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The Iron Law of Toxic Extraction

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The alkylation unit at this Tesoro refinery might serve as the gateway to the Norse hell. A network of pipes carries sulfuric acid, kept below 0 centigrade to avoid boiling. The acid corrodes the pipes as it surges to catalyze and break the energy chains of highly explosive hydrocarbons. Constant care and vigilance are vital. But workers here feared the alkylation unit. Tesoro refused to fix corroded and leaky pipes and provided insufficient acid to stabilize the catalytic process. It was not surprising last week when the pipes burst, and two workers had to be helicoptered to the hospital. Indeed, the same joint sprang a leak four days later.

Stunningly, Tesoro now won't let the U.S. Occupational Safety and Health Administration into the plant to inspect it. OSHA has worried about safety at Tesoro since a fire at the company's Anacortes, Washington refinery killed seven workers. But the company refuses to admit that the Pacheco accident was even serious.

So a well-understood and established industrial process -- refining oil -- conducted in two states with rigorous environmental regulation and robust enforcement, every year, kills or injures workers. And the company responsible stonewalls inspectors.

Is this an anomaly, a unique rogue corporation? Not really. Just down the road, the much bigger refinery operated by Chevron suffered a major explosion and fire in 2012, after an earlier 2007 blast. The Chemical Safety Board concluded, "Chevron repeatedly, over a 10-year period, failed to effectively apply inherently safer design principles and upgrade piping at its crude oil processing facility."

What is at work here is the Iron Law of Toxic Extraction. Any commodity whose extraction or processing entrains large volumes of toxic materials will, on the average, be a bad neighbor. It doesn't matter if the toxics are the mineral itself (mercury, lead), associated minerals (heavy metals in gold and silver mines) or process chemicals (acid in refineries). Producers will routinely under invest in risk management and oversight, will drift into short-cuts, suffer avoidable accidents and occasional catastrophes.

The strength of the Iron Law is revealed by the frequency, the severity and the ubiquity of resource extraction disasters. In the same week as the Tesoro accident, the New York Times reported that residents in the Red Water Pond Road Navajo community faced permanent loss of lands heavily contaminated by uranium mining tailings. North Carolina was cleaning up two failed coal ash impoundments which polluted the Dan River, and West Virginia was dealing with its third coal industry water pollution spill in a month. Around the globe, Government of China estimated that it faces a $330 billion clean up bill for water pollution clean up, a huge portion from mining and mineral processing.

The Iron Law can best be understood by looking at the world's largest known reserve of gold, the Grasberg Mine in Irian Jaya. Freeport McMoran, its owner, extracts gold, silver and 600,0000 tons of copper, using mining techniques which would be illegal in the U.S. (This caused Freeport to lose its Overseas Public Investment Corporation pollution insurance -- a first for the Agency.)

With copper at $7000 per ton, and gold at over $1000 per ounce, Grasberg looks profitable -- $4 billion a year profitable. So it could easily afford to control its pollution -- as it claims to. Right? Well, the Iron Law tells us, "not really."

In extracting this metal, Grasberg releases 200,000 tons of toxic waste each day into local rivers. Another 730,000 tons of overburden, laden with sulfuric acid and other pollutants, is dumped around the mine site. For every ton of copper, silver or gold the mine produces, then, Freeport must "manage" 565 tons of hazardous waste.

Freeport's profit margin in copper is less than $1000 per ton. Spread $1000 to manage 565 tons of toxics mine waste and you don't have much room to do it right. In fact, it's perfectly plausible that the world's biggest vein of gold wouldn't be profitable to mine -- if Freeport actually did it safely.

Sludge pits, flare stacks, ash piles, tailings ponds, slag heaps, overburden retaining walls, acid mine drainage, leach tanks and slurry ponds are all examples of the ploys that mining, drilling, smelting and refining companies fall back on when the volume of toxic by-products they generate overwhelm genuine risk management mechanisms.

None of them keep us safe -- they just store the materials or partially neutralize them until something goes wrong.

Toxic chemicals of course, are used in almost everything -- solar panels, pharmaceuticals and smart phones included. But high value products generating low volumes of toxic waste compensate producers to clean up safely -- if society is vigilant and demands it. When Silicon Valley chip manufacturers polluted aquifers in San Jose it was sloppiness, not the iron law -- and they don't do so today. Computer prices haven't noticed the extra costs. But raw materials whose production generates vast volumes of poison adhere to different economic rules, as Grasberg illustrates.

(The Iron Law can be seen working in reverse at the Fukushima nuclear disaster. The overwhelming failure of TEPCO is trying to clean up the disaster is not its inability to handle the concentrated -- but high value --fuel rods, it's the vast volume of ground water pouring through the site which has become a man-made catastrophe.)

Society's response to these risks is two fold, and the importance of the Iron Law is to remind us that only one of them is globally effective. The first, which works, is to use less of resources subject to the Iron Law of Toxic Extraction by wasting less, recycling more and finding safe substitutes. The second, on which we over-rely, is to regulate producers more closely, establish tougher safety standards and more stringent enforcement regimes.

The problem with regulatory stringency is that only the highest margin producers can tolerate investing the huge sums of money needed to secure high volumes of toxics. And only the most stringent and strongly governed jurisdictions will insist on such investments.

If for every ton of a metal you produce you must manage hundreds of tons of waste, you have to be mining a very rich lode to make money. And only a few ore bodies or oil fields -- by definition always a minority -- will be exceptionally profitable. Operators in the rest must, to survive, cut corners and lower standards. If a province or nation genuinely cracks down, the local risk may vanish -- because the mine or the field shuts down. Not every permit gets issued, not every seam is mined. Standards, if enforced, do work. But if the difference between profitable mining and bankruptcy is the presence of a weak pollution control agency, flaccid regulators can always be found or encouraged somewhere. Most extraction ends up in such geographies. As long as demand for the underlying product continues unabated, regulation really hasn't made the world safer.

Petroleum refiners will cry foul about this blog -- claiming that the volume of toxic material they produce is small enough, and the gasoline and diesel they produce valuable enough, that they can manage it safely -- even though Chevron and Tesoro didn't.

Well, that's arguably true for Kuwaiti sweet crude, costing $10 per barrel to pump, light on contaminants, and selling for $100. But if you want to understand what the Iron Law means when you apply it to low grade, highly toxic resources like tar sands oil, take a look at this video, showing the pile of petroleum coke which Marathon oil has produced on the Detroit River in only a year of refining tar sands oil. Pet coke is an unavoidable and unique by-product of refining tar sand oil, bitumen. These tar sands producers are running on very thin profit margins -- even $5 a barrel in added costs can turn them from black to red. So managing pet coke safely isn't really -- whatever they promise -- an option for these refineries. They can't even afford to cover the piles!

It's the iron law at work again.


A veteran leader in the environmental movement, Carl Pope spent the last 18 years of his career at the Sierra Club as CEO and chairman. He's now the principal advisor at Inside Straight Strategies, looking for the underlying economics that link sustainability and economic development. Mr. Pope is co-author -- along with Paul Rauber --of Strategic Ignorance: Why the Bush Administration Is Recklessly Destroying a Century of Environmental Progress, which the New York Review of Books called "a splendidly fierce book."

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