Hydro Says No Contamination in Brazil Despite Allegations

(Bloomberg) -- Norsk Hydro ASA said studies so far haven’t found indications of contamination or lasting damage from wastewater leaks at its Alunorte alumina refinery in northern Brazil. Even so, it committed to strengthening oversight and investing more in the local community.

Hydro’s internal task force and independent environmental consultant firm SGW Services found that there was no overflow from the bauxite residue deposit areas and no indication of contamination from the leak to nearby communities or lasting damage to nearby rivers. SGW stressed that its findings are preliminary and insufficient to deliver a comprehensive conclusion.

Hydro Says No Contamination in Brazil Despite Allegations

Besides drawing criticism and fines, Hydro’s February spill has caused prices of alumina, a key component in aluminum production, to surge after a court ordered the world’s largest alumina refinery to reduce output by 50 percent. The company’s appeals on the production cut have so far been denied.

The dialog with Brazilian authorities is “complex” and the company can’t say when full production can resume, Hydro Chief Executive Officer Svein Richard Brandtzaeg said on Monday in an interview. The company will also decide in the “coming weeks” on whether to shut down production lines permanently at Alunorte, he said.

Hydro now faces a tough battle as its exposure deepens. The company has pledged to invest $64 million to upgrade its infrastructure while local prosecutors are seeking 250 million reais ($74 million) in damages on top of the fines already levied against the business.

‘Unacceptable’

Hydro Says No Contamination in Brazil Despite Allegations

Rural communities living near Hydro’s operations in the Amazonian state of Para and government researchers at the Evandro Chagas Institute allege that runoff originating from the plant has contaminated rivers and wells used by residents.

Hydro initially said it had only released treated water before admitting that untreated water had also leaked due to heavy rains. This was “completely unacceptable and in breach with what Hydro stands for,” the company said on March 19.

But Hydro has also questioned the validity of the Evandro Chagas Institute’s testing and refuted allegations that it was responsible for contaminating soil and water that many local residents say is causing them health problems.

While its studies found no contamination, the company said on Monday that it would upgrade maintenance and equipment, increase the number of water sampling wells and strengthen collection, testing, analysis and monitoring of environmental and health data, including water quality.

Starting Now

Hydro said it is committing to invest about 100 million reais in the local community to help people to maintain access to clean water, while providing short-term medical assistance and water distribution to 1,800 local families.

The recent series of mishaps plaguing Alunorte are not the operation’s first brush with problems as a result of heavy rains. In 2009, the refinery, then joint owned by Vale SA and Hydro, also blamed inclement weather for a spill that resulted in multi-million dollar fines.

Hydro Says No Contamination in Brazil Despite Allegations

When asked at a press conference in Belem, Brazil on Monday why Hydro is only now taking measures to monitor the surrounding ecosystem, Executive Vice-President Eivind Kallevik said the important thing is that the company is "starting it now."

Reiterating that no proof had been found that the company was responsible for leaking toxic water, Kallevik did say that serious health concerns exist among local communities.

He said the company has seen no indications that it could have contributed to the contamination of local soil and water. Moving forward, Hydro will "monitor the environment over a long period of time to find solid and concrete data," he said.

State and federal prosecutors in Brazil released a statement Monday saying they have demonstrated that Hydro Norte routinely dumps untreated effluents.

Recent history in Brazil suggests that the road to bringing a mineral extraction operation back to full capacity after having been accused of causing environmental damage is a hard one. Samarco Mineracao SA, once the world’s second largest producer of iron-ore pellets, has yet to restart even at a limited capacity after a deadly dam rupture in November 2015.

Hydro bought Alunorte and other Brazilian assets from Vale in a 2010 deal valued at $4.9 billion.

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