18 February 2015
CRP considers reapplying for a marine consent
Chatham Rock Phosphate is considering reapplying for a marine consent to mine phosphate nodules on the Chatham Rise seabed, managing director Chris Castle said today.
We have decided an appeal is a pointless exercise. Assuming we win on points of law, we would still need to go back before the same decision-making committee (DMC) who collectively overlooked the key merits of our project, appeared to misunderstand important evidence and submissions and selectively ignored CRP’s information to reach a “no” decision.
Although they accepted the findings of scientific experts which showed negligible effects in areas such as fish, seabirds and mammals, why would we expect them to look at the other issues any differently the second time around? While the DMC’s views as to the level of information and certainty that was required to satisfy them were wildly unrealistic and at odds with the intent of the EEZ Act, the reality is that they could simply apply that reasoning again to reach a conclusion that they are unlikely to have an open mind about.
We have not committed to reapplying at this stage as we need to have confidence the process and the law is workable and the decision makers are technically competent.
However, we have no intentions of giving up.
This project is too important for New Zealand, as well as our shareholders who have already invested $33 million in this project.
As well as failing to take account of the economic benefits, the decision makers more importantly failed to consider the critical environmental benefits this project brings to New Zealand.
Chatham Rise rock phosphate would reduce pollution in New Zealand waterways from phosphate run-off and would reduce the application of the toxic metal cadmium on New Zealand soils, as our product contains among the lowest concentrations in the world. It would also drastically reduce New Zealand’s carbon footprint caused by transporting fertiliser inputs from the other side of the world.
We would be an ethical producer of farm inputs, and New Zealand would not be exporting our pollution to other countries.
While the EPA decision has decimated CRP’s share price, we believe it will recover. When we established CRP in its present form five years ago, it had a market value of NZD 2 million, and a granted exploration licence.
Since then we have raised NZD 33 million, achieved a granted mining licence, completed one of the most comprehensive environmental impact assessments ever submitted, and collected vast amounts of data and scientific reports about the Chatham Rise – much of it used for public good science. We also have a team of directors and executives who remain fully committed to the project, even though they won’t be getting paid for a while.
The market value of the company early last week was NZD 40 million, now it is now back to NZD 2 million again. However CRP now has an extended management group that is the envy of other players in the marine mining sector and a recognised place in the phosphate industry. Accordingly we are in a very strong position and much better equipped to build on that NZD 2 million platform than we were five years ago.
One of the key areas we are most concerned about are the findings on stony corals. The decision said this was a unique, rare and vulnerable ecosystem. The DMC ignored unchallenged evidence that this is a common species found throughout the EEZ.
We acknowledged the corals may not appear in a thicket or community elsewhere. Our proposed mitigation was to avoid those thicket areas by excluding them from our mining plan but that was not accepted.
We produced the best available evidence, and significant data to identify where the relevant communities were, and develop measures which would have addressed the risks posed to those communities. We committed to ground-truth the modelling work, adjust mining exclusion areas and move the first three years of mining blocks while ground-truthing occurred.
So, the DMC effectively ignored a solution to their major concern and took a zero-risk/avoidance approach, which is not required by the EEZ Act.
There are numerous instances where the committee found the scientific evidence insufficient and highlighted its “uncertainty”. This also occurred with the Trans-Tasman Resources application.
The DMC appeared to be unwilling or unable to understand the reality of working in New Zealand’s oceans. There will never be complete information and every environmental decision will have to accept some level of uncertainty. This DMC’s decision has elevated the EEZ Act’s information principles to a level which, for this project, is both unrealistic and unachievable.
Assuming we decide to undertake another application we will need to clarify, for a new decision-maker, the confused thinking of this DMC on issues they identified as having too much uncertainty. The information is there and there was an appropriate answer provided to every question – the DMC simply didn’t appear to understand it or otherwise believed it was less risky to decline consent.
CRP deserved a better and more balanced consideration of its application, and a DMC which appropriately put the issues of risk and uncertainty into their proper context. That didn’t happen.
The committee showed poor understanding of the purpose of modelling or how it works – and that it is extremely conservative, usually overstating effects several fold. Its insistence on the need for ground-truthing shows a complete lack of understanding of how modelling is used routinely in land-based applications in New Zealand with great confidence and in marine projects around the world.
The DMC seemed to go hunting for a basis to decline, thus the discussion around uncertainty in relation to much of the modelling, ignoring the conservatism that was identified. It read as if they were looking for a no or very low impact activity and that is all they were comfortable with granting.
The DMC’s interpretation of the purpose of the Benthic Protection Area coinciding with our application area (BPAs are simply no-fishing zones covered by the Fisheries Act), meant in their eyes the project could not proceed anyway. This is even though these BPAs were established without consideration of interested parties other than the fishing industry, do not maximise the conservation values of the EEZ, and will be reviewed and modified as part of the establishment of marine protected areas.
To attain the level of information and “certainty” about effects required by the DMC would require test mining, an activity that itself requires a marine consent. This would require the expenditure of hundreds of millions of euros for a purpose-built ship and dredging system to carry out test runs on the Chatham Rise, to obtain certainty about effects.
But the DMC in fact created a dead-end street, in that they would not even contemplate a short-term consent of a limited duration as a “test” because of the possible risk to the stony corals. No rational applicant or investor would make such an investment in order to achieve the certainty of information this DMC considers is required.
If there is so much uncertainty about projects such as ours, why has the government allocated rights to the resource under the Crown Minerals Act and allowed such marine consent applications to be considered, when they stand no realistic chance of being consented?
It seems this committee simply found it easier to say no than yes. This was despite our proposing more than 60 adaptive management measures to comprehensively deal with every potential concern.
The other major concern we have with the DMC’s reasoning is their apparent inability to understand economics. They relied on a World Bank nominal price for fertiliser to assess the economics of the project, a figure with no relevance to the way the phosphate market operates.
Why would we pursue a project that is at best marginally profitable? We issued an announcement to the NZX only last month advising that based on current exchange rates our profitability before royalties and taxation would be close to $100 million a year.
There are few New Zealand companies that generate profits of that level, and it is unfathomable to understand how that could be considered modest.
In terms of wider economic benefits CRP would pay port charges of several million dollars a year, and external employment opportunities would be created in the port, in the hospitality sector, on the mining ship, undertaking environmental monitoring, and in the agriculture sector – including many on the Chatham Islands.
The income earned per square kilometre of seabed affected by a single mining pass is NZD 9.7 million, compared with only NZD 9,000 annually from bottom trawl fishing. This income from mining is achieved without any impact on fishing yields or fishing industry profitability, according to joint statements signed by fish scientists and fisheries experts.
Our decision to consider resubmitting will depend on whether the Environmental Protection Authority, charged with interpreting the relevant legislation, can make significant changes to its processes. We would not expect to re-litigate areas not in contention and we would expect the EPA to sharpen its act in terms of the quality of its processes and decision-makers, and the way it manages costs.
We remain convinced the law needs changing – it is obvious in order to avoid the same sort of outcome with other similarly well-prepared applications. Even the committee said we had produced hugely detailed information - yet it still fell short of the legal requirement, as the DMC saw it.
Even more farcical, we need a marine consent (which we have been denied) to go out and get the additional information the DMC considered was required – how logical is that? The EPA has tied the process completely up in knots and created a closed loop.
The process needs to have better communication between the DMC and the applicant, offering the opportunity to identify concerns and options for solutions. It needs to embrace the purpose of the Act and become solution oriented, rather than focusing on reasons why the project should not occur. Otherwise what is the point in having such legislation in place – it simply becomes Clayton’s law.
This is not a victory for conservation – it is actually a tragedy for New Zealand’s countryside. The hypocrisy of our opponents is unbelievable, willing to export our environmental footprint to other countries by continuing to import polluting products.
96% of New Zealand is under water and it is morally indefensible to not accept that some development and environmental effects will take place there. In addition, conservation costs money. The scientific outcomes and the taxes and royalties from projects like ours will help lay the groundwork and pay for the surveys that will identify areas of the marine estate most deserving of conservation.
The fishing industry is essentially entirely environmentally unregulated and destroys 3000 km2 of new seafloor and re-scrapes 47,000 km2 of already damaged seafloor every year – vastly more than the 30 km2 of seafloor we propose to mine every year. Yet fishing claims we are a greater environmental threat.
The EPA needs to be neutral, rather than advocating as an environmental protector without due regard for other considerations, and if the Government seriously wants to promote development then it needs to speak up about the potential benefits of the project.
The decision makers must have the right mix of expertise to assess the merits and risks of marine projects. Our DMC didn't. The DMC needs at least one scientist who has the mental firepower to understand all the evidence, and at least one person who understands how risk and uncertainty is managed in the real world.
New Zealand can become a world leader in marine technology and expertise worth billions of dollars. Not a single person in the DMC, the EPA, the NGO's, or any of the opposition see that what is at stake is potentially a lot more to New Zealand than phosphate. And that is without including the significant environmental and economic benefits of our product, including low cadmium, low carbon footprint and low run off into waterways.
CRP would also like to address some of the more seriously incorrect claims of fact made in the media over the past week, most particularly in the Sunday Star Times.
Firstly CRP is not proposing to dredge a “huge swathe” of the seabed. It is proposing to mine 30 km2 a year. This compares with 50,000 km2 the fishing industry bottom trawls every year. That is a “huge swathe”. The total CRP project mining footprint of 450 km2 for 15 years is only one quarter of 1% of the Chatham Rise.
Secondly it was never “generally agreed” $169 a tonne is required for the project to break even. CRP has never stated a break even market price. However, as the mining cost is roughly the cost of transporting the product from Morocco, the world price would need to be near zero before we could not compete in the local market.
Thirdly while New Zealanders might not know much about the 4.1 million km2 Exclusive Economic Zone as a whole, the 19,000 km2 of the Chatham Rise is the best studied area of the EEZ. This is largely thanks to the work CRP has undertaken, building on the 63 years of work since phosphate was first discovered on the Rise in 1952.
Despite what environmentalists might wish for, significant amounts of the money spent on scientific research is spent by companies seeking to get a financial return. While SST writer Rod
Oram’s claim that $5 million a year is spent on marine science is rubbish – NIWA’s vessel Tangaroa costs an estimated $20 million a year to operate - these numbers are insignificant compared with the $100 million spent by CRP and TTR in recent years and the $70 million in present day terms spent by scientists previously in the CRP resource area.
The weirdest claim in the SST was this: “The minerals they want for farming on land are the ones that help make the fishing grounds so fertile. We need logical choices. Threatening fishing to further farming is not one.”
Firstly, as noted before, the DMC found our proposal does not threaten fishing.
Secondly there is no fishing in the area we are proposing to mine, which is why the fishing industry unilaterally surrendered it as a no-fishing zone.
Thirdly there is absolutely no way phosphate helps make fishing grounds fertile. The phosphate is bound within the phosphate nodules and cannot enter the water column.
Fourthly, no fish species have ever been observed eating rock phosphate nodules.
A couple of commentators have picked up the idea of spatial planning, a concept we have advocated all along. CRP’s marine consent proposals included recommendations on how spatial planning could be used to manage the potential effects on the coral communities.
Marine spatial planning is a big issue for New Zealand. We believe a critical first step is to review the benthic protection areas enshrined in fisheries regulations as they don’t consider other uses such as minerals. They could be modified to achieve the same conservation goals while allowing other uses of marine space, and not just areas chosen by the fishing industry because they have no commercial quantities of fish.
Chris Castle +64 21 55 81 85 or email@example.com