Best Practice Mining in Colombia

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Robert Goodland, independent environmental consultant for Ikv Pax Christi, “ Best Practice Mining in Colombia.” This paper, presented to Colombia’s Controlaría General de la República, details how application of international mining best-practice standards in Responsible Mining could improve the environmental and social performance of mining operations in Colombia.
Best Practice Mining in Colombia

Robert Goodland


This paper was originally presented at a Best Practice Mining forum sponsored by Ikv Pax Christi for Colombia’s Controlaria General de la Republica in December 2011.
Best Practice Mining in Colombia

The care and good management of the environment is one of the greatest challenges of our time. Colombia is a country privileged in terms of environment. There is great opportunity to advance towards sustainable development which generates employment and new openings into the long term.”

President Juan Manuel Santos

Colombia is at an ecological crossroads. The new government has to choose between guarding its unique ecosystems and boosting its economy with intensive mining. The decision could finally exhaust or simply recast Colombia's long, agonizing armed conflict.”

I have a very strong stance against mining in Colombia. I believe that large-scale mining operations in Colombia are very negative because there are no legal or social conditions for it. This does not mean that I am anti-mining. This is simply not the country I want for my children.”

Manuel Rodríguez Becerra, Former Minister of Environment (NSI, 2011).

Table of Contents

1. Global Principles for Best-Practice Mining 5

2. Perspective on Mining in Colombia 5

3. Environment and Regulatory Capacity 6

5. No-Go Zones for Mining 19

6. Environmental and Social Assessment 21

8. Conclusion: Environmental and Social Governance 32

Sources of Further Information and Literature Cited 34

1. Global Principles for Best-Practice Mining

Colombia’s most essential assets – social capital and natural capital – are chronically vulnerable after a half-century of conflict. In the continuing context of citizen insecurity, social cohesion and social trust remain fragile. Because social capital is both a prerequisite for development and poverty reduction, and an indicator of the quality of life, its protection should be a paramount consideration in all policies including those related to best-practice mining. Best-practice mining policies should be based on conserving and investing in natural and social capital and should pay particular attention to managing social and environmental risk.
Effective institutions are the key to implementing best-practice mining. In executing policies, institutions determine a country’s quality of economic development and natural resource management. If mining activity expands before effective institutions are in place, serious problems – corruption, conflict, and pollution – often emerge.

2. Perspective on Mining in Colombia

If the principles of conservation of natural and social capital, reducing risk, deepening democracy, and exercising caution are to be given priority, now might not be the best time to encourage investment in the mining sector. Further work needs to be done in three areas: (1) building environmental regulatory capacity, (2) building peaceful and democratic solutions to local conflicts, and (3) reducing poverty and ensuring that the economic benefits of mining actually accrue to the affected communities.
Under the slogan “Colombia: Mining Land,” Colombia’s National Mining Development Plan predicts that by 2019, Colombia will be the most important mining country in Latin America. Indeed, between 2001 and 2009 foreign investment in mining rose more than 500 percent. Colombia now exports about 75 million tons of coal annually, making it the world’s fourth largest coal exporter (after Australia, Indonesia, and Russia).1 Colombia’s coal is mainly for export; most of the country’s domestic energy is from hydropower. In 2010, the mining and oil sectors contributed 6 percent of GDP and provided almost 50 percent of the country’s total exports ($8 billion). By the end of the decade, mining is expected to account for nearly 13 percent of GDP. During the administration of former President Alvaro Uribe, the number of acres with mining concessions increased eightfold, from 2.79 million to 21.08 million (1.13 million to 8.53 million hectares)—to about 4 percent of the national territory.
Because skyrocketing mineral prices have prompted a backlog of 20,000 unprocessed title requests, covering approximately 20 percent of Colombia, the Government of Colombia (GoC) is trying to tighten up on regulation. With the price of gold now pushing US$1,800 per ounce, the government will be pressured to permit more gold mining. Gold is Colombia’s most important metal. AngloGold Ashanti’s La Colosa mine near Cajamarca, Tolima has reserves of 12.9 million ounces. A price of US$1,800 per ounce makes lower-impact underground gold mining profitable. Gold miners should be forced to use the safer cyanide-leaching-in-tanks (CIL) method, or non-cyanide methods, rather than the inherently risky cyanide heap leach.
The drawback to the export of raw mineral and agricultural products such as coal, gold, coffee, oil, and electricity is that there is little scope for domestic processing and value added. Colombia is basically an exporter of raw materials: more than 81 percent of its exports are unbeneficiated primary natural resources requiring low inputs of technology. There is little scope for augmenting conversion of gold into jewelry, or converting coffee beans into instant coffee powder, for example. Multinational oil corporations do not favor domestic refining of crude oil into high-value petroleum products. The importers want to capture the domestic processing and value added benefits. Colombia imports gasoline.
The Cerrejón Coal mine opened in 1976 in the Guajira Peninsula. It has become the biggest mine in Colombia and the largest open pit mine in the world. It exports more than c.45 bn tons annually. BHP Billiton, Anglo American PLC and Glencore International AG, each own one third of the shares; Xstrata PLC bought Glencore's operations in 2006.

3. Environment and Regulatory Capacity

Given the country’s steep terrain and the toxicity of chemicals used in mining, there is significant potential for rapid degradation of the water supply. Watershed management, especially reforestation to protect headwaters, should be of paramount concern in Colombia. Above all, nothing should be permitted that reduces protective watershed forest cover, or reduces water quality or quantity.
Most mining leaves large heaps of overburden and waste rock exposed to erosion especially during violent storms, and is especially of concern in seismically active zones. Most mining also leaves open waste impoundments or liquid effluent often polluted with toxic chemicals such as cyanide. Gold mining usually requires large cyanide heap leach piles or tailings impoundments, similarly exposed to the elements. Storage of large volumes of toxic mining waste behind dams on the surface all too frequently results in dam rupture and spills of cyanide and other toxins into the watershed, especially problematic in seismically active Colombia. Unlike water reservoirs that can be drained when there are leaks or problems, mine waste impoundments and their associated dams must last in perpetuity. While solid mine wastes might be stored in the underground workings, underground mines still involve tailings. Given the potential for poor water quality in open pits, open-pit mining is inherently antithetical to prudent watershed management.
Government Regulatory Capacity

Extractive industries are the first of the five top priorities or “locomotives” of President Juan Manuel Santos. The last Minister of Finance, José Antonio Ocampo, observes that not one of Colombia’s mining-dependent regions has developed. For example, la Guajira receives the most mining royalties, yet is the poorest department along with Chocó and Guainía. More than 65% of Guajira’s citizens are below the poverty line. Mining creates little employment. Therefore mining should not be one of the locomotives for the nation. It is absurd that the state should subsidize mining. But the new Royalty Law (013), expected to enter into force in 2012, controversially takes royalty management away from the Regional Corporations. That might reduce corruption but it stalled the new law.

Frame1The perennial struggle continues between authoritarian growth and the extraction and export of natural resources by foreign multinationals causing local social and environmental damage and the alternative vision of environmental conservation, democratic protection of communities and their resources, and development of value added manufacturing industries. The asymmetry between government and big business on the one hand, versus protection of communities and their environment on the other is difficult to redress. Even governments of highly developed countries find it increasingly difficult and expensive to monitor mining operations. The challenge for Colombia is, therefore, great, raising doubts over how far the GoC can muster the technical capacity to monitor and enforce prudent mining agreements. At this point, is GoC sure that it can monitor the mining sector prudently? (See Box 1.)

Even if the government insists on independent third-party monitoring fully paid by the mining corporations but answerable and reporting only to government, it seems risky for the government to promote large-scale mining nationwide. Independent third-party monitors will certainly reveal that governmental institutions in Colombia do not yet have the capacity to regulate mining. The goal is to conserve the environment for Colombians so that development can be sustainable over the long term.

Ingeominas used to be the sole source of mining permits. Ingeominas granted these permits with no thought to likely social and environmental damage, which Ingeominas did not seem to consider its responsibility. Between 2000 and 2010, Ingeominas granted 1,080 percent more mining permits covering 5 million hectares. Between 2004 and 2011, Ingeominas’s permits increased from 2056 to 5903, many in conservation units or paramos (Semana 2011). Some of these permits were in Paramos, protected forests, national parks, Indigenous Peoples Reserves, steep slopes, water sources, and other places in which mining is bound to create severe impacts and which in practically all other countries are strictly off limits to mining (See Section 5: No-Go Zones to Mining). The Controlaria General de la Republica (2009) concluded that Ingeominas failed to meet standards of efficiency, effectiveness, economics, equity, and environmental norms. Carlos Rodado, then Minister of Mines, fostered the debate about the wisdom of making mining the locomotive for growth in Colombia, especially in view of the risks of La Colosa, Santurban, and Marmato.
The decision between open-pit and subterranean mining is one of the most powerful ways of reducing social and environmental impact. Mining corporations prefer open-pit as it is much cheaper if the social and environmental costs are externalized. If such costs were internalized, as should be the case in responsible mining, then open-pit mines would be demoted.
In view of the deficiencies of Ingeominas, GoC rescinded its licensing role. Instead, Decreto 3573 of September 2011 created the National Agency for Environmental Licensing (ANLA: la Agencia Nacional de Licencias Ambientales), an autonomous unit connected with the environmental sector and with sustainable development.2 A new Ministry of Environment and Sustainable Development was also created in September 2011.3
Box 2. Codes of Conduct and Standards Followed by

Better Mining Corporations
EITI: The Extractive Industries Transparency Initiative Plus Plus.

UNDRIP: The United Nations Declaration on the Rights of Indigenous Peoples.

IRMA: The Initiative for Responsible Mining Assurance.

UN Convention Against Corruption

UN Precautionary Principle

The Voluntary Principles on Security and Human Rights.

The Equator Principles.

The UN Aarhus Convention

The Extractive Industry Review.

Corporate Social Responsibility.

The UN Global Compact.

The Environmental Liability Directive.

IPIECA Guidance Document on Sustainable Social Investment.

The ECOWAS Directive on the Harmonization of Guiding Principles and Policies in the Mining Sector.

UN ILO Convention 169: Core Labor Standards.

The International Convention on Economic, Social and Civil Rights.

The International Convention on Elimination of all Forms of Racial Discrimination.

Convention on the prevention and punishment of the crime of genocide.

Voluntary Principles on Security and Human Rights.

UN Guiding Principles on Business and Human Rights

The OECD Guidelines for Multinational Enterprises.

The Akwé: Kon Guidelines

emocracy, Violence, and Mining
Over the past few years, Colombia has come a long way in tackling both poverty4 and violence. The priority now is to strengthen those commendable trends. But Colombia has not yet fully restored its fledgling and relatively weak post-conflict democracy; thus, it is important to strengthen democracy wherever possible. This task, in turn, puts a premium on following democratic processes wherever possible and recognizing and acting on majority views. At the moment, a full 30 percent of the budget of the Ministry of Defense is spent on protecting foreign mining corporations5 from impacted communities. This waste of money could be greatly reduced by following Colombian law and best practices to prevent damaging impacts that lead to conflict and violence. Prevention is better than “cure.”
International guidelines (see Box 2),6 best practices, and bitter experience7 suggest that it is inadvisable to proceed with mining in conflict areas, or at least to wait for the conflicts, whether or not they are mining related, to die down. New projects, especially in the extractive industries, often exacerbate pre-existing conflicts. In Colombia, this situation is manifested by the well-documented history of murders, intimidation, and death threats, especially directed at anti-mining leaders, protesters’ children, and priests,8 suggesting that current areas of mining exploration and project development are indeed conflict zones.
It can be argued that such social vulnerability is more serious than any environmental vulnerability related to mining. While environmental vulnerability might be managed by technologies, social vulnerability of this sort is far less prone to management.
The case of Peru is illustrative. Only as late as 2008 did Peru create an Environmental Ministry. Even then the Ministry of Mines and Energy, the executive, and the mining corporations resisted giving the new Environmental Ministry a meaningful regulatory role. Consequently the environmental and social assessments of mining proposals are still approved by the Ministry of Mines and Energy, which is hardly impartial. Monitoring of mining has been given to the regulatory authority of the energy sector, which has little experience in mining.
Peru offers perhaps the most relevant comparison to Colombia. Peru’s mining boom began shortly after a 12-15-year period of armed conflict, in a context of significant institutional weakness (though Peru’s governmental institutions in the mining sector may always have been stronger than those of Colombia). Levels of social conflict around mining have increased steadily since the late 1990s, and socio-environmental conflicts have consistently constituted over half of all registered conflicts. In an attempt to reduce such conflicts, Peru’s newly elected government has passed a law of free, prior, and informed consent (FPIC). 9
Poverty Reduction, Growth, and Mining
The primary argument for promoting mining in Colombia is that it will lead to poverty reduction, both directly (e.g. through employment) and indirectly (through fostering sustainable development). There is still too little evidence to conclude that this will be the case. There are three reasons for this view.

Box 3. Ancestral & Artisanal Mining

In many communities ancestral, artisanal, and small-scale mining does not use cyanide or leaching. Long the backbone of some communities' economies, and in line with their own regulations and jurisdiction, ancestral artisanal mining is more sustainable and less damaging than most industrial mining. Unfortunately, ancestral mining is essentially being declared illegal, in order to pave the way for large-scale mining. This is regressive. Although this paper focuses only on industrial mining and excludes ancestral mining, this issue should be promptly addressed.

First, under current conditions (of proven and indicated reserves, and existing tax and royalty rates), the potential economic benefits of mining to the country are modest, and are outweighed by the risks that mining causes. Economic theory demands that all environmental and social costs are internalized in assessing the value of an investment. Externalizing costs is a way for the cost creator (e.g., a mining corporation) to shift costs away from the causal agent and onto society in general. There is as yet no convincing evidence to refute the argument that the net value of mining to the GoC would be negative, were the full costs of environmental and social impacts included in an economic assessment of the sector. If these costs are not internalized, then the economic analysis must be rejected. Damage and remedial costs from floods, accidents, spills, post-mining rehabilitation, etc., commonly are not accounted for in advance.

Second, mining does not automatically translate into poverty reduction and local development. For this to occur, other mechanisms need to be in place. In general, three potential mechanisms exist. The first mechanism operates through local employment and other local multiplier effects that a mining investment might have. The second occurs through the mining company’s own direct support to community and local development through corporate social responsibility (CSR) and related initiatives. The third occurs through the investment of tax and royalty revenue in measures to reduce poverty and foster development.
None of these mechanisms can be taken for granted, and each requires the existence of certain preconditions such as an adequately trained work force, local labor and service markets capable of responding to mining’s demands, company capacity to manage effective corporate social responsibility programs, subnational government capacity to invest tax and royalty revenues strategically, and a cohesive civil society that (together with government) can agree on how to invest such resources. There is currently insufficient evidence that these preconditions exist in Colombia. Thus, there is no reasonable assurance that mining projects will lead to poverty reduction and local development (even if their net present value were positive after internalizing all social and environmental costs).

Third, few of the mining proponents currently operating in Colombia have demonstrated a track record of converting mining into economic development.




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