Mining Giant Ordered to Pay $2 Billion Fine for Fuel Spill in Arctic

A Russian court ruled that MMC Norilsk Nickel PJSC should pay 146 billion rubles ($1.96 billion) in compensation for an Arctic fuel spill, in line with a demand by the nation’s ecological watchdog.

In July, the Federal Service for Supervision of Natural Resources, known as Rosprirodnadzor, asked Nornickel to pay 148 billion rubles to cover damage caused by the massive spill from one of its fuel tanks. The miner disagreed with the watchdog’s estimate, saying it didn’t account for fuel the company had recovered and other restoration works. Nornickel told the court its own compensation estimate was 21.4 billion rubles.

Mining Giant Ordered to Pay $2 Billion Fine for Fuel Spill in Arctic

The court ruling could pave the way for Russia’s largest environmental penalty, and is more than double the amount that Russia is seeking to get in mineral extraction tax from mining companies this year. The fine may also weigh on the company’s dividend prospects. Those payouts have been the source of tension between the miner’s largest shareholders, with United Co. Rusal International PJSC using the dividends to service its debt.

Nornickel said it will carefully study the verdict after getting the full text. The miner has a month to file an appeal, but a spokeswoman declined to say if the company plans to do so.

The court’s decision is a lesson not only for Nornickel, but also a signal for the entire business community, the company’s chief executive officer, Vladimir Potanin, told state TV. That signaled a change in tone from previous comments opposing Rosprirodnadzor’s claim.

Nornickel shares fell as much as 3.6% on Friday and were down 2.6% as of 6:14 p.m. in Moscow.

The fine doesn’t reflect the efforts taken by Nornickel to mitigate the consequences of the accident, Rusal Deputy CEO Maxim Poletaev said in a statement. The company plans to study the verdict’s reasoning and discuss the situation at a Nornickel board meeting.

The judge in Krasnoyarsk ordered 145 billion rubles of the fine to go the federal budget, according to her address shown on local TV. The funds will go to the government’s reserve fund, RIA Novosti reported, citing the Finance Ministry.

“We won!!!” Rosprirodnadzor head Svetlana Rodionova, who was in the courtroom on Friday, said in an Instagram post. “Ecology is everyone’s business!!!”

The miner initially blamed melting permafrost for the collapse of the fuel tank but an investigation by the regulator found faults in its construction and maintenance. The watchdog also said the 30-year-old tank had resumed operations in 2019, following repairs, without proper permission.

Mining Giant Ordered to Pay $2 Billion Fine for Fuel Spill in Arctic

Nornickel has pledged to replace dangerous infrastructure and invest in monitoring thawing permafrost in the Arctic. 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 miner has spent more than 12 billion rubles cleaning up the area impacted by the spill.

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