The vexed issue of who pays for large-scale pollution and the clean-up of toxic material is under review. David Williams reports

Government officials are investigating changes to make it clearer who is responsible for environmental contamination, in an attempt to avoid the public purse being called on to clean up messes left by private businesses.

Earlier this year, a settlement was reached in an Environment Court case involving thousands of tonnes of hazardous substances from Tiwai Point’s aluminium smelter. All the material will be trucked from a small Southland town by the end of May.

The settlement terms to accelerate the material’s removal included a promise by the Ministry for the Environment and Tiwai owner New Zealand Aluminium Smelters (NZAS) to chip in up to $500,000 each.

That solves a years-long headache for the residents of Mataura, who worried the metal-rich material, stored in an old paper mill on the banks of the town’s eponymous river since 2014, might become waterlogged in a flood, releasing flammable and noxious gases.

However, because the case was settled, the legal questions – whether, by law, NZAS is responsible for the ouvea premix and has a duty to remove and safely dispose of it – remain unanswered. (NZAS, majority-owned by global mining giant Rio Tinto, told the court there was no causal connection between it and the ouvea premix at Mataura.)

Newsroom put to Environment Minister David Parker the fact the principle of polluter pays wasn’t settled by this case puts it back into the hands of lawmakers. We asked if the Government would change the law to prevent a situation like the one at Mataura happening again.

Parker responded in an emailed statement: “I am concerned that some businesses are leaving polluted sites or are not covering the cost of remediation.

“I have asked officials for advice on including a clear hierarchy to attribute liability for contamination in legislation or regulation, either through the current RM [resource management] reform process or through separate stand-alone legislation.”

Environmental Defence Society executive director Gary Taylor is claiming it as a win.

“The minister clearly shares our concerns and we are pleased he intends to find a legislative fix which is what is required,” he says via email.

Responsibility for ensuring recycling or safe disposal of end-of-life products is available should fall on producers, Taylor says. “Those that import tyres, for example, must ensure there is safe disposal facilities available and must take direct legal responsibility.

“Contracting that out is fine but if the contractor goes bust then responsibility should revert to the producer. That’s what we argued at Tiwai.”

When approached, NZAS didn’t directly respond to Parker’s comments.

Asked what responsibility it has to remove all toxic waste from its smelting operation, including waste stored at a landfill at Tiwai, chief executive Stew Hamilton says via email: “NZAS is subject to the same legislative closure and operational requirements as any other industrial operation in New Zealand. Importantly, we are absolutely committed to a responsible closure and leaving a positive legacy for the community of Southland.”

NZAS’s initial statement to Newsroom, which recycles what it told Stuff last week, is printed in full at the bottom of this story.

BusinessNZ economist John Pask, who admits he hasn’t followed the EDS case closely, says businesses and households should pay for pollution.

“Effectively, if you don’t have to pay for the full costs associated with your behaviour you’re going to probably over-consume resources, if you can shift them onto third parties, as it were. But by the same token, I don’t think you should be responsible costs that you actually don’t impose on society.”

Dealing with pollution is complex, Pask says, particularly when it’s historic. Sometimes it’s appropriate to use taxes for general clean-ups, he says, which perhaps gives businesses time to change their behaviour.

“As a general principle, though, we’re very nervous about Government making retrospective legislation or controls.”

Millions of taxpayer dollars have been spent on high-profile clean-ups, including at Mapua, near Nelson, dubbed the country’s worst contaminated site, and the Lake Taupō protection project.

The old paper mill, on the eastern bank of the Mataura River. Photo: Dianne Manson/Getty Images

Aluminium processing produces a waste product called dross, which can be subject to a metal recovery and recycling process. One output is ouvea premix, a dry, granular substance comprising mainly of aluminium oxide, aluminium nitride and magnesium aluminate. Ouvea can be used in manufacturing fertiliser and steel production.

Aluminium oxide, a desiccant, absorbs water from the air. And aluminium nitride (AIN) reacts exothermically – it produces heat – if mixed with water.

According to the Environment Court affidavit of EDS researcher Shay Schlaepfer: “This means that any ouvea premix exposed to air will absorb water, which will then react exothermically to produce ammonia gas.”

NZAS contracted Bahrain-based Taha Group to deal with its dross. But after Taha was found to be illegally storing about 10,000 tonnes of the hazardous material in Mataura in 2014, it was forced to apply for a retrospective resource consent, which was eventually granted. One of the conditions was payment of a $2.3 million bond to ensure the material was removed safely, but the Taha entities went under before it was paid.

Most of the hazardous material was stored (in one-tonne bags that weren’t water-tight) in mill buildings across Kana St from those next to the river. The other buildings border Waikana Stream. Taha initially wanted to process ouvea in Mataura, but instead favoured a site in Invercargill.

By a count in 2015, there was a range of ouvea at Mataura: including 7500 tonnes of “cast-house” and almost 800 tonnes of “bag-house” ouvea, containing 24-40 percent AIN, plus 1600 tonnes of “landfill” ouvea, containing 1-4 percent AIN.

Taha had a history of illegal behaviour. In 2015, it was fined more than $100,000 by the Environment Court for two incidents.

Dross was used to build a three-metre-wide, one-kilometre-long farm track at Bluff, without disclosing to the landowner its potential toxicity.

And 1100 cubic metres of dross was dumped in an excavated pit at Edendale, where it was buried under 30 tonnes of gravel. Two contractors working in the pit were sent to hospital for treatment of sore eyes and throats, and the smell made the owner of the neighbouring property get headaches and feel nauseous.

Regional council officers couldn’t get close enough to take samples because of the overwhelming smell of ammonia. Bore samples showed the dross had contaminated groundwater. Enforcement orders led to the dross’s disposal in a landfill.

Taha’s lawyer said it “took a beating” over the Edendale dumping, and spent about $1.2 million remediating the site.

Clash over clean-up

The Environment Court has released to Newsroom court documents related to the EDS case against NZAS – which also swept in the old Mataura mill’s owners, Southland Storage Ltd, as well as the Southland regional council and Gore’s council – which reveals fresh details.

One interesting aspect is correspondence, often curt, between EDS and the lawyers for the smelter company, which is 20 percent-owned by Japanese company Sumitomo Chemical Company.

Taylor, of EDS, wrote to NZAS boss Hamilton on March 13 last year, a few weeks before the level four lockdown, saying it believed the company remains liable for the safe disposal and storage of the ouvea premix.

The situation was urgent, Taylor said. Flooding from the Mataura River sparked a Civil Defence emergency involving the evacuation of hundreds of residents from low-lying areas. A subsequent email from Environment Southland to the Ministry for the Environment said: “The fire service said the flood level got dangerously close to topping the protection wall at the mill (250-300mm of the top).”

An inspection of the old mill in February last year said the buildings were old and deteriorating, with roof leaks and other problems, including an infestation of pigeons. Because the Taha companies had been liquidated, any previous flood protection plans for the mill – like sandbagging and installing steel shutters on doors – would be up to emergency services, councils and volunteers.

In legal terms, Taylor says there is “sufficient causal nexus” between NZAS and the contaminants that there’s an “enforceable duty” to deal with likely or actual effects on the environment from the ouvea, including to human health.

“NZAS cannot delegate or contract out this duty, given the special hazards posed by dross to human life and the environment.”

(One EDS argument, rejected by NZAS, is that allowing Taha to remove dross from Tiwai was a breach of its discharge permit, and this breach created a legal duty for NZAS. The environmental group wanted the Environment Court to declare that regional and district councils had powers to order the ouvea premix be removed “and place it in a suitable location at the Tiwai smelter site”.)

The EDS letter raised the spectre of Environment Court action. It asked NZAS to provide a copy of the dross disposal contract with Taha Group, in case it’s “relevant to liability”, and also for the smelter company to explain why it isn’t liable for the contaminants’ removal.

A reply was needed by March 20, the letter said. However, a response was sent on March 30 – within level four lockdown – by Chapman Tripp law firm partners Ben Williams and Michael Arthur. They said NZAS wasn’t able to provide a specific response because of Covid-19 issues, and its attempts to keep Tiwai operating.

But “for immediate purposes” it emphasised several points, including that: these issues were not new and there was no change in circumstances; the company was “out of a willingness to help” working with councils and landowners; and removal arrangements were in place.

The legal letter suggested NZAS wasn’t the owner of the ouvea premix and had no legal obligations for its removal. The Environment Court probably wasn’t available to hear the matter, Williams and Arthur said. The response ended with: “NZAS will revisit your request when it is able to do so.”

That same day, EDS’s barrister, Rob Enright, replied to Williams, saying the matter was urgent, considering parts of Mataura were evacuated the previous month. “That risk will not go away. EDS is willing to delay issuing proceedings, pending a change in alert status, or resolve matters if progress can be made.”

“NZAS is making a substantial contribution to the cost set out and remains fully committed to its obligations under this deed.” – Ben Williams

Williams’s next letter on April 14 reiterated it wasn’t in a position to provide a considered response. However, he pointed to a 2018, roughly $4 million cost-sharing agreement between NZAS, the Crown, councils for Gore, Southland, Invercargill, and the province’s regional council, as well as the landlords of various sites, as a sign of progress on the material’s removal. He admitted, however, it was expected to take a significant period of time.

“NZAS is making a substantial contribution to the cost set out and remains fully committed to its obligations under this deed.”

Williams said NZAS never agreed to take material from Mataura and store it at Tiwai. In July 2019, it was Gore’s council signed an agreement with Inalco Processing for the ouvea’s processing and export.

NZAS would revisit the rest of EDS’s points when it was able to do so, Williams wrote, adding: “From NZAS’s perspective any action would, if anything, only prejudice the arrangements that are now in place.”

EDS’s May newsletter advised members its board approved filing declaration proceedings.

It’s worth injecting some global context, here. In May, Rio Tinto was criticised for destroying a sacred site in Western Australia’s Pilbara region to expand an iron ore mine.

The following month, the Australian Financial Review reported a senior Rio Tinto executive, iron ore head Chris Salisbury, told employees the company was not sorry for blowing up the 46,000-year-old Juukan Gorge caves, rather its public position was to apologise “for the distress the event caused”.

Back in New Zealand, Taylor wrote to NZAS boss Hamilton in late June warning it was preparing to file proceedings. The EDS executive director said the smelting company hadn’t responded to EDS’s request for information, or furnished it with reasons why it wasn’t liable for the ouvea premix, which “poses a low-probability, high-impact risk”.

The environmental group had cobbled together information from public sources, Taylor wrote, which concluded about 9000 tonnes of hazardous material was stored in the Mataura buildings which, on current arrangements, wouldn’t be removed until the end of 2022. That timeframe was unreasonable, Taylor says, “given the absence of safety management and monitoring”.

EDS intended to file declaration proceedings on July 1 and would request a priority fixture. But it would reconsider if NZAS took responsibility for the safe management and removal of the ouvea premix, removing “all reasonable risks to public health and safety”.

Chapman Tripp’s Williams put it back on EDS. His letter, dated June 30, said NZAS had expected a response to its April request for EDS to review its position. Also, media coverage suggested proceedings were inevitable.

NZAS emphasised – “again” – it was willing to talk and “wishes to help”, which, Williams said, shouldn’t be misconstrued as an admission of legal liability.

The company’s position was ouvea premix was generated by Taha’s patented process, and was its contractor’s legal property until its liquidation. The company spent several million dollars a year with Taha for a “zero waste solution which was ultimately not delivered”. Once liquidators disclaimed the potentially dangerous material – after 18 months of trying to find a buyer or taker – ownership passed to the Crown. (This isn’t necessarily the case, EDS argued.)

NZAS had already agreed to contribute up to $1.75 million towards the ouvea’s removal, Williams wrote, and the Gore council/Inalco arrangement “is the best arrangement that could reached by the parties in the circumstances”.

“At no time has NZAS had an ownership interest in or ability to control the ouvea or the Mataura site.”

In early July, EDS announced publicly it had filed proceedings. At the same time, talks between Ministry for the Environment and NZAS over accelerating the removal of material from Mataura broke off.

Across the ditch, under-pressure Rio Tinto told an Australian Senate inquiry it was told in 2014 and 2018 the Juukan rock shelters were of the “highest archaeological significance in Australia”.

A month later, in a statement to the Australian stock exchange, the company announced its chief executive and two senior executives, including iron ore head Salisbury, were leaving “by mutual agreement” with the board.

“Constructive practical solutions are on the table.” – Laurie Newhook

Days earlier, in New Zealand, Environment Court Judge Laurie Newhook took the rare step of putting out a public minute – a media release, effectively – after two days of “robust discussions” about the disposal of the Mataura material. The stance had softened, it seemed, and there was a mood for negotiation.

“Constructive practical solutions are on the table and are being actively worked on by the major parties,” Newhook wrote. “The parties all accept the urgency and seriousness of the situation at Mataura.”

Last month, Newhook’s final minute announced an agreement had been reached to fast-track the removal of the aluminium by-product material, to Tiwai Point “where it will be stored in containers”, by the end of April – “subject to weather and availability of equipment”.

The statement pointedly said this was a stand-alone agreement which “is not related to any agreement on the smelter’s future or remediation of Tiwai Point”.

This agreement hasn’t been the end of the controversy over the smelter’s dross.

Last month, RNZ reported NZAS had stockpiled 100,000 tonnes of hazardous waste less than 100m from an eroding beach. 

The following day, Parker slammed the company for being “uncooperative” in not disclosing information about the state of the Tiwai site. Official reports have also warned of the threat of sea level rise.

In a statement to Newsroom, NZAS chief executive Hamilton said:

“NZAS has confirmed it will move the remaining ouvea premix currently stored at the former paper mill in Mataura to Tiwai point for processing and export. The removal will be completed by the end of May.

“With regard to closing NZAS, we are absolutely committed to responsible closure leaving a positive legacy for the community of Southland. The closure study is a detailed process to help us understand all of the highly complex work that is required to close the smelter in a responsible way.

“We are in the first phase of that process and have employed a range of external independent experts to assist us. For example, in the past two months 238 bores have been drilled and samples taken which are now being analysed.

“We respect our local community and key stakeholders and will share further details on the closure studies as soon as the information becomes available.

“We will continue working collaboratively with the New Zealand Government, our local community and Ngāi Tahu as mana whenua as we go through our closure study process and continue running a safe and stable operation producing some of the lowest carbon aluminium in the world.”

Asked if any of the bores were drilled at the Tiwai landfill, Hamilton said: “There are monitoring bores in place around the perimeter of the landfill as part of our business-as-usual environmental monitoring.”

David Williams is Newsroom's environment editor, South Island correspondent and investigative writer.

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