Friday, July 25, 2008

We Can Do Better

We frequently see the debate between “environmentalists” and the rest of us as framed in an “us” vs. “them” manner. Business people feel that the environmental movement is nothing but a roadblock to progress. People in developing countries see environmental groups preventing them from experiencing the luxuries of the west because they hinder the utilization of the natural resources at hand.

Environmental groups often carry names like “Friends of the Earth” or “Save the Wildlife.” Those types of names carry with them a stigma that immediately sets on edge the typical businessman.

What if the debate became a completely economic one?

There is within the economic community the idea that when external costs are internalized into the price of a good or service, the decision to allocate resources to that good or service often changes. An example of internalizing these externalities would be the impact of a uranium mine on the Navajo Reservation. In order to avoid the potential complexities of the decision, let’s limit it to one possible issue – or, external cost -- the impact of the mining activity on the water supply of a community.

Suppose that the mine is located within the watershed of a Navajo community. To fully understand the cost to develop the mine, the potential pollution of the community’s water supply must be examined. Such examination would need to include preventative measures and possible remediation in the event of contamination. It also would need to look at long-term effects to wildlife residing in the watershed. Wildlife might provide hunting lease income to the reservation. It might also be of significant cultural value that would be difficult to price. It might affect tourist income from photography or viewing. It might impact local artisans who utilize specific clays located within the watershed.

With the exception of preventing and remediating potential contamination, none of the impacts mentioned are direct costs to the mine owner/operator. They are however, external costs to the community of locating the mine in their watershed.

How does one determine the value of natural resources? We can estimate the value of mineral deposits. We can value land based on the transactional market for similar properties. But, how do we value the less obvious things such as: filtering the water supply, tourism, hunting and fishing, recreation, moderating effects on climate, flood protection, erosion control and other items about which we don’t currently understand?

Hopefully in the near future, we will see attention paid to such values. Such things must be part of an overall land use plan before disruptive activities are begun. We need oil, natural gas, wind energy, solar energy, coal and we need minerals that can only be obtained through extractive activities. Surely we have learned enough of the complex interactions of the environment to begin to make sound evaluations of our activities in a broader sense. We must learn to utilize our resources without destroying our surroundings. Let’s drill – but let’s do so in an environmentally informed manner. Let’s build windmills for electrical generation – but let’s situate them in a manner that retains the benefits of our wild lands. Let’s learn from the unintended consequences of our past mistakes – such as ruined lakes and streams from coal mining or oil and gas extraction. We can do better.

6 comments:

The Hermit said...

I agree with the theme of your posting. The problem comes in with implementation. There are a lot of people who are vehemently opposed to any sort of process which extracts any natural resource, from logging to drilling. In the other camp (and I work with some of these guys) there are those who would practice "rape and run" procedures to get at natural resources. They say "we have a fiduciary responsibility to the investors" not to spend one cent that is unnecessary (by that, they mean anything not directly associated with making a profit.) So any money spent on containing or lessening the impact of , say, drilling is anathema to them. One phrase I hear a lot is "those who have the gold make the rules" and another is "earth first! we'll exploit the other planets late." These are said only partially in jest. In short, no responsibility on their part to anyone other than investors. It's going to be hard to work through those two groups of fanatics.

Chris McClure aka Panhandle Poet said...

Hermit: I've worked at companies where that line about the investor's money was common. I believe that it's just an excuse. It is a self-justification of their action. Developing resources in a responsible manner is good for everyone -- developer, investor and innocent bystander as well.

You're right. It will be difficult to overcome those attitudes. It requires different thinking. It requires offered solutions, not just war-like rhetoric between opposing camps. People like you -- who think about both sides of the issue -- are the key. We must work to bridge the gap between the groups through education, thoughtful action and new solutions. The same-old-same-ol' just won't work.

Anonymous said...

Check out what Anadarko is doing off the Florida coast. At least they are saying the right things when it comes to not only turning sizable profits but doing so with a strong balance of environmental protection. The last thing a company wants is an oil spill. Costs them profits, reputation, and, likely, future business deals. Seeking long term stable profitability versus short term "rape and run" techniques is important to investors. To seek that which is long term requires balance.

Chris McClure aka Panhandle Poet said...

Anon: Can you point me to any specific articles regarding Anadarko's comments on spills, environment, etc. I'm very interested and would like to do a post along those lines. You can e-mail me at:
panhandlepoet(at)hotmail(dot)com

if you don't want to leave info in the comments. Thanks!

Anonymous said...

Oops! Anadarko's rig is actually in the Gulf of Mexico. Here is a link to an interview with Jim Hackett, Anadarko's president and CEO --

http://www.cnbc.com/id/15840232?video=776858146&play=1

http://www.cnbc.com/id/15840232?video=776858127&play=1

http://www.cnbc.com/id/15840232?video=776854228&play=1

i beati said...

well said oh good and faithful servant well said

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