Pacific urged to be cautious over seabed mining

nautilus machine cutter

Radio New Zealand | 28 April 2016

A new report by the World Bank says Pacific Island countries should be cautious over any plans for mining of the seabed.

Released today, the ‘Precautionary Management of Deep Sea Mining Potential’ report recommends that Pacific countries supporting or considering deep sea mining activities proceed with a high degree of caution to avoid irreversible damage to their ecosystems.

It also stresses the need for strong governance arrangements to ensure that appropriate social and environmental safeguards are in place.  

The World Bank’s country director for the Pacific, Franz Drees-Gross spoke with Koroi Hawkins about the reports recommendations.

FRANZ-DREES GROSS: What we are seeing is whether countries adopt Deep Sea Mining as their development strategies or not That is a decision for National government we would just encourage them to use a precautionary approach if they do exploit those resources. So develop the institutional capacity to mange any financial flows as a result of those activities to make sure they really benefit communities. Make sure we fully understand the ecological impacts especially in sensitive ecosystems and also make sure that any social safe-guards are well managed.

KOROI HAWKINS: Is this of crucial importance given the close proximity of the Solwara 1 project coming into being in Papua New Guinea?

FDG: I think what is very clear about sea bed mining and we are not the first to have worked in this area. SPC’s geoscience division supported by the European Union has been working on it for a number of years. But I think everybody that has been near it agrees that it is a very new sector with a lot of knowns and a lot of unknowns for example and in a number of areas. So very little is known about the resource endowments in the first place. So what minerals are in which economic zones of countries. And then even if you knew the value of those resources very little is known about how commercial (viable) it is actually to extract them. Is it profitable at all? I mean Solwara 1 is the first exploration license that will basically get underway in 2018. So even then you will have only a very small experience on I think a tenth of a square kilometre to even test whether it is commercially viable to basically dredge minerals on the sea bed and transport them up in a slurry to a support vessel on the surface. So this is very new and what we are saying is since it is new and since there are so many unknowns around the resource it’s commercial viability, its potential ecological impacts. Just proceed with caution make sure you have good monitoring regimes. Make sure that you have got good ways to manage the resources but also the environmental impacts.

KH: Would you say that you are comfortable with the level of all of the measures recommended in your report that pacific island countries are at in terms of going into sea bed mining and exploration.

FDG: I think different countries are at different stages right, but what we are seeing right now is that already globally there is about 1.5 million square kilometres of the ocean floor both under national jurisdictions and under the jurisdiction of the International Seabed Authority that already have exploration licenses. So with or without us or without anybody else’s help right now the status quo is there are 1.5 million square kilometres under exploration. So this has happened it has slowed a little bit because of the end of the mining super cycle that lasted from 2005 to 2013 and so there is a little bit of a breathing space right now. And what we are encouraging governments to do is use that breathing space to get ahead of the curve. So put in place the legislative and regulatory frameworks put in place good environmental and social monitoring frameworks and think about regional co-operation on deep sea mining. It is a new area, it requires a lot of specialised expertise. It is very unlikely that one small country will have all of the skills necessary to sit across the table from an international company on these issues. So can countries work together under a regional approach to improve the quality of that oversight. So we see this as a good time to prepare for what we think might in the future be more interest in actual exploitation activities.

KH: There’s a lot of unknowns, that is for sure with seabed mining one interesting factor I notice in the report is that while there is a lot of focus on the environmental impacts social impacts and the like, there is also little know about the fiscal regimes as you put it and whether the whole practice will be actually beneficial to countries or the companies involved.

FDG: I think the point is everybody on the development side ourselves as a development institution of course our focus is the countries how can any mining regime or extractive industries regime on land or on the sea floor how can that be made beneficial for countries and for communities. That is the reason we exist because we want to ask that question. The issue is to do good fiscal regimes for any kind of a mining regime seabed or otherwise you have to have a good understanding of the economics of the business. So what is the value of a resource in a certain area how economical is it, how cost-effective is it to bring it to the surface and then once you have a handle on that and then you can advise countries on what their appropriate take should be so if there is an upside potential there is potential for the earnings by mining company to be large you want the government to be in a position to reap those windfall profits or to cash in on those windfall profits as well. So the IMF has done some work in the Pacific with countries on deep sea mining legislation to craft a fiscal regime. It think that work is really good I think it will be informed and and further refined going forward as people learn more about the commercial viability of the resource. But I think there is a way to do it well in terms of the resource management. Timor Leste is a relatively good example on managing an extractive industry resource well. As you know they have a petroleum fund where all resources that are earned on royalties are ploughed into one single fund. It is internationally invested, it is audited by a third party that information is given to parliament and then parliament decides how much they want to draw down from that fund every year. So there are good examples of how to manage the fiscal flows from this well.   

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Filed under Environmental impact, Financial returns, Human rights, Pacific region, Papua New Guinea

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