(Repeats story published on Saturday; no changes to text)
By Stephen Eisenhammer and Anthony Boadle
BELO HORIZONTE/BRASILIA, Nov 27 (Reuters) - With leaking
windows, moldy walls and piles of paper where you might expect
computers, the office of Brazil's National Department of Mineral
Production speaks volumes about the regulation of the country's
mining industry.
The office, in the capital city of the mine-rich state of
Minas Gerais, is the state headquarters for a team of inspectors
that is supposed to vet mines like one 100 km (60 miles) to the
southeast, where a dam burst on Nov. 5, spilling mineral waste
across 800 km and into the Atlantic Ocean.
Understaffed and underfunded because of long-delayed changes
to Brazil's mining laws, the agency is now under fire for
failing to prevent the disaster, which killed at least 13 people
and left 11 more missing.
Although no cause has been determined for the rupture at the
Samarco mine, owned by multinational mining companies Vale SA
VALE5.SA and BHP Billiton BLT.L , prosecutors argue its roots
lie in negligent licensing and lax regulation.
"Does it have the resources to do the job?" asks Carlos
Eduardo Pinto, the state prosecutor who is leading the probe
into the disaster, before answering his own question. "You just
have to look at the offices to know."
Legislators and mining experts say the haggard state of the
agency has to do with a long-pending overhaul of Brazil's
so-called "mining code," the regulatory framework for the
industry.
The code, stalled in Congress since 2013, in theory would
create a new and better-funded regulator. In practice, though,
the law has foundered due to disagreements over royalties and
exploration rights.
As a result, funding for the existing agency, known as the
DNPM, stalled even as Brazil's mining profits soared.
After the dam burst, President Dilma Rousseff authorized
emergency funding of 9 million reais ($2.4 million) for the
agency to ramp up inspections in Minas Gerais through next year.
The figure dwarfs the amount the DNPM had previously been
allotted.
In the first 10 months of this year, the agency spent 1.3
million reais on regulation, according to the Ministry of Mines
and Energy. That, in turn, was less than half the 3.6 million
reais spent in all of 2014.
Until 2010, dams used to store waste water, known as
tailings, from the mining process were not independently
regulated in Brazil.
That year, however, the government tasked the DNPM, which
had mostly managed exploration rights and calculated royalties,
with the additional responsibility of monitoring the dams.
"We weren't given any extra money to do it," said Paulo
Santana, an agency ombudsman.
A study by Brazil's national water agency found that between
2013 and 2014 the DNPM had inspected just 15 percent of 663
registered dams. Only 153 of those dams have a contingency plan
in the event of a rupture, the report said.
The Samarco dam had not been inspected since 2012, according
to the Ministry of Mines and Energy, which oversees the DNPM.
Late last year, the agency created a team of specialized dam
inspectors. According to Santana, the ombudsman, the group so
far has just four inspectors for the entire country, but a
ministry spokesman said officials from elsewhere in the agency
also conduct inspections.
At the DNPM's national headquarters in Brasilia, Brazil's
capital, staffing is also shaky. The head of the agency, Celso
Luiz Garcia, quit unexpectedly last week, citing ill health.
Comparable agencies in other big mining countries appear to
be much better staffed.
In the Canadian state of British Columbia, eight engineers
inspect each of 68 tailings dams at least once a year.
Australia's state of South Australia has eight government
inspectors for 17 tailings dams.
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Inspections alone cannot guarantee safety.
After a dam breach in British Columbia last year,
investigators said regulators had fulfilled their obligations
and the accident had occurred due to a foundation failure that
no number of inspections would have uncovered.
And mining companies argue that no one knows their dams
better, or have more at stake in keeping them safe, than they
do. Consider the billions of reais in fines and clean-up costs
that Samarco is expected to pay because of the recent disaster.
Brazil's mining ministry appears to agree. It says the
DNPM's role is only to complement self-regulation by companies
and the licensing of projects by state and environmental bodies.
But watchdog groups say a strong regulator is necessary to
provide an objective voice, focused exclusively on safety.
"If you leave companies to do it themselves, cost will
ultimately be the driving factor," said David Chambers, a
geophysicist who heads the U.S.-based Center for Science and
Public Participation, a consultancy group on environmental
issues related to mining.
Advocates say independent regulators are also crucial
because of the close ties that mining companies, like many
industries, sometimes forge with elected officials through
lobbying, campaign donations or the sheer import of their
business on the local economy.
In Minas Gerais, critics have pointed to funding by Vale for
the recent campaign of Fernando Pimentel, the state's governor
and a proponent of speedier licensing for mines. According to
electoral records, Vale and subsidiaries donated 3.1 million
reais to Pimentel's campaign, or 6 percent of the total.
Duarte Junior, the mayor of Mariana, the nearest town to the
breached dam, said 80 percent of City Hall revenue comes from
mining. Both Pimentel and Junior have been careful not to
criticize the companies for the accident.
Meanwhile, critics contrast the industry's wealth with the
shoestring budget for regulators.
So shoddy is the DNPM office in Belo Horizonte that the
local fire brigade nearly closed it down in recent years.
"The building was unsafe," said congressman Leonardo
Quintao, the legislator behind the long-pending mining code.
"The department is on the scrap heap."
($1 = 3.7 reais)