New to Blog Roll: Minerals Make Life Blog

1 11 2011

The National Mining Association has re-launched its Minerals Make Life blog. Its blog entries focus on policy issues, innovation, security and the contribution of the mining sector to economic growth. The blog also contain a number of interesting information resources such as factsheets,slide shows, short movies and good reports. This report should be your reading this week.


The Unholy Art of Spin

13 04 2010

Last Monday’s explosion in West Virginia Upper Big Branch coal mine in which 29 out of the 31 miners present at the mine died has been the deadliest since the 1970s. Records of pervasive safety violations at the Upper Big Branch mine emerged. The heat is on for Massey Energy, the owner of the mine.

Amid flags raised at half-staff in the state of West Virginia, pleas for both answers and more stringent safety standards have been made. The industry felt compelled to unfold its crisis management strategy as greater stringency in mine safety requirements could have for effect of eroding bottom lines in the entire industry.

Strangely, in the realm of crisis management the U.S. coal industry and the Catholic Church were taking cues from the same PR handbook. I collected a number of statement made in connection with the Upper Big Branch disaster in order to apply what Maureen Dowd’s column “Should There Be an Inquisition for the Pope?” established as the 6-step unholy art of spin.

“First: Declare any new revelation old and unimportant”

Don Blakenship, CEO of Massey Energy, was prompt to inform the public that safety violations in coal mines are part of the lifestyle. In an interview on April 6th he said: “I mean violations are unfortunately a normal part of the mining process. You have inspections every day and it’s hard to differentiate sometimes between head count or number counts of violations and the seriousness or type of it.”

“Second: Blame Somebody Else –even if it’s the pope’s popular predecessor, on the fast track to sainthood.

Let’s leave the former pope out of this. There is a wave of finger-pointing going on. Who’s responsible? Dead miners? The Mine Safety and Health Administration (MSHA)?

In the same aforementioned interview, Don Blakenship said: [Upper Big Branch] was a mine that had violations. I think the fact that MSHA and the state and our firebosses and the best engineers you can find were all in and order this mine and all believed it was safe speaks for itself. None of these groups would have allowed this mine to operate had it been unsafe“. So in the end, the miners, the engineers and the MSHA were wrong about their assumptions. It’s not the company’s fault for pulling an Alan Greenspan either.

Miners however have blamed the Mine Safety and Health Administration for using timidly the powers that it has.

Third : Say Black is White

Rather than reiterating that safety violations in coal mine are a way of life Massey Energy has been trying to defend its safety record in a SEC Filing saying ” We do not condone any violation of MSHA regulations, and we strive to be in compliance with all regulations at all times“. “Most of the citations issued by MSHA to [Upper Big Branch] in the last year were resolved on the same day they were issued.” In fact, despite 20 employees killed at mines operated by Massey Energy [or contractors and subsidiaries], the lost-time incident rate is better a Massey.

“Fourth: Demonize gays, as Karl Rove did in 2004.”

This one does not apply.

“Fifth: Blame the victims”

See second item.

“Sixth: Throw gorilla dust”

In this case, the dust glitters. Here’s a quote from a New York Times article.

While blaming the U.S administration of reacting hysterically to the Upper Big Branch accident, Bill K. Caylor, president of the Kentucky Coal Association stated that “750 people die each year in the U.S from eating bad or ruined potato salad? Do you think we could get some new laws put on the books to control these deaths?

US Budget’s impact on resource industry sectors.

3 02 2010

Yesterday the U.S. President budget was made available and departments have published their Green Books. The latter expand on the President’s budget proposal and give clarifications on the measures and initiatives envisioned. A few items are of relevance to resource sectors and if implemented would end series of preferences strongly lobbied for by industry in the past.

Oil, gas and coal.

The President’s Budget, as currently standing, proposes to repeal about twelve tax preferences applicable to investments and expenses related to coal as well as oil and gas production activities. These include tax credits, exemptions, depletion deductions as well as accelerated capital cost allowances. These measures are being repealed as they counter the government’s objective of promoting renewable energy. This is also in line with the engagement taken by the United States in the G-20 Summit in Pittsburgh to phase out fossil fuels subsidies. Also, the repeal of these measures is expected to save the U.S. Government about US $39 billion in (otherwise foregone) revenues in the coming five years. For more information on the measures being repealed, refer to the Department of the Treasury’s Green Book.

Royalties and Industry Fees.

Let me quote. The current proposal” improves the return to taxpayers from U.S. mineral production through royalty reforms and industry fees.” The use of the word reform alone should have given you goose bumps but the use of “return to the taxpayer” is a further cause of horripilation as it hints at a rise in royalty rates. Take a deep breath; it might not be as bad as one would think.

The Department of Interior’s Green Book highlighted, among other things, that the royalty in-kind program will be terminated which is not new as the program started phasing-out in late 2009. The Department also hinted that royalty rates will be “adjusted” to ensure, for example, that proper royalties are paid on transported and processed natural gas. A lot will also be done to ensure compliance with the system of royalties which makes sense from a public finance perspective as royalties and other industry fees constitute the largest non-tax source of revenues.

In sum, measures targeted to extractive industries are aimed at raising revenues while closing loopholes and removing macroeconomic inefficiencies that are costly for government and have for effect of distorting the effective allocation of capital (I am talking about tax preferences here). I am unsure of how these measures are going to be welcomed by the industry. Actually that’s a lie. Nobody likes having its lollipop taken away. As industry prepares lobbying efforts, it could be interesting to follow this issue.

Less coal more cool

6 10 2009

Coal is controversial. Its place as part of countries’ energy mixes (from heavy to marginal reliance), mountaintop removal, and approvals of new coal fired plants haven given rise to much debate. I like to think that when it comes to coal less is more and for that specific reason signs of the demise of coal or at least the struggles of the industry are always pleasant to notice. Last week the sweet treat came courtesy of the US EPA who delayed 79 coal mining permits in four Appalachian states for mountaintop removal.

Mountaintop removal is the surface mining of coal using explosives to remove up to 300 vertical meters at a top of a mountain to expose the coal seams. This method is usually seen as a productive and economic way to mine coal as the output per worker per hour more than doubles in comparison to underground coal mining. It is also safer for workers but the benefits of surface coal mining end there. At the environmental level, the impacts of mountaintop removal are offsetting the economic benefits. Due to excess rock and soil being dumped into “valley fills”, water is contaminated in the process and substantial deforestation takes place. A study has shown that measures undertaken to mitigate the environmental impacts of mountaintop removal have little effect in reducing environmental damage. It is summarized here.

The mining permits delayed this week were delayed due to uncertain compliance with the US Clean Water Act. EPA stated in a letter that the applications have not yet adequately demonstrated that anticipated adverse environmental and water quality impacts have been fully avoided and minimized since more than 80% of the permits “exhibited the potential to cause or contribute to violations of applicable water quality standards”. The EPA required additional information regarding potential cumulative impacts as well as an assessment of the effectiveness of existing mitigation plans to compensate for anticipated loss of functions associated with the burial and mine through of headwater streams. If projects were approved as currently envisioned a total of 170 miles of streams would be buried under mine waste.

At the community level, the coal industry has been pretty swift in to taking the jobs and energy security rhetoric in reaction to the EPA’s announcements of delays. West Virginia Coal Association President Bill Raney said in a statement that “They don’t understand why Washington is willing to kill-off good paying jobs when our economy is still on the ropes and the unemployment rate is still unacceptably high”. This one sentence sums up well the reluctance of the industry to acknowledge the environmental challenges ahead of mankind. At least this time the industry made it without slamming climate change science. Perhaps the US coal industry could take note of the Dalai Lama’s comment when asked about the development of the oilsands:
In a choice between “destruction of environment or losing money, then we have to choose losing money.”

There are conflicting regulatory measures in the US regarding the disposal mine waste as, since 2001, tailings are considered to be fill material and can now be placed legally in a waterway and since December 2008 mining waste can be put directly into headwater waterways. The Clean Water Protection Act, being debated in Congress, would review the definition of fill material to exclude mining waste and would therefore forbid the disposal of tailings in waterways. Until this comes into force, one can only find comfort in the fact that some US utilities companies are shifting away from coal-fired power generation due to the US progressing towards a cap and trade. This is the case of the Arizona Public Service, the NV Energy, PNM Resources as well as California’s Pacific Gas and Electric (if I am not mistaken California aims to have a coal-free energy mix)

P.S. Browsing the web for this post, I found a lot of information on Coal Tattoo, a blog hosted on the Charleston Gazette’s website. It’s now on the blogroll.