Resource extraction ■ Two oil fields ■ Oil company motives ■ Hardrock mining operations ■ Mining company motives ■ Differences among mining companies ■ The logging industry ■ Forest Stewardship Council ■ The seafood industry ■ Businesses and the public ■
All modern societies depend on extracting natural resources, both non-renewable resources (like oil and metals) and renewable ones (like wood and fish). We get most of our energy from oil, gas, and coal. Virtually all of our tools, containers, machines, vehicles, and buildings are made of metal, wood, or petrochemical-derived plastics and other synthetics. We write and print on wood-derived paper. Our principal wild sources of food are fish and other seafoods. The economies of dozens of countries depend heavily on extractive industries: for instance, of the three countries where I’ve done most of my fieldwork, the main props of the economy are logging followed by mining in Indonesia, logging and fishing in the Solomon Islands, and oil, gas, mining, and (increasingly) logging in Papua New Guinea. Thus, our societies are committed to extracting those resources: the only questions involve where, in what amounts, and by what means we choose to do so.
Because a resource extraction project usually requires large capital inputs up front, most of the extraction is done by big businesses. Familiar controversies exist between environmentalists and big businesses, which tend to view each other as enemies. Environmentalists blame businesses for harming people by damaging the environment, and routinely putting the business’s financial interests above the public good. Yes, those accusations are often true. Conversely, businesses blame environmentalists for routinely being ignorant of and uninterested in business realities, ignoring the desires of local people and host governments for jobs and development, placing the welfare of birds above that of people, and failing to praise businesses when they do practice good environmental policies. Yes, those accusations too are often true.
In this chapter I shall argue that the interests of big businesses, environmentalists, and society as a whole coincide more often than you might guess from all the mutual blaming. In many other cases, however, there really is a conflict of interest: what makes money for a business, at least in the short run, may be harmful for society as a whole. Under those circumstances, the behavior of businesses becomes a large-scale example of rational behavior on the part of one group (a business in this case) translating into disastrous decision-making by a society, as discussed in the preceding chapter. This chapter will use examples from four extractive industries, of which I have firsthand experience, to explore some of the reasons why different companies perceive it as being in their interests to adopt different policies, either harming or sparing the environment. My motivation is the practical one of identifying what changes would be most effective in inducing companies that currently harm the environment to spare it instead. The industries that I shall discuss are oil, hardrock mining and coal, logging, and marine fishing.
My experience of the oil industry in the New Guinea region has involved two oil fields at opposite ends of the spectrum of harmful versus beneficial environmental impacts. I found these experiences instructive, because I had previously assumed that oil industry impacts were overwhelmingly harmful. Like much of the public, I loved to hate the oil industry, and I deeply suspected the credibility of anyone who dared to report anything positive about the industry’s performance or its contribution to society. My observations forced me to think about factors that might encourage more companies to set positive examples.
My first experience of an oil field was on Salawati Island off the coast of Indonesian New Guinea. The purpose of my visit there had nothing to do with oil but was part of a survey of birds on islands of the New Guinea region; it merely happened that much of Salawati had been leased for oil exploration to the Indonesian national oil company, Pertamina. I visited Salawati in 1986 with the permission and as a guest of Pertamina, whose vice president and public relations officer kindly provided me with a vehicle to drive along company roads.
In view of that kindness, I am sorry to report on the conditions that I encountered. From a long distance, the field’s location could be recognized by a flame shooting out of a high tower, where natural gas obtained as a by-product of oil extraction was being burned off, there being nothing else to do with it. (Facilities to liquefy and transport it for sale were lacking.) To construct access roads through Salawati’s forests, swathes 100 yards wide had been cleared, much too wide for many species of New Guinea rainforest mammals, birds, frogs, and reptiles to cross. There were numerous oil spills on the ground. I encountered only three species of large fruit pigeons, of which 14 have been recorded elsewhere on Salawati and which are among the prime targets of hunters in the New Guinea region because they are large, meaty, and good to eat. A Pertamina employee described to me the location of two pigeon breeding colonies, where he said that he hunted them with his shotgun. I assume that their numbers within the field had been depleted by hunting.
My second experience was of the Kutubu oil field that a subsidiary of the large international oil company Chevron Corporation operated in the Kikori River watershed of Papua New Guinea. (I shall refer to the operator for short as “Chevron” in the present tense, but the actual operator was Chevron Niugini Pty. Ltd., a wholly owned subsidiary of Chevron Corporation; the field was a joint venture of six oil companies, including Chevron Niugini Pty. Ltd.; the parent company Chevron Corporation merged in 2001 with Texaco to become ChevronTexaco; and in 2003 ChevronTexaco sold its interests in the joint venture, whose operator then became another one of the partners, Oil Search Limited.) The environment in the Kikori River watershed is sensitive and difficult to work in because of frequent landslides, much limestone karst terrain, and one of the highest recorded rainfalls in the world (on the average, 430 inches per year, and up to 14 inches per day). In 1993 Chevron engaged World Wildlife Fund (WWF) to prepare a large-scale integrated conservation and development project for the whole watershed. Chevron’s expectation was that WWF would be effective at minimizing environmental damage, lobbying the Papua New Guinea government for environmental protection, serving as a credible partner in the eyes of environmental activist groups, benefiting local communities economically, and attracting World Bank funding for local community projects. From 1998 to 2003 I made four visits of one month each to the oil fields and watershed as a consultant to WWF. I was allowed freedom to travel throughout the area in a WWF vehicle and to interview Chevron employees privately.
As my airplane flight from Papua New Guinea’s capital of Port Moresby droned on towards the field’s main airstrip at Moro and was approaching its scheduled arrival time, I looked out the airplane window for some signs of the oil field infrastructure that I expected to see looming up. I became increasingly puzzled still to be seeing only an uninterrupted expanse of rainforest stretching between the horizons. Finally, I spotted a road, but it was only a thin cleared line about 10 yards broad through the rainforest, in many places overhung with trees growing on either side—a birdwatcher’s dream. The main practical difficulty in rainforest bird studies is that it’s hard to see birds inside the forest itself, and the best opportunities to observe them are from narrow trails where one can watch the forest from the side. Here was such a trail over 100 miles long, from the highest oil field at an altitude of nearly 6,000 feet on Mt. Moran down to the coast. On the following day, when I began walking along that pencil line of a road during my surveys, I found birds routinely flying across it, and mammals, lizards, snakes, and frogs hopping, running, or crawling across it. It turned out that the road had been designed to be just broad enough for two vehicles to pass safely in opposite directions. Initially, the seismic exploration platforms and exploration oil wells had been put in without construction of any access roads at all, and had been serviced instead just by helicopter and on foot.
My next surprise came when my plane landed at Chevron’s Moro airstrip, and again later when I flew out. Although I had already gone through baggage inspection by the Papua New Guinea Customs Department upon my arrival in the country, on both arrival and departure at Chevron’s airstrip I had to open all my bags for further inspections more thorough than on any other occasion I had experienced except when I flew to Israel’s Tel Aviv airport. What were those inspectors looking for? On the flight in, the articles absolutely forbidden were firearms or hunting equipment of any sort, drugs, and alcohol; on the flight out, animals or plants or their feathers or parts that might be smuggled. Violation of those rules results in immediate automatic expulsion from company premises, as a WWF secretary innocently but foolishly carrying a package for someone else discovered to her misfortune (because the package turned out to contain drugs).
A further surprise came the next morning, after I had walked out on the road before dawn to bird-watch and returned a few hours later. The camp safety representative summoned me to his office and told me that I had already been reported for two violations of Chevron regulations, which I was not to repeat. First, I had been noticed stepping several feet out into the roadway to observe a bird. That posed the hazard that a vehicle might hit me, or that in swerving to avoid hitting me it might crash into an oil pipeline at the side of the road and cause an oil spill. From now on, I should please stay off the road while bird-watching. Second, I had been seen bird-watching while not wearing a protective helmet, but this whole area was a hardhat area; at this point the officer gave me a hardhat, which I should henceforth please wear for my own safety while bird-watching, e.g., in case a tree fell.
That was an introduction to Chevron’s extreme concern, constantly instilled in its employees, about safety and environmental protection. I have never observed an oil spill on any of my four visits, but I do read the reports posted each month on Chevron bulletin boards about incidents and near-incidents, which are the concern of the safety representative who travels around by plane or truck to investigate each. Out of interest, I recorded the full list of 14 incidents from March 2003. The most serious near-incidents requiring scrutiny and review of safety procedures in that month were that a truck backed into a stop sign, another truck was reported with its emergency brake improperly set, a package of chemicals lacked the correct paperwork, and gas was found leaking from a compressor needle valve.
My remaining surprise came in the course of bird-watching. New Guinea has many bird and mammal species whose presence and abundance are sensitive indicators of human disturbance, because they are either large and hunted for their meat, hunted for their spectacular plumage, or else confined to the interior of undisturbed forests and absent from modified secondary habitats. They include tree kangaroos (New Guinea’s largest native mammals); cassowaries, hornbills, and large pigeons (New Guinea’s largest birds); birds of paradise, and Pesquet’s Parrot and other colorful parrots (valued for their beautiful plumage); and hundreds of species of the forest interior. When I began bird-watching in the Kutubu area, I anticipated that my main goal would be to determine how much less numerous these species were inside the area of Chevron’s oil fields, facilities, and pipeline than outside it.
Instead, I discovered to my astonishment that these species are much more numerous inside the Chevron area than anywhere else that I have visited on the island of New Guinea except for a few remote uninhabited areas. The only place that I have seen tree kangaroos in the wild in Papua New Guinea, in my 40 years there, is within a few miles of Chevron camps; elsewhere, they are the first mammal to become shot out by hunters, and those few surviving learn to be active only at night, but I saw them active during the day in the Kutubu area. Pesquet’s Parrot, the New Guinea Harpy Eagle, birds of paradise, hornbills, and large pigeons are common in the immediate vicinity of the oil camps, and I have seen Pesquet’s Parrots perching on the camp communications towers. That’s because there is an absolute prohibition against Chevron employees and contractors hunting any animal or fishing by any means in the project area, and because the forest is intact. The birds and animals sense that and become tame. In effect, the Kutubu oil field functions as by far the largest and most rigorously controlled national park in Papua New Guinea.
For months, I was greatly puzzled by these conditions in the Kutubu oil field. After all, Chevron is neither a non-profit environmental organization, nor a National Park Service. Instead, it is a for-profit oil company, owned by its shareholders. If Chevron were to spend money on environmental policies that ultimately decreased its profits from its oil operations, its shareholders would and should sue it. The company evidently decided that those policies would ultimately help it make more money from its oil operations. How do they help?
Chevron company publications refer to concern for the environment itself as a motivating factor. That is undoubtedly true. However, in conversations over the last six years with dozens of lower-level as well as senior Chevron employees, employees of other oil companies, and people outside the oil industry, I have come to realize that many other factors as well have contributed to these environmental policies.
One such factor is the importance of avoiding very expensive environmental disasters. When I asked a Chevron safety representative who happened to be a bird-watcher what had prompted these policies, his short answer was: “Exxon Valdez, Piper Alpha, and Bhopal.” He was referring to the huge oil spill from the running aground off Alaska of Exxon’s oil tanker the Exxon Valdez in 1989, the 1988 fire on Occidental Petroleum’s Piper Alpha oil platform in the North Sea that killed 167 people (Plate 33), and the 1984 escape of chemicals at Union Carbide’s Bhopal chemical plant in India that killed 4,000 people and injured 200,000 (Plate 34). These were three of the most notorious, best-publicized, and most expensive industrial accidents of recent times. Each of them cost the company responsible billions of dollars, and the Bhopal accident ultimately cost Union Carbide its existence as an independent company. My informant could also have mentioned the blowout and catastrophic oil spill at Union Oil’s Platform A in the Santa Barbara Channel off Los Angeles in 1969, serving already then as a wake-up call for the oil industry. Chevron and some of the other large international oil companies thereby realized that, by spending each year an extra few million dollars on a project, or even a few tens of millions of dollars, they would save money in the long run by minimizing the risk of losing billions of dollars in such an accident, or of having an entire project closed down and losing its whole investment. One Chevron manager explained to me that he had learned the economic value of clean environmental policies when he was responsible for cleaning up oil pits in a Texas oil field and found that the cleanup cost for even a small pit averaged $100,000. That is, cleaning up pollution is usually far more expensive than preventing pollution, just as doctors usually find it far more expensive and less effective to try to cure already sick patients than to prevent diseases in the first place by cheap, simple public health measures.
In prospecting for oil and then building an oil field, an oil company makes a large initial investment in a field that remains a producing asset for between 20 and 50 years. If your environmental and safety policies reduced your risk of a big oil spill to “only” once every decade on the average, that would not be nearly good enough, because you would then have to expect between two and five big oil spills in your 20 to 50 years of operations. It’s essential to be more rigorous. I first encountered this long-range outlook of oil companies when I was contacted by the director of a London office of Royal Dutch Shell Oil Company. That office’s job is to try to predict likely alternative scenarios for the state of the world 30 years from now. The director explained to me that Shell operates that office because it expects a typical oil field to be operated for several decades, and it needs to understand the likely shape of the world several decades in the future if it is to be able to invest intelligently.
A related factor is public expectations. Unlike the toxic mine runoffs to be discussed below, oil spills tend to be highly visible, and often their occurrences are sudden and obvious (as when a pipeline, platform, or tanker breaks or blows out). The impact of the spill is also usually obvious, for instance in the form of oil-coated dead birds whose pictures saturate television screens and newspapers. Hence the public can be expected to howl at the kind of big environmental mistake most likely for an oil company.
Those considerations of public expectations and minimizing environmental damage were especially important in Papua New Guinea, a decentralized democracy with a relatively weak central government, weak police force and army, and strong voice of local communities. Because local landowners at the Kutubu oil fields relied on gardens, forests, and rivers for their subsistence, an oil spill there would impact their lives much more seriously than oil-coated seabirds impact the lives of American television viewers. As one Chevron employee explained it to me, “We recognized that in Papua New Guinea no natural resource project could be successful in the long run without the support of the local landowners and villagers. They would disrupt the project and shut it down, as they did in Bougainville [see below for explanation], if they perceived environmental harm affecting their land and food sources. The central government lacked the ability to prevent disruptions by landowners, so we needed to take prudent steps to minimize harm and maintain a good relationship with the local people.” Another Chevron employee expressed a similar idea in different words: “We were adamant at the outset that the success of the Kutubu project would depend on our ability to work with the local landowner communities, to the extent that they would believe they are better off with us there than they would be if we were gone.”
A minor aspect of that constant scrutiny of Chevron’s operations by local New Guineans is that they understand the money that can be made by pressuring entities with deep pockets, like big oil companies. They count the number of trees cut down during construction of a road, placing particular value on trees in which birds of paradise display, and then they present a bill for damages. In one case of which I was told, when New Guinean landowners learned that Chevron was contemplating constructing a road to an oil site, they rushed out and planted coffee trees along the proposed route, so that they could claim damages for each coffee tree uprooted. That’s an argument for keeping forest clearance to a minimum by making roads as narrow as possible, and by accessing drill sites by helicopter whenever possible. But the much bigger risk was that landowners angry at damage to their land might shut down the entire oil project. My informant’s mention of Bougainville refers to what had been Papua New Guinea’s biggest investment and development project, its Bougainville copper mine, which was shut down by landowners angry at environmental damage in 1989, and which has never reopened despite the efforts of the country’s minuscule police force and army that provoked a civil war. The fate of the Bougainville mine warned Chevron of the likely fate of the Kutubu oil field if it too caused environmental damage.
Another warning sign for Chevron was the Point Arguello oil field, discovered by Chevron off the coast of California in 1981, which was estimated to be the largest oil find in the U.S. since the discovery of the Prudhoe Bay field. As a result of public disenchantment with oil companies, local community opposition, and layer after onerous layer of government regulatory delays, oil production could not begin until 10 years later, and Chevron ended up with a large write-down on its investment. The Kutubu oil field gave Chevron the opportunity to refute that disenchantment by showing that it would take excellent care of the environment without being prodded by overly stringent government regulation.
In that respect the Kutubu project illustrates the value of anticipating increasingly rigorous government environmental standards. The trend throughout the world (with obvious exceptions) is for governments, as the years pass, to demand more rather than less rigorous environmental precautions. Even developing countries from which one might not at first have expected environmental concerns are becoming more and more demanding. For example, one Chevron employee working in Bahrain told me that, when he recently drilled another offshore well there, the Bahrain government for the first time required a detailed expensive environmental impact plan that provided for environmental monitoring during drilling, assessment of impacts after drilling, and minimizing effects on dugongs and on a breeding colony of cormorants. Oil companies have learned that it is far cheaper to build a clean facility incorporating environmental precautions at the outset, than to retrofit that facility later when government standards become tightened. The companies have come to expect that, if a country in which they are operating is not environmentally aware now, it is likely to become so within the lifetime of the facility.
Still a further advantage to Chevron’s environmentally clean practices is that the reputation it has thereby gained sometimes gives it a competitive advantage in obtaining contracts. For example, recently the government of Norway, a country whose people and government today are very concerned about environmental issues, solicited bids for development of an oil/gas field in the North Sea. Chevron was among the firms bidding, and it succeeded in winning the contract, probably in part because of its good environmental reputation. If that was indeed the case, then some friends within Chevron suggested to me that the Norwegian contract might have been the biggest single financial benefit to the company from its rigid environmental safeguards in the Kutubu oil fields.
A company’s audience includes not only the public, governments, and local landowners, but also its employees. An oil field poses especially complicated technological, construction, and management problems, and a large fraction of oil company employees have higher education and advanced degrees. They tend to be environmentally aware. It is expensive to train them, and their salaries are high. While most employees of the Kutubu project are resident citizens of Papua New Guinea, others are Americans or Australians who are flown out to Papua New Guinea to work there for five weeks, then are flown back home to spend five weeks with their family, and those airplane fares are also expensive. All those employees see for themselves the state of the environment in the oil fields, and they see the company’s commitment to clean environmental policies. Many Chevron employees told me that that issue of employee morale and environmental views was both a benefit of their company’s visibly clean environmental policies and also a driving force behind the adoption of those policies in the first place.
In particular, environmental concern has been one criterion used to select company executives, and Chevron’s two most recent CEOs, first Ken Derr and then David O’Reilly, have both been personally concerned about environmental issues. Chevron employees in several countries told me independently that every month they and every other Chevron employee around the world receive from the CEO an e-mail about the state of affairs in the company. The e-mails often talk about environment and safety issues and speak of them as being number-one priorities, and as making good economic sense for the company. Thus, employees see that environmental matters are taken seriously, and are not just window-dressing that is for public display but that is ignored within the company itself. This observation corresponds to a conclusion that Thomas Peters and Robert Waterman Jr. drew in their best-selling book on business management In Search of Excellence: Lessons from America’s Best-Run Companies. The authors found that if managers want their employees to behave in a certain way, the most effective motivation is for the employees to see the managers themselves behaving in that way.
Finally, new technology has made it easier for oil companies to operate more cleanly now than in the past. For instance, several horizontal or diagonal wells can now be drilled from a single surface location, whereas formerly each well had to be drilled vertically from a separate surface location, each causing environmental impacts. The rock debris (the so-called cuttings) that is ground up as a well is drilled can now be pumped into an isolated underground formation containing no producible oil, instead of (as before) dumping the rocks into a pit or into the ocean. Natural gas obtained as a by-product of oil extraction is now either reinjected into an underground reservoir (the procedure used in the Kutubu Project), or (in some other oil fields) shipped out by pipeline or else liquefied for storage and transport by ship and then sold, instead of burning it off (“flaring” it). In many oil fields, as in much of the Kutubu fields, it is now routine to operate exploration drill sites by means of helicopters rather than by putting in roads; helicopter use is of course expensive, but road construction and impacts are often even more expensive.
These, then, are reasons why Chevron and the handful of other big international oil companies have been taking environmental issues seriously. What it all adds up to is that clean environmental practices help them make money and gain long-term access to new oil and gas fields. But I should reiterate that I am not thereby claiming that the oil industry is now uniformly clean, responsible, and admirable in its behavior. Among the most widely publicized persisting and serious problems are recent large spills at sea from wrecks of poorly maintained and poorly operated single-hulled tankers (such as the sinking of the 26-year-old tanker Prestige off Spain in 2002), belonging to shipowners other than the large oil companies, which have mostly switched to double-hulled tankers. Other major problems include legacies of old, environmentally dirty facilities, constructed before the more recent availability of cleaner technologies and difficult or expensive to retrofit (e.g., in Nigeria and Ecuador); and operations under the auspices of corrupt and abusive governments, such as those of Nigeria and Indonesia. Instead, the case of Chevron Niugini illustrates how it is possible for an oil company to operate in a way that delivers environmental benefits to an area of operations and to the people there—especially compared to alternative proposed uses of the same area for logging, or even just for subsistence hunting and farming. The case also illustrates the factors combining to produce that outcome in the Kutubu oil fields but not in many other large industrial projects, and the potential role of the public in influencing outcomes.
In particular, the question remains why I observed indifference to environmental problems in the Salawati oil field of the Indonesian oil company Pertamina in 1986, but clean practices in Chevron’s Kutubu field when I began visiting there in 1998. There are several differences between Pertamina’s situation as a national oil company in Indonesia in 1986, and Chevron’s situation as an international company operating in Papua New Guinea in 1998, that may account for the differing outcomes. The Indonesian public, government, and judiciary are less interested in, and expect less from, the behavior of oil companies than do their European and American counterparts encompassing Chevron’s major customers. Pertamina’s Indonesian employees have had less exposure to environmental concerns than have Chevron’s American and Australian employees. Papua New Guinea is a democracy whose citizens enjoy the freedom to obstruct proposed development projects, but Indonesia in 1986 was a military dictatorship whose citizens enjoyed no such freedom. Beyond that, the Indonesian government was dominated by people from its most populous island (Java), looked on its New Guinea province as a source of income and a place to resettle Java’s surplus population, and was less concerned with the opinions of New Guineans than is the government of Papua New Guinea, which owns the eastern half of the same island. Pertamina did not face rising environmental standards from the Indonesian government, such as those that international oil companies face. Pertamina is largely a national oil company within Indonesia, competing for fewer overseas contracts than do the big international companies, so that Pertamina does not derive an international competitive advantage from clean environmental policies. Pertamina has not had CEOs who send out monthly newsletters stressing the environment as the highest priority. Finally, my visit to Pertamina’s Salawati oil field was in 1986; I don’t know whether Pertamina policies have changed since then.
Let’s now turn from the oil and gas industry to the hardrock mining industry. (That term refers to mines that excavate ores from which to extract metals, as opposed to mines that excavate coal.) The industry is currently the leading toxic polluter in the U.S., responsible for nearly half of reported industrial pollution. Of western U.S. rivers, nearly half have sections of their headwaters polluted by mining. In most of the U.S. the hardrock mining industry is now declining towards extinction, largely because of its own misdeeds. Environmental groups have for the most part not taken the trouble to learn essential facts about the hardrock mining industry, and declined to participate in an initially promising international initiative that the industry commenced in 1998 to change its behavior.
These and other features of the hardrock mining industry’s current status are initially puzzling, because the industry seems superficially so like the oil and gas industry that we just discussed, and also like the coal industry. Don’t all three industries involve extracting non-renewable resources from the ground? Yes, they do, but they have nevertheless unfolded differently, for three reasons: different economics and technology, different attitudes within the industry itself, and different attitudes of the public and government towards the industry.
The environmental problems caused by hardrock mining are of several types. One involves disturbance of land surface by digging it up. This problem especially affects surface mines and open-pit mines, where the ore lies near the surface and is reached by scraping away the earth over it. In contrast, no one now extracts oil by digging the surface off of an entire oil formation; instead, oil companies typically disturb only a small surface area sufficient to drill a well to tap down into the oil formation. Similarly, there are some mines at which the ore body does not lie near the surface but deep underground, and at which tunnels and waste piles disturbing only a small surface area are dug down to the ore body.
Further environmental problems caused by hardrock mining involve water pollution by metals themselves, processing chemicals, acid drainage, and sediment. Metals and metal-like elements in the ore itself—especially copper, cadmium, lead, mercury, zinc, arsenic, antimony, and selenium—are toxic and prone to cause trouble by ending up in nearby streams and water tables as a result of mining operations. A notorious example was a wave of cases of bone disease caused by cadmium discharged into Japan’s Jinzu River from a lead and zinc mine. Quite a few of the chemicals used in mining—such as cyanide, mercury, sulfuric acid, and nitrate produced from dynamite—are also toxic. More recently, it has become appreciated that acid draining out of sulfide-containing ores exposed to water and air through mining causes serious water pollution and leaches out metals. Sediment transported out of mines in runoff water may be harmful to aquatic life, for instance by covering up fish spawning beds. In addition to those types of pollution, the mere consumption of water by many mines is high enough to be significant.
The remaining environmental problem concerns where to dump all the dirt and wastes dug up in the course of mining, consisting of four components: the “overburden” (dirt scraped away to get down to the ore); waste rock found to contain too little mineral to be of economic value; tailings, the ground-up residue of ore after its minerals have been extracted; and the residues of heap-leach pads after mineral extraction. The latter two types of residue are generally left in the tailings impoundment or pad respectively, while the overburden and waste rock are left in dumps. Depending on the laws in the particular country where the mine is located, the methods of disposing of tailings (a slurry of water and solids) involve either dumping them into a river or ocean, piling them up on land, or (most often) piling them up behind a dam. Unfortunately, tailings dams fail in a surprisingly high percentage of cases: they are often designed with insufficient strength (to save money), they are often constructed cheaply from wastes themselves instead of from concrete, and they are built over extended periods so that their condition must be monitored constantly and can’t be subjected to a final inspection declaring them completed and safe. On the average around the world each year, there is one big accident involving a tailings dam. The largest such accident in the U.S. was West Virginia’s Buffalo Creek disaster of 1972, which killed 125 people.
Several of these environmental problems are illustrated by the status of the four most valuable mines on New Guinea and neighboring islands, where I do my fieldwork. The copper mine at Panguna on Papua New Guinea’s Bougainville Island was formerly the country’s largest enterprise and biggest earner of foreign exchange, and one of the largest copper mines in the world. It dumped its tailings directly into a tributary of the Jaba River, thereby creating monumental environmental impacts. When the government failed to resolve that situation and associated political and social problems, Bougainville’s inhabitants revolted, triggering a civil war that cost thousands of lives and nearly tore apart the nation of Papua New Guinea. Fifteen years after the war’s outbreak, peace has still not been fully restored on Bougainville. The Panguna mine was of course closed down, has no prospect of reopening, and the owners and lenders (including the Bank of America, U.S. Export-Import Bank, and Australian and Japanese subscribers and lenders) lost their investment. That history provided a reason why Chevron worked so closely with local landowners at the Kutubu oil fields to gain their acceptance.
The gold mine on Lihir Island dumps its tailings into the ocean via a deep pipe (a method viewed by environmentalists as highly damaging), and the owners claim that this is not harmful. Whatever the effects of that one mine on marine life around Lihir Island, the world would have a major problem if many other mines similarly dumped their tailings into the ocean. The Ok Tedi copper mine on the mainland of New Guinea did construct a tailings dam, but experts who reviewed its design before construction warned that the dam would fail soon. It did fail within a few months, so that 200,000 tons of mine tailings and wastes are now discharged each day into the Ok Tedi River and have destroyed its fishery. From the Ok Tedi the water flows directly into New Guinea’s largest river with its most valuable fishery, the Fly River, where suspended sediment concentrations have now increased five-fold, resulting in flooding, deposition of mine wastes on the river’s floodplain, and killing of floodplain vegetation over an area of 200 square miles so far. In addition, a barge carrying barrels of cyanide for the mine up the Fly River sank, and the barrels have gradually been corroding and releasing their cyanide into the river. In 2001 BHP, the world’s fourth largest mining company, which operated the Ok Tedi mine, sought to close it, explaining, “Ok Tedi is not compatible with our environmental values, and the company should never have been involved.” However, because the mine accounts for 20% of Papua New Guinea’s total exports, the government arranged for the mine to be kept open while permitting BHP to withdraw. Finally, the Grasberg-Ertsberg copper and gold mine of Indonesian New Guinea, a huge open-pit operation that is Indonesia’s most valuable mine, dumps its tailings directly into the Mimika River, whence they reach the shallow Arafura Sea between New Guinea and Australia. Along with the Ok Tedi mine and another gold mine in New Guinea, the Grasberg-Ertsberg mine is one of only three large mines in the world that is currently being operated by an international company and that disposes of its wastes into a river.
The prevalent policy of mining companies towards environmental damage is to clean up and restore the mined area only after the mine has shut down, rather than follow the coal mining industry’s practice of reclaiming the area as mining proceeds; the hardrock mining industry opposes that strategy. Companies assume that what is called “walkaway” restoration will be adequate: i.e., that cleanup and restoration will incur minimal costs, will go on for only 2 to 12 years after mine closure (whereupon the company can walk away from the site with no further obligations), and will involve nothing more than resloping of disturbed areas to prevent erosion, applying a growth medium like salvaged topsoil to stimulate revegetation, and treating water flowing out of the mine site for a few years. In reality, this inexpensive walkaway strategy has never sufficed for any major modern mine and regularly leaves water quality standards violated. It is instead necessary to cover and revegetate all areas that could be sources of acid drainage, and to capture and treat polluted groundwater and surface water flowing out of the site for as long as the water remains polluted, which often means forever. The actual direct and indirect costs of cleanup and restoration have typically proved to be 1.5 to 2 times mining industry walkaway estimates for mines without acid drainage, and 10 times those estimates for mines with acid drainage. The biggest uncertainty in those costs is whether the mine will produce acid drainage, a problem recognized only recently at copper mines though appreciated earlier at other mines, and almost never predicted accurately in advance.
Hardrock mining companies facing cleanup costs frequently avoid those costs by declaring bankruptcy and transferring their assets to other corporations controlled by the same individuals. One such example is Montana’s Zortman-Landusky gold mine mentioned already in Chapter 1 and developed by Pegasus Gold Inc., a Canadian company. When opened in 1979, it was the first large-scale open-pit cyanide heap-leach gold mine in the U.S., and the largest gold mine in Montana. The mine proceeded to cause a long series of cyanide leaks, spills, and acid drainage, abetted by the fact that neither the federal government nor the Montana state government required the company to test for acid drainage. By 1992, state inspectors had established that the mine was contaminating streams with heavy metals and acid. In 1995 Pegasus Gold agreed to pay $36 million to settle all lawsuits by the federal government, state of Montana, and local Indian tribes. Finally, in 1998, at a time when less than 15% of the mine site had undergone any surface reclamation, Pegasus Gold’s board of directors voted themselves more than $5 million in bonuses, transferred Pegasus’s remaining profitable assets to the new company of Apollo Gold that they created, and thereupon declared Pegasus Gold bankrupt. (Like most mine directors, those of Pegasus Gold did not live in the downstream watershed of the Zortman-Landusky mine, and they thus exemplified elites insulated from the consequences of their actions as discussed in Chapter 14.) The state and federal governments then adopted a plan of surface reclamation to cost $52 million, of which $30 million would come from the $36 million payment by Pegasus while $22 million would be paid by U.S. taxpayers. However, that surface reclamation plan still does not include the expense of water treatment in perpetuity, which will cost taxpayers much more. It turns out that five out of the 13 recent major hardrock mines in Montana, four of them (including the Zortman-Landusky mine) open-pit heap-leach cyanide mines, were owned by the bankrupt Pegasus Gold Inc., and that 10 of the major mines will require water treatment forever, thereby increasing their closure and reclamation costs by up to 100 times previous estimates.
A bankruptcy more expensive to taxpayers was that of another Canadian-owned heap-leach gold mine in the U.S., Galactic Resources’ Summitville Mine in a mountainous area of Colorado receiving over 32 feet of snow annually. In 1992, eight years after the state of Colorado had issued an operating permit to Galactic Resources, the company declared bankruptcy and closed the mine on less than a week’s notice, leaving a large local tax bill unpaid, laying off its employees, stopping essential environmental maintenance, and abandoning the site. A few months later, after the start of the winter snowfalls, the heap-leach system overflowed, sterilizing an 18-mile stretch of the Alamosa River with cyanide. It was then discovered that the state of Colorado had required a financial guarantee of only $4,500,000 from Galactic Resources as a condition for issuing the operating permit, but that the cleanup would cost $180,000,000. After the government had extracted another $28,000,000 as part of the bankruptcy settlement, taxpayers were left to pay $147,500,000 through the Environmental Protection Agency.
As a result of such experiences, American states and the federal government eventually began to require hardrock mining companies to guarantee in advance some form of financial assurance that enough money would be available for cleanup and restoration, in case the mining company itself refused or proved financially unable to pay for the cleanup. Unfortunately, those assurance costs are typically based on a cleanup cost estimate made by the mining company itself, because government regulatory bodies lack the time, knowledge, and detailed mine engineering plans necessary to make such an estimate for themselves. In the many cases where mining companies have not cleaned up and the government has been forced to fall back on that assurance, the actual cleanup costs have proved to be up to 100 times the mining company estimate. That’s not surprising, because the estimate was provided by the company, which regularly underestimates because it has no financial incentive or government regulatory pressure to estimate the amount fully. The assurance is provided in one of three forms: cash equivalents or a letter of credit, the safest form; a bond that the mining company obtains from an insurance company in return for an annual premium; and a “self-guarantee,” meaning that the mining company pledges in good faith that it will clean up and that its assets stand behind its pledge. However, frequent breaking of such pledges has shown self-guarantees to be meaningless, and they are now no longer accepted for mines on federal land, but they still account for most assurance in Arizona and Nevada, the American states most friendly to the mining industry.
U.S. taxpayers currently face a liability of up to $12 billion to clean up and restore hardrock mines. Why is our liability so large, when governments have supposedly been requiring financial assurance of cleanup costs? Parts of the difficulty are the just-mentioned ones of assurance costs being underestimated by the mining companies, and the two states with the biggest taxpayer liabilities (Arizona and Nevada) accepting company self-guarantees and not requiring insurance bonds. Even when an underfunded but real insurance company bond exists, taxpayers face further costs for reasons that will be familiar to any of us who have tried to collect from our insurance company for a large loss in a home fire. The insurance company regularly reduces the amount of the bond payoff by what are euphemistically termed “negotiations”: i.e., “If you don’t like our reduced offer, you may go to the expense of hiring lawyers and waiting five years for the courts to resolve the case.” (A friend of mine who suffered a house fire has just been going through a year of hell over such negotiations.) Then the insurance company pays out the bonded or negotiated amount only over the years as cleanup and restoration are carried out, but the bond contains no clause for inevitable cost escalations with time. Then, too, not only mining companies but sometimes also insurance companies faced with large liabilities file for bankruptcy. Of the mines posing the 10 biggest taxpayer liabilities in the U.S. (adding up to about half of the total of up to $12 billion), two are owned by a mining company on the verge of bankruptcy (ASARCO, accounting for about $1 billion), six others are owned by companies that have proved especially recalcitrant at meeting their obligations, only two are owned by less recalcitrant companies, and all 10 may be acid-generating and may require water treatment for a long time or forever.
Not surprisingly, as a result of taxpayers’ being left to foot bills, there has been a backlash of anti-mining public sentiment in Montana and some other states. The future of hardrock mining in the U.S. is bleak, except for gold mines in underregulated Nevada and platinum/palladium mines in Montana (a special case about which I shall say more below). Only one-quarter as many American college undergraduates (a mere 578 students in the whole U.S.) are preparing for careers in mining as in 1938, despite the explosive growth of the total college population in the intervening years. Since 1995, public opposition in the U.S. has been increasingly successful in blocking mine proposals, and the mining industry can no longer count on lobbyists and friendly legislators to do its bidding. The hardrock mining industry is the prime example of a business whose short-term favoring of its own interests over those of the public proved in the long term self-defeating and have been driving the industry into extinction.
This sad outcome is initially surprising. Like the oil industry, the hardrock mining industry too stands to benefit from clean environmental policies, through lower labor costs (less turnover and absenteeism) resulting from higher job satisfaction, lower health costs, cheaper bank loans and insurance policies, community acceptance, less risk of the public blocking projects, and the relative cheapness of installing state-of-the-art clean technology at a project’s outset as compared to having to retrofit old technology as environmental standards become more stringent. How could the hardrock mining industry have adopted such self-defeating behavior, especially when the oil industry and the coal mining industry facing apparently similar problems have not driven themselves towards extinction? The answer has to do with the three sets of factors that I mentioned earlier: economics, mining industry attitudes, and society’s attitudes.
Economic factors that make environmental cleanup costs less bearable to the hardrock mining industry than to the oil industry (or even the coal industry) include lower profit margins, more unpredictable profits, higher cleanup costs, more insidious and long-lasting pollution problems, less ability to pass on those costs to consumers, less capital with which to absorb those costs, and a different labor force. To begin with, while some mining companies are more profitable than other mining companies, the industry as a whole operates at such low profit margins that its average rate of return over the last 25 years hasn’t even met the cost of its capital. That is, if a mining company CEO with $1,000 to spare had invested it in 1979, then by the year 2000 the investment would have grown to only $2,220 if invested in steel industry stock; to only $1,530 if invested in metal stocks other than iron and steel; to only $590, representing a net loss even without considering inflation, if invested in gold mine stock; but to $9,320 if invested in an average mutual fund. If you’re a miner, it doesn’t pay you to invest in your own industry!
Even those mediocre profits are unpredictable, at the level both of the individual mine and of the industry as a whole. While an individual oil well within a proven oil field may turn out to be dry, the reserves and oil grade of a whole oil field are often relatively predictable in advance. But the grade (i.e., the metal content, and hence the profitability) of a metal ore often changes unpredictably as one digs one’s way through an ore deposit. Half of all mines that are developed prove unprofitable. The average profits of the whole mining industry are also unpredictable, because metals prices are notoriously volatile and fluctuate with world commodity prices to a much greater degree than do oil and coal prices. The reasons for that volatility are complex and include the lower bulk and smaller amounts consumed of metals than of oil or coal (making metals easier to stockpile); our perception that we always need oil and coal but that gold and silver are dispensable luxuries during a recession; and the fact that gold price fluctuations are driven by factors having nothing to do with the supply of gold and the industrial demand for gold—namely, speculators, investors buying gold when they grow nervous about the stock market, and governments selling off their gold reserves.
Hardrock mines create far more wastes, requiring much more expensive cleanup costs, than do oil wells. The wastes that are pumped up from an oil well and that have to be disposed of are mostly just water, typically in a waste-to-oil ratio of only around one or not much higher. If it weren’t for the access roads and the occasional oil spill, oil and gas extraction would have little environmental impact. In contrast, metals constitute only a small fraction of a metal-bearing ore, which in turn constitutes only a small fraction of the dirt that has to be dug up to extract the ore. Hence the ratio of waste dirt to metal is typically 400 for a copper mine, and 5,000,000 for a gold mine. That’s a huge amount of dirt for mining companies to clean up.
Pollution problems are more insidious and much more long-lasting for the mining industry than for the oil industry. Oil pollution problems arise mainly from quick and visible spills, many of which it has been possible to avoid by careful maintenance and inspections and by improved engineering design (such as double-hulled rather than single-hulled tankers), so that the oil spills that still occur today are mainly ones due to human error (such as the Exxon Valdez tanker accident), which can in turn be minimized by rigorous training procedures. Oil spills can generally be cleaned up within a few years or less, and oil degrades naturally. While mine pollution problems also occasionally appear as a quick visible pulse that suddenly kills lots of fish or birds (like the fish-killing cyanide overflow from the Summitville mine), more often they take the form of a chronic leak of toxic but invisible metals and acid that don’t degrade naturally, continue to leak for centuries, and leave slowly weakened people rather than a sudden pile of carcasses. Tailings dams and other engineered safeguards against mine spills continue to suffer from a high rate of failure.
Like coal, oil is a bulk material that we see. The gas pump gauge tells us how many gallons we just bought. We know what it is used for, we consider it essential, we have experienced and been inconvenienced by oil shortages, we are frightened of their possible recurrence, we are grateful to be able to get gas for our cars at all, and we don’t balk too much at paying higher prices. Hence the oil and coal industries may have been able to pass on their costs of environmental cleanup to consumers. But metals other than iron (in the form of steel) are mostly used for invisible little parts inside our cars, phones, and other equipment. (Tell me quickly without looking up the answer in an encyclopedia: where are you using copper and palladium, and how many ounces of each were in the things that you bought last year?) If increased environmental costs of copper and palladium mining tend to increase the cost of your car, you don’t say to yourself, “Sure, I’m willing to pay another dollar per ounce for copper and palladium, just as long as I can still buy a car this year.” Instead, you shop around for a better deal on a car. The copper and palladium middlemen and car manufacturers know how you feel, and they pressure the mining companies into keeping their prices down. That makes it hard for a mining company to pass on its cleanup costs.
Mining companies have much less capital to absorb their cleanup costs than do oil companies. Both the oil industry and the hardrock mining industry face so-called legacy problems, which mean the burden of costs from a century of environmentally damaging practices before the recent growth of environmental awareness. To pay those costs, as of the year 2001 the total capitalization of the entire mining industry was only $250 billion, and its three largest companies (Alcoa, BHP, and Rio Tinto) were capitalized with only $25 billion each. But the leading individual companies in other industries—Wal-Mart Stores, Microsoft, Cisco, Pfizer, Citigroup, ExxonMobil, and others—had capitalizations of $250 billion each, while General Electric alone had $470 billion (almost double the value of the entire mining industry). Hence those legacy problems are relatively a much heavier burden on the hardrock mining industry than on the oil industry. For example, Phelps-Dodge, the largest surviving U.S. mining company, faces U.S. mine reclamation and closure liabilities of about $2 billion, equal to its entire market capitalization. All of the company’s assets amount to only about $8 billion, and most of those assets are in Chile and cannot be used to pay North American costs. In contrast, the oil company ARCO, which inherited the responsibility of $1 billion or more for Butte copper mines when it bought Anaconda Copper Mining Company, had North American assets of over $20 billion. That cruel economic factor alone goes a long way towards explaining why Phelps-Dodge has been much more recalcitrant about mine cleanup than has ARCO.
Thus, there are many economic reasons why it is more burdensome for mining companies than for oil companies to pay cleanup costs. In the short run, it’s cheaper for a mining company just to pay lobbyists to press for weak regulatory laws. Given society’s attitudes and existing laws and regulations, that strategy has worked—until recently.
Those economic disincentives are exacerbated by the attitudes and corporate culture that have become traditional within the hardrock mining industry. In the history of the U.S., and analogously also in South Africa and Australia, the government promoted mining as a tool to encourage settlement of the West. Hence the mining industry evolved in the U.S. with an inflated sense of entitlement, a belief that it is above the rules, and a view of itself as the West’s salvation—thereby illustrating the problem of values that have outlived their usefulness, as discussed in the preceding chapter. Mine executives respond to environmental criticism with homilies on how civilization would be impossible without mining, and how more regulation would mean less mining and hence less civilization. Civilization as we know it would also be impossible without oil, farm food, wood, or books, but oil executives, farmers, loggers, and book publishers nevertheless don’t cling to that quasi-religious fundamentalism of mine executives: “God put those metals there for the benefit of mankind, to be mined.” The CEO and most officers of one of the major American mining companies are members of a church that teaches that God will soon arrive on Earth, hence if we can just postpone land reclamation for another 5 or 10 years it will then be irrelevant anyway. My friends within the mining industry have used many colorful phrases to characterize prevailing attitudes: “a rape-and-run attitude”; “robber-baron mentality”; “a rough-and-tumble heroic struggle of one man against nature”; “the most conservative businesspeople I’ve ever met”; and “a speculative attitude that a mine is there to let its executives roll the dice and get personally rich by striking the mother lode, rather than the oil company motto of increasing asset value for the shareholders.” To claims of toxic problems at mines, the mining industry routinely responds with denial. No one in the oil industry today would deny that spilled oil is harmful, but mine executives do deny the harm of spilled metals and acid.
The third factor underlying mining industry environmental practices, besides economics and corporate attitudes, is the attitudes of our government and society, which permit the industry to continue with its own attitudes. The basic federal law governing mining in the U.S. is still the General Mining Act passed in 1872. It provides massive subsidies to mining companies, such as a billion dollars per year of royalty-free minerals from publicly owned lands, unlimited use of public lands for dumping mine wastes in some cases, and other subsidies costing taxpayers a quarter of a billion dollars per year. The detailed rules adopted by the federal government in 1980, termed the “3809 rules,” did not require mining companies to provide financial assurance of cleanup costs, and did not adequately define reclamation and closure. In the year 2000 the outgoing Clinton administration proposed mining regulations that achieved both of those goals while also eliminating corporate self-guarantees of financial assurance. But in October 2001 a proposal by the incoming Bush administration eliminated almost all of those proposals except for continuing to require financial assurance, a requirement that would in any case be meaningless without a definition of the reclamation and cleanup costs to be covered by financial assurance.
It is rare that our society has effectively held the mining industry responsible for damages. Laws, regulatory policies, and the political will to chase mining scofflaws have been absent. For a long time the Montana state government was notorious for its deference to mining lobbyists, and the Arizona and Nevada state governments still are. For example, the state of New Mexico estimated reclamation costs for the Chino copper mine of Phelps-Dodge Corporation at $780 million, but then decreased that estimate to $391 million under political pressure from Phelps-Dodge. When our American public and governments demand so little of the mining industry, why should we be surprised that the industry itself volunteers little?
My account of hardrock mining so far may have given the false impression that the industry is monolithically uniform in its attitudes. Of course, this is not true, and it’s instructive to examine the reasons why some hardrock miners or related industries have adopted or considered cleaner policies. I’ll briefly mention half a dozen such cases: coal mining, the current status of Anaconda Copper Company’s Montana properties, Montana platinum and palladium mines, the recent MMSD initiative, Rio Tinto, and DuPont.
Coal mining is superficially even more similar to hardrock mining than is the oil industry, in that its operations inevitably create heavy environmental impacts. Coal mines tend to make even bigger messes than do hardrock mines, because the quantity of coal extracted per year is relatively enormous: more than triple the combined mass of all the metals extracted from hardrock mines. Thus, coal mines usually disturb more area, and in some cases they strip the soil down to bedrock and dump mountaintops into rivers. On the other hand, coal occurs in pure seams up to 10 feet thick stretching for miles, so that the ratio of dumped wastes to product extracted is only about one for a coal mine, far less than the already-mentioned figures of 400 for a copper mine and 5,000,000 for a gold mine.
The lethal Buffalo Creek disaster at a U.S. coal mine in 1972 served as a wake-up call for the coal industry, much as the Exxon Valdez and North Sea oil rig disasters did for the oil industry. While the hardrock mining industry has had its share of disasters in the Third World, those have occurred too far from the eyes of the First World public to have served as a comparable wake-up call. Stimulated by Buffalo Creek, the U.S. federal government in the 1970s and 1980s instituted tighter regulation, and required stricter operating plans and financial assurance, for coal mining than for hardrock mining.
The initial response of the coal industry to those government initiatives was to prophesy disaster for the industry, but 20 years later that has been forgotten, and the coal industry has learned to live with the new regulations. (Of course that doesn’t mean that the industry is consistently virtuous, just that it is more regulated than 20 years ago.) One reason is that many (but certainly not all) coal mines are not in beautiful Montana mountains but in flatland not highly valued for other reasons, so that restoration is economically feasible. Unlike the hardrock mining industry, the coal industry now often restores mined areas within a year or two of ceasing operations. Another reason may be that coal (like oil but unlike gold) is perceived as a necessity for our society, and we all know how we use coal and oil but few of us know how we use copper, so the coal industry may have been able to pass on its increased environmental costs to consumers.
Still another factor behind the response of the coal industry is that it typically has short transparent supply chains, in which coal is shipped directly or else via just one intermediate supplier to the electric generating plants, steel plants, and other main consumers of coal. That makes it easy for the public to figure out whether any particular consumer of coal is obtaining it from a cleanly or dirtily operated coal mining company. Oil has a supply chain that is even shorter in number of business entities, even if sometimes long in geographic distances: big oil companies like ChevronTexaco, ExxonMobil, Shell, and BP sell their fuel to consumers at gas stations, thereby permitting consumers enraged by the Exxon Valdez disaster to boycott gas stations selling Exxon fuel. But gold passes from the mine to the consumer via a long supply chain that includes refiners, warehouses, jewelry manufacturers in India, and European wholesalers before arriving at a retail jewelry store. Take a look at your gold wedding ring: you don’t have the faintest idea where the gold came from, whether it was mined last year or stockpiled for the last 20 years, what company mined it, and what their environmental practices were. For copper the situation is even more obscure: there is an extra intermediate step of a smelter, and you don’t even realize that you are buying some copper when you buy a car or phone. That long supply chain prevents copper and gold mining companies from counting on consumer willingness to pay for cleaner mines.
Among Montana mines with a historical legacy of environmental damage, the ones that have come furthest towards paying their cleanup costs are the former properties of Anaconda Copper Mining Company around and downstream of Butte. The reason is simple: Anaconda was bought by the big oil company ARCO, which in turn was bought by the even bigger British oil company BP (British Petroleum). The result illustrates more clearly than could anything else the differing approaches to environmental messes in the hardrock mining industry and in the oil industry: same mining properties, different owners. When they discovered the mess that they had inherited, ARCO and then BP eventually decided that their own interests would be better served by trying to get the problems behind them than by denying all responsibility. That is not to say that ARCO and BP have shown any enthusiasm for spending the hundreds of millions of dollars to which they were obligated. They have tried the usual resistive strategies, such as denying the reality of toxic effects, funding local citizens’ support groups to state their case, proposing cheaper solutions than those proposed by the government, and so on. But at least they have spent large sums of money, they are evidently resigned to spending more, they are much too large to declare bankruptcy over just their Montana mines, and they are interested in bringing matters to a resolution rather than delaying indefinitely.
The other somewhat bright spot in the Montana mining picture is two platinum and palladium mines owned by Stillwater Mining Company, which entered into good-neighbor agreements with local environmental groups (the sole such agreements reached by any mining company in the U.S.), gave money to those groups, allows the groups free access to their mining area, actually requested the environmental organization Trout Unlimited (to the latter’s astonishment) to monitor effects of their mines on local trout populations in the Boulder River, and reached long-term agreements with the surrounding communities regarding labor, electricity, schools, and city services—in return for environmentalists and local citizens’ not opposing Stillwater. It seems obvious that this peace treaty between Stillwater, environmentalists, and the community benefits everybody concerned. How can we explain the surprising fact that, among Montana mining companies, only Stillwater reached this conclusion?
Several factors contributed. Stillwater owns a uniquely valuable deposit: the sole primary deposit of platinum and palladium (much used in the automobile and chemical industries) outside of South Africa. The deposit is so deep that it is expected to last for at least a century and probably much longer; that encourages a long-term perspective rather than the usual rape-and-run attitude. The mine is underground, hence it presents fewer problems of surface impact than an open-pit mine. Its ores are relatively low in sulfide, and most of that sulfide is extracted with the product, so that problems of acid sulfide drainage are minimized and environmental impact mitigation is less expensive than at Montana copper and gold mines. In 1999 the company brought in a new CEO, Bill Nettles, who came from the auto industry (the biggest user of the mine’s products) rather than from a traditional mining background, did not inherit the usual mining attitudes, recognized the mining industry’s awful public relations problems, and was interested in finding fresh long-term solutions. Finally, at the time that Stillwater officers reached some of the above-mentioned agreements in the year 2000, they were afraid that the U.S. presidential election would be won by the pro-environment candidate Al Gore, that the Montana gubernatorial election would be won by an anti-business candidate, and that good-neighbor agreements offered Stillwater its best chance to buy itself a stable future. In other words, Stillwater’s executives pursued their own perception of their company’s best interests by negotiating good-neighbor agreements, whereas most other large American mining companies have pursued their own differing vision of their company’s interests by denying responsibility, hiring lobbyists to oppose governmental regulation, and in the last resort filing bankruptcy.
In 1998 top executives of some of the world’s largest international mining companies nevertheless became concerned that their industry around the world was “losing its social license to operate,” as the expression goes. They formed an initiative termed the Mining Minerals and Sustainable Development (MMSD) project, launched a series of studies on sustainable mining, enlisted a well-known environmentalist (the president of the National Wildlife Federation) as director of the initiative, and attempted without success to involve the broader environmental community, which refused because of its historical disgust with mining companies. In the year 2002 the study arrived at a series of recommendations, but then most of the mining companies involved unfortunately declined to implement the recommendations.
The exception is the British mining giant Rio Tinto, which decided to move ahead on some of the recommendations on its own, under pressure from its strongly supportive CEO and from British stockholders, and burned by the memory of having owned Bougainville’s Panguna Copper Mine, whose environmental messes had proved so disastrously expensive to the company. Just as Chevron Oil Company found in negotiating with the Norwegian government, Rio Tinto foresaw business advantages to being seen as an industry leader in social responsibility. Its borax mine in California’s Death Valley is now perhaps the most cleanly operated mine in the U.S. One payoff that Rio Tinto has already reaped is that when Tiffany & Co., eager to fend off the risk of environmental protestors marching in front of its jewelry stores with posters about the cyanide releases and dead fish caused by gold mining, decided to stress environmental considerations in selecting a mining company to which to award a contract as gold supplier, Tiffany chose Rio Tinto because of the latter’s increasingly clean reputation. Tiffany’s further motives included some of the exact same considerations that I already mentioned as having motivated ChevronTexaco: establishing a good reputation for their brand name, maintaining a motivated and high-caliber workforce, and the philosophy of company executives.
The remaining instructive example involves U.S.-based DuPont Company, the world’s leading buyer of titanium metal and titanium compounds used in paints, jet engines, high-speed planes and space vehicles, and for other purposes. Much titanium is extracted from Australian beach sands rich in rutile, a mineral that consists of almost pure titanium dioxide. DuPont is a manufacturing company, not a mining company, and so it buys the rutile from Australian mining companies. However, DuPont puts its name on all its products, including its titanium-based house paints, and it does not want all its products to get a bad reputation just because its titanium suppliers arouse consumer wrath through dirty practices. Hence DuPont, in collaboration with public interest groups, has worked out buyers’ agreements and suppliers’ codes of responsibility that it enforces on all of its Australian titanium suppliers.
These two examples involving Tiffany and DuPont illustrate an important point. Individual consumers collectively hold some clout over oil companies and (to a lesser extent) coal mining companies, because the public buys fuel directly from the oil companies and buys electricity from the energy generating companies that buy coal. Hence consumers know whom to embarrass or boycott in the event of an oil spill or coal mine accident. However, individual consumers are eight steps removed from the hardrock mining companies that extract minerals, making a direct boycott of a dirty mining company virtually impossible. In the case of copper, not even an indirect boycott of copper-containing products would be feasible, because most consumers don’t know which of their purchases are the ones containing small amounts of copper. But consumers do have leverage over Tiffany, DuPont, and other retailers that buy metals and that have the technical ability to distinguish clean from dirty mines. We shall see that consumer leverage over retail buyers has already begun to be an effective means for consumers to influence the timber and seafood industries. Environmental groups are just beginning to apply this same tactic to the hardrock mining industry, by confronting metal buyers rather than confronting metal miners themselves.
At least in the short run, environmental safeguards, cleanup, and restoration incur costs for mining companies adopting them, regardless of whether government regulations or public attitudes ensure that the safeguards save the companies money in the long run. Who should pay for those costs? When the cleanup is of messes that mining companies made legally in the past because of weak government regulation, the public has no choice except to pay the costs itself through government tax revenues, even though it galls us to pay for messes made by companies whose directors voted themselves bonuses just before declaring bankruptcy. Instead, the practical question is: who should pay for the environmental costs of mining being carried out now or to be carried out in the future?
The reality is that the mining industry is on the average so unprofitable that consumers could not point to excessive company profits from which costs should be met. The reason why we want mining companies to clean up is that we, the public, are the ones who suffer from mining-related messes: unusable mined land surfaces, unsafe drinking water, and polluted air. Even the cleanest methods for mining coal and copper create messes. If we want coal and copper, we have to recognize the environmental costs of extracting them as a legitimate necessary cost of hardrock mining, as legitimate as the costs of the bulldozer that digs the pit or the smelter that smelts the ore. The environmental costs should be factored into metals prices and passed on to consumers, just as oil and coal companies already do. Only the long and opaque supply chain from mineral mines to the public, and the historically bad behavior of most mining companies, has obscured this simple conclusion to date.
The remaining two resource extraction industries that I shall discuss are the logging industry and the fishing industry. They differ from the oil industry, and from the hardrock mining and coal industries, in two basic ways. First, trees and fish are renewable resources that reproduce themselves. Hence if you harvest them at a rate no higher than the rate at which they reproduce, your harvest can be sustained indefinitely. In contrast, oil, metals, and coal are not renewable; they don’t reproduce, sprout, or have sex to produce baby oil droplets or coal nuggets. Even if you pump or mine them slowly, that doesn’t let them reproduce and maintain the field’s oil, metal, or coal reserves at constant levels. (Strictly speaking, oil and coal do become formed over long geological times of millions of years, but that is much too slow to balance our pumping or extraction rates.) Second, in the logging and fishing industries the things that you are removing—the trees and the fish—are valuable parts of the environment. Hence any logging or fishing, almost by definition, may cause environmental damage. However, oil, metals, and coal play little or no role in ecosystems. If you can find some way of extracting them without damaging the rest of the ecosystem, then you have not removed anything ecologically valuable, although their subsequent use or burning may still cause damage. I shall first discuss forestry, and then (more briefly) fisheries.
For humans, forests represent much value that becomes jeopardized by cutting them down. Most obviously, they are our principal source of timber products, among which are firewood, office paper, newspaper, paper for books, toilet paper, construction timber, plywood, and wood for furniture. For Third World people, who constitute a substantial fraction of the world’s population, they are also the principal source of non-timber products such as natural rope and roofing materials, birds and mammals hunted for food, fruits and nuts and other edible plant parts, and plant-derived medicines. For First World people, forests offer popular recreational sites. They function as the world’s major air filter removing carbon monoxide and other air pollutants, and forests and their soils are a major sink for carbon, with the result that deforestation is an important driving force behind global warming by decreasing that carbon sink. Water transpiration from trees returns water to the atmosphere, so that deforestation tends to cause diminished rainfall and increased desertification. Trees retain water in the soil and keep it moist. They protect the land surface against landslides, erosion, and sediment runoff into streams. Some forests, notably some tropical rainforests, hold the major portion of an ecosystem’s nutrients, so that logging and carting the logs away tends to leave the cleared land infertile. Finally, forests provide the habitat for most other living things on the land: for instance, tropical forests cover 6% of the world’s land surface but hold between 50% and 80% of the world’s terrestrial species of plants and animals.
Given all these values of forests, loggers have developed many ways of minimizing the potentially negative environmental impacts of logging. These ways include removing individuals of valuable tree species selectively and leaving the rest of the forest, rather than clear-cutting an entire forest; logging at a sustainable rate, so that the rate of tree regrowth equals the rate of tree removal; cutting small rather than large patches of forest, so that the cut area remains surrounded by trees producing seeds to start regrowth of the logged area; individually replanting trees; and removing individual big trees by helicopter if the trees are sufficiently valuable (as is true in many dipterocarp and araucaria forests), instead of removing trees by trucks and access roads that damage the rest of the forest. Depending on the circumstances, these environmental safeguards may end up either losing money or gaining money for the logging company. I shall now illustrate these opposite outcomes by two examples: the recent experiences of my friend Aloysius, and the operations of the Forest Stewardship Council.
Aloysius is not his real name but one that I have made up for him, for reasons that will become obvious. He is a citizen of one of the Asian/Pacific countries where I have done fieldwork. When I met him six years ago, he quickly struck me as the most extroverted, curious, happy, humorous, confident, independent, and smart person in his office. He courageously and single-handedly faced down and pacified a group of mutinying workers. He repeatedly ran (yes, literally ran) up and down a steep mountain trail at night, to coordinate work at two campsites. Having heard that I had written a book on human sexuality, within 15 minutes of meeting me he broke out into a laugh and said that it was now time for me to tell him what I knew about sex rather than about birds.
We saw each other while jointly involved in several subsequent projects, and then two years passed before I returned to his country. When I saw Aloysius next, it was obvious that something had changed. He was now speaking nervously, and his eyes darted around as if he were afraid of something. That surprised me, because the venue for our conversation was an auditorium in the national capital where I was giving a public lecture in the presence of government ministers, and I could detect absolutely no signs of danger. After we had reminisced about the mutiny, mountain camps, and sex, I asked how he had been, and out came the story:
Aloysius now had a new job, working for a non-governmental organization concerned with tropical deforestation. In the tropics of Southeast Asia and the Pacific islands, large-scale logging is carried out mainly by international logging companies whose subsidiaries are in many countries but whose home offices are mainly in Malaysia, and also in Taiwan and South Korea. They operate by leasing logging rights on land still owned by local people, exporting unfinished logs, and not replanting. Much or most of the value of a log is added on by cutting up and processing it after it has been felled: that is, the finished timber sells for far more than the log from which it was cut. Hence exporting unfinished logs deprives local people and the national government of most of the potential value of their resource. The companies frequently obtain the required government logging permit by bribing government officials, and then proceeding to build roads and cut logs beyond the boundaries of the area actually leased. Alternatively, the companies merely send in a logging ship, quickly negotiate permission with local people, carry out the logging, and dispense with a government permit. For example, about 70% of all wood cut in Indonesia comes from illegal operations that cost the Indonesian government nearly a billion dollars a year in lost taxes, royalties, and lease payments. Local permission is obtained by wooing village leaders who may or may not have the power to sign away logging rights, and by taking those leaders to the national capital or else overseas to Hong Kong, where they are plied with luxury hotel accommodations, food, drink, and prostitutes until they sign. This sounds like an expensive way to do business, until one realizes that a single big rainforest tree is worth thousands of dollars. Acquiescence of the ordinary village population is bought by paying them an amount of cash that seems to them enormous but that they will actually spend on food and other consumables within a year. In addition, the company also obtains local acquiescence by making promises that will not be carried out, such as a promise to replant the forest and build hospitals. In some well-publicized cases in Indonesian Borneo, the Solomon Islands, and elsewhere, when loggers have arrived at a forest with a permit from the central government and started logging, local people who realized that this would be a bad deal for them attempted to stop the logging by blocking roads or burning sawmills, whereupon the logging company enlisted the police or army to enforce their rights. I had heard that logging companies also intimidate opponents by threatening to kill them.
Aloysius was such an opponent. The loggers did threaten to kill him, but he persisted because he was confident that he could take care of himself. They then threatened to kill his wife and children, who he knew could not take care of themselves, and whom he would not be in a position to protect whenever he was away at work. To save their lives, he moved them overseas to another country and became more vigilant about possible murder attempts on himself. That explained his new nervousness and the loss of his former happy, confident manner.
With such logging companies, as with the mining companies that we already discussed, we have to ask ourselves why they behave in a way that is morally reprehensible. The answer, again, is that their behavior is profitable to them because of the same three factors motivating mining companies: economics, the industry’s corporate culture, and attitudes of society and government. Tropical hardwood logs are so valuable and in demand that rape-and-run logging of leased tropical forest land is immensely profitable. Acquiescence of local people can frequently be obtained, because the local people are desperate for cash and have never seen the disastrous consequences that clear-cutting tropical rainforest brings to local landowners. (One of the most cost-effective ways by which organizations opposed to tropical rainforest logging have induced landowners to refuse permission is by taking them to already-logged areas to talk with regretful landowners and to see for themselves.) Officials in the government forestry department can often be bribed, lack the international perspective and financial resources of the logging companies, and may not realize the high value of finished timber. Under those circumstances, rape-and-run will continue to be good business until the companies start to run out of unlogged countries, and until national governments and local landowners are prepared to refuse permission and to muster superior force in order to resist unpermitted logging backed by force.
In other countries, notably western Europe and the United States, rape-and-run logging has become increasingly unprofitable. In contrast to the situation in much of the tropics, western European and American virgin forests have already been cut or are in steep decline. Large logging companies operate on land that they own or else hold by long-term lease rather than short-term lease, thereby giving them under some circumstances an economic incentive for sustainability. Many consumers are sufficiently aware environmentally to care whether the wood products that they are purchasing have been harvested in destructive non-sustainable ways. Government regulation is sometimes serious and restrictive, and government officials are not readily bribed.
The result is that some logging companies operating in western Europe and the United States have become increasingly concerned not only about their ability to compete against Third World producers with lower costs, but also about their own survival, or (to use mining and oil industry terminology) their “social license to operate.” Some logging companies have adopted sound practices and have attempted to convince the public of that, but they found that their claims on their own behalf lacked credibility in the eyes of the public. For instance, many wood and paper products that are offered to consumers for sale carry labels making pro-environmental claims such as “for every tree felled, at least two are planted.” However, a survey of 80 such claims found that 77 could not be substantiated at all, 3 could be only partially substantiated, and almost all were withdrawn when challenged. Understandably, the public has learned to dismiss such claims made by companies themselves.
Adding to the timber companies’ concern about their social license and credibility was their concern about the impending extinction of forests, the basis of their business. More than half of the world’s original forests have been cut down or heavily damaged in the last 8,000 years. Yet our consumption of forest products is accelerating, with the result that more than half of those losses have occurred within the past 50 years—for instance, because of forest clearance for agriculture, and because world consumption of paper has increased five-fold since 1950. Logging is often just the first step in a chain reaction: after loggers build access roads into a forested area, poachers follow those roads to hunt animals, and squatters follow them to settle. Only 12% of the world’s forests lie within protected areas. In a worst-case scenario, all of the world’s readily accessible remaining forests outside those protected areas would be destroyed by unsustainable harvesting within the next several decades, although in a best-case scenario the world could meet its timber needs sustainably from a small area (20% or less) of those forests if they were well managed.
Those concerns about the long-term future of their own industry impelled some timber industry representatives and foresters in the early 1990s to launch discussions with environmental and social organizations and associations of indigenous peoples. In 1993 those discussions resulted in the formation of an international non-profit organization called the Forest Stewardship Council (FSC), which is headquartered in Germany and funded by several businesses, governments, foundations, and environmental organizations. The council is run by an elected board, and ultimately by the FSC’s membership, which includes representatives of the timber industry and of environmental and social interests. The FSC’s original tasks were three-fold: to draw up a list of criteria of sound forest management; then, to set up a mechanism for certifying whether any particular forest satisfied those criteria; and, finally, to set up another mechanism for tracing products from such a certified forest through the complex supplier chain all the way to the consumers, so that a consumer could know whether the paper, chair, or board that he or she was buying in a store, and that carried the FSC logo, actually came from a soundly managed forest.
The first of those tasks resulted in the formulation of 10 detailed criteria of sound and sustainable forest management. Those include: harvesting trees only at a rate that can be sustained indefinitely, with growth of new trees adequate to replace felled trees; sparing of forests of special conservation value, such as old-growth forests, which should not be converted into homogenous tree plantations; long-term preservation of biodiversity, nutrient recycling, soil integrity, and other forest ecosystem functions; protection of watersheds, and maintenance of adequately wide riparian zones along streams and lakes; a long-term management plan; acceptable off-site disposal of chemicals and waste; obedience of prevailing laws; and acknowledgment of the rights of local indigenous communities and forest workers.
The next task was to establish a process for ascertaining whether the management of a given forest does meet those criteria. The FSC does not certify forests itself: instead, it accredits forest certification organizations that actually visit a forest and spend up to two weeks inspecting it. There are a dozen such organizations around the world, all of them accredited to operate internationally; the two that do most of the inspections in the U.S. are called SmartWood and Scientific Certification Systems, headquartered in Vermont and in California, respectively. An owner or manager of a forest contracts with a certification organization for an inspection, and pays for the audit, without any advance guarantee of a favorable outcome. The certifier’s response after the inspection is often to impose a list of pre-conditions that must be met before approval, or just to grant provisional approval based on a list of conditions that must be met before use of the FSC label will be permitted.
It should be emphasized that the initiative in getting a forest certified must always be taken by the owner or manager; the certifiers do not go around inspecting forests uninvited. Of course, that raises the question why any forest owner or manager would choose to pay in order to be inspected. The answer is that increasing numbers of owners and managers decide that it will be in their financial interest, because the certification fee will be earned back as a result of access to more markets and consumers through the improved image and credibility gained through independent third-party certification. The essence of FSC certification is that consumers can believe it, because it is not an unsubstantiated boast by the company itself but the result of an examination, against internationally accepted standards of best practice, by trained and experienced auditors who don’t hesitate to say no or to impose conditions.
The remaining step was to document what is called the “chain of custody,” or paper trail by which wood from a tree cut in Oregon ends up as a board offered for sale in a store in Miami. Even if a forest itself is certified, the forest’s owners may sell its timber to a sawmill that also saws uncertified timber, then the sawmill may sell its cut wood to a manufacturer that also buys uncertified cut wood, and so on. The web of interrelationships between producers, suppliers, manufacturers, wholesalers, and retail stores is so complex that even companies themselves rarely know where their wood ultimately comes from or goes to, except for knowing their immediate suppliers and customers. For the ultimate consumer in Miami to be able to have confidence that the board she is buying really came from a tree in a certified forest, intermediate suppliers must keep certified and non-certified material separate, and auditors must certify that every intermediate supplier is actually doing that. That constitutes “certifying the chain of custody”: tracking certified materials through the whole supply chain. The end result is that only about 17% of the products from certified forests end up bearing the FSC’s logo in a retail store; the other 83% get commingled with non-certified products along the chain. Certifying the chain of custody sounds like, and really is, a big pain in the neck. But it is an essential pain in the neck, because otherwise the consumer could not be confident of the ultimate origins of that board in the Miami store.
Do enough members of the public really care about environmental issues for FSC certification to help sell wood products? When asked in surveys, 80% of consumers claim that they would prefer to buy products of environmentally clean provenance if given the choice. But are those just empty words, or do people really pay attention to FSC labels when they are in a store? And would they be willing to pay a little more for an FSC-labeled product?
These issues are crucial to companies pondering whether to apply and pay for certification. The questions were put to the test in an experiment carried out at two Home Depot stores in Oregon. Each store set up two nearby bins containing plywood pieces of the same size, and similar except that the plywood in one bin carried the FSC label and the plywood in the other bin didn’t. The experiment was run twice: either with the plywood in the two bins costing the same, or else with the FSC-labeled plywood costing 2% more than the unlabeled plywood. It turned out that, when the cost was the same, FSC-labeled plywood outsold unlabeled plywood by more than 2 to 1. (At one of the stores in a “liberal,” environmentally aware university town, the factor was 6 to 1, but even at the store in the more “conservative” town the labeled plywood still outsold unlabeled plywood by 19%.) When the labeled plywood cost 2% more than the unlabeled plywood, of course most customers preferred the cheaper product, but nevertheless a large minority (37%) still proceeded to buy the labeled product. Thus, much of the public really does weigh environmental values in its purchasing decisions, and a significant fraction of the public is willing to pay more for those values.
When FSC certification was first introduced, there was much fear that certified products would indeed end up costing more, either because of the expense of the certification audit or of the forestry practices necessary for certification. Much subsequent experience has shown that certification usually does not add to a wood product’s inherent cost. In cases where markets did price certified products higher than comparable non-certified ones, that turned out to be due just to the laws of supply and demand rather than inherent costs: retailers selling a certified product available only in short supply, for which there was high demand, found that they could get away with raising the price.
The list of big businesses that participated in the initial formation of the FSC, joined the board of directors, or committed themselves more recently to FSC goals includes some of the world’s largest producers and sellers of timber products. Among U.S.-based companies are Home Depot, the world’s largest retailer of lumber; Lowe’s, second only to Home Depot in the U.S. home improvement industry; Columbia Forest Products, one of the largest forest product companies in the U.S.; Kinko’s (now merged with FedEx), the world’s largest provider of business services and document copying; Collins Pine and Kane Hardwoods, one of the U.S.’s largest producers of cherry; Gibson Guitars, one of the world’s leading guitar manufacturers; Seven Islands Land Company, which manages a million acres of forest in the state of Maine; and Andersen Corporation, the world’s largest manufacturer of doors and windows. Major participants outside the U.S. include Tembec and Domtar, two of Canada’s largest forest managers; B & Q, the United Kingdom’s largest do-it-yourself-in-the-home business, analogous to Home Depot in the U.S.; Sainsbury’s, the second largest United Kingdom supermarket chain; Swedish-based IKEA, the world’s largest retailer of ready-to-assemble home furnishings; and SCA and Svea Skog (formerly Asi Domain), two of Sweden’s largest forestry companies. These and other businesses all embraced the FSC because they saw it as advancing their economic interests, but they reached that conclusion through varying combinations of “push” and “pull.” The “push” is that some of these firms were targets of campaigns by environmental groups dissatisfied with company practices such as dealing in old-growth timber: for instance, Home Depot was pressured by the Rainforest Action Network. As for the “pull” factor, companies recognized many opportunities for maintaining or increasing their sales to an increasingly discerning public. In defense of Home Depot and other companies whose motivation included some “pushing,” they understandably had to move cautiously while making changes in the network of suppliers that they had built up over many years. They then proceeded to learn quickly, to the point where Home Depot itself is now pressuring its suppliers in Chile and South Africa to adopt FSC standards.
In connection with the mining industry, I mentioned that the most effective pressure on mining companies to change their practices has come not from individual consumers picketing mine sites, but from big companies that buy metals (like DuPont and Tiffany) and that sell to individual consumers. A similar phenomenon has unfolded in the timber industry. While the largest consumption of wood is for home construction, most homeowners don’t know, select, or control the choice of forestry companies producing the wood used in their house. Instead, the customers of forestry companies are big forest products companies, like Home Depot and IKEA, and big institutional buyers, like the City of New York and the University of Wisconsin. The role of such companies and institutions in the successful campaign to end apartheid in South Africa demonstrated their ability to command the attention of even such powerful, rich, determined, well-armed, and apparently rigid entities as the apartheid-era South African government. Many retail and industrial companies in the forest products chain have increased their clout by organizing themselves into what are termed “buyers’ groups” that commit themselves over a specified time frame to increase their sales of certified products, with preference for FSC-labeled products. Around the world today, there are more than a dozen such groups, of which the largest is in the United Kingdom and includes some of the largest U.K. retailers. Buyers’ groups are also increasingly strong in the Netherlands and other western European countries, the U.S., Brazil, and Japan.
Besides these buyers’ groups, another potent force behind the spread of FSC-labeled products in the U.S. is the “green building standard” known as LEED (Leadership in Energy and Environmental Design). This code rates the environmental design and use of materials in the construction industry. An increasing number of American state governments and cities give tax credits to companies adopting high LEED standards, and many American government building projects require companies involved to follow LEED standards. This has turned out to be a significant consideration for builders, contractors, and architectural firms that don’t deal directly with the public and are not very visible to consumers, but that nevertheless choose to buy FSC-labeled products because they benefit from decreased taxes and increased access to bidding on projects. I should make clear, in connection both with LEED standards and with buyers’ groups, that both are driven ultimately by environmental concerns of individual consumers, and by the desire of companies to have their corporate brand become associated with environmental responsibility by consumers. What LEED standards and buyers’ groups do is to provide a mechanism whereby individual consumers can influence the behavior of companies that would otherwise not be directly responsive to individual consumers.
The forest certification movement has spread rapidly around the world since the FSC’s launching in 1993, to the point where at present there are certified forests and chains of custody in about 64 countries. The area of certified forests now totals 156,000 square miles, of which 33,000 are in North America. Nine countries each contain at least 4,000 square miles of certified forests, led by Sweden with 38,000 square miles (representing more than half of that country’s total forested area), and followed in descending order by Poland, the U.S., Canada, Croatia, Latvia, Brazil, the United Kingdom, and Russia. The countries in which the highest percentages of forest products sold are FSC-labeled are the United Kingdom, where about 20% of all wood sold is FSC-certified, and the Netherlands. Sixteen countries have individual certified forests exceeding 400 square miles in area, of which the largest in North America is the 7,800-square-mile Gordon Cosens Forest in Ontario, managed by the Canadian timber and paper giant Tembec. By the near future, Tembec intends to certify all of the 50,000 square miles of forest that it manages in Canada. Certified forests include both publicly and privately owned ones: for instance, the largest single owner of certified forest in the U.S. is the State of Pennsylvania, with about 3,000 square miles.
Initially after the formation of the FSC, the area of forests certified was doubling each year. More recently, the rate of growth has slowed to “only” 40% per year. That’s because the first forest companies and managers that became certified were ones that had already espoused FSC standards. The companies whose forests have become accredited more recently tend to be ones that must change their operations in order to achieve FSC standards. That is, the FSC initially served mainly to recognize companies with environmentally sound practices, and is now increasingly serving to change the practices of other companies that were initially less sound environmentally.
The effectiveness of the Forest Stewardship Council has received the ultimate compliment from logging companies opposed to it: they have set up their own competing certification organizations with weaker standards. These include the Sustainable Forestry Initiative in the U.S., set up by the American Forest and Paper Association; the Canadian Standards Association; and the Pan-European Forest Council. The effect (and presumably the purpose) is to confuse the public with competing claims: for instance, the Sustainable Forestry Initiative initially proposed six different labels making six different claims. All of these “knockoffs” differ from the FSC in that they do not require independent third-party certification, but they permit companies to certify themselves (I’m not joking). They do not ask companies to judge themselves by uniform standards and quantifiable results (e.g., “width of the strips of riparian vegetation flanking streams”), but instead by unquantifiable processes (“we have a policy,” “our managers participate in discussions”). They lack chain-of-custody certification, so that any product of a sawmill that receives both certified and uncertified timber becomes certified. The Pan-European Forest Council practices regional automatic certification, by which for instance the entire country of Austria became certified quickly. It remains to be seen whether, in the future, these competing industry attempts at self-certification will be outcompeted by the FSC through losing credibility in the eyes of consumers, or will instead converge on FSC standards in order to gain credibility.
The last industry that I shall discuss is the seafood industry (marine fisheries), which faces the same fundamental problem as do the oil, mining, and timber industries: rising world population and affluence leading to increasing demand for decreasing supplies. While seafood consumption is high and rising in the First World, it is even higher and rising faster elsewhere, e.g., having doubled in China within the last decade. Fish now account for 40% of all protein (of both plant and animal origin) consumed in the Third World and are the main animal protein source for over a billion Asians. Worldwide population shifts from the interior towards the coast within countries will increase the demand for seafood, because three-quarters of the world’s population will be living within 50 miles of the seacoast by the year 2010. As a result of our dependence on seafood, the sea provides jobs and income for 200,000,000 people around the world, and fishing is the most important basis of the economies of Iceland, Chile, and some other countries.
While any renewable biological resource poses difficult management problems, marine fisheries are especially hard to manage. Even fisheries confined to waters controlled by a single nation pose difficulties, but fisheries extending over water controlled by multiple nations pose greater problems and have tended to be the earliest to collapse, because no single nation can impose its will. Fisheries in the open ocean outside the 200-mile marine limit lie beyond the control of any national government. Studies suggest that, with proper management, the world’s seafood catch could be sustained at a level even higher than its present level. Sadly, though, the majority of the world’s commercially important marine fisheries have already either collapsed to the point of being commercially extinct, have been severely depleted, are currently overfished or fished to the limit, are recovering only slowly from past overfishing, or are otherwise in urgent need of management. Among the most important fisheries that have already collapsed are Atlantic halibut, Atlantic bluefin tuna, Atlantic swordfish, North Sea herring, Grand Banks cod, Argentinian hake, and Australian Murray River cod. In overfished areas of the Atlantic and Pacific Oceans, peak catches were attained in the year 1989 and have declined since then. The main reasons behind all these failures are the tragedy of the commons, discussed in the preceding chapter, which makes it difficult for consumers exploiting a shared renewable resource to reach agreement despite their shared interest in doing so; the widespread lack of effective management and regulation; and so-called perverse subsidies, i.e., the economically senseless subsidies that many governments pay for political reasons to support fishing fleets that are too large in relation to their fish stocks, that lead almost inevitably to overfishing, and that yield too low profits to survive without the subsidies.
The damage caused by overfishing extends beyond the future prospects of all of us to eat seafood, and beyond the survival of the particular fish or seafood stocks that we harvest. Most seafood is captured by netting and other methods that result in our hauling in unwanted animals besides those actually sought. Those other animals, referred to as by-catch, constitute a proportion varying between one-quarter and two-thirds of the total catch. In most cases the by-catch dies and is thrown back overboard. Included in the by-catch are unwanted fish species, juveniles of the targeted fish species, seals, dolphins and whales, sharks, and sea turtles. Yet by-catch mortality is not inevitable: for example, recent changes in fishing gear and practices reduced dolphin mortality in the eastern Pacific tuna fishery by a factor of 50. There is also heavy damage to marine habitats, notably to the seabed by trawlers and to coral reefs by dynamite and cyanide fishing. Finally, overfishing damages fishermen, by ultimately eliminating the basis of their livelihood and costing them their jobs.
All of these problems troubled not only economists and environmentalists but also some leaders of the seafood industry itself. Among the latter were executives of Unilever, one of the world’s largest buyers of frozen fish, whose products were familiar to consumers under the brand names of Gorton in the U.S. (subsequently sold by Unilever), Birdseye Walls and Iglo in Britain, and Findus and Frudsa in Europe. The executives became concerned that fish, the commodities that they bought and sold, were in steep decline throughout the world, just as the timber company executives who launched the Forest Stewardship Council became concerned about the steep decline of forest. Hence in 1997, four years after the establishment of the FSC, Unilever teamed up with World Wildlife Fund to found a similar organization termed the Marine Stewardship Council (MSC). Its goal was to offer credible eco-labeling to consumers, and to encourage fishermen to solve their own tragedies of the commons by the positive incentive of market appeal rather than the negative incentive of threatened boycotts. Other companies and foundations, plus international agencies, have now joined Unilever and World Wildlife Fund in funding the MSC.
In Britain the companies besides Unilever that support the MSC or buy its certified seafood products include Young’s Bluecrest Seafood Company, Britain’s largest seafood company; Sainsbury’s, Britain’s largest fresh food supplier; the supermarket chains Marks and Spencer, and Safeway; and the Boyd Line, which operates a fleet of fishing trawlers. U.S. supporters include Whole Foods, the world’s largest retailer of natural and organic foods, plus Shaw’s supermarkets and Trader Joe’s markets. Among supporters elsewhere are Migros, which is Switzerland’s largest food retailer, and Kailis and France Foods, a large operator of fishing boats, factories, markets, and exports in Australia.
The criteria that the MSC applies to fisheries were developed in consultation between fishermen, fisheries managers, seafood processors, retailers, fishery scientists, and environmental groups. The principal criteria are that the fishery should maintain its fish stock’s health (including the stock’s sex and age distribution and genetic diversity) for the indefinite future, should yield a sustainable harvest, should maintain ecosystem integrity, should minimize impacts on marine habitats and on non-targeted species (the by-catch), should have rules and procedures for managing stocks and minimizing impacts, and should comply with prevailing laws.
Seafood companies bombard the consuming public with widely differing claims, some of them deceptive or confusing, about the supposed environmental benignness of their fishing practices. Hence the essence of the MSC, as of the FSC, is independent third-party certification. Again as with the FSC, the MSC accredits several certifying organizations, rather than carrying out certifying audits itself. Application for certification is completely voluntary: it’s up to a company to decide if it thinks that the benefits of certification would warrant the cost. For the smaller fisheries seeking assessment, a foundation called the David and Lucille Packard Foundation now contributes to paying those costs through the Sustainable Fisheries Fund. The process begins with a confidential pre-assessment of the applying company by the certifying organization, then (if the company still wants to be audited) comes a full assessment typically requiring one or two years (up to three years for big complicated fisheries) and specifying issues that must be addressed. If the audit is favorable and the specified issues are resolved, the company receives certification for five years but is subject each year to an audit without prior notification. Those annual audit results are posted on a public website and get scrutinized and often challenged by interested parties. Experience shows that most companies, once they have received MSC certification, are anxious not to lose it and want to do whatever is required to pass the annual audit. As with the FSC, there are also chain-of-custody audits to trace fish caught by a certified fishery from the fishing boat to the dock where the catch is landed, then to wholesale markets, processors (freezers and canners), wholesale dealers, and distributors, to the retail market. Only products of a certified fishery that can be traced through this whole chain are permitted to carry the MSC logo when offered for sale to a consumer in a shop or restaurant.
What gets certified is a fishery or a fish stock, and the fishing method, practice, or gear used to harvest that stock. The entities seeking certification are collectives of fishermen, government fisheries departments acting on behalf of a national or local fishery, and intermediate processors and distributors. Applications are considered from “fisheries” not only of fish, but also of molluscs and crustacea. Of the seven fisheries certified to date, the largest is the wild salmon fishery of the U.S. state of Alaska, represented by the Alaska Department of Fish and Game. The next largest are Western Australian rock lobster (Australia’s most valuable single-species fishery, accounting for 20% of the value of all Australian fisheries) and New Zealand hoki (New Zealand’s most valuable export fishery). The other four fisheries already certified are smaller ones in Britain: Thames herring, Cornwall mackerel caught by handline, Burry Inlet cockles, and Loch Torridon Nephrops. Pending accreditation are Alaska pollock, the largest fishery in the U.S., accounting for half of the U.S. catch; U.S. West Coast halibut, Dungeness crab, and spotted prawn; U.S. East Coast striped bass; and Baja California lobster. Plans are also under way to extend certification from wild-caught fish to aquaculture operations (which pose their own big problems mentioned in the next chapter), beginning with shrimp and proceeding to 10 other species, including perhaps salmon. It appears at present that the most difficult problems of certification for the world’s major fisheries will arise with wild-caught shrimp (because it is caught mostly by bottom-trawling producing a large by-catch), and with fisheries extending beyond the jurisdiction of a single nation.
Overall, certification has been proving more difficult and slower for fisheries than for forests. Nevertheless, I find myself pleasantly surprised by the progress in fisheries certification achieved in the last five years: I had expected it to be even more difficult and slower than it actually has been.
In brief, environmental practices of big businesses are shaped by a fundamental fact that for many of us offends our sense of justice. Depending on the circumstances, a business really may maximize its profits, at least in the short term, by damaging the environment and hurting people. That is still the case today for fishermen in an unmanaged fishery without quotas, and for international logging companies with short-term leases on tropical rainforest land in countries with corrupt government officials and unsophisticated landowners. It was also the case for oil companies before the Santa Barbara Channel oil spill disaster of 1969, and for Montana mining companies before recent cleanup laws. When government regulation is effective, and when the public is environmentally aware, environmentally clean big businesses may outcompete dirty ones, but the reverse is likely to be true if government regulation is ineffective and if the public doesn’t care.
It is easy and cheap for the rest of us to blame a business for helping itself by hurting other people. But that blaming alone is unlikely to produce change. It ignores the fact that businesses are not non-profit charities but profit-making companies, and that publicly owned companies with shareholders are under obligation to those shareholders to maximize profits, provided that they do so by legal means. Our laws make a company’s directors legally liable for something termed “breach of fiduciary responsibility” if they knowingly manage a company in a way that reduces profits. The car manufacturer Henry Ford was in fact successfully sued by stockholders in 1919 for raising the minimum wage of his workers to $5 per day: the courts declared that, while Ford’s humanitarian sentiments about his employees were nice, his business existed to make profits for its stockholders.
Our blaming of businesses also ignores the ultimate responsibility of the public for creating the conditions that let a business profit through hurting the public: e.g., for not requiring mining companies to clean up, or for continuing to buy wood products from non-sustainable logging operations. In the long run, it is the public, either directly or through its politicians, that has the power to make destructive environmental policies unprofitable and illegal, and to make sustainable environmental policies profitable. The public can do that by suing businesses for harming them, as happened after the Exxon Valdez, Piper Alpha, and Bhopal disasters; by preferring to buy sustainably harvested products, a preference that caught the attention of Home Depot and Unilever; by making employees of companies with poor track records feel ashamed of their company and complain to their own management; by preferring their governments to award valuable contracts to businesses with a good environmental track record, as the Norwegian government did to Chevron; and by pressing their governments to pass and enforce laws and regulations requiring good environmental practices, such as the U.S. government’s new regulations for the coal industry in the 1970s and 1980s. In turn, big businesses can exert powerful pressure on their suppliers that might ignore public or government pressure. For instance, after the U.S. public became concerned about the spread of mad cow disease, and after the U.S. government’s Food and Drug Administration introduced rules demanding that the meat industry abandon practices associated with the risk of spread, meat packers resisted for five years, claiming that the rules would be too expensive to obey. But when McDonald’s Corporation then made the same demands after customer purchases of its hamburgers plummeted, the meat industry complied within weeks: “because we have the world’s biggest shopping cart,” as a McDonald’s representative explained. The public’s task is to identify which links in the supply chain are sensitive to public pressure: for instance, McDonald’s, Home Depot, and Tiffany, but not meat packers, loggers, or gold miners.
Some readers may be disappointed or outraged that I place the ultimate responsibility, for business practices harming the public, on the public itself. I also assign to the public the added costs, if any, of sound environmental practices, which I regard as normal costs of doing business, like any others. My views may seem to ignore a moral imperative that businesses should follow virtuous principles, whether or not it is most profitable for them to do so. I instead prefer to recognize that, throughout human history, in all politically complex human societies in which people encounter other individuals with whom they have no ties of family or clan relationship, government regulation has arisen precisely because it was found to be necessary for the enforcement of moral principles. Invocation of moral principles is a necessary first step for eliciting virtuous behavior, but that alone is not a sufficient step.
To me, the conclusion that the public has the ultimate responsibility for the behavior of even the biggest businesses is empowering and hopeful, rather than disappointing. My conclusion is not a moralistic one about who is right or wrong, admirable or selfish, a good guy or a bad guy. My conclusion is instead a prediction, based on what I have seen happening in the past. Businesses have changed when the public came to expect and require different behavior, to reward businesses for behavior that the public wanted, and to make things difficult for businesses practicing behaviors that the public didn’t want. I predict that in the future, just as in the past, changes in public attitudes will be essential for changes in businesses’ environmental practices.