Ann: GENERAL: CRP: CRP considers reapplying for a marine consent

• Release Date: 18/02/15 14:07
• Summary: GENERAL: CRP: CRP considers reapplying for a marine consent
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					CRP
18/02/2015 14:07
GENERAL
PRICE SENSITIVE
REL: 1407 HRS Chatham Rock Phosphate Limited

GENERAL: CRP: CRP considers reapplying for a marine consent

Media Release
18 February 2015
CRP considers reapplying for a marine consent

Chatham Rock Phosphate is considering reapplying for a marine consent to mine
phosphate nodules on the Chatham Rise seabed, managing director Chris Castle
said today.
We have decided an appeal is a pointless exercise.  Assuming we win on points
of law, we would still need to go back before the same decision-making
committee (DMC) who collectively overlooked the key merits of our project,
appeared to misunderstand important evidence and submissions and selectively
ignored CRP's information to reach a "no" decision.
Although they accepted the findings of scientific experts which showed
negligible effects in areas such as fish, seabirds and mammals, why would we
expect them to look at the other issues any differently the second time
around?  While the DMC's views as to the level of information and certainty
that was required to satisfy them were wildly unrealistic and at odds with
the intent of the EEZ Act, the reality is that they could simply apply that
reasoning again to reach a conclusion that they are unlikely to have an open
mind about.
We have not committed to reapplying at this stage as we need to have
confidence the process and the law is workable and the decision makers are
technically competent.
However, we have no intentions of giving up.  This project is too important
for New Zealand, as well as our shareholders who have already invested $33
million in this project.
As well as failing to take account of the economic benefits, the decision
makers more importantly failed to consider the critical environmental
benefits this project brings to New Zealand.
Chatham Rise rock phosphate would reduce pollution in New Zealand waterways
from phosphate run-off and would reduce the application of the toxic metal
cadmium on New Zealand soils, as our product contains among the lowest
concentrations in the world. It would also drastically reduce New Zealand's
carbon footprint caused by transporting fertiliser inputs from the other side
of the world.
We would be an ethical producer of farm inputs, and New Zealand would not be
exporting our pollution to other countries.
While the EPA decision has decimated CRP's share price, we believe it will
recover.  When we established CRP in its present form five years ago, it had
a market value of NZD 2 million, and a granted exploration licence.

Since then we have raised NZD 33 million, achieved a granted mining licence,
completed one of the most comprehensive environmental impact assessments ever
submitted, and collected vast amounts of data and scientific reports about
the Chatham Rise - much of it used for public good science.  We also have a
team of directors and executives who remain fully committed to the project,
even though they won't be getting paid for a while.

The market value of the company early last week was NZD 40 million, now it is
now back to NZD 2 million again. However CRP now has an extended management
group that is the envy of other players in the marine mining sector and a
recognised place in the phosphate industry. Accordingly we are in a very
strong position and much better equipped to build on that NZD 2 million
platform than we were five years ago.

Corals
One of the key areas we are most concerned about are the findings on stony
corals.  The decision said this was a unique, rare and vulnerable ecosystem.
The DMC  ignored unchallenged evidence that this is a common species found
throughout the EEZ.
We acknowledged the corals may not appear in a thicket or community
elsewhere. Our proposed mitigation was to avoid those thicket areas by
excluding them from our mining plan but that was not accepted.
We produced the best available evidence, and significant data to identify
where the relevant communities were, and develop measures which would have
addressed the risks posed to those communities.  We committed to ground-truth
the modelling work, adjust mining exclusion areas and move the first three
years of mining blocks while ground-truthing occurred.

So, the DMC effectively ignored a solution to their major concern and took a
zero-risk/avoidance approach, which is not required by the EEZ Act.

Uncertainty
There are numerous instances where the committee found the scientific
evidence insufficient and highlighted its "uncertainty". This also occurred
with the Trans Tasman Resources application.
The DMC appeared to be unwilling or unable to understand the reality of
working in New Zealand's oceans. There will never be complete information and
every environmental decision will have to accept some level of uncertainty.
This DMC's decision has elevated the EEZ Act's information principles to a
level which, for this project, is both unrealistic and unachievable.
Assuming we decide to undertake another application we will need to clarify,
for a new decision-maker, the confused thinking of this DMC on issues they
identified as having too much uncertainty.  The information is there and
there was an appropriate answer provided to every question - the DMC simply
didn't appear to understand it or otherwise believed it was less risky to
decline consent.
CRP deserved a better and more balanced consideration of its application, and
a DMC which appropriately put the issues of risk and uncertainty into their
proper context.  That didn't happen.
The committee showed poor understanding of the purpose of modelling or how it
works - and that it is extremely conservative, usually overstating effects
several fold.  Its insistence on the need for ground-truthing shows a
complete lack of understanding of how modelling is used routinely in
land-based applications in New Zealand with great confidence and in marine
projects around the world.
The DMC seemed to go hunting for a basis to decline, thus the discussion
around uncertainty in relation to much of the modelling, ignoring the
conservatism that was identified.  It read as if they were looking for a no
or very low impact activity and that is all they were comfortable with
granting.
The DMC's interpretation of the purpose of the Benthic Protection Area
coinciding with our application area (BPAs are simply no-fishing zones
covered by the Fisheries Act), meant in their eyes the project could not
proceed anyway. This is even though these BPAs were established without
consideration of interested parties other than the fishing industry, do not
maximise the conservation values of the EEZ, and will be reviewed and
modified as part of the establishment of marine protected areas.
To attain the level of information and "certainty" about effects required by
the DMC would require test mining, an activity that itself requires a marine
consent.  This would require the expenditure of hundreds of millions of euros
for a purpose-built ship and dredging system to carry out test runs on the
Chatham Rise, to obtain certainty about effects.
But the DMC in fact created a dead-end street, in that they would not even
contemplate a short-term consent of a limited duration as a "test" because of
the possible risk to the stony corals. No rational applicant or investor
would make such an investment in order to achieve the certainty of
information this DMC considers is required.
If there is so much uncertainty about projects such as ours, why has the
government allocated rights to the resource under the Crown Minerals Act and
allowed such marine consent applications to be considered, when they stand no
realistic chance of being consented?
It seems this committee simply found it easier to say no than yes.  This was
despite our proposing more than 60 adaptive management measures to
comprehensively deal with every potential concern.

Understanding financials
The other major concern we have with the DMC's reasoning is their apparent
inability to understand economics.  They relied on a World Bank nominal price
for fertiliser to assess the economics of the project, a figure with no
relevance to the way the phosphate market operates.
Why would we pursue a project that is at best marginally profitable?  We
issued an announcement to the NZX only last month advising that based on
current exchange rates our profitability before royalties and taxation would
be close to $100 million a year.
There are few New Zealand companies that generate profits of that level, and
it is unfathomable to understand how that could be considered modest.
In terms of wider economic benefits CRP would pay port charges of several
million dollars a year, and external employment opportunities would be
created in the port, in the hospitality sector, on the mining ship,
undertaking environmental monitoring, and in the agriculture sector -
including many on the Chatham Islands.
The income earned per square kilometre of seabed affected by a single mining
pass is NZD 9.7 million, compared with only NZD 9,000 annually from bottom
trawl fishing. This income from mining is achieved without any impact on
fishing yields or fishing industry profitability, according to joint
statements signed by fish scientists and fisheries experts.

Applying again
Our decision to consider resubmitting will depend on whether the
Environmental Protection Authority, charged with interpreting the relevant
legislation, can make significant changes to its processes.  We would not
expect to re-litigate areas not in contention and we would expect the EPA to
sharpen its act in terms of the quality of its processes and decision-makers,
and the way it manages costs.
We remain convinced the law needs changing - it is obvious in order to avoid
the same sort of outcome with other similarly well-prepared applications.
Even the committee said we had produced hugely detailed information - yet it
still fell short of the legal requirement, as the DMC saw it.
Even more farcical, we need a marine consent (which we have been denied) to
go out and get the additional information the DMC considered was required -
how logical is that?  The EPA has tied the process completely up in knots and
created a closed loop.
The process needs to have better communication between the DMC and the
applicant, offering the opportunity to identify concerns and options for
solutions.  It needs to embrace the purpose of the Act and become solution
oriented, rather than focusing on reasons why the project should not occur.
Otherwise what is the point in having such legislation in place - it simply
becomes Clayton's law.
This is not a victory for conservation - it is actually a tragedy for New
Zealand's countryside. The hypocrisy of our opponents is unbelievable,
willing to export our environmental footprint to other countries by
continuing to import polluting products.
96% of New Zealand is under water and it is morally indefensible to not
accept that some development and environmental effects will take place there.
In addition, conservation costs money. The scientific outcomes and the taxes
and royalties from projects like ours will help lay the groundwork and pay
for the surveys that will identify areas of the marine estate most deserving
of conservation.
The fishing industry is essentially entirely environmentally unregulated and
destroys 3000 km2 of new seafloor and re-scrapes 47,000 km2 of already
damaged seafloor every year - vastly more than the 30 km2 of seafloor we
propose to mine every year.  Yet fishing claims we are a greater
environmental threat.
The EPA needs to be neutral, rather than advocating as an environmental
protector without due regard for other considerations, and if the Government
seriously wants to promote development then it needs to speak up about the
potential benefits of the project.
The decision makers must have the right mix of expertise to assess the merits
and risks of marine projects. Our DMC didn't. The DMC needs at least one
scientist who has the mental firepower to understand all the evidence, and at
least one person who understands how risk and uncertainty is managed in the
real world.
New Zealand can become a world leader in marine technology and expertise
worth billions of dollars. Not a single person in the DMC, the EPA, the
NGO's, or any of the opposition see that what is at stake is potentially a
lot more to New Zealand than phosphate. And that is without including the
significant environmental and economic benefits of our product, including low
cadmium, low carbon footprint and low run off into waterways.
Media misinformation
CRP would also like to address some of the more seriously incorrect claims of
fact made in the media over the past week, most particularly in the Sunday
Star Times.
Firstly CRP is not proposing to dredge a "huge swathe" of the seabed.  It is
proposing to mine 30 km2 a year.  This compares with 50,000 km2 the fishing
industry bottom trawls every year. That is a "huge swathe". The total CRP
project mining footprint of 450 km2 for 15 years is only one quarter of 1% of
the Chatham Rise.
Secondly it was never "generally agreed" $169 a tonne is required for the
project to break even. CRP has never stated a break even market price.
However, as the mining cost is roughly the cost of transporting the product
from Morocco, the world price would need to be near zero before we could not
compete in the local market.
Thirdly while New Zealanders might not know much about the 4.1 million km2
Exclusive Economic Zone as a whole, the 19,000 km2 of the Chatham Rise is the
best studied area of the EEZ. This is largely thanks to the work CRP has
undertaken, building on the 63 years of work since phosphate was first
discovered on the Rise in 1952.
Despite what environmentalists might wish for, significant amounts of the
money spent on scientific research is spent by companies seeking to get a
financial return.  While SST writer Rod Oram's claim that $5 million a year
is spent on marine science is rubbish - NIWA's vessel Tangaroa costs an
estimated $20 million a year to operate - these numbers are insignificant
compared with the $100 million spent by CRP and TTR in recent years and the
$70 million in present day terms spent by scientists previously in the CRP
resource area.
The weirdest claim in the SST was this: "The minerals they want for farming
on land are the ones that help make the fishing grounds so fertile.  We need
logical choices. Threatening fishing to further farming is not one."
Firstly, as noted before, the DMC found our proposal does not threaten
fishing.
Secondly there is no fishing in the area we are proposing to mine, which is
why the fishing industry unilaterally surrendered it as a no-fishing zone.
Thirdly there is absolutely no way phosphate helps make fishing grounds
fertile.  The phosphate is bound within the phosphate nodules and cannot
enter the water column.
Fourthly, no fish species have ever been observed eating rock phosphate
nodules.
A couple of commentators have picked up the idea of spatial planning, a
concept we have advocated all along.  CRP's marine consent proposals included
recommendations on how spatial planning could be used to manage the potential
effects on the coral communities.
Marine spatial planning is a big issue for New Zealand. We believe a critical
first step is to review the benthic protection areas enshrined in fisheries
regulations as they don't consider other uses such as minerals.  They could
be modified to achieve the same conservation goals while allowing other uses
of marine space, and not just areas chosen by the fishing industry because
they have no commercial quantities of fish.
Chris Castle +64 21 55 81 85 or [email protected]
End CA:00260802 For:CRP    Type:GENERAL    Time:2015-02-18 14:07:39