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Media Release: CER challenges low fine issued to Rio Tinto subsidiary Zululand Anthracite Colliery

14 August 2014 at 10:31 am

Photo: www.timeslive.co.za
Photo: www.timeslive.co.za
Photo: www.timeslive.co.za

Photo: www.timeslive.co.za

The Centre for Environmental Rights has launched an appeal against the amount of an administrative fine issued to Zululand Anthracite Colliery (Pty) Ltd (ZAC) in terms of section 24G of the National Environmental Management Act, 1998 (NEMA).

Earlier this year, the KwaZulu-Natal Department of Economic Development, Tourism and Environmental Affairs imposed a R497 000 administrative fine on ZAC in relation to activities it had illegally undertaken without environmental authorisation during three expansions of its coal mining operations.

ZAC, which is majority-owned by Rio Tinto, conducts coal mining in KwaZulu-Natal on the border of the Hluhluwe-Imfolozi Game Reserve.

Between the years of 2006 and 2010, ZAC developed three separate mining shafts in order to exploit anthracite coal reserves. The development of each one of these shafts involved numerous activities requiring environmental authorisations, but no such authorisations were obtained.

The purpose of requiring authorisation for activities that are potentially harmful to the environment includes ensuring that impacts are assessed, avoided or mitigated before these activities are undertaken. The authorisation also sets conditions that stipulates how these activities must be undertaken, and contraventions of those conditions are criminal offences.

In November 2013, ZAC submitted an application in terms of section 24G for ‘after-the-fact’ authorisation of the unlawful activities, and was issued with an administrative fine in the amount of R497 000.

The CER is appealing the amount of the fine issued to ZAC. From the information available, it appears that the fine issued was a single fine for all the unlawful activities, despite the fact that each unlawful activity could have carried a fine of as much as R1 million per activity. The illegal developments would self-evidently have significantly increased ZAC’s production levels, and ZAC’s earnings before interest, tax, depreciation and amortisation were in the region of $10-15m per year[1]. Contrasted with the earnings made by ZAC in the years spanning the unauthorised activities, the low fine imposed effectively creates a perverse incentive to break the law.

The CER will also request authorities to pursue criminal prosecution in relation to the offences committed.

ZAC has a history of non-compliance in respect of mining and environmental laws. In 2012, the company was ordered  – by the Department of Mineral Resources – to suspend its operations due to non-compliance with the Mineral and Petroleum Resources Development Act, 28 of 2002, including environmental management plan requirements[2]. The amount of the s24G fine suggests that ZAC’s pattern of repeated non-compliance with the law was not taken into account.

Section 24G of NEMA provides for after-the-fact environmental authorisation for unlawfully commenced activities. It is a controversial provision that has been criticised repeatedly by civil society organisations, including the CER. Despite recent amendments that have increased the maximum fine for unlawfully commenced activities from R1m to R5m, the section remains open to abuse, disincentivises compliance and undermines good environmental governance.

According to CER attorney Catherine Horsfield, administrative fines are a crucial component of any modern environmental governance regime. “However, administrative fines must be big enough to be an actual deterrent, and not linked to obtaining permission after the activity has been undertaken illegally. Not only was this fine issued to ZAC a mere slap on the wrist, but it also perpetuates the idea that s24G is a simply a shortcut to authorisation.”

CER’s appeal with annexures

[1] http://www.forbescoal.com/News/News-Releases/News-Release-Details/2012/Forbes-Coal-Announces-Definitive-Agreement-With-Rio-Tinto-to-Acquire-Two-High-Quality-Anthracite-Coal-Assets-in-South-Africa1/default.aspx

[2] “KZN colliery given 21 days to comply with act”, Business Report, 22 June 2012