The Oil Drum: Europe

Figure: Japanese researchers testing uranium extraction from seawater using a braided adsorbent fiber (JAEA 2006). Is this the way of mining of the future?

Ugo Bardi produced a rather grim look into the future with his recent piece on the Universal Mining Machine, and the various considerations of what we are going to do as the major mining sources of the different ores that are required start to run out.

I would rather like to take another tack, and comment instead on the need that the mining industry will face, at some point soon, in having to significantly change the way in which it mines and processes ore. Whether it is in the mining of the large volumes of rock that yield the coal and oil from tar sands for the fuels industry, or the deeply won gold, from narrow veins found miles underground, the current energy cost of those operations is starting to come into conflict already with other needs, in a time of shorter energy supply. One has only to look at the stories that Leanan has been catching that have reported on the energy shortage in South Africa, to begin to see the start of the conflict. And although the current mine problems may have been overcome in South Africa itself, the “knock-on” effect in countries such as Botswana continues, with doubts as to where they will now get power.

Original Story from Monash University Faculty of Engineering: http://www.monash.edu.au/news/newsline/story/1231

A Monash University environmental engineer has warned in a new report that mineral resources are running out, excavation costs are escalating and the environmental costs of mining are devastating.

The world-first report, The Sustainability of Mining in Australia: Key Trends and Their Environmental Implications for the Future, was authored by Monash researcher and lecturer Dr Gavin Mudd in conjunction with the independent Mineral Policy Institute.

Dr Mudd said the statistics were alarming. "On average, 27 tonnes of greenhouse emissions are created to mine a tonne of uranium. That's equivalent to the annual emissions of nine family cars. To mine one kilogram of gold it takes 691,000 litres of water, and it takes 141 kilograms of cyanide to produce a single kilogram of gold.

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The week after we saw bank runs in the UK, a measure of calm has returned to the markets thanks to a combination of central bank bailouts, government deposit guarantees and interest rate cuts. For all that heavy intervention, one derivatives market expert warns that we are still at the beginning of the beginning of the credit crunch.

On the Canadian energy scene, the debate over the Alberta oil and gas royalties review continues. Alberta, which has lower royalties than comparable jurisdictions, wants its fair share, but that could affect Ottawa's tax take. Investors concerned about the royalty issue seem keen to extract themselves from tar sands investments. With the Canadian dollar at parity with the US dollar for the first time since 1976, there are concerns about the ability of the Canadian economy to adapt and compete.

Concerns on the climate front center on the potential for methane-powered runaway warming thanks to new research on the Paleocene-Eocene Thermal Maximum. The direct relationship between carbon offsets and increasing child labour in the third world is also worth highlighting.

Are we headed for an epic bear market?

One of the world's leading experts on credit derivatives, Das is the author of a 4,200-page reference work on the subject, among a half-dozen other tomes. As a developer and marketer of the exotic instruments himself over the past 30 years. He seemed like the ideal industry insider to help us get to the bottom of the recent debt crunch -- and I expected him to defend and explain the practice.

I started by asking the Calcutta-born Australian whether the credit crisis was in what Americans would call the "third inning." This was pretty amusing, it seemed, judging from the laughter. So I tried again. "Second inning?" More laughter. "First?"

Still too optimistic. Das, who knows as much about global money flows as anyone in the world, stopped chuckling long enough to suggest that we're actually still in the middle of the national anthem before a game destined to go into extra innings. And it won't end well for the global economy....

....When you add it all up, according to Das' research, a single dollar of "real" capital supports $20 to $30 of loans. This spiral of borrowing on an increasingly thin base of real assets, writ large and in nearly infinite variety, ultimately created a world in which derivatives outstanding earlier this year stood at $485 trillion -- or eight times total global gross domestic product of $60 trillion.

Ottawa Transit Derailed: An Interview with Clive Doucet

Residential, commecial and road builders have made and contine to make billions of dollars from this model. In fact, the principal industry in North America has been the construction of mall-sprawl suburbs. So the long and short of it is there are enormous vested interests in continuing the urban growth model exactly as it has been undertaken now for more than fifty years.

'New ideas' like electric light rail create entirely different kinds of growth patterns. They are more pedestrian oriented, consume less land and require a more diverse and complex building pattern. The developer just can't rip off the top soil from the farmer's field and then lay out his suburban grids which has the fewest construction costs and largest profits. Electric light rail changes all this.

Another reason why it is so difficult to make happen is that the initial costs are not incremental. Our council increases the city's road network by 100 kilometers a year and spends $600 million total on roads just for repair and expansion, but it's always increased incrementally. Each road expansion or reconstruction can cost anywhere from $5 million to $100 million. There are so many of them that they become part of the background financial noise of the city.

In contrast, a public transit project like light rail requires a more difficult, more complex environmental assessment than a road environmental assessment, requires more initial funding than a road project, and can't serve everyone all the time everywhere - unlike roads, which are perceived as a universal service when in fact they are no more than public transit is. There are many roads in Ottawa I've never driven on and never will.

The final large reason is that there is no federal or provincial funding programs for public transit systems. Canada is the only G-8 country that has no ongoing federal or provincial urban transit funding. Ottawa suffered through all of these limitations, fought for and got $400 million in special project funding from the federal government and the province ($200 million each); fought through the environmental assessments, project definition, and so on.

But unlike every other Canadian city, Ottawa had a senior federal minister deliberately interfering to make sure the project never happened for partisan political ambitions.

In my last post I commented that, while the mining industry was rejoicing in the increase in demand for coal, the impact of the underlying cause (Peak Oil) was not fully appreciated.  I had lunch yesterday with an engineer who has some responsibility in the SME, as well as a corporate job.  While I talked to him about the SME role in looking into ways of saving energy within the industry (where there are a number of processes that could be made more efficient) the answer was that the Mining Industry of the Future program at DoE had tried to do just that, and had just turned into toast.  Thus it was not a really positive thing to push.  So we talked some more, and after a while he switched to his company job role. And admitted that energy costs were the greatest current problem that he, his company, and the entire industry, are facing.  

And yet he still, the Peabody speech not withstanding, did not see this as a long-term continuing problem, but still as a short-term phase to get through.  The point being that it is short-term it's not worth the effort and cost to find alternative less-energy-intensive processes, if it is long-term, then you have to look at entire processes and make the investment (which can be high), to find lower-energy-cost alternative solutions.  (We had a variant of this discussion earlier in the year in regard to the poor and heating bills.  If the crisis is short-term you pay their bills, if it is long-term you are better to pay to insulate their houses - as a very crude summary of that debate and as an illustration of the point).