Errors allowed OB to use water free for 36 years

The country’s largest beer company, Oriental Brewery (OB), was recently found to have used stream water in its production line for free over the past 36 years, according to Yang Keun-suh, a Gyeonggi provincial assemblyman and a member of the main opposition New Politics Alliance for Democracy (NPAD).

In what appears to have been due to accounting errors made by the Gyeonggi Provincial Office and the Yeoju City Office, the top brewery is projected to have gotten away with using about 7.7 billion won ($7.1 million) worth of industrial water.

Yang on Sunday was specifically referring to the OB factory in Icheon, Gyeonggi, which produces beer through water funneled from the Yeoju Barrage on the Namhan River, located 800 meters (about half a mile) away.

Generally, companies that wish to use river water must receive permission from the Han River Flood Control Office - which OB did on Sept. 4, 1979 - and then pay usage fees.

Korea’s River Act stipulates that local authorities have the right to collect the fees from those who were granted approval by the Han River Flood Control Office. In this case, OB should have paid its usage fees to the Yeoju City Office.

When Yang initially brought up the issue last year, Gyeonggi officials argued that OB was not subject to fees for using water from the Namhan River, but rather, the Chungju Dam, following its construction in 1985.

Chungju Dam is a gravity dam located on the upper reaches of the Namhan River. Fees for using water released from that establishment must be paid to the Korea Water Resources Corporation, not to the Gyeonggi Provincial Office, provincial officials said.

Their argument is based on Korea’s Act on Dam Construction, which stipulates that those who received permission to use dam water before the completion of the dam do not have to pay charges to the Korea Water Resources Corporation.

But Yang pointed out in a press conference on Monday that, after checking with the Ministry of Land, Infrastructure and Transport, the clause was established to block imposing double taxes on those who were already paying fees for using river water.

The Gyeonggi Provincial Office said that it entrusted municipal and district offices with the authority to collect fees for using river water, and that it believed the Yeoju City Office had covered that responsibility.

In response, the Yeoju City Office said that it was unaware it had to levy fees for usage.

Statistics from last year indicate that OB used an average of 12,000 tons of water daily. On an annual basis, the company is estimated to have used 150 million tons of water in 2014.

Considering that water for industrial use costs 50.3 won per ton, OB is presumed to have gotten away with not paying about 7.7 billion won over the past 36 years.

The Yeoju City Office has so far collected approximately 1.2 billion won from the company for water use between 2009 and 2010 and plans to retrieve additional back taxes owed between 2011 and 2014.

Yeoju officials won’t be able to collect unpaid taxes from before 2009, however, due to a five-year sunset provision in the tax code.

OB claims it was unaware about the missing payments because local authorities never levied them. The company was quick to add that it had immediately paid up last month when it was initially ordered to do so.

In light of the case, Gyeonggi officials are investigating the system for imposing river water usage fees.

BY YOON JUNG-MIN [selee@joongang.co.kr]