Saturday, January 22, 2011

Battle Over Mountaintop Mining




A week ago I attempted a post on mountaintop mining but withdrew it after realizing I needed to do more reading on the subject. Here is a second attempt that I hope will capture the key points.


Background


Mountaintop mining, or mountaintop removal mining as it is often called, is the name given to surface coal mining in the Appalachian states. It sometimes goes by the abbreviations MTM (mountaintop mining) or MTR (mountaintop removal). Elsewhere in the world it might be called strip mining, opencast mining, or just plain quarrying, but, in the rugged Appalachian Mountains, mountaintop mining is an appropriate description.

According to EPA estimates, the coal fields in the central Appalachian states West Virginia, Kentucky, Virginia and Tennessee comprise an area of about 12 million acres.  Disturbance from MTM operations will reach about 1.4 million acres of that total by next year.

While concerned about the overall disturbance, including deforestation, EPA is most concerned about the impacts of MTM operations on streams. EPA notes that an MTM operation will remove as much as 400 feet of overburden material to get at a coal seam. The overburden material is commonly placed in valley-fill dumps. EPA refers to these as MTM-VF operations. EPA estimates that, since 1992, more than 2,000 miles of streams in the region have been buried by MTM-VF operations, a rate of 120 miles per year.




Spruce No. 1 Mine



A focal point of EPA's attention has been the Spruce No. 1 Mine, called “the largest mountaintop removal mine in West Virginia”. Owned by a subsidiary of Arch Coal, the mine was proposed as a 3300 acre project back in 1998, and later reduced during the permitting process to 2278 acres. In January, 2007, the Army Corp of Engineers issued the mine a key permit, a Section 404 permit under the Clean Water Act, which enabled the mine to dump its overburden material in three drainages on the property: Seng Camp Creek, Pigeonroost Branch and Oldhouse Branch.

EPA expressed concerns over water quality and noted that there were already impacts along Seng Camp Creek from previous mining activities. The 404 permit was challenged in court by environmental groups.  The mine was allowed to start within Seng Camp Creek. EPA, meanwhile, sought to limit the impacts on Pigeonroost and Oldhouse Branches, and, in 2009, requested that the Corps of Engineers modify or revoke the 404 permit. The Corps declined and EPA began its own course of action under the Clean Water Act.

On January 13, 2011, EPA revoked the 404 permit.  In announcing its decision, EPA summarized the impacts that would occur if the mine was allowed to expand:

* Burying more than 35,000 feet (more than 6 miles) of high-quality streams under mining waste, which will eliminate all fish, invertebrates, salamanders, and other wildlife that live in them;

* Polluting downstream waters as a result of burying these streams, which will lead to unhealthy levels of salinity and toxic levels of selenium;

* Causing downstream watershed degradation that will kill aquatic wildlife, impact birdlife, reduce habitat value, and increase susceptibility to toxic algal blooms;

* Inadequately mitigating for the mine's environmental impacts to high-quality streams, by using mining ditches, for example, to offset the functions provided by these natural streams; and

* Exposing Appalachian communities to additional mining related sources of pollution in a watershed already highly impacted by mining activity.

EPA noted that "it has used its Section 404(c) authority sparingly, prohibiting just 13 projects, including the Spruce mine, since 1972.  EPA is taking this action because a substantial body of new scientific studies and work completed since the mine was permitted in 2007."




Commentary


On the one hand, it's difficult to fault EPA's intentions. Who, after all, wants to see streams buried under piles of rubble and thousands of acres of habitat ruined.  EPA also notes the unwillingness of Arch Coal to cooperate and modify its plans. Recently, EPA released an independent study that showed the mine could significantly reduce its impacts for a slight increase in operating costs.  EPA gave the example of another mine it recently worked with to reduce its impacts and obtain a 404 permit.

On the other hand, industry groups and politicians point to the decision as "an unprecedented action in retroactively denying a permit."  No business likes to operate under conditions where the rules change.  In industries where projects depend on multi-year horizons for planning and permitting, such uncertainty is a serious deterrent to investment.  Small projects might be able to tolerate it, but large ones, the kind that create large and stable employment and require major capital investment, can’t.  EPA might say it’s acting with restraint, but it is setting a precedent all the same. 

EPA’s decision to act proactively will also be disturbing to investment. The action was not taken for any specific violation or wrongdoing on the part of the mine, but was made for the future protection of the environment, both on and off the property.  For the government to take such action and effectively make a park out of someone’s private property is not without precedent.  Such cases can wind up in court being argued as a government taking. 

In the case of Spruce No. 1 Mine, where jobs and a local economy are on the line, there is speculation an agreement between EPA and the mine will happen sooner rather than later.  In any event, we can expect we have not heard the last of this story.


Related Links



from EPA,  Spruce No.1 Mine footprint (yellow)






From EPA, Steps in Mountaintop Mining

 

Saturday, January 15, 2011

Rare Earth Lessons in Supply & Demand

The U.S. Department of Energy (DOE) tells us, in its 2010 Critical Materials Strategy [1], that we are on the cusp of a clean energy revolution.  That revolution is visible from my window at night, in 96 blinking red lights, and growing, that mark the location of a wind farm on the horizon, soon to be capable of generating 180 MW.  I have yet to see a Volt or Leaf on the road, but Priuses abound.  DOE tells us that clean energy production by wind turbines and solar cells; and consumption by vehicles (electric and hybrid) and energy-efficient lighting, depend on a handful of critical materials, and our dependence is likely to grow in the coming decades.  Of these, DOE determines that five rare earth metals, dysprosium, neodymium, terbium, europium and yttrium, are the most important to clean energy and carry the highest risk of problems in supply. 

By Supply, We Mean Production
As DOE and others tell us, the ‘rare’ in rare earth metals, or REE (rare earth elements) for short, is not because they are rare.  As an article by Kidela Capital Group notes [2], REE mining started in India and Brazil, then shifted to South Africa and the United States.  Continuing through the 1980s, one mine in the United States, Molycorp’s Mountain Pass mine in California, became the world leader, producing more than 70% of the world’s REE’s.  By the 1990s, exports from China came to dominate the market.  As DOE tells us, REEs can be found in many countries.  China, however, now produces 97% of the world’s REEs.
He Who Produces Cheapest Wins
It’s doubtful that, before the 1990s, China was consciously positioning itself towards world domination in REEs.  Clean energy has only recently come to the forefront, and Mountain Pass had been recognized by the United States Geological Survey as the greatest known concentration of REEs.  But, faced with abundant production from China, and increasing operating costs, Mountain Pass faced the same economic challenges that threatened or shut down US producers of other metals, tungsten, cobalt, molybdenum, antimony and others.  In 1998, Mountain Pass closed, following a spill into a dry lake of process waste water carrying uranium and thorium.  Resuming production  won’t be cheap, but Molycorp believes, with new capital investment, their operation will compete with China, and do so with process controls that will eliminate their past environmental problems [2,3].
Environment,The Un-level Playing Field
The realization that there is environmental cost to cheap metals has begun to dawn on some. In December of 2010, PBS touched on the issue with a news piece entitled “Are Rare Earth Minerals Too Costly for Environment?” [4], which focused on the environmental problems of the REE industry in China.  China responded with an announced crackdown on small, ”rougue” mines, as reported by the New York Times [5], and with pronouncements of increased environmental standards and future reductions in exports [6,7,8].  Are they too costly?  Dysprosium, the top of DOE’s leader board for critical materials in magnets, has risen from $6.50 a pound in 2003 to a current price of $132 a pound.  Yet, as Eamon Keene points out in a post [9], the 50 grams of dysprosium oxide in a hybrid car amounts to $15, or 1/2000th of the car’s price.  Clearly, we can afford to pay more for more environmentally sound production of this metal.  Unfortunately, that hasn’t been the developed world’s track record.  Markets gravitate toward the cheaper sources of a resource, be it energy, labor, or material, and it’s often only later we learn about the unseen environmental cost.         
Stability Needed for Investment
With various news articles declaring the shortage in REEs, and DOE announcing its Critical Materials Strategy, the scramble is on to find new resources, and get the existing ones back up and running.  But, as any developer of a copper, molybdenum or other metal project knows all too well, attracting investment requires some level of stability and predictability in prices.  One need only look at the absence of any new coal-fired power plants in the US last year to see what uncertainty will do to investment.  In the US, we can look at Molycorp’s capital costs, in the 100s of millions of dollars, to see that even re-opening an existing operation is not cheap, that is, if one wants to do so with any measure of environmental standards [10,11].  In the developed regions of the world, any new mine today faces a much longer lead time and greatly larger capitalization than just 40 years ago.  Without price stability, the advantage lies with those willing to accept or overlook the environmental cost.

Power of Substitution
Then, there’s the age-old way to beat a supply problem: substitute.  Copper too expensive for wires, use aluminum.  Not enough aluminum for cans, use plastic bottles. Not enough plastic for disposable diapers, now we may have a crisis.
This week, Toyota announced their strategy for the supply problem in REEs: to develop dysprosium- and neodymium-free motors for their hybrids and electric cars [12,13].  The news dragged on Molycorp stock, which traded as low as $44.93 on Friday, down from its high of $62.46 back on January 5th, an indication that stability for REEs, as well as other commodities, may not be coming anytime soon.



1. Critical Materials Strategy 2010.Department of Energy. 

2. Can America Regain the Rare Earths Crown?. Kidela Capital Group. November 28, 2010

3. Rare earth metals mine is key to US control over hi-tech future. Suzanne Goldenberg. December 26, 2010. guardian.co.uk.

4. Are Rare Earth Minerals Too Costly for Environment? Lindsey Hilsum. December 14, 2010. PBS Newshour transcript.

5. In China, Illegal Rare Earth Mines Face Crackdown. Keith Bradsher. December 29, 2010. New York Times.

6. China pollution standards for rare earth mining to be tightened

7. China cuts rare earth export quotas, U.S. concerned. Niu Shuping, et. al. December 28, 2010. Reuters. http://www.reuters.com/article/idUSTRE6BR0KX20101228

8. 2011 spells desperate search for rare earth minerals. Anil Das. January 7, 2011. International Business Times. http://www.ibtimes.com/articles/98836/20110108/rare-earth-mineral-us-department-of-energy-china-s-ministry-of-commerce-institute-for-defence-studie.htm

9. Critical Energy Metals - A Once Way Bet? Eamon Keene.  Dec 22, 2010. http://www.altenergystocks.com/archives/industry_general/

10. Global Outlook. Molycorp. http://www.molycorp.com/globaloutlook.asp

11. Troubled mine holds hope for U.S. rare earth industry. Andrew Restuccia. Oct 25, 2010. Washington Independent. http://washingtonindependent.com/101462/california-mine-represents-hope-and-peril-for-u-s-rare-earth-industry

12. Hybrid Electric Vehicles. Molycorp Minerals http://www.molycorp.com/hybrid_ev.asp

13. Toyota Developing Motors Without Rare Earths for Electric Autos, Hybrids. Alan Ohnsman. January 14, 2011. Bloomberg. http://www.bloomberg.com/news/2011-01-14/toyota-readying-electric-motors-that-don-t-use-rare-earths.html


from DOE Critical Materials Strategy 2010 



Mountain Pass Mine and Processing Facilities   Photo: WikiCommon















Pit Floor at Mountain Pass Mine Photograph: Barry Sweet/Polaris, guardian.co.uk

Saturday, January 8, 2011

Other News Items from 2010

In the previous post, I listed what I felt were the 10 most important resource-related stories from 2010.  Coming up with Items 1 and 2 (Haiti Earthquake and BP Spill) was not difficult; on a list of top stories ranked by AP editors, the BP Spill was #1 and the Haiti Earthquake #5.  Picking the additional items was not too difficult, either, as there was a long list of news items from the year.  This week, I’ll list some others I feel are notable. Even if not still in the news in 2011, these items can influence the way we think about resources, not to mention, provide topics for future posts.


First, let’s start with two events that are reminders of the power of nature to disrupt where we live and what we do:   
Chilean Earthquake
On February 27, a magnitude 8.8 earthquake in Chile caused widespread destruction, killing nearly 500 people.
Iceland Volcano Erupts
The Icelandic volcano with the name newscasters dread, Eyjafjallajokull, erupted in April, throwing off an ash plume that caused massive disruptions to a flights across Europe.  The disruptions were quickly forgotten as a different kind of eruption occurred later that month in the Gulf of Mexico.
Next, we have several items with the common thread of Green Energy development: 
Offshore Windfarm Approved
In April, U.S. Secretary of the Interior Ken Salazar approved the Cape Wind project, in Nantucket Sound off Massachusetts.  This, the first offshore wind farm in North America, has faced opposition, notably that from the late Senator Kennedy. 1.2.

Solar Farms Advance
In October, Secretary Salazar approved plans for a $6 billion solar-thermal plant in California.  In December, Secretary Salazar and Secretary of Energy Steven Chu announced a comprehensive environmental analysis (Programmatic EIS)that has identified ‘solar energy zones’ on public lands in six western states. 3.
Chevy Volt versus Nissan Leaf
Throughout the year, stories ran on planned release in 2011 of new electric vehicles (EVs) from Chevy and Nissan.  Given that both have several hundred pounds of lithium in their respective batteries, the following news item seemed significant:   
Afghanistan's Lithium
In June, NYTimes ran an article announcing “the United States has discovered nearly $1 trillion in untapped mineral deposits in Afghanistan, ... including critical industrial metals like lithium.”  Some speculated that Afghanistan could become the Saudi Arabia of lithium. 4.
In the next several items, regulations and the battle over carbon emissions appear as a common thread:
Climate Change Meeting in Cancun
In December, the UN Climate Change Conference was held in Cancun, Mexico.  Reports were that the conference resulted in an agreement aimed at limiting global warming by establishing a $100 billion/year fund by 2020 to assist poorer countries. There was no agreement on how to extend the Kyoto Protocol, or how to fund the fund.
States Ban Fracking
Hydraulic fracturing, aka frac’ing, fracing or fracking; media convention favors use of ‘fracking’.  This method for improving recovery of natural gas gained attention in March, 2010, when the PBS documentary, Gasland, took aim at the impacts on groundwater. In October, Pennsylvania Governor Rendell banned further drilling on state lands. In December, New York Governor Paterson replaced a six month moratorium with a temporary ban.  5. 6.

Battle Over Mountaintop Mining
Coal mining in Appalachian states faced opposition as EPA determined adverse impacts from a proposed mine in West Virginia.  Governor Manchin announced that the state is suing EPA over the decision. 7. 8. 9.
EPA to regulate CO2 in 2011
In March, EPA moved under the Clean Air Act towards regulating greenhouse gases (GHGs), including carbon dioxide. The move will no doubt be met with a corresponding release of GHGs in 2011 on Capitol Hill. 10. 11.
EPA approves E15
In October, EPA granted a partial waiver to allow fuel and fuel additive manufacturers up to 15 vol% ethanol (E15), pleasing some, including the State of Iowa. 12.
EPA Backs Off Hazardous Designation of Coal Ash
A dam failure in 2008 that spilled 5 million cubic yards of ash from a Tennessee Valley Authority facility raised awareness of the physical by-products of burning coal for electricity.  In May, EPA reflected on its stance, with the statement, "After extensive discussions, the Administrator decided that the options [for designation] merited consideration for addressing the formidable challenge of safely managing coal ash disposal." 13.

Yucca Mountain Dead
In January, 2010, director of the White House Office of Energy and Climate Change Policy, Carol Browner, declared dead the government’s decades-old Yucca Mountain Project for nuclear waste disposal, and announced a new commission to study alternatives for handling the nation’s spent nuclear fuel. 14.
As if we didn’t already know it, the next two items are reminders that mining is a dangerous business:
Ecuador Miners Lost
In an unhappy anthesis to the Chilean Mine Rescue story, in October four miners were trapped by a cave-in at a gold mine in southern Ecuador and later found dead. 15.
Lead Poisoning from African Gold Mines
Mining in Nigeria was blamed for lead poisoning in Nigerian villages, where miners use hand methods and no environmental controls to recover gold from lead-rich rock.  Lead poisoning has been blamed for deaths of 284 children and elevated blood-lead levels in thousands more. 16.
Following the above, the next two items are considered ‘wins’ on the year by environmental groups: 
Gold-Copper Mine Stopped
In November, Canada blocked plans by Taseko Mines for an open pit gold-copper mine near Williams Lake, B.C..  Cited were objections the project would destroy two nearby lakes and portions of a stream by filling them with mill tailings.  Taseko reported having spent $100 million and 17 years working on the project. 17.
Bauxite Mine Stopped
In August, the Indian Government blocked plans by the aluminum miner Vedanta, for a mine in the eastern state of Orissa, due to objections that the mine would remove a mountain on sacred tribal land. 18.


Finally, the last two remaining items didn’t seem to fit in anywhere above:     
Battle over Mining Tax
In May, the Australian government moved to increase taxes on the mining sector, alarming many, including three of the world’s biggest, BHP Billiton, Rio Tinto, and Xstrata.19. 20.
Canada Blocks BHP Bid for Potash
In November, BHP Billiton of Australia, the world’s largest mining company, was blocked in its $39 billion bid for the Potash Corporation of Saskatchewan, the world’s leading supplier of the nutrient potassium to agriculture.  It’s nice to be big, but not too big. 21.

Besides involving BHP, the last two items above are examples of the role big business plays in producing the resources we need.  Which reminds me to write soon about resource awareness as seen through the movie Avatar. In the meantime, next week I will try focusing on the supply side of rare earths.  
Thanks for reading.