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Viewing cable 06LIMA2230, GOP APPROVES DEFERMENT DOE RUN/LA OROYA CLEANUP

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Reference ID Created Released Classification Origin
06LIMA2230 2006-06-05 21:40 2011-08-25 00:00 UNCLASSIFIED//FOR OFFICIAL USE ONLY Embassy Lima
VZCZCXYZ0033
RR RUEHWEB

DE RUEHPE #2230/01 1562140
ZNR UUUUU ZZH
R 052140Z JUN 06
FM AMEMBASSY LIMA
TO RUEHC/SECSTATE WASHDC 0855
INFO RUCPDOC/DEPT OF COMMERCE WASHINGTON DC
RUEATRS/DEPT OF TREASURY WASHDC
RUEHBO/AMEMBASSY BOGOTA 3509
RUEHCV/AMEMBASSY CARACAS 9570
RUEHLP/AMEMBASSY LA PAZ JUN QUITO 0435
RUEHSG/AMEMBASSY SANTIAGO 0617
RUEHBU/AMEMBASSY BUENOS AIRES 2449
UNCLAS LIMA 002230 
 
SIPDIS 
 
STATE FOR WHA/AND, WHA/EPSC AND EB/IFD/OMA 
STATE PASS USTR (BHARMAN) 
COMMERCE FOR 4331/MAC/WH/MCAMERON 
DEPT PASS TO INT/USGS/RESTON FOR DMENZIE/AGURMENDI 
 
SENSITIVE 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: SENV ECON EMIN EINV ETRD SOCI PGOV PE
SUBJECT: GOP APPROVES DEFERMENT DOE RUN/LA OROYA CLEANUP 
PLAN 
 
REF: LIMA 953 
 
1.  (SBU) Summary:  On May 29, the Ministry of Energy and 
Mines (MEM) granted final approval, but with conditions, to 
Doe Run Peru's extension request for its sulfur dioxide 
(SO2) environmental cleanup plan at the La Oroya smelter. 
Doe Run will have three more years to complete three SO2 
treatment plants, but it will have to post a $28.6 million 
bond.  While Doe Run is not happy with additional financial 
requirements, the positive decision puts to rest a highly 
politicized technical request for the U.S. firm. 
End Summary. 
 
2. (U) On May 29, 2006, Minister of Energy and Mines (MEM) 
Glodomiro Sanchez approved Doe Run Peru's request to extend 
the compliance date for meeting sulfur dioxide (SO2) 
emissions standards at the La Oroya smelter (Reftel). 
Under the revised Environmental Compliance Plan (PAMA), Doe 
Run has until October 2009 to complete construction of 
three new sulfuric acid plants at its La Oroya complex, 
located 150 kilometers northeast of Lima.  According to Doe 
Run's plans, the first plant -- a refurbished existing 
facility -- should be completed by end-2006.  The other two 
plants will be new, with refurbishment and construction of 
one of the new plants already under way.   As part of the 
MEM's resolution, Doe Run Peru will have to post a 
performance bond of just over $28.6 million, 20 percent of 
the estimated project cost. 
 
3. (SBU) Doe Run and MEM officials informed the Ambassador 
and Emboffs that the final MEM decision was the product of 
lengthy negotiations.  The MEM scaled back its  remediation 
requests in light of high cost.  Over the past few months, 
Doe Run responded to 90 MEM "clarifications" to its initial 
extension request, and 23 additional clarifications to Doe 
Run's responses.  World Bank-affiliated outside experts 
were able to moderate some of the MEM's additional 
requests. 
 
4.  (SBU) The decision imposes financial conditions on Doe 
Run, however, that may be difficult for the company to 
meet.  Doe Run has to post a 20 percent bond to cover a new 
reactor (furnace) as well as the acid plants.  Doe Run is 
building the reactor for business efficiency reasons, not 
as a PAMA environmental requirement.  Therefore, the 
company has taken the position that the reactor cost should 
not be a part of the bond.  The additional bond cost could 
force Doe Run to require salary deferment or other labor 
concessions that would be unpopular; so far the La Oroya 
labor force and the townspeople who indirectly depend on 
the Doe Run complex have been fervent supporters of the 
PAMA extension request, despite NGO criticism.  MEM also 
requires that Doe Run set aside funds at the beginning of a 
given month to fund construction for that month (as opposed 
to paying expenses as they accrue).  (Note: There appears 
to be some discrepancy over whether last minute 
negotiations produced a true meeting of the minds as 
reflected in the MEM announcement; in any event, Doe Run 
and the MEM will continue implementation talks that will 
refine their agreement.  End Note.) 
 
5.  (SBU) Doe Run's application to amend its PAMA referred 
only to the sulfuric acid plants project, as the other 
components of its original PAMA remain unchanged.  These 
include meeting local standards on heavy metals emissions 
by the end of 2006 (particularly lead), water quality, 
industrial effluents and sewage.  (Note: High lead 
emissions, characteristic of the high-energy smelting 
process, have been a problem at the La Oroya site since its 
startup in 1923.  Doe Run acquired the complex in 1997, and 
NGOs have focused on the health effects of lead emissions 
ever since.  End Note.) 
 
6.  (SBU) The refurbished zinc roasting plant will more 
efficiently capture sulfur emissions and convert them to 
sulfuric acid, which can either be more safely disposed of 
or sold.  The two new plants will convert sulfur emissions 
from copper smelting operations into sulfuric acid.  Heavy 
 
metal emissions are already extensively treated. 
 
7.  (SBU) Comment: While Doe Run is not pleased with the 
increased financial burdens, the MEM's approval of the PAMA 
request puts to rest one of Peru's high profile 
environmental issues.  NGO complaints have centered on the 
perception that Doe Run has not done enough to reduce heavy 
metal emission.  They had urged the MEM to deny the PAMA 
request for an extension of sulfur treatment plans. 
Presidential candidate Ollanta Humala has mentioned Doe Run 
(without seeming to know the details of the PAMA request) 
as an example of the need for Peru to require foreign 
mining companies to be more responsible. 
 
8.  (SBU) Doe Run had been concerned that the intense media 
focus on Doe Run (including by commentators who may desire 
to work for the MEM in the next administration) would make 
MEM Minister Sanchez punt the decision into the next 
administration.  There is a sound logic to granting the 
PAMA request, as the three-year extension will allow Doe 
Run to spend more money and build state of the art 
treatment facilities.  The MEM Minister's timing in 
announcing his decision was probably wise; so far there has 
been little media reaction to the decision, as the national 
media is focused on the presidential election on June 4. 
End Comment. 
 
STRUBLE