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FMC BioPolymer Primer

I. Current Situation

Since 1977, FMC’s plant location and successful operations have made it a prime
candidate for new investment by FMC Corporation, its US-based mother firm.

However, a series of allegations from Mr. Benson Dakay, through the Seaweed Industry
Association of the Philippines (SIAP), and the orchestrated litigation in the DENR’s
Pollution Adjudication Board (PAB) by Mr. Dakay’s allies imperil the plant’s future.
Developments have caused FMC Corporation to hold an additional $10-M plant
investment in abeyance.

The FMC wastewater treatment facility (WWT) has been inspected 15 times from 2001
to 2002 (See Annex C). On Dec. 12, 2002, the PAB finally decided after almost 2 years
(See Annex D) that FMC’s WWT system complied with DENR’s Effluent Standards.
Since then, the following developments have ensued:

1. Dec. 12, 2002: EMB’s Random Inspection of WWT Facility

On the very same day that the PAB found FMC compliant, the DENR’s Environmental
Management Bureau (EMB) Manila office conducted samplings at FMC’s WWT facility.
The sampling shouldn’t have been conducted in the first place because the WWT facility
was not in production at that time and was shut down. The FMC Management pointed
this out to the inspection team and stressed that the quality of the final effluent at the
Final Effluent Holding Tank (FEHT) was only fit for recycling, not for discharge. The
inspection team insisted. Therefore, the water can never be considered as a
representative of the final effluent quality of the facility that will normally be discharged
to the Mactan Channel. Consequently, FMC filed its objections to the random sampling
at the EMB on December 18, 2002. (See Annex N)

2. Jan. 15, 2003: Looc Bgy Council’s Cease-and-Desist- Order Resolution

Mandaue City’s Looc Barangay Council, headed by Bgy. Capt. Editha Cabahug, filed a
resolution urging the DENR to issue a cease-and-desist order (CDO) to FMC’s
operations for dumping pollutants in the Mactan Channel. It claimed that FMC’s
submarine wastewater system pipe caused the “black mounds” in Mactan Channel area
fronting FMC. Their basis was samples from FMC’s pipeline, samples which were not
meant for discharge, taken by EMB inspection team on Dec. 12, 2002 after the plant
just resumed operations. This conclusion was reached despite the fact that an in-depth
analysis of black mounds has not been taken by any party, including DENR. Despite the
council’s claims, FMC’s Biological Oxygen Demand (BOD) level taken last January 24,
2003 was only 49 mg/l, way below the EMB’s Standard of 120 mg/l.

3. Jan. 23 2003: Reconsideration for PAB’s Black Mounds Directive

FMC asked the PAB to reconsider its directive – in the same Dec. 12, 2002 decision -
requiring the cleanup of “black mounds” in the Mactan Channel because FMC couldn’t
point to any other pollutant source. (See Annex O) The channel, which has already
been polluted by other external factors, such as the wharf and other industrial firms in
the vicinity, as well as the fact that the surrounding area is densely populated. In fact,
the latest study from the Mactan Channel Multi-Sectoral Management Council
(MCMMC), an environmental NGO, confirmed that Mactan Channel is highly polluted
and that - with so many sources of pollution - it can’t be traced to any single source.

4. Feb. 2, 2003: SIAP’s Preemptive Defiance of DENR Decision

Mr. Pete Borja - the SIAP spokesman and popularly known to be Shemberg’s PR
consultant – said that SIAP will not accept any decision that PAB will reach in the set
hearing on FMC’s motion for reconsideration on the “black mounds” clean up. He
claimed that PAB is harsh on RP firms, but soft on US-owned FMC.
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5. Feb. 4, 2003: FMC’s Renewal of Permit to Operate Air & Water Treatment
Facilities
Because it was cleared by the PAB last December, FMC sends appeal for the renewal
of permit to operate its Air Pollution Source & Control Installations and its Water
Treatment Facilities to the DENR Region 7 Director Bienvenido Lipayon (See Annex P).
The permit was not renewed since March 2001 due to the on-going investigation of the
water pollution case filed by SIAP against FMC at the PAB last January 2001. Since
January 14, 2003, when FMC submitted a renewed application and paid the fees,
DENR has not granted permit because the Dec. 12, 2002 PAB ruling doesn’t clearly
indicate a go signal to process FMC’s permit application.

II. Profile of Major Players

A. FMC Corporation

• FMC Corporation is a diversified chemical firm that is composed of 3 chemical

businesses – Agricultural Products, Specialty Chemicals, & Industrial Chemicals
– with approximately 6,000 employees worldwide and with nearly $2-billion in
global sales located in 34 countries. Environmental stewardship is a core value
with FMC. It can supply many examples attesting to its environmental
compliance around the world, including awards for environmental excellence.
(See Annexes E & F)
• The leading supplier of food ingredients based on natural seaweed and cellulose
materials has plants in 16 countries. It has plants in Rockland, Maine,
Copenhagen, Denmark, & Cebu, Philippines.

B. FMC Philippines

FMC - formally known as FMC BioPolymer Phils., Inc. - has operated a seaweed
processing plant in Mandaue City, Cebu since 1977. The operations employs 84 full-
time people, 50-80 local contractors, provides income for hundreds of farmer
families in the southern & central Philippines engaged in cultivating and harvesting
the seaweed used in the plant’s production. The FMC Cebu plant produces semi-
refined carrageenan for primary use in food products made throughout the world.

The FMC Cebu facility operates a WWT facility permitted by the DENR to operate in
1997 (See Annex J). The WWT facility and process are inspected by the DENR
annually and have demonstrated full compliance since installation. Environmental
stewardship is a core value with FMC Corporation and FMC can supply many
examples attesting to its environmental compliance around the world, including
awards for environmental excellence. Listed are other pertinent FMC factoids:
• FMC purchases, produces, & exports $45-M to $50-M per year from the
Philippines.
• FMC purchases more than 65% of the Philippine spinosum production and
15% of the cottonii production.
• FMC’s outputs represents approximately 25% of Philippine carrageenan
production.
• FMC has a $1-M annual payroll.
• In 1999, the DENR awarded FMC Cebu a plaque recognizing environmental
efforts and special recognition to the firm’s pollution control officer. (See
Annexes E & F)
• FMC is ISO-approved. (See Annex B)

C. Shemberg Biotech Corp. (SBC)

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• Despite the silence of the EMB, Cebu media, and national media, the media
reported that it now faces a P1-M fine from EMB & PAB for polluting the river
beside its factories in Carmen and Mandaue. Government sources, however,
said that the fine could be as high as P9-M.
• After losing 40% of its major contracts to FMC Corp., debt-ridden Shemberg
leveled several accusations against FMC Phils. These stem mainly from
competition to supply high-grade carrageenan to Colgate-Palmolive Phils. The
distinction is that FMC Phils. processes semi-refined carrageenan. Thus, FMC
Phils. isn’t Shemberg’s main competitor. Fortunately, government agencies, the
media, & NGOs have not been able to find proof to substantiate these
accusations.
• Asian Development Bank (ADB), along with other Shemberg’s creditors
composed of Standard Chartered Bank (SCB), Bank of the Philippine Islands
(BPI), United Coconut Planters Bank (UCPB), & Deutsche Investitions und
Entwicklungsgesellschaft (DEG), opposed the Cebu Regional Trial Court’s
decision to give due course to the rehabilitation of SBC because the decision
didn’t require SCB to reorganize its present management. SBC owes its creditors
P1-Billion. The creditors said it was improbable for SBC to operate because
Colgate-Palmolive Phils. Cancelled SBC’s $10-M supply contract for toothpaste-
grade carrageenan in 2001. In 2002, the creditor banks wanted SBC dissolved if
its chief wasn’t taken out from management.

D. Seaweed Industry Assoc. of the Phil. (SIAP)

• In January 2001, SIAP files case against FMC at the PAB for violation of PD 984
and its implementing rules and regulations. After a series of surprise inspection in
2001-2002, the PAB found no environmental violations in their inspection of
FMC’s plant.
• In March 2001, majority of its board directors did not authorize its president, Mr.
Benson Dakay, to file a case at PAB in its name against FMC. It only authorized
him to report FMC’s alleged disposal of untreated wastewater to the DENR. (See
Annex R)
• On February 3, SIAP spokesman and alleged Shemberg PR consultant Pete
Borja said that SIAP will not accept any decision that PAB will reach in the set
hearing on FMC’s motion for reconsideration on the “black mounds” clean up. He
claimed that PAB is harsh on RP firms, but soft on US-owned FMC.

III. Threats to Major Investments in RP

To put it simply, Shemberg’s, SIAP, & Looc Barangay Council’s allegations against
FMC at the PAB amount to economic sabotage for the following reasons:
• First, it shifts investments away from RP to another country at a time when the
government is aggressively attracting foreign investors to address its budget
deficit and to strengthen our fragile economy.
• Second, it dislocates hundreds of FMC employees and their dependents, as well
as thousands from seaweed gatherers in Visayas and Mindanao, who are
dependent on their supplying carrageenan to FMC.
• Third, this bureaucratic harrassment proves the theory on why the difficulty of
doing business in RP makes the country an unattractive investment
consideration in the region.
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IV. Chronology

2001

• January – Mr. Dakay spreads to the media that FMC is discharging untreated
water in underground bypass pipes into Mactan Channel. Mr. Dakay hired divers
to plant black sludge to prove that FMC is guilty.
• January – Benson Dakay files complaint at the PAB in behalf of SIAP. SIAP later
denied involvement in his claims.
• February – To comply with DENR order, FMC dismantled its discharge line. Mr.
Dakay dives in channel to take water samples, alleging more water pollution.
DENR analysis finds no proof against FMC.
• February – DENR sends letter requesting permission to observe FMC plant for
24 hours for 2 weeks accompanied by NGOs. DENR Manila summons FMC
Managing Director Tita Tomayao & Environmental Officer Joel Bonilla.
• March - PAB makes surprise visit to FMC’s WWT facility. Samples were taken.
Lab results showed compliance to regulatory standards.
• March - PAB makes another surprise visit and takes samples from WWT
facility. Again, no violations were found.
• September – A Looc barangay representative enters FMC at night to cut a
discharge pipe and took samples of FMC effluent. Samples were rejected by
DENR due to the unusual acquisition method and the lack of scientific controls in
their evaluation.
• September – An FMC environmental log book mysteriously disappears from the
WWT facility. A few days later it resurfaces in an environmental violation article
entitled FMC Logbook Tells All.
• October – PAB visits and observes WWT operations. No adverse findings were
made.

2002

• January – Looc barangay council refused to sign FMC’s annual business license
renewal without a legal basis. FMC’s appeal to municipal government grants
them license.
• May - SIAP presents pictures to local papers to prove that the size of FMC’s
WWT facility is too small for its operations.
• December 12 – PAB reached a decision that FMC has not violated DENR’s
Effluent Standards. However, it holds FMC liable for the presence of the black
mounds found in the vicinity of its submarine discharge pipe in the Mactan
Channel. This is because FMC couldn’t identify any possible source for the
mounds.
• December 12 – On the very same day as the PAB order is issued, EMB sends
inspectors to get samples from the FMC pipeline when FMC’s WWT facility
wasn’t operational yet (7a.m. – 8a.m.). For the sake of getting samples, the 2
inspectors insisted on sampling effluent not meant for discharge because the
plant just opened. The samples were merely for recycling. These samples were
used as basis of Looc barangay council to file resolution urging the DENR to
issue a cease-and-desist order (CDO) to FMC’s operations for dumping
pollutants in the Mactan Channel.