PDF Case Study 4

A Monitoring Framework for ADB’s Environment Policy based on Four Case Studies

ADB and the Environment 122

Marinduque CopperMining CorporationPhilippines

by

JAMESESGUERRA

Consultant

Philippine Rural Reconstruction Movement with NGO Forum on the ADB

Marinduque Marcopper Mining Corporation

Philippines 123

Executive Summary

I Introduction1. Locating the project in terms of its sectoral context• Bank’s Complimentary Financing Scheme (CFS)• Economic development and sustainable use2. Locating the project in terms of its situation specific to the country• Contributions from mining• Recent developments in Philippine Mining Policy• Philippine Environment Policy transitions:

II Project Description1. From its origins to status quo (history, planning, implementation)• The United Nations expert assessment mission• Conflict and agreement with ADB team report

• Recent developments:2. Concerns• Community demands:• Issues raised by the PRRM:3. Actions taken and results of actions by affected people and NGOs

III Project Monitoring1. Review of project against ADB’s Environment Policy Provisions2. Review of project against desirable environmental standards• Individual Indicators• Project Stakeholders and their Interests3. Key principles• Principles on environmentally sound design• Access to environmental information, environmental decision-making and environmental justice:4. Monitoring against other ADB Policies

O u t l i n e



E x e c u t i v e S u m m a r y

M arcopper’s operations in the Philippines began in thelate 1960s, at a timewhen precursors of

the 2002 ADB Environment Policywere already in place. Later,Marcopper expanded operations,and the ADB provided a loanthrough its Complimentary FinancingScheme (CFS). Years later, disasterstruck: a dam containing run off(known as tailings) from mining ac-tivities collapsed. Previously, issueswere being raised about the miningoperations by the communities, es-pecially in other sites of operation.

This case study focuses on thenew ADB Environment Policy and itsinterface with the ADB Complimen-tary Financing Scheme and the En-

vironmental Policy system of the Phil-ippines in the context of theMarcopper disaster. Recent devel-opments on the Philippine EIA Systemand Philippine mining policy are alsomentioned.

The Author approaches this studyfrom a human rights perspective, in-cluding the right to a clean and eco-logically healthy environment. Thecase pays special attention to thestrengths and weaknesses of institu-tions (organizations, policies andnorms included). The ADB’s approachto CFS is highlighted as a challengearea that needs to pay particular at-tention to the implementation of ADBand host country policies. The dis-tancing of the ADB from the projectis an unintended effect of the co-fi-nancing scheme is illustrated.



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The Project in General

I n t r o d u c t i o n

The Marcopper Mining Corporation (MMC or Marcopper)began operating in the late1960s. At that time the pre-cursors of the 2002 ADB Envi-

ronment Policy were already beingused1 , though the current PhilippineEIA system was not yet in place2 . Fur-thermore, the discourse on safe-guards and human rights was not yetwell established, and a dictatorcame to power who later declaredmartial law.

The case is included for a num-ber of reasons. First, it is significantfrom a human rights perspective. Itwas one of the more difficult projectsfinanced by the ADB. It was includedto illustrate the case of projects thatare co-financed. The case also pre-sents many opportunities for learning

from hindsight. Such hindsight can illu-minate other issues that are not yet be-ing addressed by the new ADB Envi-ronment Policy and the case presentsthe need for such projects to makethe transition towards compliance.

1 Apparently this was in the form of amonograph entitled: Integrating Social andEnvironmental Considerations in Develop-ment Projects. There were also other OMs.

2 The current version already includes apolicy on programmatic EIA. As early as 1996there was already a very well elaborated De-partment (of Environment and Natural Re-sources) Administrative Order 96-37, which wasrevised and updated in 2000. Prior to this thePresidential Decree 1586 defining the PhilippineEIA System was issued in 1978. Its basis was Presi-dential Decree 1151, issued the year before,also known as the Philippine Environment Policy.Proclamation 2146, of 1981, defined environ-mentally critical areas and projects that arewithin the scope of the EIA system.



Locating The Project inTerms of its Sectoral Context

The ADB does not have an environment sector but it has anindustry and a minerals non-fuel sector, and an infrastructure sector that covers roads,

bridges, dams and the like. All thesesectors have significant impacts onthe environment, hence the questionarises of how to manage the envi-ronment concerns in each of thesesectors. The project was chosen inpart because of its failures, but moreimportantly because of the possibil-ity of drawing lessons from it.

If it is any indication, the ADB doesnot have any further investment in min-ing after Marcopper. It does howeverhave investments to rehabilitate coralreefs, affected by mining and over fish-ing, in poverty stricken coastal com-munities in Indonesia. It was reportedlywilling to fund the clean up of a formeruranium mine site in Kyrgstan, pre-mised on a commitment not to mineuranium anymore.1

Bank’s ComplimentaryFinancing Scheme (CFS)

As of 2002, the ADB has 61 mem-ber countries, of which 37 are devel-

oping countries — these are the eli-gible borrowers. Lending in 2003 wasUS$5.7 billion, comprising 89 loans, ofwhich: the private sector share wasUS$145 million, comprising 4 loans,representing a mere 2.54% of theportfolio. Of US$5.7 billion there wasUS$35 million of equity investments,and US$178 million of grant financ-ing (covering 27 projects). Again ofthe US$5.7 billion, US$2.7 billion wasmobilized by co-financiers.2

The Complementary FinancingScheme3 (CFS) is a participationmodality under which the Bank, inaddition to the loan from its own re-sources, makes a complementaryloan on market-based terms, fundedentirely by participations from mar-ket institutions without recourse to theBank. As such, the Bank becomes thelender of record and administers thecomplementary loan. In return forthe privileges accorded, the partici-pating institutions offer better termsthan otherwise.

From the 1970s to 1994 the bank’sco-financed portfolio grew by about2 to 3 orders of magnitude (see Ap-pendix 1). Over the years, it has



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come to a situation where practi-cally 50% of the loans come from co-financing partners (official sources,commercial sources and exportcredits). While this sharing has shiftedin various directions, the co-financ-ing model remains a win-win solutionfor both the bank and the co-financ-ing partner. The bank‘s burden togenerate its own funds is reduced; itinvolves the private sector instead.Thus this reduces the involvement ofthe bank and therefore its direct risk.

This practice allows focus and re-source pooling; resulting in the shar-ing of risks and benefits. It achievesscale, which is not possible if smallerinstitutions, the bank, or the co-finan-ciers acted individually. However,there are specific challenges to suchan arrangement. An example fromthe ADB’s strategic strengths analy-sis is its decision to focus on agricul-ture and rural development and simi-lar sectors, acknowledging that it hasnot done very well in manufacturing.It was silent on its performance in min-ing and industry4 . The silence was re-ally about the risk presented by the co-financing scheme on the environment,human welfare, and the bank’s image.

Until the early 1990s, the ADB’sassistance to the private sector cov-ered numerous sectors5 with no spe-cific prioritization. The 1995 PSO strat-egy sharpened the sector focus, pri-oritizing infrastructure and financialsector projects6 and downplaying

projects in manufacturing, agricul-ture and mining sectors. With con-strained resources, it had limited abil-ity to assess manufacturing, agricul-ture and mining projects and mod-est capability to add value to them.Most of its manufacturing projectsturned out to be problematic. The1995 strategy also continued to givepriority to financial sector projects (in-cluding capital market institutions, fi-nancial intermediaries and invest-ment funds), which had been impor-tant planks in PSO from the start. Withthis strategic decision the ADB wasable to direct its PSO to the chal-lenges faced by DMCs in infrastruc-ture and capital market develop-ment to achieve sustained growth.During 1995-2000, the share of infra-structure in the total PSO portfolio in-creased substantially from 27 per-cent to 47 percent. This increase wasmatched by a decline in the shareof manufacturing and other sectorsfrom 27 percent to 16 percent7 .

Economic developmentand sustainable use

The Bank asserts that the key toeconomic development is ensuringa balance between economic de-velopment and the sustainable useof natural resources. The Bank un-derscores its commitment to promot-ing environmentally sound eco-nomic activities.8 The basis for thisOM includes a declaration signed bymultilateral development institu-



tions9 , and an ADB working paper10

among others. In recent times, theBank has been more elaborate andto a large extent specific in its re-quirements. For example it now hasa specific OM for private sectorprojects that elaborates on a processand lead-time for submission to theBank’s Board for review11 .

1 See: http://www.nti.org/db/nisprofs/kyrgyz/mining.htm (access date: 2003 Nov 26).

2 Overview of Asian Development Bank(ADB) Safeguard Policies Meeting for Develop-ment Finance Institutions Brussels – June 2003

3 “The Bank encourages co-financingwith private sector institutions to enhancemobilization of private sector capital for thepurpose of developing a viable private sec-tor in the Bank’s DMCs. The Bank may extendfinancial support to a private enterprise to-gether with other bilateral or multilateralagencies, commercial banks, and/or otherfinancing sources. Such co-financing couldbe in the form of parallel financing, joint fi-nancing, or participation in the Bank’scomplementary financing scheme. The Bankmay also participate in syndicated financ-ing. To facilitate participation of commercialco-lenders, the Bank may finance later ma-turities, or it may weight the repaymentschedule of the Bank loan towards later ma-turities to achieve a reasonable debt-serviceburden.” http://www.adb.org/Documents/Manuals/Operations/om07.asp?p=aadb

4 See: http://www.adb.org/Documents/Policies/PSO/default.asp: Private Sector Op-erations: Strategic Directions and Review: II.Assessment of Past Performance

5 Including manufacturing, agriculture

mining, infrastructure, and financial sector.6 Supplemented by organization-wide

expertise in infrastructure development.7 http://www.adb.org/Documents/Poli-

cies/PSO/strategic201.asp and http://www.adb.org/Documents/Policies/PSO/strategic202.asp

8 The applicable version of the policy forthis project at the time when the ADB becameinvolved in it is the February 1988 version ofthe Operations Manual Section 21: Environ-mental Considerations in Bank Operations.

9 Multilateral Development Institutions:Declaration of Environmental Policies andProcedures Relating to Economic Develop-ment, adopted by ADB, Arab Bank for Eco-nomic Development in Africa, AFDB, WorldBank, EEC (Commission), OAS, UNDP, andUNEP, 1 February 1980, 19 ILM 524 (1980).

10 Working Paper 6-79, EnvironmentalConsiderations in Bank Operations, dated 14December 1979

11 The Bank’s concern over the environ-mental impact of assisted projects also ex-tends to those in the private sector. Accord-ingly, this aspect will be considered as earlyas possible during the processing cycle. Gen-erally, the Bank will require adherence to theBank’s and the government’s environmentalguidelines or regulations, including anyproject-specific requirements, as well as suit-able environmental monitoring during theimplementation and operation phases.Whenever appropriate, the Bank may alsorecommend or require an environmentalimpact assessment as well as such modifica-tions in the project concept or the installa-tion of such safeguards as are necessary tominimize possible environmental damage. Insuch cases, a summary environmental im-pact assessment report is required to be sub-mitted (sic) to the Board at least 120 days priorto Board consideration. http://www.adb.org/Documents/Manuals/Operations/om07.asp?p=aadb



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Locating the Project inTerms of its Situation Specificto the Country

The Philippines has fairly advancedenvironment policies. It is among

top borrowers from ADB.

Contributions from mining

Mining has a Gross Value Added toPhilippine Gross National Productcontribution starting at 1.47% (1970)peaking at 2.14% (1985), lowest at1.00% (1999) and was last reportedat 1.05% (2000). Mining exportsstarted at 20.76% (1970) were high-est at 24.56% (1973) and was lowestand last reported at 5.12% (2000) fol-lowing an almost steady deadline.Employment in mining and quarrying(in thousands) was officially placedat about 50 (0.45% of total employ-ment, 1970), peaking at about 160(0.74%, 1987-1999) and was last re-ported at 110 (0.34%, 2000). From1980 to 2000, while copper produc-tion in the Philippines has been de-clining steadily from 1.124 MMT to

0.130 MMT, gold has seen a steadyrise from 20 MT to 34 MT Cabalda etal. (2002).

Recent developments inPhilippine Mining Policy

Civil society organizations (CSOs)were almost in a state of panic re-cently because of an alleged eventwherein the President was supposedto sign the draft National MineralsPolicy Act and its accompanyingExecutive Order. The policy liberal-izes access to mineral resources inthe Philippines. After much clarifica-tion it was established that the urgentmeeting called by the NEDA, as sec-retariat of the PCSD, was to consultCSOs. Whether this was the real in-tention or not, there have been anumber of last-minute policy deci-sions and approvals; sometimeseven railroading months of consulta-tive work. In this case, decisions may



have been made by the DENR , theESSC, and various civi l societygroups.

More recently, in part as a resultof this miscue by NEDA and the re-action of civil society organizationsthe Philippine government used adifferent tack. A draft version wasreleased Nov 24, 2003 entitled Na-tional Policy Agenda for RevitalizingMining in the Philippines which wason track to be signed by the Presi-dent once finalized as an ExecutiveOrder. Apparently there is now bet-ter elbowroom for civil society orga-nizations to negotiate given this de-velopment. There was also a forumsponsored by the World Bank thatallowed various sectors to raise theirconcerns about mining. This createdsome space for dialogue that couldpossibly begin to address the situa-tion of mining in the Philippines.

Philippine EnvironmentPolicy transitions

The Philippines set up an environ-ment framework law as early as 1977.It also responded very promptly to

the Rio Convention of 1992 by set-ting up the Philippine Council for Sus-tainable Development and craftingthe Philippine Agenda 21. The CivilSociety groups had very good par-ticipation in this process. There waseven an Asian Nations Conferenceon Sustainable Development orga-nized sometime in 1991. The BusinessSector feeling left out of this processand wanting to keep abreast withthese developments also drafted aresponse known as Business Agenda21. Environment and Natural Re-sources Accounting is finding inroadsin the country as a result of interven-tion from various groups, the ADB in-cluded. Projects have been fi-nanced also by the (EEPSEA) specifi-cally Bennagen’s (1998) estimate ofthe environmental damage from thespill of Marcopper.

While so, it is also important toacknowledge the relative weaknessof the enforcement of EnvironmentPolicy in many Asian countries, sothat the Environment Assessment sys-tem tends to be abused. At thesame time, there is a shift towardsmore stringent policies in the region.



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P r o j e c t D e s c r i p t i o n

Below are some important project details available from the Mining Om-budsman Report1 .

1 See http://www.minesandcommunities.org/Country/aus3.htm

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From its Origin to Status Quo(History, Planning, Implementation)

The Marcopper Mining Corporation (MMC) is managedand owned by Placer DomeInc. (PDI) Pacific, an Australian subsidiary of the Cana-

dian mining multinational PDI. It is thethird largest mining company in thecountry. It started its operations inthe Tapian ore body in Marinduquein 1969 producing 30,000 tons of cop-per daily. After depleting the Tapianmineral reserve, it moved to the SanAntonio ore body and used theTapian mines as a waste disposal pit.For 16 years (1975-1991), MMCdumped its mine tailings from theTapian pit into Calancan Bay. Thenin 1991 MMC built the Maguila-guilaDam in Mogpog Marinduque.

PDI ranks among the world’s topgold and copper producers. Its trackrecord for social acceptability andenvironmental safety however, is farfrom impressive. Its records includebeing charged with cyanide leach-ing at the Golden Sunlight Mine in

Montana, USA, the pollution ofLagaip River for tailings dumping atPorgera, Papua New Guinea, andthe acid mine drainage problems atBackhorn mine in Nevada, USA.

The United Nations expert assess-ment mission

Following the spill of tailings intothe Makulapnit and Boac Rivers fromthe Marcopper mine, the DENR re-quested, through the UNDP ResidentRepresentative in Manila, that theUnited Nations provide an indepen-dent assessment mission to the siteof the mine tailings spill onMarinduque Island. The Mission wassubsequently organized by the JointUnited Nations EnvironmentProgramme/Department of Humani-tarian Affairs (UNEP/DHA) Environ-ment Unit. The Mission was organizedin close cooperation with UNDP andthe Government of the Philippines.

The objectives of the U.N. Missionincluded the following: assessing the



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impact of the mine tailings on humanhealth and the environment; assess-ing the cause of the failure of thetailings dam; provide advise on longterm and short term actions; and toarrive at some consensus on theseconcerns given the disagreementamong stakeholders.

The U.N. Mission final report con-tains an extensive ecotoxicologicalassessment, an evaluation of the im-pacts on human health and well-being, general discussion on thecauses, as well as recommendationsto avoid future disasters. The U.N.Mission team’s conclusions were

• The Makulapnit and Boac River sys-tem has been so significantly de-graded as to be considered andenvironmental disaster;

• The aquatic life, productivity andbeneficial use of the rivers for do-mestic and agricultural purposesare totally lost as a result of thephysical process of sedimentation;

• The coastal bottom communitiesadjacent to the mouth of the BoacRiver are also significantly de-graded as a direct result of smoth-ering by the mine tailings;

• There is no evidence of acute poi-soning in the exposed populationdue to the mine tailings.

• There is an increased health andsafety risk due to immersion andflooding as a result of the very largevolume and physical properties of

the mine tailings, should they bemobilized during the wet season;and,

• Concentrations of trace metals inthe mine tailings were not suffi-ciently high to represent an imme-diate toxicological threat.

Conflict and agreementwith ADB team report

The ADB fielded its own team, whichdescribed the incident as an “ac-cident” and absolved Marcopperof negligence and non-compliancewith environmental requirements.The UN review on the other handfaulted the company for inad-equate environmental manage-ment and found the environmentalimpact assessment process as defi-cient. According to the UN report“the failures of Marcopper to com-pletely stem the flow of tailings fromthe tunnel five weeks after the inci-dent reflects the lack of risk assess-ment and contingency planning”.However, both ADB and UN reportagreed on one thing: “the spillageexacted a major environmentaland social toll on the island ofMarinduque.”1 The ADB report is notavailable as a public document, asis the case with most other ADBdocuments. Most of which are in-ternal bank documents pertainingto Marcopper; that are used for theBank’s decision making, classifyingthem as confidential.2



Recent developments

The DENR Secretary Elisea Gozun re-ported the following recently. TheUnited States Geologic Survey (USGS)team has finished its initial assessment.The assessment covers three aspects- the environment, health and thetechnical side of mining. The outputof the USGS study will provide a com-prehensive and long-term solution tothis problem and should be ready byearly next year (2004).

An inception report was to bepresented to the people inMarinduque. Damages amountingto P61M have been paid and an ad-ditional P40M was being processed.

While the USGS study is ongoingsome specific actions are beingtaken on the ground. Some of thetailings had been bagged. Themouth of the river had beendredged to allow for more flow inand out of the sea. The plug on thepond was found to be sound and thusthere are no further releases of tail-ings. With these initial measures, thewater quality in the Boac-MakulapnitRiver has substantially improved.Acidity – alkalinity (ph) is now withinthe standard for class C water body.The people are using it again forwashing their clothes. Some fish spe-cies have also come back, thoughthey have yet to be tested for fitnessfor human consumption.

The Philippine Department ofEnvironment and Natural Re-sources (DENR) is addressing othermining disasters. These include:the Mount Diwalwal, Maricalumand the Atlas Mining.

Yet even with this show of goodfaith by the DENR secretary, whohappens to come from the ranks ofcivil society organizations, somegroups remain skeptic. Citing for ex-ample that the pro-mining stance ofthe present government continuesas follows: “As of July 30, 2003, theDENR has approved 188 MineralSharing Production Agreement(MPSA) covering a total of 314,462.31hectares of land, 16 exploration per-mit (EP) covering a total of 70,538.40hectares and 2 FTAA covering51,955.00 hectares. It is expectedthat with this new policy, more hect-ares of land will surely be in the handsof mining TNCs and more people willbe displaced.”

1 Salazar (1998).2 This was the reply of a Bank staff on

repeated inquiry and request for Marcopperrelated documents. This has been the e atti-tude since the ADB is no longer associatedwith the Marcopper Project. Officially thiswas marked by the payment of the outstand-ing loan of Marcopper to the ADB and thereturn of the Covenant (Letter of Agreement)after the mining accident.



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Concerns

Community demands

B elow is a list of the demands from the community put together in a publication by Oxfam1 . Thesecommunity demands

have remained largely unchanged.The following demands have beenvoiced on many occasions in theseven years since the mine was shutdown in 1996.

Calancan Bay• Acknowledgement by Placer

Dome that the tailing disposal intoCalancan Bay since 1975 had animmediate detrimental impact onthe food security and livelihood ofthe communities derived from fish-ing through turbidity from surfacedisposal and progressive smother-ing of corals and sea-grasses thatsustain fish. This damage has ongo-ing economic and health ef-fects.29

• Acknowledgement by PlacerDome that the tailings containheavy metals that are still leach-ing into the bay. The CalancanBay Fisherfolks Association hasconsistently requested that PlacerDome fund an independent en-

vironmental and health investiga-tion into the impacts of the tail-ings in the bay.

• Compensation for the fisher folk forthe loss of livelihood since 1975 andsufficient funds to cover health-re-lated expenses. Such demandsare based on the findings of an in-dependent environmental andhealth audit.

• Rehabilitation of the bay so itcan once again be a productiveeco-system.

Mogpog• Compensation for the damages

and losses suffered in the 1993Maguila-Guila Dam burst and forMogpog fisher folk who were af-fected by the Boac River spill.

• Decommissioning of the Maguila-Guila Dam and rehabilitation ofthe Mogpog River.

• Removal of the mine waste thathas built up behind the dam(within the Maguila-Guila Creek)and removal of the mine wastein the San Antonio waste rockdump.

• Commissioning of independentenvironmental and health studiesto determine the extent of thedamage.



Boac• Proper sealing of the tunnel in the

Tapian pit.• Rehabilitation of the Boac River

and marine areas impacted by the1996 spill.

• Compensation for all affected resi-dents of Boac.

Mine Site• A thorough independent hydro

geochemical and engineeringstudy of the mine site, focusing onenvironmental, health and safetyrisks.

• Stabilization and eventual decom-missioning of all dams and wastestructures including the Maguila-Guila Dam, upper and lowerMakulapnit Dams, Bol River reser-voir dam and all former drainagetunnels in the Tapian pit, especiallythe 310 tunnel.

• Proper closure of the mine site in-cluding complete rehabilitation ofthe mine site and affected areasaround the mine site.

Former employees andindirect employment• Payment of back-pay and lost ben-

efits to former employees ofMarcopper who were locked outin a 1994 labor strike.

• Payment of back-pay and com-pensation for loss of livelihoods tocommunity members who lost theirjobs because of the disaster in1996.30

Issues raised by the PRRMConcerns have been raised by theaffected communities and by thePhilippine Rural ReconstructionMovement (PRRM). Specific issuesraised by PRRM in an open letter tothe DENR Secretary and the Philip-pine President were the following:

• Full payment of damage compen-sation of affected families throughthe Environmental GuaranteeFund (EGF) of the MMC.

• Immediate clean up by MMC andPDI of the Boac and Mogpog Riv-ers and Calancan Bay through so-cially acceptable options and notthe Submarine Tailings Disposal(STD) proposal of MMC and PDI.

• Complete rehabilitation by MMCand PDI of the affected communi-ties and environment not only in Boacbut also in the Mogpog and Sta. Cruz.

• Establishment by MMC and PDI ofa Health Trust Fund to address theeffects of heavy metal contamina-tion and similar cases that wouldarise in the future in Boac, Mogpogand Sta. Cruz.

• Permanent closure of MMC inMarinduque and conduct of astudy for the conversion of the minesite into economic employment op-portunities for the Marinduqueños.

1 Verbatim from: Macdonald, I., and Ross, B.,(2002), Mining Ombudsman Annual Report2001-2002, Oxfam Community Aid Abroad,p.54.<http://www.minesand communi -ties.org/Country/aus3.htm>



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Actions Taken & Resultsof Actions of Affected Peopleand NGOs

Efforts by the local communities included: amplifyingtheir desired remedial work;even the mayor presenteda study for a clean up and

rehabilitation plan. For example, at-tempts at litigation ran into difficul-ties because of inability to pay le-gal expenses. A senator also issueda resolution to bring the disaster intonational focus. There were also ef-forts to file a case with the localcourts with the aid of an NGO(Tanggol Kalikasan) to allow the resi-dents of Calancan Bay to partici-pate. MacDonald and Ross (2001)also noted the case that was filedwith the regional trial court.

In March 2001, PRRM Marinduquewrote an open letter to the thenDENR Secretary Alvarez and Presi-dent Arroyo urging them to heed thecall of the Marinduqueños to addressthe MMC issue considering its na-tional significance. Similarly the com-munity organizations approached

the Mining Ombudsman of Oxfam1

for assistance.

A Memorandum of Agreementbetween Marinduque and the DENRwas signed in 2001. It stipulated hir-ing an independent consultant tostudy the situation in the Boac River.The MOA excluded the MogpogRiver and Calancan Bay even withthe lobbying by the Provincial Coun-cilor. By March 2002, it was clear thatthe USGS was hired as the indepen-dent consultant. The USGS was thefirst choice of the project affectpeoples. The DENR gave an assur-ance that they will provide thefunding. The DENR committed tosigning a contract with the USGS.These discussions between theDENR and USGS became an issueto congress so that it was actuallytackled in some congressionalhearing. According to the DENRcongress wanted to exercise over-sight on the Terms of Reference ofthe contract.



Apparently there were repeatedefforts on the part of the provincialboard to include the Mogpog Riverand Calancan Bay in the discussionsand in the contract, to no avail. Thereason for the exclusion was not cleareven to a provincial councilor whowas actively involved in the efforts.

The results of the efforts of thecommunities were as follows: The let-ter sent to President Arroyo and thenSecretary of the DENR did not get aresponse. The engagement ofOxfam’s Mining Ombudsman con-tributed significantly in mapping outthe demands of the community andthe people. The court case did notprogress much.

Representative Reyes ofMarinduque, in an interview, empha-sized that they will do everythingwithin their means to correct the situ-ation and that the Philippine govern-ment is committed to the welfare ofthe public. It has committed fundsto finance the cost of site character-ization that will form the basis for themitigation activities. Recently theUSGS returned for the second datagathering. However, the media,NGOs and POs are being excludedin the meetings with the USGS team.“At least for now”, so says Congress-

man Reyes. Apparently there is worrythat facts will again be misinter-preted and taken out of context orblown out of proportion.

Review of primary documentsand key informant interviews indi-cate the following: Compensationhas been very limited: only a fewmonths worth of lost opportunity waspaid for, totally disregarding thecapital notion of the resources andthe continuing lost opportunity forthe succeeding years (since 1997 tothe present). The Tapian Pit dis-charge has slowed down. Engineer-ing work was done to control the dis-charge and address other physicalconcerns. However, the affectedcommunities are very disappointedand frustrated with the progress ofthe case. Very few of the demandshave been met. To this end, eleven(11) municipal councilors of Boachave sought representation with theDENR Secretary Gozun to plead fortheir case.

1 The Oxfam Mining Ombudsman servesas a conduit between affected communi-ties, government and mining firms to com-municate effectively what is happening onthe ground and to facilitate the resolution ofconflicts. It is not intended to serve as a mag-istrate, although it can help gather dataabout a case. For further details visit: http://www.minesandcommunities.org



Philippines 139P r o j e c t M o n i t o r i n g

Review of Project AgainstADB’s EnvironmentalPolicy Provisions

A review of the events and goings on were evaluated based on the draft Monitor-ing and Evaluation Guide specifically against the Desirable Environmental Stan-dards and this OM Section 21 version.

The applicable version of thepolicy for this project at thetime when the ADB becameinvolved in the project is theFebruary 1988 version of the

OM 21: Environmental Consider-ations in Bank Operations. It is notpossible to comment on properproject classification, completenessand implementation of plans asproject documents were not avail-

able. The documents were no longeravailable because the borrower al-ready returned the borrowed moneyand also the loan covenant. Hence,the ADB closed the project and alldocuments pertaining to it are nolonger accessible. The ADB Environ-ment Policy requires the followingdocument components as part ofthe EIA document. Comments ontheir availability are also provided:

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nalPtnemeganaMlatnemnorivnE .tnemucodotsseccaoN

noitaulavEdnagnirotinoMtcejorPeludehcSdnanalP

.tnemucodotsseccaoN

latnemnorivnEetitrapirTnoitazinagrOmaeTgnirotinoM

nalP

maetgnirotinometitrapitluMAotnietalhguohtla,demrofsaw

otsseccaoN.tcejorpeht.tnemucod



dnuFeetnarauGlatnemnorivnEnalP

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dnuFgnirotinoMlatnemnorivnEnalP

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dnuFtnempoleveDytinummoC)nalPdna(

erewstcejorpllamsemoS,tnednopserenoybdenoitnem

otnwonktonsawerutcipgibtub.tnemucodotsseccaoN.meht

nalPdnadnuFycnegnitnoCegdelwonkonevahstnednopseR.tnemucodotsseccaoN.sihtfo

Other primary documents which were also required as part of projectidentification, design, and appraisal. Similarly, documents were notavailable.

tnemucoD stnemmoCdnaytilibaliavA

)DAP(tnemucoDlasiarppAtcejorP .tnemucodotsseccaoN

)SF(ydutSytilibisaeFtcejorP .tnemucodotsseccaoN

)ED(nalPgnireenignEdeliateD .tnemucodotsseccaoN

)EEI(noitanimaxElatnemnorivnElaitinI .tnemucodotsseccaoN

tnemucodlasiarppacimonoceynAelbaliava

.tnemucodotsseccaoN



Philippines 141

An interview with PRRM revealedthat the delayed formation of theMultipartite Monitoring Team (MMT),lack of skills, capacity and equip-ment for monitoring may in them-selves have contributed to the situa-tion. “It is possible that given a bet-ter prepared MMT, that the impact ofthe Marcopper accident may havebeen minimized or the accident itselfcould have been prevented.”

The Project Completion Report issupposed to be submitted to the ADBafter the physical completion of theproject as a factual report. Then,three years after the Post EvaluationReport or the Project PerformanceAssessment Report is submitted es-sentially saying that the project isnow closed because it has beenperforming well for three years butwhich on the fourth year fails. Therecourse is not clear under these cir-cumstances. The policy fails to takeinto consideration the situation ofMarcopper.

It was learned from interviewsthat the NGOs and POs did not en-gage the ADB for a number of rea-sons. The ADB was seen as too dis-tant and a bad choice for the tar-get of community led advocacy. TheADB’s involvement in the project alsoseems distant in that it appears tohave no culpability on the ground.So that it is the LGUs that are beingengaged by civil society groups. The

sense is that the DENR-EMB shouldtake the lead responsibility. How-ever, in the course of requesting ameeting in Marinduque, the currentEMB director denied the request –fearing possibly for his own safety orthe surge in emotions of the people.A meeting request by provincialboard members with the DENR sec-retary translated into a meeting withthe EMB director. It became clearfrom that meeting that the EMB direc-tor was not clear on the nature of theenvironment guarantee fund, andthe current state of the funds set asideby Marcopper for compensation.

Staff within PRRM or LRC-KSK do notseem to have a full handle of the lit-erature (both policy and science) thatmay be readily available on the webfor example. This illustrates the pointthat there is so much that needs to bedone given dwindling resources.

The staff of NGOs as well as of theADB face the same challenge ofkeeping their knowledge capital sothat the present staff working on theissue or project are updated withwhat has already transpired. This isillustrated for the NGOs in the turnover of staff; for the ADB a case inpoint would be a senior staff who,when questioned, did not know whatpreceded the applicable OM for thisproject, or a clerical staff who wasasking the senior staff if the older OMsshould be disposed.



Review of Project AgainstDesirable EnvironmentalStandards

Individual Indicators

Document Completeness

Access to information was a key dif-ficulty to the case. Mainly becausethe case is controversial, complexand the documents are fairly old it isvery difficult to obtain primary docu-ments from government agencies.The ADB’s standard response to re-quest for documents is that they areno longer involved in the project.

Review of other similar projects

The practice of reviewing similarprojects and projects in a similar sitewas not being done at the pointwhen this project was put up. What isnotable though is that other miningprojects in the country are also prob-lematic, and the ADB has sinceMarcopper veered away from mining.

Respect for standards, associ-ated laws and treaties, local, na-tional, international

At the point when the projectbegan the notion of sustainable de-velopment and a rights based ap-proach to development were notyet established. This includes theright to information, especially, atthat time the Philippines was underauthoritarian rule.

Awareness of Related Principles

The OM provided for a projection ofpossible impacts of the project, butapparently the possibility of a min-ing accident was not factored in.The institutional capacity to performmonitoring and evaluation activitieswas not addressed. The institutionalcapacity to implement compensa-tion activities was not in place. There



Philippines 143

was insufficient data available tobegin with. Policy research indi-cated that there was significant dif-ference between the research resultsand actual compensation. Individu-als were also being excluded frombeing compensated due to the lackof awareness or lack of documents.In both cases it is a matter of provid-ing information to the project af-fected peoples.

Another issue that was raised isthat of how to rehabilitate damagedsites – mine sites in deforested areas.Along side this issue is the strategicalignment of ADB projects, on theone hand there is mining and on theother there is a reforestation project.It is not clear how these projects arebeing integrated at the ADB. Whatis clear though is that there havebeen three failed reforestationprojects in the Philippines.

Capacity of Consultants

Apparently the consultants who pre-pared and reviewed the EIA docu-ment or its equivalent at the timewere knowledgeable of existing poli-cies and practices in environmentalassessment. What was not ad-dressed fully however is the disposalof mine tailings, particularly the lack

of social acceptability for the pro-posed submarine tailings disposal;and later the decision to reject theproposal pointed to the use of theTapian Pit as the disposal means.Apparently, this option was not verywell studied, as a weak earthquakewas enough to trigger the mine tail-ings spill into the Boac River.

This failure may be explained by thefollowing:

• in general, only one option is wellstudied so that the other optionswhich may be less damaging getlimited attention;

• knowledge about the risk of us-ing the Tapian Pit as tailings dis-posal system may have been lim-ited;

• stakeholders who wanted to usethe Tapian Pit as the tailings dis-posal system may have done sowith limited knowledge;

• stakeholders who new bettermay have succumbed to pres-sure from below, or decided tokeep quiet; and

Whatever the case, stakeholderswho agreed to use the Tapian as thetailings disposal system with fullknowledge and consent should beheld accountable.



Project Stakeholdersand their Interests

Below is a list of the project stakeholders and their interests:

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lortnoCnoitulloPlanoitaNnoissimmoC

gnirotinoM

dnaseniMfouaeruBsecneicsoeG

htiwseirtsudnifoecnailpmocehtsrotinoMCCErieht

tnemnrevoglacoL,ytefas,gniebllew,htlaeh,tnempoleveD

fossol/ecruos,snrecnoclatnemnorivnedetceffaesohtfonoitasnepmoc,doohilevil

emedacAtnemecnavdA.gnikamnoisicedrofsisaB

foyawrettebaspahrep(ecneicsfo)sgniliatenimgnisopsid

BDAetavirptnarbivapoleveD.sdnufstievoM

.rotces



Philippines 145

Table for Stakeholder Analysis (Importance and Influence

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,PU:emedacA•UMAT,SGSUoenetA•

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)puorgspuorglacoL•

As a strategy for intervention it is im-portant that the project affectedpeople (the locals) be able to con-nect with civil society organizations,and the academe, as well as themedia for various purposes includinginformation dissemination, informa-

tion sharing, dialogue, educationempowerment, and action taking.This will have to be done more sys-tematically and strategically by thelocals, PRRM, and LRC-FOE. Periodi-cally the groups have to do somestocktaking.



Key Principles

T his section is an analysisbased on principles for environmentally sound projectdesign and implementation.They have been derived

from the standard principles for Stra-tegic Environmental Assessment andEnvironmental Impact Assessment1 .

The documents around theMarcopper were difficult to access.Using various methods values wereprepared on the descriptors for agood Strategic Environmental As-sessment below (the headers indi-cate the principles).

Principles on environmentallysound design

Is integrated: Evidence indicatesthat the environmental assessmentdid not ensure the achievement ofsustainable development. There wasa very poor integration among bio-physical, social and economic as-pects of the project. There was veryweak linking to policies in the region,the project EIA and decision making.

Is sustainability-led: While theproject paid attention to the contin-

ued risk to fishery resources resultingfrom waste dumping developmentoptions and alternative proposalsthat were more sustainable were notidentified by the project.

Is focused: Information gener-ated by the EIA was used mainly forthe project and not to contribute todevelopment planning and decisionmaking. It did not tie in with key is-sues of sustainable development.There was insufficient data to com-ment on the following two points:

• The project is customized to thecharacteristics of the decisionmaking process.

• The project is cost- and time-effective. The project is ac-countable: The lead agency,the DENR and EMB are takingresponsibility for the rehabilita-tion and compensation but itis proceeding too slowly. Sothat it lacks professionalism,rigor, fairness, impartiality andbalance. There are no inde-pendent checks and balancethat would provide some se-curity to vulnerable groups.



Philippines 147

The project is participative:Project affected persons were notable to participate early on in defin-ing the project and alternatives.There is also a lack of participationin the definition of the scope, pro-cess, criteria and conditions of com-pensation. There is also a lack ofparticipation in defining post acci-dent monitoring and evaluationwork, specif ical ly defining thescope of work of the consultantUSGS team. Information require-ments are not well understoodwhich may also be due to insuffi-cient access to all relevant informa-tion. An example would be the re-ported exclusion of claimants frombeing compensated.

The project is iterative: There is lim-ited information available to respondto the two points below, which in itselfis indicative of information availability.

• Ensures availability of the as-sessment results early enoughto influence the decision mak-ing process and inspire futureplanning.

• Provides sufficient informationon the actual impacts ofimplementing a strategic de-cision, to judge whether thisdecision should be amendedand to provide a basis for fu-ture decisions.

Access to environmental information,environmental decision-making andenvironmental justice:

The existing set up of the ADB andthe Philippine government are notvery supportive of this right. It doesnot allow members of the publicgreater access to environmental in-formation held by public authorities;thereby it does not result to increas-ing the transparency and account-ability of government. The EIA docu-ments are kept in the key offices ofthe government which are notreadily accessible to the public. Thelanguage, content, form and processof the environmental impact assess-ment system are also not accessibleto the public. The DENR has very lim-ited capacity to provide environ-mental education interventions tocommunities. While it does providean opportunity for people to expresstheir opinions and concerns on envi-ronmental matters, it does not ensurethat decision-makers take due ac-count of these. The current system isnot clear on the last pillar: Provide thepublic with access to review proce-dures when their rights to informationand participation have beenbreached, and in some cases tochallenge more general violations ofenvironmental law. A key difficultywould be the access to the covenantsigned between the ADB and theborrower, and the associated inter-



nal documents such as the Environ-ment Management and MitigationPlan and the internal assessment ofthe bank and its ultimate decision tofinance the project.

Monitoring against other ADB Policies

The issues about access to infor-mation for this project is a criticalone. Old documents prior to the in-volvement of the ADB will probablybe very difficult to find given the tran-sitions in the Philippine Governmentand the physical movement (reloca-tion) of the EMB over the past ten

years to some three sites. The archi-val, retrieval and security system ofdocuments is not in place. At theADB on the other hand, even if theproject documents were in ADB theywould not be accessible for two rea-sons: the ADB is no longer involved inthe project and the project is notcovered by the 1994 information dis-closure policy.

1 http://www.iaia.org. The InternationalAssociation for Impact Assessment definedkey principles for SEA and EIA based on sur-veys and studies the organization con-ducted.



Philippines 149

Asian Development Bank. OM Sec-tion 7: Issued on 10 October 1996:Assistance to Private Enterprises.Bank Policies (BP). (http://www.adb.org/Documents/Manuals/Opera-tions/om07.asp?p=aadb accessed24 November 2003).

Cabalda, M.V., M.A. Banaag, P.N.T.Tidalgo, & R.B. Garces, 2002. Sustain-able Development in the PhilippineMinerals Industry: A Baseline Study.Commissioned by the Mining Miner-als and Sustainable DevelopmentProject of the International Institute forEnvironment and Development. Pub-lished by the World Business Councilfor Sustainable Development.(www.iied.org/mmsd/mmsd_pdfs/184_cabalda.pdf / 26 Nov 2003).

C.P. David, 2000, Tracing a Mine Tail-ings Spill Using Heavy Metal Concen-trations in Coral Growth Bands: Pre-liminary Results and Interpretation.Coral Reef Symposium Proceedings,Bali, Indonesia.

Geoffrey S. Plumlee, Robert A.Morton, Terence P. Boyle, Jack H.Medlin, and José A. Centeno, 2000.An Overview of Mining-Related En-vironmental and Human Health Is-sues, Marinduque Island, Philip-pines: Observations from a Joint U.S.Geological Survey – Armed ForcesInstitute of Pathology Reconnais-sance Field Evaluation, May 12-19,

2000. USGS. (http://www.usgs.gov /26 Nov 2003).

Kirit Parikh and M. Aslam Khan, 2002.Environmental Governance for Sus-tainable Development in Asia andthe Pacific. UNDP, and UNESCAP.

Martin, W. E. (ed.). 1993. Environmen-tal Economics and the Mining Indus-try, Kluwer Academic Publishers, Mass.,USA. In: Bennagen, 1998. See above.

State of Queensland (EnvironmentalProtection Agency) 2003. Guidelinesfor mining. Last updated: 04 Aug2003. (http://www.epa.qld.gov.au/environmental_management/min-ing/guidelines// accessed 26 No-vember 2003).

Salazar, Rachel 1998. TheMarcopper Disaster: from Lifebloodto Deathblow. In: River f No Return:The Anatomy of a Mining Disaster.Focus vol. 4/Summer 1998.

United Nations Department of Hu-manitarian Affairs - DHA-Online. JointUNEP/DHA Environment Unit. ReliefCo-Ordination Branch Joint UNEP/OCHA Environment Unit. TheMarinduque Island Mine Disaster,Philippines Assessment Mission Con-ducted under the Leadership ofUNEP/Water Branch. http://www.reliefweb.int/ocha_ol/pro-grams/response/unep/unep4.html.

R e f e r e n c e s


ADB and the Environment 150A p p e n d i c e s

Appendix 1:

SUMMARY OF LOAN PROJECTS WITH COFINANCING, 1970-19941

1 http://www.adb.org

raeY

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knaBforofnaoL

-oCdecnaniFstcejorP

$()noilliM

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LATOT

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0791 4 80.69 0 00.0 0 00.0 4 80.69 75.04

1791 2 38.3 0 00.0 0 00.0 2 38.3 07.3

2791 1 51.3 0 00.0 0 00.0 1 51.3 00.8

3791 6 32.351 0 00.0 1 00.5 6 32.851 05.29

4791 2 28.1 0 00.0 0 00.0 2 28.1 55.23

5791 3 05.452 1 06.9 0 00.0 4 01.462 07.231

6791 5 80.59 1 13.52 2 00.31 7 93.331 62.202

7791 7 46.18 1 05.11 0 00.0 8 41.39 59.231

8791 51 91.373 0 00.0 1 60.3 51 52.673 80.483

9791 02 13.353 1 86.03 1 01.1 12 90.583 35.875

0891 12 90.893 1 26.13 2 52.61 22 69.544 23.245

1891 91 84.405 3 91.95 2 07.68 32 73.056 09.628

2891 61 46.293 1 00.51 7 06.222 32 42.036 78.808

3891 31 83.821 0 00.0 5 04.081 81 87.803 50.067

4891 91 60.947 3 51.202 5 58.922 32 60.181,1 06.983,1

5891 12 08.203 3 00.022 2 00.38 32 08.706 05.320,1



Philippines 151

6891 02 29.083 3 97.301 0 00.0 22 17.484 27.727

7891 42 91.163 3 86.051 4 03.16 92 71.375 99.912,1

8891 21 68.544 1 92.12 2 06.17 41 57.835 13.684

9891 12 02.188 1 00.661 8 00.411 72 02.161,1 66.493,1

0991 22 51.769 3 05.451 5 00.541 62 56.662,1 36.287,1

1991 81 21.026 3 04.286 3 05.921 12 20.234,1 02.744,1

2991 81 52.600,2 3 09.827 3 00.272 12 51.700,3 02.465,2

3991 41 05.634,1 6 05.616,1 7 06.072 32 06.323,3 08.829,1

4991 51 11.432,1 2 00.49 6 03.103 81 14.926,1 19.146,1

LATOT 833 75.422,21 93 11.5234 66 62.602,2 304 49.557,81 15.251,02

Appendix 2: Chronology of Events:

1956 – Placer Dome (formerly PlacerDevelopment Limited) became in-volved in an exploration project onthe island of Marinduque, Philippines,undertaking extensive geologicalmapping and drilling.1964 – Marcopper Mining Corpora-tion (Marcopper) was established.1969 – Marcopper started miningoperations in Marinduque.1971 – Island Copper in PlacerDome’s home province in Canadaand the Atlas Mine in the Philippineswere using submerged marinedumping systems for mine tailings.1975 – Placer Dome attempted asubmerged system in shallowCalancan Bay but failed and re-verted back to surface disposal,which was deemed unacceptable

by “best practice” standards by1975.1977 – PD 1151: Philippine Environ-ment Policy1978 — PD 1586: Philippine EIA System1975 – Marcos government granteda blanket permit to Marcopper tooperate. Most of the environmentalregulations were suspended or werenon-operative as far as Marcopper’soperations were concerned. PlacerDome owned 39.9% of Marcopperwhile Marcos owned 49%.1975 – 1991 – Placer Dome oversawthe dumping, via surface disposal, ofmore than 200 million tons of minetailings directly into the shallow wa-ters of Calancan Bay.1980s – Canadian NGOs met withPlacer Dome executives regularlyover the issue of dumping.1986 – ouster of President Ferdinand



Marcos. Corazon Aquino took over.November 1986 – National PollutionControl Commission issued an orderto Marcopper to stop disposing of itstailings in the Calancan BayFebruary 1988 – OM Section 21, Envi-ronmental Considerations in BankOperations of ADB was in place.April 1998 – a similar order to stop dis-posing of its tailings in the CalancanBay was issued by Environment Sec-retary Fulgencio Factoran Jr followedby a telegram denying Marcopperits request for a “Permit to Operate.”May 1988 – President Aquino re-versed the order of DENR SecretaryFactoran in April 1988April 1990 – DENR Undersecretary forEnvironment and Research DelfinGanapin signed the ECC ofMarcopper allowing it to operate for10 years and to use the Tapian pit asits mine tailings dam.1991 – Tapian pit was depleted. Anearthen dam was built in the moun-tainous headwaters of Mogpog Riverto keep silt from the new San Anto-nio mine out of the Mogpog River.Marcopper got a loan from ADB.1992 – Fidel V. Ramos became presi-dent after Corazon Aquino1992 – DENR AO 211992 - the mined out Tapian pit wasused as a storage place for tailingsfrom the adjacent San Antonio mine.1993 – the earthen dam built in 1991burst.1995 – Philippine Mining ActAugust 1995 – Marcopper noticedthe first seepage above the drain-

age tunnel near the MakulapnitRiver. A geotechnical consultantrecommended drilling a series ofholes to intercept the leakage andplugging the leaks.October 1995 – a hole was againplugged after a minor leakage. Nosubstantial measures were under-taken to ensure that leaks would notoccur againMarch 1996 – a massive tailings spillat the Marcopper mine filled the 26-km long Boac RiverDecember 1996 – DENR AO 37 revis-ing AO 21 of 1992.April 1996 – Placer Dome made com-mitments through its then-CEO JohnWilson to then-President Fidel Ramos torehabilitate all areas impacted by thetailings flow and compensate residentsof Marinduque who have suffered per-sonal inconvenience and damage totheir properties.1997 – Placer Dome divested fromMarcopper1998 – Joseph Estrada became presi-dent after Fidel Ramos1998 – the Philippine governmentdeclared a state of calamity forhealth reasons for Calancan Bay vil-lages because of lead contamination.2001 – Estrada was ousted from thepresidency and Vice-PresidentGloria Macapagal Arroyo took over.2001 – Klohn Crippen’s report, com-missioned by Placer Dome, con-cluded that five dams holding backthousands of tons of waste in themountains on the island need imme-diate remediation.