research workshop on a theme-by-theme basis. Workshop themes have included mining and sustainable development; pollution prevention, risk, and responsibility; planning for closure; and best practice in the management of mining's ecological impacts. Each workshop includes special sessions for research feedback and dissemination. Each of the chapters of this book went through such a peer-review process.
Finally, competence-building was absolutely paramount in this research process — these research studies were also undertaken as an education and training exercise. Two of the researchers who contributed chapters to this book, Maria Hanai and Fernando Loayza, were awarded PhDs for their work. All the researchers, including the editor, Alyson Warhurst, built on the network-research experience to develop their research programs. Each has now achieved either promotion within an existing role or a new position of decision-making responsibility relating to minerals development in their countries.
It remains to briefly review each chapter and describe the perspectives of the authors on these emerging themes in mining and the environment.
In Chapter 1, Alyson Warhurst develops a framework for the analysis of the case studies of environmental practices. Building on her training in the Earth sciences and in policy research, she describes the characteristics of dynamic firms that innovate to prevent pollution rather than reducing it after it has occurred. She analyzes these cases from the perspective of companies' strategies to externalize and internalize the environmental-damage costs of their production. Dynamic firms are those that not only internalize the environmental-damage costs of their production in response to the environmental imperative but also innovate to reduce their direct production and future abatement costs and so diminish the environmental-economic trade-off that conventional economic theory regards as the constraint on environmental progress. She then uses these findings to analyze changes in environmental-regulation approaches. A paradigm shift is occurring from command-and-control environmental regulations to ensure the polluter pays to environmental regulations governed by the principle that pollution prevention pays. However, Warhurst concludes that current policy mechanisms fail to promote technological and organizational change within firms to ensure pollution is prevented from the outset. She recommends broadening the range of regulatory mechanisms and making the technology-policy mechanisms and economic instruments needed to support them combine both regulation and promotion of industrial development. This new approach she terms environmental innovation.
In Chapter 2, Juanita Gana draws on her training in Chile as an engineer and her postgraduate training in the United States in minerals economics to examine the US experience of developing regulatory approaches in the minerals sector. She investigates waste disposal and the control of SO2 emissions and concludes that even US environmental policy is still very much in the trial-and-error phase and that solutions to environmental threats are constrained by our lack of scientific knowledge about the ecosystem and the impacts of human activities like mining. Gana ends by drawing some lessons for Chile US from experience. She concludes that, particularly in a developing country, cost-effective policies are crucial and that site-specificity should be examined to ensure that regulations are relevant to the site-specific pollution hazards. She argues for the ecoregional administrative approach to economic policy and therefore to environmental regulation in Chile and for a case-by-case approach to negotiating site-specific environmental controls. Gana highlights Chile's potential to learn from the mistakes and failures of other regulatory regimes and to begin its efforts with more appropriate environmental-policy objectives.
In Chapter 3, Gustavo Lagos, an engineering specialist in the mining industry, and Patricio Velasco develop these ideas through an analysis of environmental policies and practices in Chilean mining. They trace the environmental impacts of mining in Chile back to colonial times but recognize that environmental problems became more acute during the 1980s because of the growth of mining. A progressive impoverishment of ore grades was leading to increasing volumes of metallic impurities in tailings from processing plants and in smelter-feed material. Public awareness in Chile and international concern about environmental impacts also grew during the 1980s. Lagos's earlier research identified SO2 and particulate emissions from the country's six smelters as the key sources of pollution, followed closely by leakages from tailing dams and leaching operations, resulting in river and sea contamination.
Because of the lack of previous research in Chile on environmental pollution from mining and its policy, Lagos and Velasco's study mainly describes and identifies practices, trends, and policy issues. A major part of their analysis focuses on the very diverse environmental criteria adopted by different regional agencies and ministries and the diverse approaches adopted by the regulatory authorities to state, national private, and international operations. The authors report that several international mining firms adopted environmental practices in advance of legislated norms and institutional recommendations. But the state-owned companies face massive challenges in dealing with their sins of the past, in terms of accumulated environmental problems, combined with other factors such as the state companies' history, culture, and resource constraints.
The authors also report that consensus is more commonly obtained in other spheres of Chile's political, economic, and social development, such as in industrial development and the role of the private sector, than in environmental policy. Apparently, some people believe that sacrifices in the quality of the environment are needed to achieve fast economic development. Lagos and Velasco expect that environmental-management standards will be achieved before air-emission standards because the former are less dependent on capital investment. However, Congress now supports the new Environmental Framework Legislation, and the authors report that 1990 was a watershed for public companies' setting realistic and effective regulatory goals.
In Chapter 4, Alfredo Núñez-Barriga, a mining engineer with training in development studies, examines the range of environmental problems of the diverse mining industry in Peru and investigates their site-specific and policy-related factors. He concludes that ownership — private, domestic, foreign, or state — is not a key explanatory factor in environmental performance, whereas the time in operation or, as he calls it, the "longevity of production capabilities," is. Centromin Perú S.A., which is more than 100 years old and has experienced periods of foreign and state ownership, illustrates this well.
Núñez-Barriga also argues that the vintage of technology is a key factor: the older the technology the greater the pollution problem is likely to be and the more radical and costly the solutions for those pollution problems are likely to be. Núñez-Barriga also reports that size of the firm fails to explain poor environmental practice, if pollution per unit of production is considered. Núñez-Barriga makes some interesting remarks regarding the relationship between mineralogical complexity and environmental pollution. He argues that there are barriers to the acquisition and transfer of clean technology that relate to the polymetallic nature of many Peruvian mineral ores.
This Peruvian case study illustrates the recent but growing environmental awareness of the country's main production enterprises across a range of minerals and regions. Most important, it highlights that change" has come about through industry and state collaboration, rather than through government imposition of unrealistic regulations, with costly compliance and potential bankruptcy for some firms. Under the new legislative regime, most companies have developed site-specific environmental management and adequation programs. However, Núñez-Barriga reports that the mining industry in Peru tends to rely on established, external consultants to undertake environmental assessments and the planning of environmental-impact-mitigation measures, even where local capacity for this exists.
In Chapter 5, Maria Hanai, a sociologist, compares the economic roles of formal and garimpo gold mining in Brazil. She analyzes their environmental impacts and draws lessons for their mitigation. Hanai highlights the economic importance of the garimpo sector during the 1980s and its decline relative to formal gold mining during the 1990s, with garimpo mining supplying about 75% of gold production in the late 1980s and less than 50% in the early 1990s.
Hanai examines relationships among gold-mining techniques and their environmental implications. Small-scale garimpo mining is particularly polluting, with the hazards of mercury use and frequent large-scale land and watercourse degradation. Notwithstanding, she reports a fundamental link apparent throughout South America between poverty, or socioeconomic context, and environmental practice. This appears in the constraints these miners face acquiring credit to invest in improved technologies and in the lack of opportunities for education that also inhibits their adoption of improved environmental-management practices.
Hanai makes some policy recommendation as a basis for further research. These include technology-policy initiatives for education and innovation incentives for garimpo mining, as well as the adaptation of mining legislation to incorporate garimpo gold production.
In Chapter 6, Teresinha Andrade, a minerals-technology researcher, examines the environmental issues in Brazilian tin production. She also describes an industry divided between garimpos producers and mining companies and analyzes the different environmental problems with each type of production. By relating them to evolving environmental legislation, she identifies areas of potential convergence and conflict in the future relationship of tin mining to the environment. She reports that the industry is under pressure and has few resources for environmental concerns. Because of the low price of tin on the international market following its price collapse in the 1980s and because of competition from cheaper tin from China, the Brazilian tin industry has difficulty implementing the new environment-recovery plans and, for the most part, concentrates on the remediation of land degraded through past tin mining in response to regulatory pressures, rather than proactively responding to societal pressures.
Andrade comments that the most serious pollution problem is nonpoint-source pollution across mining regions, such as the silting up of large tracts of rivers. Scientists are reporting irreversible ecological degradation, the modification of gene banks and profiles of animal and plant life, changes to the soil structure, and new incidences of pests and disease. Andrade notes that current environmental legislation is retrospective and focuses on cleaning up existing pollution with current technology. She recommends emphasizing policy mechanisms to stimulate pollution prevention from the outset by providing incentives for technological and organizational change. On the basis of her interviews, she argues that this would be more attractive to mining companies, and she argues that a more democratic and regional approach to developing environmental policies is needed to find integrated and lasting solutions to the environmental impacts of Brazilian tin mining.
Liliana Acero reports, in Chapter 7, on the bauxite, alumina, and aluminum industry in Brazil. Her objectives are to document various companies' managerial approaches to the environment; to relate these practices to recent laws and regulations regarding environmental controls and planning; to measure and illustrate changes in the ways companies' environmental practices respond to specific new environmental legislation; and to describe some of the environmental effects experienced by local communities. Acero argues that regulating the environmental practices of transnational bauxite, alumina, and aluminum producers, either locally or in their home countries, is a necessary but not sufficient condition for effectively implementing sound environmental policy at the operational level. She finds that some regulations are adhered to more systematically than others and that this relates more to the economic benefits that accrue to the company than to either government or societal pressures, unless the environmental problem is very visible and has triggered a specific public response. Acero attributes some environmentally proficient practices of some transnational firms to their greater technological capacity and financial resources, although some transnational operations are not at the forefront of environmental proficiency in Brazil. She favours the strategy of Companñía Vale do Rio Doce S.A. (the state mineral producer) for reforesting and rehabilitating mined lands, which she argues is superior to the strategies of the international firms. Acero also describes lag phases in local implementation of practices already adopted in the companies' more stringently regulated home countries. She describes loopholes in local laws and regulations, along with failures in their effective implementation, which means that companies need to be proactive to achieve sound environmental track records. Acero concludes that environmental soundness depends not only on effective environmental regulation and efficient technical choices but also on the institutional context; the support, if any, given to environmental policies; and having the educational capacity and political interests needed to operationalize the law. Without the latter, Acero asserts, neither regulation nor technical or managerial solutions are sufficient to achieve truly environmentally sensitive minerals production.
Finally, in Chapter 8, Fernando Loayza analyzes, from a minerals-economics perspective, the links between competitiveness, environmental performance, and technical change in the Bolivian mining industry. He develops a dynamic economic model of the mining firm, which is empirically tested in a multiple-case study of four Bolivian mining companies and seven mining operations. This model combines an economic theory of depletion and a theory of pollution and relates investment behaviour to pollution per unit of output. It starts from the assumptions that companies compete through technical change and that competitive companies can increase their production capacity and technological capability over time.
The significance of Loayza's study is its theoretical and empirical demonstration of how mining firms' dynamic efficiency affects the internalization of environmental-damage costs. Dynamic efficiency — the ability to innovate and gain economies of scale — is not only a significant influence on a firm's ability to compete but also a principal determinant of its environmental performance. Because increased competitiveness encourages investment in technological capability and production capacity, an improvement in competitiveness tends to reduce pollution per unit of output, whereas a decline in competitiveness tends to increase pollution per unit of output. Thus, Loayza's analysis illustrates how pollution results not only from a market failure to adequately price environmental resources but also from a lack of dynamic efficiency within firms. The implication for environmental policy is that regulatory initiatives to reduce pollution should both consider mechanisms to make firms internalize externalities and address the inefficiencies of some firms, along with the dynamic capacities of others. Policy mechanisms should promote both environmental proficiency and economic efficiency.
The methodology of Loayza's study justifies applying its conclusions beyond Bolivia to other mineral-producing countries.
On a final note, the environmental imperative has been gaining momentum in recent years, along with the liberalization policies of Bolivia, Brazil, Chile, and Peru. Therefore, by the time these studies are published, some of the regulatory initiatives they describe may be out of date. Readers are therefore urged to view this book not only for the information it contains but also for its value as an historical document that, through empirical investigation, challenged some of the conventional wisdom that surrounded the dawn of the environmental imperative.
It should also be seen as a record of a process of research and education that in turn highlights the advantages of working together across both disciplines and national boundaries to ensure that future paths are forged to more environmentally sustainable development. We hope that MERN has contribute to ensuring a more sustainable future.
More than two decades ago, the famous "Report to the Club of Rome: The Limits to Growth" (Meadows et al. 1972) predicted that the principal problem facing the world would be the depletion of nonrenewable resources, notably fossil fuels and metals. It was projected that tin, for example, would run out in 1987. However, that year saw an oversupply problem in tin markets, and several mines closed. Indeed, with technical change, recycling, and the discovery of new oil and mineral reserves, those predictions have proven to be false. The Meadows et al. report stimulated a lively debate. For example, the Science Policy Research Unit (United Kingdom) argued that institutional change and a change in the world research and development (R&D) system, and therefore in the rate and direction of technical change, could avert the predicted crisis (Cole et al. 1973; Freeman and Jahoda 1978).
In the last decade, the environmental debate has focused on the depletion and degradation of renewable resources, such as water and air. Consequently, the term sustainable development has been used to reflect a growing concern about the interaction between economic activity and the quality of the environment. The 1987 Brundtland Report, of the World Commission on Environment and Development, defined sustainable development as "development that meets the needs of the present without compromising the ability of future generations to meet their
1 The author gratefully acknowledges Shirley Crawford and Gill Partridge for kindly assisting with the preparation of this paper and Kathleen Anderson, Rod Eggert, and Richard Isnor for providing reference materials and feedback. The empirical research was supported by a grant to the Mining and Environment Research Network from the John D. and Catherine T. MacArthur Foundation. Parts of this paper build on a more detailed study, Environmental Degradation from Mining and Mineral Processing in Developing Countries: Corporate Responses and National Policies (Warhurst 1994), published by the Organisation for Economic Co-operation and Development.
own needs" (WCED 1987, p. 43). This implies that economic policy should encompass environmental conservation and that the goal of more equitable economic growth refers to both intergenerational and geographic equity (Jacobs 1991).
Leaders of the G7 (group of seven leading industrialized nations) adopted the principle of sustainable development at the Toronto Summit in 1988 (Jacobs 1990, p. 59), and the 1992 Earth Summit in Rio de Janeiro heralded a more global commitment to its aims. However, the widespread adoption of the principle by policymakers, academics, industrialists, and environmentalists has not yet led to a systematic effort to make it operational through measurable policy targets or policy mechanisms for implementation. Nonetheless, regulation is slowly moving in this direction.
Previous policy, guided by the polluter-pays principle, dealt mainly with the results of environmental mismanagement — pollution — and its treatment after it occurred. The new regulatory principle — pollution prevention pays — aims to promote competitive and environmentally sustainable industrial production. This paper argues that successful implementation of the pollution-prevention principle will require the introduction of new policy mechanisms designed to both stimulate technological innovation in firms and encourage the commercialization and diffusion of those innovations across the boundaries of firms and nations. This means that government efforts to promote and regulate industry, which have traditionally been separate efforts, will need to be combined (Warhurst 1994).
This paper analyzes the challenge to policymakers posed by pollution-prevention approaches to environmental management. It develops the concept of corporate environmental trajectories for evaluating the relationship between regulatory regime and competitiveness and the implications for sustainable development. It then discusses policy mechanisms that may be used to stimulate the development and diffusion of clean technology. (The term clean technology is used here to refer to industrial processes that incorporate current best practice into environmental management. The term is not intended literally; indeed, a more accurate term would be cleaner technology.) Case studies of mining operations around the world, drawn from the research of the Mining and Environment Research Network (MERN), are used to illustrate these arguments. (The term mining is used here to cover all aspects of metals production, including mine development, extraction, smelting, re-mining, and waste management.) The paper shows how policy guided by the pollution-prevention principle represents an advance over previous policies guided by the polluter-pays principle. However, the paper highlights two flaws in pollution-prevention regulatory approaches: first, the firms that pollute the most are mismanaging the environment precisely because of their inability to innovate; second, the most efficient firms are generally better environmental managers because they are innovators and are able to harness both technological and organizational change to reduce the production and environmental costs of their operations. The paper concludes by suggesting a new policy principle: environmental innovation.
This analysis recognizes that mining is a highly heterogeneous activity and that winning metals requires the removal and processing of vast quantities of rock (Winters and Marshall 1991; Tilton 1992). Some pollution can clearly be prevented, and the inevitable by-products of mining can be treated, recovered, or recycled. Radical technological and organizational innovation can change the broader context of metals production and the resulting pollution.
Although improving the environmental management of the mining industry production is the primary focus of this paper, the author recognizes that this is only one objective of sustainable development. Policy also needs to address poverty, education, health and welfare, the agricultural sector, and rural development. Nonetheless, the analysis may have implications for other industries for which institutional change, technology transfer, and training are requirements for sustainable development.
To meet the pollution-prevention principle requirement that pollution be reduced at source, firms must either change their technology or reorganize their production process, or both. To accomplish this, firms may need to develop new technological and managerial capabilities, form technological alliances with equipment suppliers, and collaborate with R&D institutions, which may in turn require policy mechanisms not currently part of pollution-prevention thinking.
The reasons for this are rooted in the determinants of environmental-management practices in the firm. Indeed, MERN's research suggests that the environmental performance of a mining enterprise is more closely related to its innovative capacity than to the regulatory regime under which it operates (Lagos 1992; Acero 1993; Lin 1993; Loayza 1993; Warhurst 1994). Capacity to innovate is in turn related to the entrepreneurial characteristics of the firm's management; to the firm's access to capital, technological resources, and skills; and to the broader policy and economic environment in which the firm operates. This suggests that technical change that is stimulated by the environmental imperative reduces both production and environmental costs, to the advantage of those dynamic companies with the competence and resources to innovate. Such companies include mining enterprises in developing countries as well as transnational firms. However, the evidence is strongest for large, new investment projects and greenfield sites. In older, ongoing operations, environmental performance correlates closely with production efficiency, and environmental degradation is greatest in operations working with obsolete technology, limited capital, and poor human-resource management. Developing the technological and managerial capabilities needed to bring about technical change in such organizations would clearly lead to more efficient use of energy and chemical reagents and to higher levels of metals recovery. Thus, improved production efficiency would result in improved overall environmental management, including better workplace health and safety.
International standards and stricter environmental regulations may pose no significant economic problems for new mineral projects, but major costs and challenges may be involved for older, inefficient operations. Controlling pollution problems in many of these cases requires costly add-on solutions: building water-treatment plants, strengthening and rebuilding tailings dams, investing in scrubbers and dust precipitators, etc. Furthermore, in the absence of technological and managerial capabilities, there is no guarantee that pollution-control equipment — environmental hardware — will be incorporated or operated effectively in the production process. Crandall (1983) found that a significant fraction of mandated pollution-control equipment was never even installed. In some instances, regulatory requirements are leading to shutdowns, delays, cancellations, and reduced competitiveness. When mines and facilities shut down, the cleanup costs are frequently transferred to the public sector, which, particularly in developing countries, has neither the resources nor the technical capacity to deal effectively with the resulting problems. In most countries (except perhaps the United States), the lack of retrospective regulation means that the pollutee-suffers-and-pays principle is alive and well and would continue under a pollution-prevention regime, unless, of course, the new policy fosters improved production efficiency and stimulates innovative capacity.
Although some mining companies have resisted environmental regulation of their existing operations, a growing number of dynamic, innovative companies are making new investments in environmental management. This is partly because these firms see an evolution toward stricter environmental regulation and because pushing forward the environmental and technological frontiers is to their competitive advantage. Being free of investments sunk in pollutant-producing, obsolete technology or having significant resources for R&D and technology acquisition, these firms develop cleaner process alternatives or select new or improved technologies from mining-equipment suppliers (who are themselves busy innovating). New investment projects increasingly incorporate economic and environmental efficiencies into the production process, not just through new plants or equipment but also through improved management and organizational practices. Some examples of dynamic environmental innovators are discussed below in three categories: smelter emissions, gold extraction, and waste management.
INCO LTD — At one time one of the world's highest-cost nickel producers, Inco Ltd was until recently the greatest single point source of environmental pollution in North America. This was due to its aged and inefficient reverberatory-furnace smelter, which emitted excessive quantities of SO2. Inco had done all it could to improve the efficiency of this obsolete technology through incremental technical change when the Ontario Ministry of Environment introduced an intensive SO2-abatement program to control acid rain. These factors prompted Inco to invest more than $3 billion in a massive R&D and technological innovation program (Aitken, personal communication, 19902). Indeed, more than 12% of Inco's capital spending during the 1980s and early 1990s was for environmental concerns (Coppel 1992). Under the Canadian acid-rain-control program, Inco was required to reduce SO2 emissions from its Sudbury smelter complex from 685 000 t/year to 265 000 t/year by 1994, a 60% reduction. To achieve this reduction, Inco planned to spend $69 million to modernize its milling and concentrating operations and $425 million for smelter-SO2 abatement. The modernization process included replacement of its reverberatory furnaces with innovative oxygen-flash smelters and the construction of a new sulfuric acid recovery plant and an additional oxygen plant. By incorporating two of the flash smelters, the company reduced emissions by more than 100000 t in 1992, and by 1994 the firm expected to achieve the government target levels. Inco is now one of the world's lowest-cost nickel producers (Warhurst and Bridge 1997). Furthermore, like other dynamic companies responding to environmental regulations through innovation, Inco seeks to recoup R&D costs by aggressively licencing its technology to firms in other copper- and nickel-processing countries.
KENNECOTT CORPORATION (UTAH) — Kennecott Corporation (RTZ Group) recently launched a new smelter project in Utah. The dual aim of the project is to set a new emissions standard for smelters worldwide and to improve cost efficiencies in the processing of its ore. Advantages include the capture of 99.9% of sulfur off-gases (previous levels were 93%). Sulfur dioxide emissions will be reduced to a new world-best-practice level of about 200 lb/h (1 lb = 0.454 kg),
2 R. Aitken, Inco Ltd, personal communication, 1990.
less than 5% of the 4600 lb/h permitted under Utah's clean-air plan. The investment of 880 million United States dollars (USD) resulted in 3 300 new construction jobs and the transfer of 480 million USD to local companies through project-development contracts. The proposed Garfield smelter will expand the copper-concentrate-processing capability to the level of mine output (about 1 × 106 t of copper concentrate per annum) at about half the previous operating cost. It represents the first application of oxygen-flash technology in the conversion of copper matte to blister. (Details are from Kennecott Corporation [1992] and Emery [personal communication, 19923].) The two-step copper-smelting process starts with smelting furnaces, which separate the copper from iron and other impurities in a molten bath, followed by converting furnaces, which remove sulfur from the molten copper. A new technology, known as flash converting, will be used in the second step.
Kennecott developed this unique technology in cooperation with Outo-kumpu, a Finnish company and a leader in the supply of smelting technology. Essentially, the new technology eliminates open-air transfer of molten metals and substitutes a totally enclosed process. Flash converting has two basic effects: it allows for a larger capture of gases than the current open-air process; and it allows the smelter's primary pollution-control device — the acid plant — to operate more efficiently.
The smelter will include double-contact acid-plant technology that will improve the capture of SO2 gases as acid. The new smelter will have other environmental benefits. An extensive recycling plan will reduce water usage by a factor of four. Pollution prevention, workplace safety and hygiene, and waste minimization will be incorporated in all aspects of the design. In addition, the smelter will generate 85% of its own electrical energy by using steam recovered from the furnace gases and emission-control equipment. This eliminates the need to burn additional fossil fuel for power. The new facility will require only 25% of the electrical power and natural gas now used per tonne of copper produced.
HOMESTAKE'S MCLAUGHLIN GOLD MINE (CALIFORNIA) — Opened in 1988, Homestake's McLaughlin gold mine is a good example of a mine and processing facility designed, constructed, and operated under the world's strictest environmental regime (see Warhurst 1992c). Environmental efficiency is built into every aspect of the mining process. The McLaughlin site is notable for its innovative process-design criteria, its fail-safe tailings and waste-disposal systems, and its
3 A. Emery, technical executive, RTZ Group, personal communication, 1992.
extensive, ongoing mine-rehabilitation and environmental-monitoring systems. The mining operation, with its myriad of innovative technologies, defines best practice in environmental management.
The most interesting conclusion drawn from site visits and discussions with the firm's environmental officers is that most of these environmental-management initiatives have resulted in no substantial extra cost; indeed, many have improved the efficiency of the mine and made the overall operation more economical. An extensive environmental-impact analysis was undertaken before the mining started. All plant and animal species were identified and relocated in readiness for site rehabilitation once the mining operations end. Air, soil, and water quality were measured in detail and water-flow patterns were determined to provide the baseline for future monitoring programs. Assaying was done not just of the gold ore but also of the different types of gangue material so that waste of different chemical compositions could be mined selectively and dumped in specific combinations to reduce acid mine drainage. Local climatic conditions were evaluated to determine the frequency of water spraying needed to reduce dust; evaporation rates were evaluated to assist in water conservation and to determine the flood-risk potentials of tailings ponds. The tailings ponds were constructed on specially layered, impermeable natural and artificial filters, with high banking to prevent overflow and with secondary impermeable collecting ponds for use in the rare case of flooding.
At many other mining projects, site rehabilitation is seen as a costly task to be undertaken at the end of a mining operation, but at the McLaughlin gold mine rehabilitation began immediately and is an ongoing activity. This not only spreads expenditure more evenly over the life of the mine but also allows more efficient use of truck and earth-moving capacity and of construction personnel. When waste piles reach a certain size, soil (overburden previously stripped from the mine area and stored) is laid down and revegetation begins. Although mining at McLaughlin had been under way for only 3 years at the time of writing, extensive areas of overburden and waste had already been successfully re vegetated, immediately reducing environmental degradation and negative visual impacts. In addition to these in-built environmental controls, Homestake has sophisticated environmental monitoring in place. Seepages, emission irregularities, and wildlife and vegetation effects can be detected and rectified immediately, reducing the long-term risk of expensive shutdowns, costly court cases (for water toxicity, for example), and the need for treatment technologies.
In the minerals industry, marginal-ore dumps, tailings, and the removal of overburden result in considerable quantities of waste rock (Gray 1993). Any toxicity associated with that waste is principally a direct result of the loss of expensive chemical reagents or of metal values. Public policy has not yet taken up the challenge of promoting R&D geared toward waste-toxicity reduction or waste-treatment innovations. One interesting area of research is the application of biotechnology to waste treatment (Warhurst 1991a).
The task of improving environmental-management practices within ongoing mining operations may not be adequately supported, however, if waste treatment is considered a third priority, below pollution prevention at source and recycling. (For an explanation of the federal approach to pollution prevention in the United States, see the chapter on pollution prevention in Environmental Quality: The 23rd Annual Report of the Council on Environmental Quality, Together with the President's Message to Congress [CEQ 1993].) This again suggests that pollution-prevention policy needs to focus on the environmental-innovation process, rather than strictly on pollution reduction at source.
The following two examples demonstrate how innovation can reduce pollution. The approach taken — the integration of waste management into the production process — does not always represent an add-on regulatory cost as perceived by conventional wisdom; indeed, there are competitive advantages, as well as environmental benefits, to using such a strategy.
WATER TREATMENT AT HOMESTAKE'S MINE AT LEAD (SOUTH DAKOTA) — Facing regulatory pressure to clean up a cyanide seepage problem, Homestake was able to turn the situation to its own advantage. Its R&D staff developed a proprietary biological technique for treating the effluent, which led to the recovery of local fisheries and water quality in the mine's vicinity at Lead, South Dakota (Whitlock and Crouch 1990). To recoup and profit from its investment in R&D, the company is now actively commercializing the technology, which could be widely applied at other gold-leaching plants.
WATER TREATMENT AT EXXON'S MINE AT LOS BRONCES (CHILE) — Exxon is expanding its mining project at Los Bronces, Chile, into one of the largest open-pit copper mines in the world. The expansion will result in the stripping off of very large quantities of overburden and in the creation of low-grade ore dumps. Before the mine was developed, the Chilean government warned Exxon that it would be imposing financial penalties for the water-treatment costs for the expected acid mine drainage into the Mantaro River, the source of Santiago's drinking water.
This warning became the economic justification for a bacterial-leaching project at the mine. A feasibility study showed how profitable it can be to leach copper from waste at the same time as preventing otherwise naturally occurring pollution (acid mine drainage). More than 1 × 109 t of waste and marginal ore below the 0.6% Cu cut-off grade is expected to be dumped during the project's life span. The waste could have an average grade of 0.25% Cu and would therefore contain a lucrative 2.5 × 106 t of metal, worth about 3.5 billion USD at 1985 prices (Warhurst 1990). The study demonstrated that with a 25% recovery rate, high-quality cathode copper could be produced profitably at 0.39 USD/lb by recycling mine- and dump-drainage waters through the dumps over a 20-year period.
This was shown to have the double advantage of extracting extra copper and avoiding government charges for water treatment. Both investment and operating costs were less than two-thirds of estimated costs for a conventional water-treatment plant, which would not have generated saleable copper. The Los Bronces mine demonstrates the potential economical benefits of building environmental controls into a mine at its development.
These few examples suggest that dynamic companies are not closing down, reinvesting elsewhere, or exporting pollution to developing countries with less-restrictive regulatory regimes. Rather, these companies are adapting to environmental regulatory pressures by innovating, improving, and commercializing their environmental technology and environmental-management practices, at home and abroad.
Environmental regulation is frequently seen as a way to distribute the environmental costs of industrial production. Its aim is to shift the cost burden of environmental mismanagement from the pollutee to the polluter.
According to conventional wisdom, two types of costs are incurred in industrial production (Tilton 1992): the internal costs of labour, capital, and material inputs, which the company pays; and the external costs of environmental damage, such as ecological degradation, water pollution, and air contamination, which the company does not pay. This analysis runs the danger of assuming that a fixed cost is associated with each increment of pollution and that the reduction of this cost burden to society will result in a corresponding incremental increase in the firm's production costs. Tilton (1992) described this view clearly in his account of the
Figure 1. The marginal social costs (MSC) and marginal social benefits (MSB) of pollution.
Source: Tilton (1992).
relationship between the marginal social benefits (MSB) and marginal social costs (MSC) of industrial production, with pollution as an externality (Figure 1). The argument rests on the assumption that the socially optimal use of an environmental resource occurs when the additional benefits (in terms of goods and services it derives by permitting one more unit of pollution) equal the additional costs it incurs. In economic terms, this is the point at which MSB = MSC. If all social costs and benefits of pollution are incurred or internalized by the producing firm, the firm will have an incentive to pollute only up to this optimal point (Po). However, if the firm realizes all the benefits associated with pollution, but not the costs, it has an incentive to expand its production until the additional benefits from causing a further unit of pollution are equal to zero. Note that in this circumstance, pollution has reached Pa, which is far beyond the optimal point, Po.
The cost burden of this falls on society. Indirectly the pollutee pays, although the state may absorb these costs to a degree. Furthermore, as consumers do not pay the full social costs of production, pollution-intensive goods are usually underpriced and, consequently, overproduced and overconsumed. It is then argued that this situation can lead to production inefficiencies because "free" environmental resources may be substituted for labour, equipment, and other inputs (for which the firm must pay). For example, a firm may engage in the excessive and damaging use of water resources, rather than incorporating a treatment and recycling plant for effluent. This in turn reduces the entrepreneurial capacity of the firm and, most importantly, acts as a disincentive to innovate. Such a sequence of events explains in part the decline of Bolivia's state mining company, Corporación Minera de Bolivia (Comibol), and its related mismanagement of the environment (Jordan and Warhurst 1992; Loayza 1993). However, central to this idea is the assumption of a fixed environmental cost, to be either externalized or internalized. This paper challenges this assumption, arguing that technological change can reduce the environmental costs of production.
For policymakers, estimating the costs of natural-resource degradation associated with mineral exploitation is a complex task. The most significant problem is devising ways to share these costs among the polluter, state, and community. Such costs are high, particularly with old and ongoing operations.
In the past, environmental costs were largely measured in terms of remedial treatment of degraded water, investment in environmental-control technologies, or compensation for damage caused to local farmland by toxic dust. More recently, environmental costs have been estimated in terms of extensive rehabilitation of the former mine and plant site for alternative uses; such rehabilitation could include revegetation or the construction of leisure facilities (Kopp and Smith 1989). However, in developing countries, it has been argued, the mining industry has traditionally been structured to externalize such environmental costs so as to maximize profit — the industry appropriates undervalued resources and shifts the environmental costs to others, rather than improving efficiency and innovating.
When it comes to evaluating these costs, it should be remembered that those most affected by environmental pollution from mining in developing countries are generally those least able to understand and respond to it — remote miners' families or isolated rural communities. Responses are typically short term and nonsustainable. For example, when farmlands were ruined by pollution from the Karachipampa tin-volatilization plant in Bolivia, the peasants were offered small compensation payments covering only the loss of particular harvests, rather than the potential loss of their livelihoods. In contrast, in the United States, the fastest growing area of consultancy is in the assessment of liability for natural-resource damage — propelled by the Comprehensive Environmental Response, Compensation, and Liability Act and Superfund Amendment and Reauthorization Act, or "Superfund" laws, which apportion blame for environmental damage to any one of a mine's past owners and charge them with the cost of government contracts to clean up and rehabilitate the damaged site.
Inevitably, some environmental degradation results from mining. Although such pollution has a negative economic impact, it often presents unrealized economic opportunities — for firms, as well as for society. For example, toxic byproducts that could be economically reprocessed are frequently dumped instead. This is the case especially in developing countries, where inaccurate sampling or inefficient technologies result in such loss. Mining high-grade ore and dumping low-grade ore may be a short-term expediency for boosting foreign-exchange earnings in times of crisis, but it results in greater environmental degradation (higher risk of acid mine drainage from dumps) and the loss of long-term revenue. Water-treatment projects are often instigated at the time of mine closure, which is more costly than preventing acid mine drainage from the outset. Such pollution control could result in the recovery of metal values, through solvent-extraction or electrowinning techniques. Finally, some companies have had to pay the healthcare costs for communities that drink degraded water, which are in many cases greater that the cost of the technical change needed to treat the chemical effluent in the first place. Even if firms are forced to absorb some of the environmental costs of their operations in the long term, this does not necessarily translate into improved efficiency in the short term.
Considerable work is still needed to quantify the nature and extent of environmental degradation caused by metals production. Currently, only isolated case studies exist, and little systematic analysis of the problem has been undertaken. It is difficult to generalize because local geological, geographic, and climatic conditions affect mineral and ore chemistry, soil vulnerability, and drainage patterns and hence the extent of the environmental hazard. Furthermore, the degree of environmental hazard is affected by the social and economic organization of the production unit, including such factors as the firm's size, history, and ownership structure, as well as its propensity to innovate.
A combination of political, economic, and environmental elements has given rise to the polluter-pays principle, which in essence requires polluting companies to internalize the external costs of environmental damage caused by their production of goods and services. Member countries of the Organisation for Economic Cooperation and Development have endorsed this principle for many years, and the 1992 deliberations of the United Nations Conference on Environment and Development (UNCED) heralded commitment to its application on a more global scale.
The norm for environmental regulations incorporating the polluter-pays principle is for governments to set maximum permissible discharge levels or minimum levels of acceptable environmental quality. Such command-and-control mechanisms include Best Available Technology (BAT) standards (including Best Available Technology Not Entailing Excessive Costs standards), clean-water and clean-air acts, Superfund laws for determining cleanup and liability, and a range of site-specific permitting procedures, which tend to be the responsibility of local government within nationally approved regulatory regimes. Implementation and enforcement of command-and-control mechanisms tend to be the responsibility of administrative agencies and judicial systems. However, such polluter-pays regulations may not promote real reductions in environmental degradation or improve environmental management in metals production on a broad scale.
First, the polluter pays only if discovered and prosecuted. This requires technical skills and a sophisticated judicial system, often activated only after the pollution problem has become apparent and caused potentially irreversible damage. Moreover, in developing countries, serious economic and political constraints limit the implementation of environmental regulations and the penalization of polluters (Warhurst 1994). For these reasons, environmental regulations tend to address the symptoms of environmental mismanagement (pollution problems), rather than the causes (economic and technical constraints; lack of access to technology or information about better environmental-management practices). This neglect can be serious because for certain types of pollution, such as acid mine drainage, it is extremely costly and sometimes technically impossible to trace the cause and thus to rectify the problem and prevent its recurrence. Certain environmental controls may only work if incorporated into a project from the outset (such as buffer zones to protect against leaks under multitonnage leach pads and tailings ponds) or if combined with economic incentives.
Second, a plant may meet BAT standards at start-up without being able to achieve the specified effluent and emission levels throughout its life span. Technical problems may arise; cumulative production inefficiencies are not unusual; and the quality of concentrate or smelter feed may change if supply sources are changed. Moreover, the site-specific nature of mining operations has serious implications for monitoring, as technology has to be fine-tuned for each mineral deposit. It would also be erroneous for a regulatory authority to assume that standards are met simply because a preselected item of technology has been installed. Ongoing management and environmental practices at the plant are as important as technical hardware in achieving environmental best practice. Evidence from MERN research suggests that these problems are endemic to metals production in many developing countries (Núñez 1992; Hanai 1993; Loayza 1993; Warhurst 1994), where obsolete technology is widely used without modern environmental controls or safeguards. In the industrialized countries, new concentrators and roasting plants tend to be computerized. Automatic ore assaying and in-stream analysis give an accurate picture of the chemical composition of the ore feed, information that is needed for fine-tuning the pressure, heat, cooling, and environmental-control systems and for accurately predicting and monitoring emissions. However, where these controls are missing and, in particular, where ore feeds are of variable composition (in terms of, for example, sulfur, lead, and arsenic content), the pollutant effects of emissions also vary. Furthermore, pollution increases with the inefficient or excessive use of fossil fuels, particularly by poorly lagged roasters, inefficiently operated flotation units, and energy-intensive smelters. It could, therefore, be argued that command-and-control regulatory instruments are unlikely to result in a reduction of pollution, as they do not alter the capacity of a debt-ridden and obsolete mining enterprise (especially in developing countries) to implement technical change. Such a firm might find it preferable to risk detection, pay a fine, or mask its emission levels than to face bankruptcy from investing in new technology while its capital is scarce.
Third, BAT standards and environmental regulations of the polluter-pays type tend to presume that technology is static — they're based on a technology that was best at one time. Such regulations act as a disincentive for equipment suppliers, mining companies, and metal producers to innovate. Or perhaps they have innovated, but their innovations, which may have required substantial R&D resources, have been superseded by a regulatory authority's decision about what constitutes BAT for their activity. Ashford and Heaton (1979) described instances where the use of environmental innovations that were superior to the specified BAT was discouraged because the regulators were unfamiliar with their design or operation.
Regulations obliging the polluter to pay tend to lead to end-of-pipe, addon, or capital-intensive solutions (such as smelter scrubbers, water-treatment plants, and dust precipitators) for existing technology and work practices, rather than promoting alternative environmental-management systems and technological innovation. Moreover, if regulations are incremental, they may promote technical change that is also incremental, involving the addition of numerous new controls at greater cost and with more overall degradation than if a new, more radical change had been introduced in the first place (see Kemp and Soete 1990; Freeman 1992). Such regulations may also require specific reductions in pollution without regard to cost or local context. The regulations may refer to the chemical composition of an effluent in isolation, disregarding the site-specific precipitation, evaporation, or soil and geological conditions that affect the discharge rate and pattern.
Such regulations also result in a single-medium approach; consequently, firms may respond by shifting pollution from one medium to another (such as from emissions to effluent). An interesting example of this occurred at the Alean Ltd bauxite mine and alumina plant in Jamaica. Foreseeing impending environmental regulations and responding to public concerns in its home country (Canada), Alean gave support to a local university to develop an innovative solution for the disposal of red-mud sludge from the bauxite mining operations. Previously, the sludge had been dumped in a large catchment pond, but toxic seepages into surrounding soils and groundwater were reported. The university developed a process called red-mud stacking, which involves sun-drying to remove much of the moisture from the sludge and stacking of the material in much less obtrusive piles. However, this technology does not address the toxic seepage of the previously dumped slurries. Nor does it offer a solution to pollution per se because it replaces water pollution to a large extent with dust pollution, which is less stringently regulated. Moreover, a change in the production process to facilitate the recovery of caustic soda from the "mined" dry-mud stacks means that more of that chemical is discharged than with the previous method. The dust pollution, plus overflows from those parts of the dry-mud stacks that become waterlogged during tropical rain showers, presents a greater toxic hazard than the previous low-level seepages.
Also, industry may cooperate less with this regulatory approach because the rules are continually changing and the costs of complying are increasing. Finally, such regulations ignore the human-resource contribution to sound environmental management because they emphasize a specific pollution-control technology (environmental hardware), rather than training, managerial approaches, and information diffusion (environmental software).
TOWARD POLLUTION PREVENTION — Interest has been growing in the use of market-based mechanisms whereby polluters are charged for destructive use based on estimates of the damage caused. An important justification for market-based incentives is that they give companies greater freedom to choose how best to attain a given environmental standard (OECD 1991). Market-based incentives, by remedying market failures or creating new markets, may permit more economically efficient solutions to environmental problems than government regulations substituting for imperfectly functioning markets would. Two categories of incentives exist (O'Connor 1991; Warhurst and MacDonnell 1992). One group, based on prices, includes a variety of pollution taxes, emission charges, product charges, and deposit-refund systems. For example, a mercury tax has been discussed in Brazil; a cyanide tax, in the United States. The other group of incentives, based on quantity, includes tradable pollution rights or marketable pollution permits. A related measure is the posting of bonds up front for the rehabilitation of mines upon closure. This is now standard practice in Canada and Malaysia.
Few governments have designed systematic incentives for industry to innovate and develop new environmental technology. An approach such as this might change the very essence of environmental costs by no longer assuming they are fixed. Indeed, in two further areas, policy approaches may contribute to improved environmental-management practices. First, private, bilateral, and multilateral credit is frequently contingent upon the use of environmental-impact assessments and best-practice environmental-control technologies in new minerals projects. Requiring mandatory pollution-prevention plans as a condition for obtaining mine permits would be a complementary policy mechanism. A growing number of donor agencies — in Canada, Finland, Germany, and Japan, for example — are also emphasizing training in environmental management. Second, some governments are promoting R&D (jointly and within industry and academic institutions) to evaluate toxicity from mining pollution and develop cleanup solutions. For example, the Canadian government has funded R&D programs on abatement of acid mine drainage and SO2 emissions. However, considerable scope remains for expanding these approaches, as argued below.
The pollution-prevention principle differs from the polluter-pays principle because intrinsic to the notion of reducing pollution at source is a nonstatic vision of the environmental costs of production. The polluter-pays principle implies that firms internalize a fixed environmental cost. However, firms' pollution-prevention efforts demonstrate a diminishing intrinsic value of that environmental cost (not its shifting to others), and this leads to the demise of the environmental trade-off.
The US Environmental Protection Agency (EPA) is still defining pollution prevention in terms of internalized fixed environmental costs: "pollution prevention requires a cultural change — one which encourages more anticipation and internalizing of real environmental costs by those who may generate pollution" (Habicht 1992). Clarifying the concept of pollution prevention is important because it will inform the design and implementation of policy to achieve it.
The concept of corporate environmental trajectories (see Figure 2) illustrates the fundamentally different nature of technical change and therefore of the environmental costs of applying pollution prevention to metal-mining operations. Such trajectories describe the evolution of a firm's competitiveness in response to both changing market conditions and regulatory requirements. Governments and, indeed, corporate strategists need such policy tools to predict the environmental practices and competitive behaviour of firms under various market conditions and regulatory regimes and to identify the warning signs of declining competitiveness, impending mine closures, and their environmental effects. For example, combined regulatory and market pressures may prompt mine closure in advance of expected ore depletion. But in many countries a bankrupt firm is no longer responsible for its cleanup problem, so the burden frequently falls on the state, which has neither the resources nor the skills to deal with such a large-scale and complex problem. (See Warhurst and MacDonnell [1992] for a discussion of the case of Carnon Consolidated Ltd in the United Kingdom and numerous articles about the Summitville Mine Superfund site in Colorado.)
Characteristically, enterprises respond slowly to environmental pressures, and their responses predominantly reflect the regulatory regimes and public climate of their home countries. Their responses also depend on the nature of their operations in terms of
• The minerals;
• The level of integration of mining and processing;
• The stage in the investment and operations cycle; and
• The economic and technological dynamism of the firm (whether it has the financial, technical, and managerial capabilities to be an innovator).
After a period of using static technology, the mining and mineral-processing industry is currently going through a phase of technical change, with dynamic firms developing new smelting and leaching technologies in response to economic as well as environmental constraints. This trend is stimulated by rapidly evolving environmental-regulatory frameworks in the industrialized countries and the prospects of their application, reinforced by credit conditionality, in the developing countries. Changes in technological and environmental behaviour in this context are evident, particularly in the large North American and Australian mining firms, and are increasingly apparent in firms based in developing countries, such as Brazil, Chile, and Ghana. However, it seems that only new operators and dynamic private firms are changing their environmental behaviour; state-owned enterprises and small-scale mining groups in developing countries continue, with some exceptions, to face constraints on their capacity to change environmentally damaging practices.
Inevitably, only dynamic firms with new project-development plans are in a position to invest in R&D to develop more environmentally sound alternatives or to raise the capital to acquire them from technology suppliers. After a long period of conservative and incremental technical change, firms are developing alternative processes for mineral production that are more economical and less environmentally hazardous. Furthermore, these firms are beginning to sell their technologies, preferring to commercialize their innovations to recoup their R&D costs than to sell obsolete technology and risk shareholders' displeasure or retrospective penalties as developing countries start to enforce environmental regulations. Some mining firms have even pushed technology beyond what is required to meet existing regulations. These firms are seeking ways to increase regulation, particularly on a worldwide scale, because they can meet stricter standards and use their new environmentally sound technologies to competitive advantage.
The assumption that environmental regulation represents a cost burden to the firm is challenged by evidence that improved environmental management in mining operations need not be detrimental to economic performance and may in some cases even have economic benefits. This is intrinsic to the pollution-prevention-pays principle. Environmental regulations are here to stay, and they're bound to become more widely adopted, more stringent, and better enforced. It follows, then, that a greater share of the metals market will be lost by those firms that avoid environmental controls (only later to be forced to internalize the high costs of having done so). This share will be won by firms that get ahead of the game, play a role in changing the industry's production parameters, and use their innovative capabilities to improve their competitive advantage. Implementing lean-production practices is one example of this.
Much can be learned from the manufacturing sector about the development and success of lean production and related Japanese work methods, such as just-in-time inventory control, waste reduction throughout the system, total quality management, and statistical process control. Lean production is defined by a simple principle: eliminate all costs that do not add competitive value to a product. Secondary principles are reduce waste, minimize space, eliminate inventories, and integrate quality control into the production process. The implementation of lean production characteristically results in the reduction of managerial roles, with increased responsibility being given to engineers and workers and a concomitant increase in multitask activities (Womack et al. 1990). A study of more than 90 plants in 14 countries, representing half of the world's automobile-assembly capacity (Womack et al. 1990; see also Graves 1991), showed that lean production, used principally by Japanese companies, has significantly improved productivity, quality, product development, and model range. The average European and North American plants required 118 and 49%, respectively, more effort than the average Japanese plant to undertake the same manufacturing activities. Such efficiencies in Japanese plants have translated into both cheaper and better-value products, leading to the rapid growth and supremacy in Western markets of Japanese firms like Toyota, Nissan, Honda, and Mitsubishi.
The implications of applying lean-production principles to mining, or of radical process innovations with similar effects, can be expected to be remarkable. A combination of markedly lower investment and production costs and the halving of mine-development times and mine life spans would significantly affect the competitive structure of the industry and reduce negative environmental and social effects. Few mining companies have taken these ideas on board. Those that have considered alternative organizational methods include CRA Ltd (Australia), Homestake's McLaughlin gold mine (California), and Scuddles mine, of the Poseidon Group in Australia. Scuddles has implemented an innovative, multi-skilled approach to human-resource development at its underground mine in Western Australia (Mining Magazine 1991). Also important are management training and new work methods for engineers and miners. There is a clear relationship between good housekeeping at the plant site and environmental practices.
Figure 2 categorizes the environmental trajectories that different mining firms might take in response to environmental and market conditions. Companies and governments could use this diagram as a planning tool to evaluate the environmental and economic implications of different policies.
The average mining firm is competitive (that is, to the left of the threshold of economic competitiveness, X, in Figure 2). To a greater or lesser extent these firms produce environmental pollution, and to a greater or lesser extent they have internalized the cost of the environmental degradation associated with their metals production, in response to the regulatory regime they are working within. (The threshold of environmental competitiveness for a given regulatory context is also X, and company operations in compliance have environmental trajectories in the quadrants below the horizontal axis.) However, as a result of market pressures — mainly a real decline in metal prices — and their own economic inefficiencies, some of these firms are going bankrupt (on a trajectory toward quadrant B). They will leave a legacy of environmental pollution, and as happened with Comibol (in Bolivia) and Carnon (in the United Kingdom), the burden of cleanup will fall on the state and society. Other firms will respond by innovating (moving into quadrant D), building improved economic and environmental efficiencies into the new
Figure 2. Corporate environmental trajectories.
generation of technology. At the same time, these innovators are protecting themselves from having to undertake more costly add-on, incremental technical change and rehabilitation at later stages of their operation. Indeed, freed from the incumbent costs of retrofitting sunken investments, dynamic greenfield plants in particular can use the latest best-practice technology incorporating improved economic and environmental efficiencies.
Nonetheless, if obliged to add on environmental controls in line with new regulations, a growing group of firms would have to close down because the cost of the controls and cleanup would render their operations uneconomical. The environmental trajectory of this group is toward quadrant C. Currently, examples of this are scarce, and it is difficult to differentiate between purely environmental factors and other factors that may be causing a firm's cost curve to increase. However, as Figure 2 shows, that group can be expected to grow because combined market and regulatory pressures will lower the threshold of economic and environmental competitiveness to the extent that the average firm will survive in the new regime only if it innovates. Therefore, even previously dynamic firms will need to keep their environmental trajectories moving ahead of the encroaching threshold of economic and environmental competitiveness (X1 and X2).
These trajectories imply a serious constraint on the regulatory process for two reasons that distinguish mining firms from their manufacturing counterparts. First, if a mine closes down as a result of regulatory burden, its environmental degradation may continue. Pollution in metals production is not all end-of-pipe pollution, which stops when production ends. Rather, the closure of a mine heralds a new phase of environmental management — decommissioning, cleanup, and rehabilitation, all of which pose significant costs. Second, in most countries, the former operators of closed mines are not liable for the cleanup (the United States, with its Superfund liability laws, is an exception). Therefore, pushing forward the technological frontier and moving the threshold of economic and environmental competitiveness may result in an overall increase in environmental degradation (particularly where there is no liability).
The policy challenge that pollution-prevention advocates face is one of keeping firms sufficiently dynamic to reduce their pollution at source, to profitably clean up pollution that escapes, and in the meantime to generate increasing economic wealth. The policy challenge is therefore to promote environmental innovation. This means combining the regulation and promotion of industrial activity in an integrated policy.
A number of important policy implications follow if one accepts the argument that the environmental practices of firms correlate most closely with their innovative capacity and that regulations are only really effective if firms have the innovative capacity to respond and change their production processes and products, including waste products. Production inefficiency and environmental mismanagement go hand in hand.
Low rates of metals recovery, high-intensity use of energy, excessive use of reagents, and so on are symptomatic of production inefficiency and are also associated with pollution, such as metal particulates, SO2 emissions, and toxic chemical effluent. The question of economies of scale in metals production further constrains the choice of technology for minimizing waste and maximizing metals recovery.
A major implication for pollution-prevention policy is that in tackling the most significant polluters, it must also target the most inefficient (this means targeting the least innovative). Such a strategy poses a potential problem for pollution prevention: promoting innovation is key to reducing pollution at source, but the firms generating the most pollution have insufficient technological and managerial capabilities or capital resources to innovate.
A corollary of this is that the most successful metals producers use reagents and energy efficiently and have high rates of metals recovery. They are constantly engineering incremental improvements to optimize these levels. Therefore, concentrating environmental policy on pollution prevention at source might fail to optimize the potential of dynamic companies to develop and diffuse innovations to reduce pollution at any point in the life cycle of the mine and its products.
Another problem stems from the huge volumes of rock involved in mineral extraction — although the percentage releases of toxins may be small, the scale of pollution can be great because of the sheer bulk of throughput (Gray 1993). Therefore, policy needs to have a dual focus: innovation to prevent pollution at source; and innovation to promote profitable waste treatment, reagent and metal recycling, and re-mining. The latter focus may require a different range of incentives (along with the removal of disincentives to re-mine and treat waste under regulatory regimes), such as the Resource Conservation and Recovery Act of the United States. Environmental innovation is the key to progress on both fronts. It recognizes the need to integrate environmental regulations and promotion of industrial activity.
Consequently, two policy options are available for achieving pollution prevention. First, punitive regulation can be used to put the inefficient and most serious polluters out of business. Second, a range of policy mechanisms and incentive schemes can be developed to promote production efficiency and innovation in environmental management, focusing on the entire metals-production process, from mine development to waste management.
Although the first option is superficially attractive, two problems arise from pursuing sustainable development in this manner. One is that for many economies (particularly developing ones), minerals production is a crucial source of foreign exchange, government revenue, and direct and indirect employment. Punitive regulations thus put development objectives at risk, which in turn threatens the economic part of the sustainable-development equation. The other problem is that this strategy threatens the environmental part of that equation by pressuring firms to move into the close-down, cleanup quadrant of the corporate environmental trajectory (C in Figure 2). As noted earlier, this is an unattractive option because the pollution problems associated with decommissioning and rehabilitating mining sites can be horrendous and often become a responsibility of the state. Several studies have shown that retrospective legislation, such as the Superfund in the United States, is an inefficient mechanism for achieving the optimal use of resources for environmental protection (Portney 1991; Acton et al. 1992; Probst and Portney 1992; Tilton 1992).
The policy challenge for pollution-prevention advocates (if their ultimate aim is sustainable development) is thus to keep the mining industry dynamic enough to reduce pollution at source, profitably treat waste, clean up pollution on closure, and generate economic wealth (using best practices in environmental management) throughout a mine's life span. This paper argues that environmental legislation to support pollution-prevention goals must be underpinned by two further sets of policy mechanisms: mechanisms to promote environmental innovation; and mechanisms to stimulate the diffusion of these innovations among firms.
Although governments may only be explicitly concerned with the diffusion of innovation among firms within national boundaries, the commercialization of these innovations abroad can bring in revenue and improve the overall competitiveness of national mining firms and sectors. International organizations — including banks, donor agencies, and institutions concerned with implementing UNCED objectives — also need to consider policies to promote the international diffusion of clean technology.
This is not an argument against regulation but a recommendation for a more sophisticated approach to public policy. Such a policy would define the regulatory goals relating to both the production process and the output stream — that is, set something to aim at — and be underpinned by an informed technology policy to guide and stimulate industry along the fastest, most efficient route to those goals.
Policy mechanisms to promote environmental innovation in industry are of two types: expenditure programs to support clean-technology R&D, training in environmental engineering, and so on; and incentives to reward firms for environmental innovation.
Technology-policy mechanisms that support clean-technology development include expenditure programs funding R&D in selected areas of pollution prevention. Examples are Canada's R&D programs in acid mine drainage and biotechnology to clean up effluent. Another example is cofunded R&D projects involving industry-industry, industry-university, or industry-research-institution collaboration. Such programs could be supported through easily accessible, centrally compiled information-dissemination programs concerned with moving technological and regulatory frontiers.
A crucial factor in targeting R&D support is the innovation process in industry. Too often, policy documents conceptualize innovation as something that builds on government or university R&D and then is magically applied throughout an industry's operations. Such thinking is reflected to a certain degree by EPA's aims in the area of technological innovation. Evidence suggests, however, that in most cases innovation is industry driven, with firms drawing on research institutions and other firms for the additional knowledge, expertise, and technology needed to complement their own in-house R&D and engineering efforts (Rothwell 1992; Warhurst 1994). An important function of technology policy to promote source-reduction innovation should be to inhibit a possible tendency of firms to divert resources from conventional business R&D to compliance-related R&D. Focusing R&D on process innovation and making pollution prevention at source part of the overall effort to improve efficiency can be complementary aims.
Promoting innovation in pollution-prevention technology requires important changes in thinking. A multimedia approach is required because pollution prevention requires changes in process technology, not the addition of off-the-shelf, end-of-pipe controls that tend to shift pollution from one medium to another. This implies the need for a range of engineering skills to reduce or eliminate the pollutants at source (independently of where they may ultimately be discarded). New technology must be designed to deal with water and air quality and waste, as well as workers' health and consumer-product safety. Thus, training for R&D engineers in industry should be another target of policy mechanisms.
EPA policy documents on pollution prevention fail to emphasize training. Technology hardware is only one part of the equation. Of equal importance is organizational change. Mechanisms that foster lean and clean production are also needed.
Taxation policy may need to be changed to promote environmental innovation. According to Ashford (1991), the United States gives taxation incentives in the form of accelerated depreciation for pollution-control equipment, thus supporting end-of-pipe pollution control. However, no similar incentives apply to investments in new production technology, with the result that dollar for dollar a firm is better off buying from an environmental-technology vendor than developing its own process changes. Direct taxation incentives can relate to investment in pollution-prevention technological or organizational change; R&D; engineering projects and training in specific areas of environmental management; and bonds posted up front for future pollution prevention or for reclamation on closure. The impact that punitive taxation on reagent or energy use will have on firms' competitiveness and behaviour requires careful consideration — the geological and chemical characteristics of each deposit are unique, and this affects energy- and reagent-consumption patterns. Operators may perceive such taxation as prejudicial and unfair.
Flexible taxation provisions that allow and even encourage industry to be innovative are needed to complement strict standards and regulatory goals. Regulators must possess an intimate knowledge of the types of gains firms make from technological change. With this knowledge, they will be able to determine how best to promote technological innovation and can adapt or ratchet regulations accordingly (Milliman and Prince 1989). Innovative firms should be able to use environmental regulations to their competitive advantage. The innovator would benefit from stricter technology-forcing regulations that stimulate other companies either to invest in new technology or to licence (or purchase) the innovator's technology (thus enabling the innovator to recoup some of its initial investment in R&D). Regulatory authorities need to be seen to respond in this way. For the informed regulator, the rate of technological advance in pollution control is probably the most useful measure of the effectiveness of environmental policies, a view held by a growing number of researchers, including Orr (1976), Kneese and Schultze (1978), and Milliman and Prince (1989). Training for regulators, including industrial experience as environmental engineers and corporate strategists, is thus an important part of the pollution-prevention approach.
Pushing the technological frontier forward will pull the thresholds of economic and environmental competitiveness deeper into quadrant D, as shown in Figure 2. Consequently, market conditions governing metals production will also change, to the innovator's advantage.
An important corollary of an incentives-to-innovate policy is that regulators give rewards for innovation. Usually the reward is a prize for sound environmental management, such as EPA's recent Environmental Leadership program to reward US innovators. However, regulators should make the reward side of the equation more sophisticated by analyzing the ways firms realize and expand commercial gains from technological innovation and technology diffusion.
Milliman and Prince (1989) analyzed five regulatory approaches: direct controls, emission subsidies, emission taxes, free marketable permits, and auctioned marketable permits. They found that direct controls, which are the most common regulatory tool, provide the least incentive for technological innovation; free permits and emission subsidies also provide little incentive. Emission taxes and auctioned permits are the best incentives because they reward the innovator through gains the firm makes from diffusing its technology to other firms, over and above the benefits the firm derives from its own application of the technology (Milliman and Prince 1989). This is not surprising, as polluters facing high costs for abatement will find it cheaper to buy permits than to reduce their emissions, and polluters with low abatement costs will sell their permits accordingly. Firms therefore have a constant incentive to cut emissions, as this allows them to sell permits. Tradable permits, unlike pollution charges, can guarantee the achievement of particular pollution targets because the authorities control the number of available permits.
Finally, on this issue, incentives are needed to stimulate auxiliary firms to develop and commercialize innovative clean-up technologies, including re-mining techniques. In developing countries particularly, the market for such technologies is vast, and donor agencies and development-assistance grants could play a key role in stimulating such investment. For example, more than two-thirds of the current mineral reserves of Bolivia are in dumps and tailings (Warhurst and MacDonnell 1992). Furthermore, in many developing countries, such as Peru, dynamic small- and medium-scale firms supplying a range of inputs to the mineral sector could, with incentives, expand their activities to the environmental arena (Núñez 1993). In the United States, liability regulations should be reassessed because the current barriers to re-mining and treating mining waste need to be removed.
Technological and managerial capabilities are required for innovating and for dealing with new and emerging technologies, and they are also vital for resolving pervasive inefficiencies if a firm's environmental-management strategy is to use existing technology. Technology transfer and technology partnership through joint ventures or strategic alliances are ways to build up technological and managerial capabilities. This is particularly pertinent in the developing countries, although such strategic alliances are emerging in all the major mineral-producing countries. Recent collaborative partnerships in environmental innovation include Outokumpu and Kennecott Corporation; Outokumpu and the Chilean state copper corporation, Corporación Nacional del Cobre S.A.; Cyprus Mines and Mitsubishi; Comalco, Marubeni Corporation (Japan), and the Chilean power company, Empresa Nacional de Electricidad S.A.; Battle Mountain (United States) and Inti Raymi (Bolivia); and Compañía Minera del Sur S.A. (Bolivia) and Compañía de Minas Buenaventura (Peru).
However, the concept of technology transfer should be broadened to include a real transfer of environmental-management capability. Technology transfer has traditionally meant a transfer of capital goods, engineering services, and equipment designs — the physical items of the investment — accompanied by appropriate training for operating the plant or equipment. Consequently, the innovative capacity of recipients is undeveloped and they remain purchasers and operators of imported plants and equipment. This is especially the case in developing countries, where many recipients become dependent on their suppliers to make changes or improvements to successive vintages of technology. Contractual conditions may reinforce this situation.
New forms of technology transfer in environmental management are needed to embrace
• The knowledge, expertise, and experience required to manage technical change — of both an incremental and a radical nature; and
• The development of human resources for implementing organizational change to improve overall production and energy efficiency and environmental management throughout plant and facility — from mine development, through production, to waste treatment and disposal.
This new concept of technology transfer emphasizes training and skills acquisition in environmental R&D, engineering, management, troubleshooting, repair and maintenance, environmental auditing, and so on.
In global industries like mining, international firms supply significant amounts of managerial and engineering expertise through joint ventures and other collaborative arrangements. These contributions are usually limited to the immediate requirements of the specific investment project or of the equipment purchased. Flows of technology may even be structured to match regulatory requirements. Cumulative command-and-control regulations tend to lead to incremental, add-on, end-of-pipe, capital-intensive technical change and therefore successive rounds of technology imports (Warhurst and MacDonnell 1992). However, empirical research in other sectors demonstrates that these contributions can be considerably increased without adversely affecting the supplier's strategic control of its proprietary technology (Bell 1990; Warhurst 1991a, b; Auty and Warhurst 1993).
Such an approach was at the heart of the strategy of China's National Offshore Oil Corporation, which required major oil companies, under technology-transfer agreements in their investment contracts, to transfer the skills needed to master selected areas of technology (Warhurst 1991b). Another interesting example is the Zimbabwe Technical Management Training Trust. It was founded by RTZ in 1982 to train South African Development Community professionals in technical management and leadership. Participants receive a combination of academic and on-the-job training in the operations both at home and overseas. Accelerated managerial training is possible through exposure to on-the-job problem-solving situations, with experienced colleagues, in a range of challenging technical scenarios.
Similar in-depth training programs, concentrating on environmental management, could be built into many of the proposed mineral-investment projects throughout the world. Preference could be given to investors and technology suppliers with proven environmental-management competence and a willingness to transfer their skills and knowledge. It cannot be overemphasized that all technology transfer and training efforts represent a cost to the supplier, and this cost must be covered to ensure optimal results. The danger of failing to budget for this cost is ending up with a training program in operational skills instead of one in technological mastery. Corporate partners, the government, and, in the case of developing countries, donor agencies or development banks can assist in financing these schemes. Moreover, governments, organizations, or firms will have more power to negotiate the objectives and scope of the programs if they have helped finance them.
Mine operators can purchase capital goods, engineering services, and design specifications through a range of well-established commercial channels; however, the market for knowledge and expertise, including training programs, is less mature. Active development of this market will reward innovators in pollution-prevention technology. Bilateral and multilateral agencies, development banks, and government organizations can play a major role in improving this. Agenda 21, one of the main outputs of UNCED, proposes two programs of relevance (Skea 1993) that can be expected to lead to greater industry involvement. One of these programs encourages interfirm cooperation, with government support, to transfer technologies that generate less waste and increase recycling. The other program, on responsible entrepreneurship, encourages self-regulation, environmental R&D, worldwide corporate standards, and partnership schemes to improve access to clean technology. Moreover, Agenda 21 (chapter 34) recognizes that for technology transfer to be effective, a substantial increase in the technological capabilities of recipient countries is required (Barnett 1993). The capacity to effect technical change, not just the skill to operate an item of environmental-control technology, will ultimately determine whether a recipient firm can build up the competence it needs to be successful in environmental management and environmental innovation. Broadening the concept of technology transfer to encompass these issues would also enable government and industry policymakers to more accurately assess barriers to the diffusion of clean technology.
This analysis suggests the need for a two-tier policy approach. Policy concerning ongoing projects must cover the challenges of production inefficiency, its environmental consequences, and the clean-up requirements for mine closures and plant decommissioning. Policy concerning new investment and expansion projects should stipulate that environmental management and the flexibility to engage in further environmental innovation be built into the project at the outset. This requires negotiation among operators, equipment suppliers, and credit sources at the earliest stage.
The analysis of technology transfer for a pollution-prevention policy has two implications. First, if the policy is to work as a means of achieving sustainable industrial development (even if only a means for firms and countries to comply with UNCED recommendations), it must be underpinned by a technology policy with financial incentives that promote the commercialization of pollution-prevention innovations in overseas markets, including Eastern Europe and developing countries. Although this paper has highlighted some of the barriers to the diffusion of pollution-prevention technology, these barriers are not so much due to the absence or inadequacy of regulations as to a lack of technological and managerial capabilities, insufficient investment resources, information constraints, etc. It is argued here that industry, governments, and international organizations, including development banks, have an interest in overcoming these barriers. One route is fostering the real transfer of technology, as described above.
Second, environmental policy needs to be integrated with other government policies, such as those covering industry, trade, and technical assistance. Firms can learn a great deal from one another. Indeed, this is reflected in the formation of the International Council on Metals and the Environment (ICME) and the recent set of strategic alliances between leading technology suppliers and mining companies (see above). A major purpose of ICME is to promote sound environmental and health policies and practices to ensure the safe production, use, recycling, and disposal of metals. An important rationale for its establishment was the view that industry can benefit from pooling its expertise, exchanging information, promoting sound environmental and health policies, and working cooperatively and proactively with regulators, labour, and scientific and environmental groups. Great scope remains for the further diffusion of knowledge (environmental software) and technology (environmental hardware) among firms, between firms and regulators, and across firms and national boundaries.
Technology transfer is frequently perceived as being relevant only to industrializing countries. This paper shows its relevance to industry on a global scale, in terms of the broad objective of sustainable development.
This paper suggests that the concept of environmental sustainability can be made operational if governments set measurable policy targets and design policy mechanisms that support implementation. The new regulatory principle — pollution prevention pays — aims to promote competitive and environmentally sustainable industrial development. The requirement that pollution be reduced at source implies a requirement for technical or organizational change, or both, in the production process. This, in turn, requires that firms develop new technological and managerial capabilities, technological alliances with equipment suppliers, and collaboration with R&D organizations. This paper argues that for successful implementation of pollution prevention, regulatory approaches must be underpinned by technology-policy mechanisms designed to stimulate technological innovation and best practice in environmental management within firms and to encourage the commercialization and diffusion of these innovations across the boundaries of firms and nations. As a contribution to sustainable development, pollution-prevention policy represents an advance over previous policies, such as those guided by the polluter-pays principle. However, it contains two flaws.
First, the firms that pollute the most are mismanaging the environment precisely because of their inability to innovate. Environmental degradation is greatest in operations with low levels of productivity, obsolete technology, limited capital, and poor human-resource management. Yet, under the pollution-prevention regulatory regime, it is assumed that such firms, if obliged by law, will automatically introduce technical change to reduce pollution at source. This is unlikely to occur unless pollution-prevention regulations are underpinned by technology policies and financial incentives aimed at encouraging the least-efficient firms to develop the technological and managerial capabilities to innovate. Using punitive environmental regulations to put the least-efficient and most-polluting firms out of business is a short-sighted alternative. In developing countries particularly, such an approach would threaten the economic objectives of sustainable development and lead to further problems because the cleanup and mine-rehabilitation costs would be transferred to the state or society.
Second, the most efficient firms are generally better environmental managers because they are innovators. They are able to harness both technological and organizational change to reduce the production and environmental costs of their operations. Furthermore, where the costs of complying with environmental regulations threaten competitiveness, the dynamic firm can offset these costs by improving production efficiency. In the minerals industry, regulatory costs cannot be passed on to consumers because international metal prices are determined in terminal auction markets and cannot be controlled by the producers. The policy of requiring firms to reduce pollution at source, which necessarily involves changing their production technology and organization, overlooks the possibility that firms might already be searching for new ways to improve metal recovery, reagent use, energy efficiency, water conservation, and so on as part of their corporate strategies to increase competitiveness.
It is therefore more likely that pollution-prevention regulations will serve their objectives if they are underpinned by technology-policy mechanisms and economic instruments. The following approaches are suggested:
• Stimulate and reward innovation in pollution prevention through tax breaks for R&D and technology investment, other taxation reforms, auctioned pollution permits, new lines of credit, targeted R&D support, and training programs;
• Require mandatory pollution-prevention and reclamation plans in project development, and stipulate bonds for that purpose;
• Stimulate profitable innovation in waste management, such as remining, reagent and metals recovery, and biotechnological waste treatment, and remove legislative barriers to re-mining and waste treatment;
• Reward firms for innovations in clean technology;
• Use mechanisms such as credit conditionality to facilitate the commercialization and diffusion of pollution-prevention technology and work practices across the boundaries of firms and nations; and
• Promote new approaches to technology transfer, such as interfirm collaboration to develop the technological and managerial capabilities to innovate, in-depth training to manage technical and organizational change, and information-dissemination programs.
Innovation can change the context of metals production and pollution, and the widespread diffusion of innovation can reward the innovator, as well as contributing to best practice in environmental management for sustainable development. Mechanisms to support pollution-prevention policy will be more successful if they focus on the process of innovation at any point in the life cycle of the mine, rather than penalizing firms for excessive use of inputs or production of polluted outputs. The production of outputs varies too much among operations because of site-specific geological and geographic conditions. Penalties can differentially distort the operations' cost structures and be an inefficient way to stimulate innovation in pollution prevention.
This paper also makes a case for training regulators so that they have the experience and understanding to evaluate technological advance, an important indicator of the effectiveness of environmental regulations. Ratcheting the existing regulations in line with this evaluation would further enhance the competitive advantages of firms. Regulators and corporate analysts might also enhance their strategies for competitive environmental best practice by defining corporate environmental trajectories in various economic and regulatory contexts. This would help in evaluating the evolution of a firm's competitiveness in response to changing market conditions and regulatory requirements and, therefore, in evaluating the firm's contribution to sustainable development.
Broadening the range of regulatory goals and the technology-policy mechanisms and economic instruments to support them, as proposed here, would be a more integrated policy approach to regulating and promoting industrial development and to promoting trade and technical assistance abroad. Pollution prevention at source would have a key role in this policy, without always taking priority in the competitive and environmentally sustainable development of industry in developing and industrialized countries. This aim of this new, more comprehensive policy approach is environmental innovation.
This page intentionally left blank
In the design and implementation of environmental regulations, the United States is far ahead of many other countries. With more than 20 years of systematic efforts to protect the environment and improve the quality of life for its citizens, the United States can offer several lessons to Chile and other countries with less experience.
For any country planning to pursue environmental stewardship, aspects of the utmost relevance are
• The development of environmental consciousness, the mechanisms of social pressure, and the policy-making response;
• The approach selected to deal with the problems, the tools used, and the ability of these to solve the problems with minimum adverse economic impact;
• The impact of environmental regulations on productivity, market structure, and economic growth;
• Regional impacts and their effect on employment; and
• The reaction of industry and the labour unions.
1 The preparation of this report was made possible by a grant from the John D. and Catherine T. MacArthur Foundation. The author would like to acknowledge the contribution and support of all the interviewees. As always, the opinions expressed are solely the responsibility of the author.
It would not be prudent for other countries to simply duplicate either the style or the specific mechanisms of a specific US policy-making experience. For countries with different political, social, economic, and, especially, ecological conditions, it might even be dangerous. The lessons from the US experience, whatever they may be, must be adapted to the context in which they are to be used.
Also, we cannot say that the United States has found the ultimate formula for dealing with environmental problems. After two decades, the principal moral is that no such formula exists and that environmental policies should, above all, be flexible. The time may be too short, and we are still in the experimentation stage. The very nature of the problem forces us to recognize a deep void in our scientific knowledge about ecosystems and the impacts of human activities — a void that might never be filled to the extent that we feel secure about the consequences of our decisions. That has been the ultimate challenge of environmental problems: the increasing awareness of our poor understanding and our lack of control over nature.
The focus of this research on mining reflects the importance of this sector to the Chilean economy. This makes it of special relevance to identify the problems this sector poses for the environment, as well as become aware of the possible consequences that environmental regulations would have for this sector. These concerns are covered, and the present regulatory scheme and its impacts on the mining sector, particularly the copper industry, are also examined. The paper also discusses the efficiency, cost-effectiveness, dynamic efficiency, and equity of existing policies and mechanisms.
As mentioned, environmental policy in the United States is still in its trial-and-error phase. This paper examines new trends in environmental policy-making and the ways they might affect the mining industry. I take a closer look at the case of mining-waste disposal, which is receiving a lot of attention from the industry, environmental groups, and the government. The discussion of mining-disposal regulations involves not only the next step in the control of the industry but also an interesting experiment. New procedures and new concepts are being tested; their success may bring about important changes in ways of writing environmental policy. Finally, I summarize the main conclusions from the US experience and make some recommendations for policy formulation and implementation in Chile.
This study is by no means exhaustive: it is the product of a 3-month project and focuses on just some of the several themes relevant to environmental policies in the United States. Even then, the treatment of themes cannot help being somewhat superficial. Nevertheless, the study develops a sense of the main policy issues and establishes some guidelines for future policy-making.
The first US pollution-abatement regulations date from mid-century. The Water Pollution Control Act of 1948 and the Air Pollution Control Act of 1955 were enacted by Congress to address the increasing health hazards posed by industrial activities and the lifestyle of US society. The purpose of enacting these laws was mainly to grant the federal government the authority to allocate resources to investigate the causes and effects of pollution and to train human resources from state and local agencies. These laws also transferred some responsibilities from the state to the federal level. However, the state governments still had the authority to implement and enforce regulatory programs.
The need for a national framework and a stronger federal presence became more and more evident as environmental problems grew and public opinion became more sensitive. State legislation was dispersed and became a potential source of competitive disadvantage. As a consequence, states were often reluctant to take the initiative. Reacting to a strong environmental movement, Congress passed the National Environmental Protection Act (NEPA) in 1969, which was to become one of the most influential environmental regulations in the United States and abroad (Anderson et al. 1984).
NEPA was the first attempt to give a systematic and coherent framework to the problem, and it established a conceptual basis upon which other legislation was created or amended. Although NEPA gave little guidance on how its general objectives were to be met, it established a powerful mechanism for introducing environmental considerations into the decision-making process. This mechanism was the environmental-impact assessment (EIA), which NEPA required before any major federal action that would significantly affect the quality of the human environment could be undertaken. The EIA process forced federal agencies to take environmental concerns into consideration during the planning process. NEPA also made it possible to challenge federal actions affecting environmental quality, resulting in a number of high-profile court cases that served to raise public awareness and concern about environmental problems (Anderson et al. 1984).
The institution to implement NEPA was created in 1970. Several government agencies were already in charge of implementing and enforcing the several dispersed laws that in some way or another protected the environment, but Congress decided to create a new, separate agency, the Environmental Protection Agency (EPA). The rationale for the EPA was to fulfil the need for an independent institution with the expertise to formulate environmental regulations and to oversee their implementation and enforcement. Having a separate agency raised the issues not only of coordination and regulatory consistency and coherence but also of autonomy. Other government agencies were in charge of fulfilling several other objectives, with the environment being only one of them and probably not the most relevant (see, for example, the case of the US Atomic Energy Commission in Anderson et al. 1984). After this basis for environmental policy-making was set, frantic activity began in Congress.
As a consequence of its rather low national profile, mining pollution occupied a secondary place on the US environmental agenda during the last decade. The pollution produced by the chemical and petroleum industries seemed far more worrisome. But the environmental impacts of mining range from land disturbance produced by exploration, development, and mining activities, especially in the case of open-pit mining; to the pollution of surface water and groundwater by metals, toxic chemicals, and acid mine drainage; to the pollution of air by SO2 emissions and the like. Fugitive dust may also be an environmental hazard, although its impact is mostly impaired visibility. Mining pollution tends to be very localized, and because the population is generally sparse around mines, fewer people are exposed to health risks and aesthetic effects than is the case with industrial pollution in suburban areas. Nevertheless, mining pollution may have important ecological and aesthetic effects (Gomez et al. 1979; Vogely 1985; MacDonnell 1989).
Regulations affecting mining were introduced because of broader concerns, with the result that the role of the mining industry in the policy-making process has been minor. The mining industry's loss of importance in the US economy and its diminished strategic significance have further reduced the industry's negotiating power. The fact that mining has not played an important role in environmental policy-making contrasts sharply with the impact that environmental regulations have had on the industry.
The relevant regulations and legislation include NEPA, the Clean Air Act (CAA), the Resource Conservation and Recovery Act (RCRA), the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA), the Surface Mining Control and Reclamation Act (SMCRA), and the Mining Law.
Much controversy surrounds the environmental regulatory framework and the burden it has imposed on the copper mining industry. Complaints about exaggerated costs and the loss of competitiveness have been recurrent. Negative impacts on employment and on regional economic activity have also been a part of the discussion.
According to the US Department of Commerce and its Bureau of Analysis (USDC 1988), expenditures for pollution abatement and control have been constantly rising since the early 1970s, except during the 1980-82 recession (see Table 1).
Table 1. Total expenditures for pollution abatement and control, 1972-87. | ||||||||||||||||
| Total expenditures (billions of 1982 USD) | |||||||||||||||
| 1972 | 1973 | 1974 | 1975 | 1976 | 1977 | 1978 | 1979 | 1980 | 1981 | 1982 | 1983 | 1984 | 1985 | 1986 | 1987 |
Abatement costs | 40 | 46 | 47 | 50 | 53 | 55 | 58 | 60 | 58 | 57 | 55 | 56 | 61 | 65 | 68 | 68 |
Air | 15 | 18 | 18 | 21 | 22 | 23 | 24 | 24 | 25 | 26 | 25 | 26 | 28 | 30 | 31 | 28 |
Water | 20 | 21 | 21 | 23 | 24 | 25 | 27 | 26 | 25 | 22 | 21 | 21 | 23 | 25 | 26 | 28 |
Solid | 7 | 8 | 9 | 8 | 8 | 9 | 9 | 10 | 11 | 11 | 10 | 19 | 11 | 11 | 12 | 13 |
Total abatement and control costs a | 43 | 49 | 50 | 54 | 56 | 59 | 62 | 63 | 62 | 60 | 58 | 60 | 64 | 68 | 72 | 71 |
Source: USDC (1988). | ||||||||||||||||
Note: USD, United States dollars | ||||||||||||||||
a Includes regulation and monitoring costs, as well as research and development expenditures.
Overall, these expenditures grew at an average annual rate of 3.4% during 1972-87. Currently, the annual level of expenses is close to 70 billion United States dollars (USD), about 2% of the US gross national product.
Among laws and regulations, the CAA has been considered by far the most expensive. More than half of the expense of air-pollution abatement is for controlling pollution from mobile sources, reflecting the importance of vehicle emissions as a source of air pollutants.
Another source, the McGraw-Hill (1982) annual survey, indicated that pollution-control expenditures on average accounted for more than 5% of total capital expenditures during 1975-79; 3%, during 1980-84. In the case of mining, McGraw-Hill estimated a total of 21.8 billion USD in capital expenditures for 1970-81. An EPA study cited in MacDonnell (1989) gave a significantly lower figure: about 8.9 billion USD. The EPA study also gave an estimate for 1981-90 of 5.3 billion USD. EPA used engineering estimates of costs for compliance with federal air and water regulations, whereas the US Department of Commerce and McGraw-Hill relied on industry surveys and may have included other regulatory costs.
In terms of total costs, including control and maintenance, the EPA study indicated a cumulative annualized cost of 15.5 billion USD for 1970-81. The annualized cost for 1981 totalled 2.6 billion USD, and the cumulative annualized costs projected for 1981-90 totalled 32.7 billion USD. Following the general pattern, the CAA has been the most expensive regulation for the mining industry (SMCRA in the case of coal production). According to the same EPA study, cited in MacDonnell (1989), about 80% of the mining industry's expenditures for pollution abatement in 1970-81 were for control of air pollution; the other 20% were for control of water pollution.
In absolute terms, the iron and steel industry has been the most affected by air- and water-pollution-control costs, followed by the copper industry. Of the total 8.9 billion USD of investment reported by the EPA, 4.6 billion USD was spent by the iron and steel industry, and around 2.1 billion USD was spent by the primary copper industry (the last figure includes only costs for air-pollution control). Nevertheless, in terms of pollution-abatement costs as a proportion of total capital expenditures, the copper industry shows an outstanding 41%, whereas the iron and steel industry shows only 18% (Sousa 1981).
Because copper is the most important mineral in Chile, the following pages concentrate on the impact of the CAA on the copper-smelting industry. In the United States, this industry has been one of the sectors most affected by environmental regulations, particularly the CAA (Sousa 1981).
The CAA regulates SO2 emissions and sets primary and secondary standards for this pollutant. Sulfur dioxide is a primary focus of the CAA. The pollutant has a number of negative impacts, including aggravation of symptoms of heart and lung disease and increased incidence of acute respiratory disease. It can also be toxic to plants, erode statues, corrode metals, harm textiles, impair visibility, and contribute to acid deposition (GAO 1986).
The principal sources of copper are sulfide deposits. The production of each tonne of copper releases an equal or greater volume of sulfur. The recovery of copper from sulfide ores is done by pyrometallurgical processes that separate the copper from other elements like sulfur. After the copper ores are ground and concentrated, the concentrate is smelted, passing through a circuit of furnaces, converters, and roasters, any one of which may release sulfur into the atmosphere as SO2. Finally, the blister obtained from the smelters is refined. For a description of these processes, see Rothfeld and Towle (1989).
Oxide ores used in the production of copper do not present this SO2 problem because they are treated by hydrometallurgical processes. Unfortunately, oxide ores play a minor role in the copper industry because of their relative scarcity — only about 16% of US copper production involves oxide ores (Rothfeld and Towle 1989). However, they present higher risks of water pollution (USDC 1979).
At the national level, the major source of SO2 emissions is the power-utility industry (Table 2). Copper smelters make a significant contribution, especially at the regional level. Both industries together generate more than 70% of total SO2 emissions in the United States (Rothfeld and Towle 1989). According to EPA figures cited by the US Bureau of Mines (USBM), utility boilers generated 14.7 × 106 t of SO2 in 1985, whereas copper smelters produced only 0.6 × 106 t. But in the states with the greatest smelting capacity — Arizona, New Mexico, and Utah — utility boilers generated 0.2 × 106 t of SO2, whereas copper smelters generated 0.6 × 106 t of SO2 (USBM 1989) (Table 3).
Table 2. Sources of SO2 emissions in the United States, 1980. | |||
| SO2 emissions | ||
Source |
| (× 106 t) | (%( |
Utilities |
| 15.8 | 62.7 |
Nonferrous-metals smelters |
| 1.4 | 5.5 |
Copper smelters |
| 1.1 | 4.4 |
Others |
| 6.9 | 27.4 |
Source: GAO (1986). | |||
Table 3. Regional distribution of SO2 emissions from power utilities and copper smelters, 1985. | ||
State | Copper smelters (× 103 t) | Utility boilers (× 103 t) |
Arizona | 454.5 | 106.9 |
New Mexico | 96.6 | 70.7 |
Utah | 8.3 | 22.1 |
Total for 3 states | 559.4 | 199.7 |
Total for 48 states | 578.0 | 15 249.9 |
Source: Rothfeld and Towle (1989). | ||
Yet these SO2 emissions levels represent an important CAA accomplishment, because copper smelters played a much more important role in SO2 emissions a decade ago. In 1980-88, SO2 emissions from copper smelters were reduced by 73%, from 1.1 × 106 t to 0.3 × 106 t. In 1987, the aggregate capture of SO 2emissions was 83% (Rothfeld and Towle 1989). Control is currently estimated at far more than 90%, thanks to the retrofit of San Manuel (Magma Copper Company) and additional improvements derived from previously retrofitted plants. With currently available technology, it is possible to capture 99% of SO2 from the gases released from smelters (Rothfeld and Towle 1989).
Before air-quality standards and emission limitations were enforced at the federal level, some degree of control was provided at the state level. Some smelters had already decided to recover SO2 to produce sulfuric acid, even without regulations, as in the case of Garfield Refining Company. In such cases, around 60% of SO2 emission was captured from roaster and converter gases. The remaining 40% came basically from reverberatory-furnace stacks and from fugitive gases from what were mostly old plants. The problem with recovering SO2 emissions from reverberatory furnaces — a technology widely used some decades ago with copper smelters — was the weak gas stream, which contained less than 1% of the SO2. It was technologically and economically impracticable to recover SO2 under those conditions, even though there was a possibility that some technical obstacles could be overcome (Rieber 1986; Rothfeld and Towle 1989).
After implementation of the 1970 CAA, some smelters installed acid plants and used tall smokestacks and intermittent controls to comply with the ambient-air-quality standards. But the 1977 amendments to the CAA prohibited the use of these techniques for stationary sources and required permanent controls. The only alternative for copper smelters was to replace the reverberatory furnace with other technologies, like flash or electric furnaces or bath smelting. (The use of scrubbers, a technology that power plants use to remove the sulfur from coal, is not economically feasible for copper smelting because of the greater amounts of sulfur involved. There are also additional storage costs and so on [Rieber 1986].) These other furnaces and the use of enriched oxygen did provide a gas stream strong enough to allow the recovery of SO2 (Sousa 1981; Rothfeld and Towle 1989).
The huge investments needed to retrofit the plants, most of them built in the early 20th century, led the industry to ask for some relief. In addition to the financial burden, the industry cited a lack of proven technologies for controlling high levels of SO2 emissions. Eventually, the industry did get some relief — the Non-ferrous Smelter Orders (NSOs) provision. The NSOs allowed smelters to delay new investments and to use temporary measures, like curtailed production or taller stacks, to comply with ambient-air-quality standards. The NSOs extended compliance deadlines by 5 years, with the possibility of a second extension.
Although the provision was intended to apply to all nonferrous-metals smelters, only copper smelters — San Manuel (Magma Copper) and Douglas (Phelps Dodge), in Arizona; Chino (Phelps Dodge [by that time owned by Kennecott Corporation]), in New Mexico; and McGill (Kennecott), the only Nevada smelter— requested NSOs. After these NSOs expired, San Manuel, Douglas, and Chino requested a second round (McGill had shut down in 1983). Although San Manuel obtained a second NSO, Douglas shut down in 1987. Chino was retrofitted before the final decision. The government also gave the industry some financial support by allowing rapid amortization of pollution-control equipment and by providing tax credits for such investments (Larsen 1981).
The first smelter to change its process technology was Inspiration, which converted to electric furnace in 1974. The last smelter to invest in SO2 control will be El Paso, owned by Asarco Incorporated. In the last three decades, there has been only one new greenfield project, Hidalgo, owned by Phelps Dodge. Hidalgo began operating in 1976. From the beginning, it introduced air-pollution-control technology, and it was, at the time of its construction, considered to be the most modern and efficient copper smelter in the country (Rothfeld and Towle) 1989.
EPA standards demand a permanent end-of-pipe type of control. Dispersion techniques have been explicitly prohibited, as well as temporary reductions in production levels. Consequently, legislation has implicitly imposed the SO2-fixation method for reducing SO2 emissions. This has meant replacing old reverberatory furnaces with other equipment to recover SO2 and produce sulfuric acid.
The US smelting industry uses flash and electric furnaces, but bath smelting has also been used in other countries. Other techniques are either unproven for use at an industrial scale, like the ammonia scrubbing system, or too expensive to use with copper concentrates, like the limestone scrubbing system used in coal-fired electric-power plants.
For the most part, smelters choose the technology that suits their own site-specific conditions, such as metallurgical parameters or input supplies. The tendency has been to use Outokumpu smelting technology, which accounts for more than 75% of the flash furnaces currently operating in the world and two-thirds of the new capacity. Although the Outokumpu technology has important advantages, such as being the lowest-risk option, the Inco and Noranda processes also have advantages, such as simplicity and the capacity for handling dirtier concentrates. Each of these technologies achieves full compliance with strict environmental standards, but the Mitsubishi continuous smelting process yields the highest level of SO2 fixation (more than 99%).
Although the replacement of reverberatory furnaces has brought additional capacity, increased productivity, and energy savings, these investments might not have been made had there been no regulatory requirements (Sousa 1981; Rieber 1986; Cook 1989; Roethfeld 1989). The new technologies reduce operational costs, but in terms of capital costs, the scale shifts in favour of the old technology (Cook 1989). For greenfield projects, however, the new technologies have smaller capital and operational costs than a reverberatory furnace does, according to Burckle and Worrell (1981).
A company's decision to produce sulfuric acid is also considered a consequence of the regulatory environment, because the sulfuric acid market by itself fails to justify its production (Rieber 1986; Rothfeld and Towle 1989). Nevertheless, some smelters have long been producing sulfuric acid, like the Garfield smelter, which built an acid plant in 1916 (Navin 1978). In any case, ore leaching and electrowinning are creating an interesting alternative market for sulfuric acid.
The introduction of these technologies was not trouble free. Although they were being used in other countries, they had not been tried at full scale or under the metallurgical conditions of the US smelting industry. Temporary closures, delayed start-ups, and productivity losses were part of the costs of complying with the regulations. Moreover, after the new technologies were introduced, some smelters still had problems complying with emission standards — Inspiration and Hayden (Asarco) are examples (GAO 1986).
Analyzing the costs that environmental regulations imposed on the copper industry, the USBM (1989) determined that the principal impact was on smelting, because compliance with the CAA entailed major process changes, substantial capacity reduction, and increasing export of ores and concentrate. Other researchers drew the same conclusion. According to a study done for EPA in 1978 by A.D. Little, Inc. (Sousa 1981), 24% of the copper industry's total investment in the 1972-75 period went to pollution control. For copper smelters, the figure was 74%. Only 4% of this investment was for water-pollution control; the other 96% went to air-pollution control.
The strong impact of the CAA and its SO2 standards on the copper industry stimulated several studies. Some of these studies were prepared for the EPA, some were prepared for the industry, and at least a couple were prepared for Congress to use in considering protection for the domestic copper industry. USBM's Minerals Availability Program prepared the most complete report. This study, by Rothfeld and Towle (1989), examined the remaining seven southwestern smelters (which accounted for 96% of the US smelting capacity in 1987) and identified the regulatory impacts, including monitoring and direct administrative costs. The study concluded that, on average, environmental, health, and safety regulations added 0.032 USD/lb (1 lb = 0.454 kg) to operating costs. Sulfuric acid credits reduced this figure to 0.019 USD/lb. (For comparison, the total operating cost for an average smelter was 0.123 USD/lb — see Table 4.) These regulations also added 0.031-0.104 USD/lb to capital costs, depending on the smelter. (These calculations assumed operation at full capacity and excluded administrative overhead and indirect costs. The calculation of capital costs assumed a 15% rate of discount.) Metallurgical conditions, size of the plant, degree of obsolescence, and technological choices were the main factors affecting compliance costs. If both operational and capital costs are taken into account, compliance with environmental regulations represented 45% of total smelting costs and 14% of the total costs of producing a pound of refined copper (assuming no capital costs other than regulatory capital costs). Rothfeld and Towle also indicated that the capital costs of retrofitting a smelter averaged 150 million USD.
Table 4. Operational costs for an average smelter. | ||
Source of costs | USD/lb | % |
Labour | 0.0465 | 37.8 |
Energy | 0.0374 | 30.4 |
Supplies | 0.0391 | 31.8 |
Total cost | 0.1230 | 100.0 |
Source: Rothfeld and Towle (1989). | ||
Note: USD, United States dollar; 1 lb = 0.454 kg. | ||
The calculations given by Rothfeld and Towle (1989) take into account productivity gains resulting from new and improved technology, lower energy costs, and greater production capacity. These calculations also include health and safety expenses, but according to a study cited in Sousa (1981), 95% of the total regulatory expenses are attributable to compliance with EPA standards. On the other hand, those figures may be considered conservative because they include only direct costs and do not take into account the opportunity costs involved in the slow process of obtaining permits — legal fees, red tape, and delays add to the costs.
Several other studies tried to measure the actual costs of environmental regulations or to assess possible impacts of full compliance and stricter standards. For example, the Congressional Research Service (CRS 1984a), analyzing different sources of data, gave a cost for full compliance — not necessarily effective compliance — ranging from 0.05 to 0.15 USD/lb. An industry source gave the highest estimate, but the State of Arizona gave the most probable estimate, an average of 0.09 USD/lb. Earlier studies, like Sousa (1981), gave effective costs ranging from 0.03 to 0.05 USD/lb and projected an additional cost of 0.10 USD/lb for full compliance with the 90% emission-control standard.
Studies tended to overestimate future environmental costs because they normally included the cost of compliance for smelters that would shut down. These smelters usually had the highest retrofitting costs. Exploratory studies also failed to take into account substitution effects or technological improvements. Although actual costs were less than previously estimated, the relative impact of environmental regulations on operational costs was greater, because operational costs were reduced through modernization.
It is also interesting to notice that the estimates prepared by governmental agencies at the beginning of the environmental era often underestimated the real costs of compliance by the copper industry. For example, in 1971 the President's Council on Environmental Quality (CEQ) estimated that air- and water-pollution control would require capital expenditures of 311-682 million USD (MacDonnell 1989). If operation and maintenance are included, the cost goes up to 346-758 million USD (Charles River Associates Inc. 1971). Even if we take the highest point of the CEQ estimate and adjust for inflation, actual costs were more than double the estimated costs.
This underestimation of real costs was rather common. A lack of experience and a poor understanding of some industries and their technological challenges most often led to optimistic assessments of the economic impact of regulations. Certainly, in the case of the copper industry, the dramatic changes that took place in the US economy and international markets did not help.
If projecting environmental costs proved to be a difficult task, identifying the actual cost of compliance for the smelting industry was not much easier, as we have already seen. The current accounting system makes no clear distinctions among regulatory costs, leading sometimes to important discrepancies, depending on the methodology used for estimating. Figures given by companies usually refer to total investments, without adjustments for increased productivity or higher energy efficiency; some may be exaggerated just to improve the external image of the company (Gulley and Macy 1985).
The CAA amendments of 1990 introduced additional controls for SO2 emissions and focused on the power-utility industry. Nevertheless, the regulations pertaining to toxic substances released into the air are a possible new source of compliance costs for copper smelters and for the copper industry in general. The Bush administration estimated the annual cost at 3 billion USD to the whole economy. Industry estimates ranged from 14 billion to 62 billion USD (Portney 1990). Uncertainty about the cost to the mining industry is even greater.
Probably the most dramatic impact of environmental regulations has been the shutdown of several smelters (which may be evidence of an overwhelming financial burden) and, as a consequence, the reduction of the national smelting capacity. An equally visible consequence has been the reduced levels of employment in the industry.
In 1970, the United States had 17 smelters, and the total primary smelting production was about 1.6 × 106 t of copper. Two decades later, in 1989, the number of smelters had been reduced to eight, and production had been reduced to 1.5 × 106 t of copper; there was one new greenfield project. Smelting production reached its lowest level in 1983, with 1 × 106 t of blister and anodes. The smelting and refining industry suffered a steeper decrease in employment, from an estimated 11 600 workers in 1967 (Charles River Associates Inc. 1971) to about 5 400 workers in 1988 (USBM 1989).
The reduction of capacity and production has certainly been an important factor in accomplishing environmental goals; such reductions may even be an inevitable short-term consequence of implementing environmental controls. According to GAO (1986), 56% of the reduction in SO2 emissions from nonferrous smelters was achieved because of reduced production; only 44%, because of retrofitting and new technologies.
Figure 1. Cost of copper production.
The shrinkage of the smelting industry — and of the copper industry in general — is certainly an additional cost to society. This can be seen in Figure 1, where area A represents the higher operational costs, already discussed, and triangle B represents the cost of reduced production and employment (the smaller the mobility of capital and human resources, the larger the triangle).
This cost has not been included in most evaluations of the impact of pollution controls on the industry — estimates have concentrated on operational costs. Nevertheless, attempts have been made to estimate the impact on total capacity and employment; at first, the estimates were far too low. CEQ, in its "most extreme scenario," projected the stabilization of smelting capacity at around 1.6 × 106 t. It also fell short in employment estimates, predicting that employment would not fall below the 1970 level. In 1970, total employment in the copper industry was estimated to be 54000; by the end of the next decade, it was around 18 000 (MacDonnell 1989).
If we use the triangles in Figure 1 and apply the capacity lost during these last decades and Rothfeld and Towle's (1989) operational costs of compliance, we obtain a figure close to 63 million USD. This may be an underestimation, as the calculation of regulatory costs took into account only direct costs, and we are not allowing for any expansion and are assuming perfect mobility of resources. But it may also be an overestimation, as the enforcement of environmental regulations was not the only reason for the reduction of US copper-smelting capacity. As we review the circumstances, we find that some shutdowns would have taken place regardless of environmental regulations (Mikesell 1988). In fact, even some plants that were already in compliance and thus not threatened by new capital expenditures closed. In fact, 5 of the 10 closed smelters already had control equipment in place to meet SO2 emission limits (GAO 1986).
Several factors compounded the difficulties for the copper industry during the late 1970s and early 1980s. The most important was the crisis in the international copper market (Mikesell 1987). Copper prices reached their lowest levels since the early 1930s. Excess capacity (created during the early 1970s in an over-optimistic reaction to good market conditions) and declining rate of growth in copper consumption caused the glut in the market. Lower-quality ores, higher labour costs, and older plants made it difficult for US copper producers to confront a more competitive market. In addition, some companies were going through hard financial times.
Environmental regulations have corroded the competitiveness of US copper producers and reduced their world-market shares. In the US market, increased imports of refined copper have compensated for decreased domestic production. This effect does not necessarily increase the social cost of environmental regulations unless we consider, first, that there is a premium for reduced vulnerability and, second, that the United States is not a marginal actor in the international market.
If we look at the first consideration, we find that although some decades ago copper was a strategic material, times have changed. Nowadays, copper is a traditional metal with many possible substitutes, and external supplies come from allied countries that are fairly stable politically and economically. In 1986, the worst year of the crisis in the copper market, refined-copper imports reached a maximum of 23.5% of the total apparent consumption (Mikesell 1987).
Regarding the second consideration, we can say that although the United States is one of the most important copper consumers and producers in the world, its role in the international market is not decisive. In 1986, it imported slightly more than 500000 t of refined copper. Moreover, most of this trade was with Canada, to some extent a captive market.
The industry argued that environmental regulations were one of the main reasons it needed protection against copper imports. The additional costs imposed by compliance with air-pollution and other controls were identified as a significant factor in the domestic industry's loss of competitiveness. Other producing countries without similar standards and requirements were said to be subsidized.
Several studies were done to assess the real damage and the need for relief. As mentioned earlier, this concern stimulated most of the research on the costs of environmental regulations to the copper industry. Congress discussed the possibility of protection for the domestic copper industry in 1978 and 1984. In both cases, although the International Trade Commission recommended import relief under the escape clause of the Trade Act of 1974, Congress ultimately denied the copper industry's petition for import protection.
The crisis affecting the US copper industry was not unique. Other base-metals industries were experiencing similar disruptions, as was the iron and steel industry. The issues were similar: depressed markets, loss of competitiveness, temporary and permanent closures, and unemployment. Environmental regulations, particularly air-pollution standards, were also an issue, although not as much as in the copper industry (Crandall 1981).
The structural causes of the crises were also similar. Although environmental controls were imposing a significant burden on US industry, other factors played a role. The most important of these was the change in the traditional behaviour of the international metals markets. The growth rate of world demand for all basic metals was decreasing; to an important extent, this was a result of the energy crisis and the increasing concern about materials-use efficiency. The economic recessions of the mid-1970s and early 1980s somewhat obscured the reduction in the materials-use intensity indices (Tilton 1990).
On the supply side, equally important changes were taking place in the late 1960s with the emergence of new low-cost producers, who increased competition in international markets. In the copper industry, an important change was the nationalization process in the late 1960s and early 1970s, which not only altered the organization of the industry and augmented the role of state enterprises (Sousa 1981; Cook 1989) but also affected companies with incomes heavily dependent on their filials (subsidiaries). Direct investment losses were equally significant for some of them, such as Anaconda (Navin 1978).
US industry was badly prepared for the new scenario. Obsolescence was a problem for most of the plants, especially compared to the state-of-the-art plants being built in countries like Japan and Korea (see, for example, Adams [1986] for the case of the iron and steel industry; Sousa [1981], the copper industry). An equally relevant factor was higher labour costs.
Productivity growth in the copper industry decreased during the 1970s and early 1980s, but wages continued to rise at the normal rates. For copper smelters and refineries, Sousa (1981) found a negative rate of productivity growth (averaging -0.3%) for the 1960s and 1970s.
High interest rates in the United States also eroded the position of these US industries, which needed to undertake big modernization projects to comply with environmental regulations and deal with the competitiveness crisis. Some companies were already highly indebted and burdened financially (Navin 1978; USDC 1979), and the appreciation of the dollar exacerbated these problems (Sousa 1981; CRS 1984). For the copper industry, a more fundamental factor was its reliance on ores of relatively low quality (Sousa 1981; CRS 1984).
One of the reports prepared for Congress concluded that environmental costs were one among several factors affecting the industry (CRS 1984b). After balancing the different factors generating the differential between the costs borne by US producers and those borne by their lowest-cost competitors, the report suggested that import protection would give only temporary and marginal relief and would not address the root problems of the industry.
Although Congress was concerned about the economic and social impacts of additional shutdowns in the copper industry, other considerations also influenced its final decision to deny the petition for protection. One consideration was that such protection might adversely affect the copper-user industry, possibly shifting the competitiveness problems to that sector. Other considerations were the possibility of complaints under the General Agreement on Tariffs and Trade and other treaty obligations and the possibility of negative impacts on the economic stability of allied copper consumers (CRS 1984b).
Although the iron and steel industry got secured trigger prices during the 1970s and import quotas in the 1980s, the copper industry was less successful and had to overcome the crisis without special protection. Nevertheless, in the end, both had to accept drastic restructuring. High-cost plants and producers went out of business, and those who remained had to reorganize production, renegotiate labour contracts, and undertake major modernization projects. In the copper industry, the results were impressive — the average production cost went down 42.5% between 1981 and 1989, in real terms. Productivity increased both at the industry and at the smelter and refinery levels (USBM 1989).
Frequently, the industry has argued that the regulatory framework and its financial burden will lead to the migration of US investment to countries where regulations are less strict or nonexistent. Some analysts, like MacDonnell (1989), have supported this hypothesis, but the complexity of the subject makes it difficult to assess the real impact of environmental regulations on investment decisions.
The logic of the arguments for the investment-migration view, at first glance, seems to be crystal clear: in loosely legislated countries, mining production is less costly and more profitable. Available data on capital expenditures for pollution abatement confirm that US multinationals spend considerably less overseas than at home (UNCTC 1985).
But some considerations weigh against this view. One is that technology tends to be homogeneous, especially the processes and equipment used to produce internationally traded commodities. Companies investing overseas will use the technologies developed in countries already subject to strict environmental regulations.
Another important consideration is the reputation of the enterprise. Big multinationals with headquarters in developed countries would not like to be perceived as taking advantage of other countries and damaging their environment. The old stereotype of the multinational company stripping the assets of developing countries as fast as it can no longer pertains. In the late 1960s and early 1970s, the relationship between multinationals and developing countries changed dramatically. The multinationals have been more concerned to understand and fulfil the expectations of developing countries, creating a new type of partnership. Furthermore, stakeholders and environmental groups in home countries have begun to exert pressure on multinationals to protect the environment; sometimes this pressure is even greater than that exerted by host governments.
Although governments of some developing countries may have a more lenient attitude, the trend is toward increasing environmental control. Developing countries are introducing environmental concerns into their development projects, either voluntarily or because they are obligated to do so by the policies of international funding organizations, such as the World Bank and the Inter-American Development Bank. This trend toward increasing environmental control has in some cases created a disincentive for overseas investment. Lumpy and politicized processes add to the uneven capacity of these countries to formulate and enforce environmental regulations (Leonard 1988).
Nevertheless, to the extent that developing countries tend to use the experience of developed countries, there may be a trend toward a homogeneous treatment of environmental policies around the world. Unless their investments are short-sighted, multinationals will likely anticipate future changes and introduce environmentally friendly technologies from the start.
Yet, homogeneous treatment of environmental policies does not imply that the costs of compliance would be the same everywhere (Leonard 1988). The costs of compliance depend on regional environmental conditions and availability of inputs. Cost differentials may also result from building more-efficient institutional structures and less-cumbersome administrative procedures, and this is also possible in developing countries that have the will to learn from the experience of other countries.
It is not easy to discern from the available data the impacts of environmental regulations on investment in the mining industry. Certainly, increased costs have eliminated marginal projects in the United States, and even expansions have been affected to the extent that EPA's New Source Performance Standards (NSPS) also apply to new equipment. But as we have seen, many other factors affected firms' decisions in the 1970s and 1980s. International-market conditions were no incentive to invest anywhere, unless in highly profitable projects like small polymetallic deposits with high ore grades or expansions with low operating costs.
Political and general economic conditions added to the problems. During the 1970s, the relationship between multinationals and host countries suffered drastic changes, provoking the flight of mining multinationals and a general distrust of the stability of foreign-investment regulations in least-developed countries (LDCs). During the early 1980s, LDCs became less antagonistic as their external debt increased and international capital markets became more elusive. Some overseas investors benefited from the LDCs' critical need for capital and foreign resources. The trend toward the privatization of state companies made these countries attractive in the 1980s. Leonard (1988) had this to say about multinationals' overseas-investment decisions:
When US companies, even those facing extreme pressure because of pollution problems at home, decide to build a plant abroad instead of in the United States, they do not necessarily do so because of differentials in pollution controls or because governmental and public concern for the environment may have delayed construction. Conversely, an industrializing country may have no intention of becoming a pollution haven, but other forces may induce it to attract certain high-pollution industries just the same. Thus, a major methodological problem is that it is difficult to single out the effects of any one factor in assessing either international comparative advantages or individual industrial-location decisions.
Leonard examined US Department of Commerce data on direct investment of US companies overseas in the late 1970s and early 1980s. He found that the mineral-processing industry's share of total US foreign direct investment did rise by a few-points and that the portion of investment directed to developing countries also grew slightly, particularly during the early 1980s. An important portion of that investment went to Brazil and Mexico. The pattern is somewhat similar but more pronounced for the percentages of total capital expenditures going to LDCs. Leonard (1988) concluded that "stricter American environmental regulations have contributed to the international dispersion of some basic mineral-processing industries, such as copper, zinc and lead processing." Nevertheless, he added, "this trend is enhanced by other factors, such as the changing availability of raw materials, other nations' requirements that minerals be processed in the country where they are mined, and various economic factors including low prices, high interest rates, and recessions."
In the copper-smelting industry, only one greenfield project and some expansions were initiated during the 1970s and 1980s, but the situation now looks brighter. Plans for the 1990s include the expansion of the Cyprus smelter by 50% and the construction of a new smelter in Texas by Mitsubishi. Although environmental costs have affected the US industry, the location of the Mitsubishi smelter indicates that other factors have a more important influence on an investment decision. Mitsubishi is also involved in the biggest copper-mining project of the 1990s, La Escondida in Chile, but that project does not include smelting capacity.
Generally, as copper prices recovered, US production levels increased substantially. New projects are developing, which confirms that, overall, market conditions are still the main driving force. The improved market conditions will allow a better assessment of the impact of environmental regulations. Environmental regulations are the cause of cost differentials, but general wisdom and interviews with mining companies indicate that market considerations, the quality of the ore deposits, and long-term stability mostly guide their investment decisions.
The design, implementation, and results of a certain policy depend on more than economic factors: political and institutional considerations also come into play.
The setting for environmental policy in mining involves the role of mining in the US economy and, equally important, in the regional economy. A little bit of history and a look at recent structural changes help to explain the attitude of the industry, its involvement in the policy-making process, and its power of negotiation. Other elements are the structure of the industry and features of the international markets.
Complaints were registered by the industry about the competitiveness of the eight plants closed in 1985; four had introduced technologies to control air pollution. White Pine was among those that reopened. So was Garfield, after a big modernization program that placed the plant among the lowest copper producers. Ray (Kennecott) and Ajo (Phelps Dodge) were closed for other reasons. McGill (Kennecott), despite having no pollution-control equipment, was not violating the EPA's National Ambient Air Quality Standards (NAAQS), according to the General Accounting Office (GAO 1986). According to Sousa (1981), it was. Although Kennecott rebuilt the reverberatory furnace, more stringent standards were introduced and it had to operate with NSOs. It was uneconomical to build a sulfuric acid recovery plant, and in 1981 it was evident that the plant was going to close (GAO 1986).
Of the plants that closed later, Tennessee Chemical apparently was in compliance; Douglas was not, and although it requested a second NSO, it looked like it was only a matter of time before it had to close (Rieber 1986):
The closure of the Douglas smelter by 2 January 1988 is virtually assured, with or without a binational agreement. Given the plant layout, the age and type of furnaces, the projected state of the US copper market and the problem and costs of acid sale or disposal, Phelps Dodge will not build an acid plant. Given the first three factors alone, it is very doubtful that, even if an acid plant were emplaced, SO2 capture would meet NSPS. Although its present smelter operating profits are favorable vis-à-vis other US smelters, this antiquated facility could not bear the financial burden of new equipment and APC [air-pollution control] in the existing plant.
As Sousa (1981) reminds us, it was uneconomical to built a sulfuric acid plant.
Morenci, the principal violator of NAAQS in Arizona, had already paid 682 500 USD in fines before it closed. Ajo and Hayden were also contributing and paid 25 000 and 52 500 USD, respectively. Phelps Dodge was planning to invest 195 million USD in its Morenci and Ajo operations and was negotiating with EPA in 1981. Ray was supposed to be redesigned to achieve 90% control in 1983. According to Sousa (1981), however, White Pine-Copper Range Company processed copper concentrates with a low sulfur content and was in compliance with the standards.
At first, the reaction of the industry was to resist the new regulations and to delay compliance. Citing considerations like a heavy financial burden, higher operational costs, and a lack of proven technology, they sought relief. To support their arguments with numbers, they hired various consulting firms to study the situation. They did achieve section 119 of the 1977 amendments.
The copper industry was not the only one having problems with compliance. A common feature of environmental policy-making has been the underestimation of the costs of compliance and, generally speaking, an overestimation of the technological capabilities of the industry. The 1977 amendments recognized how unrealistic the original deadlines were. "Despite the high cost and technical uncertainties implied in replacing all reverberatory furnaces by other smelting processes, according to the Arthur D. Little report economic considerations were absent in the establishment of NAAQS" (Sousa 1981).
But the copper industry got more than just a new deadline — it also got the NSO, a mechanism that was not available to all industries. In part, Congress seems to have considered the risk of closures and shutdowns resulting from a depressed copper market (GAO 1986). Even with the NSO, however, the industry was still having trouble complying with the NAAQS, and those companies not in compliance in 1977 did little to improve this situation. All of the nonferrous smelters requesting NSOs were copper smelters. Three of the four that obtained NSOs applied for a second period; the fourth simply went out of business.
The Division of Stationary Source Enforcement (DSSE) reported in 1978 that almost 50% of the 27 nonferrous smelters were operating in violation of the regulations governing SO2 emissions. In contrast, by the end of 1979, "only 6.2% of the major air pollution facilities identified by the EPA were not in compliance with regulations." In 1980, DSSE reported litigation over the State Implementation Plans (SIPs) of Arizona, Utah, and Nevada. In the meantime, one smelter closed, and "the closing of this smelter has resulted in the only change in the compliance situation."
It is interesting to notice that more than half of the reduction in violations in 1977-86 was achieved by the closure of some smelters in 1984 and 1985. This is not surprising if we consider that only Douglas was releasing around 300 000 t of SO2 a year. The report of the State of Arizona indicated that in 1984, the copper smelting industry incurred only one-third of the total cost of compliance.
The strategy of the states in developing their SIPs and enforcing compliance with the NAAQS depended to some extent on the industry's importance to the regional economy. Their approach was generally to negotiate first and to use court orders as a last resort; this was in part because of the huge legal expenses and time involved.
Arizona has had the highest levels of SO2 emissions from copper smelters and the highest number of NAAQS violations (GAO 1986), partly because this state has more than 50% of the US smelting capacity and partly because its copper smelters have had more problems with compliance. Of the seven smelters operating in the 1970s, four have since shut down. This may have been one of the reasons Arizona's SIP approval took so long (Rieber 1986). Some sources indicated that other factors contributed to the plant closures. Sousa (1981) recorded that
while US copper firms have relied largely on mining technology to maintain their competitive position in the world copper market, smelting technology in this country has not progressed at the same rate. Continued reliance on scale economies to reduce costs will likely yield diminishing returns.
To some extent, productivity growth did decrease because of the diminishing returns on the use of economies of scale (CRS 1984), not only in the smelter and refinery but also at the extractive level.
Innovation in the mining industry is likewise a difficult subject: recent studies found that only 10% of both federal and private investment in nonfuel-materials research and development (R&D) deals with minerals supply; the remaining 90% is directed to materials utilization. The studies also found that industry invests about four to five times as much as the federal government on R&D related to nonfuel-materials supply. However, the R&D intensity of non-ferrous metals industries is well below average.
The control of SO2 emissions has had another kind of international dimension: SO2 particles can travel many miles and generate acid rain — either wet or dry — far from the original source of the emissions. Consequently, flows of SO2 emissions into and out of the United States have created conflicts with Canada and Mexico. But the flow to Canada is estimated to be more than double that from Canada. US SO2 emissions appear to cause pollution problems in southeastern Canada. Most of these emissions come from power utilities and industries in the northeastern states. The main sources of Canadian SO2 emissions are the nonferrous smelters in southeastern Canada.
Canada has been complaining for a long time about the problem, but in the 1980s, US policy and resources were focused mostly on studying it. Several meetings and special commissions were set up to study the issues, without specific outcomes. With the 1990 CAA amendments, however, the United States began to specifically address the problem.
There were several reasons for the delay. Most important were the economic impact and the equity issue for US power utilities and coal producers. Copper smelters played a secondary role because they were not the main offenders and the controls already in place made them a minor source of the problem at a national level. The US interest in a free-trade agreement with Canada may have been a major factor in the Bush administration's strong support for the initiative.
Similar problems have plagued the relationship between the United States and Mexico, although apparently these are not as salient as the US-Canada border issues. For a description of the transboundary issues in US-Mexico relations and the agreement to limit SO2 emissions from the "Gray triangle," see Rieber (1986).
Environmental problems are complex and evolve with time and the social and economic contexts. Moreover, adjustments and sometimes major modifications in the system have to be made because of the relative lack of previous experience.
New knowledge about the health and environmental impacts of economic activities has stimulated policymakers to modify existing standards or create new ones. In the 1990s, the focus has been shifting to regional and global environmental problems, such as acid rain, ozone depletion, and global warming. Small and nonpoint pollution sources will become the targets of future efforts as the major polluting industries and firms are brought under control.
The approach to old and new problems will tend to be more integral, involving multimedia. Major efforts will be made to better prioritize environmental problems and to concentrate available resources on those issues with higher risks to human health and the environment.
Policymakers will be under greater pressures to change the policy mechanisms for dealing with environmental problems. Different sides are seriously criticizing command-and-control regulations because it is doubtful that such regulations will help achieve environmental goals in the long term. The increasing marginal costs of pollution abatement, the US industry's competitiveness problems, and the need to reactivate economic growth have made it urgent to improve the cost-effectiveness of the system. The trend is toward market incentives, with emission or effluent charges or pollution permits in some but not all areas.
All these changes will require institutional adjustments. Bureaucratic inertia may be one of the major obstacles in the way of greater efficacy and efficiency. Multimedia approaches will challenge the compartmentalized structure of the EPA. But the tension between decentralization and consistency and coherence — not to mention the loss of power — is another issue.
There is also a need to modify the public's perception. More and better information, improved communication channels, and new ways to involve the community are crucial to efforts to implement new policy concepts. A better understanding of the real risks and the trade-offs of environmental protection is fundamental to creating the necessary Congressional support. Participation will certainly be needed as the abatement efforts shift to small and nonpoint sources.
This section discusses some of the major changes affecting environmental policy-making, particularly in the case of mining-waste-disposal regulations. Recent proposals have introduced some of the new policy concepts, and it may be worthwhile for the reader to appreciate possible obstacles in the way of modernization.
At the beginning of the environmental era, the tendency was to react to the most pressing problems and the issues on the front pages of newspapers. Consequently, the approach was partial and had a media focus.
The main concerns in the early 1970s were air and water pollution — the most visible problems — so the first laws to be amended were the CAA, in 1970, and the Clean Water Act (CWA), in 1972. As the problems of air and water pollution were to some extent being resolved, new problems appeared, either because they had been overshadowed by previous emergencies, because new technological developments had created new problems, or simply because the media approach just shifted problems from one medium to another.
This partial vision had a strong influence on EPA's organizational structure, undermining its capacity to take a more integral perspective on environmental problems. The principal divisions of EPA were created following Congressional activity and reinforced the legislative pattern and fragmentary nature of US environmental policy (for example, see SAB 1990; Portney 1991). EPA's compartmentalized structure also created coordination problems, as well as inconsistency. Lastly, individual firms faced cumbersome and lengthy permitting processes.
These problems were already apparent in the early 1980s. The EPA (1984) noted that coordination problems often led to the duplication of research, inconsistent risk assessments for the same substance, the transfer of pollutants from one medium to another, and the uncoordinated regulation of the same industry by different programs. More recently, William Reilly, the new administrator of the EPA, stressed the shortcomings of the then current approach, particularly its negative impact on pollution prevention (Reilly 1989). EPA supported the Conservation Foundation's New Environmental Policy Project. The model developed by the Conservation Foundation requires the consideration of the environment as a whole in all decisions, a single-permit system, and the standardization of regulatory procedures (Irwin 1989).
Nevertheless, the change to a multimedia approach faced several obstacles, ranging from bureaucratic resistance to Congressional reluctance to award more authority and discretion to EPA. Industry was also concerned, fearing that changes in the status quo would bring new problems and necessitate new controls, with new costs.
Another consequence of a partial view was that it made it difficult to prioritize environmental problems and allocate resources to problems with higher health and environmental risks.
The objective of the Comparative Risk Project, developed in 1986, aimed to establish the risks currently posed by major environmental problems, given existing levels of control (EPA 1987). The study distinguished cancer and noncancer health risks and ecological and welfare effects and broke new ground.
The study's conclusions, based on the "informed judgement" of experts, were somewhat disturbing (EPA 1987). The ranking rather mismatched EPA's priorities, although the latter coincided with public opinion, reflecting the source of Congressional action. The best example of a discrepancy was the CERCLA program. According to the study, the risks associated with hazardous-waste disposal were rated very poorly. But Congress had reacted quickly and appropriated billions of dollars for the program's implementation.
The scientific basis for this first comprehensive attempt to assess the real risks was not as solid as one might have wanted. However, there was no doubt that the project was important, as the Science Advisory Board pointed out (SAB 1990). The report, in identifying the most significant risks, was an important step toward better allocation of limited resources.
EPA had used risk assessments on previous occasions when designing regulations. It had also used site-specific risk assessments when developing the National Priority List of CERCLA (Russell and Gruber 1987). But this was the first time that the concept had been used in a comprehensive way.
Risk assessment could be used to tailor standards and controls to local conditions and actual risks, improving the efficiency of the system (Tietenberg 1988). In addition, risk assessment provides a scientific foundation for identifying the social benefits of pollution abatement. One of EPA's goals is to impose requirements only where the benefits of regulation would outweigh the costs. However, it has proven difficult to design regulations that both meet this standard and are enforceable (EPA 1990). The second-best alternative is the use of cost-effective mechanisms, and this means an increasing reliance on market incentives.
The use of market incentives to internalize environmental costs of private decisions and reduce excessive pollution-abatement expenditures is getting increasing political support. The idea is not new. Economists have long been suggesting the use of taxes and marketable permits.
The Emissions Trading Program was the first attempt to introduce more flexibility into the ways environmental goals could be met. Concerned with the impact of future growth in nonattainment, Congress introduced this limited version of a marketable-permits system in the 1977 CAA amendments. The system awards emission-reduction credits to firms that reduce their level of emissions beyond those stipulated in the regulations. The firm can bank the credits and use them in the future for the same plant, or it can trade them to another company (Tietenberg 1988; Hahn 1989; Liroff 1989).
Nevertheless, not until the late 1980s did the concepts of market incentives and pollution permits find their way to Congress and the White House. The inclusion of a pollution-permit system in the 1990 CAA amendments was a landmark. Other market incentives have been proposed, including some to control C0 2 emissions to mitigate the greenhouse effect. Market incentives include the removal of barriers that prevent markets from working effectively and the elimination of government subsidies that stimulate the excessive use of natural resources.
Several economic and political factors explain why Congress and the White House endorsed the use of market incentives for environmental protection (Hahn and Stavins 1991). The economic recession of the early 1980s and the general slowdown of the economy had increased the marginal costs of pollution abatement. Easy targets had already been controlled; the next step would be to control the small and nonpoint pollution sources, which tend to present more complex problems. The technology for additional reductions of emissions and discharges implied higher abatement costs. Further economic growth also posed a challenge. Concerns about the international competitiveness of the US industry and the economy's capacity to absorb additional environmental costs motivated the search for more cost-effective mechanisms.
An important political factor influencing the use of market-based instruments during the Bush administration is that this kind of scheme fit well with the goals of the Republican administration. With the introduction of market incentives, the Bush administration was able to fulfil its commitment to environmental protection without intervening further in the economy and without imposing overwhelming costs on the industry or on the fiscal budget.
The introduction of market incentives was facilitated by the environmental movement's willingness to use economic tools in the search for better environmental quality. The Environmental Defense Fund, the Wilderness Society, and other well-known environmental groups have successfully used cost-benefit analyses to support their cause (see, for example, Stavins 1983, 1987; Goerold 1987). Their philosophy regarding the use of market incentives is pragmatic: if it works to protect the environment, let's do that. Nevertheless, the environmentalists are cautious, especially when economics is applied to more basic principles.
But the industry has not shown the interest one might have expected. It tends to be more conservative and to fear new rules for a game it already knows how to play. Administrative uncertainty and unexpected additional costs are at the root of that fear.
Although some analysts say it is premature to anticipate a massive use of market incentives, there is certainly a trend (Stavins 1991). In any case, there is consensus that the use of market incentives has to complement, not be a substitute for, the old system.
Institutional change is required if these concepts are to be incorporated into regulatory programs. The structure of EPA, its composition of human resources, and its budget need to reflect a higher degree of integration and a stronger role for economics. More administrative discretion may also be needed. This brings up a complementary subject: decentralization.
If a lack of flexibility stands in the way of more cost-effective ways of attaining environmental goals, a higher degree of decentralization will be needed. This will only work if state authorities have the commitment and resources to formulate their own programs and to monitor compliance. Theoretically, state authorities are in a better position to understand the specific problems and risks in their regions (at least, they are in a better position than Washington) and can tailor regulatory programs to the preferences of local communities and their willingness to pay for a cleaner environment. State authorities are also in a better position to monitor compliance and enforce regulations.
However, public-interest groups fear that giving greater discretionary powers to state authorities may mean a dirtier environment. The possible political alliances between local politicians and industry and the need to foster regional economic development may lead local authorities to soften regulations and standards, as well as enforcement.
Although the industry may benefit from this trend, it may also fear an excessively disparate regulatory system. This may be especially true of companies with plants in more than one state. Uniform regulatory programs are more expensive in terms of compliance but reduce administrative costs and uncertainty.
Finally, for certain problems, federal authorities cannot be replaced. These include interstate acid rain and water pollution and global problems. In some areas, important economies of scale and the need for a critical mass call for a stronger federal role, as in R&D activities or in the development of information systems.
With the Bevill Amendment of 1980, mining wastes and certain mineral-processing wastes were temporarily exempted from RCRA regulations. The exemption was granted by Congress until EPA finished a study to determine whether these wastes should be classified as hazardous or nonhazardous. In 1985, EPA submitted the results of this study to Congress and, in 1986, published a regulatory determination on extraction and beneficiation wastes from mining. The principal conclusion of the study was that mining wastes should not be regulated as hazardous under Subtitle C of RCRA as originally proposed. Instead, EPA suggested a "tailored" approach for mining and beneficiation wastes under Subtitle D (nonhazardous wastes).
Since then EPA has worked intensely to produce draft regulations addressing concerns about the generation and regulation of mining wastes. The products, Strawman I and Strawman II, have been discussed by a variety of stakeholders: industry, environmental groups, the states, and federal agencies. The Policy Dialogue Committee (PDC), created in 1991, was the last chapter of this EPA effort. EPA intended to bring all interest groups to a public forum and eventually generate some agreements.
The reauthorization of the RCRA by Congress — which was to make a final decision on the legislative framework for handling these wastes and municipal and household wastes as well — was expected to take place in 1991/92. Although it was too early to predict the outcome of the EPA effort at the time of writing, some interesting aspects deserve attention: the unusual rule-making process itself; and the concepts in the regulatory proposals.
The most interesting feature of this process is the involvement of diverse interest groups in preparing and discussing the EPA draft regulations before Congress made its decision. Usually, public involvement takes place at three different stages in the legislative and regulatory process. First, the public has a chance to lobby and to bring expert witnesses once a statute has been introduced for Congressional discussion. Second, after Congress adopts a statute, EPA prepares and proposes the corresponding regulations to implement the statute; here the public may intervene by commenting on the proposed regulations. Third, after the regulations come into force, the public always has a chance to challenge in court the ways the law is implemented and enforced.
In the case of the RCRA amendments, though, instead of waiting for Congress, EPA took the initiative and started an informal rule-making process that had no precedent. This gave EPA the time and flexibility to involve the interest groups in the process. Moreover, the PDC gave these groups a chance to dialogue and interact. The groups may still consider each other as adversaries, but the communication flow — usually from each group to EPA — became multidirectional. This EPA initiative may have set an important precedent by making environmental policy-making in the United States less confrontational. This in turn might facilitate the implementation of regulations, reducing the legal and administrative costs and speeding up the whole process.
The concepts in the regulatory proposals included the use of a decentralized regulatory system, relying to an important extent on state-formulated programs; the development of programs on the basis of the real risks posed by mining wastes, instead of their potential risks; the use of site-specific controls; and the adoption of a multimedia approach, also a departure from the usual way of doing environmental policy in the United States.
Most of these concepts were present in the original formulation of RCRA regulations and are consistent with the new trends in environmental policy. Although the amendments contain no categorical statements, one may wonder whether they would have found their way into the regulatory language in the 1970s as easily as in the 1980s. The application of these concepts to mining-waste disposal has brought new light to them, particularly concerning the tensions and possible trade-offs of more cost-effective programs. Therefore, the experience may prove interesting.
In the 1990s, waste disposal will most probably be the main domestic issue on the US environmental agenda. For the mining industry, the reauthorization of RCRA and the approval of mining-waste regulations will be the next big regulatory step.
Around 4 or 5 × 109 t of waste is generated in the United States annually. An estimated 40% of this is from mining operations, including development, tailings, and leaching (Stone 1989). The other big waste generator is agriculture, contributing about 50% of the total.
Of the roughly 1 × 109 t of wastes produced by metals mining operations, 44% comes from the development stage; 33%, from tailings; and 23%, from leaching. Of the total, more than 50% comes from copper production (MacDonnell 1988). This is not surprising if we consider that more than 99% of the ore extracted is waste. Consequently, the copper-mining industry will probably be the most affected by the new regulations for mining-waste disposal.
Although these figures are impressive, the real risk posed by mining wastes is less thrilling. According to RCRA criteria, less than 25% of the ∼ 250 × 106 t of hazardous wastes annually produced in the United States comes from mining and beneficiation. In the copper industry, most of the hazardous wastes (82%) come from copper-dump leaching operations.
Mining ranks second in the list of big generators of hazardous wastes. According to figures from the Congressional Budget Office (cited in Dower 1991), 48% of US hazardous wastes are generated by the production of chemical and allied products, and 18% are produced in the primary metals industry. Petroleum and coal products generate another 12%.
Although mining wastes pose some degree of environmental risk, particularly to groundwater, they differ from other industrial hazardous wastes, as well as from municipal and household nonhazardous mining wastes. Mining wastes
• Come in higher volumes, especially compared with the volume of the associated products;
• Cover large area;
• Are disposed of at the site where they are generated, thus involving no transportation of hazardous substances;
• Are usually disposed of in dry and sparsely populated areas;
• Consist, to an important extent, of unprocessed waste; and
• Pose lower risks.
RCRA was formed in 1976 in response to public alarm over hazardous-waste sites. RCRA combined two previously existing regulations, the Solid Waste Disposal Act and the Resource Recovery Act, and was intended to provide the EPA with the authority to regulate, control, and monitor hazardous substances. Two years later, in 1978, EPA proposed rules for hazardous-waste management under Subtitle C, creating a special-waste category to include mineral-industry wastes. EPA's intention was to give some flexibility to the industry in the treatment of these wastes, given their special nature (Kimball and Moellenberg 1990).
Nevertheless, in the regulatory document that EPA submitted to Congress in 1980, mining wastes were practically subject to the same requirements as those affecting industrial hazardous wastes, with the exceptions only of overburden used for reclamation purposes and in situ mining wastes. EPA also proposed to list several mining-processing wastes to be regulated as hazardous wastes under the same Subtitle C.
Congress, aware of the particular characteristics of mining wastes and concerned about imposing unnecessary costs on the industry, prohibited EPA from applying hazardous-waste regulations to solid wastes from extraction, beneficiation, and processing of ores and minerals until the completion of the detailed studies of these wastes. This was the so-called Bevill Amendment, introduced in the Solid Waste Disposal Act amendments of 1980. The deadline for the studies was 1983. As a consequence, except for those hazardous wastes not deemed unique to the mining industry (that is, chemical substances), mining and processing wastes were temporarily exempted from RCRA regulations. At most they were subject to state regulations.
In 1984 several environmental groups sued EPA for failing to meet the deadline (Concerned Citizens of Adamstown v. EPA). They also challenged the inclusion of mineral-processing wastes in the Bevill Amendment. In response, EPA scheduled the completion of the studies and limited the number of mineral-processing wastes to be exempted.
In December 1985, EPA submitted the study to Congress. The report concluded that regulation of mining and beneficiation wastes under Subtitle C of RCRA was unwarranted. However, acknowledging some potential risks, EPA decided to develop a program under Subtitle D (nonhazardous wastes).
Given the original objective of Subtitle D — to regulate municipal- and household-wastes disposal under state supervision — EPA suggested a special program tailored to mining wastes. EPA was concerned about the need to take into account the fact that the risk varied from site to site, depending on the characteristics of the particular mining wastes and on local environmental factors, such as climate, geology, hydrology, and soil chemistry. Consequently, EPA proposed a flexible, site-specific, risk-based program (Housman and Walline 1990).
Another EPA concern was that the responsibility for administering Subtitle D of RCRA had been left to the states. EPA suggested a stronger role for federal authorities to ensure human health and environmental protection.
The 1986 report failed to address the issue of mineral-processing wastes from either abandoned or inactive mine sites. A decision was made in May 1991 regarding the 20 mineral-processing wastes subject to the exclusion, following a 1988 court order that restricted the interpretation. Eighteen were kept under Subtitle D. The other two were made subject to Subtitle C, CERCLA, and the Toxic Substances Control Act. The mineral-processing wastes removed from the exemption and those never listed are subject to Subtitle C if they have hazardous-waste characteristics. If not, they may be regulated under the new program under Subtitle D.
Since 1986 EPA has been working to develop a regulatory program through its Office of Solid Waste (OSW) and Region VIII (its regional counterpart). The same year as EPA released its report, it established a Mining Waste Regulatory Development Workgroup, with members representing EPA offices and federal agencies. This workgroup acted as an advisory group for the OSW.
In 1987, EPA established an External Communications Committee, consisting again of representatives from EPA and other federal agencies. Its role was to foster communication among all interested parties, including state agencies, industry, and public-interest groups.
In 1988, EPA released Strawman I, a set of draft regulations developed jointly by the OSW and Region VIII. Understood to be a working paper, Strawman I was to serve as a starting point for discussion. After receiving written and oral comments from the interest groups, the OSW and Region VIII prepared a second version, Strawman II, published in 1990.
In 1991, EPA officially created the PDC to bring all interested parties together to exchange points of view. Each group — whether state, federal, industrial, or environmental — has seven representatives on the PDC. The Keystone Center has acted as an independent facilitator for the meetings. The PDC meets every 6 weeks, and the meetings and their minutes are open to the public.
Environmental policy-making in the United States has been extremely confrontational. In part, this is a consequence of US political culture and the common use of the judiciary system to solve disputes. Thus, EPA's efforts to involve interested parties from the very beginning and to reach some degree of consensus are especially interesting.
Usually, EPA prepares draft regulations after Congress enacts a piece of legislation. In this case, the OSW suspected that the reauthorization of RCRA — which would have triggered the normal process — would take some years. So, the OSW took the initiative to obtain inputs from all the interested parties right from the beginning. The OSW's objective was to create a regulatory program that all parties could live with.
The OSW had another purpose in mind. Under conventional circumstances, EPA cannot influence Congressional decisions, as other players might, by lobbying. Congressional and White House approval of a bill is a very political process.
The creation of the PDC gave EPA an alternative for influencing decision-making at the approval stage. The spotlight on the issues and the interaction with the other interest groups gave EPA better access to the political scene.
To avoid bureaucratic deadlock, EPA opted for an informal process that would not require the endorsement of high management levels. The first step was Strawman I, a first draft prepared by the OSW and Region VIII in 6 weeks. The purpose of the document was not to deliver EPA's final word on mining wastes but to stimulate discussion.
As part of the effort to encourage the public to participate, EPA gave financial support to a number of groups in 1988 to analyze the problem and respond to Strawman I. With this funding, the Western Governors Association (WGA) formed a mining-waste task force; 21 states participated (Housman and Walline 1990). Also participating was Colorado Trout Unlimited, formed in 1990 by several prominent environmental groups, such as the Environmental Defense Fund and the Mineral Policy Center. Finally, EPA also supported an association of small-scale miners, the Northwestern Mining Association. The American Mining Congress represented medium- and large-scale mining companies in the discussion.
This support — as well as the focus of Strawman I on practical issues, rather than on regulatory principles — stimulated and facilitated the participation of the groups. Thanks to this approach, EPA received input from the industry, environmental groups, federal agencies (such as the USBM), and the states (under the umbrella of WGA). Public hearings were held, as well as informal meetings, and USBM, WGA, and the American Mining Congress prepared written comments. Informal channels between EPA and other parties were also used.
After 2 years of discussion and work, EPA published Strawman II, a review of Strawman I that incorporated oral and written comments received. It was closer to a final draft, but EPA still invited discussion. As usual, environmental groups charged EPA with being too lenient, and the industry complained about the rigidity of Strawman II — according to the industry, it was closer than Strawman I to Subtitle C. In this second round of discussions, the OSW realized that an important part of the problem was the lack of understanding each group had of the other parties' concerns and that each one's strategy was basically to recover lost ground.
To overcome this impasse, the OSW proposed to the EPA Deputy Administrator that the PDC be set up under the terms of the Federal Advisory Committee Act (FACA). The purpose of FACA is to sanction external advice given to governmental agencies and to prevent unnoticed outside influence. FACA had been used before, most often to form regulatory-negotiation committees. These committees had to be established by statute, and the participants had to agree to waive their right to sue each other over the agreements achieved. In this case, there was no statute and the OSW preferred to avoid pressuring the groups to make final agreements. The alternative was to form the PDC, which would have none of these requirements. The Deputy Administrator of EPA approved the OSW proposal and the PDC constitution in April 1991 (EPA 1991).
The PDC gives a great degree of freedom to both the OSW and the groups. The agreements of the PDC do not require the support of EPA's Administrator, and the groups are not forced to reach agreements that compromise their future actions. With the PDC, direct compromise and some consensus are possible. An agreement is a powerful signal to Congress, although such an agreement has no resolutory status.
It is too early to comment on the success of the PDC, but all the groups agreed that participating on the PDC improved their understanding of each other's concerns. Certainly, this was one of EPA's main objectives in setting up the group. The PDC has also focused the debate on specific issues and provided an equal standing to the different parties in the discussion.
The groups seemed less optimistic when asked about possible agreements. At the time of writing it looked like the positions of state and federal agencies and the industry were getting closer, whereas the environmental groups were lagging behind. Several factors may explain, in part, the difficulties in reaching some consensus. For one thing, unlike members of a regulatory-negotiation committee, these players had no real authority to make decisions. If the PDC members are able to reach some agreements, Congress may take these into consideration but only as advice. This feature theoretically increases the freedom of the players, but it diminishes their confidence in the PDC's ability to influence policy decisions. I say "theoretically increases the freedom of the players," because the use of a public forum puts different groups in the spotlight — especially environmental and industry groups — and forces them to emphasize principles over concrete issues. Extreme positions tend to be favoured over pragmatic compromises because of the fear of diluting the message in an attempt to find intermediate positions.
Some participants expressed their apprehension about the Keystone Center's role as facilitator. They did not consider the Keystone Center a truly impartial facilitator, as it has a contract with EPA and has to follow its guidelines.
The size of the group does not facilitate interaction among the different parties. This obstacle may be overcome to some extent through the recent creation of subcommittees to discuss specific issues.
Informal pre-meetings of some of the PDC members have reinforced the natural distrust between the groups — the groups that did not attend fear the development of covert agreements.
The problem is too broad, involving too many fundamental issues. Too much is at stake for each group. Although the advisory character of the PDC diminishes the pressure to some extent, the groups still feel that agreements will entail important public compromises and set possible precedents.
The PDC has probably brought the two extremes of environmental controversy to the table. The gap between the industry and the environmental groups appears very wide, which is partly a consequence of powerful images built up in the past. The mining industry looks at environmental groups as if they were concerned only with birds and bunnies, and environmental groups consider mining the most backward industry in terms of environmental responsibility. Each group recognizes that there is a broad spectrum on each side, and it is not clear what the position of the representatives in that spectrum is.
The reauthorization of RCRA by Congress has stimulated parallel lobbying. The different groups are aware of this phenomenon, reinforcing their lack of confidence in the PDC's ability to produce concrete outcomes.
Finally, the PDC was established after 3 years of discussion of the issues, and some participants feel frustrated because the PDC is bringing the discussion to the starting point again.
Some of the obstacles mentioned by the interviewees may be overcome in the future with a different design for the PDC and its meetings or with better timing. Other obstacles may require more substantial efforts, as distrust appears to be an important component. However, this kind of initiative may be extremely useful, regardless of whether it achieves more tangible outcomes.
Several issues were under discussion in the Strawman I and Strawman II periods, as well as during PDC meetings. In the following pages, I examine the most controversial issues, particularly those related to the new trends in environmental policy-making. They are discussed separately, although all are strongly related.
STATE VERSUS FEDERAL AUTHORITY— The distribution of power between federal and state agencies is probably one of the main issues. To an important extent, this is the institutional counterpart of uniform versus site-specific regulations. The state authorities are better prepared to evaluate the specific environmental impact of a mining site. They have first-hand knowledge of the conditions in which the companies work — both the operational characteristics and the environmental setting.
Many states already have programs to ensure adequate management of mining and minerals-processing solid wastes. These programs cover aspects like groundwater, land reclamation, dam safety, and financial assurance (Housman and Walline 1990). These programs vary from state to state, according to variations in climate, geology, and environmental sensitivity of the impacted areas (Stone 1989). It seems inefficient to disrupt existing programs.
Various EPA documents have recognized the important role that the states play in formulating and enforcing specific regulations. EPA is interested in maintaining its flexibility. It wants its programs to be compatible with state programs, and it wants to give the states a leading role in developing, overseeing, and enforcing their own mining-waste-management plans (Housman 1990).
EPA is still responsible for protecting human health and the environment. If a state has not developed a special program or does not meet minimum federal criteria, EPA needs the authority to go beyond the general guidance and assistance guaranteed under Subtitle D.
The industry, USBM, and WGA support a stronger role for the states in the design and implementation of programs. The industry and USBM believe that state agencies are better acquainted with mining specificities. Mining activities are highly concentrated in a few states, and those states have ample experience dealing with the mining industry. The industry also wants to see a better delineation of authority to avoid "having to serve two masters." States want to maintain their current programs and their authority.
Environmental groups fear that too much discretion on the part of the states will result in insufficient environmental protection. They want to see a stronger role for EPA. Their arguments are diverse. They fear that state authorities may be influenced by industry to set softer standards and loosen monitoring and enforcement programs, especially in states where mining is an important source of income. Although a state may be genuinely committed to an environmental program, it may not have the necessary resources and capacity to establish and enforce this kind of program.
EPA has proposed that plans be approved by EPA. Once the plans are approved, EPA's regional offices would have oversight and enforcement authority in the states, and EPA would issue and enforce permits in nonapproved states. EPA also suggested that it would intervene whenever human health or the environment is at especially high risk.
The conflict between EPA and the supporters of greater state discretionary power is really about some ambiguities in EPA proposals, especially in those paragraphs giving EPA authority over state programs in special circumstances. "EPA could usurp regulatory authority from the states at any time" (Kimball and Moellenberg 1990; USDI and USDA 1990).
FLEXIBILITY AND UNIFORMITY— Tailoring a program to site specifics is an important departure from traditional regulatory programs. EPA recognizes that the benefits of environmental protection (or the damages of no protection) depend on the specific environmental conditions. Instead of trying to apply an across-the-board regulatory program, EPA is attempting to design a program on the basis of the real risk posed by mining wastes, getting closer to the ideal scheme. EPA is also putting more emphasis on balancing those benefits with the costs imposed on the industry.
These concepts were in EPA's draft regulations and helped EPA gain Congressional approval for the Bevill Amendment. Although EPA's language insists on the idea of flexibility, EPA bases its proposed standards on ongoing regulatory programs and considers design and operating criteria that run counter to the original spirit of flexibility.
EPA's groundwater standards are designed to match the maximum contaminant levels of state programs established under the Safe Drinking Water Act. If these data are unavailable, a health-based risk-assessment standard is used. If neither of these standards is available, background levels become the criteria.
The industry considers the performance standards of Strawman II to be inflexible and even more stringent than those of Strawman I and closer to those of Subtitle C. USBM and the industry want to restrict EPA's role to that of providing technical guidelines — they do not want EPA to impose specific technologies.
On the opposite side, environmental groups consider flexibility risky; they want national minimum-performance standards. They argue that flexibility and state discretion imperil environmental protection because it may become a source of competitive advantage for the states. A flexible program is also more difficult to monitor and enforce because it requires higher administrative capacities and more resources. The environmentalists want to see a prescriptive and detailed program.
This partly explains why environmentalists want a statute provision allowing citizens to sue companies with unsound environmental practices. Without this provision, severe environmental damage has to occur before citizens can sue a company.
MULTIMEDIA APPROACH— The multimedia approach is another shift from the traditional approach. Although mining is already subject to several environmental regulations, including those of state programs that deal with mining-waste disposal, EPA is concerned about some remaining gaps (Housman 1990).
EPA wants RCRA amendments to cover the whole spectrum of mining-related environmental problems. A multimedia approach would also have administrative advantages: for example it would avoid duplication and conflicts between different regulations, reduce the administrative burden, identify possible disincentives, and give regulators a better picture of what is going on. EPA proposed the idea of a one-permit system incorporating all current regulations plus new ones. The states are expected to design a multimedia approach that addresses air, water, and soil contamination and incorporates existing permit requirements such as those required by the CAA (Housman 1990).
EPA wants to extend the scope of the regulatory program to include exploration wastes and materials that are not necessarily waste, such as those related to heap-leaching operations and abandoned mines. If active leaching piles — considered operating units, not waste — are left unregulated, companies might extend the life of these piles simply to avoid the cost of regulatory closure. The exclusion of abandoned mines from this program might provide a disincentive for recycling and, in general, the disincentive for a more effective cleanup of hazardous sites (Peterson n.d.). EPA intended to include incentives to mine mining wastes wherever there may be a net gain for both the environment and the company. EPA is aware that because of the present structure of CERCLA, the development of incentives will require streamlining of the regulatory process and revision of current operating and performance standards (Housman 1990). Environmental groups welcome the multimedia approach because it reduces the possibilities of gaps and of shifting the problem from one area to other.
However, the industry definitely opposes a multimedia approach. Although it makes sense for the industry to resist new standards and controls, the industry also opposes a one-permit system, a system that would reduce administrative costs. The industry argues that changing the system will introduce uncertainty and that the net costs of the change are unclear. The industry prefers keeping a system that, if not perfect, is better known and will bring no additional surprises.
USBM and the states are in a mixed position. USBM wants a single regulatory program for all wastes, including processing wastes, to reduce the administrative burden and increase consistency. USBM also emphasizes that re-mining of old mining-waste sites and impoundments and recycling of materials to reduce hazardous waste should be encouraged. But USBM opposes the one-permit system and the inclusion of exploration wastes and heap-leaching materials. USBM maintains that if there are gaps, it is because current laws are ineffectively enforced, and it fears the duplication of authority and programs (USDI 1990; USDI and USDA 1990). The states agree with the inclusion of heap leaching in the program but are more cautious about the multimedia concept. They do not want to disrupt current programs and think that having a comprehensive permit will affect current institutional structure.
In Strawman II, EPA gave up on the idea of a one-permit system and left the issue of abandoned mines for future amendment of CERCLA. Heap leaching is still under discussion.
CRITERIA FOR STANDARDS— Many issues related to criteria for standards have generated discussion. The most important of these issues are compatibility with existing standards, like those of CAA or CWA; the distinction between old and new facilities; and the use of technology versus performance standards.
As expected, the industry opposes stricter standards and, whenever possible, prefers to keep the primacy of current standards — especially the more lenient ones, such as those for groundwater quality — and the use of background levels. Inertia also explains some of the resistance to new standards. Although the industry struggles to avoid additional or more stringent standards, the position of environmental groups is that there should be no degradation. The industry is also concerned that compliance with new standards may not be feasible or economical in the case of old facilities. The states have proposed a deadline for old facilities to comply. Finally, the industry and USBM prefer having performance standards, instead of technology standards, because of their effects on innovation. USBM emphasizes that the industry should be allowed to find less expensive solutions.
It remains to be seen whether the EPA initiative provided useful inputs to Congress and helped to shape more meaningful and realistic statutes. But it is at least useful to reveal some of the tensions and obstacles in the way of more flexible and cost-effective programs and consensus.
We may see that to an important degree, the trade-off between more flexible programs and effective environmental protection rests on the real independence of local authorities and their capacity to implement and enforce the regulations. Enforcement failures and consequent environmental degradation may outweigh potential benefits. The political structure of the United States enhances the struggle for control between the regions and Washington. This tension is heightened by the extreme positions adopted by the industry and the environmental groups. Both have taken RCRA amendments as their trench to defend their dearest positions, increasing the usual distance. The industry strategy is to bring all new regulations under the RCRA umbrella to avoid new regulatory initiatives in other battlefields. The approval of RCRA amendments is the industry's opportunity to protect itself from new laws. Environmental groups see RCRA as their best opportunity to get a comprehensive regulatory scheme for the mining industry. Other initiatives, like modification of the Mining Law, will probably take longer to be approved because the issues are more fundamental and controversial.
Another big obstacle is industry and bureaucratic inertia. The discussions have made industry inertia especially patent, confirming the generally conservative attitude of the mining industry and its aversion to taking risks and trying new approaches. The industry is particularly sensitive to uncertainty. Bureaucratic inertia will probably become apparent after the implementation of a program.
Finally, ambiguity is an important barrier to agreement. The different sides tend to interpret procedural or substantive ambiguities to support their prejudices or fears. This tendency hardens positions and make things more difficult than they really need to be. The Strawman and PDC exercise helped to expose this problem.
Certainly, environmental regulations have had an effect on the US mining industry's profitability. Companies have been forced to retrofit or renovate installations or leave the market. Increasing operational costs have affected their international competitiveness, and to some extent, this may be changing the world allocation of mining investment. Employment levels have fallen substantially, and local e-conomies have borne part of this cost.
Environmental regulations have also brought with them important benefits: better air and water quality and reduced health and environmental risks. It is unclear whether the benefits compensate for the costs, much less whether the net social benefit is maximized. The aggregate numbers may show positive net results, but at a regional or local level the situation may be very different. Sometimes it is clear that the same results could have been achieved by spending less.
This does not necessarily imply a negative assessment of efforts so far or a denial of some important achievements. I wish to emphasize the trade-offs in environmental policy-making and the difficulties in measuring these trade-offs — gains against costs — and in making rationally optimal decisions about the appropriate levels of pollution control and environmental protection.
By learning lessons from the US experience, we can make our own process in Chile less painful, more efficient, and more effective as we strive to improve both the quality of our environment and our chances of keeping on a sustainable-development path.
Figure 2. The policy-making process.
If one were to draw a flow chart to illustrate the policy-making process, it might look like Figure 2. The arrows emphasize the dynamic and interactive nature of a process that is never really complete. All the steps shown, particularly research and information gathering, are essential to achieving environmental goals, but here I concentrate on policy design and implementation (although, actually, policy design encompasses design at all stages). I first discuss the main criteria for assessing the desirability of a policy and some concepts that should be at the basis of policy design. I will then discuss tactical issues like instrument choice and institutional aspects, keeping my analysis to a general level, although I will discuss the specifics of mining regulations when relevant.
Three main criteria can be used to assess the desirability of a policy:
• Effectiveness — Are we going to be able to reach the goals we have set? This is an obvious criterion, but experience shows that it is not always easy to meet. The reality is complex and evolves over time. Are we introducing dynamic considerations, such as economic growth and its impact on pollution levels? Are our goals too ambitious, leading to the inevitable extension of deadlines and the eventual abandonment of original programs, undermining our credibility? Are we overlooking relevant second-order factors, like indirect disincentives to recycle?
• Efficiency and cost-effectiveness — How close will policy outcomes be to the socially optimal levels of pollution control? Are we to the greatest possible extent taking into account the benefits and costs of environmental controls? Given a specific standard, is this the least expensive way to achieve it? Are we taking into account compliance costs, control and monitoring costs, enforcement costs, and general administrative expenses?
• Political feasibility — Will a policy have enough political support? How long might it take to get approval from the legislative and the executive? How much resistance will there be in the implementation stage? How fair will the various interest groups perceive the policy as being? What are the chances of long-term stability?
From an examination of US experience, five central concepts emerge in the design and implementation of an effective, efficient, and politically feasible environmental policy.
An ecosystem is a set of interdependent organisms in an ongoing process of adaptation to their environment. An ecosystem is described in terms of its biological elements, their mutual relationships, and their relationships with the physical and chemical media that support life.
When we are concerned about environmental quality, we are concerned about the disruption of these relationships and the endangerment of the capacity of the system to adapt, evolve, and survive. So it seems logical to use a systems approach to confront the problem. This is the only way to take into account multiple relationships, impacts of several orders, and synergistic effects. It is the only way to be really effective.
We have already seen that taking a partial view of environmental problems creates new and sometimes worse problems. Other negative practical consequences are difficulties in prioritizing problems, resulting in inefficient allocation of available resources; duplication of effort; missed opportunities for economies of scale and positive indirect impacts; and a complex and cumbersome bureaucratic structure.
We may call this multimedia or systems perspective an integral perspective, as opposed to a partial one. It is fundamental to have this integral perspective from the beginning, instead of thinking of superposing different programs at a later date. The perspective taken at the start will not only affect the perception of opportunities to attack the problem but also avoid the creation of inertial forces and interests among the different actors in the system, as happened in the United States.
Policymakers, industry, and the public have to be aware that conditions will be changing and that the regulatory system has to be flexible enough to adapt to new circumstances. Additional knowledge and information, new technologies, and new socioeconomic conditions will necessitate modifications to priorities and strategies. Moreover, the environment is constantly evolving, and the problems will change. The ongoing assessment of policy outcomes should provide a feedback process to ensure that the regulatory system adapts properly to changing circumstances and remains effective and efficient (see Figure 2).
The regulatory system should be flexible in yet another sense. Once the system is established, the main concern is in meeting ambient-quality standards (these standards should be emphasized more than emissions standards). Whenever possible, firms and individuals should be given discretion to choose how best to meet these standards. This is the best way to ensure minimum compliance costs and also to promote technology development.
However, the need for flexibility has to be balanced against the need of economic agents to reduce uncertainty. This is a particularly strong concern in the mining industry. Clear rules and appropriate phasing of programs will be central to balancing these needs.
Environmental problems differ from region to region. The types of pollutants emitted or discharged and the capacity of the environment to cleanse itself vary. Population density and the degree of exposure also vary geographically. Negative externalities depend on the kind of economic activity pursued. Environmental impacts are specific to an ecosystem and its demographic and economic conditions. This is especially true of the environmental impacts of mining activities.
On the other hand, people's preferences for environmental quality and other goods depend on socioeconomic and cultural factors that are equally diverse.
The more we are able to tailor environmental programs to the actual problems, the more effective we will be in reaching our goals and the less we will have to spend in doing so.
This is consistent with a multimedia approach. As the complexity of the system increases and we try to go from thinking of the parts to thinking of the whole, we may want a different way of simplifying the real world: reducing the geographical areas to which certain parameters apply. The limits of a properly defined ecosystem may be the alternative we are seeking.
The public has the last word on the importance and adequacy of environmental policies. Communities should play a substantive role in the policy-making process to ensure equity, effectiveness, and efficiency of the regulatory system. The community's preferences for a cleaner environment and ecological preservation are the ultimate criteria that shape the benefits of environmental protection.
On the other hand, to increase the feasibility, effectiveness, and efficiency of a policy, diverging interests should be reconciled by avoiding confrontational dynamics and using negotiation. Confrontational dynamics are time and resource consuming. Involving all the interested parties ensures fairness; legislative expedience; reduced resistance and litigation in the implementation phase; and increased likelihood of long-term stability.
A public that has been manipulated by the misuse of information is not well prepared to assess environmental problems or to judge policy matters. Lack of awareness about health hazards and ecological risks on the one hand and biased and inflamed discourses in favour of environmental protection on the other distort public opinion and diminish people's capacity to make a proper assessment of alternatives. This is why objective information and public awareness are so important.
The public should also be aware of the costs of environmental protection and of the consequences of their everyday actions. Few people realize that environmental problems and solutions are tied to daily decisions and that costs are going to be borne by the whole of society. A community must be well informed so that it can make responsible decisions about how much economic growth it may have to sacrifice in order to enjoy better environmental quality.
The feasibility and effectiveness of a policy depend on how realistically it is framed. Strict programs that go beyond the real capacity of the industry to comply result in extensions that undermine the credibility of the new deadlines and the technical capacity of the agency and implicitly justify leniency in enforcement of legislation.
Ambient-quality standards should be defined on the basis of human health first and welfare and ecological considerations later on. However, specific programs for reaching those standards, phases, and deadlines should be based on considerations of economic and technical feasibility, with market considerations included. Timing is key to avoiding unnecessary costs and to reducing industry resistance.
We are looking for a flexible, integral, participatory policy to insure effectiveness, efficiency, and feasibility. What are the instruments that best serve our purposes?
Before there were environmental policies, the courts were the only recourse for those affected by environmental problems. This proved to be ineffective and inefficient because of the uncertainty surrounding court decisions. The law left too much scope for interpretation. It was also expensive, and transaction costs were prohibitive for some of those affected. The public-good nature of this solution generated the problem of free riders. Finally, information was scarce, and secret settlements precluded the diffusion of information relevant to other actors. Of course, the use of courts to address environmental problems depends on a well-developed and accessible judiciary system.
As we have seen, although command-and-control regulations significantly advance the cause of environmental protection, they have been open to many criticisms. Some regulations have been attacked more than others (for instance, design versus performance standards), and the system has been accused of being rigid, bureaucratic, and expensive.
The same voices of criticism have advocated both the use of economic incentives (taxes and marketable pollution permits) and, in a more general sense, the use of the market to correct failures and eliminate distortions. To be sure, with market incentives one still needs regulations, but the mechanisms used to ensure that standards are met are different.
There is another alternative — the Coasian solution. This means leaving the interested private parties to negotiate over the problem, with property rights well defined. This theoretically optimal solution has been mostly kept within the pages of textbooks because its appeal depends on rather unrealistic assumptions. Normally, the negotiated outcome differs from the optimal solution because of transaction costs, strategic behaviour, manipulation of information, and income effects. Also, although theoretically efficient, this approach fails to address equity issues, like intergenerational concerns and the distribution of property rights. Uncertainty is another shortcoming of this approach.
Emphasis should be given to the role of ambient-quality standards in controlling the environmental impact of economic activities. It is preferable to set general targets for pollution abatement and to allow the allocation of the targets among the pollution sources to be driven by economic instruments such as taxes or permit prices. If this is impossible, then setting performance standards is still preferable to setting design standards. Also, where relevant, intermittent controls, depending on, for instance, meteorological conditions, are preferable to permanent controls. The mechanisms that we choose to ensure that our environmental-quality targets are met should at the same time allow for economic growth and be able to adjust to new conditions smoothly. Economic instruments (like taxes or permit auctions) may be preferable because they raise funds to support the whole system. These preferences have to be balanced against considerations of technical feasibility, such as the capacity to monitor compliance and enforce regulations and the ability to meet environmental-quality targets without creating hot spots or long-range problems like acid rain.
Looking at the situation in the United States, one might be tempted to jump into marketable pollution permits to achieve environmental standards:
• They ensure that environmental goals are met;
• They give firms the flexibility to choose their own strategy to comply while minimizing their costs;
• They adjust to economic growth and inflation; and
• They provide important dynamic incentives for developing new environmental technologies.
Marketable pollution permits seem just perfect; nevertheless, we have already recognized some caveats. The most obvious has to do with the case of substances that are toxic and pose big health and environmental risks at even low concentrations. In such cases, we cannot allow firms to decide the appropriate level of pollution abatement on the basis of their particular costs.
With this exception, three main considerations determine whether it is worthwhile to use marketable pollution permits. First, although the use of pollution permits instead of command-and-control regulations may increase net social benefits, the gain greatly depends on the competitiveness of markets. The gain is not as great in highly concentrated markets (either the permits market or the product market) as in atomized markets. Still, if pollution permits are used in markets in which they become a serious entry barrier, they may result in losses of efficiency that counteract the advantages of the system.
Second, the costs of environmental protection include not only the compliance costs of the firms but also the control, monitoring, and enforcement costs and the general administrative costs of setting up the system in the first place. The use of pollution permits (particularly ambient-quality permits, as opposed to emissions permits) is theoretically the most efficient approach but requires advanced modeling techniques and an especially good system of monitoring and compliance. These requirements limit the economic and technical feasibility of implementing a system of pollution permits.
Finally, marketable pollution permits will not work as well as command-and-control regulations if the pollution problem is so acute that it requires maximum control.
When choosing specific instruments, it is crucial that we look at the characteristics of the environmental problem; the specifics of the sources of the problem; and the social, economic, and political conditions we face. In this sense, the instruments we choose have to be appropriate for specific situations, and most likely, a mix of different instruments will be needed to reach global goals.
Having said this, I wish to call attention to the use of case-by-case negotiations for controlling the impacts of medium- and large-scale mines — the big point sources — and propose a modified version of the Coasian solution. The negotiations will take place after a general framework has been established. The framework will comprise delimitations of ecoregions; ambient-quality standards, related global abatement targets, and maximum emissions ceilings; clear definitions of property rights; decentralized authority and resources; empowerment of local communities; and clear rules for negotiation. Environmental-protection specifics (such as how the standards will be met) and specific programs (with specific degrees and types of control and timing) will be left to negotiations between the industry, local community, and local authorities. Ideally, the negotiations will cover all the relevant issues at once, giving rise to a single permitting process. The outcomes will reflect community preferences, specific environmental conditions, and the particular conditions of the firms and will address equity, effectiveness, and efficiency concerns. Of course, this scheme will be valid for either local or regional environmental impacts.
Central authorities will have the main responsibility for defining the framework and will generally oversee the process, including monitoring of compliance and enforcement of ambient-quality standards and negotiated agreements. Equally important, the environmental agency will have a central role supporting the development, analysis, and diffusion of information deemed relevant to the negotiations. Finally, I emphasize the importance of having the appropriate financial and human resources to undertake the task. These will include properly trained government officials and community and industry representatives.
Environmental problems generated by small mines, mainly groundwater and surface-water pollution, will require different schemes. Also, global problems will require a national strategy.
An integral, flexible, and participatory approach requires a great deal of multi-disciplinary work, as well as interaction and coordination of various government agencies and private institutions.
Each and every ministry and government agency must become sensitized to the environmental impacts of economic activities and must consider the environmental impacts of every policy and program. The use of EIAs has become a normal practice in the United States and has had an important impact. However, it is necessary to go beyond bureaucratic mechanisms that may become just part of a red-tape ritual.
An approach like the one I have just proposed also requires a great degree of decentralization. Although central administration is required to secure at least a minimum degree of environmental quality and uniformity, most of the decisions can be made at the regional or local level, depending on the scope of the environmental problem. This will require the empowerment of regional and local authorities and the promotion of community organizations. The delegation of authority has to be matched with the appropriate human and financial resources to ensure the capacity of the local agencies to deal with the problems.
The institution ultimately responsible for designing, implementing, and enforcing environmental policies should be a special environmental agency with the independence and expertise necessary to undertake the effort. The Ministry of Mines has nevertheless a very important role in representing the interests of the mining sector according to long-term mining-development policies. The Ministry of Mines will be the main contact between the environmental agency and the mining sector and will be the principal source of information. The ministry will also be the main source of support for the industry, to minimize compliance costs.
The Ministry of Mines should develop appropriate channels of communication with the environmental agency to ensure that policy decisions are well informed and take into account factors affecting the development of the mining sector. Collaboration and policy coordination play a very important role in the effective use of available resources.
Another important area of work is the development of information and policy analysis. The assessment of the actual environmental impacts of mining, as well as of the impacts of environmental regulations on the mining industry, is a basic step and fundamental input for policy-making. Such assessments will require the establishment of channels of communication with the industry, the installation of monitoring equipment, and the development of modeling techniques. To evaluate the capacity of various segments of the industry to comply, international-market conditions and technology availability should be considered. Imagining innovative ways to fulfil environmental goals and formulating strategies to compensate for potential losses of competitiveness and employment are some of the challenges facing the ministry.
The development of new environmental technologies should be a central element in the promotion of R&D. The future competitiveness of the industry may depend to an important extent on its capacity to develop less expensive pollution-abatement technologies. For instance, SO2-fixation techniques, alternative uses for H2SO4, and hydrometallurgical techniques should have an important place on the agenda. The Ministry of Mines can also promote technology transfer, especially in the case of small-scale mining. Extremely important is the development of training programs to create the required expertise in the different areas and at the different levels. Finally, the Ministry of Mines can improve the linkage between the domestic mining sector and international expertise, promoting exchange programs with and technical assistance from those countries with more experience.
It would be inconsistent with the principles expressed here to go much further in making specific policy recommendations. These depend on the diagnosis and the particular conditions where the problems are experienced. For the copper industry, all I can say is that the most expensive environmental regulations will be those governing SO2 emissions and mining wastes. Consequently, special attention should be given to assessing the possible economic impacts of these regulations and to fostering the development of cost-effective alternatives for dealing with these problems.
A scheme like the one I proposed will be feasible in a country like Chile: the administrative division of the country may be useful in establishing an eco-regional approach, and the small number of big mining firms will make it easy to use a case-by-case approach and to enforce negotiated agreements. It seems evident that Chuquicamata should not be subject to the same degree of emissions control as Ventanas or Chagres.
Chile and other countries that are beginning to develop an environmental-policy framework and the institutional structure to implement it have enormous challenges ahead. But they also have important advantages over countries that began the effort some time ago. Chile can learn from the experiences of other countries and avoid making the same mistakes. Also, Chile has none of the inertia that has impeded change and improvement in those other countries. So it is important to introduce, from the beginning, the right concepts to avoid confronting strong inertial forces from bureaucracy, the industry, and the public.
This page intentionally left blank
Mining, especially copper mining, has been important to Chile’s economic development since the arrival of the Spanish conquerors in the 16th century. Between the 1840s and the 1880s, Chile’s share of the world’s copper-mining production rose to about 50%. This share was eroded by the emerging flotation technology in North America and by had decreased to only 5%. However, this share has increased steadily since the late 1960s, to 10.8% in 1970, 13.8% in 1980, and 17.3% in 1990; according to projections, it will be between 32 and 34% by 2000. But it unlikely to be more than 35–40% by 2010 (Minería y Desarrollo 1993).
The contribution of mining to the country’s development has been of great importance. During the last decade, this activity has accounted for about 50% of the country’s exports and foreign investment, about 5–7% of the gross national product, but less than 2% of the labour force. Copper is the main export, followed by gold, silver, molybdenum, iron, nitrates, iodine, and lithium. Some of the gold and silver and all of the molybdenum are produced as by-products of copper mining.
Most mining is concentrated in the northern provinces of Chile, one of the driest places in the world. This is a region with little agriculture, no forestry, and few towns. If one could select a region in the world where the environmental impacts of mining must be at a minimum, northern Chile would be at the top of the list. Most of the northern economy depends on mining — this activity may not be important in terms of employment at a national level, but it is paramount to most northern cities and towns.
1 This project was carried out with the support of a grant from the John D. and Catherine T. MacArthur Foundation of the United States, coordinated by Alyson Warhurst.
The copper-mining boom of the 1990s is associated mainly with large, new, foreign-owned mining operations using the latest exploitation and processing technologies and the most modern environmental-management methods. By 2000, close to half of the Chilean copper production will come from these new mining projects, and the remainder will come from mines that have been active for several decades.
The most important old copper mines are Los Bronces and El Soldado, owned by Exxon Minerals Co. through Compañía Minera Disputada de Las Condes; the Mantos Blancos mine, owned mainly by Anglo American Corp.; and the Chuquicamata, El Salvador, Andina, and El Teniente mines, owned by the state company, Corporación National del Cobre (CODELCO, national copper corporation). It should be added that CODELCO’s mines were nationalized in 1971, after belonging to companies from the United States. CODELCO’s production constituted 85% of Chilean copper production in 1980; 75%, in 1990. No foreign companies remained in Chile’s mining after the industry’s nationalization process. However, in 1974, General Pinochet’s military government issued foreign-investment decree 600, which gave rights to foreign companies to make certain uses of their investments and revenues from these investments. In 1983, Chile issued a new mining law. This law, which had constitutional status, established methods for calculating compensation for mining properties expropriated by the state.
The mining boom of the 1990s has been due mainly to foreign investment. Chile’s attractiveness to foreign investors lies not only in the exceptional quality of the country’s ore deposits and its very favourable geography but also on the laws decreed in the previous decade, Chile’s economic and political stability, and the quality of its labour force.
As will be demonstrated in this paper, two main trends can be identified in corporate environmental policies and practices. These policies and practices originated with state-owned companies and with foreign companies that entered Chile’s mining industry after the nationalization process. In addition to CODELCO, a second state-owned mining company is La Empresa Nacional de Minería (ENAMI, national mining company). EN AMI’s role is to buy and process copper and gold minerals, concentrates, and precipitates from small- and medium-scale mining companies. ENAMI owns and operates five mineral-processing plants and two smelters.
The environmental impacts of mining in Chile can be traced back to colonial times but became more apparent during the late 1970s and especially the 1980s. This was due to the growth of mining production, impoverishment of ore grades, and increasing metallic impurities in tailings from processing plants and smelter-feed material. The public’s awareness of and international concern about environmental impacts also grew during those decades.
Companies made no assessments of environmental degradation before the late 1980s. A study published during this period (Lagos 1989) pointed out that the main environmental impact of mining in the 1980s was air contamination produced by sulfur and particle emissions from the six copper smelters in Chile at that time. This was possibly followed by river and sea contamination from tailings dams, leaching plants, smelters, and even natural waters that passed through open-pit or closed-pit mines, picking up metal ions and, in some cases, suffering changes in pH (Lagos 1990).
These hypotheses were in fact validated by President Aylwin’s government, which came to power in 1990. This government made its greatest efforts in the mining sector in 1990 and 1991, dictating decree 185 for the regulation and control of emissions of SO2 and particles from fixed sources (mainly from the seven copper smelters that have operated in the 1990s). Decree 185 establishes the same air-quality standards for northern Chile as the US Clean Air Act establishes for the United States. For central and southern Chile, where there is more rain, decree 185 establishes more stringent standards because of acid-rain effects.
Despite its economic importance, mining is not the main contributor to environmental degradation in Chile. More important factors are desertification, erosion, urban growth, and possibly industrial activity and forestry exploitation.
The object of this paper is to establish the main environmental impacts of Chilean mining since the 1980s, its relative importance at local and national levels, and the trends in company environmental policies and practices. It analyzes the strengths and weaknesses of those policies in the context of the existing legislative and institutional framework. For this purpose, we chose four mining companies as being representative of corporate environmental policies and practices:
• Two state-run operations — CODELCO’s El Teniente mine and ENAMI’s Ventanas smelter;
• Compañía Minera Disputada de Las Condes, which was bought by Exxon Minerals in 1978; and
• Compañía Minera El Indio gold-copper mine, which began its operations in 1980 and was owned then by the St Joe Mineral Company, from the United States.
In many respects, these mining operations are quite diverse: the El Teniente and Disputada mines are comprehensive copper operations — from mine to smelter; the Ventanas works is a smelter plus electrorefinery and noble-metals plant; and the El Indio works is a gold mine, whose products are doré metal and copper concentrates. These differences do not detract from the value of the study because the idea is not to make a quantitative comparison of the processes involved but to examine the evolution of corporate environmental policies and practices. Thus, the results are qualitative and may help to enlighten future issues in the mining-and-environment scenario in Chile.
Seven copper smelters operate in Chile; their environmental impacts can be summarized as follows (Solari and Lagos 1991; Schwarze and Muñoz 1991).
The Chuquicamata smelter, owned by CODELCO, produced 420 000 t of blister copper in 1993 and is the largest copper smelter in the country. It is located in a desert. Its emissions have diminished considerably since the mid-1980s, when four new acid plants were constructed and equipment to fix particles was introduced. When the wind blows in a westerly direction, the smelter impacts mainly on the mining camp of Chuquicamata, where workers’ families lived until recently. The town has been almost completely evacuated because of this pollution.
Contamination from the smelter has no direct affect on Calama, a town of several tens of thousands of people about 16 km southwest of the smelter. The emissions include SO2 and particles containing arsenic, copper, and other elements. In 1993, about 75% of the arsenic and 50% of the sulfur were being fixed. Plans were to reduce the sulfur and arsenic emissions to comply with decree 185 by the end of the decade. Chuquicamata has the natural advantage of having the wind blow generally in an easterly direction, over a desert region.
The Potrerillos smelter (also owned by CODELCO) has the same type of advantage. It produced 135 000 t of blister copper in 1993. The Potrerillos smelter impacts on the mining town of the same name, where workers’ families live. However, it is understood that reduction of the smelter’s fugitive gas emissions will substantially alleviate, at very low cost, the impact on Potrerillos town, although the total gas emissions through the stack will remain constant. To comply with decree 185, however, this smelter should install two acid plants.
A third CODELCO smelter is at Caletones, located in a high mountain area 113 km south of Santiago. This has at present only one small acid plant that only fixes about 2.5% of the sulfur in the smelted ore. In 1993, the smelter produced 364 000 t of blister copper. Its impact occurs mainly over the Caletones area, where workers operate the smelter, and also to the west over Coya, a now semi-abandoned valley mining town with agricultural land. This smelter has a lower impact on Rancagua and other towns in the central valley of Chile, including Santiago, where the stringent standards set by decree 185 apply. The arsenic effects may be of more relevance, but in 1991, the smelter reduced its use of feed concentrates containing arsenic. Caletones was to get a new acid plant in 1997 that will fix about 40% of the sulfur that goes into the smelter.
ENAMI, the other state-owned mining company, owns and operates two smelters, Hernán Videla Lira (also known as Paipote) and Ventanas. Paipote is near the city of Copiapó, in northern Chile, its emissions impact mainly on the nearby agricultural valley. In 1993, this smelter fixed between 25 and 30% of the sulfur, but this value will improve as more of the capacity of the acid plant begins to be used. Indeed, ENAMI plans to install a second acid plant at Paipote to comply with decree 185 by the end of the decade.
The Ventanas smelter is located on the coast, in the central region of Chile, and its emissions impact on the adjacent agricultural valley of Puchuncaví. Its acid plant, which began operating in 1991, can fix about 50% of its sulfur. ENAMI has considered a number of options to bring this smelter into compliance with decree 185. One of the most favoured options, considered in 1994, is to reduce the smelting capacity, which could also be a profitable move. In 1993, Paipote and Ventanas produced 63000 and 140000 t of blister copper, respectively.
All of these acid-plant projects have a negative profitability for the companies involved. The dilemma for the government is to find the resources to keep these plants operating when there is a need for social projects at the national level. The cases of CODELCO and ENAMI are different because ENAMI is a service company, without which small- and medium-scale mining companies, which make an important contribution to employment in northern Chile, would be economically viable. ENAMI’s effective profit is very small because a significant portion is used to subsidize small mining operations, and the state is reluctant to spend its limited investment funds on projects that may not even pay for themselves.
A sixth copper smelter is Chagres, which belongs to Disputada and produced 75 000 t of blister copper in 1993. This was the only smelter in Chile that complied with environmental regulations in the 1980s and early 1990s, despite having possibly the "worst" location from an environmental point of view, being surrounded by fertile agricultural land and near a town. It should be added that in 1993 this smelter stopped operating for 6 weeks to comply with decree 185. It is being expanded to produce 155 000 t of blister copper per year and will change its present technology, adding a flash smelter. The emissions will be held constant to comply with decree 185.
A seventh smelter, belonging to the Chilean company Fundición Refimet S.A., started operating in August 1993 with a nominal capacity of 95 000 t of blister copper per year. Despite its use of reverberatory-furnace-converter technology, it was designed to comply with decree 185. The smelter was scheduled to expand its capacity to 125 000 t of blister copper per year in 1996 and then to 190000 t in 1998. It plans to comply with decree 185 at all stages of its expansion.
Chile has improved its sulfur emissions considerably since 1989, when its copper smelters emitted 922 000 t of sulfur into the atmosphere and caused Chile to be ranked just behind the United States, China, and the former Soviet Union in sulfur emissions from fixed sources. Chile also ranked at the same level as Italy and Germany. In 1991, Chilean copper smelters emitted 15% less sulfur than in 1989. If Chile makes all of its planned investments in acid plants, it will reduce its sulfur emissions to 250 000 t by 2000, despite increasing its copper-smelting capacity by 27% over that of 1990. The investment ENAMI and CODELCO require to achieve this reduction is estimated to be close to 1 billion United States dollars (USD).
If the cost of compliance with the soon to be determined air-quality standards for arsenic is added into the equation, this cost could rise considerably (ACS 1991; Minería y Desarrollo 1992). This is especially true of Chuquicamata, whose ore has a high arsenic content. Chile is perhaps one of the countries most exposed to arsenic in the environment because of its very high levels of volcanic activity. Northern Chile has had a long history of dealing with arsenic: several rivers have base levels that greatly exceed the standard. Several plants extract arsenic from this water, but this has nothing to do with mining. The arsenic emitted into the atmosphere from some smelters and roasters in Chile only adds to this initially high base level in the water. In some cases, as at the town of Calama (located near the Chuquicamata smelter), the base level in the air is also high because the wind carries particles from the desert at a level that exceeds the air standard for arsenic in Europe and the United States. The high arsenic content of the desert seems to be surficial in some areas, which may be due to arsenic particles’ being deposited on the surface for many years; it may also be due to the frequent and recent volcanic eruptions, such as the Láscar eruption in 1992.
The government has started a research project to determine the air-quality standard for arsenic. It is thought that the available world database relating cancer to total arsenic exposure could be improved by looking at Chile, as its environment has a natural abundance of arsenic. This research makes economic sense. For instance, if the standard for arsenic in the air is fixed at the levels proposed by the Ministry of Health, then the Chuquicamata smelter, and maybe also the mine, will have to close down. If, however, the standard is fixed at the levels proposed by international consultants, that is, at levels based on North American and European risk information, Chuquicamata will be able to continue operating. Therefore, the total acceptable exposure to arsenic is an important issue that has to be resolved in this decade.
Studies by IRM (1988), Muñoz and Lagos (1990), Luna and Lagos (1990, 1992), and DGA (1991) of the environmental impact of mining activity on four important Chilean rivers — the Mapocho, the Elqui, the Aconcagua, and the Copiapó — showed that mining had had no proven impacts on agricultural or populated areas. However, the water-quality standards (stated in decree 1333 of 1978) were surpassed at certain points in these rivers during certain periods, as a result of mine effluent. These studies were based mostly on data collected in the mid-1970s by one of the state agencies, Direccion General de Aguas (DGA, general directorate of waters). These and other studies (Dames and Moore Consultants 1991; Lagos 1993) showed that the base levels in some parts of these rivers surpassed the water-quality standards of decree 1333.
The case of the Salado river was different. This river received tailings from the mineral-processing plant of the El Salvador mine, owned by CODELCO. The tailings completely embanked the bay of Chañaral and caused the death of sea species in the surrounding area. The El Salvador tailings dam had been filled since 1938, and the company, which then belonged to a US firm, allowed the tailings to spill into the Salado river. In 1975, the company, which was by that time owned by CODELCO, constructed a canal to divert the river water, including tailings, to another bay, Caleta Palitos, but this action produced the same embankment effect there. Overall, the company dumped 330 × 106 t of tailings into the river and the canal before the it was forced to change its tailings-management practices in 1989. In the late 1980s, an environmental group from Chañaral took CODELCO to court. The court in Copiapó ordered the company to construct a new tailings dam. In 1989, the Supreme Court ratified the decision, and CODELCO was forced to build a tailings dam, which has now entered into operation. This was an important precedent in Chilean law: despite the outdated environmental laws covering liquid effluent, companies, even state-owned companies, could be taken to court and forced to deal with environmental problems. This case dealt with the most serious environmental impact of mining on river or sea waters in Chilean history, and it illustrates clearly that environmental policy was not a priority for CODELCO until very recently.
In 1993, Chilean mines had 717 tailings dams and 149 solid-waste deposits, according to studies by Servicio Nacional de Geología y Minería (SERNAGEOMIN, national geological and mining service) (1990) and Galaz (1993). Although these studies included only the northern region, the central region, and a small part of the southern region, most mining activity is concentrated in these regions. The conditions of 299 dams were found to be unsafe, meaning that either the walls were unstable or liquid was filtering out to surficial waterways or down to groundwater. Some of these dams were also located in dangerous areas where there was a risk of earthquakes or flooding. An undetermined number of the dams were abandoned.
Legislation on tailings dams dates back to 1970 but is insufficient for today’s safety and environmental requirements. For example, this legislation gives no guidance on the construction of dams in waterways, which could be very dangerous in the event of earthquakes or flooding. Chile has had many episodes of earthquakes at tailings dams. The most important one was in 1965, when the El Cobre tailings dam, which now belongs to Disputada but was owned by ENAMI at the time, collapsed during an earthquake and killed more than 220 people in a nearby town. The collapse was attributed to the unsafe condition of the dam walls. Disputada was forced to introduce safety measures but was never compelled to pay any compensation to the families of the people who died. Chilean law has no precedent for a mining company’s having to pay compensation to an individual or group of individuals for environmental damage. This will certainly change now that environmental-framework legislation (EFL) was approved by Congress in January 1994. The EFL defines the concept of responsibility for environmental damage, among other elements. In the past, the courts at most ordered companies to repair their facilities, install new measuring devices and treatment equipment, or temporarily close their plants.
The question of tailings dams located in waterways will be discussed in the subsection providing background for the case study "Compañía Minera Disputada de Las Condes."
The first mine to apply the new dam-design concepts in Chile was El Teniente (another of our case studies), with the construction of the Carén dam. The new concepts are based on several principles:
• The dam must be located where there is little likelihood of being affected by flooding;
• Any water eventually filtering from the dam should not pollute the groundwater;
• The dam should be located where there is little risk of earthquakes;
• Water from the dam should be channeled to agricultural or forest soils or to waterways able to withstand effluent without the quality of their water being affected; and
• The company should have plans to reclaim the land after the mine is abandoned.
These design concepts have now been extended to several other dams in Chile and are accepted as standard. Many companies in Chile are now reclaiming the land. In some cases, these companies have improved the conditions of the region, such as by growing forests where there was arid land before.
SERNAGEOMIN has been working to elaborate new legislation on tailings dams that incorporates these concepts and introduces several clauses on obtaining information about the movement of solid materials during mining. Leaching installations are included in this legislation, as well as the disposal of wastes removed from a mine when the mineral is extracted. This legislation will be an important improvement, but many aspects will still be insufficiently unregulated. One of these aspects, the reclamation of land at abandoned mines, is usually associated with abandonment of tailings dams, leaching dumps, and other installations.
Other aspects inadequately addressed by Chilean legislation, even after the EFL, are who pays for the reparation of environmental damage or for the reclamation of land abandoned by a mining company and what safety and environmental conditions are unacceptable. These problems will be discussed, again in "Compañía Minera Disputada de Las Condes," under the heading "The case of the Perez Caldera tailings dam."
Chilean legislation also fails to address acidification of water caused by mine operations. This problem is related to the operation and abandonment of mines, tailings dams, and leaching operations and is affected by natural water behaviour, by precipitation, and by atmospheric pollution from smelters and other fixed and mobile sources of sulfur. This is yet another subject that needs to be investigated soon before future legislation is written.
Not very much is known about the degradation of soil resulting from metal ions or other waste products from mines and mining plants; in fact, Chile has no soil standards. Many mines and mining plants in Chile are located in high mountain areas or in deserts, so if contaminants have accumulated in the soil, the impacts have gone unnoticed. Only a few cases of contamination of soil by river water polluted by mines have been reported in the last decade. One of the reasons for this may be that agricultural soil in Chile is usually neutral or basic, which can buffer any excess acid caused by a high metallic content in water; the metal precipitates, and no harm occurs.
In Puchuncaví valley, which is near the Ventanas smelter, researchers carried out studies to establish the effects of the emissions from the smelter and from the Chilgener thermoelectric plant on the agricultural land close by (Chiang et al. 1985; Gonzalez and Bergqvist 1985; Gonzalez 1992). However, these studies were unable to show a conclusive relationship, for example, between pollution and reduced soil productivity (Lagos and Ibañez 1993). Similar results were found in other agricultural regions near smelters. Thus, no farmers’ lawsuits against copper smelters have been successful. There may have been some out-of-court agreements, but these have not been reported publicly.
The lack of water in the north may be a matter of future importance, especially given the rapid growth of mining in the 1980s and 1990s. The effects of water use during mining operations in deserts are not very well understood. How does this affect the provision of water to the Altiplano, the very fragile and unique high-altitude plateau ecosystem of many regions of the Andes mountains?
It seems that many mining operations could use water more efficiently than they do now. DGA, an agency of the Ministry of Public Construction, has monitored and created sophisticated models of the supply of water to some of the main Chilean rivers. A new mining operation would not be granted water rights if a model indicates, for instance, that a particular ecosystem would not be able to withstand that use. One of the problems is that DGA still has no models for many ecosystems in the north, especially models of the behaviour of groundwater. Thus, a company that finds groundwater, usually after having investing a considerable sum of money in exploration, can be granted permits to use this water without anyone knowing in advance what the impact of such use will be on the ecosystem. The way the system usually operates is that the company must monitor water levels and other indicators of life in the ecosystem and provide these data to the authorities so that a model can be elaborated in the future.
Lately, Congress has been developing legislation to regulate the use of water. However, some of these clauses may conflict with decree 1333, which sets water-quality standards. The proposed legislation states that in northern Chile, all industrial and mining companies may dispose of used water in surficial waters or groundwaters provided this does not alter the base quality of these waters.
The proposed legislation considers another aspect, the duration of water rights. The proposal is to limit the duration of a new water-use permit granted to a company, even if that company did the exploration to find that water source. When the permit expires, DGA would acquire the rights to use that particular water source as it sees fit. An alternative proposal is that these new water permits be permanent, like the old ones, provided that a fee for the water rights is paid by the company. At present, water rights are permanent and require no payment. This means that a few large companies that have operated for many years have concentrated most of the water rights in Chile and can use this water under authorization of the DGA.
Congress will have to approve coherent legislation on these issues within the next few years, but the potential impacts of water use in the arid regions of northern Chile will remain unknown until much more is known about the behaviour of the affected ecosystems.
The Comision Nacional del Medio Ambiente (CONAMA, national commission of the environment) has identified about 2 200 laws and presidential decrees dealing with the environment, and many of these might be applicable to the mining sector (Lagos et al. 1991; CONAMA 1992; Bórquez 1993). However, some date back to the beginning of this century and are no longer useful. Furthermore, many of these regulations have never been applied. The Aylwin government began to use only a fraction of them, which shows that the application of environmental legislation was, and still is, discretionary, depending more on political will and state officials’ readiness to act than on scientific data.
The main institutions and agencies responsible for the environment belong to different ministries, and they elaborated most of the current environmental legislation without the benefit of overall coordination. Thus, this legislation reflects to a large extent the specific interests of each ministry, rather than an overall concept of the environment. As a result, the rights and responsibilities of the various agencies often conflict. For instance, seven different institutions control the quality of water resources, with intersecting responsibilities and rights. This has created conflicts on many occasions, which not only reduces the possibility of protecting the environment but also delays the processing of the permits needed by the mining companies. In addition, a lack of funds has impaired the procedures and methods of the agencies responsible for the environment; staffing has been insufficient; personnel are often improperly trained; centralization has been excessive; the delimitation of functions is not clear; and methods for reaching decisions have not been specified.
This situation is a product of many years of disregard for the environment. The military government (1973–90) had no environmental policy other than ignoring the environment as much as possible. It is not by chance that in the mid-1980s, an influential economic adviser to the government, who later become the minister of finance, told a meeting of North American business people that they would find investing in Chile to be advantageous because they would not have to comply with any environmental law.
The public companies were among the worst offenders against the environment in the 1980s, and the institutions responsible for the environment made no attempt to change corporate behaviour in this period. A national commission of ecology was created, but it had no budget or the power to do anything except keep a few good, willing citizens occupied.
Parallel to this, public awareness about the environment began to rise. Legal demands were being presented in various parts of the country. President Aylwin’s government (1990–94) based its policy on a program elaborated in 1988. This program called for the harmonization of economic growth with environmental protection (CPD 1989).
Since 1990, many actions have given the environment a higher profile in Chile. Among these are the following:
• The creation of CONAMA and the commission for the decontamination of the metropolitan region of Santiago;
• The involvement of regional authorities in environmental decisionmaking;
• The dictation of decrees 4 and 185 (the former is equivalent to the latter but is for the Santiago region);
• The elaboration of the EFL (which was approved by Congress in January 1994); and
• The allocation of funds to solve some of the environmental problems of the state-owned companies.
The EFL is of special importance because it is the first attempt to provide a framework for environmental regulations in Chile and to refer these to a coherent environmental concept. It gives CONAMA a new role: coordinating and eventually approving all environmental-impact studies (EISs). All projects of a certain size undertaken by a company, institution, or individual must first be subjected to an EIS. When CONAMA approves an EIS, it issues an environmental-impact declaration (EID). The EID sets down the specific conditions that the project must meet. CONAMA acts in each region through a Comisión Regional del Medio Ambiente (COREMA, regional commission of the environment), which actually determines the specific terms of reference for each EIS and later analyzes its results and may issue an EID. Thus, the COREMAs for each region and CONAMA, at the national level, constitute a single-window facility to coordinate the views of all agencies and ministries involved in environmental matters.
CONAMA is institutionally located within the Ministry of the Presidency, which coordinates all matters of the Presidency with other ministries. Nothing of state importance should by-pass this ministry. CONAMA has a directing body of nine ministers, headed by the Minister of the Presidency.
Another concept introduced by the EFL is the definition of responsibility for environmental damage. Any citizen, institution, or company may be found responsible for environmental damage if a plaintiff can prove that such damage did occur. The EFL also establishes the concept of who contaminates, must pay, meaning that other decrees and laws can define market mechanisms for environmental control. These concepts are already included in decrees 4 and 184, which pertain to the atmospheric emissions of fixed sources.
Despite the will for environmental action shown by the Aylwin government, it can be observed that the advance has been very heterogeneous. The mining sector has come out the winner, mainly because it went ahead to find its own environmental solutions without waiting for the institutional and legal changes to be completed. Instead, it worked to promote the ad hoc commissions, established through the goodwill of the different ministries and other institutions involved in environmental protection and with the cooperation of private and public companies. Contrary to what some believe, companies do want legislation and clear rules. In 1990–93, when the EFL was yet unapproved, most of the procedures for new projects — for example, procedures pertaining to EISs, baseline studies, liquid and solid effluent, and even abandonment — were agreed to without reference to any specific legislation, as such legislation was nonexistent or was too incoherent to be applied.
Such ad hoc commissions could be very useful in establishing realistic legislation in the future, but unfortunately the system has left a wide gap for state discretion, which, as history shows, is not always for the best in Chile. Even after the EFL, the gap is very wide, as the terms of reference are still a matter of discretion in cases to which no existing legislation applies.
One of the key aspects of approving the EFL was the opposing positions held by different political sectors in the country. Sectors favouring economic development believed that economic development should be the ruling consideration in the country’s development, but other sectors believed that environmental protection should be the ruling consideration. Thus, the environmental advocates always pushed for the creation of an environment ministry that would have the last word on environmental issues (overruling other ministries), a more centralist vision than the EFL’s concept of having environmental issues decided, in coordination, by all the institutions concerned. Had the environmentalists prevailed, the state apparatus would have had to have been completely restructured. The agencies that have historically had environmental control, however dispersed and incoherent, would have had to render their responsibilities to this new ministry. In the end, the state would have been reorganized with an environmentalist slant. But now state reorganization, which will go ahead during President Frei’s government (1994–2000), will be geared toward improving the competitiveness of the country as a whole. But it is often argued that with this increase in competitiveness, the environment will be better taken care of after all.
The strength of the EFL is that it will be applied rapidly and, it is hoped, realistically; and the country’s economic development may continue at the same rate as in the past 10 years (more than 6% average annual growth). Furthermore, the environment seems to be at its best in a competitive economy.
The EFL’s main weakness seems to be that its optimistic view of the relationship between competitiveness and the environment may increase the risk of overlooking or dismissing some environmental-control measures, and this may lead to serious environmental problems.
The following subsections outline case studies (Velasco and Lagos 1991) of the environmental policies and strategies of four mining companies: Compañía Minera El Indio, Compañía Minera Disputada de Las Condes, the Ventanas smelter (ENAMI), and the El Teniente mine (CODELCO).
The El Indio deposit was discovered in the 1960s. The deposit had been exploited on a limited scale for about 10 years before the St Joe Gold Corp., from the United States, became interested in acquiring the rights to the deposit in 1975. This was the first foreign investment made in Chile under decree 600 (also called the foreign-investment statute), promulgated in 1974. In 1977, St Joe signed a foreign-investment contract of 100 million USD with the State of Chile.
In the 1980s, El Indio’s property changed hands twice. In 1981, the Fluor Company bought a 90% share of St Joe. In 1987, Fluor sold its share to the Australian-based Alan Bond Group through its holding company, Dallhold Investments Pty. Because of financial difficulties in 1989, the Alan Bond Group sold El Indio to Lac Minerals Ltd, of Canada, which is still the sole owner.
The El Indio mine is located in the Andes at an altitude of 4 000 m above sea level (asl). It is 200 km east of the city of La Serena and is close to the Argentina border. The mine is exploited both by underground and open-pit mining. The extracted mineral is transported to a processing plant. This plant was designed with an original capacity of 1 250 t/d of dry mineral ore, but this was expanded, first in 1985, to 1 850 t/d, and then in 1988, to 2 600 t/d.
After the material is crushed, it is fed into a dissolver-drum reactor, where it is washed with water to remove the soluble copper and the ferrous salts. These are neutralized and eliminated as waste, as their presence would affect the flotation and cyanidation processes. During grinding, lime is added to the mineral, raising its pH to around 9.0, to prepare it for the flotation process. The copper concentrate obtained after flotation contains about 20% Cu, 50 g Au/t, 300 g Ag/t, and 8% As. This concentrate is then treated in a 14-level hearth-roaster furnace to remove the arsenic. The gas generated in the roasting process passes through two cyclones, to recover residual dust, and is mixed with air for the total oxidation of arsenic and gaseous sulfur. Continuing in the particulate-cleaning process, the gas passes through an electrostatic precipitator. It is then mixed with cool air, and a precipitate of arsenic trioxide is produced by lowering the temperature.
The tailings from this first stage undergo a second stage of flotation, followed by a pressure-filtering process, both to prepare the material for the recovery of silver and gold through cyanidation and to recover and reuse the water contained in the slurry. After cyanide leaching, the gold and silver undergo absorption with activated carbon and then desorption at high temperature and pressure. The rich solution is electrolyzed and then smelted to obtain doré metal with a 10:1 gold-silver ratio, by weight. The tailings are carried by gravity through a pipeline to the tailings dam; from there, water is pumped back to a reservoir at an altitude of 3 800 m asl.
On a few occasions in the past, cyanide-contaminated water has flowed from the tailings dam to the Malo river, one of the tributaries of the Elqui. The health service of IV Region took note of these events, and in 1982, a year after the cyanidation plant started operation, health officials closed it for 3 months. The plant was reopened after a process modification that reduced the cyanide content of the tailings dam from 600 mg/L to 10 mg/L.
The health service of IV Region periodically analyzes the level of harmful substances at different points in the river between the mining plant and the water-collection plant that treats the water and supplies it to La Serena. Maximum levels for certain substances have been decided for different points along the river. In Huanta, one of the first localities downstream of the mine, the water from the Turbio river (another tributary of the Elqui) must not contain more than 0.2 ppm of cyanide concentrates. A few kilometres downstream from Huanta, near Chapilca, the maximum allowable concentration of cyanide is 0.05 ppm. The third sampling point is farther downstream, and the fourth and last is in Las Rojas, near the water-collection plant that supplies La Serena. The maximum level of cyanide tolerated at both these sampling stations is 0.02 ppm. There has been no known incidence of these levels having been exceeded.
It is evident from analysis of DGA data that opening El Indio resulted in an increase in the contents of copper, arsenic, and cyanide in the Malo river, which passes close to the mine, plant, and tailings dam (Muñoz and Lagos 1990). Although it should be added that the Malo river (malo means bad in Spanish) has a base level of arsenic that is well above the Chilean standard for water (both for agricultural use and for drinking), it is also clear that none of the environmental events detected have had an impact on agricultural or populated areas. This is not only because the contaminants are diluted downstream but also because the soil is basic and precipitates the metal ions in the water on contact.
When the company was installing a third roaster in 1991, the health service of IV Region demanded that the company comply with certain requirements to control the arsenic its roasters released to the atmosphere, These requirements were, first, that by 1993 the arsenic emissions of the three roasters not exceed those produced by the two older roasters at the end of 1990; and second, that the company install a monitoring network.
The environmental policy of El Indio is made according to guidelines established by its owner, Lac Minerals, of which the governing principle is sustainable development. From this broad definition stems a policy framework with the following seven strategic concepts:
• The company’s administrative and operational practices must be compatible with legislation regarding the protection of workers, the community, and the environment.
• The company must have an autoinspection program to ensure compliance with government and corporate policies.
• When the company has been informed of developments in technology or processes that can reduce adverse effects on the environment, it should introduce these changes, if it is economically feasible, even if they exceed legal obligations.
• If no legislation exists, the company should apply effective procedures to promote environmental protection and minimize environmental risks.
• Environmental awareness should be promoted in the sphere of governmental authorities, workers, and the community to ensure that laws are fair, realistic, and economically feasible.
• The company should encourage and participate in research to find effective solutions to environmental problems, in harmony with cost-reduction strategies.
• The board of directors of the company, government authorities, and the community should be informed about compliance with environmental programs and responsibilities.
The environmental activities of El Indio are separated into different areas, of which the most important are environmental management, surveillance, and control. Other areas include training, information, and coordination.
ENVIRONMENTAL MANAGEMENT AT EL INDIO — The environmental-management system is assessed by an environmental committee consisting of the general manager and the legal manager, the latter being most directly responsible for environmental and health management. Despite the existence of a central committee, in practice each individual operation area has to comply with specific environmental goals derived from company policy. The company, El Indio, as well as the parent company, Lac Minerals, periodically carries out environmental audits to determine whether environmental goals have been met and if necessary to introduce modifications.
Normative activities involve making the company’s environmental policy public, with a view to demonstrating to government authorities and to the community the company’s performance in the environmental-care sphere.
El Indio developed an environmental plan that takes all aspects and areas of the productive process into account. It determines critical points and priorities and compiles information on processes, installations, climate, topography, use of resources, and other issues. Using this information, the company developed an observance program that assigns responsibilities and establishes a periodic-assessment system and the budget needed to meet the goals. Environmental-protection recommendations have been developed for every component of the environment.
El Indio has also designed an environmental-emergency management plan to ensure coherent action to reduce adverse effects in a critical scenario.
A works-abandonment plan has been devised to cover the safe management of installations, deposits, and dumps after operations have ceased.
Finally, El Indio has compiled materials-security booklets for diverse environmental risks, and these booklets are distributed throughout the company.
INVESTMENTS AND ACTIONS OF EL INDIO — In environmental-surveillance and control activities, El Indio, in conjunction with regional entities (particularly La Serena university), has done a wildlife count in the zone to establish a baseline for local ecosystems. An EIS examining the interaction between mining and the environment complements this information.
A permanent monitoring system has been set up to control and survey the physical and chemical characteristics of the effluent in the operations area of the Elqui river basin, particularly the cyanide content. This surveillance allows the company to detect any change in water quality and make adjustments to the production process. The monitoring system’s particular function is to feed a database with data about pollution in the Elqui river basin. It is worth noting that the industrial water used in the process is completely recovered to avoid polluting the watercourses. The Malo river was channeled around the operations area, thus avoiding contact with the tailings dam nearby. In addition, the dam has an infiltration pumping system that prevents underground contamination of any watercourse.
Because of the high arsenic content of the El Indio concentrates, the company has equipped the roasting furnaces with gas sets, which, through cyclones, cooling chambers, electrostatic precipitators, and bag filters, recover a considerable amount of the arsenic dust generated in roasting. According to company plans, dust recovery was to be 98% by the end of 1993.
Lastly, forestation activities have been carried out in areas where mining activities have altered the physical characteristics, and the company has plans to plant trees on dry tailings deposits to improve their stability.
Activities related to environmental protection, as well as to industrial hygiene, have resulted in operational investments of 64.6 million USD, about 20% of El Indio’s total investments in all mining activities in the 1981–91 period. In 1992, El Indio assigned a total of 679 000 USD to environmental activities, which represents 7.4% of its annual budget; 54% of this sum was spent on improving the tailings dam.
At present, Disputada has two mines, Los Bronces and El Soldado; two processing plants, Las Tórtolas and El Cobre; four tailings dams, Perez Caldera 1 and 2, Las Tórtolas, and El Cobre; and one smelter, Chagres. The San Francisco processing plant was dismantled after the Las Tórtolas plant started in 1993.
The Compañía Minera Disputada de Las Condes dates back to 1916, when the Disputada and San Francisco mines were first worked. In 1936, the Los Bronces mine, located in the Andes, 62 km east of Santiago and at an altitude of 3 400 m asl, was acquired by the Disputada company. During the early years, the extremely high copper grades (10–25%) produced from these mines allowed the company to use rudimentary technology, with low productivity. However, the high-grade veins started to become exhausted, and after the grade fell to 4–5%, the company had to introduce both mechanical methods and a concentration plant. Between 1920 and 1925, the company established the Pommerantz level, which was used as a transport level; the Perez Caldera benefitiation plant; and two cable lifts, one of 7 km, to transport the ore from the Los Bronces mine to the concentration plant, and one of 21 km, to move the concentrate from the plant to Las Condes county in Santiago.
In 1952, the company was sold to a French firm, La Société minière et métallurgique de Peñaroya, which acquired 87% of the shares; the other 13% remained in the hands of minor shareholders. In 1958, when the 4–5% grade veins were depleted, new installations were constructed; the most important of these was an underground concentration plant with a capacity of 346 t/d. Because of a further fall in the ore grade, Disputada at Los Bronces was forced to completely renew its installations to raise production to profitable levels. From 700 t/d in 1959, processing increased to 3 000 t/d in 1962, 4 800 t/d in 1978, 8400 t/d in 1981, 12000 t/d in 1988, and 37 000 t/d in 1991. Several facilities for 55 000 t/d (nearly 200 000 t Cu/year) were designed in the most recent expansion. Favourable market conditions in the second half of the 1990s may lead to a further expansion of all facilities to this capacity.
ENAMI acquired Disputada in 1972, within the framework of nationalization, for 5 million USD. The company was sold for 114 million USD to Exxon Minerals Chile, an Exxon Ltd subsidiary, in February 1978.
The Los Bronces mine treats its minerals at the nearby San Francisco mineral-processing plant. The tailings are sent through a tunnel to the new Las Tórtolas tailings dam located 37 km away in the valley north of Santiago. Two of the four tailings dams, the Perez Caldera 1 and 2, are located near the San Francisco plant, in the San Francisco river basin. After 1993, all the tailings contained in these dams were to be sent through a new tunnel to the Las Tórtolas dam.
In addition to the Los Bronces mine and its related installations, Disputada also acquired the El Soldado mine, located in Nogales commune, in V Region, 135 north of Santiago, as well as the El Cobre concentration plant. The first mining-rights concession of this deposit dates back to 1842. This was transferred to the Sociedad de Minas de Catemu in 1899 and later to the Compañía Minera Du M’Zaita, in 1919. In 1975, it was acquired by Disputada and later, in 1978, these rights were transferred to Exxon. The Chagres smelter was also acquired by Disputada.
The El Soldado mine treats its minerals at the nearby mineral-processing plant of El Cobre, and the tailings are sent to El Cobre tailings dam 4. This dam was to be replaced by a new one, El Torito, closer to the plant.
The Chagres smelter, in the Catemu area of San Felipe province, north of Santiago, is in the middle of an agricultural valley. It is the only smelter in Chile that complies with environmental regulations. It was the first plant to install a monitoring network, during the 1980s, and the first to be regulated by a special decree (now replaced by decree 185). Some of the concentrates from El Soldado and Los Bronces are smelted in Chagres, to fill its capacity. Until 1992, the capacity of this smelter was about 50 000 t of copper. However, an expansion planned for 1995 would increase this to about 155 000 t of copper; the sulfur emissions were to be maintained at a constant level of 7 000 t/year.
When Exxon’s Disputada started its operations in Chile, it introduced an environmental-policy framework, in accordance with the policies of its mother company, Exxon Minerals:
• To comply with environmental regulations or, if such regulations do not exist, to apply responsible standards;
• To prevent incidents and to design, run, and maintain installations with this purpose;
• To react quickly and effectively to incidents resulting from mining operations;
• To promote the development of appropriate environmental laws and regulations;
• To carry out and promote research on the impacts of operations on the environment, to improve environmental-protection methods, and to increase the capacity to make operations and products compatible with the environment; and
• To audit operations to ensure they comply with this environmental policy.
Disputada’s environmental policy addresses three main areas of concern: compliance with the legal norms in the environmental field; prevention of incidents in works and reduction of impacts; and compatibility of the production process with environmental care.
When Exxon acquired Disputada in 1978, it perceived that Chile’s environmental regulations lacked a coherent structure for considering environmental aspects globally. As a consequence of this initial diagnosis, Disputada’s environmental policy aimed at complying with foreign standards in cases where Chilean legislation did not cover certain matters. This explains the emphasis the company placed on promoting the development of environmental laws and regulations. The lack of comprehensive legislation on some environmental aspects (such as a framework law) generates uncertainty, as current practices may change.
Guided by its policy, the company was able to react quickly to a report (known to many people in Santiago) that the Perez Caldera 2 tailings dam might collapse in an earthquake. Disputada looked at ways to reduce the risk, realizing that if the dam collapsed it would have serious implications, such as material losses or loss of lives. In addition, such an event would damage the company’s public image.
To put its policy guidelines into practice, the company created an environmental-management body. Its job was to develop plans and models aimed at tackling environmental issues and to propose action in the three main areas of concern. The organizations that operate at the different facilities implement corporate environmental plans. The environmental-management body gives guidance on environmental matters and assesses the management of operations. Similarly, it channels information to and from operational organizations, keeping them up to date on local, national, and international environmental affairs that might affect the company’s activities in any way.
The environmental-management body has two other spheres of activity: first, it concerns itself with the internal structure of the company; and second, it acts as a counterpart to government departments. In the domestic sphere, it has to inform management of risk situations, as well as establishing beforehand possible sources of conflict, with a view to defining strategies for action. In addition, it has to present an environmental-performance evaluation to the company.
In the external sphere, the environmental-management body has to interact with state institutions linked to environmental administration, to obtain the authorizations needed to run the works. This activity is particularly important when introducing modifications to the process, especially expansions of the production capacity or the construction of related installations.
Environmental-management activities occur at two levels: domestic and external. At the domestic level, the most important activities are the following:
• Personnel training — It is possible to develop awareness of the importance of environmental care. In practice, this allows the environmental variable to be introduced into project design.
• Environmental-impact analysis — By permanently monitoring the works and making base studies of water, air, and land quality, the company can determine the impacts of the production process on the environment. This activity also gives the company the information it needs to make decisions about introducing technology (emission-reduction and residual-treatment equipment) or modifying its operations to reduce contamination.
• Environmental-risk analysis — By identifying aspects that pose the greatest danger, the company is able to face any risk.
• Recovery of affected areas.
At the external level, Disputada’s most important environmental-management activities are the following:
• Promoting adequate environmental practices, from a technical and economic viewpoint;
• Educating the national community about the environmental issues, directing public concern into more productive channels, and contributing to and benefiting from local scientific and technological development); and
• Publicizing the company’s environmental experience to show that environmental protection is not only compatible with productive activity but also accompanied by clear economic benefits.
THE CASE OF THE PEREZ CALDERA TAILINGS DAM — Construction of the Perez Caldera 1 tailings dam was begun in 1936, at an altitude of 2 800 m asl, along the San Francisco river, which flows down to El Arrayán (on the outskirts of Santiago) and later joins the Mapocho river in Santiago. In 1978, when the dam had reached its full capacity, the company received approval to construct a new dam, the Perez Caldera 2, adjoining the first one but farther downstream on the San Francisco river. The Disputada company constructed a second San Francisco tunnel (the first one was in Perez Caldera 1) to cause the river water to flow parallel to the dam. In 1987, the company began construction of a third tunnel, the Ortiga, to provide an emergency outlet in case the San Francisco tunnel became blocked. Even before the completion of the Ortiga tunnel, however, the excessive spring thawing blocked the San Francisco tunnel, and the dam collected more than 300000 m3 of water in 5 d. The water level rose to a mere 45 cm from the top edge of the dam, threatening Santiago. Had there been an accident, the water would have rushed down the San Francisco river basin, from 2 800 m asl, to flood El Arrayán, at 1 000 m asl.
Whether or not, despite the precautions, the risks of such an event happening were real, the public began to think this tailings dam should not be there, as at any moment an earthquake or some other natural phenomenon might have catastrophic consequences for Santiago. However, Chile had authorized the construction of both dams and had no legislation to determine who should pay to repair this situation. Two options were open: evacuate the contents of the tailings dam or close the Los Bronces mine. By chance or by design, the company approved the Los Bronces expansion plan at this time, which meant the construction of a new tailings dam in Las Tórtolas, at the same altitude as Santiago. This opened the possibility of constructing a tunnel to evacuate the Perez Caldera tailings, although this was to be at a significant cost to the company.
The company rapidly came to an agreement with the community of El Arrayán, which was suing the company in the local court. The agreement stated that the Perez Caldera tailings would be evacuated within an agreed period, following the expansion of Los Bronces. However, the company never committed itself in that document to continuing with the expansion. The question of who would pay for the evacuation of the dam if the proposed expansion did not take place became all important. No precedent existed in Chilean law for this situation. Should the company pay the costs, regardless of its plans? What if this became economically so unfeasible that the company decided to close the mine? These questions have still not been resolved in Chilean law, even after the EFL. Who will pay for the repairs or rehabilitation of the many tailings dams that have been abandoned and no companies own them any more?
Disputada has made environmental investments in its various operative units. In Los Bronces, the principal investments have focused on channeling and diverting the river water: constructing and repairing the San Francisco and Ortiga tunnels, for example, represented a total investment of 17 million USD. These works were followed by the conditioning of the tailings dam, at 13.8 million USD. Similarly, the company made investments in dam forestation at Los Bronces and in a water-treatment plant, among other things.
At the El Soldado deposit, the company has made its main environmental investments in the tailings dam, whereas at the Chagres smelter, it has invested in a sewage-water plant; an environmental-surveillance system (network for monitoring air quality); gas- and particulate-collection hoods in the furnace and converter and in the copper-matte and slag outlets; windbreaks at the concentrate-deposit site; a connection from the smokestack to the acid plant; an effluent-neutralization plant; a concentrate sweep and vacuum system; equipment for concentrate and rainwater collection and concentrate pelletization; a gas-breakdown plant (including electrostatic precipitators); and a smokestack extension (102 m). Finally, the hydrosowing-in-slag project and the gardens surrounding the works must also be counted as environmental investments.
The production-expansion project in Los Bronces also benefited from the construction of a new loading pier at the port of San Antonio, which cost the company 8.8 million USD. Disputada considers 6.2 million USD of that to be an environmental component because it includes sealed storage bins, a double-door system, and covered belt conveyers, which are also protected with curtains (to protect the fruit exports that are also shipped through this port). Disputada’s largest investment in environmental protection, though, was the construction of the mining-ore pipeline to evacuate tailings from Los Bronces (in the high Andes) and deposit them in a valley Las Tórtolas, north of Santiago. This pipeline was designed after an EIS called for measures to minimize the effects of transportation on the environment. The Las Tórtolas tailings dam also includes the construction of walls, a water-collection and -recovery system, and the forestation and irrigation of the 700 ha property. The company’s total investment in environmental protection in 1978–91 was 111 million USD.
Planning for the Las Ventanas refinery and smelter project started in 1955, when the Empresa Nacional de Fundiciones (national smelting company) was created. It was decided that the smelter would be constructed at the beginning of 1956, and an electrolytic refinery was included to process all the copper coming from the small- and medium-scale mining operations. After assessing various alternatives, ENAMI decided to locate the new plant in an agricultural zone in the Ventanas area, near the port of Quintero, about 150 km from Santiago. Nonetheless, until 1960, the construction of this installation was limited to some preliminary work, such as earth movement, refilling, and road preparation.
In 1962, the smelter was inaugurated; and 2 years later, the electrorefinery plant was completed. The design capacity of the plant was 84 000 t of electrolytic copper. However, in 1967 an extension was made to increase the refining capacity to 112000 t, and a modification in 1986 enabled the plant to produce 200 000 t annually, starting in 1987. In the same year, a study, originally initiated in 1963, was restarted; its objective was to look into the construction of a sulfuric acid plant. However, the company did not install such a plant until 1990. The smelter complex includes a mineral-storage facility, as well as the smelter itself, which has the sulfuric acid plant, a mercury- and arsenic-extraction plant, an effluent-treatment plant, an electrolytic refinery, and a noble-metals plant.
Since its creation, ENAMI has had a double purpose: to obtain the highest profitability in mineral-processing, -smelting, and -refining processes and to provide social aid to the small- and medium-scale mining industry.
Until 1990, ENAMI did not have an environmental department, which explains the lack of an environmental policy or actions aimed at decreasing existing contamination levels at its plants. ENAMI’s new administration created the Communications and Environmental Management Department to design and implement a global environmental policy, to help the company adapt to new legal requirements, and to respond to the growing public concern about environmental issues.
To convert its environmental policy into action, the administration created the positions of communications and environmental agents. These individuals are responsible for local environmental management at each of ENAMI’s plants. Similarly, each production centre has an environmental committee, made up of interdisciplinary professional teams. These teams are responsible for detecting and analyzing critical environmental situations and proposing environmental-control measures.
One of the first actions of this managerial structure was to carry out a diagnosis to determine the environmental impacts at the company’s production centres. One of the conclusions was that the company was slow at making decisions, which has meant the postponement, sometimes for years, of investments in environmental protection. Such was the case for the Ventanas sulfuric acid plant, which was initially conceived in the early 1960s but did not materialize until some 25 years later, in 1990.
ENAMI’s environmental authorities brought up another relevant issue: poor maintenance of industrial equipment was having harmful effects on industrial hygiene.
The diagnosis also emphasized that even though there had not been a global environmental policy during the military regime, investments had been made to solve contamination problems, principally in the last years of the regime. However, companies had made those investments in response to public pressure, rather than on the basis of a clear environmental policy.
Based on these observations, the Communications and Environmental Management Department began to design short-, medium-, and long-term environmental policies that took into account ENAMI’s limited resources and harmonized the need for adequate production performance with the need to reduce contamination levels in a short time. The department came up with the Urgent Plan for Environmental Hygiene, which was intended to solve environmental problems in ENAMI’s works relatively quickly and at a low cost period. The plan stated that the company’s major concern was for the neighbouring communities, near the production centres.
ENAMI pointed out the importance of determining the real contamination levels attributable to the company on the basis of scientific observations before it implemented any initiative for the communities. Thus, it decided to carry out a study on the impacts of gases in the Ventanas zone during July 1990 and to compare its results with measurements taken at times when smelter production had been suspended. By taking into account other stationary sources that contribute to contamination, such as the Chilgener thermoelectric plant near the smelter, contamination base levels in the region could be established.
On the basis of this study, ENAMI established that the smelter emitted more SO2 than the thermoelectric station, whereas the latter was responsible for more of the dust and particulate contamination.
A joint ENAMI–Chilgener–Ministry of Mines committee was created. Using the results of the study as a starting point, the committee was to propose a decontamination plan for Puchuncavi valley and a solution to the contamination problem in the zone. Within the framework of this plan, several environmental actions were carried out in 1991, at a total cost of 1.5 million USD. Most notably, the company
• Constructed a meteorological station to detect wind dynamics;
• Installed, in the Ventanas complex (and in ENAMI’s other smelter), an air-quality-monitoring network consisting of four permanent measuring stations connected to a computer information-registration system (500000 USD); and
• Hired professionals to conduct a feasibility study (500 000 USD) on modernizing the smelters, with a view to harmonizing smelting demands with environmental-control requirements.
These investments are included in the 57 million USD cost of the new sulfuric acid plant, inaugurated in 1990.
The decontamination plan for the Ventanas area aimed to have the smelter comply fully with decree 185 by 1999. ENAMI would invest 130 million USD to install a second sulfuric acid plant and to modernize some of the equipment. However, this plan changed several times in 1990–94, and the latest approach seems to be to minimize investment and maximize profits. This could be achieved by reducing production at the smelter, possibly by 1997. Also under consideration were the installation of electrofilters at the Ventanas smelter to collect arsenic dust and particles; and a forestation program for Puchuncavi, to be carried out jointly with the Corporación Nacional Forestal (national forest company).
Large-scale production of the deposit known as El Teniente started at the beginning of the 20th century, when a North American, William Braden, bought the exploitation rights and set up the Rancagua Mine Company in 1904, also known as Braden Copper Co. Kennecott Copper Company became a partner in 1917 and later acquired the whole operation.
In 1968, with the so-called Chilienization process, the state bought 51% of the shares of the Great Copper Mining Industry. In 1971, a constitutional reform allowed the nationalization of the Great Copper Mining Industry. In 1976, CODELCO was created, uniting the four mines acquired through the nationalization process: Chuquicamata, El Salvador, Andina, and El Teniente.
The El Teniente mine is located in the Andes at an altitude of more than 2 000 m asl, 80 km southeast of Santiago. It is the largest underground mine in the world, with more than 2 000 km of tunnels and galleries. Close to 100 000 t of ore is extracted and treated daily. In 1991, El Teniente produced nearly 300 000 t of copper, mostly using the traditional process of flotation, smelting, and refining. Only 4000 t was from electrowinning. El Teniente has a mineral-processing plant in Colón, a few kilometres from the mine; a second processing plant at Sewell, which is being phased out of operation; a smelter at Caletones, next to Sewell, a few kilometres south of Colón; and an electrowinning plant, also in Colón, to treat the mine water and the solution coming from an in-house leaching operation.
CODELCO has had several projects with an environmental scope since 1976, but it wasn’t until 1990 that the company began to design a corporate environmental policy and establish an environmental-management body. Its corporate policy is based on making environmental care compatible with competitiveness.
At El Teniente, the corporate policy was implemented through the creation of an environmental-control program, to be run by the manager of engineering. The first priority of this program was to establish a strategy for dealing with environmental problems at CODELCO’s El Teniente division. To fulfil this goal, a diagnosis was undertaken to identify the division’s main environmental problems.
The company envisages a research program to increase innovation in the production process and to apply the best environmental technology. This research program will promote the participation of all the executives, supervisors, and workers to preserve and improve the environmental resources affected by the division’s operations. In addition, the program includes a diffusion policy to promote an accurate public perception of the realities of the environmental effects and to publicize the actions being undertaken to counter these effects.
Lastly, CODELCO plans to implement projects to improve environmental conditions. Tools include environmental audits, environmental-risk analyses, and emergency plans.
The El Teniente division has already carried out or plans to carry out initiatives to reduce contamination levels at different stages of the production process.
The Carén reservoir, along with complementary installations, stands out as a major project. Established in 1986, it replaced the Barahona, Cauquenes, and Colihues tailing dams, which were already full. Located east of Rapel lake, 70 km from the Colón plant, the Carén dam was planned to have a 25-year life span, but this could be extended to 75 years. This tailings dam was the first in Chile to incorporate state-of-the-art environmental design concepts. The cost of this project was 189 million USD in 1986.
Clear water is evacuated from the dam into Carén and Alhue brooks, which flow into Rapel lake. This water can be used in agriculture, as has been demonstrated by experiments carried out by the El Teniente division at the Loncha experimental station, located next to the dam. Despite the high alkalinity of the water, it has been successfully used for horticulture and grain crops, as well as in forestry and aquaculture. The division also has an animal-breeding program, in which the animals are fed fodder and other products gown with this water at the Loncha station. According to the division, the experiments have shown that the water from the reservoir can be used as drinking water for animals and can increase the sustainability and efficiency of agriculture and forestry.
Other companies in Chile have emulated the construction of the Carén dam, together with its experimental station, in places where Chileans commonly use dam waters in agriculture, forestry, and even in cattle grazing.
It should be noted that the molybdenum and sulfate contents of the water from Carén dam are higher than the standards defined by decree 1333. At present, a special decree authorizes El Teniente to discharge this water. In the past 10 years, fish have died during two episodes at Scorpio bay in Rapel lake. The reports from the county authority indicated that these events were related to sodium hydroxide added to the sewage system to clear blocked pipes. Although other explanations were suggested at the time, these alternatives were far from being proven. In any case, the Carén dam will have to comply with the Chilean standards for sulfate content eventually. To achieve this, El Teniente has set up a research and development program with a view to constructing a plant to remove the sulfate and molybdenum from the water.
Another important environmental action the mine carried out in the last decade was the construction of a solvent-extraction and electrowinning plant in Colón. This plant treats the highly acidic waters that flow through the mine, which have a high metal content. Without this plant, untreated mine water would be discharged directly into the river. The investment in this plant was 25 million USD.
The third most expensive environmental project, at 19.5 million USD, was the handling system for smelter gases. This project was designed to protect workers from fugitive emissions in the smelter. Also included were the modernization of some available equipment and the installation of new equipment to reduce particle emissions. Despite these improvements, El Teniente’s stack still emits more than 97% of the sulfur contained in the treated ore. It is therefore imperative that CODELCO construct acid plants at this mine soon to comply with regulations.
El Teniente has also been carrying out many less costly environmental projects related to different aspects of its very large operations. Most of these improvements do not have as great an impact as the three projects mentioned above, but the cost of carrying them out is less. One of these smaller projects is the forestation of the abandoned dams. The company has also identified more than 30 environmental projects that have yet to be done.
CODELCO’s environmental investments in the El Teniente division between 1976 and 1990 were 240 million USD. The total investments in this division in the same period were about 1.157 billion USD, which implies that the environmental share exceeded 20%. However, CODELCO classified the total tailings-dam investment as environmental, whereas Disputada did not consider its investment in Las Tórtolas dam as environmental but as part of production expansion. In both cases, the dams were build because existing dams were filled to capacity. If one takes the total investment at El Teniente and subtracts all of the Carén investment, then the environmental share falls to about 5%. However, this figure ignores the fact that the Carén dam incorporates many state-of-the-art environmental design concepts.
The four mining companies have quite different histories. The processes employed are similar, except in the case of El Indio, which produces mainly gold, with copper as a by-product. Therefore, this analysis compares, not the environmental impacts of in each company, as these are very diverse, but the ways the companies face environmental problems, organize themselves to protect the environment, and interact with the emerging legislative process and changing institutions.
El Indio is the newest of the four companies and the only one that started up after environmental issues began to seem relevant. Thus, one can trace environmental policies at El Indio to its creation as a project. Ventanas dates back to the late 1960s; El Teniente and Disputada, to the beginning of the century, although one of Disputada’s mines, El Soldado, dates back to the 1840s. Disputada's environmental history starts when Exxon took over from ENAMI at the end of the 1970s. Both El Indio and Disputada adopted the expertise of their US owners, as well as their code of ethics regarding the environment, and faced environmental legislation that was far from coherent. And both companies faced serious environmental problems.
When these two foreign companies entered the Chilean arena, they were confronted by a strong bias against foreign mining companies operating in the country. This bias was expressed mainly in some centre and leftist political sectors, including the trade unions. They argued that foreign mining companies failed to leave enough of their profits in Chile. This was the reason for nationalizing the copper mines 10 years before, and the view was still widely held in the 1980s. People openly disagreed with the new investment legislation dictated by the military government in the late 1970s and early 1980s. Despite the legislation, an anti-foreign-investment attitude also permeated the state apparatus. For instance, a special decree in 1985 compelled the Chagres smelter, owned by Disputada, to comply with air-quality regulations. Meanwhile, the five remaining copper smelters, belonging to the state-owned companies, CODELCO and ENAMI, carried on business as usual, without complying with any environmental regulation.
This bias still exists, but to a slightly lesser extent. Environmental organizations and the public have questioned most foreign-company EISs so far, whereas many EISs of the state-owned and Chilean companies have gone unnoticed. The foreign mining companies have reacted by adopting a policy of paying more attention to public concern about the environment. In addition, the foreign companies participate openly in the process of shaping future legislation. This is especially important because foreign mining companies still have to comply with more environmental requirements than state-owned companies do.
The analysis of the practices of Disputada and El Indio indicates that they took stricter environmental measures than required by Chilean legislation in the 1980s. The early compliance of Chagres is but one example. The expansion of the Los Bronces mine and the construction of the Las Tórtolas tailings dam, after the Perez Caldera tailings dam episode, were due partly to the need to evacuate the Perez Caldera tailings.
The advanced environmental-management practices of El Indio and Disputada were never adopted by CODELCO or ENAMI during the 1980s. Nevertheless, these practices served to show the Chilean companies how to approach environmental issues and helped the state apparatus shape future laws and regulations.
Disputada and El Indio openly discussed environmental issues with the public at a time when such practice was taboo at CODELCO and ENAMI. It was only after the Aylwin government came to power in 1990 that the state companies joined in the discussion of environmental legislation.
The two foreign companies probably had many motivations for adopting advanced environmental policies. First, their shareholders would not have let them get away with environmental degradation abroad when they were compelled to comply with strict regulations at home. Second, the managements of these companies knew that the global trend toward environmental regulation would sooner or later come to Chile and that it would pay off for them in the long run to take these advanced measures now. In fact, it had been demonstrated in developing countries that it is cheaper to install a clean process to start with than to pay for environmental repairs or a retrofit later on. Moreover, efficient technologies that allow lower production costs are almost always cleaner technologies too. (Because efficiency and cleanliness are integrated today, it is very difficult to calculate the environmental fraction of a new technology.)
The environmental policies of these two companies are much more elaborate in formulation and application than those of the two state-owned companies. This is not surprising, as CODELCO and ENAMI have had environmental policies only since 1990. Moreover, CODELCO’s organization and priorities differ from one mine to another; El Teniente is one of the most advanced mines.
The strength of all four companies is that the environment is high on their lists of corporate concerns. Each company
• Examines new technology options;
• Trains personnel to handle environmental problems;
• Keeps its board informed;
• Prevents incidents and has emergency plans;
• Identifies priorities and advises and controls management;
• Undertakes environmental-risk analyses and does research on the environment; and
• Divulges the company policy.
Some of the strengths of El Indio and Disputada are the following:
• Their operations are currently compatible with environmental concerns;
• They promote environmental awareness to the government and to the public;
• They promote environmental laws;
• They have periodic audits, works-abandonment plans, and a decentralized environmental management; and
• They apply rules over and above Chile’s environmental laws.
The state-owned Ventanas smelter and El Teniente mine are also involved in some of these areas, but they are not as yet official practice.
Disputada has displayed an ability to respond rapidly to events, as in the case of the Perez Caldera tailings dam. Also, by operating its Chagres smelter successfully according to legislation, Disputada has set the standard and method for other Chilean smelters. Regarding the Perez Caldera case, it should be remembered that construction began in the mid-1970s, when people had limited experience with the risks of building dams at high altitudes, either in Chile or in developed countries. Were one to apply the same standards today to all tailings dams in Chile, one would find many in the same situation.
Among the weaknesses of El Teniente and Ventanas are the following:
• They are unable to decide for themselves how much to invest on the environment because they have to compete for state funds that are in demand for much higher social priorities;
• The present management inherited environmental problems that will take many years to solve, even if the funds are made available; and
• The companies’ structures and brief experience in environmental management will make it difficult to implement modern management practices.
The environmental-investment levels of the four companies were similar, at 18–20% of total investment. The problem is that comparing relative levels of investment does not necessarily show how willing the companies are to solve environmental problems but points to the diversity and complexity of the operations involved. More indicative than looking at past investment is to analyze present needs for environmental investment. Ventanas and El Teniente have still to invest very significantly in environmental projects, whereas Disputada and El Indio comply with regulations at present and are thus unlikely to have to make any new significant investments.
But where will the state companies get the funds they need to comply? The Ventanas smelter has found a way to comply with decree 185 that minimizes investment and maximizes profits, and at the time of writing it looked as if this smelter might be in compliance with decree 185 by 1997 or 1998 (1 or 2 years before the deadline), according to the decontamination plan. A first acid plant was projected to be in operation at the Caletones smelter by 1997–98. Whether this smelter will comply with decree 185 after this installation is still to be proven.
The state has a greater incentive today to authorize expenditures on new acid plants at Ventanas, Caletones, Paipote, and El Salvador, as Chilean public awareness is higher now and the free-trade treaty with the United States may be affected by such matters. If the state fails to authorize the funds required for these installations, the only real option will be to sell the operations to private companies. However, the situation seems to be far from this as yet.
in the short term, the EFL is unlikely to fully resolve the inconsistencies of the present legislation or to address the problems in Chile’s environmental institutions. The environmental policies of the various agencies and ministries still vary greatly, and it will take many years to bring these into a coherent framework. Nevertheless, the EFL represents a real advance in ordering the discussion of these matters, in requiring EISs for all medium- and large-scale mining projects, and in establishing the concept of responsibility for environmental damage, which did not exist in Chilean law before. The EFL also means the effective decentralization of environmental decisions, as the most important decisions will be shaped at the regional level.
Legislation is still needed in this decade to deal with many environmental aspects improperly treated or left unconsidered in the existing legislation. In the meantime, the terms of reference of EISs and EIDs can be used to balance environmental, economic, social, and political interests. These decision-making tools and their outcomes will be important to the design of future legislation.
It is evident that consensus agreements obtained in other spheres of Chile’s political, social, and economic development are not that common in terms of state environmental policy. An important sector of the country believes that pressing the country toward rapid economic development will have a considerable negative impact on the Chilean environment. However, Chile is a democracy, and however important this dissident sector may be, it will have to abide by the majority in Congress, which so far has supported the EFL option.
One of the weaknesses of the EFL is that it fails to consider mechanisms for community participation in environmental decisions. It should be remembered that the community, acting through informal regional and local channels, has fundamentally influenced recent EISs. Excluding communities from participating in decisions concerning EISs and other environmental issues may result in an even larger dissident sector.
The policies and practices of mining companies in Chile seem to be way ahead of the legislation and the institutional system. Even the difficulties of the public companies lie not so much in their management’s perceptions as in the companies’ histories and cultures, the volume of environmental problems they face, and the lack of funds. Compliance with international environmental standards, especially those related to managerial practices, also depends on the transformation of the state-owned companies’ vertical administrative structures into lean, decentralized structures. The more experienced foreign mining companies may play a very important role in that transformation because they remain a showpiece of how environmental issues should be handled. The application of existing legislation and the design of future environmental legislation should also be influenced by the proactive practices of these foreign companies, especially given that the weight of the private mining sector is increasing faster than that of the state sector. It seems likely that compliance with managerial environmental standards will be achieved before compliance with air-emission standards, as the former is not dependent on capital investment.
Despite the absence of legislation on many aspects of environmental management, the mining sector is putting its environmental policies into practice for all new mining projects. This has been possible because of the cooperation between government and industry. The examples are many, and one is led to conclude that new projects — like Candelaria, Quebrada Blanca, Cerro Colorado, Collahuasi, Zaldivar, Lince, Radomiro Tomic, El Abra, Manto Verde, and Refimet’s smelter — have already met or will soon have to meet environmental requirements that are not too far behind those in North America, Europe, or Japan.
The participation of the mining industry was paramount to the elaboration of decree 185. The public companies need an up-to-date perception and knowledge of environmental problems not covered by the legislation. This would be the case for with solid- and liquid-effluent regulations, soil-quality standards, legislation on tailings dams, and abandonment procedures. Public companies must get involved in the study of these problems; otherwise, new legislation will not be firmly based on the possibility of these companies’ achieving the new standards, as in the case of arsenic.
Public environmental policy was revolutionized in 1990. What occurred in CODELCO and ENAMI is an indication of this revolution. Other indications are the passage of decree 185 (regulating sulfur and particle emissions from fixed sources) and the discussion to set up the EFL. It is important to stress that pieces of legislation are being written, discussed, and approved with a sense of reality, for the aim is not to produce declarations of principle but to create effective legislation. In a country like Chile, the efficiency of such legislation is of paramount importance, as Chile cannot afford failed experiments — other sectors have such a great need for public investment.
This research was conducted to examine the environmental problems of the mining industry in Peru, looking into its plausible explanatory factors. The research focuses on the development of legal and institutional framework, using an historical approach to place the sector in the context of the national economy, and the environmental behaviour of the mining firms, approached through a detailed analysis of case studies.
The analysis of the legal and institutional development framework aims at determining the extent to which its particular features have had a bearing on the environmental behaviour of the firms and have thereby limited the environmental impacts of the sector's activities. On the other hand, the analysis of case studies aims to work out the extent to which distinctive patterns of environmental behaviour may be ascribed to differentiated main mining groups.
This paper summarizes the main findings of the research.
This research aims to show, first, that the mining sector has traditionally played a key role in the Peruvian economy; and second, that it has also been a major contributor to environmental degradation in this century.
1 The original study was developed within the framework of an international collaborative research project on environmental management in mining and mineral processing, centrally coordinated by A. Warhurst, Director, Mining and Environmental Research Network (see Warhurst 1991b). The specific terms of inquiry were those set forward for a Peruvian case study in Núñez (1991).
These hypotheses were kept in mind throughout the development of the research. In the end, we wanted to be able to find ways that improvements in the competitiveness of this sector — crucial to a developing-world economy such as Peru — could be harmonized with a regulatory system that could successfully stop the processes of environmental degradation.
The importance of Peru in world mining goes back to the 16th century, when Spanish colonial rulers integrated Peru into the world economy. However, at the beginning of the 20th century, precious metals, fundamentally silver, gave way to the production of base metals: first came copper, then lead, and later zinc. Silver continued to be important but was produced mainly as a by-product of lead and zinc. Gold was important in the 1930-40s, declining afterwards and only returning to importance in the 1980s. Iron's importance as a main product was only acknowledged in the early 1950s. The major rise in gold production of the 1990s is being accompanied by the appearance of tin as the new important product of Peruvian mining.
Mining has played a central role in the Peruvian economy as the main provider of foreign exchange. The median participation has been between 45 and 50% of total exports, and its share of gross domestic product has ranged between 9 and 10% in the past 2 decades.
However, mining is only a minor direct provider of employment; in 1989, it employed 1.3% of the working population. This figure may underestimate its actual capacity as an employment generator, because it fails to include the employment indirectly generated through mining's connections with other sectors of the economy. Nonetheless, even if this is included, it is unlikely that a qualitative change would be observed.
Documented information and interviews with officials and professionals working on environmental control in the country already show that the mining sector is greatly responsible for its past and current environmental degradation. Two of the more important institutions involved in this are the Oficina Nacional de Evaluación de Recursos Naturales (ONERN, national office for the evaluation of natural resources) and Direccion General de Salud Ambiental (DIGESA, general directorate for environmental health).
In 1986, ONERN produced, through international cooperation, the first attempt to diagnose the environmental situation in Peru (ONERN 1986). This work aimed to coherently integrate a large number of partial studies and information and to define a reference framework of priority areas and problems. Similarly, it also coordinated the production of an official national report (ONERN 1991) for the United Nations Conference on Environment and Development held in Rio de Janeiro in 1992. Both documents clearly stated the importance of mining activities as a factor in the degradation of soil, air, and water resources.
Moreover, these studies defined critical environmental zones (CEZs), that is, areas in which major processes of environmental degradation have become or are on the brink of becoming irreversible. The 1992 national report, which updated the CEZs defined in the previous ONERN study, identified 16 CEZs. Of these, eight have mining activities as the main degrading factor and two (Cerro de Pasco-La Oroya and Tambo-Ilo-Locumba) have mining and metallurgical activities as practically the only economic activities causing environmental degradation. No other production industry shows such a widespread incidence in the CEZs.
The CEZs that have mining activities as the main originating factor (CEZMs) are presented in Table 1. From this information, it may be concluded that the most commonly affected features are watercourses. This reflects the findings of two pieces of research: a study of the rivers of the Pacific and Atlantic basins undertaken by ONERN to produce a national diagnosis of water quality for a national plan for the use of the country's hydraulic resources: and a study integrating a group of studies on pollution and preservation of important river basins, such as Moche, Mantaro, Rimac, Santa, and Hualgayoc-Maygasbamba-Llaucano, commissioned by DIGESA. This research was produced in the 1980s.
The most commonly quoted sources of natural watercourse contamination are flotation tailings, followed by mine waters. Flotation is the standard concentration-processing method for producing base metals, presently used by the bulk of Peruvian mines. It should be recalled here that technological change has not moved to replace this process, which was introduced in the 1920s. Instead, technical change has expanded the capacity of the mines to provide important productivity increases and so maintain their competitiveness but prevented the emergence of economically viable technological alternatives. Technological changes have not occurred in the processing of sulfides, which represent the bulk of the available base-metals resources in Peru; nor has there been any change in either the generation of flotation tailings or their environmental implications (Núñez 1991).
Table 1. Critical environmental zones with a major mining or metallurgical component. | ||
Zone | Region a | Main sources of pollution (polluted resource) |
Chimbote-Santa | C-H | • Steelmaking (air) |
|
| • Mining (rivers) |
|
| • Other |
Chillón-Rímac-Lurín b | C-H | • Mining tailings — Pb, Cd (rivers) |
|
| • Manufacturing |
Tambo—llo-Locumba | C-H | • Mining tailings (rivers) |
|
| • Copper smelters—SO2 emissions (air) |
Trujillo—Moche | C-H | • Mining tailings (rivers and sea) |
Cajamarca | H | • Mining tailings (rivers) |
Cerro de Pasco - La Oroya | H | • Mining tailings (rivers and lakes) |
|
| • La Oroya metals complex — S02 emissions and residual gases (air) |
|
| • (Degradation of flora and fauna) |
Huancavelica-Ayacucho | H | • Mining tailings (rivers) |
Puno | H | • Mining tailings (rivers) |
Madre de Dios | A | • Gold production (rivers) |
Source: ONERN (1986, 1991), UNCED (1992), and interviews at Oficina Nacional de Evaluación de Recursos Naturales (ONERN, national office for the evaluation of natural resources).
a C, coast; H, highlands; A, Amazonia.
b This has not been included by ONERN or the United Nations Conference on Environment and Development as having a major mining component, but Direccion General de Salud Ambiental (general directorate of environmental health) (DIGESA n.d.) has explicitly referred to mining as a main factor degrading the water resources of the Rimac river.
Two of the three CEZMs have atmospheric pollution generated by extractive metallurgical activities: Cerro de Pasço-La Oroya, where Centromín Perú has a 70-year-old metallurgical centre, and Tambo-Ilo-Locumba, where the Southern Peru Copper Company (SPCC) has a copper smelter that has produced since 1960. The third CEZM with a major pollution problem is Chimbote-Santa; however, its pollution originates in a downstream metallurgical activity (steelmaking) and fishmeal production, rather than in an extractive metallurgical activity.
These factors fully cohere with the results of a study commissioned by DIGESA, "Diagnosis of Air Pollution Sources in Peru: Bases for a National Air Quality Surveillance" (Olórtegui 1989). This study aimed "to identify and locate the most important sources of atmospheric pollution in the country" (Olórtegui 1989, p. 1), focusing on "the main cities and industrial centres causing evident levels of atmospheric pollution" (Olórtegui 1989, p. 18). Under the previously mentioned conditions, Olórtegui chose seven geographical zones, five of which overlap with the CEZs defined by ONERN. Furthermore, of these five, four — Lima, llo, Chimbote, and La Oroya — coincide with CEZMs pointed out above.
More specifically, this study singled out the cases of Minero Peru's Cajamarquilla zinc refinery, located only 24 km from Lima; SPCC's Ilo copper smelter; Sider Peru's steelmaking plant; and Centromin's La Oroya metallurgical complex.
Air pollution from extractive metallurgy in Peru is particularly a consequence of base-metals production. Among toxic gases that may affect air quality, S02 is the most common and problematic. These emissions are the result of the necessary elimination of sulfur, the bulk of which is from sulfides from minerals and concentrates used by pyrometallurgical methods for processing base metals.
However, technical changes in pyrometallurgical methods have advanced both in-plant and end-of-line solutions for environmental control. For example, in copper smelting, which is of major importance to Peru, the old reverberatory furnaces can be replaced by new alternatives that integrate various extractive metallurgical processes and also save energy. Such changes increase productivity. They also reduce S02 emissions sufficiently such that the off-gases are amenable to the environment. The alternative is to modify reverberatory technology; this can be done with Corporación Nacional del Cobre's (CODELCO, national copper corporation) El Teniente modified converter, as a midway solution for the environmental control of S02 emissions. The end-of-line solutions control SO2emissions by converting, according to the particular parameters, sulfuric acid, liquid SO2, and elemental sulfur (Núñez 1991).
Mining is a crucial activity in the Peruvian economy but has shared an important responsibility for environmental degradation of the countryside in this century. A natural consequence of all this is the need to harmonize the pursuit of competitiveness with an adequate environmental-protection policy. The design of such a policy will surely have to take account of the fact that environmental problems have accumulated and become more complex in the long history of Peruvian mining.
In this section, we present an outline of the mining-industry structure and note in more precise terms the particular type of firms behind the aggregate figures for production and environmental impacts. This will help to highlight their respective investment perspectives and to expose the external influences that influence the firms' environmental behaviour. Furthermore, it will give a more satisfactory context for the sample of firms chosen for the case studies and show that they typify Peruvian mining.
Traditionally, the Peruvian legal system has differentiated firms into three groups according to size of operation (amount processed by their concentration plants):
• Small-scale mining, less than 350 t/d;
• Medium-scale mining, 350-5 000 t/d; and
• Large-scale mining, more than 5 000 t/d.
However, this classification cannot show the actual wide distribution in the scale of firms. In fact, there is a large gap between large-scale mining and the rest of the sector. This can be demonstrated by the fact that the largest medium-scale firms may be treating between 3 000 and 3 500 t/d, whereas SPCC's two concentration plants are treating around 100000 t/d of minerals.
At the other side of the spectrum (in a less defined way), the small-scale mining group also shows an important diversity of firms: from some that are significantly well organized and equipped, with relatively modern technology, to the larger groups of firms that work with artisanal techniques and marginalized profitability and that also enter and leave the market with the rapid rise or fall of metal prices. It also should be mentioned that small-scale mining includes the informal producers that exploit the gold placer deposits of the Amazonian region. Although this group has not been of particular importance in Peruvian mining, its numbers have been rapidly increasing since the early 1980s.
Large-scale mining controls 95% of copper, 100% of iron, and 40% of lead and zinc production. It is also important to note the majority of the medium-scale mining operations (35–40 firms) are mainly domestically owned and specialize in zinc-lead-silver production. They control well more than half of the national production of these metals. Finally, just before privatization started, in 1992, the state-owned firms were responsible for 30% of copper, 40% of lead and zinc, and 100% of iron production. State-owned firms still control all metallurgical productions, except for blister produced at SPCC's Ilo copper smelter. This clearly indicates that the state has been the most important mining producer in the country and thus provides a global picture of the large production capacities at stake in the present privatization process.
Large-scale mining is dominated by open-pit operations; the exception is Centromin's operations, which are practically all underground. Medium- and small-scale firms typically operate underground mines.
Most large-scale and several medium-scale operations are well mechanized; underground operations may involve trackless or conventional systems, or a combination of both. At open-pit operations, mine planning has generally assigned specific areas for dumping marginal ores, with the expectation that they will be processed in the future when it becomes economically feasible to do so. This is the case at SPCC's Toquepala and Cuajone mines, which started production in 1959 and 1976, respectively, and have accumulated marginal minerals that will be leached and processed by solvent extraction - electrowinning (SX-EW) as part of its present 5-year 300 million United States dollar (USD) investment program.
Mineral concentration of base metals is generally performed by flotation. This involves crushing, grinding, and flotation of minerals. Technical change in this process in the past 20 years has been summarized in the following terms:
• A sharp rise of the conventional flotation-cell size (from 100-350 ft3 [1 ft3 = 0.028 m3] in the 1970s to 3 500 ft3 in 1991);
• The introduction of huge column flotation cells in the late 1980s (by 1991, these were already working at SPCC's and San Ignacio de Morococha's [SIMSA's] operations);
• Introduction of more efficient and less environmentally hazardous reagents; and
• Introduction in the early 1980s and the subsequent diffusion (Brewis 1991; Hall 1991; Núñez 1991) of automated control systems on the basis of more simple flow sheets allowed by the much larger cells (Núñez 1991).
In general, Peruvian concentration plants, at least in large-scale mining and the larger medium-scale firms, are moving to simplify their flow sheets and increase their productivity by introducing larger flotation cells and automated production-control systems. SPCC and Compañía Minera Milpo, an important medium-scale firm, typify this finding. Unfortunately, no information has been gathered about the substitution of traditional reagents for less-polluting alternatives.
As previously shown, flotation tailings are the main environmental hazard to water resources. Effective control most frequently requires the construction of special technologically designed ponds for their adequate disposal and treatment. The volume of materials is huge in a large mining operation, and the required investment may be considerable, as the case studies show.
Extractive metallurgy in Peru, like most of the world's base-metals production, follows the pyrometallurgical route. The process for eliminating sulfur from the sulfides, which constitute the bulk of the minerals and concentrates, generates toxic gases, among which S02 is the most common environmental hazard.
As mentioned earlier, the problem of controlling S02 emissions, especially from copper production, is related to the reverberatory-furnace technology, which generates this gas in concentrations of less than 4%; this is also why it is uneconomical to use the established control alternatives — neutralization through conversion to sulfuric acid, elemental sulfur, or liquid S02.
In the past 2 decades, several new alternatives to the reverberatory furnaces have entered industrial production. These integrate two or more extractive pyrometallurgical processes in one furnace (offering substantial energy savings) and increase the concentration of S02 in the off-gases, which makes neutralization economically feasible and more environmentally acceptable.
A midway solution developed by CODELCO, the El Teniente converter, is of particular relevance to developing countries with long mining histories, such as Peru. This solution involves partial changes in the reverberatory-furnace technology that increase productivity by increasing the actual capacity of the furnaces. This technology makes important energy savings and produces off-gases with an S02 concentration high enough to make its conversion to sulfuric acid economically feasible. The investments involved in El Teniente converter are significantly lower than those required by the new furnaces, although it seems to provide lower internal rates of return.2 The lower investment requirements of the El Teniente converter, coupled with the difficulty most developing-country producers have in getting external financing, especially after the foreign-debt crisis, led Núñez (1991) to presume that this was a more likely choice in these countries. This has been confirmed by the information gathered through fieldwork in Peru, as will be explained in the case-studies section.
The hydrometallurgical route for base-metals production is also used in Peru, such as at Cerro Verde copper mine, developed by Minero Peru in the mid-1970s and just acquired by Cyprus Mines in the current process of privatization. If not appropriately controlled, this type of process presents environmental hazards from leakages of toxic solutions, particularly to water resources. However, it may be noted that there have been no environmental complaints of this sort against Cerro Verde since it began operation in 1977, but numerous complaints have been registered against La Oroya and Ilo copper smelters since they started production in 1922 and 1960, respectively.
2 This may be concluded from a financial evaluation of smelter alternatives for Chino modernization, discussed in OTA (1988). In this case, three options were considered: installing an Inco flash furnace; retrofitting the existing reverberatory furnace; or shutting down the plant.
Lastly, gold production has been gaining in importance since the early 1980s and includes producers of gold either as a by-product or as a main product. Centromin is the main producer of gold as a by-product; gold as a main product is produced by both formal firms and informal producers (Webb and Fernández 1991, 1992, 1993). It seems reasonable to assume that the informal producers, working mainly but not exclusively in alluvial deposits of the Amazonian region, might have grown in number concurrently with this new rise of gold, because of the profound economic depression in Peru. However, research has provided no definite information on this. If this is confirmed, it also seems probable that the environmental degradation distinctive to informal production has proportionally increased, because no attempt has been made to control these producers. in fact, as early as 1986, ONERN had defined a large area in the southeast of the country, in Madre de Dios, as a CEZ (ONERN 1986).
However, the environmental implications of informal gold production are more localized and far smaller than those of base-metals production. Therefore, our research excludes informal gold mining but includes Yanacocha, a formal gold project that has been the most important gold development in Peruvian history. The environmental implications of this project, which uses hydrometallurgy, are discussed later in this chapter. This is the only case we know of in which a firm (Newmont Mining, Denver, CO) has explicitly stated that it will not only abide by Peruvian environmental regulations but, in accordance with its own environmental code of conduct, also abide by the much stricter rules of the United States.
From the information gathered for this study, we can generally conclude that a new wave of mining investment, not witnessed since the 1950s, has started in Peru. This is led by foreign firms of diverse origin, including firms based in newly industrialized economies (NIEs). The larger domestically owned operations of the medium-scale group are also participating in this, particularly in association with foreign partners, for example, Compañía de Minas Buenaventura S.A.
The emergence of new foreign capital is mainly associated with the current process of privatization. The government requires investment commitments for the next 3-5 years from foreign bidders to modernize and expand production in the units involved. This investment requirement is not restricted to mining operations but also includes the privatization of mining deposits, as in the case of Quellaveco, a large copper deposit.
By the same token, state-owned firms have practically ceased their development plans, turning their efforts to rationalization of production. The aim of this is to regain profitability by making more efficient use of labour, materials, and installed capacity, without significant expenditures, thereby attracting private bidders. Although these firms have had no relevant development projects in the past 3 years (with the exception of Centromín's new oxygen plant), their managements were successful in this process of rationalization, as shown by Minero Peru's and Centromín's financial results for 1993 (Centromín n.d.).
Nevertheless, the dynamism observed in the mining industry in recent years cannot be exclusively accredited to privatization but also relies on a macro-economic policy developed to promote private investments. This policy has included the elimination of restrictions on foreign exchange and major changes in labour regulations. As will be discussed later, new specific sectoral laws have also reinforced the incentives for mining investment. It is important to note, however, that these same laws have, in some instances, relaxed the environmental restrictions on the exploitation of natural resources.
The projects directly related to privatization are the following:
• Refurbishing Marcona iron mine to recover its 10 × 106 long tons/year nominal production capacity (1 long ton = 1.016 t) — This deteriorated over the years, reaching its lowest point in 1992, when it produced only 2.7 × 106 long tons. The mine, including its processing and auxiliary facilities, was the sole property of Hierro Peru until 1992, when it was acquired by Shougang Corporation (Beijing, China) for 120 million USD. Shougang took responsibility for the firm's debts (42 million USD) and made a commitment to invest 150 million USD in 1993-95 to recover the original production capacity. It is possible that the mine's capacity will be expanded to 15-20 × 106 t/year, and there may be a steelmaking plant constructed near the present processing facilities (Kisic 1993; Orihuela 1993).
• Expansion of the Cerro Verde facilities from its present capacity of 36000 lb/year to 100000 lb/year (1 lb = 0.45 kg) — Previously owned and developed by Minero Peru, this mine was bought by Cyprus Mines in October 1993, for 35 million USD. Cyprus Mines planned to invest 485.3 million USD in 1994-98. Buenaventura also has a 10% participation option for its development. At the time of writing, the technological choice for this project had not yet been defined (Gestión 1993).
• Development of Quellaveco deposit — This deposit will be developed by Mantos Blancos, Santiago de Chile, a subsidiary of Anglo American Corporation (which consists of Anglo, De Beers, MINORCO, and Anglo American Gold Investment), provided that the results of a 2-year feasibility study, now under way, are favourable. The deposit is expected to produce 100000 t/year of cathodic copper, probably by SX-EW.
The two main new projects not originating from privatization are the Yanacocha and Iscaycruz. SPCC's 300 million USD investment program probably responds in part to the new, promotional legal framework, but the case-study analysis indicates that it also responds to other factors, including the environmental impacts of its operations.
Of the more relevant projects not connected to privatization, the following are notable:
• SPCC's 300 million USD investment program — This involves both expansion and environmental projects. Expansion includes the construction of two leaching plants, which will use SX-EW processing on the Cuajone and Toquepala dumps of marginal material. This will allow SPCC to expand production by 9%. The environmental component, comprising about one-third of the total investment, includes construction of a sulfuric acid plant for partial control of the S02 emissions from the Ilo copper smelter and a system to control the concentration tailings. SPCC has not yet decided whether the 30 × 106 t/year tailings of Cuajone and Toquepala will be deposited on the mainland or under the sea. In any case, SPCC's program represents the largest environmental investment yet undertaken in Peru.
• Yanacocha gold project — When fully developed in 1995, the Yanacocha gold project will produce 500000 oz (1 oz = 28.35 g) of gold per year. This is about 15 t/year, or 1.5 times Peru's 1992 production of gold (INEI 1993). Newmont owns 38% of the shares and is associated with Buenaventura (32.3%), the Bureau de recherches géologiques et minières (a French state-owned firm; 4.7%), and the International Finance Corporation (IFC) of the World Bank (5%). An initial investment of 36.6 million USD was needed to bring production up to 250000 oz/year. An estimated additional 14 million USD in 1995 was needed to bring production to 500000 oz/year.
• Iscaycruz — This property was developed by Compañía Paraibuna di Metais (Brazil), which holds 45% of the stock, in association with the state-owned Minero Peru (25%) and Buenaventura (15%). With an investment commitment of 39.8 million USD, Iscaycruz is expected to produce around 120 000 t/year of zinc and 10000 t/year of lead concentrates in 1995 (Centromín n.d.).
The ongoing and expected expansions of the sector stress the urgent need for an appropriate environmental regulatory system.
We undertook an historical analysis of the legal and institutional system for environmental control in Peru, especially in relation to mining and metallurgical activities. Our purpose was to study the main factors influencing the emergence of this system and the actual enforcement of its regulations. This will allow us to assess the more recent developments in setting up a new regulatory system and to evaluate the extent to which the limitations set by previous regulatory frameworks may be overcome.
The historical analysis covers 1950 to the present, with reference to the main macroeconomic policies and particularly to the role of the state. We distinguished three periods:
• 1950–68 — Peru had a typical laissez-faire economy, in which the state was practically absent from direct production activities and the economy was fully open to international competition. (There were a few exceptions, such as a small steelmaking plant in northern Peru, in Chimbote. This was SOGESA, which years later became Sider Peru.)
• 1968–90 — The state was the main entrepreneur. However, opening the economy to the world dramatically changed Peru in this period, first by introducing strong foreign control on capital movements (1968–75), then by relaxing them (1976–85), and finally by reintroducing them (1985–90).
• July 1990 to the present — The state has retreated altogether from production activities and will go back to having as its sole role that of promoter of private capital in the framework of a fully open economy.
We studied the general dynamism of this sector and the emergence of its regulatory system, particularly environmental controls. Our purpose was to determine whether there was any connection between distinct macroeconomic policies and the emergence of the environmental regulatory system and the actual enforcement of its regulations.
The regulations have emerged to a large extent independently of macro-economic policies. The regulations dealing with the environment in the workplace and outside the fences of production units have been numerous (Andaluz and Valdez 1987), but their actual enforcement has been weak, to say the least. However, historical analysis showed that public opinion, availability of resources, and international technical and financial cooperation can play an important role in improving the system of environmental regulation.
The Environmental and Natural Resources Code, published in 1990, represented a qualitative change from previous legislation because it attempted to coherently integrate the dispersed and not infrequently contradictory legislation that preceded it. Moreover, environmental legislation after the Code has reoriented the spirit of environmental regulation from being nominally punitive to being supportive of feasible and adequately determined environmental standards. This has been particularly so in the case of legislation for the mining sector issued as the Regulation of Title XV (that is, Environment) of the Unifying Text of the General Mining Law (D.S. 016–93-EM), of April 1993.
This following paragraphs support the above summary.
From 1950 to the present, new environmental regulations and institutions have appeared independently of the specific macroeconomic policies.
In 1950–68, the most important progress was made in environmental conditions in the workplace. The Instituto Nacional de Salud Ocupacional (INSO, national institute of occupational health), which was responsible for this performance, is probably the most successful example of an environmental institution in the country. INSO was set up in 1947 through a cooperation program between the Peruvian and the US governments. The initial purpose was to reduce the high incidence of silicosis and other occupational diseases that had been affecting Peruvian mining workers for some time. Public awareness of these problems probably influenced the government's decision to participate in this program. Vizcarra (1982, pp. 219–220) presented a detailed account of this institution, indicating that "it was granted rents through an ad hoc law (No. 10833) that amounted to 1.8% of the mining wage bill. Although [INSO] was ascribed to the Ministry of Health it had the capacity to act with autonomy and at the national level."
The program's direction was initially controlled by foreign professionals and advisers. Later on, these were replaced by national professionals who had attended postgraduate courses in specialized centres abroad as part of the program. Particularly relevant here is that INSO produced technical reports and studies on occupational health at 120 mines in Peru. INSO then widened its scope, undertaking studies in manufacturing and agricultural activities. The success of INSO also spread to other Latin American countries, as it became, on the basis of its national achievements, a recognized training centre.
Although Vizcarra (1982) emphasized that the studies developed by INSO included specific recommendations for confronting the problems detected, he provided no information about the ways firms actually responded to these recommendations. In any case, the successful trajectory of INSO came to a halt in the 1970s, when its integration with other health institutes eliminated its specific rents and the important autonomy it held. This case shows that international cooperation, availability of resources, and adequate autonomy can play a very important role in the performance of environmental institutions.
History shows that the enforcement of environmental legislation in Peru has clearly been weak. A study undertaken by the National Council for the Protection of the Environment for Health (CONAPMAS), which became the nstituto Nacional de Protección del Medio Ambiente (national institute for environmental protection), grouped together the accusations (of contamination) filed against mining firms before DIGESA at the Ministry of Health and at the Office of Environmental Affairs by the Ministerio de Energía y Minas (MEM, ministry of energy and mines) in 1970–87 (Conapmas 1988). The study found that only in 11 of 64 cases was there a judgment (6 in favour of the claimants and 5 against). The other 53 cases received none. In other words, the regulations were not of much use in more than 80% of the cases. Similarly, another study on the application of forest regulations revealed that only 15% of cases were subject to judgments under the relevant regulations (Andaluz and Valdez 1987). Among the explanations for the weak enforcement of the environmental legislation are the following:
• Not infrequently the scope and jurisdiction of the regulations have been ill defined.
• In some cases, the regulations contain evident mistakes; some are just simple typing errors. In most cases, however, these could have been easily corrected, but even in important instances they have not been. For example, the water-quality standards for the country, which are contained in the Regulation of the General Law of Waters (D.S. 007–83-SA), are 1000 times stricter concerning sulfate content than those of the Environmental Protection Agency in the United States. This has given rise to distrust about the technical and scientific backing of the whole regulation, weakening the basis for its enforcement.
• Although the number of environmental regulations is high, there are clearly important gaps. When the actual terms with which firms must comply are not fully and clearly specified, it is difficult to enforce the standards. This is the case with environmental standards. Existing standards in Peruvian legislation pertain to the environment in the workplace and to water quality. No standards have yet been defined for effluent, air quality, or emissions. Since 1984 different drafts of regulations on air standards have been proposed to the highest levels of government and to Parliament, but nothing in this field has been finally approved.
• Environmental institutions lack the resources to do their job. In the case of INSO, the importance of this has already been emphasized. Also, DIGESA, which commissioned and produced valuable studies in the mid-1980s, showed a dynamism that decreased rapidly toward the end of the decade (as happened in most of the public sector), resulting in a reduction of its budget.
• The legislation and the environmental institutions have a sectoral focus. This is because a ministry covers specific types of activities, without a suprasectoral level of coordination to ease the application of the regulations.
• The pre-1990 legislation emphasized only penalties for firms that failed to abide by it, without offering guidance to those that wanted to comply with it. This led to poor application of regulations and even to corruption. However, the new regulatory framework, following the introduction of the Code, has shown qualitative changes, particularly in mining and petroleum activities. Thus, the Programa de Adecuación y Manejo Ambiental (PAMA, environmental-management and adequation program) was introduced. Its purpose was to open up ways for production units to achieve the appropriate environmental standards.
At the time the Environmental and Natural Resources Code was published (September 1990), the main environmental regulations related to mining-sector activities were
• The Regulation on Mining Safety and Welfare (D.S. 034–73-EM/DGM), published in 1973, which stipulated environmental standards for mines and metallurgical plants;
• Water-quality standards, which were set by the Regulation of the General Law of Water (D.S. 261–69-AP) in 1969, as well as its later modifications in 1983 (D.S. 007–83-SA);
• Other regulations, such as the Forest and Wild Fauna Law (D.L. 21147) of 1975, which strongly limited the exploitation of natural resources in zones declared as conservation areas (that is, national parks, national reserves, national sanctuaries, and historic sanctuaries), and the Sanitary Code of 1969.
The mining sector was regulated by the General Mining Law (D.L. No. 109) of 1981, within the framework of the 1979 National Constitution, which was the first to include articles specifically addressing the environment. One of the 12 articles (art. 123) expressed the following view:
Everyone has the right to inhabit a healthy, ecologically balanced environment that is adequate for the development of life and the preservation of landscapes and nature. Everybody has the duty to conserve that environment. It is an obligation of the state to prevent and control environmental contamination.
From an analysis of the Code's content, it seems clear that one of its aims is to overcome the dispersed and sector-specific character of previous environmental legislation, which had been so poorly enforced. Also, the chapter XXII of the Code created the National Environmental System, which, according to art. 128, was to be
made up by all public institutions dedicated to research, evaluation, monitoring, and control of natural resources and the environment and by the departments and offices of the different ministries at the national, regional, and local levels that perform similar roles. By a Supreme Decree the government shall determine the co-ordinator of the System.
The Code, however, contained shortcomings. For instance, production activities directly affected by the Code argued that it lacked the necessary technical backing to be valid and therefore that it had to undergo major changes before it could be enforced. The outcome of this was the annulment of major sections of the Code, which was performed indirectly by the promulgation of laws specifically developed to promote private investment. These laws were the Framework Law for the Growth of Private Investment (D.L. 757) and the Law of Investment Promotion in the Mining Sector (D.L. 708), both published in November 1991. The sections of the Code superseded in this way included the one defining the National Environmental System (chap. XXII) and one defining the penalties for violations (chap. XXI).
No substitute legislation has been issued for these sections. Meanwhile, the applicability of the Code has been substantially undermined. Moreover, the intended suprasectoral nature of the Code has been further undermined by the emergence of new sectoral legislation for mining and petroleum activities that names MEM as the authority to issue the maximum permissible levels of environmental control. This is expressed in a complementary ruling of the Regulation of Title XV of the Unifying Text of the General Mining Law (D.S. 016–93-EM), published in April 1993. This regulation constitutes the most, and perhaps the only, specific environmental legislation for mining activities. It specifically addresses environmental controls in their respective areas of influence.
In October 1992, the Regulation of Mining Safety and Hygiene (D.S. 023–92-EM) was published, superseding the Regulation on Mining Safety and Welfare of 1973. Both explain, among other things, the minimum environmental standards for workplaces at mines and metallurgical plants. The Regulation of Title XV was introduced by the PAMA for mining activities and placed its emphasis on providing ways to make the existing activities comply with environmental standards, rather than merely penalizing offenders, as was the case with previous legislation.
The PAMA's concept is not included in the Code, but it was included in the official Proposal for the Debate on the Regulation of the Environmental and Natural Resources Code published in 1991. This may give some support to the opinion that approach should have been to iron out the shortcomings of the Code through this regulation, rather than annulling entire sections of the law. It was this latter approach that subsequently limited the Code's applicability. It should be added, however, that this regulation has not yet been issued.
In 1991, the administration redefined the state's role in production, that is, that the state should not be present at all in direct production but should return to its sole function as the promoter of private capital. This role was specifically expressed in the promotional laws. In addition, the purposeful introduction of new environmental legislation led to the rewrite of the 1981 General Mining Law. This new version was issued as the Unifying Text of the General Mining Law (D.S. 014–92-EM) in June 1992.
The Regulation of Title XV and its modification in December 1993 (D.S. 059–93-EM) represent the essence of the present environmental legislation for mining operations:
• All existing mining operations are required to present an annual environmental-impact declaration (EID).
• The operations must monitor their activities for 1 year, producing a preliminary environmental assessment. Its approval or rejection by MEM may take up to 3 months. The ad hoc formats to elaborate this assessment will be available only as of March 1994.
• After approval of the preliminary assessment, the operator has 1 year to produce a PAMA. Its approval may take up to 6 months. For mining and mineral-processing activities, the approval of the PAMA may be good for up to 5 years; for other downstream metallurgical operations, up to 7 years.
• The annual investment involved in the PAMA must be equivalent to at least 1% of total sales.
• New operations should present an environmental-impact assessment (EIA), which has to be approved by MEM.
From this timetable for environmental compliance, it may be gathered that no actual investment in compliance with environmental legislation (that is, the actual application of the PAMA) could be expected before 1997.
Lastly, it should be stressed that the PAMA and the EIA have to be undertaken by third-party firms registered for these purposes with the Dirección General de Asuntos Ambeintal (DGAA, general directorate for environmental affairs) of MEM. Alternatively, the preliminary environmental assessment and EID may be performed by the firm itself, but they must be assessed by an environmental auditing firm registered with the Dirección de Fiscalización Minera (DFM, directorate of mining control), also at MEM. Thus, although the new environmental regulations for mining activities became wider in scope, MEM relinquished its direct control, as this responsibility has been transferred to private firms or public institutions (that is, universities). This fully coheres with the governmental directive that the state's influence should be sharply reduced. However, it seems certain that a minimum controlling capacity will be held at the ministry, from which it will be able to undertake random inspections of the controllers. From information gathered from the DGAA and DFM in June 1993, we got the impression that rather than keeping a minimum capacity to carry out random compliance inspections, these offices would assign that task to the third-party firms registered at both offices.
DGAA, a branch of MEM created in 1981, produced a high number of technical environmental reports on mining units in the 1980s. International cooperation, particularly that of the Japan International Cooperation Agency (JICA) (Cacho, personal communication, 19913), was crucial for the development of this procedure. However, DFM has transferred these types of activities to firms or high-level academic institutions, keeping only the role of overseeing the work.
DIGESA, at the Ministry of Health, is in charge of controlling environmental issues (that is, water, air, and soil) with respect to human life. The research it commissioned in the past has already been cited. Among DIGES A's duties is monitoring water-quality standards to protect human health. In this respect, it can intervene if a mining-pollution incident takes place. However, the 1993 Regulation of Title XV, granting MEM all responsibility for approval of environmental standards for mining activities, seems to have created a conflict in this matter.
ONERN used to be a decentralized public organization, dependent on the National Planning Institute. However, when the latter was eliminated and the organizational charts of the ministries were restructured, ONERN amalgamated with other departments of the Ministry of Agriculture, under the umbrella of the Instituto Nacional de Recursos Naturales (INRENA, national institute of natural resources). INRENA is in charge of the "management and the rational and integral use of the renewable national resources and the ecological environment to achieve a sustainable development" (D.S. 055–92-AG, art. 4). Furthermore because mining activities, like almost any other production activity under certain circumstances, may represent a threat to the conservation or preservation of renewable natural resources, this institution has the obligation to regulate these activities.
Peru is a country with a long mining tradition, during which it has kept a significant presence in the world mining industry. The importance of mining in the national economy and its connection with other sectors show that it has created important domestic demand for its material inputs and its qualified personnel.
3 N. Cacho, director of DGAA at MEM, Lima, Peru, personal communication, 10 January 1991.
The response of the production system to this demand is reflected, for example, in the number of universities in Peru that offer courses in mining and metallurgic engineering, as well as geology. In addition, the country has several related organizations and professional associations, and these groups publish specialized journals and organize seminars and conferences.
This dimension of the sector and its long history in production have brought about the development of relevant technological capabilities, not only in mining but also in the production of certain capital goods and inputs, as well as in the provision of technical services for the industry. This is shown by the significant number of local equipment suppliers and, to a lesser extent, of mining consultant firms. For example, a catalogue of equipment suppliers for mining operations and concentration plants, produced by the Board of the Cartagena Agreement (the Andean Integration Organization) in the late 1980s, lists 20 Peruvian firms (Junac n.d.). On the other hand, in 1983, eight or more domestic consulting firms were officially registered with the Corporación Financiera de Desarrollo S.A. (COFIDE, development finance corporation) as being eligible for state contracts in the areas of prospecting, mining, and metallurgy. More consulting firms were registered at the time in the areas of environmental sanitation and water and waste treatment. Also, some domestic and foreign firms appeared as specialists in geology, seismology, hydrology, and meteorology.
In nominal terms, this may lead us to presume that the domestic technological capabilities relevant to environmental management in the mining sector might be significant and should be considered in the design of any environmental strategy. With this premise, we examined a small sample of consulting firms and two of the most important university centres. We gathered information through direct interviews with top representatives of these firms and institutions.
In accordance with the terms of the new environmental regulations for mining activities, MEM maintains two registers of firms: one for firms officially eligible to conduct EIAs and PAMAs at the DGAA; and one for firms similarly eligible to conduct mining auditing tasks for the EVAPs and EIDs at the DFM.
In May 1993, the initial idea was to compare in a complementary way the information available in COFIDE's register (which had existed for 10 years) with the information in the registers set up by MEM in the first quarter of 1993. However, it turned out that no updated list of processed firms (that is, classified by type of specialization) was available at that time at CONASUCO (the office at COFIDE in charge of the register) (Ramirez, personal communication, 19934). On a different account, the register at DFM had only a couple of firms registered and provided an extension to new applicants.
Eventually, a sample of 4 firms was chosen from the list of 25 registered at the DGAA at MEM in May 1993 (Lanza, personal communication, 19935). Two were chosen because they or their main representatives already appeared as specialists in COFIDE's 1983 register, namely, Buenaventura Ingenieros S.A. (BISA) and Aqua Plan Ingenieros. The other two were Laboratorio Geotécnica S.A. (LAGESA), with more than 25 years' experience in consulting work (although it is new to environmental work) and Ecología y Tecnología Ambiental, a new consulting firm.
It should be emphasized that BISA, a firm belong to the Compañía de Minas Buenaventura group, and Instituto Geológico, Minero y Metalurgico (INGEMMET, geological, mining, and metallurgical institute), a government entity, were the only two registered at the DGAA that had also appeared in COFIDE's register as specializing in mining and metallurgical activities by 1983.
This inquiry was aimed to provide some very preliminary information about the role domestic technological capabilities could play in environmental-management tasks stipulated by the new legislation. From the analysis of the sample of the consulting firms, the following may be concluded:
• No relevant experience on environmental control for mining activities seemed to be available yet. BISA was the only consultancy with experience in mining activities and was the most important domestic firm in this area: it has had several significant international projects (participating in the development of mining projects in Venezuela, Argentina, Colombia, and Ecuador).
• The experience in environmental engineering was limited to water control. No previous work on atmospheric control was reported by these firms. It should be noted that this specialization was not even considered in COFIDE's 1983 register.
• The consulting firms seemed to have very limited laboratory facilities of their own, relying instead on those available at universities or specialized public institutions. This is apparently not an uncommon
4 Lic. Javier Ramírez, head of CONASUCO, interview, 10 May 1993.
5 Ing. Jorge Lanza, general director of DGAA at MEM, interview, 10 May 1993.
procedure in consulting work: BISA, for example, for its work on mining activities, frequently used the laboratories at the Universidad Nacional de Ingeniería (UNI, national university of engineering) and at INGEMMET. LAGESA also stated that for its environmental work, it used the laboratories at SEDAPAL, Lima's potable-water firm.
• All four firms did other kinds of environmental-control work of interest, apart from mining. For example, BISA was registered to develop EIAs in energy and industrial activities; LAGESA expressed similar capabilities for the electricity-generating industry; and Aqua Plan specialized in environmental sanitation and water and waste treatment generally, a specialization it had maintained for more than 2 decades.
• There seemed to be some consensus among the firms that the qualifications of local professional groups for mining and for environmental activities related to water were quite important. The point is that those capabilities were only then being pulled together in response to the new regulatory framework for the mining sector. BISA assured us that, because of its professions qualifications and experience, the firm was not only locally but also internationally competitive. BISA indicated that when a very specialized technical capability was needed that was unavailable locally, the firm made the necessary contacts to get it from abroad. BISA was going to approach environmental protection in a similar way (Benavides de la Quintana, personal communication, 1990; Sánchez Saavedra, personal communication, 19936). Similarly, Fernando Chuy Chang, managing director of Aqua Plan, with more than 25 years of professional experience in consulting on environmental engineering, confirmed that the local professional groups in this area were quite good for these types of studies. As in the case of BISA, when it was necessary to complement the local team with foreign expertise, Chang had generally been able to find it. However, in Chang's opinion, there was an important gap in qualified mid-level technicians, particularly those who work in the specialized laboratories. For environmental auditing, it was necessary to have not only adequate infrastructure, but also specialized personnel for adequate operation and maintenance. Chang mentioned instances of studies having been spoiled because of
6 Ing. Alberto Benavides de la Quintana, president, BISA, interview, 27 December 1990; Ing. Jaime Sánchez Saavedra, manager, BISA, interview, 18 May 1993.
inadequate calibration of instruments (Chang, personal communication, 19937).
These points give the impression that certain relevant domestic capabilities outside the mining firms were needed for the environmental-management tasks (EIAs, EIDs, etc.) stipulated by the new regulatory system, but the external component needed to adequately perform these tasks is likely to be important, particularly to atmospheric-pollution control. The participation of domestic technological capabilities, as in the past with the supply of mining equipment and consulting services, will probably concentrate on the market provided by medium- and small-scale mining.
We also undertook a preliminary examination of two universities to determine whether their present human resources and laboratory infrastructure had the capacities to confront the more relevant environmental problems and to take responsibility for carrying out role particular tasks defined by the new regulations. Our research also aimed to provide a limited account of the slower development of technological capabilities through the formal system of higher education.
To choose the two universities and programs to be analyzed, we set out the following criteria:
• The programs had to directly relate to environmental control in mining and metallurgical activities; and
• The sample universities had to be from the vicinity of Lima, which had the most important university centres.
With this perspective, we approached the Statistics Office of the National Assembly of University Vice-Chancellors (ANR) in May 1993. A catalogue of the programs available in the national university system in the country had just been completed. From the analysis of this information, we chose two universities: UNI and the Pontificia Universidad Católica del Perú (PUCP, Catholic University of Peru). UNI had programs on geology, industrial hygiene and safety, sanitary engineering, and mining and metallurgical engineering, as well as a master's program on sanitary engineering. PUCP had a well-equipped mining engineering program and, in 1992, had entered a Technical Co-operation Programme with
7 Fernando Chuy Chang, managing director, Aqua Plan Ingenieros, interview, 30 June 1993.
Cardiff University, supported by the British Council, to develop capabilities in environmental management of mining operations. PUCP decided to provide its excellent institutional support for our research precisely because of its particular interest in the topic of mining and the environment. Furthermore, in 1993, PUCP decided to set up the Institute of Environmental Studies (IEA) to pull together the work of different departments of the university and strengthen its future work on the environment with an adequate multidisciplinary approach.
It should also be pointed out that, if our intention had been to provide more than a preliminary study, our sample would have included other universities, such as the Universidad Nacional Mayor de San Marcos and Universidad Nacional Agraria, which, according to the information provided by ANR, also have particularly relevant programs.
At UNI, the information gathering was limited to the Faculty of Mining, Metallurgy and Geological Engineering (FIMMG) and the Faculty of Environmental Engineering (FIA). It is interesting to note that UNI began its activities with a School of Mines and Civil Works Construction well over a century ago, in 1876. studies related to the environment started in 1937, with the Faculty of Sanitary Engineering, which in 1984 became FIA. In 1973, this faculty established an undergraduate program in engineering of industrial hygiene and safety.
Both FIMMG and FIA have master's programs: FIMMG has one in mining engineering; FIA has one in water treatment and waste reuse and another (jointly with Universidad Mayor de San Marcos) in occupational health and hygiene.
PUCP was founded in 1918, and its Engineering Mining Section started its activities in 1970. To set up of this section, PUCP counted on major support from the United Kingdom, through the University of Cardiff. In fact, 2 decades later, Cardiff renewed its support, this time to add environmentalists specializing in mining activities to the technical groups. We obtained information about the Engineering Mining Section from two important centres at PUCP, both directly related to environmental-control issues: the Centro de Investigation en Geographia Aplicad (CIGA, centre for applied geographic research) and the Laboratory of Corrosion.
An important omission from our research — the chemistry programs at both universities — should be acknowledged because chemists have important roles in environmental control. Only the very preliminary nature of this inquiry justifies this omission.
Our analysis of the information provided indicated the following:
• The curriculum for mining and metallurgical engineering included only one course on environmental issues, on safety and hygiene in mines and plants (that is, environmental conditions at the workplace). However, in a couple of exceptional instances, a course contained topics related to environmental control. For example, a course on auxiliary services included the design of tailings ponds. At both universities, interdepartmental coordination was strengthening the presence of environmental issues in the curriculum. At UNI, this was being done in FIA and the Faculty of Chemical Engineering. At PUCP, IEA was set up to connect and integrate the different groups working on environmental issues at that university.
• FIA's curriculum included the elaboration of EIAs. FIA and the FIMMG were collaborating to develop an EIA for the polymetallic Iscaycruz project, as well as for expansion of the Ishihuinca gold mine, under contract to BISA.
• FIA's postgraduate programs have been changed to address water and waste control, as well as occupational-health issues. Atmospheric-pollution control appears not to be a primary concern at this level.
• At both university centres, steps were being taken to officially participate as consults in environmental issues. To this end, UNI was establishing the coordination of FIA and UNITEC, its consulting and services arm. PUCP was planning to do the same with IEA and the Centre of Technological Transfer.
• The relationship between automation and the capacity for environmental control is well known. The mining section of PUCP was working to set up a laboratory for automation of flotation plants for academic as well as consulting purposes. Because of the main importance of flotation processes in mining production and its environmental implications, this step appears to be of major relevance.
• Remote-perception techniques have a significant capacity to monitor water and soil contamination, the direction of emissions into the atmosphere, and other processes. CIGA (at PUCP) was working with geographic information systems (Bernex and Córdova, personal communication, 19938) and remote-perception equipment in several
8 Nicolle Bernex and Hildebrando Córdova, CIGA, interviews, 27 August 1993.
areas of the country (such as, Tambo Grande). It is important to note that CIGA was operating with five full-time researchers and providing training programs, in addition to the support they gave to other departments at PUCP. CIGA has relevant backing from Belgium cooperation.
• The laboratories were far better equipped for doing research on water-quality control than on air-quality control.
FIA had three laboratories: one for sanitary engineering (physicochemical and bacteriological); one for sanitary machinery and equipment; and one for ergonomics, hygiene, and safety. FIA was trying to modernize these laboratories not only to support its academic studies but also to provide external services. Moreover, FIA intended to become a reference laboratory in those areas, for which it was looking for support from the Inter-American Development Bank (IDB). FIA's Sanitary Engineering Laboratory already has the capacity to determine water quality according to the parameters set up by the Regulation of the General Law of Waters, described above (Botto, personal communication, n.d.9).
UNI pointed out that it had a capacity to undertake a wide range of atmospheric studies (Sotillo, personal communication, 199310). However, it was unable to do analyses using portable monitoring equipment, particularly important for work in chimneys in industrial plants. IDB was asked to assist UNI's efforts to acquire this equipment.
At PUCP, the Engineering Mining Section's laboratories were set up with the specific purpose of determining assays of minerals with economic value, and these laboratories do not have the capacity to detect traces of contaminants. However, PUCP's Laboratory of Corrosion had the capacity to perform this kind of analysis for water-quality determination (Diaz, personal communication, n.d.11). It was probably the best-equipped corrosion laboratory in the country. Set up in 1989, it depended on the support of the German Gesellschaft für Technische Zusammenarbeit, which grants resources for training professionals at a postgraduate level in Germany and for laboratory facilities.
For PUCB's studies of air-quality control, the Engineering Mining Section depends on equipment on loan from MEM. This equipment was donated several
9 Ing. J. Ruiz Botto, dean, FIA, interview, n.d.
10 Ing. Francisco Sotillo, UNI, 1 June 1993.
11 Ing. Isabel Diaz, head, Laboratory of Corrosion, PUCP, interview, n.d.
years ago to MEM's DGAA by JICA. Some of this equipment was appropriate for S02 monitoring and had been taken to La Oroya for that purpose.
However, we received the impression that the capacity was again much weaker for air-quality than for water-quality control. It should be added that according to a provisional inventory in the country, 47 laboratories had the capacity to determine water quality; 20% of these were in Lima, and 89% were in the rest of the country.
A central objective of this research was to study the attitudes of mining firms toward the environment and the environmental regulatory framework. Moreover, we wished to determine the extent to which particular patterns of response can be ascribed to particular types of firms. We approached these questions through the detailed analysis of case studies. However, the scope of the fieldwork was much broader than initially planned. Thus, it practically covered all the large-scale mining firms, three of the most important medium-scale mines, and the two most important greenfield projects under development in 1993. Similarly, the sample included firms with diverse controlling interests — state, foreign, or domestic private. Also, we distinguished between foreign interests from developed countries and those from other parts of the world.
The importance of the mining sector in Peru's economy is expressed in, among other forms, the prominence of its firms compared to those of other sectors. Table 2 shows the mining firms that appeared among the 100 largest, by sales, in 1989, just a year before the state-owned sector was called into question by the 1990 administration. Thirteen mining firms are included in total. In fact, if Minpeco, the state-owned minerals-trading company, is not counted as a productive firm, then Centromín, SPCC, and Minero Peru would occupy, respectively, second, third, and sixth positions (the largest firm in 1989 was Petro Peru, the state-owned oil producer). These firms, along with the then state-owned Hierro Peru, now Shougang Hierro Peru (15th), all large mining firms, were the case studies in our research.
SIMSA, Milpo, and Buenaventura, ranking 29th, 37th, and 72nd, were included as case studies of the medium-scale firms. The relative weight of the Buenaventura group is unclear in Table 2 because it differs from the others in having more than one important mining firm. Thus, for example, the group owns Compañía de Minas Orcopampa S.A, which ranks 36th. The Buenaventura group's aggregate sales would place it at the top of the ranking of medium-scale firms.
Table 2. Peru: mining firms included in the ranking of the 100 largest firms in 1989. | |||||||
|
|
|
|
| × 109 intis | ||
General ranking | Mining ranking | ISIC | Firm | Typea | Income | Assets | Equity |
2 | — | 6120 | Minpeco b,c | S-L | 2103 | — | — |
3 | 1 | 21, 23, 29, 36 | Centromín Perú S.A.b | S-L | 2 026 | 2 593 | 935 |
4 | 2 | 23, 36 | Southern Peru Copper Company | P-L | 1692 | 3 098 | 1 725 |
7 | 3 | 21, 23, 36 | Minero Peru b | S-L | 860 | 2 555 | 465 |
15 | 4 | 23 | Hierro Peru | S-L | 384 | — | — |
21 | 5 | 23 | Tintaya S.A. | S-L | 344 | 1460 | 697 |
29 | 6 | 23 | San Ignacio de Morococha | P-M | 260 | 258 | 103 |
36 | 7 | 23 | Minera Orcopampa S.A. | P-M | 202 | 300 | 46 |
37 | 8 | 23 | Compañía Minera Milpo S.A. | P-M | 201 | 269 | 90 |
59 | 9 | 23 | Minera Atacocha | P-M | 144 | 205 | 99 |
68 | 10 | 23 | Perubar S.A. | P-M | 126 | 138 | 77 |
72 | 11 | 23 | Compañía de Minas Buenaventura S.A. | P-M | 116 | 223 | 32 |
81 | 12 | 23 | Compañía Minera Raura S.A. | P-M | 100 | 93 | 32 |
87 | 13 | 23 | Minsur S.A. | P-M | 94 | 175 | 92 |
Source: The Peru Report (1990).
Note: ISIC, International Standard Industrial Classification.
a P, private; S, state owned; L, large-scale mining; M, medium-scale mining.
b Firms taken as case studies.
c This is the state-owned minerals-trading firm and therefore is not considered in the ranking of productive mining firms.
The sample included the Yanacocha gold and Iscaycruz polymetallic green-field projects to allow us to evaluate the responses of firms with this type of project to the new environmental regulatory framework. These cases also offered us the opportunity to examine whether the responses of firms with capital based in NIEs, such as the Brazilian Paraibuna Metais, which controls Iscaycruz, overlap or differ from that of Newmont, of the United States, which controls Yanacocha.
The respective longevity and historical ownership structure of the firms in the case studies showed that Peru had practically no state-owned production sector until the 1970s. Thus, SPCC, Cerro de Pasço, and Marcona Mining Company were already in operation when Velasco's military regime started its process of nationalization. As a result, Cerro de Pasço became Centromín Perú S.A. in 1974, and Marcona Mining Company became Hierro Peru in 1975. SPCC, on the other hand, remained untouched and signed a new agreement with that government to develop the Cuajone project, which more than doubled its previous production capacity. Hierro Peru returned to foreign control at the end of 1992, but this time its buyer was Shougang Corporation.
The state-owned sector was by no means restricted to taking over production facilities; it also decided to develop new projects. For this purpose, it set up Minero Peru and entrusted it with the state's interests in the mining sector. This firm received the mine deposits that returned to the state from private holders who failed in 1970 to present concrete plans for developing them. Minero Peru eventually developed three main projects: Cerro Verde copper mine, Ilo copper refinery, and Cajamarquilla zinc refinery. Cerro Verde was privatized at the end of 1993, but the refineries (Anon. 1994) and many mine deposits remained in Minero Peru's hands.
Firms outside the large-scale mining sector were not touched by the process of nationalization in the 1970s; in fact, new domestic firms continued to appear during that period. The most important of these is probably SIMSA, currently the largest private zinc producer in the country. This firm, Buenaventura, and Milpo, which had entered the sector 2 decades earlier, were always controlled by well-known groups of domestic investors.
Lastly, Minera Yanacocha and EME Iscaycruz, which were set up to develop greenfield projects after the 1990 introduction of the Code, are both foreign controlled, although each has an important domestic stake.
A final report of the research described, at length, all these firms and their respective units, production processes, environmental implications, and the ways they have responded to the evolving regulatory framework (Núñez-Barriga and Castañeda-Hurtado 1994). Here, the discussion will focus only on the main features that came out of the research as having some bearing on the environmental management of the differentiated type of firms (see Table 3). This comparative presentation of the results is developed below.
International pressure (particularly in relation to financial facilities for modernization and new projects), as well as the realization by investors (international, state, and domestic private) and governments that there is little chance of this pressure being relaxed in the foreseeable future, has been crucial to the emergence of a new, much more realistic environmental regulatory framework. For the same reasons, firms have been showing a clearer stance toward compliance.
At least one important supporting factor has made local producers more sensitive to external pressures, particularly since the early 1980s. This is the difficulty firms have had getting the necessary financial resources to maintain their competitiveness in an increasingly competitive market in the context of a domestic economic policy in the second half of the 1980s that was unfavourable to the sector and of a foreign debt crisis that started in the mid-1970s. In this context, the new environmental stands of multilateral agencies, such as the World Bank, IDB, and development-aid agencies of developed countries have been granted greater attention.
It is important to note that these developments affected all types of firms. Particularly relevant has been the case of medium-scale mining firms, which not only express their influence by their relative weight in production among domestic firms but also dominate the local organizations of the mining community, whose opinions are highly respected. Domestic producers have traditionally specialized in zinc-lead-silver production, in which the weight of silver (in terms of value) has been quite important. With the depression of base-metals prices, domestic firms had to add the burden of historic lows in silver prices.
In these circumstances, investors had failed since the early 1980s to maintain the rhythm needed to face a more competitive market. From the case studies, it can be concluded that there is a need for investments to modernize production capacity and that much of this will have to come from abroad and be used for more appropriate environmental management. This has been explicitly recognized not only by the state-owned firms that receive important support for privatization from multilateral agencies but also by the medium-scale firms interviewed. Given their leading role in the mining community, their perception is likely to have a significant effect on the attitudes of smaller formal firms.
The information gathered indicates that environmental behaviour was unrelated to ownership structure (that is, foreign, state, or domestic private) or the size (that is, large or medium) of firms. More clearly relevant was, for example, the longevity of production capacities. For instance, of the 91 years that the former Cerro de Pasço Co. has been in operation, only for the past 20 (since 1974) has it been a state-owned firm (Centromín). Centromín inherited serious environmental problems, which had accumulated during more than 70 years of foreign ownership, but state control did not change this situation much. Only in the past couple of years, ironically, with privatization and the pressure of multilateral agencies, has the firm taken some initial steps to improve its environmental performance.
Table 3. Peru: case studies on environmental management in the mining industry. | |||||
Firm | Reliance on external financing | Difficulties for technology transfer | Environmental behaviour of management | Location | Observations |
|
|
| Large-scale mining |
| |
SPCC Centromin |
| Disruption in production process for introduction of new pyrometallurgical options (i.e., in-plant environmental solution) | • In 1992, Division of Environmental Affairs is set up • Independent environmental policy (does not follow any particular "environmental code of conduct" of its shareholders) | Copper smelter is 17 km from the port of llo | • 30 × 106 t/year of Cuajone and Toquepala tailings since 1977 (and half this in 1960–76) went directly into Ite bay, affecting water and the marine ecosystem • S02 in the off-gases of the smelter, under certain meteorological conditions, reaches the port and valley of llo • Disposal of smelter slag at the nearby seashore has affected beaches |
Minero Peru | Centromin | Mineralogie complexity implies high costs and important in-house research for adaptation of new technology | • Developed a diagnosis of environmental problems at each production unit in the 1980s • Prepared a strategic plan in 1985 that included an environmental policy (firm ignored most of this later) • In 1991, prepared a PAMA for 1993–99 • In 1992, division of environmental affairs set up in La Oroya • Environmental master plan is being prepared with IDB support |
| • Conflicts with nearby communities re environmental care • Gases of the metallurgie centre affect the atmosphere (S02, CO, etc.) • Concentration tailings and mine waters seriously affect surface and groundwater (Mantaro river and others) |
Shougang Hierro Perua | Independent of multilateral international financing |
| • Cajamarquilla zinc refinery was constructed on the basis of environmental studies dating as far back as 1970 (almost a decade earlier) • Relies on a sulfuric acid plant to control SO2 • Treats effluent in a plant • Office of mining hygiene and safety at each production unit is responsible for environmental-control tasks |
| • Contamination, under certain meteorological conditions and electricity generation cuts, has affected a nearby observatory • Large amounts of tailings, after 1953, were directly disposed of at the seashore, apparently affecting the marine ecosystem |
|
|
| Mediul-scale mining |
|
|
Compañía Minera Milpo | Asking CAF for support for its 40 million USD expansion project |
| • Personal push from the general management for the environment had an important place in the general activities of the film • Contracted a Canadian firm to design a 12 million USD taillings pond; constructed by local firms in the 1980s • Reforestation and development of back gardens in the mining camp • New expansion program includes a treatment plant for tailings-pond decanted water and a lime plant for neutralizing effluent |
| • Uses cut-and-fill mining • Back-filing of part of the tailings, with the rest going to tailings pond |
San Ignacio de Morococha S.A. |
|
| N/A |
| N/A |
Empresa Minera Iscaycruz |
|
| • In 1992, contracted an environmental consulting firm to develop an EIA of its production activities | One of only two mines located on eastern side of Andes | • Uses back-filling and also has a tailings pond |
Minera Yanacocha | Negotiations with CAF, IIC, and BID for its 50 million USD Yanango electril-generating project |
| • Environmental control has to be a responsibility of all • EIA developmed by FIA (UNI) recommended integrating environmental activities of prevention and environmental control and making these the responsibility of the Department of Hygiene and Safety |
|
|
| IFC is a shareholder of the project |
| • Will abide by Peruvian regulations and also by Newmont's Environmental Code of Conduct, based on US environmental regulations • Contracted a US consulting firm to develop its EIA | Cajamarca local council is asking for a canon, equivalent to 30–50% of total income tax | • Hydrometallurgic technology (Merril Crowe method) for gold production • Will use a three-layer carpet to prevent leakage of solutions |
Note: BID, Banco Interamericano de Desarrollo (IDB); CAF, Andean Finance Corporation; EIA, environmental-impact analysis; FIA, Faculty of Environmental Engineering [UNI]; IDB, Inter-American Development Bank; IFC, International Finance Corporation [World Bank]; IIC, International Investment Corporation [IDB]; PAMA, Programa de Adecuación y Manejo Ambiental (environmental-management and adequation program); SPCC, Southern Peru Copper Company; UNI, Universidad Nacional de Ingeniería (national university of engineering) [Peru]; USD, United States dollars.
SPCC has been under the same controlling interest, Asarco Incorporated (US), for 4 decades. The actual environmental effects of its production facilities have been bitterly disputed since its operations started in 1960. Only in December 1991 did the government and SPCC sign an agreement for a 300 million USD 5-year investment program (1993–97), of which one-third was to be used to partially control the operation's environmental impacts. This agreement granted SPCC a sort of environmental-regulation stability, as it was later excused from presenting a PAMA by the same legal instrument that introduced it and made it compulsory for all production units, that is, the Regulation of Title XV (Third Transitory Disposition). Only after the completion of this program will it be feasible for SPCC to proceed further in complying with the new regulatory framework.
Marcona iron mine has never been a matter of major public environmental concern. Nonetheless, it may be negatively affecting the marine ecosystem in its area, as it is a huge mine and has been operating its processing plants, particularly the concentration plant, for more than 3 decades. In fact, the mine has disposed of the enormous amount of tailings produced during all this time directly into the sea. The disposal of tailings into adequate tailing ponds would have prevented this environmental hazard. However, this provision was never made.
Marcona was developed and exploited in 1952–75 by Utha Construction in association with Cyprus Mines, both from the United States. The firm was nationalized in 1975 and remained a state-owned firm until December 1992, when it was bought by Shougang Corporation. Thus, the ownership of this mine, whether by well-known international firms or by the state, seems to have had no effect on the environmental issue.
However, under the new regulatory framework, its new owner, Shougang Corporation, is considering constructing an adequate tailings pond. This project will become even more urgent if the firm proceeds with expansion plans and doubles its production capacity to 20 × 106 t/year and adds a steel plant. Shougang Corporation is a property of the People's Republic of China, which may be considered a prospective NIE but certainly not a well-established developed country.
Centromín, SPCC, and Shougang Hierro Peru to a large extent use technology first introduced many decades ago. For example, two central processes with important implications for the environment in Peru are flotation concentration and the reverberatory furnace for copper smelting. Flotation concentration was introduced in the early 1920s; the reverberatory furnace, a century or so ago. Although important improvements in both technologies have provided major increases in productivity, these technical changes alone cannot alter the hazards that solid residues, effluent, and off-gases can cause.
For many decades, the industry has known about ways to control the tailings from the flotation process through specially designed ponds and treatment of the decanted water. This has for some time been on the university curriculum for mining engineers in Peru.
In the case of smelting with reverberatory-furnace technology, S02 has been difficult to control. This S02 needs to be at a minimum concentration of 4% to become economically recoverable by oxidation conversion into sulfuric acid. In the past 3 decades, and even earlier, new furnaces have been developed that integrate two or more pyrometallurgical processes to produce a high enough S02 concentration in the off-gases and are far more energy efficient. Inco Ltd, Noranda Inc., and Mitsubishi Minerals Corporation, among others, make use of this technology. Also, with CODELCO's modified converter, reverberatory-furnace technology offers S02 concentrations high enough to be economically converted into sulfuric acid, with greater energy efficiency and higher productivity.
Nonetheless, these are in-plant solutions, affecting the core installation of the process. As such, they are likely to involve major disruptions in production from the time setup until efficient operation is achieved. This is not the case with the control of flotation tailings, which is an end-of-line solution involving no in-plant disruption. In-plant disruption may have important costs over and above those of installing solutions, thus increasing the total net costs of environmental control.
The well-known international firms involved in large mining projects and the technical groups of the state-owned firms must have been aware of all these developments. However, Cerro de Pasço - Centromín, SPCC, and Marcona-Hierro Peru developed their mining and extractive metallurgical projects well before the environment became a serious issue in developed countries and for international multilateral agencies. Moreover, domestic environmental legislation presented important gaps and shortcomings that contributed to weak enforcement. This may explain why these firms made their first serious moves toward compliance with environmental regulations only as recently as the 1990s, motivated by more realistic and enforceable environmental legislation and by the strong support of the multilateral agencies.
On the other hand, state-owned Minero Peru developed its mining and metallurgical facilities in the 1970s and 1980s with foreign financing that in certain cases tied its support to adequate enforcement of environmental control. This company has shown relatively fair environmental behaviour throughout its period of operation. No one has filed serious complaints against Cerro Verde or the Ilo copper refinery. At Cajamarquilla zinc refinery, environmental assessments date back to 1970, long before Minero Peru began construction toward the end of that decade. Sudden disruptions of electricity flow, particularly as a result of sabotage, are the only isolated problems that have emerged, despite the mine's proximity to Lima (24 km).
We observed no major differences with respect to size, at least for the range of the firms we studied. Moreover, Milpo, a medium-scale firm, has shown concern for appropriate environmental management from the early 1980s, when it invested 12 million USD to construct a large tailings pond. This pond complements the use of some of the tailings to back-fill the mines. Furthermore, Milpo is looking for financing from multilateral agencies for a 40 million USD expansion and modernization program with a significant environmental component. This is planned for the next 2 years. The firm has enthusiastically supported a reforestation project in the areas close to the mining camp and also the development of ecological back gardens at the camp, where the miners' families grow their own vegetables. Ing. Augusto Baertl, the general manager, gave a decisive push toward this kind of environmental policy. He was convinced that environmental concerns had come to stay and that the industry must accept it. In the recent past, he was president of the National Association of Mining and Petroleum, which groups together private large-, medium-, and the more organized small-scale mining firms. This indicates that an influential manager who has a commitment to the environment may be a more important factor in a firm's environmental behaviour than ownership, size, timing of projects, or vintage of production technology.
The case of Milpo shows that, with determination, even a venture that started production in the 1940s can make important investments in environmental controls and maintain its competitiveness. This case also shows that longevity of the firm need not be a restriction on environmental performance.
The barriers to technological transfer stemming from mineralogie complexity may explain the attitude of some firms toward technical change. In-plant solutions to environmental problems may entail major changes to existing production facilities and processes. Such complexity seems to be the case with Centromín Perú and, particularly its La Oroya Metallurgical Centre. According to Centromín's manager of metallurgical operations, the complexity of the minerals processed at La Oroya can only be compared with that of minerals processed by Boliden in Suecia and Dowa Mining Company Ltd, and even so, La Oroya's is still the most complex (Huayhua 1993).
The bulk of the 250 × 109 t of minerals and concentrates treated at La Oroya comes from mines in the central Andes. Of this total, 150 × 109 t comes from Centromín's mines and the other 100 × 109 t comes from third parties. A central feature is that this plant processes "dirty" minerals and concentrates that many other smelters would be unwilling to process because of the complexity and high contents of toxic elements. La Oroya's third-party customers include some from Canada, the Philippines, and Spain, and the firm has also received offers from Russia.
Because of the materials Cerro de Pasço - Centromín has had to deal with for the past 7 decades, in-house innovation has been encouraged. In fact, the need for in-house research led the firm to set up the Department of Metallurgical Research at La Oroya in 1927. This department has since then been called "the school" of metallurgical engineers in Peru. J. Bonelli, director of the department for several years in the 1980s, and Ing. Agustín Mejía, head of Centromín's Division of Environmental Affairs (DEA), both stressed that mineralogical complexity was driving technological innovation at La Oroya and had implications for technology transfer (Bonelli and Mejía, personal communication, 199312).
During La Oroya's long history, there has been an important process of incremental innovation. The opportunities (and difficulties) offered by mineralogie complexity have supported its longevity. Although this complexity implies substantial investments to adapt technologies originally designed to treat much simpler and more typical minerals, the net costs may be substantially reduced, or even turned into profits, by the much wider range of by-products.
Firms are likely to be more enthusiastic about incremental innovation or the introduction of a new production line than about radical innovation that disrupts production. Nevertheless, radical innovation is precisely what is needed in important sections of La Oroya's pyrometallurgical facilities, particularly to protect against atmospheric pollution. The situation is further complicated by the nature of its minerals and concentrates.
Thus, Cerro de Pasço - Centromín, in a long production life in which, until very recently, the environment was of little concern, has accumulated a huge environmental debit. According to International Management Centres (IMC) (London, United Kingdom), the valorization of Centromín, in preparation for privatization, included an estimate that compliance with relatively acceptable environmental standards would require at least 465 million USD in 1992. It should be noted that IMC's study was unavailable to us; therefore, we were unable to establish whether IMC included air-pollution control in that estimate. At Centromín, Ing. Mejía estimated the cost of air-pollution control at 500 million USD. In any case, the investment requirements are high; the costs of adapting technology and of disrupting
12 Ing. J. Bonelli, former director, Department of Metallurgical Research, Centromín, interview, October 1993; and Ing. Agustín Mejía, head, Division of Environmental Affairs, Centromín, interview, 23 March 1993.
production are needed to give even a first approximation of the dimensions of the environmental task.
Compare these estimates with the 280 million USD cash and 60 million USD in eligible titles of Peruvian debt that were fixed as base price for bidding in March 1994 (Anon. 1994). Or compare them with Centromin's 400 million USD annual average sales for 1991–93 (Centromín 1992, n.d.).
It should also be pointed out that in 1992 the firm designed a PAMA on the basis of the IMC study and chose only those environmental-control projects with low investment and high pollution reduction per dollar. DEA produced a PAMA requiring only 45.2 million USD over a 7-year period, 1993–99 (Mejia, personal communication, 199313). However, the PAMA omitted IMC's fundamental recommendations regarding atmospheric pollution. IMC explicitly recognized that the smelter emits 37163 N · m3 S02/min, but the low concentration (0.68%) precludes economic recovery. But IMC added that this problem could be solved through technological innovation involving the production processes (Centromin 1992).
The approval of the PAMA granted the firm some regulatory stability: as far as environmental control is concerned, the new owners of Centromin must abide by the terms of the PAMA. Because this PAMA excluded atmospheric pollution, the likelihood of this problem being seriously addressed during the present decade is very slim.
In cases where minerals and concentrates are highly complex, such as at La Oroya, investment needed for transfer of environmentally friendly technologies is likely to be much higher than predicted. This cost is likely to become more critical when, as in the case of Centromin, a firm has been under major financial constraints and is unable to get fresh external resources because the country has a heavy foreign debt.
Another important factor in a firm's environmental behaviour is reliance on international financing, particularly from multilateral development agencies. This has been observed in private, state, and foreign firms, independently of firm size:
• IDB was seriously considering an important loan to Centromín before the government decided to privatize the economy in 1991. The firm included a major environmental component at the express request of
13 Ing. Agustín Mejía, head, Division of Environmental Affairs, Centromín, interview, 23 March 1993.
IDB, whose technicians had visited La Oroya and had apparently been shocked by its situation. Later on, IDB helped Centromin prepare for privatization, commissioning the IMC study to evaluate the firm's environmental debit. Furthermore, and particularly relevant here, IDB was helping the firm prepare the terms of reference for a 2 million USD study to produce an environmental master plan. The study would cover the global problem of Centromín's impact (on La Oroya as an urban centre, on its are of operations, and on local agriculture) within a medium- and long-run perspective.
• Buenaventura has kept important long-term contacts with the IFC of the World Bank and the Inter-American Investment Corporation (IIC) of IDB. Thus, IIC, the Andean Finance Corporation (CAF), and the organization of the Andean Pact are helping to finance Buenaventura's Ishihuinca gold mine.
• SIMSA has approached the IIC and CAF for support for the50 million USD electricity-generating Yanango project. The particular importance of this domestic firm, which is the largest private zinc producer in the country, may be gathered from the fact that it may participate as a bidder in the privatization of Minero Peru's 101.5 × 109 t/year Cajamar-quilla zinc refinery (Centromín n.d.).
• Milpo, the third largest medium-scale firm, has been looking for support at CAF and other multilateral agencies for its 40 million USD expansion plan.
• SPCC received a 60 million USD grant from CAF for the development of its Toquepala and Cuajone marginal-minerals leaching project, which is included in its 300 million USD 5-year investment program.
International financing in the new greenfield projects is even more evident:
• Iscaycruz had by May 1993 progressed well in the negotiations for financing with CAF and IIC (Bressi, personal communication, 199314). It may be recalled that this firm is owned by Paraibuna Metais (Brazil)
14 Ing. Rodolfo Bressi, general manager, EME Iscaycruz, interview, 28 May 1993.
(45%), in association with Buenaventura, Minero Peru, and Marc Rich (Switzerland).
• IFC has participated in the financing of Newmont's majority-owned Yanacocha gold project and is at present a shareholder.
Lastly, worth noting although it is not one of the case studies, is Mantos Blancos's Quellaveco copper deposit, which is of comparable type and size to those of Toquepala or Cuajone. The firm was undertaking a 2-year feasibility study for the deposit's eventual development, and IFC was participating as a shareholder in the project.
The pressure that the multilateral agencies, particularly the World Bank and IDB, have exerted on firms' environmental behaviour in recent years has been important. This has been explicitly recognized by most of the firms mentioned. However, an important exception to this observation would be Shougang Hierro Peru, which, as it has been pointed out, is a property of the People's Republic of China and, as might be expected and is in fact confirmed by the firm (Alfaro, personal communication, 199315), works outside the spectrum covered by these multilateral agencies.
The analysis of the case studies indicates a particular way large mining have tended to relate to the new environmental regulatory framework. Vizcarra (1982), noted that many firms exert direct influence through governmental or parliamentary commissions set up to investigate issues of public concern. In fact, the importance of these firms in the national economy may account for this approach.
In general, enforcement of the environmental regulatory framework has been very weak. The new legislation, emerging in the period following the publication of the new Code, significantly departs from the previous regulatory system. The emphasis in the new regulatory framework is on providing firms with ways to progressively comply with appropriate environmental standards, rather than merely penalizing them for failure to meet these standards. For this reason, we postulated the likelihood of a much higher rate of compliance.
The case studies confirmed this postulate. At a formal level, this might be indicated by the emergence during the 1990s of specific environmental offices in the organization charts of several of the analyzed firms. Moreover, in all cases, third parties were performing environmental research, according to law, to produce
15 Ing. J.Cl. Alfaro, technical manager, Shougang Hierro Peru, interview, 28 December 1993.
the firms' PAMAs or EIAs. This work was, in general, coordinated by the production departments and the specific environmental office or with the office of safety and hygiene. The environmental office, or the one in charge of these activities, in most cases is just one step down from operations management and only two from general management. People at the high decision-making levels can thus be rapidly informed about environmental developments, reflecting a clearer focus on environmental issues.
As it might have been expected, the large firm in most cases allocated important technical resources (professional groups and laboratory infrastructure) of the firm to support the work of external environmental consultants. Thus, as it has been noted, Centromín produced its PAMA on the basis of the IMC valorization study. It should also be mentioned that IMC had subcontracted a US environmental auditing unit to develop the environmental component. All production departments and the Division of Metallurgical Research supported those producing the PAMA.
Minero Peru has not confronted relevant environmental problems in its units. As of 1990, it had developed environmental activities only at its Cajamarquilla zinc refinery (Vidalón, personal communication, 199016). However, we learned that by June 1993, environmental-monitoring activities had begun at its other two production units — Cerro Verde copper mine and Ilo copper refinery.
The Environmental Control Office at Cajamarquilla was set up when the plant began producing in the early 1980s. It has maintained a permanent monitoring system for its emissions, liquid effluent, and solid waste. Thus, it analyzes, for example, air-pollution control, at 17 permanent stations; the office also works with Sedapal S.A., Lima's water firm, to monitor the Rimac river water, as well as other control tasks. The analyses are done with the assistance of two chemists, a biologist, seven supporting samplers, and the staff of the plant laboratory.
In 1992, Minero Peru, like Centromin, had IMC do its valorization in preparation for privatization. This time, IMC subcontracted Morgan & Grenfell (United States) to develop the environmental component of the study. Although IMC's reports were unavailable to us, interviews at the production units and central offices indicated that only specific aspects, mainly of the environment in the workplace, were pointed out for correction, in this case, the mining firm's participation significantly contributed to the work of the environmental consultants.
Since the mid-1970s, SPCC has commissioned environmental studies. The first one was to evaluate the potential environmental impacts of developing its Cuajone mine to more than double its capacity. Another study several years later
16 Ing. J. Vidalón, head, Metallurgie Direction, Minero Peru, 26 November 1990.
was undertaken to respond to a parliamentary commission set up to investigate the environmental impacts of the firm's operations in its zone of influence. More recently, in the 1990s, the firm commissioned studies to prepare its 300 million USD 5-year investment program, which includes 100 million USD for environmental projects. For its mid-1970s and mid-1980s studies, the firm contracted Dames & Moore (United States). In the 1990s, it contracted Rescan Environmental Services Ltd (Vancouver, BC, Canada) to study the feasibility of disposing of Cuajone and Toquepala tailings in the sea; and Klohn Leonoff Ltd (Richmond, BC, Canada) to study an alternative method for disposal on the mainland.
SPCC set up its Environmental Protection and Research Centre in Ilo to undertake environmental activities at its operations. However, we were unable to find out specifically what this centre is working on. It may be added that the firm also set up in Lima a Directorate of Environmental Services, which is in charge of the firm's relations with official environmental-control offices and commissions, as well as coordinating the work of the consultants. SPCC is relying fundamentally on well-known foreign firms, especially from the United States and Canada, to develop its environmental activities.
On the other hand, Shougang Hierro Peru contracted LAGESA to develop its PAMA. LAGESA, a domestic consulting firm, was one of the case studies we used to analyze Peru's technological capabilities. Similarly, Iscaycruz, the polymetallic greenfield project controlled by Compañía Paraibuna de Metais, commissioned FIA at UNI to undertake its EIA.
The two firms controlled by foreign investors from NICs (Shougang Corporation [Beijing] and Compañía Paraibuna de Metais [Brazil]) have, independent of their size, contracted domestic environmental technological capabilities.
Of the three medium-scale firms, Buenaventura is the only one that set up a consulting firm — BISA. This firm has mainly worked in mining and metallurgy and has been registered at MEM to perform EIA in these areas. However, for environmental studies it has expressed a willingness to look for domestic or foreign partners to complement its technological capabilities.
Milpo and SIMSA, the other two medium-scale firms, have relied, to an important extent, on foreign consultants for its environmental activities. Milpo contracted Golder Associates of Canada to design its 12 million USD tailings pond, although the construction was commissioned to domestic contractors. However, its much smaller projects of reforestation and back-garden development were assigned to a local nongovernmental organization, Friends of Peoples Close to Nature.
Similarly, SIMSA contracted Tecno Serv (United States) to develop its EIA. However, this firm has relied mainly on the local infrastructure of laboratory services (such as Universidad Nacional Agraria, Universidad Nacional Mayor de San Marcos, and the National Institute for Agricultural and Industrial Research).
In rough terms, it may be concluded that the medium-scale firms do not seem too keen to take on much of the environmental-control activities themselves but prefer to employ consultants and external services for this purpose. Also, the two new greenfield projects, Yanacocha and Iscaycruz, have shown that from the very beginning, they have integrated the environmental dimension into their design on the basis of EIAs commissioned to consulting firms. As already mentioned, Newmont, the controlling interest of Yanacocha, was the only firm that expressed its willingness to abide both by the Peruvian regulations and the much stricter regulations of the United States.
This page intentionally left blank
For the past 20 years, the environmental impacts of mining have been a growing concern. In Brazil, this concern was reflected in the passage of the 1981 National Environmental Policy. This legislation consolidated existing regulations and created an administrative structure to implement them. At about the same time, a major expansion occurred in both formal and informal gold mining. The emergence of the garimpo (artisanal) phenomenon, particularly in the informal sector, was primarily due to the dramatic increase in the gold price in the late 1970s and to the high unemployment at that time.
This paper provides an overview of the gold-mining sector in Brazil. It examines the environmental effects of the technologies used, identifies factors in the environmental behaviour of formal gold-mining companies, and suggests how the regulatory regime can be enhanced to minimize the effects of gold mining on the environment.
This research was done from April 1990 to October 1992. It involved the use of both secondary sources (reports, articles, books, and statistics) and direct interviews with government officials, nongovernmental agencies, mining-company executives, and prominent members of the garimpo community.
Although gold was known to be present in Brazil in the 16th century, commercial exploitation only began a century later with the discovery of rich deposits in the states of Minas Gerais, Goiás, and Mato Grosso. In the 18th century, production in these areas (and others) made Brazil the largest producer of gold in the world. During this time, output was 830 t, or 58.4% of the global output, which was about 1421 t (Berbert 1988).
Table 1. Investments in exploitation of gold and m |