World Bank, EBRD approve destructive Oyu Tolgoi mining project

A mine in a field. — Oyu Tolgoi Project Facilities, December 2012, *Original picture by BIC staff*

The Board of Directors of both the European Bank for Reconstruction and Development (EBRD) and the World Bank Group (WBG) have approved funding for the Oyu Tolgoi (OT) copper/gold mine in Khanbogd, Mongolia last week, despite local and global resistance to the project.

While both institutions are still negotiating with the company over the terms of the agreement, the EBRD is proposing up to $1.4 billion in loans and the International Finance Corporation (IFC, the private sector arm of the WBG) is proposing up to $900 million in loans as part of a $4 billion financing package for Oyu Tolgoi LLC. Other investors, such as Standard Chartered Bank and US Ex-Im Bank, are also seeking a $1 billion political risk guarantee from the Multilateral Investment Guarantee Agency (MIGA), another part of the World Bank Group.

Over 30 Civil Society Organizations (CSOs) submitted a letter to President Kim of the World Bank, President Chakrabarti of the EBRD, and the Executive Directors (EDs) of both Banks in early February 2013 outlining the key recommendations these groups would like to see in the OT loan agreement. In addition, a global Change.org petition started by CEE Bankwatch in early February that outlines the same recommendations has received over 500 signatures to date. The recommendations stem from a Board Seminar at the World Bank headquarters in Washington, DC on 16 January 2013, during which civil society representatives, including one of the Mongolian herders directly impacted by the mine, presented their most pressing concerns regarding the negative environmental and social impacts of this project. However, the few Executive Directors who have responded to our requests for feedback have been either vague, dismissive, or both. The one exception is the US Executive Director’s office, which will publicly disclose its position on the project on the Department of the Treasury’s website per US policy in the coming weeks.

In spite of this outcome, our network of civil society groups has engaged and will continue to engage with staff from the EBRD, World Bank Group, and Oyu Tolgoi LLC. For example, our CSO review of Oyu Tolgoi LLC’s Environmental and Social Impact Assessment (ESIA) that was submitted to the company and the Banks in December 2012 has served as a platform to share independent expert evaluations of the flaws and policy violations we see in the company’s project documentation. OT LLC submitted a written response to the review in December 2012, followed by a written response from the IFC in February 2013. A rebuttal to both responses was crafted by OT Watch, Accountability Counsel, BIC, CEE Bankwatch, London Mining Network, Sierra Club, and Urgewald and sent OT LLC and the IFC on 26 February 2013. The EBRD also sent a response to the ESIA review on 25 February 2013, but due to time constraints the rebuttal could not cover the particular arguments made by the EBRD. The rebuttal focused on our important concerns such as our contention over the company’s definition of indigenous peoples as it applies to the herders of Khanbogd, problems with the Undai River diversion, lack of technical understanding of tailings pond management, the need for a robust alternatives analysis for the mine’s future power source, and the lack of transparency regarding the release of important project management plans such as the mine closure and reclamation plan and supporting documentation that we expressly asked for in our initial ESIA review.

Our organizations are also supporting the complaints submitted to the IFC’s Compliance Advisor and Ombudsman (CAO) office by the local community of Khanbogd through Gobi Soil, a Khanbogd-based herder organization. The first complaint, submitted in October 2012, deals primarily with herder dissatisfaction with the compensation packages promised by the company as well as their concerns regarding access to water. The second complaint, submitted in early February 2013, calls for the company to halt the diversion of the Undai River as it is the sole source of surface water in the area and the diversion will cause significant impacts to both the human and wildlife populations through the loss of natural springs. Both complaints have been deemed eligible for assessment, though currently only the first complaint is available on the CAO website. Now that the project has been approved by the EBRD, a complaint to the Bank’s Project Compliance Mechanism is currently being considered by OT Watch and Gobi Soil.