Financial Times Europe - 10.10.2019

Thursday10 October 2019 ★ † FINANCIAL TIMES 15

COMPANIES

A N J L I R AVA L— LONDON

BP’s chief executive said the anti fossil-
fuel movementwas targeting gas, as
well as coal and oil, which could hinder
the world’s ambitions to reduce carbon
emissions and prevent climate change.

“One of my concerns is that gas is being
increasinglymarginalised.Evenvilified,
and demonised,”Bob Dudley old ant
industry conference in Londonyester-
day.
Mr Dudley, who will hand over to his
successorBernard Looney n February,i
said gas had a “vital role” to play in any
transitiontowardscleanerfuels,helping
tomeetenergydemand.
Switching from coal to gas has cut
more than 500m tons of carbon dioxide
this decade alone, Mr Dudley said.
“That’s a gain made precisely because
gas emits half the carbon of coal when
burnt for power. That’s why gas is so
important.”
Whilegasiscleanerthanoilandcoalit
is still a fossil fuel and has come under
attack by environmentalists who are

calling for a rapid shift to renewable

energytopreventglobalwarming.

Gas advocates say the fuel will

be essential to guarantee reliability

of power supply as wind does not

blow all the time and the sun does

not always shine. It will also be essential

as the world willbe dependent on

hydrocarbons or decades to come.f

“To exclude gas — when so much is at

stake — is to take a huge and unneces-

sary risk,” said Mr Dudley. He added

that gas was abundant, affordable and

an “efficient store of energy, in a way

thatbatteriescan’treplicate”.

Yet methane is the main component

of natural gas and it is released into the

atmosphereduringoilorgasproduction

by incomplete flaring or leaks in pipe-

lines. Even though it breaks down faster

than carbon dioxide, it is a bigger con-

tributortoglobalwarming.

“Methane leaks and flaring can and

must be tackled. And gas itself can and

must be increasingly decarbonised,”

said Mr Dudley, who added that there

should be government regulation of

methane.

But energy majors have been criti-

cised forremaining members of indus-

try lobby groups that support het

Trump administration’s continued roll-

back f US regulations and a push too

removelimitsonmethaneemissions.

See Opinion

Oil & gas

BP chief says targeting gas harms green effort

Bob Dudley says gas is abundant

and an efficient store of energy

N E I L H U M E
NATURAL RESOURCES EDITOR

Every Monday morning,Marcelo Klein
has a sombre task: briefingexecutives
atVale n the devastation caused byo
oneofthebiggestdisastersinthehistory
ofmining.
A total of 251 people — mainly Vale
employees and contractors — died in
January when almost 12m cubic meters
of mining waste burst from a storage
dam nearBrumadinho in southeastern
Brazil. The tidal wave of mud destroyed
everything in its path, including a staff
canteen and administrative buildings,
and polluted ariver system. A total of 19
peoplearestillmissing,presumeddead.
“I go every week to the executive
board of directors, on Monday for one
hour, reminding everyone about what is
happening here,” said Mr Kleinat Vale’s
Rio headquarters last month. “At the
last one, I showed them some funeral
pictures. It is hard but I am the one giv-
ing them the real picture. I talk to the
families.”
Mr Klein is the head of Vale’sspecial
repair anddevelopmentdepartment, a

400-strong-unit focused onfixing the
damage —social and environmental —
caused by the collapse of Dam 1 at the
Córrego do Feijãomine. It reports
directly to Valechief executiveEduardo
Bartolomeo.
The operation that Mr Klein oversees
is enormous. The company has set aside
more than $6bn — equivalent to 10 per
cent of its market value — to cover repa-
rations and a project to decommission
otherriskydams.
More than 100,000 people have
received emergency aid, and250m
litresofwaterhavebeendistributed.
Mr Klein hopes his briefings — based
on thefour to five hours he spends talk-
ing to the families of victims each week
— will help shape a new approachat
Vale,thebiggestproducerofironore.
It will involve building new relations
with communities, starting in Minas
Gerais where the company has
announced a $50m development plan
forthreetownsclosetoBrumadino.
Mr Klein said: “Social participation is
something new for us. In the past we
used to believecreating jobs and taxes
was enough. That’s no longer enough.
Our licence to operate will come from a
permanent dialogue with society and
listeningtothecommunity.”
Rebuilding trust will be no easy task.
The tragedywas the second fatal disas-
terinfouryearstoinvolveVale.
“We are very mindful that society
does not like us atpresent,” Vale hiefc
financial officerLuciano Siani aids. “But
we have the strong belief that by doing
therightthing,itwillcomeback.”
In 2015, a tailings dam nearMariana
—alsoinMinasGerais—burst,killing
people and spewing a sea of reddish-
brown mud hundreds of miles down a
river system, in what is considered Bra-
zil’sworstenvironmentaldisaster.
After the latest disaster, many fund
managers — particularly in Europe —
dumpedVale stock, saying it was “unin-
vestable”. Bankers were equally
alarmed, asking if Vale had cut corners

on safety, something it emphatically

denies.

“It was not that Vale was a company

that didn’t pay attention to safety,” said

Mr Siani. “We were doing a lot of stuff.

Butclearlyitwasnotenough.”

Adam Matthews,ethics and engage-

ment head at theChurch of England

Pensions Board, said the disaster should

not havehappened.

“We are a long way from considering

Vale a company we would be willing to

reinvest in,” he said. We remain deeply

concerned that such a terrible disaster

can happen and that so many lives were

lost. We need to be assured that all that

can be done... has been done to sup-

port the local community today, tomor-

rowandinthelongterm.”

The best way to appreciate the

destructive forces unleashed by the fail-

ure of Dam 1 is from the air. From what

remains of the barrier, a mass of dark

brown sludge follows a stream down a

valley for five miles before intersecting

with the Paraopeba River, asource of

waterforstatecapitalBeloHorizonte.

The rainy season is about to start,

which is a “big problem,” according to

Mr Klein. “Visual inspection is much

betterwhenthematerialisdry.”

From a helicopter,Rogerío Galvão,

Vale’s executive manager for repair

works,pointstothe105mlongsteelcur-

tain his team has constructed to contain

the tailings, and to the nearby water

treatment plant, which has cleaned

more than 1bn litres of water since it

startedoperatingattheendofMay.

Later, over lunch at Brumagrill, a res-

taurantontheoutskirtsofBrumadinho,

Mr Galvãosaid daily contact and the

repair workhad helped eased tensions

withthecommunity.

“We are trying to be responsible and

do what we have to do,” he said. “We

don’tseethisasaprojectbutamission.”

He went on to to explain how the

tidal wave of mud — enough to fill

almost 5,000 Olympic-sized swimming

pools — destroyed most of the local veg-

etation andValewould need to reforest

the area.

Before thatcould happen, all of the

sediment deposited along the valley

Restoring trust proves tough task

for Vale after Brazil dam tragedy

Fresh approach involves rebuilding relations with communities, starting in Minas Gerais

would have to be removed and placed

backintotheCorregodoFeijaomine.

“One question is how do we do that.

Pump it up or use trucks,” said Mr

Galvão, who expects the clean-upto

takeatleastfiveyears.

Vale is also decommissioning nine

dams in Minas Gerais. According to the

company, this is among the biggest civil

engineering worksundertaken in Brazil

and it has set aside $1.9bn to cover the

costs of increasing the height of down-

stream embankments and filling in

storageponds.

At one of the structures — dam 8B of

the Águas Claras mine, on the outskirts

of Minas Gerais — work is well

advanced. All of the water has been

drainedfromthedamandthemainwall

partially flattened and reinforced by

19,000cubicmetresofrock.

We could be finished by the end of“

November,” said Frank Pereira, the

engineer in charge of decommissioning

atÁguasClaras.

The Águas Claras mine is also the site

of Vale’s geotechnical monitoring cen-

tre, where it has consolidated allits dam

auditing operations. Opened in Febru-

ary, the centre uses drones, satellites,

radar and artificial intelligence to moni-

tor 70 dams in real time, increasing to

more than 100 next year. Vale has 133

iron ore dams in Brazil, 90 of themtail-

ingsdams.

While the technology at the centre is

impressive, there is much the mining

industry does not understand about

tailings dams, in particular a process

where seemingly solid material can

becomeliquidveryquickly.

Earlier this year,Andrew Mackenzie,

head ofBHP, thebiggest miner, said the

industry needed to “acknowledge the

deficiencies in the scientific and techni-

cal understanding” that could lead to

the use of dams with an “unacceptable

leveloffailure”.

He admitted that BHP and Vale did

not learn much from the Mariana

disaster — the two companies jointly

owned the mine. He said “the inquiry

was reasonably inconclusive as to what

wasthecause”.

MrKleinishopefulthathewillbeable

toprovidesomeanswers.

“Weowesocietyaclearexplanationof

what happened... and what can be

done to prevent it happening again,” he

said. “It is probably going to be a set of

causes... and we need to translate into

alanguagethateveryoneunderstands.”

Dam 1 is around 60km south-west of

Belo Horizonte, the state capital of

Minas Gerais, which in Portuguese

means ‘General Mines’.

Built in 1976 byFerteco Mineração—

a company acquired by Vale in 2001 —

it utilises anupstream design herebyw

waste slurry is pumped into a storage

pond behind a starter mud wall. As

more material is added, solidified waste,

or tailings, are used to raise the height

of the dam. This makes thedam

dynamic, unlike hydroelectric dams,

which are static andnot expanded.

The tailings are produced when

mined rock is finely ground and mixed

with water (and sometimes chemicals)

to separate minerals and valuable

metals. As mines age and grades

decline, more rocks have to be crushed

to keep production steady.

Whileupstream ams have been ind

use for decades, the construction

method is seen as less stable than other

designs and it is best suited to arid

climates such as Chile’s Atacama Desert

(home to some of thebiggest copper

mines), not southern Brazil.

Dam 1 received tailings from Córrego

do Feijão and another mine until 2016,

when it became inactive. At the time it

burst, it washolding 11.7m cubic metres

of iron ore tailings, or almost 5,

Olympic-sized swimming pools, and

stood 86m high.

Vale has nine other upstream tailings

dams that the Brazilian government

said it must “decharacterise”, or return

the site to its original state, by February

2022.

After the tragedy, the International

Council onMining and Metals, whose

members include Vale, BHP andAnglo

American, started work on anew

international standard for tailing dams,

which it says will provide a far greater

level of protection.

A public consultationon its draft

standard will start soon, and the final

report is due to be publishednext year.

The Church of England Pensions

Board haswritten to Vale and more

than 700 companiesrequesting details

on their storage dams. To date, less

than half ave responded.h

Upstream design

Less stable method is best

suited to arid regions

OW E N WA L K E R A N D N E I L H U M E

LONDON

One ofBHP’s largest shareholders is to

pushit to suspendmembership oflob-

bying groups, as theminer faces an

investor rebellion at its annual meeting

next week.

Standard Life Aberdeen, a top five

shareholder in BHP,said it would vote

for a shareholder resolution calling on

the Anglo-Australian group to suspend

membership ofadvocacy groups that

engage in obstructive lobbying for the

fossilfuelsindustry.

The resolution hasdrawn support

from BHP shareholders ontrolling atc

least £2.1tn, includingAxa Investment

Managers,Calpers, theChurch of Eng-

land Pensions oard andB largeUK and

Australianpensionfunds.

The shareholder pressure comes at a

time of heightened public awareness

over the lack of progress towards meet-

ing the Paris Agreement goals on tack-

lingclimatechange.

“Lobbying is the most acute blocker

preventing the transition that is

required towards achieving the Paris

goals,” saidBill Hartnett, environmen-

tal, social and governance stewardship

director at Standard Life Aberdeen,

whichowns3.2percentofBHP.

It is the first time the investor has

publicly declared its voting intentions

beforeanAGM.

Mr Hartnett said: “We think BHP has

done many leading things in regard to

climate change management. But these

have been undermined by its associa-

tion and funding of certain lobby

groups.”

BHP reviewed its membership of

advocacy groups two years ago, but is

stillamemberoftheMineralsCouncilof

Australia, the main lobby group for the

country’scoalindustry.

BHP has told shareholders to vote

against the resolution, arguing that

industry bodies have apart to play in

helping develop tandards and bests

practicesfortheindustry.

It said membership allowed BHP to

help shape the debate onissuessuch as

global warming and community

engagement.

While BHP has won plaudits from

investors for its stance on global

warming — the company recently

said itwould set public goals next

year on reducing greenhouse gas

emissions from its products even

after theyhad been sold — its member-

ship of bodies such as the MCA are a

causeforconcern.

In response to the shareholder resolu-

tion, BHPsaid last month t was launch-i

ing a fresh review of industry associa-

tions.

This would use the same method

as its 2017 report, but would be

expanded in scope to include Coal21,

an Australian-based organisation that

has bankrolledpro-coal marketing

campaigns.

It has drawn the ire of groupssuch as

theAustralian Centre for Corporate

Responsibility ecause Coal21, which isb

funded by industry donations and

shares staff with the MCA, was origi-

nallysetuptohelpresearchanddevelop

low-emission technology for the coal

industry.

“While BHP positions itself as a cli-

mate champion, it continues to fund

aggressive and effective lobbying to

block climate policy, including via the

Minerals Council of Australia and

Coal21,”theACCRsaidlastmonth.

Mining

Standard Life

Aberdeen

presses BHP

on lobbying

‘We are very mindful

that society does not

like us atpresent’

Luciano Siani, finance chief

Firefighters search for bodies in Córrego do Feijão, near Brumadinho in southeastern Brazil, after the dam collapse at Vale’s iron ore mine Douglas Magno/AFP/Getty—

512

Deaths in January

when mining

waste burst from

a storage dam

91

Number of people

still missing,

presumed dead,

after the disaster

Global Appointments

OCTOBER 10 2019 Section: Time: 10/20199/ - 19:01 User:keith.allen Page Name:CONEWS4, Part,Page,Edition:EUR , 15, 1