Biodiversity offset (BDO) is a creative tool to ensure that development of extractive operations is not conducted at the cost of biodiversity conservation. With the increasing expectations of stakeholders and investors with regard to responsible mining practices, BDOs can contribute to developing a social license to operate. GOLD RESERVE INC.'s Brisas copper-gold project in Venezuela is used to illustrate key concepts and approaches to developing a BDO for a mining project.
CONTEXT AND DEFINITION
The central importance and stakeholder expectations associated with biodiversity conservation in mining operations was highlighted in the World Bank's Extractive Industry Review, the Mining, Minerals and Sustainable Development Project, the more recent Canadian Roundtables on CSR and Canadian Extractive Industry in Developing Countries and its consensus Advisory Group Report. In response, extractive companies and their stakeholders are seeking new approaches to attain "no net biodiversity loss" for their operations. BDOs are rooted in the principles of the Rio Declaration on Environment and Development (Earth Summit, 1992) and adapt a concept dating back to "Wetland Mitigation Banking" used in the US since the 1970s.
More recently, the Business and Biodiversity Offset Program (BBOP) has emerged as a partnership of over 40 companies, leading conservation groups, governments, and financial institutions. BBOP is exploring and testing BDOs and offers the following definition: "Biodiversity offsets are measurable conservation outcomes resulting from actions designated to compensate for significant residual adverse biodiversity impacts arising from project development and persisting after appropriate prevention and mitigation measures have been implemented. The goal of biodiversity offsets is to achieve no net loss, or preferably a net gain, of biodiversity on the ground with respect to species composition, habitat structure and ecosystem services, including livelihood aspects." BBOP is developing a suite of tools to assist in design, implementation and evaluation of BDOs. BBOP is currently road testing its emerging methodologies on pilot projects from extractive and other sectors.
MITIGATION HIERARCHY
The application of BDOs in emerging markets is still in its early stages. However, it is already attracting a growing following amongst major conservation NGOs and the business sector. Some critics liken the BDO concept to donating to an animal shelter to "offset" mistreating one's dog at home. But this is neither the intent nor the methodology which is being developed using a multi-sector and consensus seeking approach. The basic mitigation hierarchy applicable to environmental and social impact assessments also applies to the development of an appropriate BDO. The project developer would be expected to mature its project through an iterative design process. This prioritizes avoidance and impact minimization over mitigation, offset and compensation measures. Residual impacts (those not amenable to avoidance or mitigation) could then be addressed through the development of appropriate BDOs. Consultation with key stakeholders, particularly local communities and indigenous people, is also an important element feeding into the development of BDOs.
BANKABILITY AND CREDIBILITY
More rigorous planning and consultation processes are also expected by the IFC Performance Standards and the Equator Principles. These are benchmarks used by major project finance institutions, export credit agencies (such as Export Development Canada), multilateral financial institutions and others to appraise and manage social and environmental risks associated with their prospective investments. Experience suggests that, in addition to working with local and indigenous communities, the involvement of conservation NGOs is a critical component in generating credible BDO initiatives. This is not merely recognizing the obvious; mining companies are better at mining, whilst NGOs and other stakeholders have an edge on conservation and credibility. Without the involvement of legitimate NGOs, most BDO concepts may not gain credibility and would not be able to contribute to a social license.
The involvement of international NGOs will also help to develop practical approaches to complex methodological issues surrounding BDOs. NGOs can assist in assessing and validating baselines and benchmarks, selecting appropriate "offset currency" and indicators (hectares, trees or frogs), identifying eligible components in view of the project specific context (planting trees, capacity building or trading up to higher biodiversity priorities) and use of multipliers (two trees planted for each tree removed). In many cases, responsible mining practices applying best international practicewhich we anticipate to incorporate increasingly BDOs, where appropriateare seen as the preferred development option compared to unregulated and poorly run operations. The latter includes artisanal and small-scale mining (ASM), which is a growing phenomenon in emerging markets commonly associated with significant adverse biodiversity (and other) impacts.
BRISAS CASE STUDY
Gold Reserve commissioned a bankable environmental and social impact assessment (ESIA) for its Brisas copper-gold deposit (10.2 million oz of gold, 1.4 billion lb of copper). The ESIA, which was spearheaded by AATA International and supported by Prizma LLC and others, was designed to meet Gold Reserve's corporate commitments to best practice and sustainability. The study was also designed to meet the IFC Performance Standards and the Equator Principles.
BASELINE STUDY
For the Brisas project, the biodiversity baseline information was gathered and evaluated within a regional and landscape context. This allowed consideration of other key regional developments and challenges. ASM is widely practiced in the Imataca Forest Reserve in the Bolivar State in Venezuela, which hosts the Brisas project. The regional perspective also helped to include matters of scale, connectivity, cumulative effects, and inclusion of indigenous knowledge and government priorities. Potential biodiversity impacts were evaluated with a species specific approach. This enabled a targeted determination of presence or absence of critical habitats within the project boundary la escalara tree frog (Hyla sibleszi) that was found on-site. It also facilitated the identification of activities and interventions that could be incorporated into a BDO program.
DESIGN CHANGES REDUCE IMPACTS
Using an iterative methodology, the ESIA process not only identified potential impacts, but also assisted in the development of project alternatives to reduce conservation and other risks. This resulted in significant design changes to reduce adverse biodiversity and other impacts. Key changes include splitting the waste rock storage area to eliminate blocking or re-routing the Aymara Creek. This creek provides habitat for an endemic species of fish (Bryconops colaroja). It also provides local communities with access to the Cuyuni river system. Thus, several potentially significant adverse impacts were avoided in line with the mitigation hierarchy process prior to considering any offsets. Also, management measures and infrastructure additions were provided to protect environmental receptors, improve sediment control and address potential acid rock drainage.
RESIDUAL IMPACTS AND ARTISANAL MINING
However, despite adopting an iterative approach and including design changes, a number of residual impacts were expected to remain. These include those predicted to be associated with the presence of several indigenous animals on or near the project site. Some of these have local or international conservation status. Another key residual impact revolves around the conversion of forest habitat into an open pit, which will eventually be reclaimed as a lake. Also, significant off-site ASM activities have impacted the regional biodiversity landscape and contribute to other regional socio-economic conditions.
BIODIVERSITY OFFSET STRATEGY
To address residual impacts and ensure "no net loss" or possibly "net gain," GOLD RESERVE adopted a biodiversity offset strategy. Gold Reserve also incorporated a portfolio approach to avoid putting all the proverbial eggs into the same basket. This philosophy requires the selection of several different interventions to help with risk management. This approach is not unlike assembling a risk adverse retirement fund. Also, engaging and involving local and international NGOs, in addition to local communities and other stakeholders, were viewed as important ingredients for the company's BDO strategy. As the offset strategy developed, it became apparent that there were opportunities for synergies with social, regional and cumulative impacts. In response, the offset strategy matured to include more than biodiversity alone.
PORTFOLIO SELECTION CRITERIA
The selection process used to assemble a preliminary BDO portfolio for further discussion with local communities and conservation NGOs considered a number of criteria. These included (a) biodiversity linkage (similar ecosystems, species, size); (b) expected desirability by key stakeholders (indigenous and other local communities, and government); (c) sustainability (cost, risks, capacity, longevity) and, (d) partnership opportunities (including for mobilizing of funds and expertise). Using this approach, a number of preliminary options were developed. These ranged from regional reclamation and sustainable agro-forestry assistance to more conventional measures aimed at strengthening existing pristine or protected areas.
NGO ALLIANCES
The emerging BDO portfolio was taken to two short-listed international conservation NGOs to explore possibilities for collaboration. The aim was to seek partnership to help enhance conservation and development outcomes and enable Gold Reserve to outsource activities to competent and credible organizations. The company proceeded with a partnership with Conservation International, a leading international non-profit (with presence and networks in Venezuela) and Fundacin Para el Desarrollo Sostenible (Foundation for Sustainable Development, based in Venezuela). Outcomes of joint activities to date include extending the biological baseline study by conducting a rapid biological assessment through the Center for Applied Biodiversity Science of Conservation International. Also, selected ecotourism and agro-forestry projects were initiated and are already in the early stages of development.
WORK IN PROGRESS
The concept of BDOs is contributing to a positive vision: win-win outcomes pursued by collaborating stakeholders from local communities, business, conservation organizations and governments. Using established and emerging methodologies and approaches, mining projects can develop credible, sustainable and bankable BDO strategies and programs. BDOs have the potential to be a foundation for activities that reach beyond the scope of biodiversity alone and help to address more complex concerns that incorporate key facets of sustainability: environmental, social and economic. Applying an adaptive management approach and flexible alliance structures will contribute to successful implementation of BDO strategies. These strategies are also expected to demonstrate Gold Reserve's commitment to responsible mining and give confidence to both stakeholders and investors.
___________________________________________________Mehrdad Nazari (mehrdad@prizmasolutions.com) is senior ESIA and CSR advisor at Prizma LLC. Dr. Don Proebstel (DProebstel@goldreserveinc.com) is the VP Environment and Sustainability at Gold Reserve Inc (www.GoldReserveInc.com).
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