Ok Tedi Mining Ltd.
Mine Waste Management Project
Risk Assessment and Supporting Documents
A.
Introduction
1
Basis of this Technical Note. In August 1999, the Prime Minister of Papua New Guinea,
requested the World Bank to provide the Government with comments on the Mine Waste
Management Project - Risk Assessment (MWMP), prepared for Ok Tedi Mining Ltd. (OTML)
(August 1999). Subsequently, the Risk Assessment and supporting documents were received in
mid-October following which this report was prepared by World Bank staff Given the limited time
available, the Bank specialists undertook no supplementary research, relying totally on the
information presented in the various reports. No members of the team visited the site or areas
affected by the mining operation since receipt of the reports (although two members of the team had
visited the mine site in the early 1990s during the course of preparing an overview of the mining
sector in PNG). This Technical Note is not meant to be a comprehensive summary of the findings
and conclusions of either the Risk Assessment or the supporting technical studies. The Note is being
provided to assist the Government in dealing with the broader issues of social and environmental
stewardship and responsibility which rest with the Government in relation to the people of Western
Province, and not as a shareholder of OTML. To the extent that any technical information is
presented (e.g. in Section B, following), it is for the purpose of providing context to matters covered
in subsequent sections of the report.
2.
Summary of Main Findings. The findings of this technical note are that the technical and
analytical information presented in the Risk-Assessment and supporting documents regarding
environmental impacts provides as good an evaluation of the scientific, engineering and financial
options and consequences as can reasonably be expected; but considerably more work is needed to
bring the social analysis up to the same standard as the environmental work. The data: in the Risk
Assessment indicates that from an environmental standpoint, the best option is to close the mine
immediately. But the Risk Assessment also states that from a social standpoint this would result in a
potentially disastrous situation because there is no preparedness for
mine closure. But, the Risk Assessment does not adequately address the trade offs between
environmental and social scosts nor does it provide any information or details on the mine closure
plan or broader mine closure strategy. This is a critical shortcoming of the Risk Assessment since it
is not possible to assess the appropriateness of the social and environmental mitigation measures
that are being considered in the mine closure plan and whether international best practice is being
followed. In this regard, any decision on mine closure can only be made once a mine closure plan
and mine closure strategy are agreed. It is understood that OTML are presently finalizing a mine
closure plan. It will be important that this plan adequately addresses social as well as environmental
issues and that the timing of mine closure be determined by finding an appropriate balance between
environmental and social impacts. In view of the above this note addresses social issues in more
detail than environmental issues and addresses some of the content that would be needed in a Mine
Closure Plan. In examining the Risk Assessment another important finding is that the Risk
Assessment does not provide an adequate evaluation of risk from the government's perspective
since it addresses risks from the financial standpoint of the
2
company and its shareholders and not from the standpoint of the broader scope of issues the
Government must consider. This note also finds that the four options presented in the Risk
Assessment do not represent the only options available and the Risk Assessment fails to consider
the option of early mine closure at such time as a mine closure plan is in place that address the
social impacts in a satisfactory and sustainable manner.
3. Material Reviewed The Risk Assessment comprises a summary report and a series of supporting
reports bound into nine volumes which provide the technical information on which the risk
assessment was based. The supporting reports include the reports of technical peer review groups
and auditors who were commissioned to independently evaluate the technical reports. Table 1
overleaf lists the titles of the technical reports and the associated peer review/audit reports.
4. The Ok Tedi Mining Operation. Ok Tedi Mining Ltd. (the Company) operates the Ok Tedi
copper-gold mine and ore concentrator at Mount Fubilan in the highlands of Western Province of
Papua New Guinea. Since the mine commenced operations in 1984, it has been discharging
significant quantities of waste rock and tailings to the Fly River system and is expected to continue
to do so until mining ceases. From 1984 until the end of 1998, the average rate of discharge of
tailings and waste rock into the river was 65 million tomes per annum: (Mtpa) of which 44 Mtpa
was waste rock and 21 Mtpa was tailings. The tailings particles are all less than sand-sized and
contain copper and other heavy m~.: The waste rock particles are predominantly larger sized gravel
material and boulders but much of this abrades over time to form finer and more readily transported
material. The tailings material and the abrasion products of the waste rock are being deposited in the
Fly River system including the Ok Mani and the Ok Tedi and are significantly affecting the
hydrology of the system mainly by raising the bed level 1. of the Ok Tedi and Fly Rivers.
Aggradation and/or high suspended sediment loads-have produced physical impacts in the form of
loss of fish habitat, reduced fish populations and dieback of vegetation on the floodplains. The
tailings and the waste rock also contain copper, other heavy metals and diverse sulphide minerals
which have the potential to register adverse chemical and biological effects on living things.
5. The Risk Assessment of the Mine Waste Management Project. The Company has carried out
engineering and other studies to assess the options available to address the environmental problems
being created by operation of the mine. These options, collectively, are referred to as the Mine
Waste Management Project (MWMP). In 1998, the Company commissioned consultants to
undertake a risk assessment of the M~ to assist the Board and management of the Company in
determining which of several management options it should pursue. The purpose of the risk
assessment was to identify and quantify the risks. associated with the various mine waste mitigation
options so as to define the highest realistic financial exposure associated with each and provide a
basis for determining which option to pursue.
1 Current aggradation is 6-7 meters Konkonda (Lower Ok Tedi), 4-5 meters at D'Albertis Junction.
3
Table 1 : List of Technical, Peer Review and Audit Reports Which Comprise the MWMP Risk
Assessment
Technical Reports
1. MWMP Risk Assessment
2. Screening Level Risk
Assessment (SLRA)
3. Detailed Level risk
Assessment (DLRA)
4. Sediment Transport
Model*
5. Dieback Thresholds*
6. Dieback Modeling*
7. River Chemistry Model*
8. Acid Rock Drainage
Model*
9.Food Web*
10. Energy Pathways*
11. Fish Habitat*
12. Fish Toxicity*
13. Dredge Growth Trials*
14. Tailings Growth Trials
15. Alice River Health survey
(Summary only)
16. Fly River Human Health
Survey
17. Socio-economic Baseline
of Lower Ok Tedi
18. Embankment Design
19. Tailing Pipeline
20. Community and
Environment Programs
Notes:
Peer Review/Audit
Reports
Risk Assessment
Audit
Peer Review of
SLRA
Peer Review of
DLRA
Peer Review of
Sediment
Transport Model
Comments on the
Science
Underlying the
HERA'
Review of Health
Surveys
Review of Health
Surveys
1 HERA
is the Human Health and Ecological Risk Assessment, comprising
the 10 reports marked by asterisks.
2 This report was an interim report. It is understood that
research on acid rock drainage is continuing.
6. The risk assessment addressed four options:
Dredge Option - continuation of mining until the scheduled end of mine life (2010) accompanied by
continuation of a trial river dredging program initiated in mid-1998 in response to an earlier (1996)
assessment of tailings disposal options which indicated that dredging of 20 million tomes per annum
(Mtpa) of sediment from the lower Ok Tedi River would be the optimum method of reducing
downstream sedimentation impacts;
4
No-dredge Option - discontinuation of dredging at the end of the trail period (1999) and
continuation of mining to the scheduled end of mine life;
Tailings Option - continuation of the trial dredging operation until the end of 2001, construction of
a tailings dam on the banks of the lower Ok Tedi using dredge spoil and piping and storing of
tailings at that site until the end of mine life; and,
Early Closure Option - discontinuing all mining operations in the year 2000.
For all options, the assessment assumed that a comprehensive mine closure plan would be
implemented that would "adequately address the engineering, environmental and social aspects
associated with cessation of operations" and that a 10 year "after-care" period would follow mine
closure after which time the Company would cease to exist.
B.
Summary of Main Environmental Issues
7. The Risk Assessment is generally thorough and of the highest scientific standard. Several of the
components were not as strong or as well done as others, but without exception, the weaker sections
of the report were of only peripheral importance to the overall assessment of risk. The core of the
Risk assessment is the sedimentation and bed movement model, the work on hydrology, the
assessment of likely concentrations of dissolved copper in the river over time, and finally the
relative impacts of leaving tailings/overburden from the mine in the river or removing it to
permanent land disposal (acid drainage issues). It seems likely that no new environmental studies
are needed although there is still some important ongoing work in the areas of.


predicting dissolved copper concentration (including spikes) in the river, and
assessment of the likelihood and severity of acid drainage from spoil disposal sites for dredged
material. The acid rock drainage study is likely the most critical environmental issue that needs
to be assessed in making any decision regarding a mine closure.
8.
The Risk Assessment reports confirm the widely acknowledged view that the environmental
impacts of mine operation are significant, and have been far greater than initially anticipated. The
report also confirms the understanding that the impacts are likely to worsen, and will continue for
some time even after the mine has closed.The Risk Assessment makes a strong case for the
following general mechanism of damage. First, aggradation of the riverbed, aggravated by
suspended solids levels, change the hydrology of the river, altering the natural flood and low water
levels of
the river floodplain. Hydrologic changes are also probably affecting the nature of connection
between the river and off-river water bodies, which are extremely important and sensitive
ecologically. Dissolved copper concentrations have increased following the opening of the Mine,
but
the
problems
associated with copper seem to be "episodal" (associated with what are thought to be spikes in
dissolved copper concentration) rather than chronic.
9.
From a purely environmental perspective the following appears to be the case:

Significant and unacceptable environmental impact (certainly much greater than originally
predicted) is occurring in the Ok Tedi and Fly Rivers below the mine;
 Impacts on the Ok Tedi and Fly Rivers downstream of the Mine will be felt for a long time
after mine closure, even if there are no more extraordinary movements of material into the
river;
 The ~ of the mine on slope stability and soil erosion in and around the mine site is likely to
be major and significant, particularly if the mine closure plan does not adequately address
issues of final land form Final landform of the mine site after the mine closes will be an
important factor controlling residual impacts over time (decades or more), and this does not
appear to have been addressed well in the Risk Assessment.
10. Die-back Projections. The discharge of tailings and. waste rock from the mine far exceeds the
sediment transport capacity of the river system downstream of the mine. The result is that sediment
is accumulating in the beds of the Ok Mani, Ok Tedi and middle Fly Rivers which reduces their
flow capacity and increases the incidence and severity of flooding in the affected areas. Over-bank
flows result in deposition of mine tailings and abraded waste rock on the floodplains and this is
resulting in die-back of vegetation in those areas. One of the key tools for predicting likely future
sedimentation effects is the sediment transport model (Report 4., Table 1). The Peer Review Group
concluded that "the science behind (the) model is stateof-the-art and, although uncertainties remain,
this model provides the best information to date on the present and future .... hydrology and fluvial
transport of the Fly River system." The sediment model predicts, inter alia, that elevated bed levels
along the lower Ok Tedi and Fly River leading to accelerated floodplain deposition of mine derived
sediments and increased flooding will continue for the life of the mining operation and for decades
after closure although suspended sediment levels will decrease relatively quickly after mine closure.
11. The most obvious manifestation of sedimentation in the downstream rivers is dieback of
floodplain vegetation' '. The amount of dieback has increased steadily over the life of the mine and
will continue to do so into the future;. the affected area was 18 square kilometers (km2) in 1992
and it is currently about 480 km2 . According to the Risk Assessment, the estimated area of land
which is- ultimately susceptible to dieback induced by mining operations (the Maximum Impact
Area or MIA) ranges from 1,278 - 2,725 km2 depending on the assumptions made (Table 2).
However, the area of
dieback which will actually occur depends primarily on the potential frequency of inundation of
different ecosystems within the MIA as predicted by the sediment model for each of the alternative
mine development options. The results of the predictions in the Risk Assessment are shown in
Table 2 for three levels of prediction; pessimistic, likely and optimistic. Given the likely accuracy
of the
e dieback results partly from increased flood frequency and duration, which affects plants not well adapted to such
conditions, physical damage to vegetation due to fast flowing flood waters, plus the direct effects of tailings/waste
rock/sediment deposition which: (a) induces anoxia; and, (b) buries seedlings of smaller plants.
2 Th
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modeling procedure, there is very little difference between any of the development options in terms of
potential dieback although there is at least the suggestion that cessation of dredging could have a greater
adverse effect on dieback than any of the other options.
Table 2 : Predicted Dieback Areas for Development Options
According to the Risk Assessment
Predicted Area of Dieback for Each Development Option (in km2 and % change on existing a)
Pessimistic_
Likely
Optimistic
Cease mining
Tailings Option
Cease Dredging
1,259 (260%)
820 (170%)
608(130%)
1,314 (270%)
848(180%)
633 (130%)
1,374 (290%)
887(190%)
665(140%)
Continue
Dredging
1,275 (270%)
829(170%)
614 (130%)
Source: Risk Assessment
12. The dieback reflects not only a loss of ecosystems, but has also been associated with loss of farming
(gardening) areas for people residing in downstream areas. In addition to the estimates of potential
future dieback, the study also indicates that: (a) dieback will continue past mine closure due to
progressive downstream movement of the sediment wave as predicted by the sediment model; (b)
recovery will be slow; and, (c) dieback recovery will be quicker the sooner the mine is closed.
13. Other Physical and Chemical Effects of Mine-derived Sediments. Mine derived sediments raise a
variety of environmental risks other than dieback. Other potential physical effects include; burying of
fish and- aquatic macro-invertebrate habitat due to river bed aggradation, dilution of nutrient
concentrations in aquatic ecosystems, reduction in light penetration and possible direct physical effects
on aquatic organisms (e.g. damage to fish scales and abrasion of gills). Potential chemical effects arise
due to the heavy metals and mine-related chemicals present in the mine discharges and potential
affected people include people living in the downstream areas.' and the terrestrial and aquatic
ecosystems in the same areas. The human and ecological implications of these risks were subject of
both screening and detailed level risk assessments (SLRA and DLRA), the first of which was peer
reviewed' while the second had only been completed to draft stage and thus had not been peer reviewed
by the time that the reports were forwarded to the Bank.
14.
The SLRA and DLRA are both very long and detailed reports and they, in turn, are based on 10
supporting studies. It is very difficult to summarize their findings and conclusions but the following
are considered to be some of the most important considerations:
People in downstream areas may be affected both directly, through chronic exposure to polluted water (from drinking,
washing, etc.) or incidental ingestion of polluted soil or sediment adhering to aquatic
food products, or indirectly, through consumption of plants, aquatic or terrestrial organisms which have taken up and stored
pollutants internally.
4 In its fourth progress report (the only one available to the Bank), die Peer Review Group noted, inter alia, that it was "...
generally impressed by the quality of work which has been done (in the technical reports which underlie the Human and
Ecological Risk Assessment) .... Overall, the work is of good quality., a number of the reports are world class, most are
adequate for the HERA, and one is unacceptable.' (the unacceptable report related to fish toxicity studies).
3
•
dissolved copper (dCu) concentrations in the receiving river are expected to plateau during the
next 10 years, based on the current mine plan, and decline thereafter. Neither the concentrations
measured in the river to date or the predicted concentrations derived from mathematical
modeling are of biological concern when based on an average annual concentration basis.
However, monitoring data indicate the presence of periodic spikes in dCu concentrations which,
thus far, have not been explained or accounted for (Le. it is not known whether or not they are
real and, if they are real, whether they are related to mining operations and, if so, in what
manner), nor can they be replicated in the mathematical models. These spikes, if real, may be
more biologically significant than the annual average figures due to their possible impact on
sensitive algal species which form the basis of the aquatic food chain in the regiod. Particulate
Cu concentrations in the sediments on the bed of the river are substantially higher than the dCu
levels being recorded in the water column. The copper chemistry model did not consider the
possibility of this material being released into the water column in the long term;
•
there is a major uncertainty as to the potential extent and. significance of long term Acid Rock
Drainage (ARD) from deposited mine sediments'. This problem is potentially controllable
during mining but essentially uncontrollable thereafter. If excessive ARD occurs, more copper
(and other heavy metals) may be mobilized from existing and future mine sediments than
allowed for in current models. The implications of this risk could be more significant in relation
to land-based disposal activities (i.e. disposal of dredge spoil on the flood plain, tailings
disposal on the flood plain) than for river disposal;
•
fish biomass/diversity declines have been documented: in the Fly River system since the early
1990s. It has been hypothesized that this is primarily a result of the physical effects of mine
waste disposal (e.g. elevated levels of suspended sediment resulting in burial of spawning sites,
abrasion of fish tissues, etc.) but this has not been conclusively determined. An alternative
explanation would be that the declines are due to collapse of a lower level in the food chain due
to chemical effects, in which case, the potential arises for a much longer reduction in fish
biomass/diversity and much longer social and ecological effects associated with such
reductions.
C. Summary of Main Social Issues
5 One of the studies forming part of the HERA (Report No. 10) established that algae (some of which are extremely sensitive
to dCu) are an extremely important food source for " and aquatic invertebrates. This work: (a) establishes that heavy metals
pollution could threaten a fundamental element at the base of the aquatic food chain; and, (b) identifies a pathway which
could permit dissolved heavy metals to pass up die food chain and potentially affect local people dependent on higher
organisms such as fish and aquatic invertebrates.
6 1he mine deposit contains potentially acid forming (PAF) minerals and, as a result, both waste rock and tailings, under
certain circumstances, can contain PAF materials. On exposure to air and water, these materials can generate sulphuric acid
which, in turn, can result in mobilization of heavy metals such as copper beyond what would be released in a less acidic
environment. Based on the limited information available, it is likely that PAF effects, if they are to occur, will have a long lag
period (i.e. many years of exposure would be required before acid conditions develop). 7 ]be limited information presently
available suggests that river disposal, involving mixing and blending with mine-derived limestone and natural sediments,
produces a non-acid forming sediment.
8
15. There is a substantial difference in the quality, content and scope of the Risk Assessment work
on the social side compared to the environmental side. The challenges and complexities facing the
local communities, government agencies and the Ok Tedi management with regard to closure can
vary considerably. The imperative for mine closure has different and even conflicting environmental
and social implications. The social and political risks governing closure even if not quantified in
financial terms can have grave consequences if not properly understood and managed. For example,
the greatest attention to social impact in the Risk Assessment is provided in the early closure option
which postulates a dramatic scenario of social breakdown associated with "shortages in food supply
.... resulting in fires, over-hunting ... and increases in store food prices. The population was
considered unlikely to reduce until driven from the area by hunger the overall result would be a shift
from a cash or cash/subsistence economy to subsistence existence and malnutrition could become
prevalent. .... Other predicted adverse impacts were the removal of rubber industry subsidies: and
the immediate loss of much of Western Province's funding (50%) with resulting declines in
education and health services'. While the report emphasizes the social chaos that would occur if
mine closure took place in year 2000, it does not examine how long is needed for:


the necessary preparation to take place so that mine closure could take place in a socially
acceptable manner, and
strong local government institutional capabilities to be built up to support the mine closure
strategy.
16. The only reports having a bearing on the social. dimensions of the project included two health
survey report?, peer reviews of these reports, and a report of a socio-econornic survey (Report No.
17). The baseline health survey report (report 15) found no connection between the observed health
conditions and discharges from the mine and analysis of potable water indicates that the annual
average concentrations of copper and lead being recorded in the Fly river system appear to pose no
substantial human health risk and, in any event, the majority of people in the affected area do not
rely on surface water for their drinking water supplies?. While Report 17 provides very useful
information regarding the social aspects and impacts of the Ok Tedi operations it is a very modest
effort compared to the many volumes on environmental aspects and a much higher profile and more
extensive work is needed regarding social sustainability. The complex social environment in which
Ok Tedi is situated, exacerbated or arguably caused by the fact that. Ok. Tedi is the only agent of
development in the Western Province, has meant that closure has multiple ramifications for the
community impacted by its operations and for the government with whom overall responsibility
rests for the welfare of its citizens. Thus, much
8 One (Report 15) was a summary of a baseline survey of nine villages in the vicinity of the proposed trial dredging area
prepared in 1998, and the other (Report No. 16) was a detailed account of a survey of 10 villages and 618 people located
along 800 km of the Fly river including the delta which was intended to provide a baseline against which potential health
effects of the mine might be compared. 9 In fact, the human health surveys indicated that people are very reluctant to
consume river water because of their (understandable) concerns about pollution and associated health risks, even during
extreme drought events (e.g. during the EI Nino drought of 1997). It was also noted in one of the surveys that many people
blame a wide variety of disorders being experienced on contamination of the river water by mine waste.
9
more information is needed regarding the social and cultural history and characteristics of the
communities affected by the OTML's operations and the impacts need to be examined under four
major aspects, namely consultation and participation of local communities; compensation; local
distribution of benefits and related social, economic and cultural impacts ; and employment impacts
during and after mine operations
C.1
Social and Cultural Background.
17. The existing documents in the Risk Assessment are sparse on the social and cultural history of
the environs of Ok Tedi In order to properly assess the impact of the different possible futures for
the mining operation, additional background information is needed as follows:
1. A definition of the project impact area is needed. Communities impacted by the project and
communities who have the potential to impact the project need to be identified. The current
understanding of the distribution of villages is hindered by lack of demographic maps.
Additional maps on the distribution of economic and ecological resources, social services
and assets would be helpful to both planning and understanding.
2, In the first stage of understanding the sociology of the Ok Tedi region a complete chart
listing the villages grouped under the different regions - Upper Fly, Middle Fly, Lower Fly,
Fly Estuary and. the. Tabubil and Kiunga road, together with their ethno-linguistic
classification, and available census would form the basis for categorizing the target
population groups affected by closure and for whom mitigating measures need to be
developed accordingly.
3, More information on the composition of the population in the regional towns of Tabubil and
Kiunga is also needed since the impact of closure on women, children and the elderly will
be different to those employed by the mine, or those who have been economically
empowered by providing contracting and other services to the mine.
4. In order to gain a proper appreciation of the social and cultural context impacting and
impacted by the Ok Tedi mine, more information is needed, on the social history, the
movement and composition-of the different communities into the Ok Tedi area, the
governing structure of each of these communities, the relationship between the various
communities- to each other, to the mine and to the different government agencies and the
extent of the influence each of the agencies extend over the welfare of the, respective
communities
5. The organizational structure and staffing of Ok Tedi's Environmental Relations Group and
also information on how the staffing in this group has evolved over the years, is useful to
understanding mine community relations and will serve to throw light on the history. of the
population, its movement and growth to the area, and explore the evolution and current
characteristics of the 'project dependency syndrome' that pervades amongst the communities
living within the vicinity of the mine and the mine's supply line - the Fly River.
6. Data or information on mobility trends and migration patterns is helpful to assessing
potential for renewal migration. Report 17 (Socio-Economic Baseline of Lower Ok Tedi)
notes the importance of movement between Kiunga and both the Awin and Yonggom
villages in the Lower Ok Tedi
10
(Kiunga is grouped under 'other North Fly' or 'Upper Fly') and finds that 1/3rd of the
population of Kiunga aged over 8 yrs and a 1/4 of the Miamroe population were resident in
Kitinga before 1990. This is attributed to the dredging project and the job opportunities that
villages expect out of it. There is no information however, on whether this expectation has
been met and the question is asked if such a return flow might continue (Report 17:28).
7. Conversely in discussing villages concern for closure. Report 17 raises the question of
Yonggom people migrating from Kiunga should the mine close and place even more
demands on village land in the Lower Ok Tedi regions . The decline of Kiunga commerce
and the out-migration from Kiunga to the Tabubil and the North Fly villages and the pressure
this would cause on the natural resources and available arable land is also an aspect that has
being highlighted in the Executive Summary of the Risk Assessment. Possible future
migration from Kiunga to the Lower and North Fly regions needs serious investigation, as
this could have significant impact on the food security to those areas and potential to cause
inter-ethnic tensions and strife.
8. For mitigation and conflict prevention purposes it is important to understand how villages
classify themselves and each other. "what villages regard as the village population (and
therefore what Ok Tedi reeognizes as the population for purposes of compensation) differs
rather sharply from what the census taker thinks it W' (Report 17:20). More understanding
and information is needed on (a) who is perceived by whom as part of the local group and
who is perceived by whom as refugees or 'border crossers' , and (b) the relationships between
'true landowners' and 'land users' and the likely consequences at mine closure when all these
groups compete for. a. diminishing resource. It would also be useful to document the
dynamics between communities living in the middle and upper Fly regions and also in
Tabubil and Kiunga.
C.2
Consultation and Participation of Local Communities
18.
Good practice (and World Bank guidelines) would discourage Government from reaching a
conclusion on issues of such substantial political, social and economic magnitude without
engaging in a process of public consultation to help it to assess the political dimensions of
the problem. This is also an area that NG0s (local and international) may well make a major
issue of, as already indicated by the number of NG0s that expressed their concerns in this
area. A consistent failing in many large resource projects is the lack of informed
participation of local communities in both the broader discussions on the project itself and
specifically in the social and environmental programs. Closure needs to be prepared in a
participatory manner and
communities need to invest and own the closure option (1st level stakeholders). There is also
a wider public audience consisting of NG0s and the wider community in PNG who stand to
be affected by Ok Tedi's closure (2nd and 3rd level stakeholders).
19. According to the Ok Tedi report 'Community and Environment Programs' the Ok Tedi
Rehabilitation and Planning Committee has been set up to facilitate communication on the
decommissioning process with all stakeholders, including three levels of government and the
communities that will be affected by mine closure
11
Report 17 shows that while significant differences occur with regard to Awin and Yonggom attitude
and perception to the mine, both groups overwhelmingly considered that the quality of their lives
had deteriorated since 1981, with the Yonggom being roughly twice as negative on this point as the
Awin (notwithstanding that objective data regarding life expectancy, educational opportunities, and
other measures of well-being point have improved). Both groups rated the performance of both
OTML and the Government negatively. With regard to mine closure, the Awin (who have engaged
in the cash economy generated by the mining operation to a greater extent) were rather more
concerned about the implications than the Yonggom. But it is clear from Report 17 that information,
especially regarding potential mine closure, has not been disseminated effectively, perceptively
failing to reach all target groups. More detailed information is needed on:
1. What type of consultation programs exists?
2. Who are represented at company level; government level, community level?
3. In what form and frequency has the program being implemented?
4. What kind of documentation/records exists in support of them:
a. From the government
b. From the company
c. From the community
5. What kind of local assessment procedures exist to measure compliance with
community/stakeholder relations performance standards?
C.3 Compensation
20. The whole issue of compensation has played a critical role in the history of Ok Tedi. The
key agreement that existed prior to 1996 concerning compensation was the Land Lease
Compensation Agreement. Compensation was limited to land lease compensation payments,
gravel royalties, and general compensation for food gardens and economic crops affected
during construction which was undertaken between Kiunga and the mine site. Since then the
scope of compensation has expanded considerably and today 6 different compensation
schemes exist. These additional compensation payments have enhanced the bargaining
position of the recipient villages and could possibly have changed the power structure in
those areas. One of the most important, and highly contentious concerning compensation, is
the 1995 RESA (Ok Tedi Restated Eighth Supplemental Agreement Act), where all
communities deemed to be affected by the changes to the river system are eligible for
compensation without proof of loss.
21. There seems to be limited understanding by almost all the communities in the Lower Ok
Tedi area with regard to the various compensation agreements. The compensation
agreements have not met the expectations of the affected peoples. The Yonggom people are
particularly alienated from the company and discontented with the outcome of legal actions
which have been launched against the company. The situation is not helped by the fact that
there are major misconceptions with regard to the Lower Ok Tedi agreement made in 1997
(Report 17:69). For example, there was an almost universal belief (in both the Yonggom and
Awin communities) that OTML should "fulfil its promise" to build new houses for everyone
in the area - but this is not in any agreement.. There is also a widespread belief that OTML
will provide further compensation for and/or rehabilitate land lost due to tailings deposition
12
whereas both the company and the Government are reportedly of the view that agreements
already in place cover all compensation and mitigation measures (i.e. that peoples'
expectations regarding additional compensation/rehabilitation are misguided). Such
expectations, although obviously built on false premises, nevertheless need to be better
managed under the consultation program so that the communities fully understand what is
actually in the agreements..
22. It is likely that the closing of Ok Tedi would be perceived as the shutting off an economic life
line with all its attendant problems. Further details are needed on how the general
compensation monies (K10 paid between 1984 - 1994), and the K4 million a year which Ok
Tedi continues to pay under the Eighth Supplemental Agreement, has been used and the
outcomes that have resulted. There may be some important lessons to be learned in this
regard. The data in the Risk Assessment regarding foregone profits (for the early mine
closure option) indicate that OTML is expected to be very profitable from 2000-2010.
OTML’s financial outlook needs to be presented in order to demonstrate what proportion of
the benefits are to be shared with the local people. Estimates are needed of the expected
future flows of monies to the communities including:
1 . The amount and source of expected future payments under different mine
closure scenarios
2. The size of the payments in relation to the expected turnover and
profitability of OTML
3. The agreements or regulations governing the payment
4. the targeted beneficiaries for such payment,
5. the intended use (if any) for the payment
6. who manages the various payments
7. the capacity of local government to provide services presently being
provided by the mine
8. whether the proposed level of social spending during further operations
and after mine closure is appropriate or not.
9. the expected use of the payment amongst the different beneficiary groups
10. steps that can be taken to maximize the benefits derived from the
payments taking into account especially the needs and expectations of
future generations within the communities
23. Removing the dredge could release funds that could be used for other types of environmental
improvements (e.g. in the mill) or for social improvements and compensation. Specific
information is needed as to the cost of the dredge and how the expected payments to the
villages as outlined above would be changed if the dredge were to stop operating. In
summary, much more attention needs to be given, on the size and use of payments related to
mine operations and how such payments can be adjusted and/or phased out at the time of
mine closure in a manner that is sustainable to the existing villages. Also, the Risk
Assessment addresses indemnity and compensation regarding future risks - but more details
and a fuller explanation is needed regarding the assumptions and calculations used and the
issues relating to indemnity, compensation, values used, and the period covered.
13
C4
Local Distribution of Benefits and related social, economic and cultural
impacts
24. The World Bank discussion paper No: 384 Integrating Social Concerns into Private Sector
Decision Making - A review of Corporate Practices in the Mining, Oil and Gas sectors,
states that one of the critical success factors with regard to natural resource sector projects is
'delineating institutional responsibilities between governments and the private sector to
provide support for social and community development activities (housing, water and
sanitation, health care, education, training and enterprise development, and infrastructure
such as access roads and bridges), either to mitigate social impacts or to improve social
cohesion'. OTML has become the principle agent responsible for providing for a variety of
social services such as health, education, training programs, infrastructure development and
local business development, in the Ok Tedi, Fly River areas. Half of the Western Provinces
funding comes from Ok Tedi. Significant advances have been made in the area of public
health with infant mortality down from 300 per 1000 to less than 15 per 1000, average life
span up from 30 yrs to 50 yrs and the incidence of Malaria decreasing from 70% of children
to less than 15% and amongst adults from 35% to less than 6% (Ok Tedi Mining Ltd.
Community and Environment Program 1999). Therefore a thorough analysis on how this
funding can be bridged in a sustainable- fashion needs to be done.
25. The mine closure committee needs to assess what measures can be taken to prevent the
regression of the advances made in the health and education spheres. The Ok Tedi
Community Agriculture Program covers approximately .110,000 sq. kilometers
(approximately 1/6th of mainland PNG). The program is aimed at establishing sustainable
agriculture activities that would provide the area with sufficient food security should the
mine close. This is especially significant in terms of off-setting some of the economic
impacts of the mine, which through the injection of a cash income has resulted in
communities becoming less dependent producing their own food and more dependant on
food purchases from outside sources.
1.
2.
3.
4.
5.
6.
The large risks related to malnutrition, food security and social chaos need to be more
carefully assessed in the light of the timing of ceasing operation.
A clear examination of measures to prevent such consequences is required including the
time period needed to successfully design and implement them.
An inventory of the type, quality, cost, funding sources and staffing of services; target
groups recipient of those services; a review on how these services have been used and
the level of community participation and investment in these programs.
A review on government participation and involvement in the social programs. An
overview of the government regional development plan and assessment on how these
programs fit or can be adapted to fit into the framework of a wider and longer term
development plan of the region. Number of government staff allocated and working on
each program - Central, Provincial, Local level.
Identifying the extent and level of partnerships that have been developed with regard to
social and community development initiatives.
Identifying the skills and training needed for government (e.g. Local Government
Council, Village Planning Units), community, NGO personnel to take over services.
14
7.
8.
C.5
Cost/benefit analysis of the various trust funds set up to support community
development activities.
Identify and acknowledge gender specific issues. Report 17 notes that women and older
member in the community were generally unaware of spin-off benefits and village based
development projects.
• What is the proportion of women and men who are self employed/operate
micro-enterprises?
• What is the current distribution of land between men and women?
• What are the differences in crops grown by men and women (food crops and cash
crops)?
• What would the likely gender implications be on health, consumption patterns, land
ownership, violence with regard to a shrinking income that is likely to result on mine
closure?
• What would be likely impact of closure on other vulnerable groups such as the
elderly, children and refugees?
Employment Impacts during and after mine operations
26. Ok Tedi employs almost 1900 people directly, (113 d of whom come from the Western
Province) and has created indirect employment opportunities to the equivalent of at least
four times that amount. Under its Business Development Program, 81 landowner businesses
have been established providing employment to 1,050 people. The majority of businesses
however seem to depend on OTML as a market for their services. Ok Tedi has being largely
responsible for influencing the shift from a subsistence based economic system to a cash
based economy. The arrival of cash based employment, and a large infusion of cash with
regard to
compensation payments to a community previously unaccustomed to handling cash has not
been without its problems. Competition for jobs has increased tension between villages.
"Few issues generate as much animosity among villages as that who is or not being
employed by OTML or other firms associated with the dredging project (Report17:71). On
the other hand if these job opportunities cease to exist, viable alternative employment
opportunities need to be developed, together with a program managing the transition back to
a subsistence traditional agricultural system if needed
1. What are the suitable income generating activities, that can be developed as an alternative
to mining, and that makes best use of the projected skills and abilities of the local
population?
2. How can the existing local businesses be integrated: into a long term regional
development plan of the government?
3. What mechanisms can be put in place to incorporate the removal of the rubber industry
subsidies (transportation), to prevent the collapse of the industry?
4, How can the lessons learned (positive and negative) from some of the other mining
experiences in Papua New Guinea (Bougainville, Misima, Porgera and Lihir) be translated
into a set of learning tools in the Ok Tedi case?
27. A feasible mitigation program countering the social, economic and cultural impacts of
closure, can only stem from an understanding of the complex nature of the
15
communities based on in-depth socio-economic baseline studies. The findings of these
studies serve to guide the design and implementation of mitigation program. It is important
to establish the objectives and the commitment of the company, government, local
communities and civil society in this iterative process. The resources that the company and
government are willing to allocate towards the process (design, implementation and
monitoring) needs to be stated.
D. Summary of the Risk Assessment
28. The objectives of the Risk Assessment were to identify and quantify the risks associated with
the various mine waste mitigation options which were being evaluated so as to define the
highest realistic financial exposures associated with each. As previously mentioned, the
options considered in the Risk Assessment were:

Dredge option - continuation of the current trial dredging scheme (nominally, about 20
Mtpa) until the expected end of mine life in 2010;

No-dredge option - demobilisation of the dredge at the end of the trial period in 1999 and
continuation of mining until the end of mine life in 2010;

Tailings option - continuation of the trial dredging operation to the end of 2001 during,
using the dredge material to build an embankment in which to store tailings, and the piping
and storing of mine tailings until the end of mine life in 2010; and,

Early mine closure - closure of the mine in the year 2000.
29. The Risk Assessment report attempts to provide as realistic a picture as possible of the
financial exposure associated with each technical option dealing with the management of
mine waste. The Risk Assessment attempts to determine the total cost that is most likely to
be incurred by the company for each of the scenarios, based on widely accepted techniques
of identification, characterization and quantification of risks. The total cost also includes the
opportunity cost of foregone sales revenue i.e. lost profits have been factored in as part of the
cost to OTML under the scenarios where earlier that planned mine closure is being
considered The financial costs associated with each development option consist of the base
engineering costs associated with implementing the project plus the costs of remediating
and/or mitigating unwanted and/or unexpected events that may be associated with
implementation of each development option if the full range of riskiest issues were to occur
over the period for which the financial projections are made (51 years in the present case)`.
The identification and characterization of "risk issuee” was based on the technical studies
and a series of risk workshops involving company staff, technical specialists and peer
reviewers. Quantification of risks (that is, estimation of the likelihood of particular events
occurring over the exposure period and the financial consequences of occurrence) was based
on a combination of technical assessment, consensus of appropriate experts and historical
data (where available).
'0 The
'riskiest issues' are those whose risk value (i.e. the product of the chance of a risk issue occurring and the
discounted net present value of the financial consequences of its occurrence) is greater than US$0.1 million.
16
30. Two approaches were taken in risk modeling: a threshold method, which assumes that the
risk cost is equal to the sum of the exposure costs of all of the riskiest issues and/or all the
most likely risk issues"; and, a simulation method which attempts to model future outcomes
by allowing the model to determine which risk issues occur and at what magnitude. The
latter tends to provide lower cost estimates than the former and was mainly used to provide a
measure of the uncertainty associated with risk cost assessments derived from the threshold
estimates.
31. The Risk Assessment presents a variety of cost estimates but the most Illustrative is the
“total scheme” costs for each of the options, with the total scheme cost comprising the base
cost plus a risk cost range which reflects the difference between the risk cost estimates using
the threshold and simulation methods of analysis. The results from the Risk Assessment are
shown in Table 3 (the costs represent the Net Present Value of all costs using a 9.75%
discount rate and are expressed in 1999 US$).
Table 3: Total Scheme Costs for Each Option According to the Risk Assessment
--------------
Approximate Costs (US$ million - 1999 terms) -----------Base Cost
Risk Cost
Total Cost
Dredge option 294
20-70
300-400
No-dredge option 177
30-140
200-300
Tailings option 426
20-70
400-500
Early closure option
479
30-90
500-600
Note: Early closure option includes opportunity cost of foregone profits.
Source: Risk Assessment
32. The risk analysis confirms what we would expect on a purely intuitive basis. First, the lowest
cost to OTML is to continue operating until 2010 under the nodredge option. The highest
cost option is to close the mine early and fbrego 10 years of operating profit. From an
environmental standpoint, the best option is to close the mine immediately since this avoids
the discharge into the Fly River system of some 200 - 300 million tonnes of tailings and
mine waste which will occur if mining continues to 2010. But from a social standpoint this
would result in a potentially disastrous situation because there is no preparedness for mine
closure. The major attractions/disadvantages of the four options are summarized in Table 4.
The clearest distinction is between the early closure option and all other options.
In addition to the use of a risk cut-off (see footnote 14), a frequency cut-off was also applied. Issues which had
a likelihood of occurrence of less than 10-5 (or 1 in 100,000) over the life of the project were not included in
the analysis of risk cost. Ibis tends to eliminate events which might be of very low probability but very
substantial consequence.
17
Table 4. Summary of Main Comparative Attractions/Disadvantages of the Four
Options
Option
Attraction
Disadvantage
Dredge
Dredging will lower bed
Levels in the Ok Tedi to some
degree with decreased flood
frequency and flood plain
Aggradation will continue ownstream of
the Ok Tedi;
Navigability in the Fly will reduce to
about 40% (from current availability of
deposition (in the Ok Tedi 5 0 0/o);only);
Local communities expected to react
adversely (the company believes that they
would rather that the money being used to
finance the dredging operation would be
used better by investing in the local
1 economy);
No- Dredge
Tailings
Early
Closure
Demobilization of the dredge Higher downstream aggradation than the
would provide an income
dredge option so downstream flooding
strewn that could be used to and dieback will increase;
mitigate critical social issues Navigability will reduce to 25 - 30%;
(this implies a limit on funds Risk of avulsion (change in course) of the
otherwise available to
Fly River due to aggradation is highest for
mitigate critical social issues); this option, If avulsion occurs, the most
likely receiving water is the Agu river and
the result would be ecological damage to
an otherwise untouched catchment,
additional compensation liabilities and
further reduction in Fly River navigability
The risk of adverse international reaction
was assessed as being highest for this
option.
Both OTML shareholders and
Loss of local- community's traditional land
wider stakeholders (local and
could be source of long-term resentment;
international community)
Suspended sediment load will remain high
likely to support this option as
(so there will be no immediate visual
it is believed to be widely
change in the water quality
perceived as modern industry
situation in the river)
best-practice standard.
May be long term risk of acid rock
Will have similar effects to
drainage from the tailings disposal area
the dredge option in terms of
aggradation, dieback and navigation
Immediate reduction in
aggradation in the Ok Tedi
although sediment wave will
take many years to move
down the Fly River system;
Avoids input of about 200 300 Million tonnes of mine
wastes into the Fly River
Major adverse economic effects on the
local community (this is a feature of all
the options although it would be much
more imminent with the early closure
option);
Major adverse impact on the national
economy due to lost of excise and tax
revenues;
system which would occur
with adoption of any of the
other options.
Conversion of local economy to
essentially subsistence basis plus
temporary increase in exploitation of local
natural resources as people are forced to
increase demands on the
environment
for survival.
Source: World Bank staff derived from the Risk Assessment
33. Against its environmental attractions has to be weighed the fact that the early closure option also
would have the worst short term economic and social impacts due to lack of preparedness to deal
with the social shocks and costs associated with immediate mine closure including loss of jobs in
the region and the loss to Provincial and national governments of the tax and excise revenues which
would accrue from an on-going mining operation This is only a distinguishing. feature however, if.
(i) an "orderly mine closure plan” is developed and implemented to cover mine closure (as is
developed under the other three options according to the assumptions used in the risk assessment);
and, (ii) the orderly closure plan includes provision for reducing the ultimate social and economic
shock of mine closure (e.g. by providing for gradual phasing out of mining over an extended period
to provide time for the local and regional economy to adjust). If these conditions do not apply, the
only thing that distinguishes the early closure option from the other option in terms of ultimate
social and economic risk is in the timing.
34. Excepting the early closure option, the balance between the other options is as follows
(excluding considerations of cost). The dredging and tailings options are similar insofar as they
reduce the total load of sediment being discharged into the Fly River system which reduces
aggradation in the Ok Tedi should result in some lessening of the incidence and severity of flooding
in: the Fly River system and constrains the deterioration in navigability of the Fly which is
associated with all options other than early closure. The tailings option is disadvantaged by the fact
that it may increase the likelihood and consequences of long term acid rock drainage (ARD) and it
may lead to conflicts with the people who- ancestrally own or have rights to the tailings disposal
site. It should be noted however, that neither the risk assessment or the supporting technical reports
made it very clear why the dredge option does not raise a similar although perhaps less
consequential risk`
35. In comparison ' the no dredge option appears to be the least environmentally attractive option of
all. However, from a social perspective the risk assessment indicates that a major social benefit
would be that the money being used to finance the dredging operation could be re-directed to
investments in the local community. However, it is not clear that this would be a necessary
consequence of cessation of dredging and a more detailed explanation of this possibility is needed
from OTML. While little detail is given in the risk assessment, the. foregone profits associated with
closure in 2000 indicate that the mine will be very profitable form 2000 to 2010. An assessment of
the cash flow of the mine over this period is needed including the expected receipts of different
stakeholders ( e.g. dividends to the three shareholders, fiscal transfers to central Government,
distribution of compensation and benefits to landowners, transfers to the Provincial Government,
expenditures on infrastructure etc.
The river sediments contain quite high levels of particulate copper and at least parts of it are potentially acid forming. Thus
there would appear to be some risk of acid being generated from the disposed dredge spoil although perhaps not to the
degree that it could be from disposed tailings.
'2
Another important question is the capability of provincial and local government to put such funds to
good use. This information would be very useful to the assessment of additional options and the
identification of the economic and social implications of mine closure at ^rent points in time.
E.
Comments
36. The risk assessment was commissioned by the company to assist it in assessing the potential
environmental, social and, ultimately, financial consequences of four development options which it
had previously identified. The reports acknowledge that "none of the options for mitigating
environmental impacts, or otherwise operating Ok Tedi provides a clear best alternative forward”. It
is therefore in this context of inconclusiveness, at least in the view of the mine operators, that the
following comments are provided.
37. The technical and environmental reports underlying the risk assessment appear to be
comprehensive and the independent peer reviewers and auditors commissioned to review them
generally concur in affirming that the quality of scientific and technical expertise underlying them is
of a high order. The risk assessment itself was also subject to independent audit and the auditor
concluded that: (i) an appropriate risk assessment process has been adopted; (ii) the quantitative risk
analysis models are appropriate; (iii) the risk assessment process and the quantitative analyses have
been implemented. well; (iv) OTML management can rely on the conclusions of the risk
assessment; and, (v) OTML’s objectives for the risk assessment have been achieved. On this basis it
is concluded that the technical and analytical information presented in the risk assessment and
supporting documents provides as good an evaluation of the scientific, engineering and financial
options and consequences as can reasonably be expected". This is not the case, however, regarding
the social aspects of the risk analysis. As noted previously considerably more work- is needed to
bring the social analysis up to the same standard as the environmental work. This said, there are
three main comments that can be provided which the Government may want to consider when it is
reviewing these reports and determining its position. These are summarized below.
38. First, the Risk Assessment Does Not Provide an Adequate Evaluation of Risk from the
Government's Perspective The Risk Assessment is incomplete in terms of the integration of social
and environmental costs so as to make them comprehensive enough for the Government to decide
on next steps i.e. the Risk Assessment does not provide. an. adequate evaluation of risk from the
Government's perspective given the broader scope of issues the Government must consider. Nor
does the risk assessment adequately address the trade offs. between environmental and social costs
according to the timing of mine closure. The Risk Assessment views risk from as a purely financial
proposition and assesses risk totally from the perspective of the company (which is completely
understandable since the company commissioned it). The Government shares this perspective to the
extent that it is a shareholder in the
It should be noted that certain studies (e.g. Acid Rock Drainage) are still underway and the DLRA has not yet been
reviewed by the Peer Review Group so there is some information outstanding but, on balance, it is difficult to see how this
additional information would significantly alter the balance of risks and consequences that are already set out in the
documents.
13
20
company. But the Government also has wider responsibilities and concerns. It has to consider the
situation of other local, Provincial and national stakeholders, not only of the current generation, but
future generations as well. In this context, the Government needs to determine whether the risk
analysis, as presented, provides adequate guidance or whether it should "re-cast" the analysis in the
light of the full range of factors it needs to take into account. The costs associated with the various
options presented address the financial viability of the mining operation, which is not the same as an
economic review from a "natural resource economics” perspective;

The report does not give anywhere near the same attention to social issues as to environmental
impacts - yet the social is just as important as the environmental. The report emphasizes the
social chaos that would occur if mine closure took place next year but it does not examine how
long is needed for: a) the necessary preparation to take place so that mine closure could take
place in a socially acceptable manner, and; b) strong local government institutional capabilities
to be built up to support the mine closure strategy. It is clear that significant investments in the
local communities will be required to mitigate the socio-economic impacts of mine closure,
regardless of its timing. Removing the dredge could release funds that could be used for other
types of environmental improvements (e.g. in the mill) or for social improvements and
compensation. More information is needed in this regard. But regardless of whether or not the
dredge is moved, the report indicates OTML is expected to be very profitable from 2000-2010.
However, the report does not show how these profits are shared with the local communities or
whether the proposed. level of social spending is appropriate or not.

Inadequate attention was paid to the cost of closure, particularly the need (which was not
discussed) to work towards a final landform that mininzes soil erosion, landslips and landslides,
and leaching of wastes (associated with the disposal of refuse, oil lubricants, copper from waste
rock and tailings, human waste, etc. at the mine site). Since a mine closure plan has not. yet been
tabled, it is impossible to determine if it is environmentally and socially sound, which means
that it is also impossible at this stage to judge its final cost;

Little or no attention in the Risk Assessment was given to the impact of the various options of
mine closure to the overall macro-economy of the country, yet such impacts will be considerable
given the significant share of GDP, exports, foreign exchange and employment in the country
provided by Ok Tedi.

The Risk Assessment does not provide estimates of payments to be made to cover the long-term
costs of managing the impacts of the mine nor does it address how the Government should
manage such funds which is as important as determining the amount of the financial
responsibility. In considering financial consequences, the Government needs to consider all of
the financial consequences which might accrue to it through, for example, the changes inrevenues attributable to it from the mining operation and liabilities it might incure in providing
financial relief to affected communities in the event of mine closure either now or in the future.

The risk assessment does not provide adequate guidance on how to deal with the social and
political consequences of whether the mine should close or continue to
2
operate and, additional studies should be commissioned to clarify the dimensions of such
concerns. It should be noted that the social studies undertaken as part of the assessment
highlighted considerable levels of discontent amongst the affected communities and,
presumably, this might have a bearing on the ranking of the various options considered.
39. Second, the Four Options Presented in the Risk Assessment Do Not Represent the ~ Options
Available. There are two dimensions to this issue. First, the four options analyzed do not appear to
all be fully realistic options. Most importantly, the Risk Assessment indicates that the early closure
option (under which mine operations cease completely in the year 2000) would result in severe
social crisis and disorder. It is very difficult to imagine that any major investor or government would
permit itself to be associated with such developments. This reinforces the view that the early closure
option (as defined in the Risk Assessment) may not be a realistic option at all. The risk assessment
also notes that the. "no dredge" option would apparently reduce the availability of the Fly River for
navigation to 20 - 30%. The question arises whether the mine could continue to technically and
economically operate under such circumstances and hence, again, whether this is a realistic option.
If it is the case that neither early closure nor no-dredge are real options, then the choice would
appear to reduce to a decision between the dredging and the tailings options. Yet, it is by no means
clear that there is very much to separate these two options, at least in environmental terms.
40. The second and more important dimension is that there are options worthy of consideration
other than the four considered in the risk assessment. One logical response the Government could
make is to adopt the position that the Ok Tedi Mine needs to be moving towards closure as soon as
possible. This does not mean that the mine should close in 2000. In fact, without a draft mine
closure plan and an environmental social assessment of that closure plan, it is currently impossible
for the mine to close. But to wait until 2010 to adopt the position that the mine should begin
working towards closure is likely to result in increased environmental impact, prolonging the period
needed for natural and artificial- rehabilitation of existing damage to be accomplished, and is likely
to aggravate any associated increase in political, economic and financial costs attributed to the mine.
An alternative option would be to develop a transitional phase-out approach to provide a better basis
for addressing the economic and social disruptions that were posited to accompany the early closure
option (and would accompany closure at any other time if no ameliorative action were taken).
41. The most important point to be made is that. the environmental work suggests that earlier
closure is the best option but the social assessment indicates that improper and hasty mine closure
can result in even worse and. longer term impacts than that experienced with the working mine.
What is needed, therefore, is an investigation of the timing of mine closure that would achieve the
best balance of environmental and social impacts combined. Such work involved a shift from the
theoretical realm of predicting impact to the practical world of how best to deal with the impact in
the near, medium and long-term. This will be as difficult and time consuming as was the assessment
of environmental and social risk. Therefore, the sooner this process starts the better. The work
needed is to examine what would be the environmental and social consequences of a more phased
approach and what strategies could be applied (e.g. formation of trust funds) to underwrite potential
long term liabilities?
22
42. Third, Any Decision on Mine Closure Cannot Reasonably Be Made in the Absence of a Mine
Closure Plan and Mine Closure Strategy. One of the main underlying assumptions of the risk
assessment was that "... there will be a comprehensive mine closure plan that adequately addresses
the engineering, environmental and social aspects associated with the end of the project." It also
assumed for all four options, that cessation of mining would be followed by a 10 year aftercare
period after which OTML would cease to exist. The report does not provide any information or
details on the mine closure plan or broader mine closure strategy. A critical shortcoming of the Risk
Assessment as it stands is that it is not possible to assess the appropriateness of social and
environmental mitigation measures that are being considered in the mine closure strategy and
whether. international best practice is being followed. It is understood that OTML is presently
finalizing a draft mine closure plan for submission to Government but it is not clear from the
documents what the assumed nature of a comprehensive mine closure plan might be, what its
financial consequences would be, and whether the plan and financial consequences would
necessarily be the same for all options. Inadequate attention is given in the Risk Assessment to the
cost of closure, particularly the need to work towards a final landform, that minimizes soil erosion,
landslides and leaching of waste. Since a mine closure plan is still being prepared, it is not possible-,
to determine if it is environmentally and socially sound, which means that it is also not possible at
this stage to judge its final cost. The Government, thus, can not make any assessment of the options
in the absence of an agreement as to what such a closure plan might entail and how it might be
financed.
43. It will be important that the OTML draft mine closure, plan takes into account not only
historical contractual requirements but also best international practice and that fully address the
environmental and social measures needed to accomplish mine closure in a manner that adequately
mitigates the potential impact on the affected peoples. The Plan should be based on in-depth.
consultation with stakeholders (shareholders, communities, national and provincial governments,
NG0s). It should include a detailed budget, preliminary financing arrangements and a timetable
planning exercise that takes into account the competing environmental and social imperatives. The
Plan should also have an implementation schedule, including tasks to be implemented by the
company, community organizations, NG0s and Government. It should also identify the outside
technical- "stance needed for longterm implementation purposes. The mine closure plan should
present a timetable for ramping down commercial exploitation of the ore body. and ramping up
expenditures for mine closure. It should also address the capacity of local government to take over
functions that have been typically undertaken by OTML. The Government will need to an
independent review of the proposed mine closure plan, including involvement of the affected
communities in its assessment. Until the mine closure plan is reviewed and accepted, commercial
operations should be allowed to continue at the Ok Tedi mine- with suitable environmental
safeguards in place. Some preliminary thoughts on the content to be included in of such a plan are
provided in Table 5.
44.
Preparations for closure should be initiated: without delay given the traditionally long lead
time associated with social impact mitigation measures.
23
The mine closure plan should be supported by a comprehensive and participatory mine closure
strategy that addresses the medium to long term future of Western Province together with the
implications for the overall economy of PNG . While the mine closure plan will be a company
document, preparation of the mine closure strategy should involve both the provincial and national
governments, OTML, and interested stakeholders through a participatory mechanism. Western
Province is facing a transition, over a period of a few years, to a situation where the revenues to
Western Province will be cut by half and where many of the social services (health, housing, etc.)
will be transferred to the Government. Very little has been done so far on understanding how best to
achieve that transition. The area has undergone a relatively rapid transition to a cash economy, with
all the strains that that imposes, but also to significant improvements in the many of the key
development parameters such as infant mortality. A rapid regression, given the expectations that
have been generated, would have very serious social and political consequences. The strategy
should include a Transition Plan, covering what the Government. needs to do, in terms of revenue
management, capacity building, generation of alternative opportunities and provision of social and
infrastructure services. Such a Transition Plan must fit with the mine closure strategy and would
mirror the mine closure plan of OTML and would need to be implemented by a transition team to be
established between the Central Government and Western Province. The Government will need to
undertake an independent assessment of financial costs of amelioration and compensation costs. It
will also need to determine how funds received from OTML can be managed to generate a
more-or-less permanent income stream over- the very long term (since observed, predicted and
unexpected environmental and social impacts are likely to be long-term) and the institutional
capacity to make sure that- these funds are properly and productively used.
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Table 5 : Possible Content of a Mine Closure Plan.
A.
Background and Area of Impact
Summary and background regarding the details original environmental assessment, environmental
management plan and environmental audits. Identification of the area of impact of the mine closure
(not just the mine site- but a11 waste disposal sites, infrastructure, transport routes, loading and
storage facilities etc.)
Identification of the communities affected by closure including l` Line (Directly Affected), 2nd Line
(Indirectly Affected) and3rd Line (International interest groups); Identification of stakeholder
expectations; and making the stakeholders part of the decision-making process; how are the
concerns and aspirations of the key stakeholders being reflected in the closure plan
c
Regulatory and Contractual Requirements.
Regulatory requirements or contractual agreements related to mine closure including land tenure,
national, provincial and regional regulation and foreseeable regulatory developments
D.
Environment
Identification of the environmental protection and remediation needed and estimation of the costs
and timetable of physically closing the mine, with special attention to hazardous plant, materials and
wastes. These should cover physical stability, chemical stability and land use and should cover
mining operations, waste dumps, tailings, plant and infrastructure. Time needed for physical mine
closure; the proposed timetable for ramping down commercial exploitation of the ore body and
ramping up expenditures for mine closure; the final landform and land use of the mine site, and
plans to ameliorate impacts already in evidence at the mine site, in the Ok Tedi and Fly Rivers and
their floodplains, including hydrology, physical and biological landscape, ecology, flora and fauna
E.
Social
The social aspects of mine closure and estimates of the costs and the time period within which these
can be adequately dealt, this includes food security and managing the transition back to a
subsistence traditional agricultural economic system, if needed; sustainability of existing social
services taking into account the sustainability and level of government institutional involvement,
commitment and participation in the social services provided; involvement, participation and
representation of local communities in community activities and services; the extent and level of
partnerships that have been developed with regard to social and community development initiatives;
the findings of work on social sustainability and on the capacity'of local' authorities to administer
the communities and properly use funds that are available after production stops; sustainability of a
cash economic system; sources of employment and income generating activities and levels of
income post mine closure; location of possible income generating
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opportunities in relation to affected communities and possible implications regarding migration;
also the broader impact of mine closure on the national economy.
F.
Compensation
the environmental and social costs of amelioration and compensation both of existing and predicted
impacts, and include some leeway for unexpected impacts; OTML’s view of its financial
responsibility for amelioration and compensation of social and environmental damage;
compensation amounts, recipients and delivery mechanisms; relationship of i compensation to
incomes needed for communities to survive.
G.
End Point Criteria
Targeted outcomes relating to (a) social - including building local government capacity,'
building local community capacity, community and social development, economic
sustainability, conflict flee and harmonious communities and (b) physical including
landform stability, soil stability, water quality, soil formation.
H.
Post Mine Closure and Conflict Resolution
How the mine closure process will be monitored and how post-closure sustainability will be
monitored; liability and indemnity regarding past, present and future harm Sources of possible
post-mine closure conflicts and mechanisms for resolving them.
9