Is our love of the West destroying Chile?

  • David Rockland

 

I was drafting this essay, when Bill Brewster, former congressman from Oklahoma and now president of a Washington lobbying company, stuck his head into my office: "Do you know any companies that would be interested in buying gold concessions in Azerbaijan? Their Minister of Privitization is a friend of mine, and he wants to put a trip together of interested companies."

Bill's question reminded me of a meeting I was at recently in the offices of the minister of education in Peru. The official is quite close to President Alberto Fujimori, and was his negotiator with the terrorists at the Japanese embassy last year. The minister wanted to make sure that the company I was then with, BHP Copper, was getting all the support it needed in expanding the Tintaya mine, 14,000 feet up in the Andes mountains.

Compare those events with a public meeting earlier this year to review environmental regulations for hardrock mining on public land. I felt like the token miner.

Every other seat at the table was taken up by people from environmental organizations. We were supposed to talk about the Bureau of Land Management regulations and report on our collective ideas; their mission was to manipulate the process to get mining out of the United States. In their view, mining is a dirty, polluting industry that has no place here. Evil multinational mining companies were raping the American landscape, being given billions of dollars of gold and copper for pennies, and were now even trying to destroy Yellowstone National Park.

So, the easy answer to the question put to me by High Country News - Has the U.S. made it so difficult to site open-pit mines that the situation is ripe for change? - is, "Yes. The mining industry is going to move offshore."

That's the easy answer. But if you take another look, you find it ain't so simple.

Open Pit Economics 101

A mining company is motivated by the same things that every company is concerned about - providing a return to its owners. Most mining produces a commodity: It is sold through a world market, price is uncontrollable and cost of production drives the business.

Open-pit mining is usually cheaper than underground mining. A metric ton of ore can be mined for as low as 50 cents out of an open pit, vs. $20-$80 a metric ton from an underground mine. This translates into something like a dime-a-pound difference for copper, or about 10 percent of the final price. The lower price is a result of less capital investment, shorter development time and higher productivity per man-shift.

There are costs, however. Money has to be spent to remove the overburden, and more ground is disturbed than with an underground mine. And, with an underground mine, there is a greater ability to follow the richest ores; with an open pit mine, the company generally has to handle every ton of dirt in the pit.

There is another problem with open pits: They are likely to be opposed by the nearby communities, government, and in the rare case, such as the New World Mine near Yellowstone, society at large. These conflicts raise costs.

Geology rules, followed by politics

At BHP Copper, the siting of a mine was determined almost entirely by the quality of the ore body, and rarely (although we could have been smarter about this) by community reaction. It was easy to put money into Escondida in Chile, rather than Pinto Valley in Arizona; the ore grades were 10 times higher down south. If every scoop of dirt produces 10 times more product in Chile than in Arizona, your investment goes to Chile. Community opposition is not a factor.

Joe Danni, vice president at Placer Dome, says, "More terrain is being opened up overseas, with some wonderful geology. As a result, companies are looking offshore more and more. It's a falsehood to think that community opposition and federal regulation are the only reasons we're looking overseas."

But the politics is pushing mining companies in the same direction as the economics and geology. Countries like Chile, Argentina, Brazil, Peru, the Philippines, Pakistan, Australia, Mongolia and Zimbabwe are becoming stable enough to risk investment in a major mine even as the politics of mining becomes less stable in the U.S.

Despite all this, doing business at home is still a strong draw. Danni, who has experience around the world, says, "If I had to pick the best place in the world to site a gold mine, it would be Nevada. The predictability due to a history of mining, a legislature and government that, once committed, is willing to see things through, a trained workforce, and an existing infrastructure make Nevada my top choice."

But he continues, "There is no denying that the politics of federal-land ownership and use are making it harder and harder to do business in the United States. As mining takes off in other countries, and the things that make Nevada number one now become part of their cultures, other parts of the world will be increasingly attractive."

Many argue that the growing resentment in the West toward mining is a result of the New West. Twenty-five years ago, the corner grocer knew that his customers were paying with money from mining. Now that connection is missing. The economy in the West has diversified, and mining is less of a local political force.

At BHP Copper, two of our mines were the biggest producers of export income in two countries - Chile and Papua New Guinea. You can bet it was easier to do business there than in the West, where the connection to mining as a reputable enterprise gets weaker daily.

The environmental movement has done a superb job of vilifying the mining industry. The Mineral Policy Center, in particular, has been incredibly effective at showcasing mining as an industry that has created huge environmental disasters here and abroad. The mining industry, particularly its associations, has done an abysmal job counteracting this public relations campaign.

Honesty

At some point, the environmental community will need to be honest about what it wants and what it is willing to pay for. Everyone in this country uses copper. It is in every home, car, appliance, phone and computer. And every pound of copper requires about 100 pounds of ore to be mined and processed and 99 pounds of waste to be disposed. Do we balance our consumption against our desire for pretty, pristine landscapes? Or do we send our problems to some other country?

What is the anti-mining environmentalist really saying? "I want to live a 20th century lifestyle, and I know that means I will use mined products. But I like to go out West on my vacations. So, I am willing to have this done somewhere else in the world, and let them bear the environmental costs in exchange for the dollars I am going to send them."

I'm reminded of a client I used to have in Santa Barbara, Calif. We were working on an oil and gas development project. Although she was supposed to be an unbiased government regulator, she was trying to kill the project. As we drove up Highway 101, I asked, "If the oil isn't going to come from here to power your BMW, where will it come from?"

The reply: "How about New Jersey? They already screwed that state up."

I grew up in New Jersey, so this really pissed me off, but at least she was honest.

New Technologies

Can we have it all? Can we mine here, so we're not exporting the fallout from our consumption, and still have an intact, if not pristine, landscape? Some new technologies hold promise.

One is in-situ mining. A weak acid solution is injected into an ore body and then pumped out after copper from the ore body has been dissolved into the solution. BHP Copper just received permits for the first such mine in Florence, Ariz. With an exceptional outreach effort to the local, regional and national environmental stakeholders, and with great cooperation from the EPA and the state agency, the permit process went smoothly.

What's really exciting about this technology is that the ground is not disturbed except for wellheads, and they are removed after the project is over. The land then returns to its original use; at Florence, this will be cotton farming. The current drawback is that in-situ mining can only work where the ore is near the surface and of a certain type.

A second change is new technologies that make it profitable to mine properties that were mined before. Applying today's environmental and mining technologies to a mining district that has been disturbed for over a century can clean up that mining district and create jobs.

But companies often fear re-mining projects because they might be tagged with liability under Superfund for previous operations. If a company was exempted from liability for what occurred under previous ownership, as long as they were cleaning up the environment, there would be greater incentive. The current Congress may reauthorize Superfund, and it is possible the new law will encourage re-mining.

We are left with a dilemma: Public concern over open-pit mines, magnified by the environmental movement's desire to destroy mining in the U.S., is pushing some companies abroad. But since the U.S. is the biggest-consuming nation in the world, that creates a moral quandary.

To resolve it, two things have to happen: Mining companies have to get smarter. And so do environmentalists.

To be smarter means being realistic and reasonable.

* Can U.S. environmentalists accept mining if done right? Or be willing to admit that exporting environmental problems is the outcome they are creating?

* Is mining willing to recognize society's environmental concerns and constrain itself accordingly?

Let's hope the answers to both questions are yes.

David Rockland runs a public affairs company in Washington, D.C., The Rockland Group. Prior to launching his firm he held positions with BHP Copper, Times Mirror Magazines, and the National Environmental Education & Training Foundation.