Modern mines must absorb social costs

Each July for the past four decades I have traveled to the Rocky Mountain Mineral Law Foundation’s Annual Institute for the purpose of maintaining my credentials as a lawyer and to keep abreast of developments in the mining industry. Each year I come away with new information and a better insight into matters of interest to me and my clients.

One cannot practice mining law for very long without realizing that there is a mountain of statutes and regulations that impact the industry. My shorthand explanation of these mandates is that they force the industry to internalize certain costs that theretofore had been “externalized.” By externalizing costs, I mean that although certain social costs associated with mining have been palpable, initially they were not borne by the ultimate user, primarily because they were ignored by the mine owners. Every step in the supply chain, from the mineral source to the retail outlet, is subject to scrutiny in this regard.

The cost of mining includes a full panoply of potential insults to society including wage and hour standards, health and safety standards, environmental and resource protection standards, and community and cultural standards. When the issues caused by ignoring those standards became overwhelming, in the U.S. at least, statutory intervention has become inevitable.

There was a time, for instance, when the primary consideration for mineral extraction was recovery of the mineral at the lowest possible cost and at the greatest possible return, devil take the hindmost. This was not unique to America – it was a global condition that still persists in some regions around the world. However, as death and disaster have over time roiled these negative attributes to the headlines, our priorities have changed and mine operators have been induced, if not compelled, to modify their practices.

The Mine Safety and Health Act of 1977 (MSHA) is an illustration of the response by the government to leverage the jobsite conditions in the U.S. into what is now probably the healthiest and safest place in the world to be employed, but not without cost to mine operators. Few could disagree with the result, though some might criticize MSHA’s ham-handed methodology.

Likewise, the catalogue of environmental laws designed to embrace everything from air, water and noise pollution to protect all manner of critters, on the land or in the air or in the sea, have escalated the ultimate costs of domestic mineral production. Ultimately internalizing those costs into the price of consumer goods makes the buyers of everything from cellphones to indoor plumbing pay for the industry’s ethical practices.

Ironically, some of these social costs do not actually go away. They are just temporarily hidden from view until today’s toys wind up in trash yards overflowing with Blackberries and Dells. The life of any given mineral is finite. With few exceptions, even the rarest of commodities is not recycled forever.

What caught my attention at the most recent Institute, however, was the emphasis of one of the presentations on the social costs of the supply chain, from the mining of raw materials to the sale of consumer goods to the ultimate user.

The catch phrase used in this paper was “Environmental, Social and Governance (ESG) Standards.” Although all of us have lived with issues relating to supply chain integrity for a very long time, the presenters’ (Andrew Lillie and Elizabeth Och of the Hogan Lovells law firm in Denver) breakdown of the subject matter was intriguing as well as entertaining.

Lille and Och focused attention on ethical supply chain management in a changing world. The thrust of the presentation was that mining companies can and do influence the ethical practices of others through the use of blockchain technology.

Blockchain technology allows comprehensive end-to-end tracking of ores and minerals by requiring sealed bags or containers of concentrates and ore to be stamped with a unique identifier. The blockchain identifier contains information on the quality and quantity of each parcel of ore or concentrate, is continually updated and, among other things, will help confirm to buyers that the minerals being purchased come from ethical producers.

For Alaska’s mines, this technology is essentially a no-brainer. Producers of Alaska’s mineral products can certify compliance with the full range of ESG standards at the outset and ultimately consumers can know exactly where the commodity was produced and what social and environmental protections were in place at the time of production.

It has long been my view that America’s inability to be self-sustaining with regard to critical minerals is a travesty, not only in the sense that many of the commodities we consume are produced off-shore under less than ethical conditions, but also because it projects vulnerability in the case of national emergency.

As this presentation essentially documented, not only should we be in a position to produce many of our own critical minerals, but through blockchain technology, we will be able to prove it.