Environment Pays Price for Infrastructure Inefficiencies

March 23, 2014 Posted by otwatchweb

Originally published by EurasiaNet.org

Reposted from: http://www.eurasianet.org/node/66014

October 5, 2012
By Pearly Jacob

Mirage-like, a slinky piece of asphalt appears on the horizon after hours of driving across the dusty Gobi Desert. What’s coming into sight is the only paved surface for miles around. Yet many trucks are driving alongside the new highway, not on it.

In southern Mongolia’s mineral-rich hills, mining companies – foreign-run and local alike – are having trouble sharing something that should be a no-brainer: the roads. Despite the region’s remoteness, now two more roads are being built parallel to the new highway. They’re within spitting distance of each other – all heading through the same valleys and over the same hills towards China. And it’s the local nomadic herders paying the price.

Energy Resources, a private Mongolian firm, built the one existing road from its coal mine in Tavan Tolgoi – the world’s largest untapped coking coal deposit – some 245 kilometers to the Chinese border at Gashuun Sukhait. When it opened in 2011, herders in the vicinity welcomed the promised relief from dust stirred up by the constant traffic of coal trucks to the border. But with so many trucks still running on the bare earth, and construction seemingly nonstop alongside the new road, the air is just getting worse, residents and environmentalists complain.

That road was built on a 10-year build-operate-transfer concession agreement with the government, permitting Energy Resources to charge tolls on third-party users until handing the rights over to the state in 2021. But drivers working for neighboring mines say the toll of 180,000 tugriks (about $130) per load is exorbitant. One driver explains why he can’t afford to drive on the road: “We’re given 200,000 tugriks to deliver our load to the border and come back. If we pay the toll, there’s nothing left for us,” he said. To evade the toll, he drives on dirt tracks parallel to the new paved road.

A spokesperson from Energy Resources would not discuss the toll rate. In an email exchange, however, he defended the toll scheme and said the paved road still saves other companies money on fuel, time, and vehicle wear. Energy Resources has also recently signed an agreement with the government to build a railroad along the same route.

Running parallel to the Energy Resources road is a yet-unpaved road being built by a subsidiary of a private Mongolian company called Ajnai Corporation. A 2011 report published by USAID, Washington’s aid arm, raised concerns about Ajnai’s intention to build the road to avoid the Energy Resources toll. One problem, the report said, is that “local governments have the authority to construct their own roads, so there is no coordination.”

One hundred kilometers further south, the Oyu Tolgoi copper mine — a joint venture between Canada’s Ivanhoe Mines, British-Australian-owned Rio Tinto and the Mongolian government — is building yet another road, which will run alongside the Energy Resources road to the same border checkpoint at Gashuun Sukhait. The three roads crisscross each other at times but mostly run parallel. If all three are paved, this will mean over 500 kilometers of surfaced roads on this single, sparsely populated route. By comparison, in 2010, according to UN figures, Mongolia – a country roughly the size of Western Europe – had less than 2,600 kilometers of paved roads in total.

These routes bisect wildlife corridors between two adjacent national parks, the Small Gobi Special Protected Areas.

“Counting the proposed railroad, this will mean four parallel roads. Wildlife in this region, particularly the khulan [Mongolian wild ass] and gazelle, have already been affected by mining activities. When the roads are built, their migration routes will be cut off by not just one, but four dangerous crossings,” said Batsukh Choijonst, an ecologist at the park headquarters in Khanbogd. He said he asked government officials to find a way to limit the number of roads, but never got a response.

When asked if there was a way to collaborate with Energy Resources to improve the capacity of the existing paved road and share it, an Oyu Tolgoi spokesman said building a new road was part of its promise to the government.

Watchdogs feel the government is not doing enough to promote infrastructure efficiency. “We think it’s the government’s responsibility to fix its policies. You cannot allow every mine to have its own road. … It’s ridiculous,” said Sukhgerel Dugersuren, director of Oyu Tolgoi Watch, a non-governmental watchdog group.

Experts working on transportation development in other parts of the country also admit concern. “In building any linear infrastructure one would want to ensure there’s rational planning to avoid duplication of routes to minimize impact on the environment,” said Shane Rosenthal, deputy country director of the Asian Development Bank.

For herders affected by the dust, paved roads are petty compensation. At a camp site about two kilometers from the Oyu Tolgoi road construction, a local goat and camel herder, Dambadorj Mukhbayar, noted that the roads are fragmenting pastures and creating unnecessary dangers for his animals: ” Oyu Tolgoi is starting to pave the road now, after bringing in heavy equipment on dirt roads all these years. How can the new roads compensate for the damage already done?”

Leading Mongolian lawyer dismissess sentence given to Munkhbayar

February 25, 2014 Posted by otwatchweb

Reposted from: http://www.transrivers.org/2014/1066/
29 January 2014

Rivers without Boundaries finally obtained proper English translation of the  CRIMINAL CODE OF MONGOLIA  .

 According to this UN-approved copy the articles, according to  which Munkhbayar and each of his his friends were sentenced on January 21 to 21 year in prison, have the following titles:

Article 81. Act of terrorism

Article 177. Banditry-“zandalchlah” (see legal definition of this “zandalchlah”after the article)

Article 185. Illegal acquisition, preparation, keeping, carriage, distribution and

manufacture of firearms, ammunition and explosives.

However, they were fully cleared from accusations based on  Article 149. Extortion of property, because they apparently did not force money out of mining company.

January 22 press-conference at Zuuny Medee

January 22 press-conference at Zuuny Medee


The RwB representatives have declared on the first press-conference on January 22  that the sentence is absolutely disproportional to the deeds of protesters, and soon we learned that lead experts in Mongolia share our concerns and are even more radical in their judgement than NGOs. Zuuny Medee Daily on January 24,  presented an interview  taken by By Ch. Ul-Oldokh from the prominent  Academician Lawyer S. Narangerel regarding the 21 year and 6 months’ imprisonment sentence delivered by the court on the leader of “Fire nation “Ts. Munkhbayar and his team. Here we present translation of relevant parts done by Sukhgerel Dugersuren (OT Watch\RwB Mongolia). After the interview we provided text of relevant articles of the Criminal Code.




- The longterm imprisonment sentence delivered by the court on for Ts, Munkhbayar and team has shocked the public. What do you think about this court decision?

S. Narangerel-The court has delivered an inexplicably “inhumane” sentence in the opinion of right-mindedpeople in Ts. Mukhbayar’s case,which does not contain the elements of a grave crime against public security such as the crime of “banditry”.

I will not hide that I think that the court which delivered this sentence is not court where right or wrong is weighed but political tool that carries out repression and stamp on acts.

-Clause 177.2 of the Criminal Code which stipulates that subjects charged with a terrorist act under the clause shall be sentenced to 20-25 years of imprisonment.  That is what the court has applied?

S. Narangerel- I just said the court has applied this sentence in the Ts. Munhkbayar case when there is not element of a crime that is described as “banditry”.

-Why do you think so, can you elaborate?

S. Narangerel-Legislators defined the key element of “banditry” as direct or indirect act of forcing a public office or official to deliver or refrain from deliver  a certain decision.

Article 16 of the Criminal Code requires that a criminal offence have an element of a serious threat to society. Some decision-makers submitted a draft legislation that will derogate or weaken “the law with the long name”. A fight to stop this draft is all that took place here. (see THE SHORT HISTORY OF THE LAW WITH LONG NAME) (2009-2013)

The purpose of “the law with a long name” is to prevent land destruction, especially in headwaters and fragile areas, that will benefit the for profit interests of individuals. There is no way an attempt to stop an amendment that would make such a law weaker or derogate its implemention should be interpreted as a threat to society. This public interest demand is in fact in full conformity with the fundamental rights and interests of the Mongolian people.

In addition to this the Criminal Code stipulates that the crime should not only contain an element of demanding a public office or official to deliver or refrain from a certain decision but also should include an element of use of force or threat to use force that creates fear and panic in society, which did not happen in this case.

-You just mentioned use of force that creates fear in society did not happen in this case. Under the Criminal Code what is the definition of that use of force or threat to use force that creates fear in society?

S. Narangerel-Use of force that kills large numbers of people, causes harm to their health, kidnap, arson that shocks society. Ts. Munkhbayar team has not caused any damage to life or health of anyone. They did not set fear in people by threatening to use or shooting at the public.

The fall session of the parliament was not even disrupted by this event. There was no damage caused to other people’s property. That is why there was and is no fear in the society. On the contrary, the public has received this act of showing fire arms as a last means left in their attempts to protect the environment and natural resources, a fight of courage and will. The clause of the Criminal Code defined as “banditry” is essentially a terrorist act, a crime of terrorism.

-You mentioned that there was no element of “terrorist act” in the Ts. Munkhabayr case. How should the appellate courts consider this case?

S. Narangerel  - Judges, prosecutors and investigators’ salaries are financed by taxes paid by citizens. The taxpayer tasked them to pacify the criminal and protect the innocent . They do not pay them to suppress the innocent and encourage the criminals. Therefore the court should abide by the fair justice rules and acquit the case based on the lack of elements of the alleged crime as stipulated in the Criminal Procedure Code. If it is too embarrassing for the court to acquit in such a manner, they could use Clause 16.2 of the Criminal Code stipulating that “An act or omission which, though formally containing signs of a criminal act specified by the Special part of the Criminal Code, poses no social danger by virtue of its little significance, shall not be qualified as crime”.

-How do you define “insignificant”?                   

S. Narangerel-It means that the intent was insignificant and caused no harm or damage.

- So no punishment at all?  Ts. Munkhbayar after all did walk on the government compound with fire arms in his hands?

S. Narangerel-One should look up the  stipulations of “illegal possession of fire arms” in the Criminal Code or the Administrative Law and see if there is a provision for an administrative penalty.

-What is the punishment for carrying fire arms illegally?

S. Narangerel-The highest sentence is 5 years of imprisonment.

-You are very critical of the new draft Law on Crime submitted by the Cabinet. The Munkbayar case seem to support the position that the letter of law, its definitions in Criminal Code need to be straightforward, clear and simple for everyone to understand and interpret?

-I think that the fact that the court sentenced Ts. Munkhbayar team to 21 years and 6 months of imprisonment will trigger some thought within the society. The 2002 Criminal Code was not a good code.



Article 6. Principle of Justice

6.1. Punishment and other measures of criminalliability shall correspond to the nature and

degree of the social danger of the crime, the character of the culprit and circumstances of the


6.2. A culprit shall be subjected to criminal liability once only.


Article 16. Concept of Crime

16.1. Culpable acts and omissions subject to the criminal liability specified in the Criminal

Code which are socially dangerous shall be recognized crimes.

16.2. An act or omission which, though formally containing signs of any action specified by

the Special part ofthe Criminal Code, poses no social danger by virtue ofits little

significance, shall not be recognized a crime.


Article 17. Classification of Crimes

17.1. Crimes shall be classified as follows according to the nature and degree of their social

danger and gravity of the punishment to be imposed:

17.1.1. minor;

17.1.2. less serious;

17.1.3. serious;

17.1.4. grave.


Article 81. Act of terrorism

81.1. Encroachment on the life of a state or public figure committed in connection with

his/her state or public activities with the view of destabilizing the public order or influencing

the decision taken by the government bodies or preventing political or other public activities

shall be punishable by imprisonment for a termof 11 to 15 years.

81.2. Assassination of a state or public figure withthe view specified in paragraph 1 above

shall be punishable by imprisonment for a termof 15 to 25 years or the death penalty.

Article 149. Extortion of property

149.1. Demand to transfer property or the right of ownership, or to performany actions of the

property nature under a threat of violence in respect of the victimor his/her close relations,

spreading of slanderous or libelous information about the victimor his/her close relatives,

damage or destruction of their private property or the property in his/her custody or under

guard, which could potentially cause a real damage shall be punishable by a fine equal to 251

to 300 amounts of minimumsalary, incarceration for a termof more than 3 to 6 months or by

imprisonment for a termof up to 3 years.

Article 177. Banditry “zandalchlah”

177.1. Arson, blast of explosives, poisoning and other similar actions or threatening to do

such with the purpose of organizing an armed band with a view of attacking state or public

enterprises, institutions, organizations or individuals as well as participation in such bands and

in attacks committed by themshall be punishable by imprisonment for a termof more than 10

to 15 years.

177.2. The samecrime committed by a recidivist, an organized group, a criminal organization

or if it has entailed human death another grave consequence shall be  punishable by

imprisonment for a termof more than 20 to 25 years or the death penalty.


Article 185. Illegal acquisition, preparation, keeping, carriage, distribution and

manufacture of firearms, ammunition and explosives.

185.1. Illegal acquisition, preparation, keeping, carriage, distribution and manufacture of

firearms(other than hunting), ammunition or explosives shall be punishable by a fine equal to

31 to 50 amounts of minimumsalary or by incarceration for a termof 1 to 3 months.

185.2. The samecrime committed repeatedly, by a group at an advance agreement, by an

organized group, as well as illegal manufacture offirearms, ammunition and explosives shall

be punishable by imprisonment for a termof 2 to 5 years.

Civil Society Review of the Oyu Tolgoi audit and Operational Management Plans

December 3, 2013 Posted by otwatchweb

For a PDF of the document click: CSO review of the OT OMPs final

November 13, 2013

The Oyu Tolgoi (OT) copper/gold mine in the South Gobi aimag of Mongolia, which is one of the International
Finance Corporation’s (IFC) largest and most complex infrastructure investments, poses a significant
environmental and social risk to the local community of Khanbogd soum in the South Gobi, as well as to the
country at large. As presented in our collective submissions before the Board approval in February 2013,1 the
Project’s ESIA was incomplete and retroactive, a situation that was partially remedied with the recent, but much
delayed, publication of the project’s Operational Management Plans (OMPs).
While we are pleased that the plans, as well as the April 2013 audit of the project, have finally been published,
we are concerned that the OMPs and the audit fail to address many of the key issues we flagged to the IFC and
the European Bank for Reconstruction and Development (EBRD) back in February. In the absence of an
opportunity for formal public comment, we take this opportunity to provide some initial thoughts regarding the
audit and the OMPs and rearticulate the concerns we share with the impacted herder community in Khanbogd.
We ask the Board to hold disbursement until it can ensure that (i) critical components of the OMPs, such as the
Biodiversity Monitoring and Evaluation Programme and Water Monitoring Plan among others, and other
unreleased reports, such as the Aquaterra groundwater monitoring report, are disclosed and an opportunity for
public comment is provided; (ii) the ongoing processes related to the CAO complaints on the compensation
package and Undai River diversion and the EBRD Project Complaint Mechanism complaint on roads and dust
impacts are more effectively taken into account; and (iii) herders are guaranteed access to clean water, clean
air, and adequate pastureland, which is dependent on the previous two asks. We also ask that a clear process
and timeline for reviewing the OMPs be established, especially since the OMPs envisage the expansion of blockcaving
and Gunii Hooloi water abstraction north of the existing indicated areas.
These key asks are supported by the following observations on the disclosed audit report and OMPs, as well as
the most recent updates from the communities themselves. As a reflection of our previous recommendations,
these observations relate to seven areas of concern: (1) OT’s failure to properly implement important social and
environmental commitments; (2) water scarcity; (3) the Undai River diversion and replacement of the Bor Ovoo
Spring; (4) Stakeholder Engagement and impacts on herder livelihoods; (5) waste management and mine
closure; (6) the proposed coal-fired power plant; and (7) biodiversity.

1. OT’s Failure to Properly Implement Important Social and Environmental Commitments

  • The audit found a total of 108 instances in which OT had failed to comply with its own social and environmental commitments since September 2012, more than half of which (64 in total) OT has still failed to address.2
  • It is clear from the audit that while OT has addressed a substantial number of the least critical compliance issues, it has failed to fully address nearly 90% of the non-compliance issues that, according to the auditors, are “reasonably likely” to cause negative impacts, material damage or even irreversible harm to sensitive resources.3
  • With regard to the OMPs, we fear that if such a pattern continues, OT may fail to properly implement the commitments outlined in the OMPs in a timely manner, with resulting serious, negative impacts on the herders and the environment of the South Gobi.

2. Water Scarcity

  • The audit confirms that OT has not adequately responded to declining water levels of several herder wells.4
  • The audit confirms the existence of several “cascading” wells that “indicat[e] possible cross connectivity” between the shallow aquifers used by herders and the Gunii Hooloi aquifer used by OT.5 The planned mitigation is to abandon the wells once permission is obtained from local authorities, but neither the audit nor the OMPs discuss repairing or replacing affected herder wells.
  • The audit does not include a comprehensive audit of OT’s water balance – its use and reuse of water – and while the OMPs commit to future external audits of the site water balance, there is no indication that comprehensive reviews of the monitoring results will be conducted regularly or made public.6 Regular auditing of OT’s water balance is vital to understanding OT’s impact on water scarcity in the region, as well as whether it is fulfilling its water conservation commitments.
  • The Water Monitoring Plan, described as “[t]he principle procedure” for implementing OT’s water management plans,7 is still not available for review. The release of this document is critical, as the available OMPs do not address the impact of toxic leachate on surface and ground water sources that improper waste rock management may cause.8

3. Undai River Diversion and Replacement of the Bor Ovoo Spring

  • Although the OMPs indicate that the Undai River diversion will not be completed until Q3 2014,9 the diversion is already in place. The audit confirms that OT made changes to the diversion project without properly notifying lenders or adequately considering impacts to biodiversity.10 Neither the audit nor the OMPs mention how findings of the independent expert panel convened under the CAO process to investigate impacts of the Undai diversion will be integrated into future management plans.
  • The audit confirms that OT’s interim Bor Ovoo spring replacement does not fulfill OT’s commitment to create a replacement spring that mimics the ecological function of the original.11
  • Herders report that construction of the permanent replacement spring has not been completed due to the company’s inability to demonstrate that the current proposed design can replicate the original spring’s important ecological service of preventing soil and water contamination by flushing/cleansing animal droppings from around the spring and downstream areas. As Governor T. Buyan-Ulzii stated, the local government will not issue the land permit until the herders are satisfied with the proposed design of the artificial spring.

4. Stakeholder Engagement and Impacts on Livelihoods

  • The audit verified the resolution of grievances submitted by herders to OT, but it did so without attempting to find out whether herders were satisfied with OT’s “resolution.”12 The same problem exists regarding the auditors’ statement on resettled households.13 Similarly, both the audit and the Stakeholder Engagement Plan praise OT’s consultation practices while only briefly acknowledging the complaints raised about this issue to the IFC, the CAO, and the EBRD.14
  • The OMPs note that OT selected an 11 member panel to help develop and implement the Pastureland and Livelihood Improvement Strategy,15 but it is unclear if and how OT took measures to avoid conflicts of interest in selecting panel members; neither the TORs for the panel nor the list of panel members has been disclosed. The Strategy also fails to explain how the panel will draw on the findings generated by the investigation of the Undai diversion impacts being undertaken as part of the CAO process.

5. Waste Management and Mine Closure

  • The audit is critical of OT’s failure to put in place effective methods to sort or segregate different types of waste rock, saying that OT’s methods “did not reflect a precautionary approach to the management of these materials.”16 OT must relocate stockpiles and do additional sampling/testing per the recommendations of the auditors.
  • The Integrated Mineral Waste, Acid Rock Drainage and Dump Management Implementation Plan, which would presumably address some of the auditors’ concerns, is not yet available.
  • The Mine Closure Plan, dated June 2012, is too conceptual and lacks detail. For instance, the tailings dam cross-section is shown as a conceptual drawing, rather than as built.17 To be relevant, the plan must be updated as facilities are constructed.

6. Coal-fired Power Plant

  • The OMPs scarcely mention the proposed coal-fired power plant and do not identify a timeline for the Power Plant ESIA.18 The OMPs fail to commit OT to a comprehensive study of the combined impacts of a captive coal-fired power plant and the mine. It is unacceptable to issue a supplemental ESIA for the coal plant, which will lead to critical decisions being made before the full impacts, particularly impacts on the scarce water supply, are known.19
  • While OT has pledged to do a full alternatives analysis, the documents still appear to assume that the power will come from a new coal plant.20

7. Biodiversity

  • Fundamental components of the Biodiversity Management Plan (BMP),21 such as the Biodiversity Offsets Management and Biodiversity Monitoring and Evaluation Programme (BMEP), are still not available, and will not be available until 2014 and 2015, respectively.22
  • There are no data supporting many of the key mitigation measures proposed in the BMP. For instance, baseline data for the BMEP should have been collected long before construction and operations commenced but was only scheduled to begin in Q2 of 2013.23
  • The targets proposed in the BMP are unrealistic or highly improbable. For instance, the target of eliminating wildlife deaths attributable to OT does not outline any incentives for the target to be maintained or for reporting of the number of incidents, nor does it plan for the chance that wildlife deaths may increase.24 To comply with the ESIA’s adoption of the precautionary principle in assessing biodiversity impacts,25 OT must develop contingency plans to address the possibility of missing BMP targets, especially since the audit indicates that OT is behind in its commitments to install wildlife underpasses on the unfinished OT Gashuun Sukhait road.26

For more information, please contact:
Sukhgerel Dugersuren, Executive Director, OT Watch, otwatch@gmail.com
Sarah Singh, Accountability Counsel, sarah@accountabilitycounsel.org
Jelson Garcia, Bank Information Center, jgarcia@bicusa.org
Sarah McNeal, Bank Information Center, smcneal@bicusa.org
Fidanka Bacheva-McGrath, CEE Bankwatch Network, fidankab@bankwatch.org
Richard Harkinson, London Mining Network, research@londonminingnetwork.org
Nicole Ghio, Sierra Club, nicole.ghio@sierraclub.org
Paul Robinson, Southwest Research and Information Center, sricpaul@earthlink.net



1 These include our February 11, 2013 letter to WBG President Kim and February 15, 2013 letter to EBRD President Sir Suma Chakrabarti (available at:
http://www.bicusa.org/wp-content/uploads/2013/03/CSO-letter-to-Dr-Kim-on-Oyu-Tolgoi.pdf; http://bankwatch.org/sites/default/files/letter-EBRD-OT-
15Feb2013.pdf), as well as our February 26, 2013 reply to OT LLC and the IFC (available at: http://www.bicusa.org/wp-content/uploads/2013/02/CSOReply-

2 ERM April 2013 Audit Report (available at: http://ot.mn/sites/default/files/documents/ESIA_Audit_report.pdf), Table 3-1 at p. 12.
3 Ibid, Tables 2-2 & 3-2. This may be exacerbated by the conflict between aimag and soum regulators and OT on how to implement Bank standards, as
suggested by the audit report.
4 Ibid, Table 3-2 ##1.11 & 1.12 at pp. 18-19.
5 Ibid, Table 3-2 #1.15 at p. 21. In addition, GHW 4×6 bore construction shows the use of gravel for fill around the pipe, raising the question of whether this
was an instruction to the contractors.
6 See Water Resources Management Plan (available at:
http://ot.mn/sites/default/files/documents/ESIA_OT_OMP_Water_Resources_Management_Plan_EN.pdf), p. 29 (indicating only that Project Lenders can
request a comprehensive presentation of monitoring results no more than once per year).
7 Ibid, p. 13.
8 The current Water Resources Management Plan refers only to monitoring bottled drinking water quality and effluent waste water, which is to be treated
and discharged to the Tailings Storage Facility (TSF). In view of the reported lack of rigor in separating acid-forming rocks and the planned discharge to the
TSF of waste with high acidifying levels of ammonia [at 30 mg/l], the potential for leachates containing toxic metals/metalloids escaping to surface and
groundwater is troubling. The Water Resources Management Plan also references the 2003 WHO DW Guidance [updated in 2006, 2008, 2009 and reissued
in 2011] which flags universal mining waste concerns with arsenic and selenium, of which there is evidence in the South Gobi (see


9 See Environmental and Social Management Plan (available at: http://ot.mn/sites/default/files/documents/ESIA_OT_OMP_ESMP_ENG.pdf), p. 53.
10 ERM April 2013 Audit Report, pp. 54-55.

11 Ibid, Table 3-2 #6.06 at p. 42; see also ibid, Table 3-2 #1.10 at p. 17 & #1.19 at p. 23.
12 Ibid, p. 88.
13 Ibid.
14 See ibid, pp. 102-103; Stakeholder Engagement Plan (available at:
http://ot.mn/sites/default/files/documents/ESIA_OT_OMP_Stakeholder_Engagement_Plan_EN.pdf), pp. 22, 60-62. Rio Tinto has fashioned itself as a
“leader in stakeholder consultation” while at the same time destroying the sole source of surface water in Khanbogd soum without community consent, as
evidenced by the complaint to the CAO on the Undai River diversion.
15 Pastureland and Livelihood Improvement Management Plan (available at:
http://ot.mn/sites/default/files/documents/ESIA_OT_OMP_Pastureland_and_Livelihood_Improvement_Strategy_EN.pdf), p. 12.
16 ERM April 2013 Audit, Table 3-2 #1.16 at p. 21.
17 Mine Closure Plan (available at: http://ot.mn/sites/default/files/documents/ESIA_OT_OMP_Mine_Closure_Plan_EN.pdf), pp. 55, 57.
18 See Environmental and Social Action Plan (available at: http://ot.mn/sites/default/files/documents/ESIA_OT_OMP_ESAP_Sep2013_EN.pdf), p. 1.

19 Although the latest Power Plant DEIA suggested that it would have low water-use, the tailings storage facility will have to contain its ash, adding to both
the volume and toxic contents of the TSF during operations and afterwards. This is another example in which the impacts of the mine and the power plant
must be analyzed together in a comprehensive study.
20 See Environmental and Social Management Plan, pp. 16, 53.
21 Available at: http://ot.mn/sites/default/files/documents/ESIA_OT_OMP_Biodiversity_Management_Plan_ENG.pdf. The newest version (October 14) is
available at http://ot.mn/sites/default/files/documents/ESIA_OT_OMP_Biodiversity_Management_Plan_EN.pdf, and omits much of the tables found in
the original Biodiversity Register (Annex D).
22 Ibid, pp. 7, 23.
23 Ibid, p. 23. It is unclear whether this Core Biodiversity Monitoring Programme has begun as scheduled or what the methodology is, as documents related
to this program have not been disclosed.
24 Ibid, p. 22.
25 See ERM April 2013 Audit, p. 55.
26 See ibid, Table 3-2 #6.13 at p. 46.

Mongolia Copper Mine at Oyu Tolgoi Tests Water Supply and Young Democracy

December 3, 2013 Posted by otwatchweb

Link to original article: http://www.circleofblue.org/waternews/2013/world/mongolia-copper-mine-oyu-tolgoi-tests-water-supply-young-democracy/

By Keith Schneider, Circle of Blue

Tuesday, 05 November 2013

Mining boom in South Gobi influenced by local and global citizen activism


Image © Keith Schneider / Circle of Blue
Mining giant Rio Tinto and Mongolia’s young, free market government are the $6.6 billion, 80-square-kilometer (30-square-mile) Oyu Tolgoi mine in the South Gobi Desert. It is the largest industrial enterprise ever constructed in Mongolia, and, with 7,500 workers, the nation’s largest employer. Click image to enlarge.

KHANBOGD, Mongolia – Though it is well before noon, the hot light of the South Gobi desert sun punches through the ventilation openings at the peak of Byambasuren’s white ger.
The door of her teepee-like home, a single round room built of felt and canvas, is open to a dirt compound surrounded by a fence made of rough-cut wood. Beyond that, cattle and horses churn a small grid of unpaved streets to powder. Herders on foot follow behind, their features obscure in yellow clouds of dust.

Byambasuren’s ger lies 700 kilometers (434 miles) from Ulaanbataar, Mongolia’s capital. The trip overland is mostly on hard-packed dirt roads and takes 15 hours across treeless steppes and sand. Much of the world’s second largest desert remains remote from the world, even forbidding.

“Before Oyu Tolgoi came here, we had enough water for our animals. Now we don’t. Things are different.”


That is not the case for Byambasuren, a young herder and mother, or for Khanbogd, an expanding livestock and desert town in Omnogovi, Mongolia’s largest province, which lies along the border with China.

Not far away, about 40 kilometers (25 miles) south, mining giant Rio Tinto and Mongolia’s young, free market government are developing one of the planet’s sizable reserves of copper and gold. The $6.6 billion, 80-square-kilometer (30-square-mile) Oyu Tolgoi mine is the largest industrial enterprise ever constructed in Mongolia, and, with 7,500 workers, the nation’s largest employer.

Along with the oil-producing tar sands mines in Alberta, Canada, Oyu Tolgoi also is among the most thoroughly scrutinized resource extraction projects on Earth. The reason: It’s located in one of the most water-starved regions of Mongolia.

Singing well, South Gobi, Khanbogd, Coal, water scarcity, South Gobi, Mongolia, Omnogovi, Tsogttsetsii, Oyu Tolgoi. Rio Tinto. copper mine, gold, water, food, energy, choke point, circle of blue wilson center, Keith Schneider

Image © Keith Schneider / Circle of Blue
Byambasuren, a young herder and mother, and an activist in Khanbogd, Mongolia who’s work is influencing Rio Tinto’s copper and gold mine in the South Gobi Desert. Click image to enlarge.

Unlike earlier eras, when industrial companies descended on unwary countries to mine and log and drill with scant resistance, resource development in the 21st century faces new operating rules, many of them imposed by people like Byambasuren.

Timeline: Democracy, Mining Transform Mongolia

1990: Mongolia transitions from a single party socialist system, with ties to the Soviet Union, to a multi-party democracy.

1997: Mongolia’s authorities enact the Mineral Law and opened most of the country to mineral development. More than 6,000 licenses were approved, including those for the big copper and coal mines in Omnogovi.

2003: BHP, an Australian company, drills water monitoring wells in anticipation of developing the Oyu Tolgoi mine.

2007: A Mongolian herder named Tsetsegee Munkhbayar wins the Goldman Environmental Prize, a prestigious American public service award for his work to organize opposition to mining pollution in the Onggi River.

2009: Major construction begins on Oyu Tolgoi. Rio Tinto assumes primary management and ownership of the mine.

2009: Mongolia enacts the Law on the Prohibition of Minerals Exploration in Water Basins and Forested Areas, which outlawed many forms of placer mining — the extraction of mineral deposits from streams, rivers and protected wild lands.

2010: A World Bank study warns that unchecked water use by mines in Omnogovi and two neighboring South Gobi provinces could deplete the region’s groundwater supplies by 2022.

2010: The Mongolian government suspends almost 2,000 mining licenses and tightens provisions for securing licenses.

2011: Mongolia starts work to overhaul its mining law.

December 2012: The government circulates a draft mining law that alarms industry executives because new provisions called for higher financial returns for the Mongolian government and heightened scrutiny of licenses.

June 2013: Mongolians re-elect President Tsakhiagiin Elbegdorj of the Democratic Party, who campaigned on attracting foreign investment and heightening environmental oversight of the mining industry.

July 2013: First shipments of copper concentrate are shipped from Oyu Tolgoi to Chinese processors and markets.

She and seven other herders, who have access to cell phones and the Internet, belong to Gobi Soil, a year-old environmental group. Byambasuren and her colleagues are the on-the-ground local hub of a national and global network of policy strategists, environmental scientists, and communications specialists that elevated Oyu Tolgoi and Mongolia’s capacity to manage its mining sector to the nation’s top political issue.

In June, Mongolians re-elected President Tsakhiagiin Elbegdorj of the Democratic Party, who campaigned on attracting foreign investment and strengthening environmental oversight of mining.

There are two big ecological issues. The first is preventing water pollution, principally in northern and central regions of the country caused by gold mining practices that use mercury and cyanide.

The second is sharing the South Gobi’s limited water supply between livestock herders and the country’s biggest hard rock and coal mines. “We need water,” Byambasuren, who like most Mongolians uses only one name, says through an interpreter. “Before Oyu Tolgoi came here, we had enough water for our animals. Now we don’t. Things are different.”

High Stakes, Major Players

Several big players, including Mongolia’s government, the World Bank and Rio Tinto, the world’s second largest mining firm, have a stake in the mine’s development. Rio Tinto, based in London, is well aware that its record of environmental management at a number of its mines is routinely criticized by prominent international environmental groups as abusive.

One example is the company’s big and closely scrutinized Grasberg copper and gold mine in West Papua, Indonesia, which it operates jointly with Freeport McMoran. The mine uses more than a billion gallons of water a month and unloads 230,000 metric tons of waste into the Ajkwa river daily, which kills plants and contaminates drinking water, according to Corporate Watch, a London-based investigative oversight group.

Among its many objectives, Oyu Tolgoi represents a new opportunity for Rio Tinto to introduce Mongolia and the world to state-of-the-art mining practices, including water use and recycling techniques that conserve water and limit pollution. The international mining sector, mindful of its global reputation, regularly commends Rio Tinto, which last year earned total revenue of US $55.6 billion, for responding to technological trends and heightened civic expectations here.

The Mongolian government, which owns slightly more than one third of Oyu Tolgoi, counts on the mine to finance its ascent to economic and political influence in Asia. The country’s newly elected Democratic Party leaders also want to prove they have the smarts and moxie to manage Mongolia’s mineral treasures and work as an equal partner with a global industrial giant.

The World Bank and its affiliated financial institutions, which helped to fund Oyu Tolgoi, weigh new loan requests to expand the mine against Rio Tinto’s record in the South Gobi in achieving the United Nation’s Millennium Development goals. And environmental and human rights organizations, with offices networked from Ulaanbataar to Beijing to New York to London, make a strong case that the Manhattan-size mine, tearing a big hole in the South Gobi, is producing permanent damage to land and water, and eroding the region’s irreplaceable culture of tiny human outposts, livestock herding, and seasonal wandering.

Oyu Tolgoi, in effect, is at the center of a globe-circling vortex of competing ambitions. It’s more than the mine’s location in a mineral rich and environmentally sensitive, water-scarce region or its immense dimensions. It’s more than the huge price tag and the mine’s prominent and stubborn developer. It’s more than a young government’s insistence on oversight and fair economic returns, or the substantial pressure from the world’s environmental community to restrain damage.

It’s all of these facets, mixed and modulated on a global motherboard, that have amplified Oyu Tolgoi into an internationally significant case study of the fierce and increasingly transparent civic conflict over tapping the earth’s natural resources.

Little more than a decade ago, this was territory so vacant it rivaled Antarctica, Siberia, and the Australian outback as places farthest removed from the global mainstream. Now there’s an airport outside Khanbogd. The money to be made here lures thousands of workers and attracts regular convoys of television producers, magazine writers, and documentary film crews.

Mongolia, Ulaanbataar, mining, South Gobi desert Mongolia Khanbogd Oyu Tolgoi Rio Tinto copper mine gold water food energy choke point circle of blue wilson center J. Carl Ganter

Image © J. Carl Ganter / Circle of Blue
The population of Ulaanbataar, Mongolia’s capital, has nearly tripled since 1990 and is almost half of the national population of 2.9 million. Click image to enlarge.

Oyu Tolgoi’s executives are sensitive to the attention. “We are very aware of almost everything that’s said about this mine, wherever it comes from,” says Mark Newby, Oyu Tolgoi’s 42-year-old environmental manager, in an interview with Circle of Blue. “You have to listen. You have to respond. You can’t go eye to eye with the country or the community. A number of large mines worldwide did that, and they lost their mines as a result.”

‘Singing Well’ Sounds Alarm

Along the west wall of Byamba’s ger is a display cabinet with glass doors. Looseleaf notebooks, standing on end like encyclopedia volumes, occupy one shelf. They are sections of the mine’s environmental and social impact statement produced under contract for Rio Tinto.

Joining her are: Battsengel Lkhamdoorov, a 40-year-old herder who founded the Gobi Soil environmental group; Paul Robinson, a mining reclamation expert from New Mexico; and Batnasan Damdinsuren, a travel industry manager and interpreter who’s toured mining regions in Russia, Mongolia, and the United States.

“It was like bells ringing, it was a sound that you never forget.”


Byamba rises from a stool at the center of a room that is getting steadily warmer and draws a binder from the case. It contains maps of the area with an assortment of red, blue, green, orange and pink dots. Each dot designates a well that supplies water to Oyu Tolgoi, or a well that monitors levels in underground water reserves close to the surface or 60 meters (180 feet) deep. The wells were drilled by Rio Tinto, or by Oyu Tolgoi’s previous managers, BHP and Ivanhoe Mines.

Byamba is particularly interested in one map with pink dots. She points to a well designated GHW4X6. “Here it is,” she says, “This is the problem.”

The day before, in a meeting in a local government office, Byamba told this story about the well. It is, she said, the “singing well” discovered by camels sometime in 2008 or 2009. She wasn’t sure. With their hooded eyes and dual humps, the big ungulates huddled day after day around a brown length of steel well casing, about eight inches in diameter, a foot tall, and open at the top.

Their behavior was so unusual, and so persistent, that some of Byamba’s neighbors rode into the desert on motorcycles and small trucks to investigate. The men didn’t see anything wrong with the pipe — no holes, no cracks. But when they dropped to their knees and put their ears to the well what came back wasn’t the drip, drip of a leak. What they heard was the unmistakable sound of a stream flowing deep underground. It was a cascade of water, startlingly loud in a land so dry that even when rain or snowmelt caused springs or streams to flow, it hardly made any sound at all.

“It was like bells ringing,” Byamba says. “It was a sound that you never forget.”

There are many places in southern Mongolia — a nation larger than Spain, France, Germany and Britain combined — where economic intent and water scarcity converge. None, though, illustrates the confrontation with more clarity or urgency than in Omnogovi, where Mongolia’s largest and thirstiest hard rock and coal mines are located. For several years Mongolia’s economy has grown more than 15 percent annually, faster than all but a handful of countries, largely due to the mineral exploration and development in this province so close to China’s steel and coal-fired power plants.

West of Oyu Tolgoi, hundreds of trucks loaded with coal from mines in and around Tsogttsetsii head to China on a two-year-old paved highway. In July, Oyu Tolgoi began its first shipments of copper concentrate to China. A 250-kilometer rail line (155 miles) from the Omnogovi mines to China is planned.

Omnogovi also is a place where domesticated camels outnumber people, where springs are rare, and rivers run intermittently. Just as gas prices in the United States serve as either a measure of national well being or a gauge of societal stress, water supply serves as a meter for uneasiness between Omnogovi herders and mining companies, and as a proxy for a range of other concerns.

The story of the singing well is illustrative. It was one of a group of production and monitoring wells drilled in 2003 by Ivanhoe Mines, a Canadian company, in anticipation of developing Oyu Tolgoi. Marked in white paint — GH4X6 — the well is surrounded by much older wells, dug by hand and no deeper than 20 feet, to tap what herders call “soil water,” the moisture stored closest to the surface and used to water livestock.

Coal, water scarcity, South Gobio, Mongolia, Omnogovi, Tsogttsetsii, Khanbogd Oyu Tolgoi Rio Tinto copper mine gold water food energy choke point circle of blue wilson center, Keith Schneider

Image © Keith Schneider / Circle of Blue
For several years Mongolia’s economy has grown more than 15 percent annually, faster than all but a handful of countries, largely due to the mineral exploration and development in Omnogovi, the country’s largest province. Trucks loaded with coal make their way out of a mine in Tsogttsetsii. Click image to enlarge.

Byambasuren says she is one of the herders who were forced to reduce the number of animals they cared for because some of those hand-dug wells dried up. Nobody knew why until camels discovered the singing well. Byambasuren and her neighbors suspect the cascade they heard was soil water somehow pouring into the deeper aquifer and drying out their wells.

Robinson, a mining expert and research director at the Southwest Research and Information Center in Albuquerque, New Mexico, inspected the singing well and explains to Byamba that GHW4X6, as constructed, is different than what was described on the well’s technical document. “This picture shows only one pipe,” Robinson says. “The actual well has two. The second serves as an outer casing. What we saw is different than what’s shown here in important ways. This picture doesn’t show the outer ring.”

“We do acknowledge that the well wasn’t installed in the best manner possible”

–Mark Newby, Evironmental Manager, Oyu Tolgoi

Robinson explains in English as Batnasan, who was raised in the South Gobi, translates for the two herders. Robinson concludes that the actual construction of the monitoring well is flawed. It was built with a sleeve of rock and gravel packed alongside the well’s steel casing that may be allowing soil water to drain from the surface to the deeper underground reservoir. “This is the low point,” he tells them. “It’s like a bathtub drain.” Robinson, an exacting professional, cautions that his view is a thesis based on his visual inspection and the document.

Mark Newby, the mine’s environmental manager, is well aware of GHW4X6. He says it is theoretically possible that it could drain the soil and shallow surface wells close to it. But that seems unlikely, he says. He says the company monitors the shallow wells in the area closest to GHW4X6, which was drilled before Rio Tinto took over the mine, and they aren’t losing water.

“We do acknowledge that the well wasn’t installed in the best manner possible,” Newby says. “But the effects that people think are going on wouldn’t be expected. And we haven’t seen anything like that in shallow wells.”

Mongolia by the Numbers

Coal Production Mongolia

With ample reserves and China's world-leading market right next door, Mongolia's coal production is soaring.

With ample reserves and China’s world-leading market right next door, Mongolia’s coal production is soaring. Click image to enlarge.

Copper Production Mongolia

Oyu Tolgoi, one of the largest copper mines in the world, started marketing copper concentrate in July, 2013, an event that will prompt sharp increases in Mongolia's copper production.

Oyu Tolgoi, one of the largest copper mines in the world, started marketing copper concentrate in July, 2013, an event that will prompt sharp increases in Mongolia’s copper production. Click image to enlarge.

Gold Production Mongolia

Unregulated wildcat placer gold mines produced a treasure in gold early in the 2000s, and a mess of Mongolia's rivers. In 2009, Mongolia enacted a law to protecti rivers and forests, which outlawed the harmful practices and limited gold 	production.

Unregulated wildcat placer gold mines produced a treasure in gold early in the 2000s, and a mess of Mongolia’s rivers. In 2009, Mongolia enacted a law to protecti rivers and forests, which outlawed the harmful practices and limited gold production. Click image to enlarge.

Improved Roads Mongolia

Mongolia expanded its paved highway network by roughly 130 kilometers (81 mlles) annually in the first decade of the century, twice the annual increase in paved highway in the 1990s.

Mongolia expanded its paved highway network by roughly 130 kilometers (81 mlles) annually in the first decade of the century, twice the annual increase in paved highway in the 1990s. Click image to enlarge.

Graphs © Luke Gehrke / Circle of Blue.

In September, Rio Tinto posted online a mass of new environmental studies that noted what it called “cascading behavior” in GHW4X6 and five other nearby wells, “indicating possible cross-connectivity of aquifers at these locations.” The new data pointed to a drainage problem with six wells that was stronger than Rio Tinto has acknowledged previously.

Regardless, in 2010, a year after Rio Tinto assumed primary management and ownership of Oyu Tolgoi, the company proposed pouring grout into GHW4X6 and the surrounding monitoring wells in a project to decommission the wellfield, he says. The regional government, which has jurisdiction for projects outside the mine’s perimeter, wouldn’t issue a permit for the work.

Instead, the local government turned to a citizen-government working group, which was established at the direction of the World Bank to oversee aspects of Oyu Tolgoi’s operations, including the decommissioning project, which still hasn’t happened.

The back and forth exemplifies most of the interactions between mine executives, local government officials, and herders. Newby asserts that Rio Tinto operates Oyu Tolgoi with exceptionally ambitious standards of water conservation, safety, and pollution prevention. Critics say the company can do much better.

A Contentious Project

Everything is an issue at Oyu Tolgoi. Robinson notes, for example, that Rio Tinto was late in preparing a mine reclamation plan to secure overburden and rock wastes during the mine’s operating life, and after Oyu Tolgoi closes. Rio Tinto finally introduced the plan in late September, years after the first ridges of mine spoils appeared at the edges of the open pit.

Herders complain that dirt roads constructed by the mine owners are barriers to their animals and cause excessive levels of dust. Oyu Tolgoi excutives say the issue is exaggerated. Rio Tinto is building a new 107-kilometer highway (66.5 miles) from the mine to the Chinese border. Company executives, mindful of the civic distress about dust, said in October that the first 80-kilometers of the new highway will be paved by the end of the year. The final 27 kilometers will be paved by the end of 2014.

Most significantly, herders worry that Oyu Tolgoi is draining the region’s water supply and making it difficult for their animals to find water. The steel fence that surrounds the gaping mine has blocked traditional herding corridors. Oyu Tolgoi also cut off a freshwater spring within the fenceline that herders used for generations.

Singing well, South Gobi, Khanbogd, Coal, water scarcity, South Gobi, Mongolia, Omnogovi, Tsogttsetsii, Oyu Tolgoi. Rio Tinto. copper mine, gold, water, food, energy, choke point, circle of blue wilson center, Keith Schneider

Image © Keith Schneider / Circle of Blue
The South Gobi’s famous singing well. When herders dropped to their knees and put their ears to the well what came back wasn’t the drip, drip of a leak. What they heard was the unmistakable sound of a stream flowing deep underground. Click image to enlarge.

The company substituted a manmade spring for the natural spring and installed it along the mine’s southern fenceline. Water bubbles from two pipes there, pools in mud, flows to a shallow pond, then vanishes into the dry sand of the Undai riverbed. Rio Tinto executives said the two pipes are temporary measures to keep water flowing past the mine’s boundaries so that livestock can drink. The project’s completion, they said, has been held up by local officials who want a review by the citizen committee.

On the afternoon that Robinson and two herders visit the artificial spring, they express skepticism that it will be as effective in watering livestock as the natural spring. “Just moving water to a new place won’t serve the need,” he says. “You can’t create a spring without the right geologic conditions. Oyu Tolgoi can’t just move water to a place that is convenient. They have to move the spring to a place that holds the water or it will become soil water, not surface water. “

Democracy Driving Growth

In the summer of 1990, as its Soviet neighbor to the north slowly collapsed, Mongolians held their first free election, a signal act that ended 70 years of socialist control. Almost nothing in this big country of surpassing vistas, a huge southern desert, and a treasure chest of mineral and energy resources has been the same in the 23 years since.

Skycranes hoist men and materials to the summits of new office towers in the capital city, where 1.4 million people live. The population of Ulaanbataar has nearly tripled since 1990 and is almost half of the national population of 2.9 million. Outside Ulaanbataar, across the green steppes, cell phones and solar panels connect and power the country’s rural herding families.

Visualizing Mongolia

Mongolian Population 2011

Map created by Andrea Zheng/ Circle of Blue
Shades of brown represent the population (in thousands), with darker shades representing larger populations. To see the population in each province, click on the map.

Surface Water Inventory (Rivers, Springs, Mineral Water, Lakes) 2007.

Map created by Andrea Zheng/ Circle of Blue
Shades of blue represent the total number of surface water sources, with darker shades representing higher quantities. The surface water sources include rivers, springs, mineral water, and lakes. To see the total number of surface water sources in each province, click on the map. Note that the last water census was conducted in 2011, but the data for each province of Mongolia does not seem to be published anywhere online.

Number of Livestock (Horse, Camel, Cattle, Sheep, Goat) in Thousand Heads 2010.

Map created by Andrea Zheng/ Circle of Blue
Shades of red represent the total number of livestock (in thousand heads), with darker shades representing higher quantities. The number of livestock includes horses, camels, cattle, sheep, and goats. To see the total number of livestock in each province, click on the map.

As the U.S. and much of the developed West experience a damaging unraveling of institutional capacity and public confidence, Mongolia is ambitiously pursuing an economic development strategy that is founded in modern goals of environmental sustainability, income growth and nation building.

“We are a large country with a small population,” said Chuluunbat Orchibat, the 55-year-old deputy minister for economic development, in an interview with Circle of Blue. “Our economic goals are very high. We are working to improve the quality of life here. We also are trying hard to establish environmental standards that are high. We’ve had difficulties. But we know both can be done.”

In interviews with herders and shopkeepers, activists and executives, Mongolians expressed similar views of the country’s potential. Two clear advantages make the economic formula possible: Copper, gold and coal lie beneath Mongolia’s South Gobi desert — hard rock and energy wealth that international mining companies are tapping; and Mongolia shares a border with China, the world’s largest processor and consumer of such materials.

Tsakhiagiin Elbegdorj, Mongolia's Ministry of Environment and Economic Development, Mongolia, World Economic Forum, water scarcity, Ulaanbataar, mining, South Gobi desert Mongolia Khanbogd Oyu Tolgoi Rio Tinto copper mine gold water food energy choke point circle of blue wilson center J. Carl Ganter

Image © J. Carl Ganter
In June, Mongolians re-elected President Tsakhiagiin Elbegdorj of the Democratic Party, who campaigned on attracting foreign investment and strengthening environmental oversight of mining.  In September the World Economic Forum,  Mongolia’s Ministry of Environment and Economic Development, the International FinanceCorporation’s Water Resources Group 2030 brought together conservation leaders, business executives and members of parliament to discuss the implications of demands on Mongolia’s water resources. Click image to enlarge.

There is, though, considerable skepticism among environmental specialists in and outside Mongolia that an economy dependent on mining can marshal the policymaking and enforcement apparatus to reach its environmental goals. Mining industry executives also are growing deeply suspicious of the Mongolian government’s ability to oversee their sector’s operations with consistency and fairness.

Just as in the other nations Circle of Blue has reported from in recent years — China, India, Qatar, Australia, and the western United States — some of the most significant issues center on water supply. The overriding concern: Can Mongolia safeguard its fresh water and grow the hard rock and coal mining sectors in a region of the country where water is in short supply?

“People care about this. Actually, young people are eager to make sure we have enough water. They want to protect the motherland,” said Bailgalimaa Nyamdawa, a 25-year-old lawyer at the Center for Human Rights and Development, a Ulaanbataar-based legal group that prosecutes civil cases against water polluters in the mining sector, most of which are owned by the Chinese.

“We need good regulations,” Nyamdawa said through an interpreter. “We need good enforcement. We need more people who know how to influence good policy. Before the mining started we didn’t have such problems.”

Growing Pains

In the first years after throwing off socialism in 1990, Mongolia’s rush to generate hard currency from mining was a familiar story of boom and pollution. While converting from a centralized economy to the free market, Mongolians suffered through dire seasons of food shortages, energy shortages, hunger and joblessness.

Desperate to generate revenue, Mongolia’s authorities in 1997 enacted the Mineral Law and opened most of the country to mineral development. More than 6,000 licenses were approved, including those for the big copper and coal mines in Omnogovi.

Camels, singing well, South Gobi, Khanbogd, Coal, water scarcity, South Gobi, Mongolia, Omnogovi, Tsogttsetsii, Oyu Tolgoi. Rio Tinto. copper mine, gold, water, food, energy, choke point, circle of blue wilson center, Keith Schneider

Image © Keith Schneider / Circle of Blue
Camels outnumber people in Omnogovi, Mongolia’s largest province in the South Gobi desert along the border with China. Click image to enlarge.

The first mineral mining boom occurred in northern and central Mongolia, where rivers and streams were colonized by gold miners and companies, many from Russia and China. They dropped backhoes and pumps into waterways, turned high pressure hoses on river banks, and used mercury and other toxic substances to separate gold from mud and sand. In short, they made a colossal mess.

Mongolians fought back at the grassroots. As a herding culture, Mongolians understood the ties between their well being and the health of water and land. Local non-profits allied themselves with international environmental organizations. Mongolia’s news media, aided by video and photographs taken by citizens and posted on the Internet, turned the damage into a national and international story.

In 2007, Tsetsegee Munkhbayar, a herder, was awarded the Goldman Environmental Prize, a prestigious American public service award, for his work to organize opposition to mining pollution in the Onggi River, one of the country’s longest and largest.

Mining and environmental damage also became an election issue. In 2009, Mongolia enacted the Law on the Prohibition of Minerals Exploration in Water Basins and Forested Areas, which outlawed many forms of placer mining — the extraction of mineral deposits from streams, rivers and protected wild lands. In 2010, the government suspended almost 2,000 mining licenses and tightened provisions for securing licenses.

Mongolia Khanbogd Oyu Tolgoi Tsogt Tsetsii

Map © Jordan Bates / Circle of Blue
Map of Mongolia including Tsogt Tsetsii, Khanbogd, and Oyu Tolgoi. Click image to enlarge.

In 2011, Mongolia began to overhaul its mining law. In December 2012, the government circulated draft rules that alarmed industry executives. The new provisions called for higher financial returns for the Mongolian government and greater scrutiny of mining licensees.

The proposed regulations also offered greater security for water resources. The justification, say most industry executives and environmental authorities, is sound. Though smaller gold mining operations in the wet North and central regions led Mongolia’s mining boom in the first decade of the century, the country’s development authorities anticipate that the big and thirsty coal and hard rock mines in the South Gobi will generate the huge revenue streams, and employment, that will drive Mongolia’s economy.

Water Supply At Risk

Water supply is an impediment to increased mining. In 2010, the World Bank published a study of water use in Omnogovi and two neighboring South Gobi provinces. The study said that 3.8 million head of livestock consumed nearly 32,000 cubic meters (8.3 million gallons) of water daily. That was less than a fifth of the almost 100,000 cubic meters (26.4 million gallons) of water used daily by coal mines around Tsogttsetsii, and the nearly 70,000 cubic meters (18.5 million gallons) that was consumed daily by Oyu Tolgoi during its construction. At that rate of consumption, the bank estimated, the region’s groundwater supplies would last 10 to 12 years.

Rio Tinto reached different conclusions in its environmental studies. Oyu Tolgoi’s water source, explains Mark Newby, is an aquifer called Gunii Hooloi, near Khanbogd, that is 300 meters to 400 meters deep (1,000 to 1,300 feet). The aquifer was discovered by the Rio Tinto’s hydrologists and contains tens of billions of gallons of saline water, according to the company.

Mongolia, Ulaanbataar, mining, South Gobi desert Mongolia Khanbogd Oyu Tolgoi Rio Tinto copper mine gold water food energy choke point circle of blue wilson center J. Carl Ganter

Image © J. Carl Ganter / Circle of Blue
As the U.S. and much of the developed West experience a damaging unraveling of institutional capacity and public confidence, Mongolia is ambitiously pursuing an economic development strategy that is founded in modern goals, supported by young people, of environmental sustainability, income growth and nation building. Click image to enlarge.

The Mongolian Water Authority permit allows Oyu Tolgoi to use 870 liters of water per second (20 million gallons daily), which is pumped to the surface and transported by pipeline 35 kilometers to serve mining operations. Newby says the mine recycles 80 percent of its water and uses under 500 liters per second (11.5 million gallons daily), far less than the permitted amount. Even at the higher permitted level of water use, he says, Oyu Tolgoi will consume about 20 percent of the water contained in Gunii Hooloi.

Rio Tinto’s study conservatively estimated that aquifers in the South Gobi were capable of supplying 500,000 cubic meters (132 million gallons) of water daily. A cubic meter is 264.4 gallons. That level of consumption, according to the company study, could be reached by 2020 as more mines open in the region, and more people arrive in Khanbogd and other towns to work and live.

Like the U.N. report, the Rio Tinto study concluded that water shortages are a barrier to mineral development in the South Gobi. The company study said “there may eventually be a need for the construction of water pipelines from the Kherlen or Orkhon rivers.” Those are two of Mongolia’s largest rivers and lie 1,000 kilometers (621 miles) away in the country’s forested North.

South Gobi, Khanbogd, Coal, water scarcity, South Gobi, Mongolia, Omnogovi, Tsogttsetsii, Oyu Tolgoi. Rio Tinto. copper mine, gold, water, food, energy, choke point, circle of blue wilson center, Keith Schneider

Image © Keith Schneider / Circle of Blue
Khanbogd, Mongolia, a growing livestock and mining town in the South Gobi Desert, where water scarcity and mineral development are colliding. Click image to enlarge.

Proposals to pipe water from the North to the South have popped up periodiocally in Ulaanbataar since construction of Oyu Tolgoi began in earnest in 2009. But they aren’t generally taken seriously.

The cost of building and operating a lengthy water pipeline would be enormous. The Kherlen River flows into China, and Orkhon’s waters reach into Russia. Both countries would be expected to exert significant diplomatic opposition to such large water diversion projects.

What’s more, by the time water shortages become an emergency in the South Gobi, climate change may well have dried up enough of the nation’s surface water to significantly deplete the supply carried by the Kherlen and Orkhon rivers.

Climate Change Hotspot

A 2010 United Nations report found that since 1940, average annual temperatures in Mongolia increased 2.14 degrees Celsius (4.42 degrees Fahrenheit), a rate of increase that is higher than almost any other country. The number of droughts in Mongolia has increased 95 percent since 1950, and 680 rivers and 760 lakes have dried up since 2006, according to the U.N. study.

The drying trend is most pronounced in the South Gobi, according to the U.N. report. That’s also where the Oyu Tolgoi mine is located.

“In southern Mongolia, characterized by Gobi desert, the impact of climate change is expected to be extremely challenging. It will be in the form of extreme events — sand and dust storms, flash floods or heavy snowfalls, droughts, desertification, land cover changes and water stress.”

–United Nations Report, 2010

“In southern Mongolia, characterized by Gobi desert, the impact of climate change is expected to be extremely challenging,” according to the report. “It will be in the form of extreme events — sand and dust storms, flash floods or heavy snowfalls, droughts, desertification, land cover changes and water stress.”

In Ulaanbataar, Deputy Economic Minister Chuluunbat Ochirbat described the cross-cutting economic and environmental trends, unfolding in multiple dimensions, that confront his young nation. National ambition, he said, is expressing itself in new public pressure to gain more control of foreign industrial projects. The country’s mineral abundance can be developed with stricter environmental oversight and enforcement, which he said is occurring. But he acknowledged that the one big barrier that has not been adequately recognized or addressed is water scarcity.

“We’ve taken some actions,” Ochirbat said. “We suspended mining leases to control water pollution. We approved a new law four years ago to protect rivers and forests. I think what’s important right now is that our mentality has been upgraded. But we know we aren’t using our water resources properly.”

Tough Choices Ahead

Heading south to the Gobi Desert, and not far from Ulaanbataar, the sole paved two-lane highway dissolves into multiple hard-packed, single lane dirt roads. They criss-cross each other and from a distance resemble braided strands that rise to the peak of wind-tossed ridges and fall to treeless green valleys. Every now and again lone dirt roads peel off to the East or West, their destinations known to local residents and expert drivers who are familiar with the territory.

The multi-tracked roads, unique in the world, form a powerful metaphor for Mongolia’s national development. The sheer mass of unmarked roads that bound across the grasslands and desert reflect the fast-growing number of drivers and vehicles, and rising personal incomes fostered by a free market economy and just two decades of mineral development.

South Gobi, ger, herders, livestock, Khanbogd, Coal, water scarcity, South Gobi, Mongolia, Omnogovi, Tsogttsetsii, Oyu Tolgoi. Rio Tinto. copper mine, gold, water, food, energy, choke point, circle of blue wilson center, Keith Schneider

Image © Keith Schneider / Circle of Blue
The children of a herding family near Oyu Tolgoi spend the afternoon in the shelter of their ger. They are (l. to r.) 17-year-old Batbayar, 11-year-old Gurragchaa, and 15-year-old Odgerel. Click image to enlarge.

Multi-tracking also represents the complexity of Mongolia’s choices. Follow the tracks and eventually they lead to Khanbogd, a desert town that is both enthused about mineral development and concerned sufficiently about dust, water, and the durability of a generation’s old herding culture to support Gobi Soil, an activist citizens group.

The South Gobi is a frontier of economic development and a laboratory of environmental consequences and social responses. It’s the sort of place that attracts people like Sara Jackson, a young American who is a human geographer and doctoral candidate at York University in Toronto. Jackson has traveled often to the South Gobi to study the effect of Oyu Tolgoi on the region’s residents. “I spend time thinking about how people feel,” she said in an interview with Circle of Blue.

In preparing her dissertation, Jackson conducted 80 interviews and held five focus groups to understand how Mongolians in Ulaanbataar, Khanbogd, and several more communities perceive Oyu Tolgoi. The idea, she said, is to promote communication between stakeholders.

In a draft report she wrote earlier this year, Jackson found persistent distrust among the stakeholder groups: Citizens felt they were being ignored and Rio Tinto officials felt their work to support independent review groups at Oyu Tolgoi was not appreciated. Dust from new roads and a dwindling water supply are viewed by stakeholders as chronic problems that haven’t been addressed to the extent that residents feel their complaints produce actual results.

Jackson’s conclusion: “Without resolution of the issues discussed above, feelings of marginalization and exclusion will continue to cause local, regional, and national tensions about Oyu Tolgoi and mining development in general. However, mining has had the positive effect of politicizing citizens, who are now more aware of and active in local politics.”

“I’ve spent a lot of time thinking about what I learned in Mongolia,” Jackson added in the interview. ”Cautiously, what can be said is that what’s happening in the South Gobi is different than in other developing places. Oyu Tolgoi is a big target. They do get picked on more than other companies. But at the same time, if they are pushed that raises standards. And they are

A Tank of Warm Water Brews a New Development Tea in Mongolia’s South Gobi Desert

September 18, 2013 Posted by otwatchweb

Reposted from: http://www.circleofblue.org/waternews/2013/cob/choke-point-china-2/a-tank-of-warm-water-brews-a-new-development-tea-in-mongolias-south-gobi-desert/

Monday, 19 August 2013 11:49

Circle of Blue senior editor Keith Schneider wraps up his recent trip to Mongolia.

Oyu Tolgoi, Mongolia's largest company, installed this tank to satisfy herder concerns. Herders say it's a joke. Rio Tinto says it was a temporary means to an end - supplying water to livestock. Photo/Keith Schneider

Photo © Keith Schneider / Circle of Blue
Oyu Tolgoi, Mongolia’s largest company, installed this tank to satisfy herder concerns. Herders say it’s a joke. Rio Tinto says it was a temporary means to an end – supplying water to livestock.

KHAN BOGH, Mongolia — “And this,” says Battsengel Lkhamdoorov, a South Gobi herder who once managed 600 animals, “is our new spring.”

Laughing, he lifted the lid of a brown steel box, its hard lines unusual in a landscape of layered sand and rounded clouds. The tank rests on four metal legs, contains about 1,000 gallons of water, is filled twice a week, and is small enough to fit in the bed of a pickup. It’s located along the south fence guarding the 80-square-kilometer Oyu Tolgoi hard rock copper, gold, and molybdenum mine.

Had the tank been set in one of the dusty towns in the South Gobi it would not have attracted much attention. The fact that it’s here — in a landscape of sand, tufted grass, and hot sun — and that it was brought here by Rio Tinto, one of the world’s largest mining companies, has turned the unadorned brown metal box into an object of regional significance, and perhaps a lesson in the new principles at work in 21st century water management and resource development.

Last month the 80-square-kilometer Oyu Tolgoi mine delivered the first shipments of concentrated ore to market, the product of an expanding open pit. The shipment culminated a decade of mine development and would not have been possible without the state-of-the-art water supply, treatment, monitoring, and recycling system that Oyu Tolgoi installed.

That closed loop system was designed and engineered under the oversight of Mark Newby, Oyu Tolgoi’s 42-year-old environment manager and a British-trained civil engineer. I talked to Newby on Thursday and learned that water supply and management are viewed by mine managers as a priority equal in importance as digging and processing the ore.

The brown tank, though, lies beyond the closed loop. It is an outlier that is giving the mine’s leadership and a number of the region’s herders a shared headache. It is part of a much disputed water management project to divert the ephemeral rain-fed flow of a dry stream bed, the Undai River, away from the mine’s open pit. Right now, early in the mine’s development, the river’s dry channel skirts the pit’s edge. But as the mine expands over time and the pit widens, its southeastern edge will eventually meet the Undai’s path and the river’s waters will pour into the mine.

Oyu Tolgoi set out to fix that problem by digging a new channel that bypasses the mine pit. But doing so also means halting the flow of water to Boor Ovu, a natural spring in the river channel that herders have used to water their livestock for generations. Newby and his staff proposed to fix that problem by developing a manmade spring several kilometers downstream and outside the mine’s fence line.

The company’s consultants suggested placing the manmade spring 500-meters from the fence so that wild animals could take a drink. That spot is now marked by the brown water tank, which makes it a bit of an eyesore, and a summary of distaste for the mine and its effect on their lives that some herders here openly express.

Beyond the door of a herder's ger, the source of wealth and culture and food is a herd of camels. Photo/Keith Schneider

Photo © Keith Schneider / Circle of Blue
Beyond the door of a herder’s ger, the source of wealth and culture and food is a herd of camels.

Local government officials also aren’t thrilled. The region’s governor recently stopped construction of the Undai diversion pending a review by a citizens working group of the manmade spring.

Oyu Tolgoi had already built most of what was needed to change the river channel, and a year ago it closed the spring. Six weeks ago, the company completed the construction of wells and a pipeline that delivers the waters of the ruined natural spring to a spot in the Undai channel just outside the perimeter fence.

The new wells provide a light stream of water to the riverbed. They also make the brown water tank superfluous.

“The tank was put as a replacement water source until we finished,” Newby told me on Thursday. “We have a new water source there now inside the mine’s licensed area. Maybe we need to see whether the tank serves any additional benefit.”

But the tank remains, heating up in the desert. Until its fate is decided it will attract attention and ridicule. On the day of my visit, Battsengel showed me the tank’s interior. Desert light reflected from the water surface. On the outside a stopcock valve and a faucet curved over the closest end of a steel watering trough. Battsnagel leaned down and turned the valve. Solar-heated warm water ran out, more brown than the desert sand.

“Our new spring,” Battsengel said again. This time he wasn’t laughing.

Almost 20 years ago, western mining companies began probing the mineral-rich ground of this part of the South Gobi, not far from the border with China. The main elements of the economy and human culture at the time were goats, sheep, horses, camels, and considerable financial stress. Mongolia was emerging from decades of socialist government and building a new market-based economy.

Through all of the stress, though, herders here could count on having enough water, especially at Boor Ovu. The spring was almost sacred, said Battsengel, a place where mothers gave birth and children played in shallow water. The water’s temperature and flow also resisted the brutal Gobi winter and did not freeze until January. That made it possible to water livestock through some of the coldest months.

Shutting off Boor Ovu’s flow and moving it south is viewed as more than an insult by some herders. They say it’s an outrage.

On Wednesday this week Battsengel stood beside the mine’s tall, barbed wire-topped metal fence, and showed me the two wells that replace the natural spring. They produced a small stream of fresh water that drained into the Undai’s dry river bed, generating a shallow and temporary pond. A hundred meters from the well the pond turned to mud. A bit further, the mud-dark surface vanished in the light brown sand of the Gobi.

Perhaps at its core, there’s nothing terribly new about the basics of this narrative. The story of a big resource company pushing native people around is as old as western civilization. The United States, after all, was built with slave muscle and on land seized from Native American tribes. The U.S. industrialized in the late 19th and through 60 years of the 20th centuries without giving much thought to the consequences of its plants and their massive wastes to human health, land, or water.

Except the brown water tank, the new wells, the local government oversight, and Rio Tinto’s responses indicate that resource development in the 21st century looks to be different. Just how different was displayed in full on Thursday here when Rio Tinto, the mine’s controlling partner, announced it was laying off 1,700 of its 5,000 Oyu Tolgoi mine workers because it has not gained national government approval for a $5 billion mine expansion.

Battsnagel and the other seven members of Gobi Soil, their year-old non-profit, as well as their allies in Ulan Bator, can legitimately lay claim to having a tiny bit of influence in that decision. Here in Khan Bogd, a former herding town that has become a dusty mining town of perhaps 800 residents, the new rules of industrial development are in full view.

With instincts and toughness honed by the desert, and with remarkable persistence, Battsengel and his herding friends here have been leaning hard on the owners of Oyu Tolgoi, and the local and national governments. They have been helped considerably by the national and global networking made possible by the Internet, and by technical expertise provided by non-profits outside Mongolia, particularly the Southwest Research and Information Center in Albuquerque. I’m traveling here with Paul Robinson, who’s worked at the center since 1976 and is one of the most expert mining policy and reclamation experts in the U.S. Paul is helping Gobi Soil understand the dynamics of drilling, soil, hydrogeology, mining, and reclamation.

Gobi Soil’s goal is to significantly improve how the giant mine manages its water. They are making headway. The newly elected Democratic government earlier this year expressed concern about the $5 billion mine expansion, which involves a form of underground mining that, among other things, could leave a deep crater in the desert large enough to swallow most of Manhattan.

From outside the perimeter fence, the Oyu Tolgoi mine rises from the Gobi Desert in a wall of blue. Photo/Keith Schneider

Photo © Keith Schneider / Circle of Blue
From outside the perimeter fence, the Oyu Tolgoi mine rises from the Gobi Desert in a wall of blue.

Rio Tinto, faced with the government delay and softening of global metals prices, announced last week that they had put off the expansion indefinitely.

Mines are an issue in Mongolia, arguably the biggest issue at the moment. This week, a member of the Mongolian Parliament held a news conference to report on steps his committee is taking to more tightly manage environmental protection measures in the mining sector.

And prompted by a letter from Battsengel and the other members of Gobi Soil that critiqued Oyu Tolgoi’s environmental management and the damage they said it was causing to water resources, one of the mine’s largest global funders is convening a Compliance Assessment group. Among the presumed tasks of the gathering is for mine and environmental experts to review how well mine officials are adhering to water and ecological safety standards required by Mongolia and the international banks that financed the mine’s construction and operation.

Gobi Soil receives a minimum of three seats on the compliance assessment panel. It’s not satisfied, and is calling for the same number of seats promised to the Oyu Tolgoi ownership group.

What’s so clear to me after decades of reporting on these sorts of struggles in the United States, and more recently around the world, is that new norms are in effect for resource development in Mongolia.

They are much different than those that operate in China and India, two other developing nations where I’ve spent time on assignment for Circle of Blue, and where we discovered massive disregard for communities, public health, and the environment.

Here in Mongolia the principles and values of civic and economic fairness, and ecological safety, are alive. They reach more deeply into native communities, governments, and front offices than the world yet recognizes.

The basic formula of the old 20th century debate, environment versus economy, seems to have evolved here. New ingredients are being added in the first decades of the 21st century to produce something important and nuanced. Caveats abound and will be included in upcoming reports for Circle of Blue. Still, success here has the real potential to be measured as much by ecological security and cultural longevity as it is by jobs and economic wealth.

The desert south of Khan Bogh is a proving ground, and a lone brown water tank is its apt symbol. It’s where a tiny group of herders is challenging their national government and global mining companies to operate with new priorities. Both are responding. It’s where the world might see a developing country come close to actually achieving a new environmental and financial order.

Der Spiegel Article on Oyu Tolgoi

August 23, 2013 Posted by otwatchweb

Mining the Gobi: The Battle for Mongolia’s Resources

Khanbogd Soum petition to Rio Tinto Shareholders–August 2013

August 7, 2013 Posted by otwatchweb

Dear Rio Tinto Shareholder,


We hereby are sending you the petition of the affected herders of Khanbogd soum where the Oyu Tolgoi project is located:

Rio Tinto in its policies has it that it will protect the rights of land-based peoples, will not cause damage to the right of such indigenous communities and implement on responsible production without damage to the environment.

Rio Tinto is not applying this policy to the affected communities in South Gobi. It is therefore requested that you ensure implementation and monitor compliance with your policies.

Violation 1: Our livelihoods and lifestyle are based on land and natural resources. Loss of pasture leads directly to loss of means of livelihood. Oyu Tolgoi project management does not recognize this connection.

Violation 2:  We are absolutely against the use of scarce desert water resources for Oyu Tolgoi production purposes. It is already evident that not only livestock but local communities are losing access to adequate water supply. Pasture, water resources are being taken from us and fenced in by the mine.

Violation 3: The impact assessment and compensation is carried out without an adequate methodology that measures impact based on the proximity of winter camps to the sources of negative impact rather than the size and quality of pasture lost; lacking transparency and nondiscriminatory application; there is no compensation for loss of access to water.

We hereby request that you remind Rio Tinto/Oyu Tolgoi LLC of their responsibility to respect the rights of local communities; and monitor the implementation of remedies to our complaints; and ensure that adequate compensation is calculated that is based on adequate impact assessment methodology applicable to mobile people’s status.



July 10, 2013 Posted by otwatchweb

Unofficial translation


Ts. Elbegdorj, President of Mongolia

Z. Enkhbold, Speaker, SGH

N. Altankhuyag, Prime Minister

S. Oyun, Minister of Environment, Green Development

D. Gankhuyag, Minister of Mining

A. Gansukh, Minister of Roads & Transport

N. Batbayar, Minister of Economy & Development

Y. Udval, Minister of Health

B. Badraa, Governor, Umnugobi aimag

T. Buyab-Ulzii, Governor, Khanbogd soum, Umnugobi aimag

N. Gunibazar, State Specialized Inspection Agency

Cameron McRay, CEO, Oyu Tolgoi LLC\Rio Tinto


The opening ceremony attended by the Government, held on July 9, inaugurated the export shipment of Oyu Tolgoi ore on gravel road before completing required standard road infrastructure. The national and international standards for transporting heavy loads such as copper ore require construction of a blacktop road that meets technical specifications & standards, which will be ready in September.

Currently, as approved by the Government, 100 trucks of 115 tons of weight will transport copper ore on the gravel every day.

Local community and environmental organizations demand that the copper ore be transported on a road that meets the technical requirements for its transportation. Otherwise it will increase in much greater scale of negative impact from  noise and dust contamination of pastures, vegetation, health of human and animal populations brought by the transportation of coal on gravel.

Based on the above, WE demand to seize transportation of copper ore on gravel road; complete the construction of a road that meets the technical requirements for heavy load transportation to ensure transportation free of negative environmental and social impact.

If no effective action is taken upon this demand, we will move to the implementation of next steps of protests.


Mongolian Civic Council of Environmental NGOs

Green Parliament

OT Watch

Steps without Borders

Environmental Federation of Youth

Lawyers for Environment

Centre for Human Rights and Development

Citizens Aliance  Centre (not present)

Sacred Stupa NGO

United States Position on Oyu Tolgoi

June 4, 2013 Posted by otwatchweb

United States Position Mongolia – Oyu Tolgoi Mining Project

European Bank for Reconstruction and Development Proposed Investment– February 26, 2013
International Finance Corporation/Multilateral Investment Guarantee Agency Proposed Investments– February 28, 2013

The United States requests to be recorded as abstaining on this project based on environmental policy concerns and legislative mandates.
Nevertheless, the United States wishes to make the following points and recommendations to support the successful implementation and goals of this project.
This project has the potential to transform Mongolia’s economy and advance its economic transition. It is being closely watched as a barometer for the foreign investment climate in Mongolia, with strong potential to attract further investments in the country by high quality companies and to catalyze further private sector participation in the mining sector. It also has the potential to generate substantial government revenues that can be harnessed for poverty reduction country-wide, and to improve the lives of Mongolians by creating broad opportunities for skills transfer and linkages to local small- and medium-sized enterprises. In addition, with leadership from both IFC and EBRD, Oyu Tolgoi under its new ownership is expected to raise the bar substantially for environmental and social standards in Mongolia’s mining sector.
The Government of Mongolia has made significant progress in many areas, including in revenue management and transparency, enabling Mongolia to gain full membership in the Extractive Industries Transparency Initiative in 2010. In addition, the MDBs and donors have helped Mongolia develop greater expertise in mining regulation and stronger standards for environmental and social impact assessment. It is important to note, however, that despite substantial progress Mongolia still lacks capacity in these areas.
The United States appreciates the value of IFC’s and EBRD’s participation in this project and their hard work to make a positive impact by mobilizing long-term finance and raising the bar for environmental and social risk management. The timeline and complexity of the project, and the relatively late entry of IFC/EBRD when construction was already well underway, have created challenges for IFC/ EBRD engagement, particularly on environmental and social issues.
For example, the United States’ review of the Environmental and Social Impact Assessment (ESIA) for the project has raised concerns in a number of areas. First, the United States believes the ESIA has gaps in critically important information, particularly related to the operations phase of the project and mine closure. Specifically, the Boards of the IFC and EBRD are being asked to make a decision on this project without seeing the agreed commitments contained in the forthcoming Operations Phase Environmental Management Plans.
Second, the ESIA does not provide a sufficiently detailed analysis of associated facilities and cumulative impacts, notably concerning a coal-fired power plant that will likely be needed to provide reliable power for the project. Also, the planned expansion in the project’s mining capacity is covered only lightly in the cumulative impact assessment.
Third, the United States believes achieving the positive development impact potential of this project will require a coordinated effort of the entire World Bank Group and the EBRD to ensure that there are:
• Strong and clear commitments in the Operational Phase Environmental Management Plans on timely mitigation measures for meeting IFC/EBRD standards for air quality, water adequacy and safety, waste management, biodiversity management and mine reclamation/finance, including remedial actions should the standards not be met.
• Timely implementation of the Biodiversity Action Plan.
• Implementation of a strategy for developing further Mongolian government capacity in mining regulation and oversight, environmental protection and revenue management, building on the current efforts underway.
• Strong MDB leadership in assisting the government in developing and implementing a sustainable regional development strategy that is linked to Mongolia’s green development policies, a regional biodiversity strategy and a regional water strategy, drawing on work undertaken to date;
• With respect to the domestic power plant, follow through on the commitment for an expanded alternatives analysis of power supply options and consideration of renewable energy in the energy supply mix, and an additional commitment to consider broader measures to reduce emissions, either globally by the company, or by Mongolia through energy reforms.
• A robust and well-funded supervision and monitoring program. The United States urges circulation to both IFC’s and EBRD’s Boards of monitoring/audit reports conducted by the independent environmental consultant.
The United States is keenly interested in the outcome of the IFC’s Compliance Advisor Ombudsman (CAO) review of herder complaints. The United States is pleased that the parties have agreed to dispute resolution and urges the IFC and the project sponsor to cooperate fully with the CAO-led process.
Finally, the United States urges the IFC to clearly highlight in Board documents gaps with respect to the IFC performance standards and the timeline for addressing them.


The Rio Tinto AGM: money makes their world go round, but for the company’s opponents, the struggle goes on

June 4, 2013 Posted by otwatchweb

reposted from London Mining Network

visitors to 2013 AGM

Visitors to the Rio Tinto AGM: left to right, Verner Wilson from Alaska, USA; Alexandra Thebert from the Upper Pensinsular of Michigan, USA; Roger Featherstone from Arizona, USA; and Sukhgerel Dugersuren from Mongolia. Photo: Amy Scaife/London Mining Network.

Report on the Rio Tinto AGM, London, Thursday 18 April 2013

Richard Solly, Co-ordinator, London Mining Network

This year’s London Rio Tinto AGM was a marathon three hours. If you are interested in money, it was a gripping performance by both board members and individual shareholders wanting more of the stuff. If your major concerns are Indigenous rights, workers’ rights, human rights in general, and the health of the environment, it was not such a hit.

In his introductory remarks, Chairman Jan du Plessis said – among many other things – that the company voluntarily declares its tax payments, including at local government level, as it believes in transparency. This was presumably a response to recent accusations that it had lobbied the UK Government to oppose European Union legislation to compel extractives companies to report on such payments on a project by project basis. Jan du Plessis also said that urbanization across the world would lead to continuing demand for minerals.

When the Chairman opened the meeting to questions, a number of shareholders made exceptionally lengthy points about investments, profitability, income and dividends. The Chairman appeared to enjoy these points and at no stage attempted to curtail them.

In answer to one such question, new CEO Sam Walsh said that phase 1 of the Oyu Tolgoi project in Mongolia was coming to fruition. It had produced its first concentrate in January and intended to move to full production in the first half of this year. It had already paid a significant amount of tax – $830 million since 2008. He said that everyone wants the project to succeed. Once it is fully operating, it will generate 36% of Mongolian GDP. It will “create a new basis for Mongolia to go forward”. The government and Rio Tinto are having constructive discussions, but the company is clear that the existing investment agreement is the basis on which the company has invested in the country. Such agreements are “sacrosanct”. The company had “helped the people of Mongolia to understand the importance of that,” he said. Every investor in Mongolia takes the same view.

Shareholder Albert Beale spoke of last year’s Greenwash Gold Campaign, in which Rio Tinto, BP and Dow Chemical were shortlisted as the three worst corporate sponsors of the Olympics on the basis of projecting a ‘green’ image belied by their actions. After a public vote in which thousands of people had taken part, Rio Tinto won the award as being the ultimate company in relation to such ‘greenwash’. Albert asked why this important award had not been mentioned in the Annual Report. He also asked why former CEO Tom Albanese was not in the room to answer questions about the period covered by the Annual Report, given that he was CEO for the whole period covered by the report and remains on the company’s payroll until 16 July 2013.

Jan du Plessis replied that he had no intention of publicizing the Greenwash Gold Campaign in the company’s report. He said that as Tom Albanese is no longer a director, it would be inappropriate for him to be at the AGM. John Varley, senior independent non-executive director and chairman of the remuneration committee, added that Tom Albanese had been entitled to twelve months notice but that this had been reduced to six, and that relations developed by Tom during his tenure would be “developed in an orderly way”.

Joel Reynolds of the Natural Resources Defense Council spoke about the Pebble Mine project in Alaska, USA. He said that an advertisement had been published the day before in the Financial Times expressing the continuing support of 80% of local residents for efforts to stop the project. He asked how, if Rio Tinto supports sustainable development and cultural and social commitment, it could continue to support a project opposed by 80% of local people and condemned this year by the US Environmental Protection Agency. The opposition campaign generated over one million signatures against the project last year and a further quarter of a million this year. He said that Bobby Andrew, a Yupik elder, was at the AGM to represent the community of opposition to the Pebble Mine at Bristol Bay.

Bobby Andrew pointed out that the company is supposedly pursuing “greater value for shareholders”. He said that with all that is happening with climate change, permafrost thawing in Alaska and the recent landslide at Bingham Canyon in Utah, it was clear that a disaster could happen at Bristol Bay if the Pebble Mine were to go ahead. He suggested that the company divest from Northern Dynasty, the company through which Rio Tinto has a share in the Pebble Mine project. There is no infrastructure there, the mine would be experimental, the site is currently accessible only by air for much of the year and by barge for three and a half months, and the company is looking for low cost operations. In its own best interests, the company should divest. Bobby pointed out that the Yupik people have been in the area for thousands of years and that Rio Tinto is onoly 140 years old. The Yupik people rely on all the renewable resources in the region and everyone requires clean water: nobody could survive more than three days without water. He said that the aim of the project’s opponents is to stop the project, and that they would not give up. Their numbers are growing. This could be very costly for shareholders.

Jan du Plessis said that CEO Sam Walsh had been pleased to meet the Alaskan representatives the day before and that he had heard that their presentation had been “extremely professional”.

Sam Walsh added that Rio Tinto has no immediate plans to develop the Pebble project. Its investment is indirect, through its 19.5% holding in Northern Dynasty, which owns 50% of the project. He said that the issues of which Bobby had spoken are very important to the company. Rio Tinto would only participate in the project if it can be constructed, operated and closed in a way that protects water and preserves wildlife. Rio Tinto favours underground mining there, unlike Anglo American, which wants an opencast mine. Before the project could proceed, there is much to be done to prove that it can go ahead in a way that meets Rio Tinto’s standards.

Roger Moody called out that he should answer the question about divestment – and not only from the Pebble project but from other damaging projects in which the company is involved. Jan du Plessis replied that the company has “no intention” of selling its share in the Pebble project.

Glen Mpufane of global union IndustriALL asked about the company’s conflictive relations with trade unions, noting particularly the lockout of workers at the Alma smelter in Quebec, Canada, in 2012. How could the company move away from its image of being anti-union?

Sam Walsh replied that the Alma smelter dispute that went on during the first half of 2012 was about remuneration and how to do business, how to improve productivity and the viability of the smelter. He said that the company is in a tough position in relation to aluminium. It has invested a lot of money in the industry to improve its cost basis. It is important that the company gets “an outcome to work smarter”. He said that the company is not anti-union, that it respects the right of workers to join or not to join unions, but that it does want to maintain direct contact with all its employees. It needs full communication and engagement with employees. It needs to improve productivity, to use the knowledge and experience of employees to deliver value.

Sukhgerel Dugersuren of Mongolian NGO Oyu Tolgoi Watch said she was speaking on behalf of herders who live around the Oyu Tolgoi mine. She said that Rio Tinto is diverting the Undai River – the sole river that supports life in this Gobi desert region – without local community consent and necessary government permits. She said that the Bor Ovoo spring does not freeze until late December, providing a unique ecological service to all creatures living in the area. It is on the site of the spring that Rio Tinto has chosen to dump its waste rock. Water is an essential – life and death – resource for the indigenous nomads of the Gobi Desert.

Sukhgerel asked what guarantees Rio Tinto would commit to in ensuring that herders, livestock and other plants and animals would have water in December. She said that Rio Tinto will not recognize the herders as Indigenous people or even as mobile land-based people, and is offering inadequate compensation for loss of access to pasture and water. More herders will lose livestock and livelihood – what will the company give them in compensation? She said that many statements had been made about Rio Tinto being ‘world class’ but that affected communities did not see this at Oyu Tolgoi. There had recently been an explosion at the chalk dispenser because of inadequate dust control. The tailings dam was already leaking and lacks a commissioning permit. She said that OT Watch and other organizations had reviewed the company’s Environmental and Social Impact Assessment (ESIA) and that it lacked an operational management plan, a tailings management plan, a waste rock management plan and a closure plan. She called for Rio Tinto to disclose these plans. She asked when the company would disclose them so that the herders could hire independent experts to review them. She said that the herders had prepared a petition to the company which would be delivered soon.

Jan du Plessis said that the company would arrange to receive the petition when it was ready.

Sam Walsh thanked Sukhgerel for her comments and for travelling to attend the AGM. He had noted her comments and recommended that she speak with the Head of the Copper Division. He said that 89 herder households were impacted by Oyu Tolgoi infrastructure, that agreements had been made with 88 of them and that the company was negotiating with the remaining family. Compensation had been agreed in line with company standards and IFC and EBRD guidelines. The consultation process with the herders was participative. The company will continue to monitor the livelihoods of these households to ensure that they have a healthy and prosperous future.

Sam Walsh continued that the company was not using its own definition of Indigenous Peoples but following the definition established by the World Bank/International Finance Corporation. He said that this is an issue for the World Bank. [So the company is clearly unwilling to accept Indigenous Peoples’ own definitions of who they are – they are to be defined by international financial organizations with a vested interest in minimizing costs to the projects that they support.]

He said that the company had undertaken not to draw on surface water but from a deep underground aquifer, distinct from the shallow river bed used by herders. The mine will draw 20% of the available water from underground wells over the next 40 years. Herders will be enabled to monitor and inform the company if water availability deteriorates. The company has undertaken to find new water sources and committed to reusing most of the water at the mine. The Undai River is ephemeral and flows at different times of year. It crosses the open pit and the waste dump and the company needs to divert it. This is clearly understood by the government. The Undai River Protection Project is continuing in the mine lease area and the company is using external experts to ensure that the work is done well. The company is waiting for a permit to work outside the mine licence area and will not do so until the permit has been received. The company will replicate the spring downstream for the use of herd animals and people.

He said that mine management plans are internal documents provided to the government as appropriate but that they exist mostly to provide direction to the management team. This is so that the company can draw on best practice and have one standard worldwide.

Sukhgerel replied that the compensation package for the herder families was the subject of a complaint to the International Finance Corporation and that mediation is in process but that there has been little change in the company’s position. Families are losing livelihoods. More than 89 families will be affected as the mine expands – the 89 families initially affected are having to move away into the pasture of other families who will be impacted as a result.

Richard Harkinson, a research associate of London Mining Network, added that the US Government’s position when the IFC voted on funding for Oyu Tolgoi was that the company’s ESIA lacked essential information and that the compensation offer to families was inadequate. In negotiation with multilateral funders the IFC and the EBRD, Rio Tinto is insisting that if loans are approved, environmental reporting should take place annually rather than quarterly, despite the fact that the EBRD believes that quarterly reporting is ‘non-discretionary’. The company is going through the motions of consultation with the EBRD while blundering on with a badly organized river diversion which will impact of the ecosystem and on families who have been there much longer than Rio Tinto has been in existence.

Richard added that the company had recently had a landslip in Utah and had pulled out of Palabora in South Africa because of a collapse, so its operations are clearly not unproblematic.

Sam Walsh said that the company was reviewing compensation to make sure it was contributing to sustainable livelihoods. He said that the US Government regularly abstains from voting on project funding of this sort and that its public statement did support the project and said that the new ownership is expected to raise standards in the mining industry in Mongolia. He said that Rio Tinto is committed to work along the lines of the report published in August 2012 and that the project meets the company’s standards and those of the EBRD, IFC and other organizations which do not take funding decisions lightly and only do so after much research and analysis. These organizations and the people of Mongolia would hold the company to account.

Sam Walsh continued that mining is difficult and complex. At Bingham Canyon, a faultline runs under the mine and the company had been monitoring it continuously in recent years with the latest technology. As a result, the company was able to ensure that everyone left the mine at 11am, and the landslide happened at 9.30pm.

Andy Whitmore asked if the company could confirm that Rio Tinto subsidiary ERA will cease its operations at the Ranger Mine in Australia by 2021 and complete rehabilitation by 2026.

Sam Walsh replied that the company is looking at the underground expansion known as Ranger Three Deeps, but that this is exploration activity. The company has a range of commitments with the project and it will keep these commitments.

Alexandra Thebert from Save the Wild U.P. in Michigan, USA, spoke about the Eagle Mine in the Upper Peninsula of Michigan. She said: “Our community has been fighting Eagle Mine since the project nearly a decade ago, which you know as we’ve travelled to your London shareholders meeting for years to call attention to our issues.

“To set the stage, mining engineers have said that this permit was fraudulently issued and the structure is unsound to drill a portal, which is located directly underneath sacred land to the native people of this region, who have lived here far longer than the 140 years of Rio Tinto’s existence.

“As a sulphide mine, Eagle Mine threatens nearby Lake Superior and other major watersheds– over 20% of the world’s freshwater, with sulphuric acid drainage as there is no precedent for a similar mine that does not leak, including your own Flambeau Mine in Wisconsin, where you are now fighting your Clean Water Act violation and I’ll see you in a Chicago courtroom next week about that.

“With the recent reporting of uranium at the site, former federal oil regulator Jeffery Loman has stated the risks associated with the project have just increased exponentially, potentially endangering the workers, community, and environment to radiation and radon exposure.

“Further, you seek to remove your only air filter from your mine portal– added in response to community outrage that unfiltered mine dust, potentially laden with heavy metals– and now uranium, would be piped straight into our community.

“Over 10,000 citizens oppose this mine, including hundreds of health professionals and over 100 faith leaders and support is continuing to mount. Yours is a very expensive and risky investment, and we are a very expensive, and growing opposition dedicate to protecting our health and environment. We will not stop pursuing you. We will not stop suing you until you have left our community – fully intact.

“My question is – at what cost to the health and safety of our community will you pursue so-called value for your shareholders?”

Sam Walsh replied that the project has state and federal government environmental approvals; that it has been awarded all necessary permits to operate; that the permits have been upheld in court; that the mine has reduced its allowable emissions by 80%; that air quality is being monitored by independent organizations; that uranium is naturally found in very small percentages and that it is being tightly controlled by the company; and that the company is preserving the sacred Eagle Rock outcrop in its natural state and providing access to it for visits by tribal members.

Jan du Plessis said at this point that he was aware that people had come from around the world to address the meeting and that as time was moving on he would take any further questions from those who had travelled from overseas before taking any further questions, if time allowed, from other shareholders.

Roger Featherstone, Director of the Arizona Mining Reform Coalition in Tucson, Arizona, USA, said: “We have been closely following and are very concerned about Rio Tinto, through its subsidiary, Resolution Copper, not playing by the rules in your attempt to privatize an area withdrawn from mining by President Eisenhower in 1955 in order to build a copper mine. This area, the Oak Flat Campground and the surrounding watershed is sacred and critical for the religious freedom of Native American Tribes. It is heavily used for recreation, especially rock climbing and camping and is ecologically sensitive. Oak Flat is an hour east of Phoenix, Arizona in the United States.

“There is a tried and true method of permitting mines located on public land. This method involves completing exploration, and writing a mining plan of operations, and submitting it to the appropriate federal agency for a through review. Every large mine permitting in the United States since 1973 has gone through this process. However, instead of writing a mining plan which can be fully vetted, you have chosen to instead pressure the United States Congress to pass special interest legislation that would give you the land without first writing a mining plan. You say it will take you a decade before you would be ready to mine at Oak Flat, which would give you plenty of time to write a mining plan.

“You have tried to bypass the normal permitting process with your special interest bill 11 times and have failed. Yet you persist in trying yet another time which only wastes time and money both for your company and our communities.

“You say that you will only mine after receiving the free, prior, and informed consent of local people that would be impacted by your proposed project before moving forward. However, in this case, you have not and cannot receive the free, prior, and informed consent of local people without first writing your mining plan, yet you continue to pressure the US Congress and others to give you this precious piece of public land. How do you reconcile your corporate rhetoric about getting local informed permission first with your actions on the ground in Arizona? Will you commit to stop pressuring the US Congress to pass your legislation until you have completed your exploration, written your plan and had it fully vetted by the appropriate federal agencies?

Sam Walsh replied that the plan is for an underground mine which will still allow access to areas above ground. The company aims to have a mine plan available before the summer. Resolution Copper is committed to managing the lands it acquires in a respectful way, including land of significance to Native Americans. He said that Rio Tinto acknowledges that the US Forest Service land has historical significance and includes sites of cultural and archaeological significance. It recognizes the rights of the Apache tribe but would like a direct dialogue with them, and the San Carlos Apache tribe limits itself to government-to-government relations rather than talking directly to the company. He said that it would help if Roger Featherstone would also engage directly with Resolution Copper.

Dr Natasha Posner, a shareholder and Australian citizen, said: “I would like to ask you about the implications of the New South Wales Land and Environmental Court’s decision on Monday not to allow the extension of the Warworth mine the Hunter Valley on environmental and social grounds. What happened about any consultation and agreement with the community of Bulga – a community which would have suffered from the impact of noise and dust and in effect have been wiped out? What value was put on the ecosystems and endangered species involved? The extension would have destroyed an extremely rare and endangered ecosystem, home to 17 endangered native animal species. Does this court decision have implications for Rio Tinto’s involvement in coal mining In Australia?”

Sam Walsh replied that the whole process has been long. For three and a half years the company had attempted to get a decision. They thought they had approval from the State Government and the outcome is a blow to the company’s plans and to the many people who work at the existing mine and to the mine’s suppliers and contractors. Rio Tinto is exploring other development options. He said that he did not know if the company could develop a new plan that meets the objections raised. Rio Tinto has existing projects and these will continue while the company gets a better understanding of the ramifications of the decision.

With the question session drawing to an exhausted close, shareholders wanting to raise important issues about the company’s involvement Grasberg in West Papua and its Bunder diamond project in India were unable to make points that they had been trying to make since the beginning of the session. A report on the company’s Bunderr project can be found at http://londonminingnetwork.org/2013/04/rio-tinto-what-it-says-and-what-it-really-does-in-india/. Information about its Grasberg involvement can be found at http://londonminingnetwork.org/?s=Grasberg.

There was one final question, from Hilary Temple, a shareholder who said she had ‘sympathy’ for the environmental concerns raised and wondered how the company justified raising its dividend to shareholders in a year when it made a “thumping loss”. Jan du Plessis replied that the policy of continuously raising the dividend was adopted years ago.

Perhaps if the dividend accurately reflected the impacts of the company’s operations on the communities and workers whose lives it ruins, shareholders might all withdraw their investments!

Rio Tinto has posted a webcast of the the entire AGM at http://www.riotinto.com/shareholders/12361_agm_2013.asp. Registration is required. This takes you to http://www.media-server.com/m/p/ame2hzwm. The webcast has a slider with which to move to particular time points within the meeting, but the slider does not become visible immediately – a wait of two minutes may be necessary. The webcast lasts 2 hours 55 minutes and 39 seconds, and includes all the questions and answers.

There is a further reflection on the Rio Tinto AGM at http://londonminingnetwork.org/2013/04/london-calling-sees-the-grey-man-cometh/.