BHP Billiton: image and reality

Briefing for the BHP Billiton plc Annual General Meeting, 23 October 2008

BHP Billiton is the largest mining company in the world. Jointly listed on the London and Australian Stock Exchanges, it has a market capitalization of 180 billion US dollars, more than twice the size of its nearest rival, Brazil’s Vale Inco. In the financial year 2008 its earnings before net finance costs and taxation were over 24 billion dollars and its attributable profit (excluding exceptional items) over 15 billion dollars. It produces and markets aluminium, coal, cobalt, copper, diamonds, iron ore, lead, manganese, nickel, petroleum, potash, silver, titanium and zinc.

The company likes to claim a good reputation for corporate social responsibility. But is it justified?

1 Communities and the environment

The company’s 2008 Annual Report (2.9 Sustainable Development – Health, Safety, Environment and Community) says:

One of our strategic drivers, ‘Licence to operate’, recognises the intrinsic link between sound sustainability performance and long-term business viability. We aspire to Zero Harm for our people, our host communities and the environment, and strive to achieve leading industry practice. Sound principles to govern safety, business conduct, social, environmental and economic activities are integral to the way we do business. As a global company, operating in many different countries, we are subject to extensive regulation surrounding health and safety of our people and the environment. We make every effort to comply with the regulations and, where less stringent than our standards, exceed applicable legal and other requirements. We have a number of systems and supporting documents to implement our commitment to sustainable development. The Sustainability Committee of the Board continues to oversee the Group’s sustainability strategy, policy, initiatives and activities. Management holds responsibility for our Health, Safety, Environment and Community performance and for driving our commitment to Zero Harm.

How well does the company live up to its principles? Let’s investigate some examples…

1.1 Chile: excessive water use at Minera Escondida

The Escondida copper mines (57.5% owned by BHP Billiton) in the Atacama Desert of Northern Chile are in desperate need of water. Plans to draw large quantities of groundwater from areas near the mine were turned down by regulatory authorities after massive opposition from local communities who feared for the survival of their settlements and farms if so much scarce water were diverted to the mines. The company now plans to expand its desalination operations on the coast and pipe the water to the mines.

But communities over the border in Argentina fear that the company may be seeking to transport water over the Andes from the Argentinian province of Salta. This would be cheaper than relying entirely on desalination. According to Salta’s El Tribuno newspaper (16 April 2008), an Argentinian company began drilling at the end of last year, without approval or even an environmental impact study.

According to the newspaper, ‘details emerged about a project that BHP Billiton had developed in early 2000 in Santiago, Chile. There, in the offices of a company named “Inversiones El Alamo SA” (El Alamo Investments, Inc.), consultants working with Minera Escondida began creating a “technical and economic feasibility study for the production and distribution of industrial water for mining projects from the province of Salta (Argentina) and the II Region of Chile.” ….  A team of journalists from the Salta newspaper El Tribuno has revealed that holes are being drilled near Capie and the Socompa and Llullaillaco volcanoes, which are only ten kilometres from the Chilean border and the region of Antofagasta. The team verified that at least five wells have been drilled and are ready to be connected to an aqueduct that will carry the freshwater to Monturaquí, the Trans-Andean settlement located some 25 kilometres from Socompa and 75 kilometres from La Escondida.’

Local communities in Salta are concerned about the possible diversion of water and the Secretary of Mining of the province is apparently opposed to it. The company should abandon the plan.

Source: Latin America Editor, Mines and Communities (www.minesandcommunities.org)

1.2 Colombia: community removals round the Cerrejon Coal mine

BHP Billiton was part of a consortium of three multinational companies which in late 2000 bought the Colombian Government’s 50% share of the massive opencast Cerrejon coal mine in northern Colombia. The mine, operated by Exxon subsidiary Intercor (which owned the other 50% share) had a history of forced relocations of communities, with inadequate or non-existent compensation, to make way for mine expansion.

In August 2001, the small farming village of Tabaco, inhabited mainly by Colombians of African descent, was bulldozed by the mining company in a brutal operation accompanied by hundreds of armed soldiers and security personnel. In February 2002, the consortium of which BHP Billiton was a part bought the remaining 50% of the Cerrejon mine from Intercor. BHP Billiton now owns 33.33% of Cerrejon Coal, the mine’s operator.

In response to a sustained campaign of community opposition, supported by dissident shareholders in BHP Billiton plc and others around the world, last year BHP Billiton and the other two multinational companies involved in Cerrejon Coal (Anglo American and Xstrata) commissioned an Independent Panel of Investigation to look into Cerrejon Coal’s social programmes and its general impacts on local communities. The Panel found substance in much of the criticism that had been levelled at the company. It made a number of recommendations, particularly concerning a just settlement for the people of Tabaco. The Panel recommended, among other things, that Cerrejon Coal work with the Tabaco Relocation Committee as well as with other former residents of the village to ensure just compensation, buy collective land for agriculture and help construct a church and community centre for common use by former residents. The Panel also recommended that in future open, transparent negotiations take place with communities badly affected by the proximity of the mine, leading to collective relocation with community consent.

The company has broadly accepted the Panel’s recommendations. Negotiations with the Tabaco Relocation Committee and with communities facing imminent relocation have begun. Some progress has been made towards the relocation of Tabaco but Cerrejon Coal and its multinational owners still refuse to accept the full legal and moral implications of their purchase of a company which had treated communities with such brutal lack of respect. Too much is being left to the good will of the Colombian State, which has over the years demonstrated its complete lack of interest in a just settlement.

Difficulties also remain for communities currently facing displacement. There are disagreements over the quantities of replacement land needed for communities to continue their agricultural activities and worries that while the relocation process is under way – a process which may take two years – people will have no means of supporting themselves.

At the same time, Cerrejon mine workers who are members of the SINTRACARBON trade union are concerned about the inferior working conditions of non-unionised contract workers at the mine. SINTRACARBON is also worried about exposure to coal dust. The union says that coal dust is a hazardous substance under Colombian law and that because of this the company is legally bound to pay higher social security contributions than it is currently paying, in order to facilitate earlier retirement for mine workers.

The Panel’s report can be found on the Cerrejon Coal website at http://www.cerrejoncoal.com/formas/425/Cerrejon%20Panel%20Final%20e%20v%20%20260208%20(2).pdf and the company’s detailed response at http://www.cerrejoncoal.com/formas/441/Response%20to%20the%20independent.pdf

Source: Colombia Solidarity Campaign, based on information from various community contacts

1.3 Guatemala: nickel production threatens pristine lake, local livelihoods

BHP Billiton is exploring for nickel in Guatemala and is believed to hold a number of leases in the Lake Izabal region, where there has been strong community opposition to any activities which run the risk of polluting the lake. Opposition has been based on the destructive history of nickel mining and processing in the area, which left areas of land without vegetation and contaminated ground water. A proposed ore processing and smelting plant, taking material from several planned mines, would inevitably affect the lake.

Over 1,000 fisherpeople and their families depend on the 40 species of fish and other aquatic resources of Lake Izabal, the largest of Guatemala’s four lakes. The lake is part of a major national reserve. All the communities surrounding the lake will be affected by the proposals, particularly the largest town, El Estor. ASALI (the Association of Friends of Lake Izabal) has campaigned to defend the fishing culture of the communities and the unique natural resources of the Department of El Estor, especially the river systems associated with the lake. Members of ASALI have been harassed and threatened by local supporters of mining.

Eco-tourism and solar energy projects are considered priorities for the region and are incompatible with large-scale resource extraction. Opposition to the plans comes not only from fisherpeople but from doctors, community workers and officials in the Guatemalan environment agency.

Baroness Miller of Chilthorne Domer, a Liberal Democrat spokesperson in the British House of Lords and member of the All Party Parliamentary Groups on Central America and Latin America, visited the Lake Izabal area in February 2008. Baroness Miller doubts that the companies proposing mining and mineral processing in the area will be able to carry out adequate Environmental Impact Assessments or valid community consultation. She says: ‘The trouble is that it depends on the EIA being in a country which has the infrastructure, resources and will to make community consultation a reality. Given the problems Guatemala is still facing, not so many years after a bitter and terrible civil war, in governance and judicial probity, the companies proposing mining activity there must be aware that it is a very different matter from operating, say, in Australia.’

Sources: ASALI; Ken Luckhardt, Board Member, Mining Watch Canada; Baroness Miller of Chilthorne Domer.

1.4 Papua: Gag Island nickel project threatens forests, coral, communities

BHP Billiton’s planned nickel mine on Gag Island in Indonesian-controlled West Papua will tap one of the world’s richest nickel deposits – bringing profits for shareholders and revenues for the Indonesian and Papuan governments. But the US$4.5 billion plus plan, which includes a smelter on Halmahera in the neighbouring Moluccas, could very well also destroy livelihoods, forests, and the world’s richest marine environment.

The project has been highly controversial since exploration work was started in the mid-1990s. The company secured a government-issued Contract of Work covering the tiny Gag Island (12 km by 8 km) in February 1998, during the turbulent last months of President Suharto’s brutal and corrupt 32-year rule.

But the Gag project was put on hold after the island’s forests were classified as ‘protection forest’ and a 1999 Forestry Law made open-pit mining in such forests illegal. The mining industry launched a high pressure counter-campaign to overturn the ban, and thirteen projects eventually got the go-ahead in 2004 – one of them Gag.

Meanwhile, in 2002, a study by international conservation organisations had revealed that the Raja Ampat Islands, which include Gag, contain the richest coral reefs – 64% of all known coral species, with the highest marine biodiversity – in the world.

Raja Ampat is considered so important to protect, that it is first on the list of proposed UNESCO marine World Heritage Sites. When Indonesian parliamentarians were deliberating whether or not to permit mining in protected forests, UNESCO wrote to them to point this out. The letter said:

‘While media reports of decimated and degraded marine ecosystems in western and central Indonesia are common, this survey shows that there is still a chance to conserve globally significant, high quality island and reef ecosystems in Indonesia and to ensure future sustainable income sources for the local communities.’ (UNESCO Office, Jakarta letter to Akbar Tandjung, Speaker of Indonesian Parliament, 25 June 2003)

Local Papuan civil society organisations are today still calling for the sustainable development of eco-tourism and fisheries to improve local people’s lives. They want all mining in the area to be stopped immediately.

If BHP Billiton’s planned project goes ahead (it is a 50-50 deal with Indonesia’s state-owned company Aneka Tambang), it will be a giant among around 16 other nickel projects in Raja Ampat, a few of them already in production. According to local reports, mining is already muddying the clear coastal waters of other Raja Ampat islands, leaving islanders with the impacts while the nickel is shipped to Australia and China.

The groups are concerned that large-scale mining will have irreversible impacts on land, in the forests and in the surrounding waters, ruining prospects of sustainable, marine-based development.

There are also serious social and human rights concerns: an influx of workers or people looking for work from other parts of Indonesia could lead to tension or conflict with the island’s existing population, and competition for jobs.

On the wider political level, Indonesia’s security forces are quick to put down any expression of the Papuan desire for political self-determination – a right that has been denied ever since the sham ‘Act of Free Choice’ in 1969 was orchestrated by Jakarta in order to hang on to resource-rich Papua. But brutality against Papuan independence activists only fuels resentment against Indonesia profiting from Papuan resources. One scenario, which has already been played out at the notorious Freeport-Rio Tinto Grasberg mine on Papua’s mainland, is that the ‘separatist threat’ will be used as a justification for repression – courtesy of the Indonesian security forces. At Grasberg and in other parts of Indonesia, this has led to well-documented human rights atrocities committed against local people.

For more background on BHP and mining in Indonesia see Down to Earth’s website at http://dte.gn.apc.org/news.htm.  Source: Down to Earth

1.5 Peru: a legacy of injustice at Tintaya

Until 2006, BHP Billiton owned and operated the Tintaya copper mine in southern Peru. There was widespread opposition to the mine on health and environmental grounds. In 2005, after two days of public demonstrations, some protesters broke into the company’s offices, causing damage to company property. The company pressed for widespread prosecutions, and the legal process continues to this day. The State prosecutor is calling for harsh prison sentences of up to seven years against anti-mining activists who were not involved in any violence. BHP Billiton, sensing reputational damage, pulled out. The mine is now controlled by London-listed Xstrata plc.

Source: Latin American Mining Monitoring Programme

1.6 Philippines: violence and community conflict

BHP Billiton is involved in several controversial existing and planned nickel projects in the Philippines, with serious potential social and environmental impacts.

Islanders on Sibuyan in the Central Philippines have been protesting against an agreement between BHP Billiton and Pelican Resources of Australia, which is seeking to develop a massive nickel mine. During a peaceful protest on 3 October 2007, local councillor Armin Marin was shot dead by the head of the security guards employed by Pelican’s Philippine subsidiary Sibuyan Nickel Properties Development Corporation Ltd (SNPDC). Local people allege intimidation by the company in its efforts to silence opponents.

Sibuyan is a small (46,000-hectare) island in the province of Romblon. One-third of it is a protected area. Having been separated from the mainland as far back as the last Ice Age, Sibuyan has been dubbed the “Galapagos island of Asia.” Home to one of the densest forests in the world, the local people are well aware of the value of their unique ecology.

The 3 October 2007 protest was part of a continuing campaign by islanders to show their rejection of plans to develop mining on their island. BHP Billiton had an agreement to purchase 500,000 tonnes of nickel from SNPDC, in exchange for a loan of US$250,000 for exploration activities. BHP Billiton was therefore providing financing and incentives to drive the project forward despite strong local opposition.

Councillor Marin, who was married with five children, is a former employee of the World Wide Fund for Nature (WWF), Philippines. As a result of his killing, BHP Billiton has withheld funds under the ore-supply agreement, pending the outcome of an investigation. The company needs to ensure that its partners, suppliers and contractors adhere to the highest of standards.

At the same time, according to Catholic development agency CAFOD, ‘people living in Macambol on the island of Mindanao claim BHP Billiton’s joint venture partner, AMCOR, and Philippine government officials, have offered members of the community bribes in return for supporting the proposed mine and to silence opposition. One community leader was allegedly offered as much as one million Philippine pesos (around £12,000) by an AMCOR representative and a government official to support the project, in an area where the average family income is around £1 a day. BHP Billiton’s £13 billion project, which is in an area of outstanding natural beauty, home to rare and endangered species including the Philippine eagle and sea cow, is not due to start production until 2014 but  has already deeply divided this close-knit community. Some people living in Macambol are in favour of the mine while others think the potential risks to their livelihoods and the environment are too great. Many say they haven’t been properly consulted and some are afraid to speak out. At times, this tension has threatened to spill over into violent conflict.’

CAFOD will launch a report on this project at the same time as the BHP Billiton London AGM on Thursday 23 October. The agency is calling for ‘a new, independently-monitored consent process to be carried out and for the Macambol community to be given sufficient information about the mine and all its potential impacts so that they can make an informed decision about whether it should go ahead or not. CAFOD, which has been supporting the Philippine people’s struggle for justice for nearly 40 years, also believes that if the risks to the environment are too great, the project should not continue.’ (CAFOD’s report has been produced separately from London Mining Network.)

For further details of the CAFOD report, see www.cafod.org.uk/inthedark.

Sources: PIPLinks, CAFOD

2 Impacts of the proposed merger with Rio Tinto

BHP Billiton is eager to merge with rival Anglo-Australian mining giant Rio Tinto. Whether the merger is practical in the current financial climate is questionable. But is it wise, given Rio Tinto’s own track record? At its April 2008 AGM in London, Rio Tinto came under heavy fire for its involvement in projects in Alaska, Argentina, Bougainville, Madagascar, Michigan and Papua. In each case, communities affected or potentially affected by the company’s operations were opposing its activities because they believe they are causing or will cause significant damage to communities’ lives and livelihoods.

On 9 September, the Norwegian Government announced its decision to exclude Rio Tinto from its massive State pension fund ‘due to a risk of contributing to severe environmental damage’ at the Grasberg copper and gold mine in West Papua, in which the company is heavily involved. BHP Billliton is on record as admitting the damage caused by the riverine tailings disposal method which it used at Ok Tedi in Papua New Guinea. This is precisely the method used at the Grasberg mine. If it succeeds in its takeover bid for Rio Tinto, how could BHP Billiton reconcile its admission of the damage done at Ok Tedi with involvement at Grasberg?

3 Climate Change and radioactive wastes

On page 23 of the company’s Concise Annual Report for 2008, the company says:
‘Our challenge is to meet the growing global demand for resources while addressing the challenges of climate change…. Our new five-year targets … reflect out intent to further reduce the energy and greenhouse gas intensity of our business. We are also working with others to find technological solutions to manage our emissions and to address the impact of our products in relation to climate change.’

But the same Concise Annual Report announces (page 2) the ‘Commissioning of six major growth projects and other volume growth in our high-margin oil and gas, iron ore and manganese businesses expected in FY2009’ and (page 7) ‘We expect volume growth from our petroleum business to continue at around 10 per cent a year…’ And the Annual Report (section 2.2.2 Petroleum Customer Sector Group) boasts that ‘Our total oil and gas production in FY2008 was 129.5 million barrels of oil equivalent, an increase of 13 per cent over our total production of 115.05 million barrels of oil equivalent from continuing operations in FY2007.’

According to the Carbon Disclosure Project Leadership Index 2008, BHP Billiton’s ‘scope 3 emissions’ (‘indirect emissions that you cause but that are not from emission sources that you own’, which would include emissions attributable to the use of its products*) were 330,165,000 tonnes. According to the British Government’s Department for Environment Food and Rural Affairs (DEFRA) the UK emitted 557 million tonnes of carbon dioxide from all sources during 2006**.
* See http://www.puretrust.org.uk/Business/EmissionsScope.aspx)
**See http://www.defra.gov.uk/environment/statistics/globatmos/gagccukem.htm.)

Then there is the company’s planned massive increase in uranium production. The mining, transport and processing of uranium are themselves important contributors to climate change, as documented by Germany’s Oeko-Institut in 2007 in a report prepared for the German Environment Ministry. (See http://www.minesandcommunities.org/article.php?a=1695; German language report available at http://www.bmu.de/files/pdfs/allgemein/application/pdf/hintergrund_atomco2.pdf). The mining and use of uranium also leave a legacy of radioactive wastes remaining deadly for hundreds of thousands of years.

The company’s Olympic Dam mine in South Australia contains the largest uranium ore body in the world. The company plans to expand the mine, creating a hole three kilometres across and one and a half kilometres deep. The mine already creates large quantities of deadly waste. About 35% of the uranium remains in this waste. The waste (‘tailings’) is put into a pit lined with plastic to prevent leakage, then covered with a layer of earth and then water. According to documentary film maker David Bradbury in his film A Hard Rain, the liners used in these tailings dams will last around 30 years. According to journalist Ty Pedersen, writing in Australian publication Green Left Weekly on 26 January 2008 (see http://www.greenleft.org.au/2008/737/38157), three billion litres of this radioactive water leaked into the ground in 1994, under the mine’s former owners WMC. Pedersen also points out that in 1982 the South Australia Government signed the Roxby Downs (Indenture Ratification) Act, exempting BHP Billiton from the Aboriginal Heritage Act, the Development Act, Environmental Protection Act, Freedom of Information Act and Natural Resources Act.

Pedersen encapsulates the mine’s double impact on radioactive waste production and climate change: ‘Olympic Dam also releases deadly radon gas from the uranium. Even the smallest doses of radon gas can cause cancer and birth defects. It is seven times heavier than air so it remains close to the ground and is odourless and tasteless. A Hard Rain explains that the radon gas has a half life of 3.8 days, which would be enough time to be blown to the nearby service town of Roxby Downs, the 550km to Adelaide or even as far as Melbourne and Sydney. Olympic Dam is already responsible for 10% of South Australia’s total power consumption. The proposed expansion would increase this to 25%, adding to the massive greenhouse gas emissions of the site — everything is taken in and out of Roxby by truck; every chemical, kilo of food, litre of diesel and all the minerals that are produced that head back out.’
Further information

For much more information about BHP Billiton, see www.minesandcommunities.org.

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