Russia's environmental watchdog files US$2B claim against Norilsk over oil spill
Russia's environmental watchdog filed a claim Sept. 10 of 147.78 billion Russian rubles against Arctic mining group PJSC Norilsk Nickel Co. over a catastrophic fuel spill at the end of May at its OJSC Norilsk-Taimyr Energy Co. subsidiary.
The environmental agency known as Rosprirodnadzor previously
requested Norilsk to settle the US$1.96 billion claim voluntarily, before
threatening legal action in September. Norilsk set aside US$2.1 billion in the
first half of the year to cover the accident, reducing its net profit for the
period to just US$45 million from close to US$3.0 billion a year earlier.
"I am not surprised by this turn of events as I
initially expected the government to have a free hand in determining the amount
of the fine (which was set at a record value) and enforcing it," George
Voloshin, the head of the Paris branch of independent integrity risk
consultancy Aperio Intelligence, told S&P Global Market Intelligence.
Norilsk described the watchdog's decision to pursue the
matter through the court as "premature," in a same-day statement.
Even though the cleanup of one of the rivers contaminated by the accident has
been completed, the final amount of diesel collected has not yet been assessed,
according to the group.
Only the completion of an ongoing expert review will reveal
how much fuel was spilled and the resulting cost of the environmental damage,
Norilsk said.
The leading nickel and palladium producer blamed the
collapse of an aging Soviet-era fuel tank in May, which disgorged 21,163 tonnes
of diesel into the surrounding area, on melting permafrost and has disputed
Rosprirodnadzor's calculation of the damages caused by the incident.
The spill was the first in a series of highly polluting incidents
in the High North over the summer that have overshadowed Norilsk's
multibillion-dollar efforts to reduce its notoriously heavy environmental
footprint. Unscheduled inspections between August and September by
Rosprirodnadzor of the facility responsible for the first spill identified 139
violations and revealed the site's equipment to be "worn out" and
"obsolete."
"In normal circumstances, you would expect a Russian
court to slap a large company controlled by an influential oligarch on the
wrist and let it walk away with a modest fine (10x, 20x ... lower than the
originally assessed liability)," Voloshin said. "This case is
different for all the above reasons. I don't exclude a settlement at a value
lower than the US$2.1 billion penalty that the federal government is seeking to
levy, but I don't think it will be an easy win for [Norilsk's CEO and largest
shareholder] Vladimir Potanin."
Mines feature prominently among a range of infrastructure at
risk from rising temperatures and permafrost degradation as climate change
causes increasingly extreme weather in Russia's far-flung northern and eastern
regions. Rapidly melting sea ice nevertheless makes the development of the
strategically important Arctic ever more attractive to Moscow as it seeks to
revive an ailing economy and increase its military presence around the North
Pole.
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