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By John Helmer in Moscow

Russian environmental inspector to despatch bailiffs to halt Evraz steelmill for water pollution.

Evraz, Russia’s largest steelmaker, is testing for the second time in two years the will of the Russian government to enforce environmental protection and water emission rules.

At stake is the continued operation of the biggest rail producer in Russia — and the drinking water of the two rivers serving Novokuznetsk city, in the Kemerovo region of Siberia.

A series of federal government environmental inspections, just completed at two of Evraz’s steelmills in Novokuznetsk, has found that one of the mills, West Siberian Metallurgical Combine (Zapsib), has met a court-ordered emission standard, but the second, Novokuznetsk Metallurgical Combine, has not. The result is that the federal regulator, Rosprirodnadzor, has gone to court for an order that may force the closure of the Evraz mill.

The disclosures by Rosprirodnadzor follow two years of bitter recriminations, court litigation, and political lobbying. In September 2006, they resulted in the largest penalty ever imposed on a Russian company for industrial pollution.

At the start of 2006, Mineweb reported at the time, Rospriroadnadzor sent an official order to Evraz for closure of the Novokuznetsk plant’s water treatment plant, effectively forcing the steelmaking operations to halt. Then, in return for rescinding the order to close, Evraz agreed to invest Rb2.4 billion (then US$92 million) in new treatment and anti-pollution facilities at Novokuznetsk, as well as at Zapsib. The agreement by Evraz was part of a Kemerovo region court order, also backed by Rosprirodnadzor. “It is an unprecedented decision and we are very happy to reach it,” Oleg Mitvol, head of the inspection agency, told Mineweb at the time.

The investment requirement in this enforcement against a major Russian industrial group was unprecedented; although Evraz had admitted its vulnerability in a circular issued in 2005 to investors in its maiden London Stock Exchange listing. According to the IPO circular, the company’s “operations generate large amounts of pollutants and waste.” It also conceded it was subject to environmental regulations “that require the clean-up of contamination and reclamation.” The company noted that clean-up costs are “often impossible to assess unless environmental audits have been performed and the extent of liability under environmental laws is clearly determinable.”

A statement just issued by Rosprirodnadzor, and obtained by Mineweb, reports that levels of chlorides, aluminium, fluorine, zinc and other contaminants in river water emitted from Zapsib, have been reduced to the legislative standard and court-ordered level. Zapsib, the agency also reports, had more than met its required target for investment in environmental protection of Rb577 million (US$26 million).

The non-compliance of Novokuznetsk, and the associated Evraz-owned power company, reports the government agency, will face a court hearing to halt steelmaking, and pay damages for the ongoing pollution of the two rivers in Novokuznetsk, Aba and Konobenikha.

As it had done in 2006, Evraz has tried stonewalling the regulatory orders issued against it, while claiming that its environmental compliance record is exemplary. A spokesman for Evraz told Mineweb the details of the report of the recent water emission inspections, and the results for Zapsib and Novokuznetsk in Rospriradnadzor’s announcement, are not disputed. The spokesman promised a corporate comment, but this has not been forthcoming.

The Novokuznetsk mill is more than 80 years old; production of rails for railways, the specialization of the mill, began in 1932. Privatization of the mill in 1992 was followed by takeover pressure from coal, power, and iron-ore suppliers. Combined, they drove the plant into bankruptcy and liquidation, which Evraz claims preceded its takeover of the assets. Crude steel capacity at the plant is 2.4 million tonnes per annum; rail output capacity is about 840,000 tonnes pa. Actual production in 2006 was 1.4 million tonnes of steel, and 1.8 million tonnes of rolled products.

There is no reference in Evraz’s financial reports or website postings of the court ruling, or the size of the penalty imposed in 2006 on Novokuznetsk. Instead, the group financial report for the year claims that “in 2006, Evraz Group’s subsidiaries performed a comprehensive set of activities to reduce air emissions and water discharges, processing industrial waste and implement resource-saving technologies”.

Mitvol explained what has been happening in the city over the pollution by the two steelmills. “There was a court decision in 2006 on the two enterprises. We demanded immediate suspension of the mills, but the court decided that there was a social aspect, like jobs, the economy of the region, etc. So the court ruled in favour of a delay for two years, during which the [two Evraz units] should improve the ecology….Now we will calculate the damage cost for [waste water] emissions by new coefficients that we have. We will demand the closure of [steelmaking] with bailiffs to implement the court ruling of 2006.”

There has been speculation that Evraz is reluctant to invest heavily in the environmental controls, as it may wish to close the plant permanently, or parts of the production line (as occurred at the end of 2006), while avoiding blame from the regional government, the city, or the workforce. Mitvol said he could not explain why Evraz had failed to comply with the 2006 order. “Maybe they thought they will renegotiate it again, or there will be another court delay.”

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