Samarco dam disaster cumulative damages effects

Samarco dam disaster cumulative damages effects

Oct 5th, 2016

We have read a great number of articles related to the true cost of the failure of Samarco dam. However, only recently we saw the Samarco dam disaster cumulative damages effects actually detailed (see below). The dam failed in November 2015, killing at least 19 people, making 700 people homeless, and polluting hundreds of miles of Rio Doce river, all the way to the Atlantic Ocean.

In its annual report, just filed last week, BHP Billiton detailed what the true potential costs might be and the list goes, at this time, as follows:

  • $2.3 billion in civil public actions filed by state prosecutors in Minas Gerais
  • $3.1 billion in damages filed by public defenders in Minas Gerais
  • $620 million in damages filed by state prosecutors in Espirito Santo
  • $6.2 billion in a public civil claim
  • $43 billion for reparations, compensation, and “moral damages” in relation to the Samarco dam failure

Samarco dam disaster cumulative damages effects

Oftentimes we see FMEAs performed where the cost of consequences associated to each risks scenario are described with a single value. Furthermore it is common practice methodology (certainly not a recommended practice) to split the consequences in categories, for example reputational, environmental, cost and number of lives lost, then to ask the risk assessor to select the worst and use that “single-value” for the determination of the risk. Over the years we have shown to many of our clients why this approach is bogus, and always take care of explaining the reasons in our courses. The Samarco dam failure gives a perfect example.

Samarco dam disaster cumulative damages effects

Cost of consequences associated to each risks scenario have a single value

Costs are additive once an hazard hits or a scenario occurs. Consequences are an additive function of at least the following costs:

  • direct & indirect,
  • health and safety,
  • environmental,
  • image and reputation,
  • legal, etc.

As we can see in the Samarco list, the legal, the reparations (moral damages), etc.. have now indeed been added. BP are learning the lesson in the hard way with their 62 billions additive estimate for the Gulf disaster.

This is the reason why when we perform any risk assessment, even as simple as this one, we use the consequences category listed above in an additive way!

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Category: Consequences, Probabilities, Probability Impact Graphs, Risk analysis, Risk management

2 responses to “Samarco dam disaster cumulative damages effects”

  1. This assumes that the greater the severity the less frequent the event which is true only of random events.( the normal sphere of insureable losses).not tailings dam failures which are virtually all man made and preventable as the case at Samarco.

    Frequency is unlimited potentially for man made catastrophes. One or two critically wrong engineering decisions at a large facility can result in a 100% of failure in a very short time frmae..6 years at the Fundao and even less than that at Mt Polley.

    The more fundamental these wrong decisions are to dam stability the shorter the time frame in which the inevitable failure will occur

    The greater the runout the greater the number and diversity of claimants and the greater the final combined total of ,third party damages, damages for natura resource impairment ,investor loss claims and owner write offs BHP has taken a 100% wrie offn the Samarco facility

    The Fundao failure is the largest failure in recorded history. It crossed state lines from MInas Gerais ( the permitting district) to Esprito Santo, the downstream community.and within each of these states were towns and villages with government infrastructure, business, personal injury and property damage claims. Most of the separate items on the BHP list cited were for different classes of loss from different classes( types) of claimants none which have been or can be systematically accounted for under the structure that has been allowed to exist . We may never know what actual losses were and will continue to be. The two largest items involve a miner driven settlement agreement ($6.2 billion was a miner driven settlement agreement with no limit but a preliminary estimate of eventual cost which set a minimum per year needed to evidence compliance with the agreement). The Federal Prosecutor did not agree with or sign off on that so the $45 billion supercedes and nullifies the $6.2 billion with its miner controlled minimum annual disbursements and claims to provide a better supervised settlement process driven by needed mobilization of resources not miner cash flow and budgets. As with the BHP Gulf spill on which the Brazil prosecutors provisional estimate of $45 billion is based the nature and permanence of loss not included in that estimate of actual loss is still unfolding and may never be fully measured.. That is the still unfinished story at Mt Polley.

    It would be more accurate to say of potential losses greater than say 10 million cubic meters of release and runout of greater than 20 km that they are not quantifiable, or repairable and will remain for decades. Not so much cumulative as ongoing. Quantifiable losses at a failure of this scale can easily be assumed to average over $1 bn when all that can be tallied is added up. Much of that will not be paid by responsible miners but taken as uncompensated losses by investors, citizens businesses and government jurisdictions with impaired infrastucture and permanently impaired water and lands.. infall to .

    The risk management strategy is to not allow instability to exist and form in facilties large enough to cause a multi generational non remediable loss..

    The Fundao was put on line in 2009. It had neither of the two design elements on which stability depended: separation of slimes and sands and adequate drainage.( it was a conventional slurry deposition in an upstream dam greatly exceeding best knowledge on upstream dam use. That was known in 2009 and not corrected. When Samarco went to market for $3,2 bn in bonds for its last expansion it knew it did not have adequate TSF capacity and it knew the dam wasn’t even suitable for existing contents with these two fatal flaws. That 100% inevitable failure evolved in 6 years .Important to note the foolishness of these decisions is compounded by the fact that Brazil has both strict liability and joint and severability for mining so the miners as they made these wrong decisions were going deeper and deeper into total company assets with the ever increasing risk in each of these bad decisions.

    Thinking about these failures in the same terms as natural catastrophe’s which are random will neither accurately predict the number of incidents in a given tie period nor restore public and investor confidence in the development and management of super size mines.

    • Franco Oboni says:

      Dear Lindsay,
      Thanks a lot for your detailed comment.
      We would urge you to read carefully the our text before sending in the Marines! We are not assuming anything in the text you lambast: we are showing a common practice graph that we immediately criticize and define as “bogus”. In our courses we detail why. At least we agree on one point, if you read carefully.
      It also seems like you see the world as a binary reality, but dams are not a Presidential Debate! What about “kinda wrong decisions”, a couple unreported mishaps that evolve “silently” for years, etc.? There is no certainty the dam will fail, but the probability it does increases dramatically. Take, for example, the decision of reducing the stability factor of safety by 0.1: it does not lead to certain failure (although if the dam fails many people will scream it was obvious), but it increases the probability of failure by a significant factor and that, by all means has nothing to do with the “time to failure”.
      Your stated runout-volume of losses relationship seems a bit simplistic: take Stava, for example…in merely 8km 268 lives (I do not know about the families), buildings, 8 bridges were wiped out…do not you think the land use, population density, etc. should be taken into account, as well as topography that, as we know, has a huge impact on the depth, velocity and direction of the runout?
      We agree that some losses may be “imponderable” (meaning difficult to estimate), especially when fines and legal costs are added. However we have to make an effort and, based on performing some national scale risk assessments, we claim there are ways to approach this from both a governmental and a corporate point of view. Crossing arms and stating “The risk management strategy is to not allow instability to exist and form in facilties large enough to cause a multi generational non remediable loss..”, as you do, does not bring any benefit. Risks will always exist, no matter what we human think we can do….despite the efforts, we do not know any industry, human endeavor that is failure free and risk free. If you do, please quote the list. In particular, if there will be a day where, for example, tailings are dewatered, we can imagine people will go higher and steeper, and new classes of failures will develop…generating new risks.
      The multitude of human “errors”, minor mishaps, concatenation of minor causes “ramdomizes” failures in a world that is not a polarized “black/white” chess game. Public confidence will not be restored by stating that failures “are not allowed”… especially since the world portfolio of dams is out there…. and event if we started today mitigating the riskier structures (that prioritization is the objective of Riskope’s work), there will be failures.

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