More Setbacks for ArcelorMittal’s 3rd Amended MDA

It might have been considered a foregone conclusion that the third amendment of the ArcelorMittal Liberia (AML) concession agreement would have sailed through the Senate on the strength of new recommendations from the House of Representatives. But what transpired on Tuesday, February 8 in the Senate chamber could set the deal back several weeks, after a report read by Grand Cape Mount County Senator H. Varney Sherman recommended that the MDA be circled back to the House of Representatives for concurrence due to additional recommendations. 

The House had earlier passed the Third Amended MDA, with its own set of recommendations, and forwarded the same to the Senate for concurrence. Key among the House’s recommendations was to strip from the AML revised MDA any exclusive right by the concessionaire to the Yekepa to Buchanan rail and port infrastructure. 

The Senate did concur with the Lower House’s recommendations, especially those regarding third party access to Liberia’s rail and port infrastructure. According to the Senate committee report, the agreement as structured does not give the kind of leverage that the government should have.

“We perceive the possibility that Buchanan -- and may I say the entire Grand Bassa County and Nimba County because of these two infrastructures -- could possibly one day become the bedrock of our economy,” Sen. Sherman noted. “If we allow the railway and the port to be accessible to third parties, tremendous financial and economic benefits will be derived therefrom.”

However, on Tuesday, the report, read by Senator Sherman, chairman of the Committee on Judiciary and a ranking member on the committees on Concessions and Investment, and on Lands, Mines, Energy, Environment and Natural Resources, suggested that the additional recommendations from its own perusal of the third Amendment to the AML Agreement, which are quite separate from those raised by the Lower House, required the Lower House’s concurrence. 

In its own recommendations the Senate Joint Committee report expressed dismay over unfulfilled promises on the part of the concessionaire with regard to infrastructure to serve the communities in the project-affected counties. 

“We don’t think that ArcelorMittal has complied with the expressed language of the agreement or with the intent of the parties,” Senator Sherman told the Plenary, referring to the 2005 MDA, with specific reference to rehabilitation of infrastructure -- housing, health and education facilities and other infrastructures such as electric power, water and sanitation in the concession area. “And this has caused tremendous inconvenience and perhaps suffering of the people of both Grand Bassa and Nimba Counties.” 

Senator Sherman, described neglect by ArcelorMittal as “very disheartening”. 

In a rather exhaustive report, the Senator highlighted that even though compliance was a challenge on the part of the executive branch of government, those agencies responsible needed to get to work and fulfill their respective mandates. This was mainly directed at the National Bureau of Concessions, established for the purpose and objective of monitoring the compliance of concessionaires with the terms of their agreements. “The Bureau of Concessions,” Sherman said, “has complained that we have not provided enough money to it to conduct the level of monitoring that is necessary to ensure compliance. 

In response, Grand Bassa County Senator Nyonblee Karnga-Lawrence stressed that those agencies tasked with monitoring compliance be strengthened through adequate budgetary support to make them More effective. 

“How do we enforce compliance,” she asked. “ArcelorMittal is one of the biggest concessions we have in the country, but we have serious issues because of non-compliance. If we have ministries and agencies responsible for compliance, we need to support them in order to get results.”

She recalled how, during recent budget hearings, the Ministry of Mines and Energy raised US$128 million as contribution to national revenue. According to her, the same ministry requested an additional US$5 million budgetary allotment, projecting that they could double their contribution. “So to give them US$5 million in exchange for an additional US$100 million, we refused to do that. So you cannot get compliance if those responsible cannot be adequately supported.” 

Below is the full text of the report of the joint committee, read by Senator Sherman: 

Our first issue is the issue of the disputed area. Our Investigation shows, notwithstanding the fact the MDA provides the metes and bounds of the area ceded to the concessionaire, there have been encroachments some of those approved of by our government. This is wrong. The explanation that the concessionaire did not exercise its right to explore those areas or to mine those areas is not enough to cause the government to unilaterally allow somebody else to begin to mine or explore in areas that have been previously ceded to the concessionaire. It is our recommendation that to avoid the concessionaire taking us to arbitration tomorrow because a dispute has arisen, these encroachments should be stopped, or the parties, i.e. the concessionaire and the government, should sit and renegotiate the area that is finally ceded to the concessionaire.

The 2005 MDA provides that the concessionaire has the right to explore not only for iron ore, but also for associated minerals in the concession area. Now, we are concerned that AML, the concessionaire, has limited itself to exploration only for iron ore; and perhaps limited itself to just a small part of what has been vetted. Our recommendation is that AML should be compelled, in keeping with our exploration regulation, to provide to the Ministry of Mines and Energy specific exploration plans with timelines and it should agree that those areas that it is not interested in should be relinquished. And by relinquishing those areas, the government can then allow other interested parties to conduct exploration in those areas.

Our joint committee, your concern about the issue of rehabilitation of infrastructure -- housing, health and education facilities and other infrastructures such as electric power, water and sanitation and more -- we don't think that ArcelorMittal has complied with the expressed language of the agreement or with the intent of the parties. And this has caused tremendous inconvenience and perhaps suffering of the people of both Grand Bassa and Nimba Counties.

We are concerned that ArcelorMittal needs to pay attention to these issues. Our interaction with ArcelorMittal and interactions with the stakeholders for the document to be produced is a matrix attached to this report, entitled: ArcelorMittal Liberia's Responses to Stakeholders' Issues and Grievances in Nimba, Bong and Grand Bassa Counties. And those responses are satisfactory.

We recommend that the Government of Liberia pursues the implementation of the concerns ...

You might be aware that by our law -- law enacted by this body -- we set up a Bureau of Concessions with the principal purpose and objective of monitoring the compliance of concessionaires with the terms of their agreements. The Bureau of Concessions has complained that we have not provided enough money to it to conduct the level of monitoring that is necessary to ensure compliance. Notwithstanding, it is our recommendation that the government, through this Bureau, should conduct extensive monitoring to ensure that these infrastructures are rehabilitated. And if I may deviate a little bit, it is our understanding that the erstwhile LAMCO JV operating company left more than a thousand residential buildings.

After all these years, ArcelorMittal has rehabilitated less than fifteen percent of those buildings. Trees are now growing in some of those buildings. It's very disheartening.

So, Madam President of the Senate, distinguished colleagues, it is our recommendation that specific details should be required from ArcelorMittal on the rehabilitation of these infrastructures in the area of education, housing, employment, for the sustainable livelihood and other benefits for the affected communities. And there should be timelines attached to those.

Our 4th recommendation, found on page 7 of this report, Third Party Access to Rail and Port Infrastructure, as much as we ... that the direct benefits to the affected communities is very important, in terms of the economy of this country and the future of our patrimony, this issue -- third party access to rail and port infrastructure -- is paramount.

Madam Vice President and distinguished colleagues, we perceive the possibility that Buchanan -- and may I say the entire Grand Bassa County and Nimba County because of these two infrastructures -- could possibly one day become the bedrock of our economy. If we allow the railway and the port to be accessible to third parties, tremendous financial and economic benefits will be derived therefrom. Those of us who are familiar with these processes know that as far back as the years of President Tolbert, there was interest in the iron ore deposits of our sister Republic of Guinea. But Guinea has always insisted that it will not allow that rich deposit of iron ore on their side of the boundary to be developed unless a rail is constructed from the iron ore deposit to a port in Conakry and a new port is constructed, which would cost in excess of 10 billion USD. Anybody who has been interested in the Guinean deposit has always proposed that the rail in Liberia be used and the Port of Buchanan be used. Can you imagine that if there is third-party access and those third parties are paying to the Liberian government something for every ton of iron ore that passes on our rail, that goes through our port, the amount of money that will be derived from that? Can we imagine the possibility that mines from Ivory Coast might also want that?

Madam President and Colleagues, those of us who know about this --- in fact, we have had some investors come and talk to us about their interest in third-party access to the rail and the port. The agreement as structured doesn't give the kind of leverage that we believe the government should have, even if it means when there is a dispute, that dispute can be submitted to a technical committee to ensure that third parties would have access to the rail and the port to the benefit of the Republic of Liberia.

So we recommend that, during the implementation phase, any activities enshrined in this amendment the executive branch of our government should ensure that third parties or any other party which wants to have access to the rail and port should have unhindered access and should pay revenue that would come to the Republic of Liberia.

Distinguished colleagues, we looked at the fiscal terms of the agreement and we were concerned that in order to attract the additional investment that the concessionaire has proposed to make substantial waivers and incentives are being given to the concessionaire. We do have the intent to challenge the experts in the executive branch of government, who assessed that these waivers --- even though [would mean] that money would be taken from our pockets today --- justified the investment.

But we wish to propose and recommend that the concessionaire, ArcelorMittal, be redrafted to a lump sum additional amount of US$25 million, to be deposited in our consolidated fund, portion of which should be allocated to the directly-affected communities and apportioned to our support for our national budget. That's item #5.

Item #6: Again, we are concerned about the implementation of various provisions of the MDA, and what we determine to be the failure or neglect of the administrative agencies to regularly monitor compliance and to ensure that ArcelorMittal complies with those basic terms of the agreement or the reasonable expectations of the people of Liberia. For example, this agreement anticipates --- and our people expect --- that local businesses would be prioritized for the purpose of supplying goods and services to the mining operation. These concession agreements also anticipate that there will be corporate and entrepreneurial linkages to the mining operation. These have been absolutely neglected by the concessionaire. We believe that it is incumbent on the administrative agencies to ensure that ArcelorMittal is not another LAMCO JV operating company.

I will tell you from my personal experience when LAMCO JV Operating Company was closing down in this country. I happened to be a member, legal advisor, to the government delegation on the cessation of this business. And one of the things we identified was that LAMCO JV Operating Company was closing down and was leaving nothing --- absolutely positively nothing to ensure that economic activity would continue in that area upon the cessation of their business. We are asking, colleagues, that that doesn't happen with ArcelorMittal, after its many years of exploiting our iron ore, that it leaves here with no other economic activity, that our people go back to what -- subsistence farming.

These can only be done when our administrative agencies ensure that there are entrepreneurial linkages to the mining operations that take place.

We are also concerned about the environmental impact of these mining operations. To the best of our knowledge, there hasn't been periodic investigation and environmental investigation by our Environmental Protection Agency. We are recommending that there should be periodic environmental audits conducted and their reports published. Maybe we can even put a timeline --- every year. We should know what is happening in those areas of our country and how it impacts our people's lives. We are concerned that the Liberianization policy is not satisfactorily implemented by ArcelorMittal. We think there are sufficiently qualified Liberians, both in the technical area and in the administrative area, to be employed by ArcelorMittal, especially those whose origins are from where we call the three directly-affected counties. That's Nimba, Grand Bassa and Bong. ArcelorMittal should be required to publish all job vacancies; in fact, to publish every job that is available there, and make them accessible to the Liberian people --- again to the three directly-affected counties.

And unless our director-general for the Bureau of Concessions and our Minister of Labor are proactive, our experience has been and is that ArcelorMittal has neglected its obligation to employ skilled Liberians living in Liberia and some of them [who] go out of Liberia are available to come to work for our country and for this company.

We discovered that there is no communication mechanism between the company and the directly-affected communities. We are even concerned that there may not even be proper communication between the company and our government. We recommend that more effective communication mechanisms be set up. Our colleagues from these three directly-affected counties have complained that this company does not pay much attention to them.

We did not investigate the details of what I am going to talk about, but those of you who have your beard as gray as mine, know that there was a time that the administrative manager of LAMCO JV Operating Company was a Liberian citizen, appointed by the Government of Liberia. So was Bong Mines. And the purpose was that the Liberian people's eyes would be there to ensure that the interests of Liberia and the Liberian people are properly protected and secure.

We are asking that we revert to something like that. The last administrative manager of Bong Mines, I think, was Morgan. And I think, for LAMCO.

We think we need that in ArcelorMittal. And what we are recommending, colleagues, for ArcelorMittal, we are recommending for all other mining concessions. These concerns should be taken into account so that we have a better communication mechanism between the company and the affected communities, and between the companies and the Government of Liberia.

The last concern I will raise is the management of the social development funds allocated to the three affected counties. It is our considered opinion that a new regime and a much more effective strategy ought to be adopted. When our special committee went around investigating, the conclusion was that the individual people are not feeling the impact of these social development funds. So we call on our government to do something better so that the communities --- the affected counties and the people in those affected counties, will feel the impact of the social development funds.

Finally --- and this will be a tough one --- for every one of these concession agreements, like in most other countries, a signature fee is paid. Our experience has been that the entire signature fee goes into the coffers of the Government of Liberia. We are suggesting that our government should be sufficiently gracious to give a portion of the signature fees directly to the affected counties. The signature fee, instead of everything going into the consolidated fund, a percentage should be given directly to the affected counties. We did not put in this report what percentage of this signature fee should be. Thus, in my own opinion, something like 50 percent will not be unreasonable and then divided between the directly-affected counties.

We ask our colleagues, given the time that we spent working on this Mineral Development Agreement, the extensiveness of our report, the success of our report, that you will be good enough to approve it by your vote. And we will engage our colleagues in the Lower House to concur with us as we go forward. Thank you Madam, thank you colleagues.