Benjamin Franklin wrote that, in this life, nothing is certain but death and taxes. Well, if you are in the business of developing mineral or energy projects in America, there is one more certainty to add to the list: lawsuits!
In our business planning, we always must consider political risk. The usual suspects for such obstacles are countries like the Democratic Republic of the Congo, or Hugo Chavez’s Venezuela, where large development projects can be subject to crippling tax increases or outright expropriation.
But sadly, no nation can match America for political risk, where de facto expropriation often is caused by irrational, hypocritical and economically suicidal environmental policies. No country in the world contains such a large inventory of vital natural resource projects blocked in the name of environmentalism.
Withdrawing domestic mineral and energy developments seriously harms America’s economy by unnecessarily bringing vast increases to the balance of trade deficit.
Moreover, these projects could provide jobs to build and operate them, as well as in support industries. Some of these withdrawals result from increasing changes in land classification from multiple-use to de facto wilderness, while others are caused by endless environmental lawsuits and appeals.
Most of the projects which I will discuss below have been blocked for decades.
For classification purposes, I will designate mineral and energy projects as “threatened” or “endangered,” while in some cases “extinct” would be appropriate. In fact, almost any new mineral or oil and gas project in America will fall under the “threatened” category.
Metals deposits — extinct category
Crandon, Wis., zinc-copper-gold-silver ore deposit — This is a volcanogenic massive sulfide deposit located in gentle terrain, where the Canadian Shield extends into the U.S.
Most such deposits are modest in tonnage, but Crandon is one of the rare giants, containing more than 55 million tons of high-grade ore tested to depth. The deposit, after formation, was structurally tilted from horizontal to vertical, forming an elongate, steeply dipping, tabular-shaped mass, which would be mined by underground methods.
Mining this deposit would involve only minor surface disturbance, the main risks consisting of containment of mining and milling waste materials, which would be easily feasible. Crandon was discovered in the 1970s and in any other country it would have been developed shortly after its discovery. But in the U.S., obstruction by environmental activist groups has effectively killed the project.
So, what are the consequences? If a mine were to be developed here, it would create hundreds of high-paying jobs locally for a few decades, and an estimated hundreds of millions of dollars in tax revenues. Most importantly for America, it would produce more than 4.3 billion lbs. zinc, 765 million lbs. copper, 459 million lbs. lead, 30.3 million oz. silver and 1.1 million oz. gold, all conservatively valued at more than US$13.4 billion.*
Endangered category
Cabinet Mountains, Mont. — Underlying parts of the Cabinet Mountains are two long-ago discovered, large tabular-shaped deposits of copper-silver ore, respectively named Montanore and Rock Creek.
The Cabinet Mountains, which are a more environmentally sensitive area than Crandon, have been designated as a “Wilderness Area.” The plan for mining the two deposits is to access them by adits, the portals of which are located in low terrain outside of the Wilderness Area. As the deposits are far beneath the surface and gently dipping, they can be mined underground by methods which would not cause surface disturbance.
Also, in contrast to Crandon, the ores contain relatively small percentages of metal sulfides, so that waste rock would be chemically benign.
These projects, though they have been approved by pertinent government agencies, have been stopped for decades by endless environmental lawsuits and appeals, mainly concerned about highly exaggerated fears of contamination of the Clark Fork River, which flows through the region. Much of the opposition comes from the town of Sandpoint, Idaho, situated on Pend Oreille Lake, which the Clark Fork flows into.
But there is no concern whatsoever of a mountainside sewer lagoon servicing a condo-hotel city on a nearby mountain, built by the developers of the Schweitzer Ski Resort, which creates a far more serious threat to the environment than any imagined hazard from the proposed mines.
If Montanore and Rock Creek were developed, again it would be a great boost to the local economy, and would generate very large tax revenue.
And for the country, the mines could produce 3.6 billion lbs. copper and 413 million oz. silver, all valued at $22 billion.
Threatened category
Pebble copper-molybdenum-gold deposit, Alaska — The Pebble is a world-class porphyry-type ore deposit located on the Alaska Peninsula. The terrain in the Pebble area is flat to gently rolling, creating an environmentally favourable situation for mining. The legitimate, principal environmental concern here is that the drainages in the area flow into Bristol Bay, a prime salmon fishery.
Extreme care would be required to be certain that waste rock and tailings are well contained. But because of this area’s gentle topography, this should not present a difficult challenge.
The Pebble resources are enormous: 80 billion lbs. copper, 106 million oz. gold and 5.6 billion lbs. moly. This combined open-pit and underground mine would be long-lived, create thousands of jobs and tax revenues in the billions of dollars. The metals produced would be conservatively valued at more than US$418 billion.
This project has been approved after exhausting reviews by appropriate government agencies. The Pebble orebodies could be developed without deleteriously impacting the salmon fishery, but development is held up by non-government organizations alleging inadequate environmental studies.
Energy developments
Vast portions of the U.S., including much of the offshore, have been, and are being withdrawn from oil and gas drilling, while any new technology, such as shale gas-oil production, has every conceivable obstacle thrown across its path.
Several decades ago the premise for this opposition was the mistaken idea that remaining American oil and gas resources were too trivial to risk the environmental consequences of development.
But advanced technologies have made mockery of this argument.
Now, it’s a war against fossil fuels to combat hypothesized human-caused climate change.
The problem with this war, beyond the fact that the over-hyped, anthropogenic-caused climate change theory looks increasingly nebulous, is that there are at present no viable alternatives to fossil fuels.
Perhaps, at some future time the world will be able to run on yak dung, but at this time, there is far more scandal than reality, particularly considering biofuels.
To stop developing fossil fuels can be metaphorically compared to a rough quote from Calgary-based energy economist Peter Tertzakian: “Getting humans off of fossil fuels at present would be tantamount to getting Tyrannosaurus Rex to live on parsley.”
A descriptive list of obstructed U.S
. fossil fuel developments would fill a book, so I will describe only one, which falls somewhere between the endangered and extinct categories: the Arctic National Wildlife Reserve, or ANWR, in northern Alaska.
As an affront to common sense, nothing can compare to the ANWR sacred cow.
No one can deny that most of the ANWR is a beautiful region that deserves preservation. But when the reserve was created, a small portion of desolate, windswept coastal wasteland was deliberately set aside for possible oil development, because there is strong evidence, including numerous surface oil seeps frozen into tar, of major underlying oil and gas deposits.
Indeed, geological surveys and limited drilling indicate a giant field estimated to contain somewhere between 10 billion to 16 billion barrels of oil, all located under a relatively compact area, which could be exploited by a small number of wells.
Compared to offshore drilling anywhere, environmental risk here would be infinitesimally minimal. Even in the unlikely event that a blowout accident might occur, it could be contained in a matter of hours, or at most days, in comparison to weeks or months for offshore wells.
If development of this field were, by some miracle, allowed, considering the 10 billion barrel estimate, it could produce one million barrels a day for 27 years.
Considering a price of US$80 per barrel, this single development could reduce the U.S. trade deficit for imported oil by $29 billion per year. Moreover, the Prudhoe Bay field, located a short distance west of the ANWR, is depleting, so another source is necessary to replenish the vital Alyeska pipeline, which supplies the U.S with a significant amount of its domestic oil.
The bottom line
America has the most stringent environmental regulations in the world, and the governmental enforcement agencies are for the most part diligent and effective.
The approval processes for extractive natural resources are generally thorough to excruciating.
In latter years many of the anti-development lawsuits and appeals filed by environmental organizations have been directed at the approvals granted by federal and state governments. Often they are based upon some conjured endangered creature, which they believe is inadequately protected.
This brings me to the “threatened” sand dune lizard recently recognized by biologists in the long-productive, desolate West Texas Permian basin. Should this create a reason to stop further development in this prolific oil province? Some people think so.
Knowing the importance of oil and gas production from this region, would the average American think this is a good idea? The problem is that the average person is ill informed about such matters. Listening to educators, or following the media, Americans will learn all about various threatened species, but almost nothing about the value to the economy of natural resources that might be produced, or the fact that they can be produced without causing mass extinctions.
When considered collectively, the above stalled or stopped domestic resource developments, which comprise only a short list of the total, could produce critical commodities valued at over US$1.2 trillion, all of which will eventually have to be imported from somewhere.
And that “somewhere” will likely have far laxer environmental regulations than America.
Oil and gas production from the ANWR, for example, would entail minimal environmental degradation, and might substitute for, say, the messy Niger Delta fields, from which the U.S. receives substantial imports.
So, in reality, killing these vital projects for environmental reasons, only to then import the vital commodities from countries with poor standards, is hypocrisy and not sound environmentalism.
Particularly during this time of economic malaise, considering hundreds of thousands of jobs that would directly and indirectly be created by these projects, tax revenues that would be collected and the positive effect on the balance of trade, a modicum of common sense in American mineral and energy policies would dictate that all of the above cited projects, and many others, be given the go ahead.
I would guess that if most Americans understood the real cost to them of not developing these projects, only a minority would be in favour of the obstruction policies.
A democracy is supposed to provide maximum benefits for the majority of its population. In regard to mineral and energy policies, the U.S. democracy is dysfunctional.
Two steps could have a huge effect in limiting natural resource withdrawals. First, due consideration by state and federal authorities must be given to the mineral endowments of proposed Wilderness Areas before these are withdrawn from development.
Second, any group filing anti-development lawsuits or appeals should be subject to appropriate damages in the event that their cases are thrown out.
— The author is a geologist and professional engineer, and resides in Spokane, Washington.
*Note that resource numbers for all of the above metal deposits are based on total reserve and resources, including inferred resources. For production numbers, metallurgical recovery is estimated at 90%, and metal prices used are as follows: zinc, US$1 per lb.; copper, US$3.50 per lb.; molybdenum,US$14 per lb.; silver, US$25 per oz.; and gold, US$1,000 per oz.
Be the first to comment on "Commentary: The United States of Withdrawal"