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The value of mining in Arizona

Without minerals, we would not have electricity, food, or shelter. Minerals make today’s technology-based life possible, but that’s something many of us take for granted. We want the benefits from those minerals, but some want mining of minerals to be in somebody else’s neighborhood.  The importance of mining has long been recognized:

If we remove metals from the service of man, all methods of protecting and sustaining health and more carefully preserving the course of life are done away with.  If there were no metals, men would pass a horrible and wretched existence in the midst of wild beasts…  -Georgius Agricola, in De Re Metallica, 1556.

For Arizona, it is not just metals.  Arizona produces sand and gravel, limestone for cement production, coal for electrical generation, and a variety of industrial minerals which contribute almost $2 billion to Arizona’s economy (see here).

Arizona has a long history of mining.  There is archeological evidence that cinnabar, coal, turquoise, clay, pigments, and other minerals were mined in Arizona beginning at least 3,000 years ago. (See A History of Mining in AZ by the Arizona Mining Association.)

According to the Arizona Mining Association, Arizona currently produces 68% of domestically mined copper.  With that copper production comes by-product molybdenum, gold, silver, platinum, and rhenium.  Incidentally, The Sierrita Mine south of Tucson is currently the onlydomestic producerof rhenium, a metal used in high-temperature, super-alloy turbine blades for jet aircraft and other land-based turbines.  The Sierrita plant processes output from other mines on a toll basis. It may soon be joined by a second rhenium plant at the Kennecott (Rio Tinto) mine in Utah.

The direct and indirect economic impact of copper mining on Arizona’s economy is about $4.6 billion annually.  That includes $3.2 billion in personal income,  $500 million in state and local government revenues, and 49,800 high-paying jobs for Arizonans. Average labor income of mining company employees (including benefits) is $108,000 per worker vs. $47,000 for all Arizona workers.  If we add in non-metallic, non-fuel, minerals, then Arizona produced about $8 billion worth of mineral products in 2012 according to the U.S. Geological Survey.  Arizona ranks second, after Nevada, in value of total mineral production.  The U.S. total value of mineral production was about $76 billion which supported more than 1.2 million jobs in 2012.

Arizona is endowed with great mineral resources as shown on the map below prepared by the Arizona Geological Survey.

mineralmap

Currently ASARCO and Freeport-McMoRan Copper & Gold are the two biggest copper producers in the state.  ASARCO operates three mines and a smelter. According to the Southern Arizona Business Coalition, in 2012 ASARCO paid wages and benefits of $215.8 million, property, severance, and sales taxes of $47.2 million, and employed 2,198 people in Arizona. Freeport operates mines in Safford, Morenci, Bagdad, Miami, and Sierrita.  They paid wages and operational spending of $860 million in 2012, taxes of $274 million while employing 7,600 people directly and indirectly employing an additional 30,000 people.

In addition to past and current mining, there are many projects on the horizon, some in the exploratory stage, others navigating the byzantine regulatory permitting process.  (See my posts: Mining and the bureaucracy and How NEPA crushes productivity)

Perhaps the largest project is that of Resolution Copper near the town of Superior just west of the famed Globe-Miami mining district and just north of ASARCO’s Ray mine.  This is a bold undertaking because the orebody is 7,000 feet below the surface.  Resolution says that at peak production, this mine will be the largest copper mine in North America, producing over one billion pounds of copper per year.  Resolution estimates that over the 64-year life of the mine, the project will generate $61.4 billion in economic value, provide $20 billion in tax revenues, and provide 3,700 permanent jobs.

The Rosemont copper mine south of Tucson is nearing the end of its long journey through the regulatory maze, and mine construction may begin early next year.  This mine will generate 2,900 Arizona jobs and inject $19 billion into Arizona’s economy and pay $404 million in local taxes over its 20-year projected life.  The mine expects to produce 243 million pounds of copper per year.

Curis Resources is developing an in-situ copper mine near Florence, Arizona.  In this project, instead of mining rock, Curis Resources “seeks to dissolve copper minerals from an underground deposit by introducing water with a lowered-pH (making it slightly acidic).This low-PH, water-based solution dissolves the copper and allows it to be pumped to the surface through a continuous loop water treatment system.”  This deposit, lying 400-to 1200 feet below the surface contains approximately 2.84 billion pounds of copper.

Curis estimates that over the projected 28-year life of the project, it will generate $2.2 billion in economic activity for the state of Arizona, $1.1 billion in economic activity for Pinal County, $325 million in taxes and royalties for Arizona government, and $1.46 billion in increased personal income in Arizona, 170 direct jobs at the project site in Florence, and 681 jobs in the state of Arizona.

TheI-10 copper deposit, located along Interstate 10 between Benson and Willcox, Arizona, is being investigated as another in-situ copper leaching project by  Excelsior Mining Corporation, a Canadian junior company. They estimate the deposit currently contains an indicated oxide copper resource of 3.21 billion pounds and an additional inferred oxide copper resource of 0.88 billion pounds.

Wildcat Silver Corporation is in the exploration stage of its Hermosa Project which is evaluating the silver-manganese potential in the historic Hardshell mining district near Patagonia in Southern Arizona. Their preliminary economic assessment estimates a measured and indicated resource of 236 million ounces of silver and an inferred silver resource of an additional 79 million ounces.  Project life is estimated at 16 years.  Wildcat estimates that annual production will be 4.1 million ounces of silver, 233,000 tons of manganese carbonate, 20,187 tons of zinc cathode, and 960 tons of copper.

Copper Creek is an old mining district located on the east bank of the San Pedro River and on the western slope of the Galiuro Mountains about 75 miles northeast of Tucson. The property has been acquired by Redhawk Resources, a Canadian junior mining company that plans to develop an underground mine for copper, molybdenum, and silver.  Redhawk estimates a resource of 7.75 billion pounds of copper, 150 million pounds of molybdenum, and 32 million ounces of silver.

The Oracle Ridge mine is a small, underground copper mine in the Santa Catalina Mountains just north of Tucson. The mine was operated intermittently, most recently from 1991-1996. The mine is being developed by a junior Canadian mining company, Oracle Ridge Copper (project website).  The company anticipates employing about 200 people to run the mine which has a projected life of 11 years. The mine will produce 140 tons of concentrate (about 30% copper) a day which will be trucked off the mountain and transported to a smelter.

In northern Arizona, near the Grand Canyon are over 1,300 known or suspected breccia pipes many of which contain uranium oxide as well as sulfides of copper, zinc, silver, and other metals. According to the Arizona Geological Survey, “Total breccia-pipe uranium production as of Dec. 31, 2010, has been more than 10,700 metric tons (23.5 million pounds) from nine underground mines, eight of which are north of Grand Canyon near Kanab Creek.”  This area is mired in fears of contamination of the Colorado River (see Uranium mining and its potential impact on Colorado River water) and a 20-year, million-acre mineral entry withdrawal by the Department of the Interior.

In northeastern Arizona there is potential for a major potash deposit. American West Potash has recently delineated, a considerable resource estimated at  158 million metric tons of sylvinite (a mixture of sodium and potassium chloride, not to be confused with sylvanite, a gold telluride), with about 16 million metric tonnes of K2O; and inferred resources of 560 million metric tonnes of sylvinite with just over 66 million metric tons of K2O in the Holbrook Basin, about 30 miles east of Holbrook, Arizona.

The Holbrook Basin area also holds potential for helium and shale oil resources.

Arizona currently has three producing gold mines and several other prospects being actively explored for gold (see here).

“In 2011, the state of Arizona led the United States in the production of gemstones. Arizona has long been famous as a producer of turquoise, peridot and petrified wood. Gemstones such as azurite, chrysocolla and malachite are associated with the Arizona’s many copper deposits and have a long history of being produced there. Agate, amethyst, garnet, jade, jasper, obsidian, onyx, and opal have all been found in Arizona and used to make gems.” – Geology.com

As you can see, besides currently producing mines, Arizona holds future potential that will add jobs and economic value to the local, state, and national economy – if they can get through the bureaucratic regulatory maze.

Remember, the value of mining is not just the money, it is in providing the products we need to keep our civilization going.  If it can’t be grown, it has to be mined.

Open federal land to energy exploration and development to boost economy

The United States has recently experienced a boom in oil and gas production, but that has occurred almost exclusively on private and state lands. Federal land has been largely closed due to the policies of several administrations.

The American Energy Alliance has a new report “Beyond the Congressional Budget Office” which shows the potential of a more enlightened federal policy in energy development. Here is the executive summary:

While headlines have reported a boom in US oil and gas production, that boom has been related almost exclusively to exploration and development on private and state lands and waters. Even that limited expansion has had profound effects. Opening up Federal resources — in addition to private and state resources — to exploration and development can accelerate all of those trends. But recent administrations have yet to follow through on promises to allow access to Federal resources, instead proposing to levy increased taxes on oil and gas production.

The Congressional Budget Office (CBO), at the request of the House Budget Committee, recentlyreleased an analysis of lease revenues that could be expected to arise from a proposal to open Federal lands and waters to oil and gas leasing (the “CBO Assessment”). Specifically, the proposal aims to open areas that are statutorily or as a matter of administration policy prohibited from leasing. The issue has repeatedly been a hot-button political and economic issue in the last several years, most recently at the beginning of the Obama administration and then again as Republican challengers in the 2012 election placed opening the lands and waters at the center of their energy policy.

But while the Administration cannot shy away from exploring the fiscal benefits of opening Federal lands, the CBO study was restricted to analyzing just one component of those benefits: lease revenues. This paper highlights the larger economic effects, including economic growth, wages, jobs, and both federal and state and local tax revenues, of opening Federal lands and waters to oil and gas leasing, relying solely upon the CBO natural resource and oil and gas price

estimates to show these broader economic effects in order to maintain direct comparability with their analysis. This paper also seeks to “complete” the CBO Assessment by taking measurements of output, jobs, wages and tax revenues into consideration.

The findings of this paper demonstrate that opening federal land that is currently closed-off because of statutory or administrative action would lead to broad-based economic stimulus, including increasing GDP, employment, and wages. Specifically:

GDP increase:

• $127 billion annually for the next seven years.

• $450 billion annually in the next thirty years.

• $14.4 trillion cumulative increase in economic activity over the next thirty-seven years.

These estimates include “spill-over” effects, or gains that extend from one location to another location. For example, increased oil production in the Gulf of Mexico might lead to more automobile purchases that would increase economic activity in Michigan. Spillover effects would add an estimated $69 billion annually in the next seven years and $250 billion over thirty years.

Jobs increase:

• 552,000 jobs annually over the next seven years.

• Almost 2 million jobs annually over the next thirty years.

Jobs gains would be felt in high-wage, high-skill employment like health care, education, professional fields, and the arts.

Wage increase:

• $32 billion increase in annual wages over the next seven years.

• $115 billion annually between seven and thirty years.

• $3.7 trillion cumulative increase over thirty-seven years.

Increase in tax revenue:

• $2.7 trillion increase in federal tax revenues over thirty-seven years.

• $1.1 trillion in state and local tax revenues over thirty-seven years.

• $24 billion annual federal tax revenue over the next seven years, $86 billion annually thereafter.

• $10.3 billion annual state and local tax revenue over the next seven years, $35.5 billion annually thereafter.

Read the full report here.

MasterResource also has a three-part series on this subject:

Part I: Expanding “Depletable” Resources

Part II: Coal Issues

Part III: Federal Land Potential

The importance of minerals to our economy and national security

Without minerals we would not have electricity, food, or shelter. Minerals make today’s technology-based life possible, but that’s something many of us take for granted. We want the benefits from those minerals, but some want mining of minerals to be in somebody else’s neighborhood.

Here in Arizona, which produces about two-thirds of the nations’ domestically mined copper, there is opposition to mining projects such as the Resolution copper/gold mine near Superior, the Rosemont mine near Tucson, Curis Resources’ proposed copper mine  near Florence, uranium miningnorth of the Grand Canyon, and even a small marble depositnear Dragoon.

Let’s step back for a moment and review some benefits and importance of mineral production (data from the National Mining Association, see more detail here).

In 2011, $669 billion worth of processed mineral materials were used by businesses including construction, manufacturing and agriculture to add more than $2.2 trillion to the U.S. economy. Minerals were put to use in lifesaving medical devices, our nation’s infrastructure, defense technologies, and the computers and communications systems that connect us to the world. In Arizona, the value of mineral production is about $8.25 billion.

Though America has abundant mineral resources, our ability to secure these critical materials amid rising global competition is threatened by an outdated permitting process and regulations that delay mining projects for years, in some cases, up to a decade or more.

U.S. minerals mining supports more than 1.2 million jobs. A job in U.S. metal ore mining is one of the highest paying in the private sector, with an average salary of $85,504 a year (2011 average salary) and often climbing above $100,000 for experienced workers.

Our increasingly technological society needs as many as 60 different minerals or their constituent elements that are used in fabricating the high-speed, high-capacity integrated circuits that are crucial to this technology.

Though U.S. mines play an important role in meeting domestic demand for many minerals, American industries currently rely on foreign suppliers for more than half the minerals they use, a substantial increase from 30 years ago. Our growing dependence on imports leaves us vulnerable to supply scarcity brought on by high demand and disruptions in the supply chain. For instance, the U.S. relies on China for 79 percent of rare earth minerals.

The U.S. Department of Defense uses nearly three-quarters of a million tons of minerals every year in the technologies that protect our nation. But with our growing reliance on imports for an ever-widening range of minerals, the United States is now at greater risk of facing supply disruptions.

U.S. mineral production paid more than $16.5 billion in federal taxes and $10.5 billion in state and local taxes in 2010. Although mining operations disturb the local scenery, over 2.6 million acres have been reclaimed and restored in the past 30 years.

Minerals make our standard of living possible. To ensure that standard, we must make certain regulations are consistently guided by sound science and economic reality rather than political agendas.

For those of you who are against mining, I invite you to think of all you would have to give up without it.

Mining and the bureaucracy

To maintain a healthy economy, our industries need reliable access to raw materials.  The American mining industry helps fill that need by providing good, relatively high-paying jobs and the critical minerals we need to bolster our economy and provide the materials that keep us going.  Yet, government, especially the federal government, seems to put many roadblocks in the way of developing our abundant natural resources.

In Arizona we are witnessing governmental delays in the permitting process for the Rosemont copper mine south of Tucson.  Near the small town of Dragoon, Arizona, a proposed marble mine has been delayed for more than 15 years due to US Forest Service bureaucracy including establishing a Roadless Area which encompasses the quarry site, even though there is a dedicated county road to the quarry.  In Alaska, the EPA is delaying what could be one of the largest copper and gold mines in the world, the Pebble mine, because of some unwarranted concern over salmon.

Some of the permitting delays are due to activists in government and radical environmentalists who don’t want any development.  But much of the delay is caused by inefficiency and lack of coordination in and among federal agencies.

Hal Quinn, president of the National Mining Association notes that permit delays are among the biggest hurdles for mineral development.  “The length, complexity and uncertainty of the permitting process are the primary reasons investors give for not investing is U.S. minerals mining. In the U.S., necessary government authorizations now take close to 10 years to secure, resulting in decreased competitiveness and increased reliance on foreign sources of minerals.”

These bureaucratic delays affect businesses other than mining, because the supply of raw materials gets harder to obtain and more expensive.

This is not just a recent problem, but one that is growing as more and more agencies are embracing “green” or “sustainable” principles.  In 1999, the National Academy of Sciences’ National Research Council found that: “The process has become much slower and more costly than was originally intended or than it needs to be. It commonly imposes data collection and analysis requirements on the applicant and the regulatory agency that are poorly coordinated, excessively expensive, and of uneven value in protecting the environment. Mining operators are entitled to a permitting process that is as timely and cost effective as possible while still achieving compliance with all statutes and regulations.”  There has been no improvement since that study.

Quinn notes that “Behre Dolbear, the international consulting firm that advises mining companies globally, has identified the U.S. as having one of the longest permitting processes in the world for mining projects, placing domestic mining investments at a competitive disadvantage.”  It also means  that we will need to import more and more of our minerals.

The US Geological Survey studied domestic permitting and found that “permitting time frames are often lengthy and unpredictable” sometimes taking as long as 17 years and even with an “expedited permitting schedule” taking seven years.

Quinn says that “more efficient permitting does not mean less environmental protection.”  Among the needed reforms in the permitting process are:

Clearly defining the responsibilities of a lead agency to include the establishment of binding time frames, coordination with other agencies and reliance on existing data and reviews.  Limiting the total review process for issuing permits to 30 months unless signatories to the permitting time line agree to an extension. Reduce delays posed by litigation over permitting decisions by requiring challenges to be filed within 60 days of the final agency action.

It’s not just the mining industry that suffers under a bureaucratic bottleneck.  Investor’s Business Daily notes that the Obama administration has issued more regulations than Bush and Clinton combined.  Just the EPA and Department of Transportation have increased the regulatory burden on manufacturing by $142 billion per year.

If you want your automobiles and iPhones, a reliable electricity supply, transportation, and jobs, we need to cut the red tape and make access to and production of the raw materials for industry more efficient and timely.  That can all be done while providing rational environmental protection and in doing so will prove to be a boon to our economy.

See also:

Uncorrected Forest Service errors block marble mine

Why imposing royalties on hard rock mining is a bad idea

Pima County versus Rosemont

Uranium mining ban near Grand Canyon all politics, no science

Jaguar Listing and Habitat Designation Based on Junk Science

Jaguars versus the Rosemont mine

Clean Coal: Boon or Boondoggle?

EPA versus Arizona on regional haze issue

EPA war on coal threatens Tucson water supply

BLM Wild Lands Designation Attempts To Bypass Congress

Politics versus American Energy Security

Politics versus American Energy Security

There seems to be a great disconnect between administration rhetoric and actual administration policy.  Here I will examine two examples, policy on outer continental shelf drilling for oil and gas, and actions on the controversial Keystone XL pipeline from Canada.

White House rhetoric:

“We need to deploy American assets, innovation, and technology so that we can safely and responsibly develop more energy here at home and be a leader in the global energy economy.” – White House website.

“[T]he Obama Administration has launched the most aggressive and comprehensive reforms to offshore oil and gas regulation and oversight in U.S. history to ensure that our nation can safely and responsibly expand development of its offshore energy resources.” – White House website

The reality:

Exploring for oil and gas offshore has been an on-again, off-again circus.  The latest round is a de facto moratorium.  On November 8, 2011, the Obama administration announce a draft plan that would close exploration drilling on the outer continental shelf until 2017.

OCS-2008This moratorium places some of the most promising areas off limits and blocks some leases that were in progress.  This policy certainly is “aggressive” but misguided.

The Keystone XL pipeline would bring OCS2010additional oil from Canada.  Canada currently supplies us with more oil than all the Persian Gulf sources combined, and this pipeline would put an additional large dent in that unstable source.

The pipeline is awaiting administration approval.  President Obama is caught between his environmentalist lobby supporters who want him to ban the pipeline, and the unions because the pipeline would create many new jobs.  President Obama has decided not to decide until after the 2012 election when he will have less need of these opposing forces.

White House rhetoric:

“As we recover from this recession, the transition to clean energy has the potential to grow our economy and create millions of jobs – but only if we accelerate that transition. Only if we seize the moment.” – President Barack Obama

The reality:

This is a green fantasy that ignores reality.  So-called clean energy or green energy, such as solar and wind generation, is actually a parasite on the economy because neither would exist without government mandates and subsidies.  Expenditures on these programs divert resources that could otherwise be spent on more economical and productive development.

One administration claim is that increased use of solar and wind generation will reduce our dependence on foreign oil imports, but this doesn’t fly because less that 1% of our electricity is produced from petroleum.

The experience in Europe should serve as a warning:

Spain spent €571,138 (Euros) to create each ‘green job’, including subsidies of more than €1 million per wind industry job.” “… the programs creating those jobs also resulted in the destruction of nearly 110,500 jobs elsewhere in the economy,” and that “each ‘green’ megawatt installed [including solar jobs] destroys 5.28 jobs on average elsewhere in the economy.” The study also estimates that between subsidies, and higher production costs, Spaniards would have to pay 31% higher electricity prices to repay the incurred debt.

The administration’s EPA is also promulgating unrealistic regulations which will harm our ability to produce energy.  For a story close to home, The San Pedro Valley News-Sun has a story which starts:

The U.S. Environmental Protection Agency is proposing new regulations that, if enacted, could cause the cost of generating electricity to go up substantially in rural areas. In some cases, the cost of implementing the infrastructure to support the regulatory changes is so prohibitive, power generation facilities may be forced to shut down entirely.

Potential regulatory changes involving the sequestering of carbon and how coal ash is used – if enacted – could impact generating stations throughout rural America, including Cochise County, said Geoff Oldfather, the communications, marketing and public relations manager for Arizona Electric Power Cooperative.  (Read the rest of the story here.)

Politics and environmental zealotry are getting in the way of sound energy policy.

UPDATE:

Canadian Prime Minister Stephen Harper said Sunday that he was looking at exporting more oil to China after the United States delayed a decision on a controversial pipeline.  Read more here.

See also:

Obama Clueless on Energy – Part 1

Obama Clueless on Energy – Part 2

Obama administration still clueless on energy

Blowing in the Wind, a look at green jobs

The myth of green jobs

Clean Coal: Boon or Boondoggle?

EIA says Clean Energy program will increase electricity costs 29%

Electricity supply endangered by EPA regulations

The Environmental Protection Agency is promulgating new regulations regarding emissions of nitrogen dioxide, sulfur dioxide, and ozone which may greatly increase the cost of electricity, cause some power plants to close, and endanger our ability to produce adequate power.

According to Investors Business Daily:

The Cross-State Pollution Rule, announced last month, and its implementation over the next 18 months will likely result in the loss of a fifth of the nation’s electricity-generating capacity.

The rule requires [coal-fired power plants] in 27 states to slash emissions of sulfur dioxide and nitrogen dioxide by 73% and 54%, respectively, from 2005 levels by 2014.

Up to 110 gigawatts of capacity came on-line between 1940 and 1969 and were grand fathered under the Clean Air Act. Now the EPA is saying bring them up to their code or shut them down.

An analysis released earlier last month by the National Economic Research Associates used government data to examine the combined impacts of this latest rule and other EPA rules and found the EPA’s actions would cause a net job loss of more than 1.4 million job-years by 2020.

Even the New York Times says “Because of new Environmental Protection Agency rules, and some yet to be written, many of those [power] plants are expected to close in coming years.”

The Washington Times reports:

The EPA said it would soon release updated ozone regulations that are going to kill jobs and impose substantial costs on the U.S. economy – at least $90 billion, by its own estimates, and $1 trillion annually between 2020 and 2030 according to industry estimates.

The Clean Air Act requires the EPA to review standards every five years. The EPA last did so three years ago. Why the rush to imposes new stricter standards two years early? Is this political science rather than real science? According to the EPA, ozone levels have been falling since 1980 and are now just 50% of what they were then.

Sulfur dioxide, nitrogen dioxide, and ozone are associated with fine particulate matter which is regulated by the EPA.

Again from the Washington Times:

What if today’s levels of air pollution didn’t kill anybody? That certainly would be bad news for the U.S. Environmental Protection Agency (EPA), which has spent the past 15 years stubbornly defending its extraordinarily expensive and ever-tightening air-quality regulations.

The EPA claims airborne fine particulate matter kills tens of thousands annually and that the prevention of those deaths will provide society $2 trillion annually in monetized health benefits by 2020.

But we can debunk those claims with more than mere criticisms of EPA’s statistical malpractice and secret data. We have actual data that simply discredit the EPA’s claims.

Continue reading.

For the most part, current standards have been met, so the EPA is moving the goal posts. The EPA has yet to provide any solid scientific justification for these regulations. And the regulations will greatly harm our economy. But regulators tend to regulate to justify their own existence. How clean is clean enough?

For a more in-depth analysis see: Pretending Air Pollution Is Worse Than It Is from Junkscience.com.

Blowing in the Wind, a look at green jobs

President Obama has touted production of “green” jobs by promoting alternative energy sources to produce electricity, especially wind energy. He has particularly pointed to the experience in Spain and Denmark as examples of what could be done in the U.S.

However, the experience in those countries shows that all is not well.

A research team from Madrid’s King Juan Carlos University produced a detailed, well-sourced paper: “Study of the Effects on Employment of Public Aid to Renewable Energy Sources ,” which shows that the “green jobs” program was an economic failure.

See: http://www.juandemariana.org/pdf/090327-employment-public-aid-renewable.pdf

This study found that for every subsidized green job created, 2.2 jobs were lost elsewhere in the economy. “The study calculates that since 2000 Spain spent €571,138 (Euros) to create each ‘green job’, including subsidies of more than €1 million per wind industry job.” “… the programs creating those jobs also resulted in the destruction of nearly 110,500 jobs elsewhere in the economy,” and that “each ‘green’ megawatt installed [including solar jobs] destroys 5.28 jobs on average elsewhere in the economy.” The study also estimates that between subsidies, and higher production costs, Spaniards would have to pay 31% higher electricity prices to repay the incurred debt.

In Denmark, they produce 19% of their electricity from wind power, but to produce that 19% takes 75% of all jobs in the energy sector. A study from Denmark (http://tinyurl.com/mdfsju ) notes “that the effect of the government subsidy [to the wind industry] has been to shift employment from more productive employment in other sectors to less productive employment in the wind industry. As a consequence, Danish GDP is approximately 1.8 billion DKK ($270 million) lower than it would have been if the wind sector work force was employed elsewhere.” This study estimates that the per job subsidy for the wind industry was $90,000 to $140,000 US.

The Danish Economic Council concludes: “The wind power expansion in the 1990’s is an example of a policy that was unprofitable from society’s point of view, even taking the economic advantages that the wind business enjoyed into consideration. ” As a result, the energy sector underperformed by 13% when considered on a value-added basis compared to other industries.

If the Obama administration really wants to create jobs, perhaps they should rethink their energy policy.

Local Politicians Against Jobs

Southern Arizona is blessed with abundant mineral resources, and cursed with a Congressional delegation and county supervisors, such as Ray Carroll, who would deny us that blessing.

Representatives Gabrielle Giffords and Raul Grijalva have introduced HR2944, the Southern Arizona Public Lands Protection Act of 2009 into the House. This bill would prohibit staking of mining claims, mineral leases, and geothermal projects on all federal land in Pima and Santa Cruz Counties (subject to pre-existing rights). This is essentially a response to the Rosemont mining venture.

Apparently, these politicians are not in favor of good jobs or economic opportunity.

According to testimony before the House Subcommittee on National Parks, Forests and Public Lands, the Steelworkers union opposes the bill. “HR 2944 is bad public policy. The bill would completely bypass the federal EIS process put in place under the National Environmental Policy Act for consideration of proposed mining and minerals operations that involve public lands. The EIS (environmental impact statement) process involves state and local agencies on a collaborating basis and works well to thoroughly examine proposed projects. Congressional intervention to enact land use and resources development policy on a county-by-county basis is a bad idea. In addition, job creation would be sacrificed in this bill. Mining plays a strong economic role and has done so for more than a century in Arizona.”

“In Arizona, the average mining job pays $60,000, which is 44% higher than the average pay in the state. Tourism and retail jobs on the other hand pay, on average, about half this amount or just over $29,000. In addition, for every new mining job, another 4 indirect jobs are created. Arizona is home to 411 mining operations that provide direct employment to about 18,480 people and another 34,360 people indirectly from mining activity occurring both in and outside the state for a total of 52,840 jobs statewide.”

The law is also poorly written and may have unintended consequences. For instance, the law would prohibit “all forms of entry, appropriation, and disposal under the public land laws.” The word “entry,” in what I think is the intended context, means “mineral entry” the terminology used for staking and registering a mining claim. But, as written, the law could be construed to prohibit cattle grazing, hunting, hiking, other forms of recreation, and use by the border patrol. The only “entry” we will see is by illegal aliens and drug smugglers.

To give you some idea of the mineral potential of Pima County and the folly of HR2944, I present below, excerpts from a 2001 publication, “Mineral Potential of Eastern Pima County, Arizona” published by the Arizona Geological Survey as Contributed Report 01-B. This report was written in response to Pima County’s Sonoran Desert Conservation Plan by The Southwestern Minerals Exploration Association, a group of local geologists (I am a co-author of the report).

Mineral production has always been viewed as an essential industry, not only to generate wealth and provide employment, but also for the array of products that are consumed by a society. Terms such as Bronze Age and Iron Age have served to demonstrate the essential role of minerals in improving a society’s standard of living. Today, in what we have come to call the Technology Age, the demand for minerals and mineral-bearing products has grown exponentially. This is not surprising, over the last four thousand years, societies with mineral technologies have flourished, while those lacking mineral resources have either conquered to take others, or have ultimately perished.

Mineral production is essential to our civilization because minerals provide the raw materials which allow our society to function. Pima County is endowed with many mineral resources, not only copper mines, but also the important products such as sand, gravel, and limestone used everyday in supporting the infrastructure of our cities. It is essential that these mineral resources, and the lands where they occur, remain available for exploration and development.

Pima County has a unique, and complex, geological history which makes it critical habitat for large copper deposits, geothermal resources, and many industrial minerals such as sand, gravel, gypsum, and limestone. This report documents known occurrences of these mineral deposits, and delineates areas with the greatest potential for future discovery of additional mineral deposits, based on existing geological and geochemical data, and upon proven methods of investigation.

Spencer R. Titley, University of Arizona Professor, wrote in 1982: “The porphyry copper deposits of southeastern Arizona and contiguous regions compose one of the richest copper metallogenic provinces on earth and perhaps the richest of seven separate porphyry copper provinces which surround the Pacific Basin. At least thirty-five separately named significant occurrences of porphyry-intrusion-related concentrations of copper occur here and the

record of discovery suggests that more will be found.” (Titley, Spencer R., 1982, Advances in Geology of the Porphyry Copper Deposits, Southwestern North America: University of Arizona Press, Tucson Arizona 560 pp.)

The first map below shows the distribution of known copper deposits in Pima and Santa Cruz Counties. The red color show outcrops of Laramide intrusives, which can be the generators of the mineral deposits. The brown shows outcrops of older host rocks. Additional potential occurs in the valleys under cover.

EPCcopperdeposits

The next map shows the mines and areas that hold additional potential for discovery in Pima County. The broad orange arcs are areas favorable for exploration and discovery of porphyry copper deposits as defined by members of the Southwestern Mineral Exploration Association. The yellow areas (e.g. G-1) are tracts permissive for the occurrence of porphyry copper deposits defined by the U.S.Geological Survey in OFR 90-276 “Preliminary Mineral Resource Assessment of the Tucson and Nogales 1 x 2 Quadrangles, Arizona.” The green areas (e.g. T-1) are tracts favorable for the presence of undiscovered mineral deposits – High Potential Tract defined by the U. S. Geological Survey in Bulletin 2083 A-K “Resource Potential and Geology of Coronado National Forest, Southeastern Arizona and Southwestern N.M.”

EPC-favorable-copper-areas

The next map shows (in blue) the geothermal potential in Pima County. This is a low temperature resource suitable for space heating and cooling for industrial parks and residential developments such as apartments, town houses, condominiums and neighborhoods composed of single-family dwellings. This type of resource is also suitable for aquaculture and greenhouse agriculture. Studies show that 30 degree C water is ubiquitous at depths of 300m and that potential exists for potential for 50- to 55 degree C water at a depth of 1,000 m.

The red area is a mercury anomaly which sits below our water recharge project in Avra Valley (does Tucson Water know about this?). Not to worry though, the mercury anomaly is 75-750 ppb Hg while ADEQ allowable residential standard is 6,700 ppb Hg. (Reference: Hahman, W. R. and Allen, T. J., 1981, Subsurface stratigraphy and geothermal resource potential of the Avra Vally, Pima County Arizona: Arizona Bureau Geol & Min. Technology, OFR 81-5).

EPCgeothermal

The American mining industry pioneered Arizona. For more than one hundred years, metal and aggregate companies have operated under the rules and regulations set out in legal frameworks.

Few anticipated that they would lose access to land for future mineral development. Viewed as a societal good, access to the land encouraged growth. The mineral products provided much needed materials for construction, trade, and local economies. Land-use planning was motivated by economic development needs, manifest in the desire for improved tax bases and infrastructure. Therefore mining plays a key role. We should not let short-sighted politicians deprive us of these benefits.

(Disclaimer: I spent my professional career exploring for and helping develop mineral deposits, and I worked for a major mining company. I have, however, no connection with Rosemont or Augusta Resources.)

Obama administration still clueless on energy

After a year on the job, the Obama administration has learned little about energy. They still claim that “green” jobs will be created in the electrical generation sector if only we switch to more wind and solar energy projects.

Their claim that 5 million new jobs will be created in the energy sector over the next ten years is just not credible. Consider that, according to the Bureau of Labor Statistics, the entire electrical generation industry, from mining, manufacturing equipment, power generation, and transmission, currently employs just under one million people. Where is Obama going to put 5 million more people? Will he have platoons of people peddling bicycles hooked to small generators? And in the State of the Union speech, he pushed for job-killing climate legislation in spite of recent events showing that the data have been fudged. During the speech, Obama was laughed at after referring to the “overwhelming scientific evidence on climate change.” First the audience laughed, then Pelosi and Biden, and finally Obama himself smirked at the insanity of his remark. Maybe his speech writers should read the news.

So called “green” energy is more expensive than fossil-fuel generated electricity, so energy costs would necessarily increase. Our economy is very sensitive to energy costs, so rising costs would more likely result in job losses rather than more employment.

According to a Cato Institute study (Policy Analysis 280), wind generation costs are 6-7¢ per KWh vs. 3¢ for natural gas, 2.2¢ for coal, and 1.7¢ for nuclear. Solar power costs 38¢ to 53¢ per KWh. The Cato report also said that the materials required for thermal-solar projects were 1,000 times greater than for a similarly sized fossil-fuel facility, and therefore would create substantial incremental energy consumption and industrial pollution. A major environmental cost of photovoltaic solar energy is toxic chemical pollution (arsenic, gallium, and cadmium) and energy consumption associated with the large-scale manufacture of photovoltaic panels. The installation phase has distinct environmental consequences, given the large land masses required for solar farms–some 5 to 10 acres per MW of installed capacity.”

 The Administration touts “fast-tracking” solar development in the west, but has limited permits to 670,000 acres of more than 30 million suitable acres available.

Wind-generated electricity, especially, is intermittent and unreliable, so that it requires conventional backup generating capacity. Energy companies will have a hard time monitoring and switching between generation sources to meet demand and prevent blackouts or brownouts.

The Interior Department policy does not help wind-power. The Cape Wind Project in Nantucket was to be the first off-shore venture, but Interior will allow the area to be listed on the National Register of Historic Places, thus precluding development.

During the State of the Union speech, Obama gave lip service to off-shore petroleum exploration. During the Bush administration, Congress lifted a moratorium on off-shore exploration, but Obama’s Interior Department has imposed a de facto moratorium while they “study” a leasing program. In 2009, the administration leased less land for energy development than that of any other year on record, according to the American Energy Alliance. And government revenues from leasing in 2009 were just one-tenth that in 2008. Meanwhile China is buying up all the leases it can get, some close to American shores.

The Interior Department has withdrawn most of the offered leases for natural gas in Utah, delayed oil shale research and demonstration projects in Wyoming, Utah, and Colorado, and blocked uranium mining in Arizona. Obama proposed development of nuclear energy. But, last year, in a sop to Senator Harry Reid, the Yucca Mountain nuclear repository was closed, so nuclear waste will continue to be stored in barrels near the generating plants rather than safely underground.

Biofuels such as ethanol require heavy government subsidies. According to the Journal of Environmental Monitoring, ethanol subsidies amount to the equivalent of $1.95 per gallon on top of the gasoline retail price. At present, no automobile manufacturer will extend an engine or parts warranty for vehicles that use more than 10 percent of ethanol content in fuel, except for vehicles specifically designed to run on E- 85 fuel. This means that the majority of cars on the road today in the United States are not under warranty for anything other than gasoline containing 10 percent ethanol or less. Currently, ethanol displaces about 2% of gasoline and saves relatively little in petroleum imports. Ethanol is not as energy efficient as gasoline. A 2006 study by Consumer Reports found that an E-85 vehicle delivered 27% less mileage than a similar gasoline-powered vehicle. A study from Stanford University found that ethanol-powered E-85 vehicles significantly increased ozone, a prime ingredient of smog.

While the Obama administration is all starry-eyed over “green” energy, it is unlikely that solar, wind, and biofuels taken together would ever account for more that 2- to 3% of total energy use. For the next few decades, at least, fossils fuels with continue to provide about 85% of energy.

What the government should do is remove restrictions to exploration and development of our domestic resources. For instance, in 2007, the Department of the Interior inventoried 99 million acres of federal land which it estimated to contain 21 billion barrels of oil and 187 trillion cubic feet of natural gas. DOI found that due to restrictive regulations “just 3 percent of onshore Federal oil and 13 percent of onshore Federal gas are accessible under standard lease terms.”

The Department of Energy estimates that the Green River formation in NW Colorado, SE Utah, and SW Wyoming contains 1.8 trillion barrels of oil in shale that could be economically produced. That is more than three times the total reserves of all Mid-East oil fields.

Off-shore resources are also restricted. The Minerals Management Service (of DOI) estimated that there are about 86 billion barrels of undiscovered, recoverable oil and about 420 trillion cubic feet of undiscovered, recoverable natural gas in the Federal Outer Continental Shelf of the United States, but 85% of this resource is off limits due to federal and state restrictions.

The U.S. has vast coal supplies which could be turned into gasoline, diesel, and other fuels. Coal reserves in Illinois alone, for instance, have the energy equivalent of all the oil in Saudi Arabia and Kuwait combined. The process was invented by the Germans in 1920 and perfected more recently by Sasol in South Africa. According to Business Week, Sasol “churns out 160,000 barrels of gasoline, diesel fuel, and jet fuel a day, enough to cover 28% of South Africa’s needs, without using a single drop of crude oil, imported or otherwise.” Cost is equivalent to about $30- to $35 per barrel of oil. This source alone could end our dependence on Mid-East oil.

Investors Business Daily (IBD) points out that China is attempting to lock up oil reserves throughout the world, including “in America’s backyard, Argentina, Venezuela, and Canada, and in a country America presumably dominates, Iraq.” At the same time, American oil companies are being discouraged by government, from exploring and exploiting domestic reserves. IBD opines that “What the world is witnessing is the largest peaceful transfer of power in history. Energy means power, and while the U.S. is consumed by environmental ideologies and climate rhetoric, it is committing economic hara-kiri in the process. China, riding on energy acquisitions with little competition, will propel itself into the economic stratosphere.” Obama’s stated goal of reducing our dependence on foreign oil seems to be based on a green fantasy, blinded by ideology.