BAUXITE Case

Jamaica Bauxite Case (BAUXITE)



CASE NUMBER:131
CASE MNEMONIC:BAUXITE
CASE NAME:Bauxite and Jamaica


A. IDENTIFICATION

1. The Issue
The principal environmental issues facing Jamaica's second largest industry are caustic soda contamination of water supplies, bauxite and alumina dust, and eco-system dislocation. However, the island is so dependent on the export that it is very difficult to stop the practice. Being a limited resource in Jamaica, some day it will. But until then Jamaica needs to find mining techniques that are less harmful to the environment.

2. Description
After Australia and Guinea, Jamaica is the third largest producer of bauxite ore in the world and fourth in the production of alumina; bauxite and alumina accounted for about 75 percent of total exports which find a major market in the United States. Jamaica is an island country, located in the northern Caribbean, approximately 145 km south of Cuba and 160 km west of Haiti, with a population about 2.4 million people in 1992 and a land area of 11,000 sq/km. Jamaica, which is relatively small in size, has an attractive amount of non-renewable mineral resources. Mining has an essential role in the country's foreign exchange earnings (contributing relatively 60 percent towards foreign exchange earnings). A certain amount of care must be taken in the exploitation of these resources because of the direct/indirect impacts which mineral extraction and processing may have on other sectors of the economy and the environment.

Bauxite, Jamaica's main mineral resource, is a vital element of the country's economy. Other mineral resources include gypsum, limestone, marble, silica sand, clay peat, and to a lesser extent, lignite, black sands containing titanium, copper, lead, zinc and phosphates.

Jamaica's bauxite total reserves are estimated at two billion tons. More than one billion tons, enough to last 100 years at current rates of production, are easily accessible. Bauxite mining began in 1952, with an initial output of half a million tons per year and increasing to a maximum output of 15 million tons by 1974. In 1993, bauxite total exports were 11.1 million tons. In 1992, the total "Net Foreign Exchange Inflows" $185 million in 1992.

Jamaica is a member of the International Bauxite Association (IBA), established in 1974, which groups the majority of the world's main producers and has its headquarters in Jamaica. The Jamaican Bauxite Industry is run by several foreign companies and the government. Canada's Alcan, Alcoa and Kaiser of the United States and Hydro Aluminum of Norway are involved in mining and refining (see GEDDES case). The government markets bauxite and alumina, the refined product, and has supply contracts with Picheney of France and Marc Rich, the commodity broker. There are five sites at which the ore is surface-mined, however it is then exported through four separate port facilities. About one third of Jamaica's bauxite is shipped unprocessed by Kaiser Aluminum. The balance is processed locally at four refineries and exported as alumina to North American and European smelters.

Jamaica's alumina capacity is approximately three million tons per year. Thus, approximately one ton of red mud waste or residue will be produced from each ton of alumina. Jamaica's land mass is limited, and therefore cannot accommodate the disposal of such high volumes of waste material. This problem is intensified by the fact that the residue leaves the plant in association with large volumes of weak caustic soda solution.

The major environmental problem caused by the industry is the disposal of the tailings, which form an alkaline mud. The original procedure that was used to dispose of the red mud to pump material into mined-out ore bodies and dyked valleys. However, these "red mud lakes" resulted in the percolation of caustic residues (sodium) into the underground aquifers in local areas. A later approach was to build sealed ponds in which the interior of the ponds was lined with 12-14 inch clay sealant. These ponds, which were 100-120 acres in area, created other problems. One problem was that they were constructed on highly arable lands. Ponds were designed to hold 5-7 years of mud storage. Furthermore, these ponds never dried out after they were full and consequently had to be abandoned. Recent readings obtained from domestic water wells in the vicinity of Jamaican alumina refineries have indicated elevated sodium and PH readings. Also, the escape of caustic soda (which is used to extract alumina from raw bauxite) into the groundwater supply significantly increases sodium concentration of domestic well water mostly in the rural areas. Sodium is associated with a higher incidence of hypertension. As a result of its genetic composition, the Jamaican population is particularly subject to hypertension, which can be aggravated by high levels of sodium.

The environmental impact of Jamaica's bauxite mining symbolizes the majority of mining or heavy industrial operations. Bauxite mining, which is considered as surface mining, is land extensive, noisy and dusty. Mining pits are often interspersed with small rural communities, thereby requiring companies relocate the people and/or to monetarily compensate them. An increasing concern is the loss of habitat for Jamaica's unique plant and animal species.

Also, bauxite mining severely affects the water retention capability of the soil. The Jamaican Mining Act of 1947 requires mines to remove topsoil before mining, and restore it as part of the reclamation process. However, due to the enlargement of the surface area after mining, and the extraction of much bauxite, the soil is less capable of retaining water. Where formerly annual crops were grown, now only tree crops and pasture are feasible, and water reaches the aquifers more quickly. Generally, farmers who reclaim the land receive extension services from these companies. Refineries and port facilities, besdies handling bauxite and alumina, handle an enormous amount of fuel oil, caustic soda, lime, and other chemical inputs. Storage bunkers are situated close to the shore line and are relatively exposed generally resulting in spills occurring at the ports. The refineries are also subject to spills and other incidental releases. One of the major sources of air pollution is oil combustion for power generation and alumina calcining.

Two other environmental impacts of great concern is dust and caustic soda contamination. The particularly small size of both raw bauxite and alumina very often affect areas downwind of mining, transport, calcining, and ship loading operations. "During a visit to ALPART'S port facility economic officials observed a considerable amount of alumina spilled on the pier and clouds of dust being carried downwind from loading equipment." It has been argued that the dust is chemically inert, however it adversely affects the respiratory system, pollutes the residential cisterns, and defaces property. The degradation of Jamaica's delicate coral reefs along its south coast is as a result of alumina spilling during ship loading (see CORAL case).

The urban expansion of the Jamaican population into bauxite deposits areas have resulted in the sterilization of substantial bauxite reserves. It is estimated that about $300 million US dollars worth of bauxite is to be found in the parish of Mandeville, which is located in the west of the island. There has been a steady migration of people from the urban areas to areas in the south of the parish where a substantial high grade bauxite can be found. The Jamaican Housing Authorities is responsible for controlling major housing developments and subdivision of lands. Due to the lack of the necessary funds the Housing Authorities have not been effective in deterring the construction of individual residences on privately-owned bauxite lands. The acquisition of such developed territory is often uneconomic, thereby resulting in the ruination of a substantial amount of bauxite reserves.

In addition, since the 1950's a significant amount of land purchases have been executed, however there still remains a substantial amount of small settlers residing and carrying out subsistence-level farming on bauxite lands. Generally, these individuals are found within very tightly-knit communities and kinship groups. The overwhelming impact of the acquisition of their lands and the process of relocating them into new communities that are yet to be developed very frequently results in the separation of family groups. Attempts have been made to relocate of these individuals onto larger subdivided holdings in close proximity to the established community facilities. However, the voluntary admission of small settlers to temporarily relocate during the period in which their lands is being mined, and to which they are permitted to return once the lands have been rehabilitated is yet another goal to be attained.

The rehabilitation of mined lands is essential for ensuring a healthy environment. The structure of a mined-out pit depends largely on the shape and structure of the ore-body. In that, the pit can vary from being a shallow saucer-shaped basin to a wide, deep hollow with vertical walls. "The shallow basins are graded to a gentle slope ending at the approximate middle of the mined-out area or terraced to that point. Deeper deposits are graded to the toe of the vertical walls and serve as collection ponds for water." Despite the fencing that is secured around these pits, the collection ponds are extremely dangerous. In order to create ponds that can be used and engineered as water reservoirs, synthetic or other form of sealant must be used on the bottoms and sides of these "holes."

The mining companies in Jamaica have a general agreement among themselves which stipulates the general techniques that are to be utilized in rehabilitating bauxite mines of different sizes and shapes. The initial stage of the mining process begins with careful consideration of the rehabilitation process that will be needed later on so that the first 18 inches of top soil is carefully removed and stored for replacement following the depletion of the mine. Jamaica has one of the best records for rehabilitation of mined lands in the world. The establishment of forest, growing vegetables, rearing livestock, cattle and sheep on the mined land have been some of the successful attempts made by companies (Reynolds and Kaiser) to repair the environment.

The Jamaican bauxite companies maintain well-equipped environmental units with staff trained in environmental management. Companies also draw upon the technical resources of parent firms in the US, Canada, and Norway. Relatively old facilities (ranging in age from 21 to 42 years) have been stable. Industry experts project that both crude bauxite output and alumina production will remain steady through 1994, with increases to follow.

The bauxite mining industry creates a significant source of employment. In 1974, over 10,000 people were employed by the industry. In 1984 with a decline in both local and world economies, employment in the mining sector fell to about 7,000. With the growth in the global and local economies, the use of various marketing strategies, increasing interest in Jamaica as a major source of limestone, it is to be expected that future employment in the sector will surpass the levels of prior years.

3. Related Cases
JAMTOUR case
GEDDES case
ONTARIO case
BENIN case
BRAGOLD case
Keyword Clusters
(1): Trade Product = STONE
(2): Bio-geography = TEMPerate
(3): Environmental Problem = HABITat Loss
4. Draft Author: Opal A. McFarlane

B. LEGAL Clusters

5. Discourse and Status: AGReement and INPROGress

6. Forum and Scope: JAMAICA and UNILATeral

7. Decision Breadth: 1

8. Legal Standing: LAW
There are sixteen Acts which regulate or influence mining activities in Jamaica. The provisions of the most important three are as follows.
(a) The Bauxite and Alumina Industries Encouragement Act (1950/1967/1980) granted import concessions to recognized bauxite producers. These concessions include exemption from custom duties, as well as excise, tonnage and stamp duty.
(b) The Bauxite and Alumina Special Provisions Act (1977/1982). This act made it possible to credit income tax against the production levy; the tax is payable in the United States.
(c) The Bauxite Production levy Act (1974) imposed a production tax on all laterites (e.g. bauxite).
C. GEOGRAPHIC FILTERS

9. Geographic Locations
a. Geographic Domain : North America [NAMER]
b. Geographic Site : CARIBbean
c. Geographic Impact : JAMAICA
10. Sub-national Factors: NO

11. Type of Habitat: TEMP

D. TRADE Clusters

12. Type of Measure: REGSTD
The recovery in the Bauxite Industry since 1985, when production was one-half of 1980, the result of changes between the Jamaican government and the mining and refining companies to a controversial production levy. The levy imposed unilaterally by the government in 1973, saw earnings from the industry moving from $23 million to $170 million in 1974. It was based on a formula which indexed the island's earnings to the average realized market price for aluminum ingot. The companies argued that the increased payments made Jamaican bauxite uncompetitive. With a slack market in the 1980s, the companies reduced mining and refining in the island. In 1987, the government made concessions on the levy agreed after negotiations with the companies. The levy rate was cut from 6 per cent, and the companies agreed to pay taxes on income of their Jamaican operations at the corporate rate of 33.3 per cent.

In addition to the bauxite levy and corporate income tax, the government receives a royalty of $0.50 per ton of bauxite mined. The funds generated are for administration of mining activities.

13. Direct vs. Indirect Impacts: DIRect

14. Relation of Measure to Impact
a. Directly Related : YES BAUXite
b. Indirectly Related : YES ALUMinum
c. Not Related : NO
d. Process Related : YES Pollution Land [POLL]
15. Trade Product Identification: MINEral
The trade product involved here is alumina that used to manufacture pots, various types of cans, and many other products.

16. Economic Data
The Bauxite-Alumina sector brought approximately $559 million dollars into the county last year. The biggest plant, Alumina Partners of Jamaica (Alpart), is undergoing an expansion and modernization program and is aiming to produce 1.45 million tons of alumina a year from an average 1.13 million tons/year over the past four years. In 1993, Jamaica's bauxite production suffered from poor market conditions; 11.3 million tons were produced, 1 per cent less than the previous year.

Jamalco, a refinery jointly owned by the Jamaican government and the Aluminum Company of America, is boosting capacity from 700,000 tons/year to one million tons at a cost of $60 million dollars. The plant's rated capacity was increased later to 1.5 tons a year. Two refineries owned by Alcan of Canada are also being upgraded to lift total alumina output to 1.5 million tons a year from the present 1.1 million tons (see ONTARIO case). The largest refinery, owned by Alumina Partners of Jamaica (which is in turn owned by Kaiser and Hydro Aluminum), will increase capacity to 1.5 million tons as a result of a $200 million upgrade (see Tables 131-1 and 131-2).

                           Table 131-1

          Bauxite and Alumina Production and Exports
                        (million of tons)

          1987 1988 1989 1990 1991 1992

Baux/Prod 7.9  7.3  9.7  10.9 11.5 11.3
Alum/Prod na   na   2.2  2.9  3.0  2.9
Baux/Exp  3.7  3.5  4.2  4.2  4.3  na
Alum/Exp  1.5  1.5  2.1  2.9  na   na

Source: Jamaica Bauxite Institute 

                           Table 131-2

          Bauxite and Alumina Exports (US $ million)

          1988      1989      1990      1991      1992

Bauxite   104.8     125.6     102.9     112.9     88.8
Alumina   312.3     431.9     625.2     543.0     471.1
Total     417.1     557.5     728.1     655.9     559.9
Source: Planning Institute of Jamaica


The bauxite and alumina industry employs more than 4,000 persons and is an important source of foreign exchange. The contribution to government revenues by way of royalty, taxes and levy amounted to about $625 million in 1992. Earnings have declined steadily from $700 million in 1991 and $725 million in 1990 as aluminum prices have fallen.

17. Impact of Measure on Trade Competitiveness: MEDium

18. Industry Sector: STONE

19. Exporters and Importers: JAMAICA and MANY

V. ENVIRONMENT Clusters

20. Environmental Problem Type: HABITat Loss

21. Name, Type, and Diversity of Species
Name: Many
Species: Many
Diversity: (Jamaica)
Bauxite mining has impacts upon the production of sugar cane, banana and citrus trees, coffee and cocoa production in rural areas where it is mined. Even though major land purchases (where the bauxite is found) were carried out in the late 1950s and onwards, there is still a very large number of small settlers residing and carrying out subsistence-level farming on bauxite lands. The relocation of these families often result in pain and hardship for these individuals.

22. Resource Impact and Effect: HIGH and REGULatory

23. Urgency and Lifetime: Low and 100s of years
Even though bauxite mining is responsible for the removal of sugar cane, coffee, cocoa and citrus and banana trees from the environment, their growth however is not adversely threatened. Constant relocation of families results in these individuals adjusting to new and strange surroundings often without community facility. In addition, extended families stand the risk of being dismantled when the areas into which they are relocated is unable the accommodate them all.

24. Substitutes: Recycling

VI. OTHER Factors

25. Culture: NO

26. Trans-boundary: NO

27. Rights: YES
The mining causes a variety of damage to people and to the environment, including tourists (see JAMTOUR case).

28. Relevant Literature

Central Intelligence Agency, The World Factbook --1994, February
     16, 1994.
Government of Jamaica.  Ministry of Agriculture, Natural    
Resources Conservation Division, Jamaica Country  Environmental
Profile.  September, 1987.
Harben, Peter W.  "Mining Annual Review."  The Mining Journal,
     July, 1994.
"IBC International Country Risk Guide", Jamaica, August, 1993.
Jamaica Country Report, Walden Publishing Ltd.,
      January 30, 1995 
United States Department of Commerce. U.S. Embassy Reports from
     Jamaica: R121715Z (Unclassified).  October, 1993.
United States Department of Commerce. U.S. Embassy Reports from 
     Jamaica: R251559Z (Unclassified).  March, 1994.
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