One Pebble Just NOT Worth the Risk

I have been closely following the controversy surrounding the development of the Pebble prospect for some time. I have been flying hunting and fishing clients into the area, and I own property in Pedro Bay, so I have a personal stake in what happens if this mine is pushed forward into production. To tell the truth, I had been leaning towards supporting developing the Pebble mine. The NIMBY argument used by the Renewable Resources Foundation is NOT justification for stopping development. It simply shifts the potential environmental harm from our back yard into somebody else’s, and that is not an ethical thing to do.

I hate to say it, but Anders Gustafson may have persuaded me to switch horses. While his presentation tends to use emotion more than economics as persuasive tactics, I think it’s the economics of the prospect that is the best argument against it. Here’s why.

At today’s prices the total value of the minerals in the Pebble prospect is estimated at $400 billion, a stupendous bounty. Of course, it’s hard to estimate how much profit the developers would realize in the venture, but let’s be generous and say it’s 10% of the take ($40 billion). At the current state tax rate on minerals of 3% of the adjusted gross profit, the people of Alaska’s share of the booty would be $1.2 billion. Not per year, but for the projected life of the mine.

Sure, the mine would directly employ a lot of Alaskans that would contribute to the economy, and indirectly many more would benefit. Compared to the fishing industry, though, the employment benefits of the mine are peanuts, so if it’s a matter of one or the other (not both) the fishing industry is the clear winner here. Of course, when the mine pulls the last profitable ore out of the ground, those jobs disappear while the fishermen keep on fishing. If there are any fish left.

The metals in the Pebble prospect aren’t going anywhere, and perhaps in the future extracting them will be worth the risk. Maybe new technology will allow us to ensure no ill effects to the salmon, or maybe climate change or some other change will remove the salmon so they are no longer a factor. However, with today’s mining technology, and the poor track record of all large sulfide mines that have preceded Pebble, the potential risk of proceeding with development of the Pebble Mine is simply not worth the negligible benefit to the people of Alaska, from a purely economic standpoint.

Dave Oberg