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Drummond responds to Colombian ship-loading ban

20 Jan 2014 16:03:06 | csd

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Colombian coal producer Drummond on Sunday said it did not receive the final approval needed to build its port infrastructure until 21 March last year, due to slow work by the Colombian environmental licensing authority ANLA and appeals by Glencore Xtrata-owned coal producer Prodeco and its port Porto Nuevo.

In a document titled “Drummond responds with facts and asks WHY?” the US-headquartered coal producer listed the obstacles faced in recent years, which led to a ship-loading ban imposed on Drummond on 9 January of this year and force majeure, which Drummond declared last Monday.

“With the precedence set of granting extensions in extenuating circumstances, why was Drummond denied? We are investing $360 million USD [€265m] to solve the problem of direct loading, which demonstrates our good faith commitment to the dictates of government. We only needed two-and-a-half months,” the company said in the document published on Sunday.

In December the government announced it would allow Drummond to continue to load ships via barges until its infrastructure is in place, but would charge the company a daily fine for breaching the law.

However, in a complete change of tack, on 9 January Colombian president Juan Manuel Santos instructed the country’s environment minister Luz Helena Sarmiento to take any action required to protect the environment. His statement was followed by notice from the environment ministry of the suspension of Drummond’s ship-loading activities until its infrastructure has been completed.

One analyst told ICIS that Colombia probably changed its approach in the matter because it wanted to change the world’s perception of the country. “I think this is a sign of Colombia wanting to show the world – and potential investors – that they are serious. They’re trying to change the perception that it’s a corrupt country in which conducting business is risky. It’s a search for respect,” the analyst said.

Order of events

In 2007, Colombia said all ports must be equipped with direct ship-loading infrastructure by 1 July 2010 but extended the deadline to 1 January 2014 in 2011.

Drummond said it filed for an environmental licence modification three times between 2009 and 2010 but was repeatedly denied because at the time, Colombia allowed only one access channel to be built and it had already licensed that to Prodeco in the Cienaga region – south of Drummond’s port in Santa Marta.

Drummond resubmitted its request in 2011, which was approved at the end of the year, but ANLA again failed to authorise the dredging for the access channel. Drummond said that after numerous meetings with ANLA over the following years in which it stressed the importance of dredging a turning basin – an absolute requirement for its new port to be viable – it finally received its licence at the end of March last year.

After that, 53 days of strikes further delayed port construction. According to Drummond, its strike contingency plans were repeatedly submitted to the country’s labour ministry which eventually denied Drummond’s request. “Drummond filed an appeal to this ruling, but never received a response from the Ministry of Labor. This intransigence by Sintramienergetica [the union that called the strike] and refusal by the Ministry of Labor caused a delay of approximately two months on the construction of the port,” Drummond said.

Drummond also pointed out that Colombia has a history of granting extensions in similar situations, quoting a decision from 2009 in which the government granted an extension to Prodeco’s port authorisation by saying: “It is necessary to adopt measures of a temporary nature in order to ensure continuity in coal exports … [This is a] temporary measure that manages to avoid significant economic impact for the region.”

Environmental fines

In December, Colombia fined Drummond almost Colombian pesos (Ps) 7bn (€2.6m) over an incident on 13 January last year, when workers on a barge belonging to the company dumped around 200 tonnes of coal into water to avoid it sinking in rough waters.

Drummond on Sunday listed five similar events, which took place between 1996 and 2010, in which coal was dumped in water. Drummond pointed out that in four of those events, the company responsible was not fined, while one – in which 1,100 tonnes of coal sank into the sea, the company paid a mere $2,500 although the amount of coal which sank was more than five times greater than the 200 tonnes Drummond dumped.

“After the barge accident in early 2013 several detailed studies were completed … findings: there does not appear to be any long term lasting environmental impact, removing the coal from the bottom of the ocean is not necessary and would cause more harm than good,” the company said. “Actually, coal has been used for many years as a filter medium for drinking water. This said, our intention is to operate our marine operations in an environmentally friendly manner with no coal spills or pollution.” Manca Vitorino

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