The Global West: how foreign investment fuels resource extraction in Western states

  • Composite photo: Wyoming drill rig and Chinese flag.

    Istock, Jim W. Parkin
  • An American flag flaps in the wind on a ranch near Douglas, Wyoming. The area is part of the Niobrara Shale Formation in which the Chinese are invested.

    Michael Shane Smith
  • A loaded China Shipping Line container ship makes its way down the main channel at the Port of Los Angeles.

    Tim Rue/Bloomberg via Getty Images
  • The Climax Molybdenum Mine in central Colorado, closed for more than a decade, held a job fair in February, and is gearing up to reopen, market conditions permitting.

    Robert Moran
  • U.S. Sen. Harry Reid (center), Democrat from Nevada, and Republican Jon Huntsman (far left), former Utah governor and now candidate for president, meet with Wu Bangguo, chairman of the Standing Committee of the National People's Congress, during a mission to China in April. Nine other U.S. senators traveled to China for talks on topics from clean energy to human rights.

    Ng Han Guan, Pool/Getty Images
  • Governors Brian Schweitzer, D-Mont., and Christine Gregoire, D-Wash., meet to discuss the controversial proposal to build a coal-export terminal near Longview, Washington.

    Elaine Thompson, Associated Press
  • Arizona Gov. Jan Brewer, R, gets an explanation of photovoltaic cells from Suntech founder Zhengrong Shi at Suntech's new manufacturing plant in Goodyear, Arizona.

    Suntech
  • Holli and Patrick Guillory ride near their home south of Hillsdale, Wyoming, where the increase in drilling operations -- sparked by global demand and international investment -- has them worried.

    Michael Shane Smith
 

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How truly entangled are we in this global web? In March, U.S. Rep. Cynthia Lummis, a Wyoming Republican, introduced legislation to keep the royalty rate on soda ash mining at 2 percent rather than the 6 percent rate set back in 1995. Her reasoning: To allow American companies to compete with Chinese soda ash producers. "Although our proud tradition of soda ash production continues to be a force of economic strength for Wyoming and our country," said Lummis, "overseas competition and rising energy costs have undercut Wyoming's status as the largest producer."

Wyoming's Sweetwater County provides about 90 percent of the nation's soda ash, which is used in glass and other industrial applications. Four manufacturers operate there. One of them is Solvay Chemicals, owned by a Belgium company. Another is Tata Chemicals, whose parent company is based in India. Tata says it exports half of its Wyoming soda ash back home, helping make soda ash the state's number-one export product.

The logic of a Wyoming congresswoman shorting U.S. taxpayers to protect an Indian company operating in her state from Chinese competition so that it can cheaply export its product back to India may border on the bizarre. But these days, it's business as usual. As often as not, political efforts to block mining law reform or bills such as the American Energy and Western Jobs Act, forwarded by conservative Western lawmakers this year to fast-track oil and gas development, benefit foreign-owned companies operating in the U.S.

Few people even noticed Lummis and her Tata connection. But the Chinese invasion, as it were, has been popping up on many a right-winger's radar. "China's corporations ... serve as forward troops in Beijing's global strategic economic warfare," writes William F. Jasper, in the May issue of New American, the John Birch Society's publication. "And the line between economic warfare and the more traditional concept of military warfare can be very thin." The article echoes many of the comments on stories and blogs about these issues.

Liberals have their own spin on the foreign invasion story. In response to a new wave of uranium mining -- dominated in the U.S. by Canadian companies -- environmentalists are pushing once again to reform the 1872 Mining Law, which allows minerals to be extracted royalty-free. They are playing up the fact that so many of these mining companies are foreign-owned. Some greens also joined conservative lawmakers in opposition to the Russian company ARMZ's purchase of a controlling stake in Uranium One, a Canadian company with some 10,000 acres of uranium claims in the West, including two mines north of Douglas. They worry that the Russians could route American uranium to Iran.

For the most part, though, politicians and economists, and even many environmentalists, told me that the fact that this new wave of globalization is coming from China or even Russia rather than say, Japan or Britain, is neither here nor there: A hole in the ground is a hole in the ground, no matter who's getting the stuff from it; a skilled job in the oil field is good for the economy, no matter who's forking out the payroll; and an oil spill is an environmental disaster, whether it's BP or Exxon doing the spilling. Princeton economist Paul Krugman, in a 1995 book on foreign direct investment, suggested the same, saying that multinational firms -- regardless of where they're based -- sprawl across national boundaries, and therefore tend to lack national identity, and aren't rooted in any place.

Besides, say many economists, it's good to have China in particular as a big investor and customer, because it takes a bite -- however small -- out of the gargantuan trade deficit the U.S. has with them. Even Matthews, for all his alarming statistics, seems resigned to it: "If they keep making stuff for us and keep lending us money so we can buy it, I guess it will be OK."

Yet, even if we put aside our xenophobia and leftover Cold War nightmares about the Red Army infiltrating Idaho potato patches, the West still has reason to be concerned about the Asian "invasion." The Asian stimulus package may have lifted up the mining and gas drilling sectors, but it's left the rest of the economy in the dust. And that could throw our regional economy back to its old lopsided ways.

In its fourth-quarter report for last year, Wyoming's economic analysis division noted: "After a short, but severe recession, Wyoming's economy has turned around ... thanks to the robust rebound of the energy industries." Attributing the boost to Chinese demand, the report noted that unemployment dropped to 6 percent, compared to 9.6 percent nationwide, and the mining industry in Wyoming added 2,130 jobs. But the picture isn't as rosy as it seems. "You look at wages and employment in Wyoming: Wages are higher, income per capita is higher than average U.S., and employment is higher," says Ed Barbier, a University of Wyoming economist and author of the book Scarcity and Frontiers, a history of the world through a natural resource economics lens. "But it's distorted," because just about every non-extractive sector of the economy -- even in the oil and gas boomtowns -- remains sluggish, at best. As a result, a deep schism has opened between the state's fossil-fuel-centric economies, and everything else. Teton County, for example, home of Jackson and archetype of the high-end amenity economy of the New West, has a 12.8 percent unemployment rate. That's three to four points higher than the national rate, and three to four times higher than the gas and coal counties of Sublette, Converse and Campbell.

This divergence appears across the region. In Arizona, mines are ramping up again, and Freeport-McMoRan, the Phoenix-based company that owns copper mines in Arizona and molybdenum mines in Colorado, posted a $1.5 billion profit during its first quarter of 2011. Meanwhile, the construction industry has lost more than 100,000 jobs in the last five years in Phoenix, where hundreds of thousands of homes sit vacant.  Nevada's mines more than doubled their shipments to China over the course of just one year, while housing values have dropped by 60 percent in the last five. North American timber and lumber exports to China increased fivefold between 2008 and 2010, yet the unemployment rate in the Pacific Northwest remains higher than 9 percent. The scrap-metal barons are back, scraping the Navajo Nation of its junked cars and sending them to China. But those fast-food signing bonuses of yore? They're history: Nearly 1 million people showed up in April for 62,000 jobs offered at McDonalds' first-ever national hiring day -- no signing bonus offered.

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