permitting

Permitting, Economic Value, and Mining in the United States

A new report commissioned by the National Mining Association finds that our current convoluted mine permitting process can cause a mine to lose a third of its value as it waits for the numerous permits needed to begin production. These delays, combined with other risks and costs, cut the expected value of a mine in half. This often makes minerals projects economically unviable and jeopardizes an important feedstock of the manufacturing industry while discouraging investment in the U.S.

The report, produced by SNL Metals & Mining of London, can be downloaded here.

The report begins:

“Of all the developed nations, unexpected and often unnecessary delays in obtaining mining permits afflict the U.S. most severely. Despite being blessed with a vast reserve of mineral resources, the U.S. accounts for only 7 percent of world-wide spending on mineral exploration

and production is currently reliant on a population of mature mining projects. The average remaining life of active mines in the U.S. and the share of projects in advance development have also fallen in recent years. Meanwhile, the demand for minerals to supply the defense, advanced energy, high-tech electronics, medical, and transportation industries is rising. The U.S., while leading on the manufacturing of these technologies, is lagging in the production of the minerals needed to make them.”

It also notes:

“In the U.S., the requirement for multiple permits and multiple agency involvement is the norm, as is the involvement of other stakeholders, including local indigenous groups, the general public and non-governmental organizations. As a consequence of the country’s inefficient permitting system, it takes on average seven to 10 years to secure the permits needed to commence operations in the U.S. To put that into perspective, in Canada and Australia, countries with similarly stringent environmental regulations, the average permitting period is two years.”

Three examples cited by the report are examined in detail:

The Rosemont Copper

project in Arizona continues in its attempts to secure permits, five years after the originally planned start date of 2010. Over this period, the value of the project has fallen from $18 billion to $15 billion despite much higher copper prices.

The Kensington gold mine

in Alaska was plagued by permitting issues during development. It commenced production in 2010, nearly 20 years after the originally planned start date of 1993. By the time the mine opened, the capital cost of building the mine had increased by 49 percent, and the company had reduced planned gold production by nearly a third, to focus mining operations on the most profitable part of the deposit only.

Twin Metals Minnesota

is still in a relatively early stage of the permitting process, completing a prefeasibility study in 2014. The developers have acknowledged that the delay in receiving permits, or the possibility of denial, could be a significant business risk to the project.

Another article from NMA, contains comments by Harry Moser, founder and president of the Reshoring Initiative, a program committed to bringing manufacturing back to American soil to accelerate job growth and support a stronger economy here at home.

Moser notes:

“Every manufacturing operation in the U.S. uses minerals—either as the material that they’re producing or the tools they use to produce the material.” As the U.S. manufacturing sector grows, so does the demand for more minerals, and to keep American manufacturing growing it’s important that the U.S. has a secure, stable and reliable mineral supply in place so manufacturers can obtain the minerals they need when they need them.

“My goal is to balance the trade deficit,” Moser adds, “To bring back $500 to $600 billion dollars a year worth of manufacturing. That will increase U.S. manufacturing by 30 percent, which will require about 30 percent more minerals.”

The House Committee on Natural Resources is holding hearings on the “National Strategic Critical Minerals Production Act of 2015.” This bill aims to modernize the current U.S. mine permitting process by improving access to the trillions of dollars worth of mineral reserves, which will boost domestic manufacturing and the American economy.

It’s about time.

Related articles:

How NEPA crushes productivity

Pima County versus Rosemont

Jaguars versus the Rosemont mine

Rosemont and the Cuckoo scam

And, by David Briggs:

Congressman Grijalva Attempts To Undermine Our Economy And National Security

Resolution Copper-Setting the Record Straight about Oak Flat

America’s mining industry is vital to our economic and national security

 

ADEQ shows a better way for environmental permitting and protection

The Arizona Department of Environmental Quality (ADEQ) has the mission to protect public health and the environment.  They have to vet and permit operations big and small.  They do this through three main divisions: Air Quality, Waste programs, and Water Quality.

In a previous post, “How NEPA crushes productivity,” I wrote about the National Environmental Policy Act (NEPA), a byzantine Federal bureaucratic maze that stifles productivity.  The length, complexity and uncertainty of the permitting process of NEPA now takes a mining company about 10 years to obtain the necessary Federal permits for a major project.  That puts the U.S. at a competitive disadvantage since other countries are more efficient in this regard.  For instance, permitting time in Canada and Australia is typically less than two years.

In contrast to the Federal NEPA process, ADEQ has a process that gets the job done much more efficiently and now ADEQ is striving to make it even better.  The ADEQ system should be a model for the Feds.

I asked ADEQ Director Henry Darwin some questions about the philosophy and workings of ADEQ:

Wryheat: 1. What advancements in regulations and permitting time lines has ADEQ made recently?

Darwin:

ADEQ has applied “Lean techniques” to its permitting processes and is now making permitting decisions much faster.  Permits that previously required 18 months to process are now being processed in less than a year.  Certain interim permitting steps, administrative review for example, previously took up to 60 days and can now be completed in a single meeting.

Wryheat note: “Lean techniques” according to Wikipedia “is a production practice that considers the expenditure of resources for any goal other than the creation of value for the end customer to be wasteful, and thus a target for elimination. Working from the perspective of the customer who consumes a product or service, ‘value’ is defined as any action or process that a customer would be willing to pay for.  Essentially, lean is centered on preserving value with less work.”

Wryheat: 2. Do you believe that economic activity, especially mining, can co-exist with good environmental stewardship? If so, how?

Darwin:

I have long believed environmental protection and economic development go hand in hand. It is a little recognized fact that poor countries and countries that are emerging from poverty have the most difficult time protecting the environment. The converse is also true; a strong economy provides society the wherewithal to protect the environment.  As a result, the best indicator of a healthy natural environment is often a healthy economic environment.

Wryheat: 3. To some, mining and environmental quality are opposites. How does ADEQ reconcile the apparent conflict?

Darwin:

This is a false choice. Prudent use of natural resources and environmental protection are not at odds. Conflict between the two only arises at the extreme of either activity, and legal protections exist to minimize mining’s adverse impacts. ADEQ doesn’t get to decide whether a mine opens, but through our permitting processes, we ensure mining operations occur in an environmentally responsible way that limits harmful emissions to our air, water and soil. It’s worth noting, as important as the mining industry is to Arizona’s economy, our state leaders recognized the value in protecting our precious natural resources. This is why they passed the Environmental Quality Act in 1986, which not only established ADEQ as a separate, cabinet level agency, but also created the Aquifer Protection Permit program, the first comprehensive groundwater protection program in the nation. As a result, every mine that operates in Arizona must obtain a permit that ensures groundwater is protected.

Wryheat: 4. What do you regard as the minimum time for ADEQ to vet a major project and what does the process consist of?

Darwin:

In the recent past we have permitted several large projects in as little as six months, but timeframes are project-specific and providing a general timeframe would be subject to error. We encourage any party who is planning a major project to visit with us to establish a plan for expeditious permitting. An expeditious process consists of the following major steps:

Pre-Application Meeting: Face to face pre-application meeting

Administrative Review: A real time and face to face administrative review meeting to make sure the applications is complete

Substantive Review: Regular phone contact between the ADEQ permit writer and the applicant’s consultant during substantive review

Applicant Review of Permit Conditions

Public Comment

Public Comment Response

Final Payment

Issue Permit

Wryheat: 5. Does ADEQ regard itself, in its role of protecting the environment, a partner of business or a strict watchdog, or both? How is that reconciled?

Darwin:

As I said in my response to Question 2, above, a strong economy and safe, healthy environment are not adversarial. In fact, one of our agency’s strategic goals is to support environmentally responsible economic growth. Companies that do business in Arizona often require our products and services (permits, or example) in order to operate. Such companies are, in fact, our customers, and ADEQ must deliver value as our customers define it. This doesn’t mean we give our customers everything they want, because the customer is not always right. We have shareholders, too, namely taxpayers, who require a solid return on their investment; they want clear skies, clean water and land that is safe to roam, work and play. There must always be a healthy balance between delivering customer value and providing that solid return on investment for Arizona taxpayers.

I asked some representatives of the mining industry about their perception of ADEQ.

From Kathy Arnold, VP Environmental & Regulatory Affairs, Rosemont Copper Company:

ADEQ has made great strides with permitting both in setting specific requirements and in setting specific timeframes. This gives businesses the certainty necessary for determining timeframes.  ADEQ has been working on developing processes and rules for programs and their stakeholder system allows people to give input necessary so rules can be fully vetted and understood before implementation. The overall process for permits is fair and can be followed without political interference. The enforcement of the rules and permits is tough but again fair.  

From  Steve Trussell, Executive Director, Arizona Rock Products Association:

The ADEQ has recently worked on several projects that have been of key interest to citizens of our state in terms of air and water quality, but two that come to mind as of late are efforts to respond to  components of Governor Jan Brewer’s Four Cornerstones Document which was presented at the State of the State Address in January of this year. 

The ADEQ began the laborious task of process waste reduction regarding the amount of steps it takes to get a permit out the door by reducing licensing time frames.  ADEQ hosted events which included stakeholders in order to identify the factors that arise in permitting that could be potentially holding up permit approvals.  Permitting can be a challenge depending on the specific project and the current regulatory requirements and is a key factor in business investment in Arizona.  ADEQ has employed LEAN process improvements that have and will continue to reduce permitting delays for both air and water permitting and will be implementing the lessons learned across the boards and within all sections of the agency.  The agency reports that processing times have been reduced by one-third and have allowed companies to allocate valuable resources elsewhere. 

Additionally, the ADEQ will further enjoy expeditious submittals, approvals and reporting compliance as a result of their proposed e-portal which will allow the agency to move in a paperless direction.  The portal will enable a permitted source to track, report and submit payment on all of their various permits with the agency, and all in one place.  A process that once required a tremendous amount of time and effort from a record keeping and delivery standpoint would now be possible at the project site.

These are merely a few examples of progressive steps the ADEQ has taken to be protective of the environment while addressing time and resource sensitivity of Arizona’s businesses. Governor Brewer had this to say about the initiative, “The completion of this project, with its cost savings, convenience, and compliance assistance, will be a boon to business regulated by the ADEQ and help attract new business to Arizona” and the members of the Arizona Rock Products Association. couldn’t agree more.  All business organizations regulated by the ADEQ should encourage the legislature to support this laudable effort.

Mr. Darwin sent me some information on the proposed e-portal Mr. Trussel mentioned.  The new site will be called MyDEQ.  The program “will  funded through existing revenue ($10 million) from the Vehicle Emissions Inspections Fund.”

Here are some highlights of the proposed program:

MyDEQ1

MyDEQ2

The Federal government should take notice of ADEQ methods and try to emulate them.

See also:

Mining and the bureaucracy

How NEPA crushes productivity

Uncorrected Forest Service errors block marble mine

Pima County versus Rosemont

The importance of minerals to our economy and national security