NILSY MMC Norilsk Nickel PJSC (CE)

By Ann M. Simmons 

MOSCOW -- The Russian mining company that saw a massive fuel leak at one of its Arctic installations in May is refusing to pay some $2 billion in damages requested by the Russian government to cover the cleanup, and has questioned how the figure was calculated.

At least 20,000 tons of fuel seeped from a holding tank at a power plant run by a subsidiary of Norilsk Nickel, or Nornickel, contaminating a swath of land and several ecologically-important bodies of water in what international environmental group Greenpeace called the worst spill the Arctic had seen. Russia's environmental protection agency presented a request for damages on Monday.

But Nornickel Wednesday said it refused to pay, disputing the agency's assessment of the damage the fuel spill caused, saying it was distorted, and that it would pay for and conduct the cleanup.

Nornickel has also suggested the disaster was caused by melting permafrost, echoing environmentalists and scientists who have been sounding the alarm for some time over the threat that global warming might pose to other oil and gas installations across the resource-rich region of Siberia.

Russian government officials told journalists Nornickel must comply and pay the $2 billion bill. Its stance appears directed in part at encouraging other companies to ensure their Arctic facilities can withstand further melting of the permafrost.

"Damage to the environment and liquidation of the consequences of the accident are two disparate concepts," said Dmitry Kobylkin, who leads the Ministry of Natural Resources that oversees the environmental protection agency.

Nornickel blamed the May 29 incident on the sudden failure of posts that supported the basement of a fuel storage tank at its plant in Norilsk after the permafrost below had begun to thaw. Last month, Russia's chief prosecutor ordered regional and environmental prosecutors to conduct a comprehensive inspection of "particularly dangerous installations" to avoid a repeat of what happened at Norilsk.

Neither Nornickel nor the prosecutor's office responded to a request for further comment on the role that the thawing permafrost might have played in the fuel spill.

Russian President Vladimir Putin has taken steps to tackle environmental issues in recent months. He declared a national state of emergency in the Krasnoyarsk region where Norilsk is located after learning of the spill in early June. At least four people, including the head of the power plant where the spill occurred, were detained on several counts of causing environmental damage and negligence in delaying reports of the incident.

Scientists have stepped up their warnings that as Arctic warms faster than most of the rest of the world, infrastructure built on permafrost, which covers around 65% of Russia, could become unstable. Russia's Hydro-Meteorological Center reported Saturday that the first half of 2020 was the warmest in Russia since records began some 130 years ago.

"Melting permafrost over Russia, mostly in the eastern Russia, affects all types of infrastructure, including of course oil and gas infrastructure," said Sergey Gulev, a climate scientist at the Shirshov Institute of Oceanology of Russian Academy of Sciences in Moscow.

If roads and piers are damaged by the thawing, "this would definitely affect oil and gas structures," he said. "This is very likely a problem to be faced in 10 to 15 years."

Nikolai Korchunov, a Russian Foreign Ministry ambassador-at-large and a senior official of the Arctic Council intergovernmental forum, told an online conference last month that environmental disasters like the one in Norilsk could undermine Russia's efforts to develop the Arctic economically.

He noted that Russia's Arctic zone accounted for more than 20% of the country's exports, including through large mineral projects, and 10% of gross domestic product.

Moreover, the oil and gas sector is Russia's biggest industry and helps prop up government spending.

Environmentalists, meanwhile, are wary of the precedent that might be set if Nornickel is allowed to conduct its own cleanup and restoration operation. Vladimir Chuprov, project director at the Russian branch of Greenpeace, said it has received only fragmentary information about the progress of the cleanup.

This, he said, causes "a lot of questions and distrust."

Write to Ann M. Simmons at ann.simmons@wsj.com

(END) Dow Jones Newswires

July 08, 2020 13:18 ET (17:18 GMT)

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