Alcoa Australian Refinery Project Faces Tough Environmental Regulations and Expanding Costs

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Researched by Industrial Info Resources (Sugar Land, Texas). The economic and environmental conditions surrounding the expansion project at Alcoa’s (NYSE:AA ) (New York) Wagerup alumina refinery in Western Australia typify the challenges faced by project developers worldwide in the new millennium. Waiting for state government approvals in the face of local environmental objections and delays becomes costly. Increasing shortages of project skills and resources see what was a $1.2 billion project in 2004 becoming a $1.6 billion plus project after the twelve to eighteen months it will now take to assemble the additional data to satisfy conditions associated with the state government’s approval, which finally came through this week. This is in line with comparable project cost overruns experienced worldwide between 30 to 100%, depending on the mix of engineering resource shortages and raw material price increases.

The Wagerup project involves the construction of a third production unit and upgrading an existing plant to improve efficiency and environmental requirements. Alumina production capacity will be increased by 80% from 2.6 million tons per annum (mtpa) to 4.7 mtpa.

In all, there are 42 conditions qualifying the conditional approval by state Premier Alan Carpenter who said that the refinery would become the most regulated in the world. The conditions will include one that requires Alcoa Australia’s md to sign and publish an annual statement of compliance. This is the first of several compliance statements for any project in Western Australia.

The environmental conditions are designed to ensure the emissions at the site will not increase and that total refinery odor emissions are reduced by 36% and emission of volatile compounds by 12%. Alcoa has undertaken the responsibility to continue scientific data collection through the $1.1 million construction of additional meteorological and air monitoring facilities at the refinery.

Alcoa has also agreed to a government request to fund a supplementary property purchase scheme in the vicinity of the refinery. This will provide an opportunity for people in communities adjacent to Wagerup to sell their properties to Alcoa, if they wish. This agreement is separate to the environmental approval. In addition, the Alcoa Land Management Strategy will be managed and administered by the state government. This will ensure that local property prices benefit from growth in the region.

Wayne Osborn, md of Alcoa Australia said that the expansion would create over 1,500 construction jobs in addition to 3,000 direct and indirect permanent jobs. The current investment spent per annum by Wagerup with local business will rise sharply. The expansion would provide over $8.3 million in extra state government revenue and about $ 2.8 billion in additional export revenue over the project’s lifetime.

The conditions do not come as a shock to Alcoa as the company has been a leading champion of industrial environmental awareness for more than a decade. Since 1998, the company has invested $30 million on new technologies and other improvements at the refinery, which, it claims, have already made Wagerup the most environmentally advanced refinery in the world.

To complete the company’s social and environmental contribution to the community, Alcoa is investing $2.3 million to establish a local Enterprise and Learning Center to provide youth training, skill development and adult education.

The Alcoa World Alumina and Chemical Wagerup refinery is a joint venture between Alcoa (60%) and Alumina, Limited (NYSE:AU ) (Victoria, Australia).

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