President’s visit in freezing winter brings warmth to people of the Gobi

O. Khostsetseg accompanied Ts. Elbegdorj on a visit to the mining areas of the Gobi and saw how he was moved by herders’ grievances. It is now for both mining and Government officials to ensure his promises to the local people are kept.

Suddenly as President Ts. Elbegdorj looked out, to the distant horizon, he seemed lost in his thoughts for a while. Until then, he had been asking the MPs with him and the senior company executives some hard, even fierce questions, but now he looked mellowed. I could only guess that the softening came because the wide steppe of the Gobi and the Mount Khan Javkhlant had whispered something to him. Nature does deliversilent messages to a sympathetic human heart. The ancient Mount Khan Javkhlant might have whispered some little word of great value… the locals do believe that the blue sky stretched above the Gobi desert brings wisdom and comfort to visitors.

It is possible to ignore or sidestep uncomfortable questions asked by reporters, but the ministers and the field directors could not do this when the questions were from none other than the President. His blunt and incisive questions reminded everybody that Ts.Elbegdorj’s original profession was journalism and long years of public life had not rusted his skills.

The meeting was being held at the central office of Energy Resources LLC.When J.Odjargal, chairman of the board, spoke of the coal market and prices, the President sought several clarifications. Odjargal had said that the total cost of transporting processed coal from Ukhaakhudag to Nakhodka port is USD168, and the President wanted to know if that made the end price competitive. “The main reason why Mongolia offers coal at a much lower price, especially than our competitor Australia, is the transportation cost,” said Odjargal. He added, “Mongolia is landlocked, and has poor infrastructure. Because of this, we have to sell the coal atthe mine site at a ridiculously low price. If we build a railway to Russia and reach a fairtransport tariff agreement with them, our coal will reach other Asian countries and even the European market, at higher prices in keeping with those in the market.”
So far, Energy Resources LLC has delivered 48 trains of coal to Germany’s Thyssen Krupp Co’s branch in Poland through Choir port, and 20,000 tons to Japan’s Sumitomo Metals. Mongolian coal will reach Mesco Steel Group in India in February 2012.

The President inquired about the status of negotiation with the Government of Russia about a 60% reduction of the tax on coal transport. Minister of Mineral Resources and Energy D.Zorigt replied, “The core of the Russian stance is thatthe talks on tax reduction will make progress only if Russia becomes one of the major investors at Baruun Tsankhi mine.” In the present political situation in Mongolia, it is clear that there will be no decision on investment in Tavan Tolgoi any timesoon.Since agreement on Baruun Tsankhi and railway taxation are connected, there will not be much profit in exporting coal to Europe at present.

The President asked the Energy Resources leadership to explain the stability agreement mentioned by Kh.Battulga at the DP’s National Advisory Committee meeting some time ago. The issue created sensation. J.Odjargal replied, “According to the Mineral Law, if a company invests more than USD300 million, it can ask for an investment agreement valid for up to 30 years. What we want is that the present tax regime should not become more restrictive. We have begun construction work on a huge scale, and have had to take large loans for this. All we are asking for is a stable tax situation so that we can continue our normal operation. We are not looking for any kind of preference or favour.” He firmlydenied that the company was seeking a 70-year agreement. The President turned to the accompanying team of MPs to express his disappointment. “When a foreign company comes in, we adjust our law for them, offer easy terms for an investment agreement, and reduce the tax. But when a national company makes a investment and asks for a legitimate agreement, we demur,” he said and wondered, “Can our nation be like this?” The MPs kept quiet.

The commonest and gest issue for companies that transport coal from Tavan Tolgoi is infrastructure. They all agree that a railway needs to be built as soon as possible. The President wondered aloud why there is no progress on this issue, even after the National Security Council has given clear directions.

Solving the Oyu Tolgoi power issue

The President showed keen interest in the issue of electricityat Oyu Tolgoi. The company representatives explained that present construction work was done with 20 MW electricity, and they plan to draw power from China in the near future. The President inquired why they are asking for power from China when the agreement stipulates that power would be produced within the country. Minister D.Zorigt then explained, “The Oyu Tolgoi agreement states that a power plant must be built within four years of first production. The work will proceed quickly once the Government receives the technical and economic evaluation report on the Oyu Tolgoi power plant.”

Cameron McRae, Chief Executive Officer of Oyu Tolgoi, said, “We shall import 300 MW from China. The plant to be built in Mongolia will generate 450 MW. We shall then provide electricity to local residents. China has agreed to sell power only if we reach an agreement on copper supply.”

The President’s questions covered a wide range, such as the bonus amounts paid to the project leadership, how the company was meeting its social responsibility and the openness of the supply tenders. He felt the bonus amount was too high and asked the Minister of Mineral Resources to look into the matter.

We need water, not tugrugs

Gobi residents are furious. On 13 January, people of Khanbogd and Tsogttsetsii soumsshowed their displeasure byindefinitely closing down the road by which coal is transported to Gashuunsukhait. They were protesting against destruction of the pastureland and other forms of environmental damage resulting from mining. As a result, the President’s meeting with them was charged with high emotion. The people opened up their disappointed heart and made myriad complaints. The general impression that the two soums are developing dramatically appeared quite misleading. The reality is that that some issues such as electricity and drinking water have been solved thanks to these projects, but at a heavy cost to the environment.

Drinking water is now more easily available but herders complain that the water level has gone down drastically. If this is what happens when exploration, construction and production are just beginning, they wonder what lies in store after20 to 30 years of extensive mining. The already scarce water might disappear completely. They made it clear enough water to drink was much more important to them than MNT21,000 or even MNT70,000. Project representatives explained how they are spending money to identify drinking water resources, but their confidence that these will be found was not widely shared by the residents.

Indeed, there was outrage when the Director of the Water Authority sought to allay misgivings by making some statements of reassurance. The residents bluntly told him that they had had enoughof authorities forgetting when they return to base all promises they made at meetings with the people. The company executives could not give any specific answers to how the water issue was to be tackled. They repeated they were studying the matter with urgent concernbut there was no mention of possible other solutions such as using surface water or snow and rainwater. It was strange that the State representatives did not say a word about the Orkhon Gobi project Saudi Arabia built a pipeline and a purifying system to use water from the Red Sea at a total cost of USD425 million and the Orkhon Gobi project could be implemented at the same cost but with less work. There has been no progress on this project.

I have seen at the Maiga water pool in Ukhaakhudag that it is possible to keep the groundwater without letting it be absorbed in the soil or evaporate. It is thus possible to accumulate surface water in this kind of a pool and then put it to use. However, whether we use groundwater or surface water, the main thing is to consider, carefully and beforehand,the possible environmental consequences, both short- and long-term. We cannot put any price to water. Using groundwater without thinking of the future, caring only for lower expenses, is not a step of wisdom.The President remindedOT representatives that they must keep in close touch with local residents and take them into confidenceduringall phases of the work leading tostart of production and also thereafter. It was decided that company officials will sit with local people on the 20th of every month to discuss issues that concern them and to explain how pending issues have been resolved.  

The clean fresh air of the Gobi had by now cleaned our urban lungs and a lighter and unpolluted chest made us all feel fresh and good. In Ulaanbaatar, it is worsening air pollution that causesseveral types of respiratory diseases, while in the countryside, the danger to the environment is from mining activities and the residents complain about the depletion of water and loss of pastureland. There are few allusions to this in officialinformation on how the economy is growing rapidly. It has become common to call our country MINEGOLIA to indicate that Mongolia is full of mineral treasures. How their exploitation will impact us largely depend on our country’s policy.

Residents of Khanbogd soum, which is close to Oyu Tolgoi, the hub of miningoperations, constantly grieve that there has been no benefit for them at all. People in neighbouring soums are also raising their voice against the enormous dust clouds raised by the construction activities and the loss of water and pastureland. The reputation of the mining industry in Mongolia is very much mixed.

Keeping the nation’s lungs healthy

We all accept that production at Oyu Tolgoi and Tavan Tolgoi will rapidly boost the Mongolian economy in the next few years. Yet up till today, no clear decisions have been taken on how the deposits will be put into commercial circulation. If we think of these deposits in the south Gobi as the ‘lungs’ of our economy, we must make sure the right decisions are taken to keep them healthy.  Sustainable development is not possible at the cost of nature and the environment. The demands and complaints of local residents are mostly legitimate and addressing them should not be difficult if the political will is there.

Many people wonder if herders in the area have a genuine grievance or if their avowal of concern for the environment is just an attempt to get money from the mining companies.

During the President’s meeting, when the locals were vocal, there were some who sniggered that old men wearing sheepskin deel and red cheeked countryside women were now trying to influence investment agreements and State policy. Such unsavoury comments ignore the fact that these locals have never complained about their harsh and generally unrewarding life, and have kept and protected the environment for their own and for our benefit. Having been nurtured by the land, they have all the right to be concerned at the changes they face and to demand a proper reply to their worries about the future. The responsibility to allay their fears lies with both the companies that are digging out the treasures of their land and Government officials who take decisions that may prove central to the survival of their lifestyle. I heard
Umnugovi residents bitterly condemn people in power and authority“who took no notice of us when we lived under candlelight for years but regularly remember us whenever an election approaches. They promise great things, expressing sympathies with our complaints, and forget all about them when the election is over”.

They feel certain the President’s promises will not fall by the wayside. We who saw how clear and determined Ts.Elbegdorj was when issuing instructions to ministers and officials, feel certain his soul had communed with the spirit of Mount Khan Javkhlant.