While I am not a specialist in green technology, I could not help but be depressed by an article in the New York Times Tuesday about China’s rare earth minerals and metals.  

The Times and many other papers announced Tuesday that China which “currently accounts for 93 percent of production of so-called rare earth elements” plans to cut its exports of these minerals in order to get manufacturers to open plants in China. Today, China did a bit of backpedaling to reassure the rest of the world that rare earth materials would still be available.

While obscure, these elements and metals are used in a number of green technologies, including magnets for wind turbines and batteries in hybrid cars, and in missile systems.

What especially caught my eye was the Times report that

“some of the minerals crucial to green technologies are extracted in China using methods that inflict serious damage on the local environment. China dominates global rare earth production partly because of its willingness until now to tolerate highly polluting, low-cost mining.

To get at the materials, powerful acid is pumped down bore holes. There it dissolves some of the rare earths, and the slurry is then pumped into leaky artificial ponds with earthen dams, according to mining specialists.”

Western green technology at the cost of extreme pollution in another country. China’s environmental problems, not limited to the mining sector, are well-known. How do environmentalists resolve this moral dilemma? They cannot force China to clean up its act; they cannot repudiate hybrid cars and other green technology. Will environmentalists support development of rare earth extraction elsewhere, like in Australia, California, and Canada? Can green technology engineers find alternatives to rare earth? I will be interested in following how they resolve this predicament.

Oil giant Chevron says that it had obtained video recordings — and has posted them on its website —  that appear to show an Ecuadorean political operative seeking $3 million in bribes, in connection with a $27 billion lawsuit the company.

It is the latest wrinkle in the on-going class action lawsuit brought by dozens of Ecuadorean communities against Chevron. The tapes supposedly implicate the judge in the case and President Correa’s sister, but as several newspapaers point out, they do not show if the bribes were paid or even if the judge and the sister even knew of the bribes. Chevron says it did not pay for the recordings. It’s hard to know what to think: political corruption versus oil profits.

The background of the case, Aguinda vs. Texaco Inc., is pretty straightforward and well-known: for more than 20 years — until 1992 —Texaco oversaw the extraction of oil from Ecuador’s virgin rain forest. They made a colossal mess. And they are being sued because of it. Similar awful situations exist in Nigeria, today’s China, — dozens of other places — and of course, the US.

But this particular situation gets murky. There is ample, more than ample, documentation that the Ecuadorean government was aware of these problems and in fact worked very, very hard to facilitate Texaco’s operations in the rain forest. The government often put extreme pressure on the indigenous people and, when they did not acquiesce, it ignored their wishes. According to The Economist, from the mid-1970s, the Ecuadorean state-owned oil company (now Petroecuador) had a nearly 2/3 stake in the field, with Texaco overseeing operations. It’s hard to imagine Ecuador was unaware of the contamination. In 1992, the government did not renew Texaco’s contract and the company left everything for Petroecuador.

In 1993, lawyers representing 30,000 local people filed a suit against Texaco in New York City court, claiming damage to the environment and people’s health. In the face of public outcry, Texaco agreed to clean up the pits. It cost $40 million, was completed, and signed off on by the Ecuadorean government. (The Economist says too, Petroecuador was supposed to clean up the rest of the mess, but apparently has not done so and seems to be still using some of the contaminated dump sites. And there have also been questions raised whether Texaco’s work was done right or even at all.)

In 1999, Ecuador passed environmental regulations, but they were not retroactive. In 2001, Chevron bought Texaco and inherited the problem.

 “The case is historic by several measures. Never before have indigenous peoples brought a multinational oil corporation to trial in their own country. Moreover, a victory would mark a turning point in the relations between native populations around the world and the foreign corporations that do business in their homelands.
Texaco discharged more than 18 billion gallons of waste water into rivers and streams, burned millions of cubic meters of natural gas without proper emissions controls and spilled millions of gallons of crude oil directly into the earth, polluting the water”, according to the LA Times

It sickened residents including 1,400 people in the region who died of cancer possibly caused by toxic chemicals.

The suit seeks $27.3 billion in damages. $9.5 billion will go to compensation for the cancer deaths; $8.4 billion is for “unjust enrichment”; the remainder is for environmental clean-up.

The case was dismissed in the US appeals court, and sent back to Ecuador.  The Ecuadorean judge in the Lago Agrio district, Juan Nunez, seems sympathetic to the local people. “This is a fight between a Goliath and people who cannot even pay their bills,” Mr. Nuñez, 57, said to The New York Times in an interview in his office, where more than 100,000 pages of evidence were stacked to the ceiling. He was also seen on “60 Minutes” expressing similar sentiments.

But the Ecuadorean government has a lot to answer for too. And as The Economist points out,

“Texaco’s total profits from its operations in Ecuador were only $497m, while over the 20 years to 1992 Ecuadorean governments received $25.3 billion in profits, taxes and royalties from the field.”

Increasingly it seems that oil (or other multinational) corporations are sued for very real damages, but ones where the national governments are also partially liable. Perhaps it seems to the plaintiffs that they will get farther if they sue a multinational rather than their own government (if they even legally can); or perhaps they think that since oil companies have a low reputation and deep pockets, it’s easier to go after them alone; or perhaps they have greater hope for a case that gets started in a Western courtroom (as with the Ken Saro-Wiwa case from Nigeria in New York). But the governments of many resource-rich countries seem only too happy to let the multinationals assume full responsibility.

It is not that the multinationals are not responsible for what they did — everyone has always known such dumping was an environmental catastrophe (even before the term was coined), and that the people of the area were angry and exposed to waste that could poison them. But the corporations did not do it alone, and the governments that let them ought to at least recover compensatory money from those nationals who enriched themselves one way or another on the misfortune of their countrymen.

Central Africa is not the first place energy people traditionally think of when it comes to oil. Now it appears Uganda may have up to 2 billion barrels of the stuff, according to their government. The question is what to do about it.

Uganda would like to have a refinery, although some oil companies say this is a mistake. Uganda could use the energy, but not as much as would be produced. They believe the oil should be exported, although it is waxy and difficult to pass through a pipeline. A pipeline to the Indian Ocean would cost $1.5 billion; investors interested in helping Uganda, according to the Economist, include Iran, the US and China.

All this talk of what to do with the oil when it finally comes out of the ground is less important than setting up good government policies before serious drilling begins. Museveni’s government faces a number of hurtles if it is to do things right. But they can get it right.

The first question is income transparency: the two Western companies, Heritage and Tullow, who own the drilling rights have said they are open to disclosure. Now the government must decide whether it can resist the temptation of opacity and probably corruption, and sign on to EITI (Extractive Industries’ Transparency Initiative).

Dow Jones newswire has noted Tullow and Heritage have reached out to local communities, which, having heard about what happened when oil was discovered in Nigeria and Angola, are understandably worried. There are issues of more general public input.

“A dispute is already brewing over who controls rights to minerals in the Lake Albert area and how revenues will be distributed between the government and leaders of the Bunyoro Kingdom - the ethnic grouping that occupies districts on the lake’s eastern shore. Local communities ‘say they have been completely left out of the process and are not satisfied,’” Dickens Kamugisha, chief executive of the African Institute for Energy Governance, a non-governmental organization based in the Ugandan capital, said in the same article.

An especially encouraging note: New Vision (of Uganda, reported by allAfrica.com) says,

   “Under the mining law, the Government takes 80% of the revenues, the local government 17%, while the land owner takes 3%.”

This distribution of income is different than most other countries, where the constitutions cede all mineral rights and income to the national government. Assuming by “landowners” they mean those living on the land (as opposed to a wealthy absentee deed-holder), this, plus environmental controls and transparency, means that people in the area could actually profit from the oil extraction.

Uganda’s government will hopefully realize that they have the chance to effect that rarest of economic phenomena — with public inclusion, their oil bonanza could actually financially help the country and the people.

One of the greatest bones of contention about extracting fossil fuels — in the industrialized world anyway — is the damage it can or will do to the environment. The industries resist the idea.

Do the costs of environmental protections cripple the production of newer, more unconventional fields, as the industry has long proclaimed?

Apparently not.  For example: the Associated Press reported this week that Chevron, a partner in the joint venture, had agreed to meet the 28 environmental conditions Australia set for the development of the offshore Gorgon gas field, worth $41 billion in gas exports to China. One of the condition is a safeguard for a rare turtle.

Similarly, in northern Pennsylvania, Hess has just signed a deal with a large group of farmers, in the Marcellus shale play. Their environmental demands included much stronger safeguards for their farmland and water supplies than required by state or federal law, and stringent demands on waste disposal. Responding to public pressure, the regional water authorities there have also set much tougher regulations to limit water use.

In the contracts offered by extraction companies, environmental protections are played down, although according to energy lawyers I have talked to, these contracts are still infinitely better than those signed years ago. These lawyers also say that the worst offenders aren’t the energy super-giants, but the smaller scrappier companies who have leaner margins and are willing to take greater risks in developing small or questionable fields.

Unsurprisingly, all these contracts serve the financial interests of the company. Meaningful environmental considerations, especially site specific ones, are conveniently limited. A number of developing countries seem to just accept this — perhaps they lack capacity or perhaps they are ill-informed or, for some of the worst dictatorships, they just don’t care. But they don’t have to accept these terms and shouldn’t.

Similarly, the landmen who travel through the US seeking unsuspecting homeowners in resources-rich areas willing to sign over their mineral rights for a pittance also offer environmentally inadequate terms.

Most companies will start with the gambit that strong environmental protections make any given project economically unfeasible. Occasionally, this is true. However, increasingly, though, this argument seems like a negotiating tactic — untrue and dishonest. The rationale that it’s just business to glean every penny even at the cost of environmental damage is even worse than ripping people off financially. It ruins their homes, their lives.

Fortunately, more and more, it seems that if a country or group of contiguous landowners sitting on a sizeable deposit worth extracting comes up with its own thought-out and locally appropriate environmental demands and sticks to them, sooner or later an energy company will come along willing to meet the terms.

Oil and gas companies have historically managed to develop truly astonishing technology to get oil under the conditions that they face. Some of these will be the environment and they can and do rise meet these challenges — but only if they must. It is up to the governments that set the environmental laws to make them.

A Gallup poll done two weeks ago reveals that of all industries, Americans rated the oil and gas worst, even worse than banking, GM and lawyers.

There have been some annoyed, defensive responses from workers in the oil and gas field — understandable since most people in the industry are hard-working, honest and understandably offended at being categorized as disreputable.

These complaints are undercut by recent oil company actions, like this month’s artificially staged “grassroots” events in Texas against stronger emissions controls. The New York Times reported:

“The event on Tuesday was organized by a group called Energy Citizens, which is backed by the American Petroleum Institute, the oil industry’s main trade group. Many of the people attending the demonstration were employees of oil companies who work in Houston and were bused from their workplaces…
For its part, the oil industry plans to raise the pressure in coming weeks through its public rallies so that it can negotiate more favorable terms in the Senate than it got in the House. The strategy was outlined by the American Petroleum Institute in a memorandum sent to its members, which include Exxon Mobil, Chevron and ConocoPhillips. The memorandum, not meant for the public, was obtained by the environmental group Greenpeace last week.”

In a related story, PR firms for the coal industry were found to have sent more than five dozen fake letters ( supposedly from groups like senior centers and the NAACP) opposing new climate change laws to members of Congress. The PR company, Bonner and Associates, blamed it on a rogue temp. The coal industry has apologized. But it’s understandable that public suspicion continues.

The new documentary film, Sweet Crude, directed by Sandy Cioffi, offers a rare visceral look at the enormous problems facing the people of Nigeria’s oil-rich Niger River delta.

Everyone interested in energy knows the complexity of the problem: massive oil reserves, oil companies only too willing to get into bed with corrupt military dictators (or now elected officials) in the name of if-I-didn’t-someone-else-would, extreme environmental degradation, excessively violent Nigerian security forces supposedly policing the area, violent militants kidnapping oil workers and stealing oil, aggravated ethnic tensions, desperate poverty for the local people — and the mind-boggling corruption that makes Nigeria the poster child of the resource curse.

But few outside the energy field know or care much about the situation; it’s simply below the radar, another messed-up African country.

Cioffi’s passionate film doesn’t pretend to be fair or balanced — she openly sides with the local activists in one small part of the delta whom she had come to know personally. The movie’s best parts offer glimpses of the infinitely sad lives of the residents.

It may be too much to expect balance from a filmmaker who was arrested, detained and whose footage was confiscated by Nigerian forces for making this film.  Yet Cioffi also seems unwilling to explore evolution of the organization MEND (Movement for the Emancipation of the Niger Delta) — she claims her friends are the true MEND and are non-violent. But someone is out there as a much more violent and militant version of this group, and she doesn’t help her case by blithely dismissing these supposed pretenders so easily.

And she doesn’t talk to any major figures (corrupt or otherwise) inside the government  at any level  or any of international NGOs working on this issue.  There is  only one vague chat with an oil company manager. There is no exploration of why this issue has been so unbelievably hard to resolve.

Perhaps no film could tell the whole story of the Nigerian tragedy. But a more complete set of characters and deeper understanding of all sides would have given this film much more power and credibility.

In my family, there is the story of how, when one of my aunts sold her house, her sisters, helping her empty the place, found 27 boxes of Fab detergent squirreled away in the kitchen cupboard. In case she should ever run out, and besides it was on sale, you see. Something like this may be about to happen to China.

This week’s Forbes has once again posed the questions sporadically floated for some time: what happens when the Chinese realize they have over-bought commodities? Did the Chinese inadvertently create a mini-bubble in commodities?

In the depths of the financial crash, when the global economy seemed to be unable to find bottom and the prices of oil, gas and metals were in freefall, China, as we know, went on quite a shopping spree.

Everyone was willing to sell and China gave loans in exchange for future guarantees on oil and gas from Russian companies, Brazil’s Petrobras, and many others. They went shopping in Africa, Latin America and Australia, snapping up commodities at great prices (and not always as low as they could have gone, either).  Overextended mining giants like Rio Tinto sought out China for huge cash infusions to keep them afloat — though that deal, of course, obviously ended in disaster with Rio Tinto pulling back as prices improved and China retaliating with charges of spying.

Most investors are not betting on metal futures. Oil and gas prices seem unnaturally high, given the lower demands. Metals like copper have piled up in Chinese warehouses. Forbes reports China has imported nearly 300 million tons of iron ore this year, and nearly a half million tons of copper more than it needs.

Even with all the building going on in Shanghai for next year’s World Expo, even with their own stimulus package, even with the Chinese banks supporting it, it seems impossible that China will actually need all this stuff in the foreseeable future, especially with world demand still slow and its own exports down.

Chinese buying has slowed. Will the oil, gas and metals prices hang in there till there is a real economic recovery, or again crash to reflect actual demand?

On Friday, the New York Times reported that Iraq’s date production, has fallen to half of what it was in the 1980s, when the country was the world’s leading date producer. “Date palms have been left to die for lack of water, and fungi and pests have ruined thousands of tons of fruit because the country has only three crop-dusting airplanes and three qualified pilots. American military approval is still needed to fly.”

The Iraqi government says it cannot spare any oil income to save the agricultural sector.

If, for thousands of years, Iraq, “the Fertile Crescent”, had a decent agricultural sector, and until the 1980s, also a stable manufacturing sector, its economy is now about only one commodity: oil. According to a senior Iraqi economist quoted in the article, 95% of the government’s revenue now comes from oil. It isn’t only the war’s destruction that threatens the Iraqi date crop. Even under the best of circumstances, countries with a heavy extractive sector have to work especially hard to sustain their agricultural or manufacturing sector in the face of the so-called Dutch disease, which vastly inflates the value of the resource country’s currency.

This means that a country’s other exports become too expensive to compete internationally and the economy withers. The country becomes totally dependent on its oil or gas. And extraction sectors bring in far fewer jobs than is commonly thought, leaving a lot of unemployed, bored, angry and restive people.

When you think of what the Dutch disease done to large sections of the Middle East, Nigeria, Gabon, Angola, and many other countries, you can see why this bodes very, very ill for Iraq in the long run. It would be smart for USAID or another American agency to start focusing on helping Iraq with more than oil and peace.

Green tech leaders meeting this week in Las Vegas at the National Clean Energy Summit conference sponsored by Democratic Majority Leader Senator Harry Reid used the opportunity to complain about the lack of government support. Despite recent announcements from the Obama Administration that some initiatives are moving, the money is not going out the door as fast as they would like.

But its not just funding that is delaying alternative energy development. There are more structural issues such as permitting that all levels of government need to address to foster green projects. For example, fears over the fate of the sage grouse are stymieing plans for a large-scale alternative wind energy project in Wyoming developed by Texas-based Horizon Wind Energy. As such projects increase in scale to create efficiencies, they are becoming ensnared in permitting issues as they may create other environmental problems.

The government will seek to reduce the environmental impact of any large project, but at some point the government must make a fundamental decision. Either sacrifice large renewable projects, which means relying on older more polluting fuels that affect many species, or build a project could affect just one.

As the governments in the US debate permitting issue, other countries, such as China are making decisions and companies, such as Evolution Solar Company are jumping ship and finding more profitable opportunities there. Stimulus funding will no doubt give green tech companies some support, but without a more flexible regulatory environment, the US will still be behind the green curve.

Australian Foreign Minister Steven Smith stated today that Stern Hu, General Manager of Rio Tinto China, was detained on espionage charges earlier this week. Hu’s firm, Rio Tinto, is a major Australian supplier of iron ore (a necessary ingredient for making steel). The company is currently negotiating annual contracts with China that dictate pricing terms of the commodity for the next year.

Rio Tinto was also the target of an investment bid by Chinalco, China’s state owned aluminum firm, as it seeks to acquire access to strategically important commodities. The deal fell apart last month due to backlash over the terms and fears in Australia that China would be taking a substantial stake in a strategic commodities firm.

More details will likely emerge over time, but the Australian Press hints that the arrest may be in connection with the unsuccessful investment bid. Such speculation is premature as no facts have been released. At the least, this case dampen dealmaking in strategic sectors as it will likely raise fear within the expat community in China that business executives may be personally responsible for “failed” dealings from China’s perspective. And at worse, China has unveiled a serious intimidation strategy as its firms expand globally.