Arctic Diesel Spill Caused $2 Billion Damage, Russia Says

Russia’s ecological watchdog said the massive Arctic fuel spill from a MMC Norilsk Nickel PJSC tank in May caused 148 billion rubles ($2.1 billion) of damage and asked the miner to pay for it.

The vast majority of the damage was to waterways linked to the Kara Sea, according to the Federal Service for Supervision of Natural Resources, known as Rosprirodnadzor. Nornickel, which has pledged to fully fund the clean-up, had estimated the cost to reach $150 million, excluding any fines. The shares slid as much 5.8%.

Arctic Diesel Spill Caused $2 Billion Damage, Russia Says

“Potentially the company faces one of the biggest ecological damage fines in Russian history, if not the biggest,” Kirill Chuyko, head of research at BCS Global Markets, said by phone. Still, “the miner can afford it as it pays more even in annual dividends.”

Greenpeace compared the biggest fuel spill in the Arctic, in which 20,000 tons of diesel polluted nearby land and rivers, to the 1989 Exxon Valdez accident in Alaska. The mishandling of the spill infuriated President Vladimir Putin, who has held several video links with government officials and Nornickel’s management, including billionaire Chief Executive Officer Vladimir Potanin.

Shares in Russia’s biggest miner dropped to the lowest since late March in Moscow, taking this year’s decline to more than 5%. Nornickel said it will comment once it receives documents from Rosprirodnadzor.

Arctic Diesel Spill Caused $2 Billion Damage, Russia Says

The bill could also be bad news for United Co. Rusal, Nornickel’s second-largest shareholder, as it uses the miner’s dividends to serve its own debt, Chuyko said. Potanin recently offered to cut the payout, although Rusal had said it’s only ready to discuss the issue when the impact from the fuel spill is clear.

Rusal said the amount Nornickel has been asked to pay was unexpected and hopes management will detail how the company will cover the “unprecedented” cost at a Nornickel board meeting that should be called soon.

Nornickel has said melting permafrost and soil subsidence damaged the tank, while Russia’s Investigative Committee said the 35-year-old tank was commissioned without proper permits in 2018, the year Nornickel says it was renovated.

Scientists have warned for years that thawing of once permanently frozen ground covering more than half of Russia is threatening the stability of buildings and pipelines. The rate of warming in the Arctic is twice as fast as the rest of the world.

©2020 Bloomberg L.P.

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