the two main elements of value above discussed. This method is sometimes
called the _rational_ or _ad valorem_ method. The profit per ton (or per
other unit) of the product is established, on the basis either of past
performance of the property or of experience with other similar
properties. This profit is multiplied by the total tonnage estimated in
the deposit, the estimate including known reserves, probable reserves,
and in some cases possible and prospective reserves. The product of the
profit per ton and the total tonnage gives the total net amount which
will be received; it does not, however, give the present value, because
the commodity cannot all be taken out and sold at once, but must be
mined and absorbed by the market through a considerable period of years.
The returns receivable some years in the future have obviously a lower
proportionate present worth than amounts to be received at once. The
interest rate comes into play, making it necessary to discount each
annual payment for the number of years which will elapse before it is
received. It is evident, therefore, that an estimate of the _life_ of
the property is necessary, involving not only knowledge of the reserves,
but also a forecast of the annual extraction or _rate of depletion_.
As a simple case of _ad valorem_ valuation for illustrative purposes, a
deposit containing 1,000,000 tons in reserve has an estimated output of
100,000 tons a year for ten years, on which the profit per ton has in
the past averaged $1 and is expected to average $1 in the future. Ten
annual instalments or dividends of $100,000 are to be received. The
present value of the total of these instalments is figured by an annuity
method. It is the value upon which the series of dividends will pay
interest at a predetermined rate, in addition to paying to a sinking
fund annual instalments which, safely invested each year at a low rate
of interest (usually 4%), will repay the present value at the end of the
ten years. In our hypothetical case, if an interest rate of 8% be taken,
the present value of $1,000,000, to be received through ten years in ten
equal instalments, is $612,000. In other words, the sum of $612,000 will
be replaced by the sinking fund at the end of ten years, and will pay 8%
interest during this period,--this requiring total receipts of
$1,000,000 in ten equal annual instalments. If the deposit here cited as
an illustration were to be worked out in three years, thus yielding
three annual instalments of $333,000, its value would be $833,000.
Each of the factors entering into this method of valuation covers a wide
range of variables, any one of which may be difficult to determine.
The profit per ton for a given deposit may have been extremely variable
in the past, making it difficult to determine whether the highest or
lowest figure should be projected into the future or whether some
average should be taken; and if an average, whether the time covered by
the average should be long or short. For a small, short-lived deposit
obviously the most recent conditions would be taken into account in
estimating future profits. For a long-lived property there would be more
tendency to consider the long-time average vicissitudes, as reflected in
the average profits of the past. For some mineral commodities there are
cycles of prices, costs, and profits, of more or less definite length,
established during the long past history of the industry; and in such
cases it is desirable in calculating averages to use a period covering
one or more of these cycles, rather than some shorter or longer period.
For many minerals, however, these cycles have been too irregular to
afford a sound basis for future estimates. If the experience of the
property itself is too short to afford a sufficient foundation for
forecasting profits, or if there has been no previous work on the
property, then it is necessary to use averages based on other
properties or other districts; or if there are none strictly
comparable, to build up a hypothetical figure from various estimated
costs of labor, supplies, and transportation, selling prices, etc. In
the estimate of the profit factor, the geologist is not primarily
concerned.
In estimating the total reserves in a mine, geological considerations
nearly always play a large part. An ore body may in some few cases be
completely blocked out by underground work or drilling, eliminating the
necessity for inferring conditions beyond those actually seen; but in
the huge majority of mineral deposits the reserves are not so definitely
known, and it becomes necessary for the geologist, through knowledge of
similar occurrences, through study of the structural features of the
deposit, its origin, and its history, to arrive at some sort of an
estimate of reserves.
In estimating the life of a mineral deposit it is necessary to start
with the figure of total reserves, and from a study of conditions of
mining and of markets to estimate the number of years necessary to
exhaust the deposit. This is a more nearly commercial phase of the
problem, in which the geologist takes only part of the responsibility.
Perhaps more estimates of value have gone wrong because of misjudgment
of this factor than for any other cause. If the physical conditions are
satisfactory, it is easy to assume a rate of extraction and life based
on hope, which experience will not substantiate.
The choice of the interest rate to be used in discounting future
receipts to present worth likewise is a financial and not a geologic
matter. Again, however, the geologist must give consideration to this
factor, in view of the fact that the interest rate must be varied to
cover the different degrees of hazard and doubt in the geologic factors.
For instance, to the extent to which the estimate of ore reserves is
doubtful, it is necessary to use a high rate of interest to allow for
this hazard. In a large, well-developed mineral deposit, with the
geological factors all well known and the demand and market well
established, it is reasonable to use a lower rate of interest. In
general, the mineral industry is regarded in financial circles as being
more hazardous than many other industrial lines; and money is put into
the industry with the expectation of a high rate of interest, no matter
how safe the investment may be. In actual practice interest rates used
in making valuations vary from 6 to 15 or 20 per cent.
It is clear that, where a property has long life, the interest will very
materially reduce the present value of the ores to be mined far in the
future. Reserves to be mined more than thirty years hence have
relatively little or no present value. Beyond a certain point,
therefore, the acquirement and holding of reserves for future use by
private companies has little commercial justification. This is a matter
which is too often not sufficiently well considered. Man's natural
acquisitiveness often leads him into investments which, because of the
time and interest factor, have little chance of successful outcome. Of
course a large corporation, anticipating an indefinitely long life, or
perhaps aiming at monopoly, may afford to hold reserves as a matter of
general insurance longer than a small company,--even though, because of
the interest rate, these reserves have no present value on their books.
It is likewise true that governments, looking forward to the future of
the nation, and without the necessity of paying so much attention to
interest and taxes, are not so limited by this consideration.
An illustration of the limiting effect of the interest rate on the
acquirement of long-lived coal deposits by private interests is
discussed in Chapter XVII on Conservation. Investments made many years
ago have so augmented, even at low interest rates, as to make it
practically impossible to count on a return of capital and interest; or
if the return were to be exacted from the public it would mean excessive
charges, which are not possible in competition with other mines not so
burdened.
In the commercial valuation of oil wells and pools, much the same method
is used as has been described for mineral resources in the solid form,
but the estimate of reserves or life is based on consideration of curves
of production of the sort mentioned on pages 134-136.
The essence of the _ad valorem_ method of valuation above described is
income-producing capacity. This method recognizes the fact that the
value of the mineral deposit depends, not only on its physical
constitution, but also on what performance can be expected from it.
Stock quotations on mineral properties in the standard markets are based
substantially on estimates of income capacity, more or less on the _ad
valorem_ basis. However, the quotations also reflect the hopes and fears
of the public, often resulting in valuations quite different from those
based on studies of the objective conditions.
The war introduced new considerations into the problems of _ad valorem_
valuation. Under peace conditions there is a tendency toward the
establishment of normal costs, selling prices, and markets, which can be
taken more or less for granted by anyone attempting to value mineral
deposits. Under war and post-war conditions, few of these elements can
be taken for granted; it becomes necessary to consider the entire world
situation in regard to a mineral commodity, the effects of the Peace
Treaty (which greatly concerns minerals), future international
relations, tariffs, and other matters of a similar sort. If a person
were today valuing a manganese deposit according to the method above
outlined, and were to confine himself solely to a narrow consideration
of past markets and profits on individual properties, he would be very
likely to go wrong,--for the world manganese situation has an immediate
and practical bearing on each local problem (see pp. 173-176).
OTHER METHODS OF MINERAL VALUATION AND TAXATION
We have discussed the _ad valorem_ method of valuation at some length
because it is the one in widest commercial use, and also because the
principles involved underlie practically all other methods of mineral
valuation. The _ad valorem_ method is used in appraisals for taxation in
some districts and for some commodities, as, for instance, the iron
mines of Michigan and Wisconsin. Its application, however, requires
skill and judgment if equitable results are to be secured. For taxation
purposes, therefore, it is not uncommon to adopt purely arbitrary or
empirical methods which eliminate the element of judgment, and which
often result in valuations quite different from those used commercially.
The state of Minnesota divides its iron ore deposits into a series of
classes, on each of which a more or less arbitrary flat value per ton is
placed, based on the spread between cost and selling price. The
adjustments of flat values on the several classes through a series of
years, however, as well as the assigning of specific ores to the
different classes, have been based on the same factors as are used in
_ad valorem_ valuations.
The state of Wisconsin uses a so-called "equated income" method of
valuation and taxation for the lead and zinc deposits of the
southwestern part of the state. Under this method the state puts such a
tax on the mine incomes for the preceding year as will yield
approximately the same total return as under the _ad valorem_
method,--the whole being based on the assumption that each deposit has
about the average life figured for the mines of the entire district. So
far as individual ore deposits vary from this average life, the value
fixed departs from the true or _ad valorem_ value.
Several states impose specific taxes based on the operations of the
mines for the preceding year or for some combination of preceding years,
as expressed in tonnage output or net profits or net proceeds,
regardless of life or reserves. So far as output or net proceeds for a
year are proportional to the real value of the property, a rough
approximation to equitable taxation as between mines is accomplished.
Often, however, the valuation thus obtained has little relation to the
true value, because it does not take into account the great differences
between properties in reserves, in life, and in capacity for future
profit.
Income taxes, national and state, are of course based on the profits of
the preceding year; but in the collection of these taxes from mineral
operations, it is recognized that mineral deposits are wasting assets,
and therefore a considerable part of the income may under the law be
regarded as a distribution of capital assets, and be deducted from
taxable income. The amount to be deducted obviously depends on the size
of the reserves and the life,--with the result that progressive
adjustment of income tax valuations tends to take into consideration
exactly the same factors as are used in the _ad valorem_ method. It is
obviously unjust, for instance, to collect the same proportion of tax
from the annual income of a mine which has a life of only two years as
from a mine which has a life of fifty years. Under the federal income
tax a capital value is placed on the mineral deposit as of March 1,
1913, which total capital value may be increased with subsequent
discoveries. As the ore is taken out of the ground and sold, income tax
is paid only on the difference between the assigned capital value per
unit and the selling profit. If, for instance, the capital value as of
March 1, 1913, is placed at 50c. per ton of mineral in the ground, and
ten years later a ton is sold for a profit of $1, income tax is paid on
50c. The figure of 50c. per ton as value in the ground is actually
obtained by estimating a profit, when the ore is ultimately mined and
sold, of $1 per ton, and discounting this dollar to present worth as of
March 1, 1913. Therefore the total amounts on which taxes are paid
during the life of the mine should represent approximately the total
accruals of interest from March 1, 1913. In this manner the proportion
of annual income to be taxed becomes larger with the length of the life
period. With a deposit having a life of thirty years the net result is
that about half of the aggregate income is taxed, though this figure of
course varies somewhat with the interest rate used.
In the collection of income taxes from coal mines in England, and in the
collection of certain state income taxes in the United States, a
considerably smaller allowance is made for the retirement of capital
value (or for _depletion_, as this is commonly called). In these cases
the deduction allowed is a small fixed percentage of the capital value,
regardless of the actual life of the property.
The treatment of mineral resources as wasting assets in the United
States income tax law meets one considerable practical difficulty--namely,
that the law really requires physical or _ad valorem_ valuation of
every mineral property by the government, as a check on the claims for
depletion allowance. This immense and expensive task is too much for the
tax collection agencies as now organized, and it may be questionable
whether it will ever be desirable to expand these agencies to the extent
required for such a purpose. This is the principal argument for the use
of arbitrary depletion factors such as those sometimes used abroad.
There are many advocates of the straight tonnage tax on mineral
deposits, on the ground that it is simple, definite, and easily applied.
The present tendency is to extend the application of this form of tax.
It is clear, however, that to assume the same value per ton for taxing
purposes on a property making a large profit, and on another property
which, because of physical conditions, is barely able to operate at a
profit, imposes a relative injustice. To meet this difficulty, it is
sometimes proposed that the tonnage tax should be graded in such a
manner as to allow for differences in physical conditions and in profit
at different mines. When one attempts to apply a graded tonnage tax,
however, it soon becomes apparent that, in order to make such a
valuation equitable as between properties, it is necessary to use all
of the factors of the _ad valorem_ method for each of the properties.
The wide appeal of arguments for a flat tonnage tax is based partly on
popular misconception of the complexity of elements entering into
mineral valuations.
There are many forms of more or less indirect tax which are substituted
in different parts of the world for direct taxes. For instance, certain
states in South America do not tax ores in the ground, but collect the
revenue in the form of mining licenses or export taxes.
GENERAL COMMENTS ON TAXATION OF MINERAL RESOURCES
There has been a noticeable tendency in recent years to regard mineral
resources as a heritage of the people, to be held in trust, rather than
as property to be acquired and managed solely for private interest. This
tendency has been indicated by the adoption in various parts of the
world of laws affecting rights to explore and acquire minerals on the
public domain; laws relating to the right of eminent domain over
minerals already alienated from the government; laws regulating the
exploitation of minerals in the interests of conservation; laws relating
to tariffs and other restrictions on the export of mineral commodities;
and laws relating to taxation.
The feeling that mineral resources really do not belong in private hands
has undoubtedly been an underlying factor in the imposition of heavy
taxes. Contributing to this action also are the popular belief in the
intrinsic bonanza values in mineral resources, the failure to recognize
the large element of value which is put into such resources by human
efforts, and the failure to realize that the social surplus in the
aggregate is small. To some tax officials an ore is an ore, more or less
regardless of situation, of conditions of mining, of the demand for the
product, and of the time when the demand will allow the ore to be
mined,--in short, more or less regardless of what the ore may be made to
yield as a going business. In this way heavy taxes are sometimes imposed
on mineral reserves, which are based on unwarrantably high appraisals of
future possibilities, and which cannot be paid out of earnings.
Ultimately, a tax must be adjusted to the capacity of the mine to pay
out of its earnings, and this capacity in turn is determined both by the
physical characters of the ore and by the success with which it may be
made available for consumption. This view of valuation for taxing
purposes is sometimes opposed by mining men on the grounds that it taxes
brains, skill, and initiative, and that it puts a premium on shiftless
management. The same argument might be applied to the valuing of any
business or profession. To the writer the argument is not sound, in that
it fails to recognize the element of human energy in resource values. If
value were to be confined solely to the intrinsic character of the ore
itself, there would be required an almost impossible degree of
discrimination on the part of taxing officials to dissociate this value
from other considerations; and there would be required further the
differentiation between efficient and inefficient management, which
involves so many considerations that the conclusion would be worthless.
In the application of income taxes to mining operations, there is
sometimes another tendency toward over-taxation in that the income is
regarded as more or less permanent, and insufficient allowance is made
for exhaustion of the mineral deposit. Under the United States income
tax, mineral deposits are definitely recognized as wasting assets and
this factor is allowed for; but in state income taxes and in England and
other parts of the world, allowances for this purpose are small.
There is wide belief that heavy taxation of mineral resources,
particularly on the _ad valorem_ basis, retards exploration and prevents
the development of the reserves which are necessary to stabilize the
mineral industry. High taxes have undoubtedly had this effect in some
cases, especially where taxes have been imposed on resources long prior
to development; but, in the writer's view, this tendency in general has
not yet passed the danger point, and is not likely to do so until taxes
become positively confiscatory of the industry. To argue that increase
of taxes may even have certain beneficial results on the mineral
industry may lead to suspicion of one's mental soundness; but it is hard
to escape the conclusion that the incidence of high taxes has led to a
much more careful study of the question of reserves, has eliminated in
some cases the expenditure of money for development of excessive
reserves to be used far in the future, and has tended to prevent
over-production.
Where mineral reserves are developed too far ahead of demand, the
interest on the investment piles up an economic loss to be charged
against the industry. It may be assumed that the urge for exploration
will continue as long as there is demand for mineral resources; and
that, to keep the industry on a sound basis, a certain amount should be
set aside and charged to cost for the purpose of keeping up reserves in
a proper ratio to production. Much remains to be learned about the most
desirable ratio between reserves and production. In many camps, before
the incidence of high taxes, this ratio was not properly determined; and
there was a tendency, due to natural acquisitiveness and in the absence
of anything to hinder it, to build up reserves indefinitely. The first
effect of high taxes in such camps has frequently been the curtailment
of exploration and development. Later, as production has begun to
approach the end of the reserves, exploration has been resumed, but only
on a scale necessary to insure production for a limited period in
advance.
The argument that high taxes inhibit exploration is good only beyond the
point where the industry itself becomes no longer profitable. If there
is sufficient demand for the resource, it is obvious that such a
condition cannot long continue; for, as production and the development
of reserves fall off, the resulting increase in the price received for
the product is likely to offset any effect of taxes, and to restimulate
production and exploration.
Nevertheless, in this period of high taxes following the war, there is
much discouragement in the matter of exploration, suggesting that the
danger point is being approached. Some relief has been afforded by
recent special provisions of the federal income tax law, recognizing
mineral resources as wasting assets, allowing recent discoveries to be
included with total assets for depletion purposes, and recognizing
special and peculiar circumstances with reference to each mine. Also a
certain amount of exploration goes on through the momentum gained from
past conditions, without sufficiently full recognition of the effect of
present high taxes. This is not surprising when it is remembered that
the people actively engaged in field exploration often do not think
sufficiently fully of the tax situation, until after a discovery or
development has brought them face to face with it.
Because of the vital importance of the reserve factor in mineral
valuation, geologic aid and advice are extensively sought by both public
and private organizations. Mining geologists are playing an important
part in the application of the national income tax. A larger number are
acting for private companies in appraisals required by this tax. Many
geologists are used in making valuations for state taxes, and in two
cases the state geological surveys have complete charge of appraisals.
These appraisals include not only examinations of specific properties,
but general surveys of large regions, to ascertain possible values of
undeveloped lands and to establish broad principles of valuation based
on a consideration of all the physical factors in the situation.
CHAPTER XVI
LAWS RELATING TO MINERAL RESOURCES
This heading is likely to suggest mining law and the vast literature
devoted to it. Mining law has mainly to do with questions of the
ownership and leasing of mineral deposits. In addition, there are laws
relating to the extraction of mineral products, including those having
to do with methods of mining and with safety and welfare measures. There
are laws affecting the distribution of mineral products, such as those
relating to tariffs, duties, international trade agreements, and many
other matters. There are laws relating to underground water, to shore
lines, and to various geologic engineering fields.
In the formulation of these laws, as well as in the litigation growing
out of their infraction, basic geologic principles are involved; and
thus it is that the geologist finds much practice in the application of
his science to legal questions. It will be convenient to consider some
of the laws relating to mineral resources under three headings: first,
ownership and control; second, extraction; and third, distribution.
I
LAWS RELATING TO OWNERSHIP AND CONTROL OF MINERAL RESOURCES
Large use of mineral resources is of comparatively recent date. Some of
the mineral industries are not more than a decade or two old and the
greater number of them are scarcely a century old. In the United States
the mineral industry dates mainly from the gold rush to California in
1849. The formulation of laws relating to the ownership of minerals has
on the whole followed rather than preceded the development of the
mineral industries; and hence mining laws relating to ownership are not
of great age, although historical precedent may be traced far back.
ON ALIENATED LANDS
Where lands came into private ownership, or were "alienated" from the
governments before the formulation of mining laws, varied procedures
have been followed in different countries.
In England and the United States, under the old regime in Russia, and to
a slight extent in other parts of the world, mineral titles remain with
the owner of the land and the government does not exercise the right of
eminent domain. But even in England, where private property rights have
been held peculiarly sacred, the discovery of oil during the later years
of the war led to an attempt to expropriate the oil rights for the
government. Because of the objection of landowners this attempt has not
reached the statute books, but the movement is today an extremely live
political question in England. A somewhat similar question is involved
also in the movement to nationalize the coal resources of England, now
being so vigorously urged by the labor party. In the United States, no
serious attempt has yet been made to take over mineral resources from
private ownership.
Other countries have gone farther in retroactive measures in regard to
alienated lands. Under the leadership of France, most of the countries
of western Europe have appropriated to their governments the
undiscovered mineral resources on private ground, particularly those
beneath the surface, except where previously they had been specifically
conveyed to the private owners, or with the exception of certain
designated areas and minerals which had been conveyed to private
ownership prior to certain dates. Some minerals occurring at the
surface, variously specified and defined in different countries, are
allowed to remain with the private owners, although often subject to
government regulation in regard to their development and use.
In varying degree this treatment of mineral resources on alienated lands
is followed in the British colonial laws--in South Africa, Australia,
New Zealand, and Canada--and in the Latin-American laws. The laws are
usually based on specified classifications of minerals. Those occurring
at or near the surface, and called "quarries," "placer deposits,"
"non-mines," or "surface deposits," usually remain with the surface
owners. Those beneath the surface, called "sub-surface deposits" or
"mines," in general belong to the government. In some of the countries
of South America the state exercises eminent domain even over the
surface deposits; and in others even sub-surface minerals remain in
private ownership, where specifically granted, or where the transfer of
property took place prior to certain dates.
Where the government has acquired mineral ownership of lands previously
alienated, the resources are open for development either by the owners
of the surface or by others, on a rental, lease, specific tax, labor, or
concession basis. The government holds the title, exacts tribute, and
more or less directs and controls the operation. Exceptionally, as in
Ontario, British Columbia, Quebec, and Newfoundland, the government
grants patents, that is, it disposes of its rights to purchasers.
ON THE PUBLIC DOMAIN
Where the development of mineral resources began before the lands had
passed from governmental ownership, special mining laws were enacted.
Looked at broadly, these laws may be regarded as based on two partly
conflicting considerations.
(1) The assumption that mineral resources, which are wasting assets,
accumulated through long geologic periods, are peculiarly public
property,--not to be allowed to go into private ownership, but to be
treated as a heritage for the people as a whole and to be transferred to
posterity in the best possible condition. Some of the early minerals to
be developed were used either for money or for war purposes, leading
naturally to the acceptance of the idea that these belonged to the
government or to the sovereign.
(2) The assumption that the discovery and development of mineral
resources requires a free field for individual initiative, and that the
fewest possible obstacles are to be put in the way of private ownership.
Governments have not as a rule been greatly interested nor particularly
successful in exploration. Therefore, in framing laws of ownership,
concessions have been made to encourage private initiative in
exploration and development. In the case of the United States this idea
was coupled with the broad doctrine that the government held public
lands only in the interest of the people, and that its people were
entitled to secure these lands for private ownership with the least
possible restriction.
A survey of the mining laws affecting the public domain or
non-alienated lands of different parts of the world, as well as the
history of changes in the mining laws, indicates a wide range of
relative emphasis on these two underlying considerations. In the United
States, at one extreme, the laws have been such as to give the maximum
possible freedom to private initiative, and to allow easy acquirement of
mineral resources from the government. At the other extreme, in South
Africa, Australia, and South America, it is impossible for the
individual to secure title in fee simple from the government; he must
develop the mineral resources on what amounts to a lease or rental
basis, the ownership remaining in the government.
The trend of events in mineral laws is toward the latter procedure. This
is evidenced in the United States by the withdrawal of large areas of
public lands from entry, and by the recent enactment substituting
leasing privileges for specified minerals for the outright ownership
which was allowed under the federal law before the lands were withdrawn
from entry. The withdrawal of oil lands from public entry in other parts
of the world is another illustration (see pp. 131-132).
NATIONALIZATION OF MINERAL RESOURCES
Nationalization, as this term is popularly understood, means financial
control and management of mineral resources by the government, either
through actual ownership or through measures of public control designed
to eliminate private interest from the active direction of the
resources. In a broader sense, it may be used to include a considerable
variety of restrictive and coercive measures adopted by the government
in the proposed interests of public welfare,--as illustrated by the
war-time measures instituted by the United States and other governments
relating to the mining and distribution of coal, and to coal prices. In
this broader sense various aspects of nationalization are indicated
under other headings in this and other chapters.
It is clear that other countries of the world have gone farther in the
direction of nationalization of mineral resources than the United
States. The tendency was manifest before the war, and has been strongly
emphasized during and since the war. In the United States,
notwithstanding war-time measures, the subject has not yet come
prominently forward, at least by name. On the other hand, there has been
growing recognition of the dependence of public welfare on the proper
handling of mineral resources--particularly of the energy resources,
coal and oil,--as evidenced by a variety of proposals and measures under
consideration in legislative and administrative branches of our national
and state governments. Even taxation, both local and national, has in
effect reached a stage where private interest has become considerably
minimized by the increasing burdens laid on the industry by government
requirements. The immediate purpose of taxation is to raise money for
the needs of the government; but in the formulation of tax measures
there is clearly to be discerned a growth of underlying sentiment that
natural resources belong in some fashion to the public, and that private
control is to be regarded not as a sacred property right but as a trust
held on sufferance of the public.
In view of the obvious trend toward nationalization in other parts of
the world and the significant tendencies in the United States, it seems
likely that the subject of nationalization of mineral resources will
come prominently to the front in this country in the comparatively near
future. If so, it is time that students of mineral resources should
recognize the comprehensiveness of this problem, and should attempt to
develop basic principles to serve as a guide in the direction and
formulation of the numerous and complex measures which are sure to be
proposed. At present there is no government or technical organization
related to the industry which is studying the problem in its broader
aspects and is in a position to advise wisely with public officials
interested in this problem.
It is beyond the scope of this book to discuss the pro and con of an
economic question of this magnitude. The writer would, however, record
his belief, which is implied also in discussions in other chapters, that
the discovery and intelligent management of mineral resources by their
very nature and infinite variety require private initiative, and that
the history of government efforts in this field in this and other
countries does not promise that nationalization can supply sufficient
advantages to counterbalance the loss of this element. With this view
the problem of nationalization becomes one of determining what steps, if
any, can be taken by a government to the advantage of public welfare,
which will at the same time preserve and foster private initiative,
exercised with the hope of reward, which seems alone to be capable of
meeting the variable, elastic, and complex problems inherent in the
development of a natural resource.
A first step toward a broad scientific attack on this problem would be
the recognition of the fact that tariffs, taxes, conservation,
international mineral questions, leasing laws, and various technical
investigations of minerals are but parts of a great unit problem. With
this recognition there should follow naturally an attempt to correlate
and direct the many government agencies, legislative and administrative,
now concerned with different aspects of the problem. Under present
conditions, the various elements of the problem are considered by
different groups of persons, without sufficient contacts or correlation
to promise the development of a broad, underlying policy.
EFFECT OF OWNERSHIP LAWS ON EXPLORATION
The nature and the progress of exploration (and development) in
different countries have been more or less related to the character of
the mining laws.
Where the mineral resource has passed from government control into
private ownership, exploration is a matter of commercial arrangement
between the explorer and the owner. There is often some lag in
exploration, especially where the lands are held in considerable blocks.
The owner is often not inclined, or unable, to institute effective
exploration himself; and even though he is willing to offer favorable
exploration terms to others, the inducement is often less attractive
than on government lands. For instance, it is stated that in England,
due to the many requirements of law and custom, it takes on an average
eight years, and in some cases even longer, to close a coal lease after
the terms have been agreed upon. The slowness of exploration and
development on the great land grants in the United States, and on the
tracts of the large timber companies, also illustrates the retarding
effect of private ownership. It is partly this situation that is making
governments increasingly careful about parting with mineral ownership,
and that is leading to the introduction of more or less coercive
measures, either to regain control or to make it easier for the public
to explore and develop minerals on privately owned lands. Under the
great land grants to railroads in the United States it is becoming
increasingly difficult to secure mineral patents from the government;
and there has been litigation between government and grantees, as in the
case of certain oil lands of the Southern Pacific Railway. The taxation
in some states of mineral rights which have been reserved by large
owners is indirectly resulting in appraisal of these rights by the
owners and in efforts to utilize them. As long as mineral rights were
not taxed independently of surface rights, they were often reserved in
selling surface rights on the mere chance that mineral might be found in
the future, and thereby general exploration and development were held
back.
In the United States, minerals on the public domain have been open to
exploration and acquirement with minimum restrictions, except for the
considerable areas later withdrawn from entry. After long delay a part
of these withdrawn lands are again open to private exploration, but not
to fee ownership. Specified minerals--coal, oil, phosphates, and
potash--may be explored for, and may be leased under certain
restrictions as to amount and time of development. The effect of this
act on exploration is yet to be proved; but since many of the lands have
now been shown to be favorable for minerals which are in great demand,
there is little doubt that exploration will be resumed on a large scale.
On the whole, under the federal mining laws of the United States the
individual prospector has maximum leeway,--and from the standpoint of
development of resources this procedure probably has been justified.
In other countries where the mineral resources are owned by the
government, there is in most cases considerable restriction, through
licenses and other regulative measures, upon the activities of
prospectors. This restriction, together with the fact that it is usually
not possible to secure title to the land, but only to secure rights
through rental or leasing, is to some extent a deterring influence on
the penniless prospector. It does not follow that under these conditions
exploration and development are absent. The charges imposed are light,
and in the early stages require comparatively small contributions as
evidence of good faith. It is to be remembered that exploration has
become concentrated more and more into the hands of persons financially
able to meet such conditions. Exploration is passing from the highly
hazardous stage of individual effort into a systematic business with
calculable returns.
USE OF GEOLOGY IN RELATION TO OWNERSHIP LAWS
The contacts between geology and laws relating to mineral ownership are
many and varied; a few illustrative examples are offered.
Many difficulties arise from the loose use of mineral names in these
laws. The laws governing location of mineral deposits in Cuba are so
framed that iron ores may be located and claimed from the government
either as "iron ores" or as "bog ores and yellow ochers." Some of the
important ores of eastern Cuba, now being extensively used in the United
States, came into litigation because rival claimants had overlapping
claims under the two classifications. The wording of the law is of
course ambiguous, and suggests that geologists did not have a hand in
its framing. To establish title to these claims it was necessary to show
whether these ores had been rightfully located as iron ores, or whether
they should have been located as bog ores and yellow ochers. This
involved an analysis of the geological conditions, to show that the ores
are the result of normal weathering and concentration in place of the
underlying rocks--an origin common to many iron ore deposits,--and that
they do not have the characteristic origin of bog ores. In short, the
question was settled on the scientific principles of origin of ores and
of metamorphic geology.
The efforts of our federal government to frame and apply mining laws to
public lands have involved extensive geological and mining surveys by
the United States Geological Survey and the Bureau of Mines. The land
classification work for this purpose by the Geological Survey has been
of wide scope. The recently enacted leasing law, which opens up
government lands for exploration of coal, oil, potash, and phosphate,
requires carefully prepared geologic data for its proper administration.
State governments also have initiated surveys of an exploring nature for
taxing and other public purposes (see pp. 306, 311).
In the United States there is a wide use of geologists as witnesses in
litigation affecting "extralateral rights." The federal mining law gives
the owner of the claim containing the "apex" or top of a mineral vein
or lode the right to follow the vein down the dip, with certain
limitations, even though this takes him on to adjacent properties under
other ownership. Where two branches of a vein are followed down from
separate claims, the owner of the oldest claim is entitled to the vein
below the point of junction. The law was framed to validate a procedure
more or less established by mining custom. It was obviously framed with
a very simple and precise conception in mind--namely, a simple vein
definitely and easily followed, without much interruption or contortion.
In nature, however, veins or lodes have a most astonishing variety of
form and occurrence, making it difficult to frame a definition that is
comprehensive and at the same time sufficiently precise for all cases. A
commonly used definition of a vein or lode is a mineralized mass of rock
which is followed for purposes of finding ore. The mineral matter may be
continuous or discontinuous. There may be one definite wall, or two
walls, or none at all. There may be associated gouges and altered or
mineralized rock. The vein may consist of almost any combination of the
elements of mineral matter, walls, gouges, and mineralized rock. Instead
of being a simple tabular sheet, a vein may have almost any conceivable
shape; it may consist of multiple strands of most complex relations; it
may have branches and cross-over connections. It may be a more or less
mineralized sedimentary formation with limits determined by original
deposition. It is very often bent or folded, and even more often
faulted; the faulting may be of great complexity, making it extremely
difficult to follow the vein. The vein may be cut by other veins of
different ages, which in places may be hard to distinguish one from
another. Erosion working down on a complex vein displaced by faulting
and folding may bring several parts of the same vein to the surface,
developing what seem to be separate vein apices. Where there are many
veins close together, it may be difficult to determine whether the
entire mass should be considered a unit vein or lode (a "broad lode"),
or whether each vein should be considered independently under the law.
The geologic aspects of these problems are obvious. There are few mining
districts where the vein conditions are so simple that no geological
problems are left to be solved with relation to extralateral rights. In
the early stages of the mining, separate operations may be carried on
for a considerable time in a district without mutual interference; but
as mining is carried down the dip, what seemed to be separate veins may
be found to be parts of the same vein or parts of a complex vein system,
and separate mining organizations are thus brought into conflict. It
then becomes necessary either to consolidate the ownerships or to go to
the courts to see which claim has the extralateral rights. In either
case, the geologist is called on to play a large part,--in the valuation
of rights for the purpose of combination, or in litigation to settle
apex rights. A geologic survey of the conditions is a prerequisite. In
order to get the needed information for the courtroom, it may be
necessary to go further, and to conduct extensive underground
exploration under geologic direction. Some of the most intensive and
complete geological surveys of mineral resources in existence have been
done for litigation purposes. The study in these cases is not empirical,
but goes into every conceivable scientific aspect of the situation which
may throw any light on the underground conditions--the source of the
ores, the nature and source of the solutions which deposited them, their
paths of travel, the structural and metamorphic conditions, the
mineralogical and chemical character of the ores and rocks, and even
broader questions of geologic age. The many volumes of testimony which
have accumulated during famous apex trials cover almost every phase of
geology, and are important primary sources for the student of economic
geology.
It is often argued that strictly scientific, impartial geologic work is
impossible in connection with one of these trials, because the viewpoint
is warped by the desire to win. The sharp contrast in the views of
experts on the two sides is cited in evidence.
There is no denying the fact that the conditions of a trial tend toward
a certain warp in scientific perspective. On the other hand, the very
existence of competitive and opposing interests leads to the most
intensive detailed study, and to complete disclosure of the facts. In
most cases there are no substantial differences in the statements of
scientific fact by reputable experts on the two sides, although there
may be wide differences in the inferences drawn from these facts. The
failure to note a fact, or any distortion or misstatement of a fact, is
followed so quickly by correction or criticism from the other side, that
the professional witness usually takes the utmost pains to make his
statement of fact scientific and precise as far as his ability goes. Few
scientific treatises in geology contain any more accurate accounts of
mineral deposits than testimony in cases of this sort. If every student
of geology, early in his career, could have a day on the witness stand
on a geologic problem, under both direct and cross examination, he would
learn once and for all the necessity for close and accurate thinking,
the difference between a fact and an inference, and the difference
between inductive study of facts and the subjective approach to a
problem.
It is a common assumption that a witness called to testify on scientific
matters is on a somewhat different basis from the eye-witness to an
event or transaction. We are not sure that this assumption is justified.
Seldom is it possible in mining operations to disclose the facts in
three dimensions so completely that they may be empirically observed and
platted by the layman. The grouping and presentation of the facts in
adequate perspective require an analysis of the origin of the ores and
rocks, the rock alterations, the structural systems, and other facts. No
one ever saw the vein or lode in the process of formation. The true
nature of the event and of its physical results must be inferred
inductively from circumstantial evidence. If it be conceded that it is
necessary and right to call an eye-witness to an event involved in
litigation, it is equally necessary where there are no eye-witnesses to
call the persons best qualified to interpret the circumstantial
evidence.
It is to be remembered that apex cases are only one kind of a vast
variety of cases affecting mineral resources. At one time or another,
and in some connection or another, practically every geologist of
considerable experience has found it necessary to testify on geologic
matters in court. The wide interest attaching to certain spectacular
apex cases has led in some quarters to hasty criticism of the
participation of geologists therein, without apparent recognition of the
fact that the criticism applies in principle to many other kinds of
litigation and to practically all economic geologists. This criticism
also fails to take cognizance of the fact that, for every case tried,
there are many settled out of court through the advice and cooperation
of geologists. While there may be in the geologic profession, as in
others, a very few men whose testimony can be bought outright, in
general it must be assumed that geologists will appear on the witness
stand only when, after careful examination, they are satisfied that
there is a legitimate point of view to be presented.
Geologists and engineers understand more clearly than almost any other
group the extent to which the complexities of nature vary from the
conditions indicated in the simple wording of the law of extralateral
rights. Almost to a man, they favor either modification or repeal of the
law. On the other hand, the law has been in force since 1872, it has
been repeatedly interpreted and confirmed by the courts, and a vast body
of property rights has been established under it. Lawyers see great
legal difficulties in the way of its repeal or serious modification.
Mining men for the most part are not primarily interested one way or
another, unless there is potential application of the extralateral-rights
provision to their particular properties. Of those who are thus interested,
some hope to gain and some fear they may lose in the application of the
law. The general public naturally has little direct interest in the
problem. There is thus no effective public sentiment favoring the repeal
or modification of the law. It seems likely that for some time to come the
law, in spite of its recognized defects, must be applied, and the best
geological effort must be directed toward reaching interpretations which
come most near to meeting its intent. To refuse to lend geologic science
to the aid of justice because the law was improperly framed is hardly a
defensible position. Presumably it will never be possible to frame laws
with such full knowledge of nature's facts as to eliminate the necessity
for scientific advice in their interpretation.
It has been suggested that the courts, and not the litigants, should
employ the geologists. The practical objection to this proposition lies
in the difficulty encountered by the judge in the proper selection of
geologists. On the assumption that the judge would select only men in
whom he had confidence, it is not likely that he would override their
conclusions. The outcome of the case, therefore, would be largely
predetermined at the moment the selection of experts was made. It is to
be doubted whether courts can have the knowledge of the scientific field
and of the requirements of the situation necessary to make the wisest
selection of men to interpret the given condition. The competitive
element would be eliminated. From a judicial standpoint, there seems to
be an equally good chance of getting at the best interpretation of the
facts by listening to presentations from different standpoints, with the
accompanying interplay of criticism and questioning.
Another practical objection to appointment of experts by the court is
the limitation of court costs, which would make it impossible to secure
the highest grade men. So far as these men are public employees, such as
members of the federal or state geological surveys, this might be
arranged. For others, it might be suggested that they should be willing
to sacrifice their energy and time in the interests of justice; but as
long as human nature and conditions are what they are, it is perhaps
futile to argue this question.
If it is right to apply science to practical affairs, in other words, if
the profession of economic geology is a legitimate one, it seems
inevitable that the application must be in some part directed by the
geologist himself, in order to avoid mistakes and confusion. The
contention that the scientist must isolate himself in a rarified
atmosphere to avoid contamination from a non-scientific, commercial, or
legal atmosphere, seems to the writer practically untenable, if we
recognize any obligation on the part of science to the practical conduct
of human affairs. The fact that the geologist in making these
applications may occasionally find himself in a non-scientific
atmosphere may be deplored from the standpoint of maximum creativeness
in science, and from this standpoint there may be reason for limitation
of time given to this kind of work,--but to stay out entirely on this
ground is to deny his obligation to make his science helpful to his
fellows. The problem cannot be solved by staying out. It calls rather
for an especial effort on the part of the scientist to establish and
maintain his standards of science and ethics in the applied fields. Some
doubtless fail in this effort. Others are strengthened scientifically
and ethically, and contribute important aid in raising general
standards. The principle of non-participation in such activities for
fear of lowering scientific standards may make the geologist's problem
easier, but at the expense of non-fulfillment of duties. Such a course
has for its logical consequence an abandonment of the application of his
science to untrained men without the ethical anchorage of scientific
achievement. In short, there may be legitimate criticism of individual
geologists for their methods and ethics in the applied field, and this
is desirable as an aid to maintaining and improving standards; but it
is not a logical step from this to the conclusion that, to avoid
unfortunate incidents, economic geologists must cloister themselves and
thus deny the very implication of their title.
II
LAWS RELATING TO EXTRACTION OF MINERAL RESOURCES
Under this heading come a wide variety of laws and
regulations,--national, state, and local,--affecting the manner in which
mineral resources shall be mined or quarried. Such laws may specify the
number of shafts or outlets, the use of safety and prevention devices,
miners' compensation and insurance, and many other features. Most of
these laws are framed for the purpose of conserving human life and
energy, but they directly affect the mining or extraction of the mineral
resources themselves. Geology plays but little part in relation to such
laws.
Where the government retains ownership and leases or rents the
resources, there are often provisions regarding the manner of mining and
the quality and quantity of the material to be mined, in the interests
of efficient operation and conservation. The geologist is often called
into consultation both in framing and in dealing with the infraction of
such provisions. It may be noted that the control thus exercised on the
operator by government ownership is very much the same as that often
exercised by the private fee owner. It is not unusual for fee owners of
mineral rights to maintain a geological staff in order to follow
intelligently underground developments, to see that the best methods of
exploration and mining are followed, and that ores are either extracted
or left in accordance with the best conservational practice.
III
LAWS RELATING TO DISTRIBUTION AND TRANSPORTATION OF MINERAL RESOURCES
Under this heading come governmental regulations affecting directly or
indirectly the transportation and the destination of mineral products.
Transportation rates, tariffs, zoning, duties, and international trade
agreements of all sorts have vital effects on distribution. In framing
any of these measures for a mineral resource, it is desirable to know
all about the character of the raw material, its physical occurrence and
distribution, and the possibilities for future development. In adjusting
the scientific naming and classification of mineral materials with the
crude names and classifications used commercially--as in tariffs, in
import and export laws, in reports of revenue collectors, in railway and
ship rates, etc.--the geologic information is likewise necessary.
Heretofore, the formulation of measures concerning mineral distribution
has often not been done on a scientific and impartial basis; but in
recent years geologists have been called on more frequently for aid and
advice, as a means of checking or verifying the special pleadings of the
different industries. The rude disturbance of trade routes during the
war brought home the necessity of basing control of distribution of
mineral products on fundamental facts of geology and geography; thus it
was that geologists had a considerable voice in the vast number of
special measures taken for war purposes by such organizations as the
Shipping Board, the War Trade Board, the War Industries Board, and other
public organizations. The same was true in relation to the mineral
resource questions at the Peace Conference. In the reconstructive
measures of the future, a still larger use of scientific considerations
may be looked for. Further suggestions as to the relation of geology to
laws affecting distribution appear in the chapter on International
Aspects (Chapter XVIII).
IV
OTHER RELATIONS OF GEOLOGY TO LAW
It is often assumed that the economic geologist is exclusively
interested in mineral resources. However, there are varied applications
of geology outside of the mineral resource field,--to many kinds of
engineering and construction operations, to soils, to water resources,
and to transportation,--any of which may develop legal problems
requiring geologic service. A few illustrative cases follow.
The classification of mineral materials in contracts presents many
difficulties. A contract for a railway cut, for a canal, or for any
other kind of excavation may specify different prices for removing
different mineral materials. Too often these are stated in extremely
crude and arbitrary terms, such as _rock_, _hard rock_, _hardpan_,
_earth_, _dirt_, etc., without regard to the actual variety of materials
to be dealt with. When, therefore, in the case of the Chicago drainage
canal, the contractor encountered a soft shale and claimed compensation
for rock excavation, geologists played a considerable part in the
extensive litigation that followed in the attempt to define the facts of
nature in terms of a contract which did not recognize them. In a railway
cut through glacial drift or till, a contractor came suddenly upon a
mass of till which had been so thoroughly cemented in place as to have
all the resistance of rock. Litigation was then necessary to decide
whether this should be classified as dirt or rock.
Rock and dirt slides of all kinds, met with in open-pit mining, canals,
and other excavations, present engineering problems with a geologic
basis. The kinds of rocks, their strength, porosity, and moisture
content, the effects of weathering, and the structural conditions must
be determined in order to ascertain the cause of the slides, and are
features which figure largely in litigation arising from troubles of
this sort.
Both federal and state laws give the right to lateral and vertical
support. When, therefore, adjacent or underlying excavations cause earth
movements in a neighbor's property, litigation is likely to ensue and
the geologist is likely to be called in. The long-wall method of coal
mining, extensively practiced in certain parts of the United States, is
slowly withdrawing support from the ground overlying the coal seams,
resulting in damages to surface structures and in some cases to
overlying mineral deposits. Extensive litigation has been the result,
and the future seems to promise more of it. In certain metal-mining
camps, where considerable amounts of materials have been mined to great
depths, caves and cracking in the surface are reaching over unexpectedly
wide areas, again threatening litigation.
The laws relating to the use of surface and underground waters touch the
geologic conditions in many ways. The permanent lowering or raising of a
water level through mining or damming may require a careful geological
analysis of the underground conditions affecting the movements of
ground-water. The use of streams for placer mining, as in California,
has resulted in formulation of laws and in extensive litigation, again
requiring analysis of geologic conditions.
In fact geologists, perhaps more than any other group, have come to
realize how many and how varied are the ways in which people get into
conflict in using the earth on which they live.
CHAPTER XVII
CONSERVATION OF MINERAL RESOURCES
THE PROBLEM
Conservation of mineral resources may be defined as an effort to strike
a proper balance between the present and the future in the use of
mineral raw materials.
Mineral resources have been used to some extent as far back as evidences
of man go, but great drafts on our resources have come in comparatively
recent years. The use of many minerals has started within only a few
years, and for others the acceleration of production within the past two
or three decades has been rapid (see pp. 63-64). In general, the use of
mineral resources on a large scale may be said to have started within
the lifetime of men still active in business. The wide use of power
necessary to an industrial age, the development of metallurgy, the
increasing size and complexity of demands for raw material, mean that
the intensive development and use of our mineral resources is in its
infancy, and is in many respects in an experimental stage.
As nations have awakened to their need of mineral raw materials and to
the recent rapid depletion of these materials, they have been naturally
led to inquire how long the reserves may last, and to consider
prevention of waste and the more efficient use of materials, with a view
to planning more prudently for future national supplies. The first
inquiries seemed to reveal such shortage of mineral supplies as to call
for immediate and almost drastic steps to prevent waste, and possibly
even to limit the use of certain minerals in the interests of posterity.
More careful study of the problem, as might be expected, revealed new
factors and greater complexity. The conservational idea has a wide
sentimental appeal, but the formulation and application of specific
plans meet many difficulties. In its practical aspects the problem is
now a live one, the solution of which is requiring the attention of
mining men, engineers, geologists, economists, and public officials. It
is a question which is coming more and more into the field of actual
professional practice of the economic geologist.
It is our purpose to indicate the general nature of the conservation
problem. We may assume agreement to the desirability of preventing
waste, of making a wise present use of mineral products, and of striking
a proper balance between the present and future in their use. Nature has
taken many long geologic periods to build up these reserves. We, of the
present generation, in a sense hold them in trust; they are entailed to
our successors. With this general thought in mind, how shall we proceed
to formulate definite plans for conservation?
An initial step is obviously a careful taking of stock. With increasing
knowledge of mineral resources, it is becoming apparent that early
estimates of supplies were too low. Many of these estimates failed to
take into account mining to great depths, and wide use of low-grade
ores, rendered possible by improved methods; and especially they failed
to put sufficient emphasis on the probabilities of new discoveries to
replace exhausted supplies. Early predictions have already been upset in
regard to a number of mineral resources. The recognition of the general
fact that the world is far from explored in two dimensions, to say
nothing of three, of the fact that known geologic conditions do not yet
indicate definite limits to the possibilities of exploration for most
mineral resources, and of the consequent fact that for a long time in
the future, as in the past, discoveries of new mineral deposits will be
roughly proportional to the effort and money spent in finding
them,--which means, also, proportional to the demand,--makes it
impossible, for most of the mineral resources, to set any definite
limits on reserves. It is comparatively easy to measure known reserves;
but a quantitative appraisal of the probable and possible reserves for
the future is extremely difficult. Successive revisions of estimates
have, with but few exceptions, progressively increased the total mineral
supplies available. The result is that the time of exhaustion has been
pushed far into the future for most of the important minerals, thus
minimizing the urge for immediate and drastic conservational action,
which followed naturally from early estimates of very limited supplies.
For both coal and iron, supplies are now known for hundreds or even
thousands of years. For oil and lead, on the other hand, the reserves
now known have a life of comparatively few years, but the possibilities
for successful exploration make it probable that their life will be
greatly extended. Notwithstanding this tendency to lengthen the
exhaustion period, the limits of mineral resource life are still small
as compared with the life of the nation or of civilization,--and the
fundamental desirability of conservation is not materially affected.
It is not easy to predict the rate of production for the future. At the
present rate of coal production in the United States, the supplies to a
depth of 6,000 feet might last 6,000 years; but if it be assumed that
the recent _acceleration_ of production will be continued indefinitely
into the future, the result would be exhaustion of these supplies in
less than 200 years. It is generally agreed that exhaustion will come
sooner than 6,000 years, but will require more time than 200 years. The
range between these figures offers wide opportunity for guessing. It is
supposed that per capita consumption may not increase as fast in the
future as in the past, that possibly an absorption point will be
reached, and that there will be limits to transportation and
distribution; but how to evaluate these factors no one knows. In the
case of some of the metallic resources, such as iron, the fact that the
world's stock on hand is constantly increasing--losses due to rusting,
ship-wrecks, etc., being only a small fraction of the annual
output--suggests that a point will be reached where new production will
cease to accelerate at the present rate and may even decline. But again,
the factors are so complex and many of them so little known, that no one
can say how soon this point will be reached.
For the immediate future, there is little to be feared from shortage of
mineral supplies in the ground. The difficulties are more likely to
arise from the failure of means to extract and distribute these supplies
fast enough to keep up with the startling acceleration in future demand
indicated by the figures of recent years. The speed and magnitude of
recent material developments in many lines cannot but raise question as
to whether we have the ability to understand and coodinate the many
huge, variable, and accelerating factors we have to deal with, or
whether some of the lines of development may not get so far ahead of
others as to cause serious disturbance of the whole material structure
of civilization. Coal alone, which now constitutes a third of our
railway tonnage, may with increased rate of production require
two-thirds of present railway capacity. Will railway development keep
up? It may be noted that national crises and failures in the past
history of the world have seldom, if ever, been due to shortage of raw
materials, or in fact to any failure of the material environment.
In its early stages the conservation movement in this country concerned
itself principally with the raw material. Later there came the
recognition of the fact that conservation of raw materials is closely
bound up with the question of conservation of human energy. The two
elements in the problem are much like the two major elements in mineral
resource valuation (see pages 329-330). If in saving a dollar's worth of
raw material, we spend two dollars worth of energy, it naturally raises
question as to the wisdom of our procedure. It might be wiser in some
cases to waste a certain amount of raw material because of the saving of
time and effort. It might be better for posterity to have the product of
our energy multiplied into raw material than to have the raw material
itself. The valuation of these two major elements of conservation is
again almost impossible of quantitative solution. We do not know what is
the best result to be aimed for. We cannot foresee the requirements of
the future nor the end toward which civilization is moving--or should
move. The extravagance of the United States is often contrasted
unfavorably with the thriftiness of Europe. When considered in relation
to raw materials alone, there seems to be basis for this charge. When
considered in relation to the product of human energy into raw
materials, the conclusion may be far different; for the output per man
in the industries related to mineral resources is far greater in the
United States than in Europe. In the case of iron, it has been estimated
that the output per man in the United States is two and one-half times
as great as in the rest of the world. Which is best in the true
interests of conservation, we are not yet able to see.
Our view of what is desirable in the way of conservation depends
somewhat on the limitations imposed by self-interest or location. By
devoting ourselves exclusively to one mineral resource, we might work
out a conservation program very disadvantageous to the best use of some
other mineral commodity. We might take steps to conserve chromite in the
United States which would have a disastrous effect on the iron and
steel industry. We might conserve coal by the substitution of oil, when
the procedure is hardly warranted by the supplies of oil available. We
might work out a program for the United States which would not be the
best conservational plan for the world as a whole, and which would
ultimately react to the disadvantage of the United States. The wisest
and most intelligent use of mineral resources seems to call
unquestionably for their consideration in their world relations, rather
than for a narrow interpretation of local requirements.
DIFFERENCES BETWEEN PRIVATE AND PUBLIC EFFORTS IN CONSERVATION
It appears that a wide range of effective conservational practices has
resulted solely from the effort to make more money through more
efficient operations, and this is likely to be true in the future. Many
improvements in mining, grading, sorting, concentration, and metallurgy
of minerals, to yield larger financial returns, are coming naturally
through private initiative, under the driving power of self-interest.
Another considerable group of conservational practices is possible only
to governments or other public agencies. This group of practices on the
whole requires some sacrifice of the immediate financial interest of the
individual, in the interests of the community as a whole, or in the
interests of posterity. In this group may be mentioned the compulsory
use of methods of mining, sorting, and metallurgy which tend to conserve
supplies but result in higher prices; the control of prices; the
elimination or lowering of the so-called resource or royalty value (p.
375); and the removal of restrictions on private combination or
cooperation, leading to more efficient methods, lessening of cost, and
better distribution of the product; or, what might amount to the same
thing, the acquirement by the government of the resources to be operated
on this larger scale.
The most effective conservation measures yet in effect are the ones
dictated by self-interest and instituted by private initiative.
Governmental measures are not yet in effective operation. Illustrations
of these two types of conservational effort are cited in relation to
coal on later pages.
THE INTEREST RATE AS A GUIDE IN CONSERVATION
In striking a balance between the present and the future, economists
have emphasized the importance of recognizing the interest rate as a
guiding, if not a controlling consideration. It is obviously difficult
for private capital to make investments of effort and money for the
purpose of conservation which will not be returned with interest some
time in the future. For the present, at least, this consideration
furnishes the best guide to procedure in the field of private endeavor.
So far as conservational measures, such as investment in an improved
process of concentrating low-grade ores, promise return of capital and
an adequate interest rate in the future, they are likely to be
undertaken.
It is clear that governments are not so closely bound by this economic
limitation. They can afford to carry their investments in raw materials
and processes at a lower interest rate than the private investor. Their
credit is better. Taxes do not figure so directly. They can balance
losses in one field against gains in another. As a matter of insurance
for the future of the nation, a government may feel justified in
inaugurating conservational measures for a particular resource without
hope of the interest return which would be necessary to the private
investor. In appraising the iron ores of Lorraine taken over by France
from Germany at the close of the war, the actual commercial value of
these ores, as figured by the ordinary _ad valorem_ method, was only
ninety millions of dollars. It is clear, however, that to France as a
nation the reserves were worth more. They could afford to pay more for
them, and could afford to spend more money on conservational practice
than under ordinary commercial limitations, because of the larger
intangible and more or less sentimental interest.
The valuation of this larger interest, as a means of determining the
limit to which conservational investments may be made, lies in the
political field. It may be suggested, however, that a desirable first
step in any governmental program of conservation is to ascertain the
cost and the possibility of an adequate return of capital and interest.
These determinations at least afford a definite point of departure, and
a means for measuring the cost to the people of measures which are not
directly self-supporting.
ANTI-CONSERVATIONAL EFFECTS OF WAR
Experience during the recent past indicates that the exploitation of
mineral resources for war purposes is on the whole anti-conservational.
It is true that the vast amount of war-time exploration and development,
as well as the thoroughgoing investigations of the utilization of
various minerals, have led to better knowledge of the mineral resources
and their possibilities. It is also true that the war required a much
more exhaustive census of mineral possibilities than ever before
attempted. The immediate and direct effect of the war, however, was the
intensive use of mineral resources without careful regard to cost,
grade, or many other factors which determine their use in peace times.
For instance, in ordinary times considerable quantities of
high-phosphorus iron ores are mined; but, because of the fact that such
ores require more time for conversion into steel, war-time practice
concentrated on the higher-grade, low-phosphorus ores, resulting in an
unbalanced production which in some cases amounted almost to robbing of
ore deposits. In the case of coal, quantity was almost the only
consideration; it was impossible to grade and distribute the coal to
meet the specialized demands of industry. The results were a general
lowering of the standards of metallurgical and other industrial
practices, and increased cost. High-grade coals were used where
lower-grade coals were desirable for the best results. In the making of
steel, it is the custom to select the coal and coke with great care in
regard to their content of phosphorus, sulphur, ash, and other
constituents which affect the composition of the steel product; but
during the war it became necessary to accept almost any kind of coal,
with a resulting net loss in quantity and in grade of output.
For a considerable number of mineral resources, such as the
ferro-alloys, foreign sources of supply were cut off during the war,
requiring the development and use, at high cost, of low-grade scattered
supplies in the United States. It was found possible to produce enough
chromite in the United States for domestic requirements, but at two or
three times the normal price of imported chromite. The grade was low and
the loss in efficiency to the consuming interests was a high one. The
extremely limited natural supplies were raided almost to the point of
exhaustion.
With the post-war resumption of importation of minerals of this kind,
producers naturally began a fight for a protective tariff, and the
question is yet unsettled. The tariff, if enacted, would in most cases
have to be a high one in order to permit the use of domestic supplies.
The results would be a large increase in cost to other industries,
decreased efficiency, and the early exhaustion of limited supplies in
this country. Most of the mineral resources have been concentrated by
nature in a comparatively few places in the world; and when the two
elements of conservation are considered--the materials themselves and
the human energy expended in obtaining and using them--it is clear that
any measure which interferes with the natural distribution of the
favored ores is anti-conservational from the world standpoint.
CONSERVATION OF COAL
In the sections on mineral resources, there are many casual references
to conservation of specific minerals. Here we shall not go further than
to introduce a brief discussion of the conservation of coal as
illustrative of the general problem of conservation of mineral
resources.
It has been estimated that the United States possesses, to a depth of
3,000 feet, in beds 14 inches or over, 3,538,554,000,000 tons of coal,
and an additional reserve between 3,000 and 6,000 feet of
666,600,000,000 tons.[42] If all the unmined coal to a depth of 3,000
feet could be placed in one great cubic pile, the pile would be 18 miles
long, 18 miles wide, and 18 miles high. Of the original amount of coal
to this depth only about 0.4 of 1 per cent has been mined or wasted in
mining. The wastage is estimated at about 50 per cent. If the annual
production of coal were to remain the same as in recent years, the total
life of the coal reserves (to a depth of 3,000 feet) would be between
4,000 and 6,000 years; but if the acceleration of production of recent
years were to be maintained in the future, the life would be but little
over 100 years, and the life of the highest-grade coal now being mined
might not be over 50 years. All agree that the acceleration of
production is not likely to continue indefinitely, which will mean that
the life of coal reserves to 3,000 feet will be somewhere between the
two extremes named. It seems clear that actual shortage of coal will not
be felt for some hundreds of years; but this period of years is short as
compared with the probable life of the race.
MEASURES INTRODUCED OR PROPOSED TO CONSERVE COAL
The following list of measures for conservation of coal is taken from
several sources. The exhaustive report of the British Coal
Commission,[43] published in 1905, contains a considerable number of
specific recommendations for conservation of the coal of Great Britain.
The reports of the National Conservation Commission[44] of the United
States, published in 1909, treat of the conservation of the coal of the
United States and naturally follow some of the recommendations of the
British report. The coal section of the National Conservation report was
prepared by M. R. Campbell and E. W. Parker of the U. S. Geological
Survey, and is contained in U. S. Geological Survey Bulletin 394. The
recommendations there given are amplified and developed by Van Hise[45]
in his book on Conservation, published in 1910. Since that time the
subject has been discussed by Smith, Chance, Burrows, Haas,[46] and
others, and certain additional conservational methods have been
proposed. A considerable number of men have also discussed the
sociologic and economic aspects of the question. The report of the
Conservation Commission of Canada,[47] published in 1915, treats rather
fully of the conservation of mineral resources.
It will suit our purpose, and avoid some repetition, if we group most
of these recommendations without regard to authorship. In general, these
recommendations can be grouped under the heads: (A) Methods of mining
and preparation of coal; (B) Improvement of labor and living conditions
at the mines; (C) Introduction or modification of laws to regulate or to
remove certain restrictions on the coal industry; (D) Distribution and
transportation of coal; (E) Utilization of coal; (F) Substitutes for
coal as a source of power.
=(A) Mining and preparation of coal.= Under this heading may be included
a large number of proposals which concern primarily the engineering
treatment of the coal underground and in the mine plants. Some of the
more important measures are:
1. Introduction of the long-wall system of mining in places where the
conditions allow it, in order to minimize the waste underground.
2. Modification of the room-and-pillar system of mining, by which larger
pillars are left while the mine advances, and are recovered in the
retreat,--thereby recovering a larger percentage of coal than under the
old system, where small, thin pillars were left, which failed and were
permanently lost.
It has been argued that the great loss of coal by leaving it in pillars
could be saved by using other material to support the roof; but an
elementary calculation of the cost of this procedure shows that it is
cheaper to use the coal. Chance[48] says:
The coal left as pillars to support the roof is thus utilized
and performs a necessary and useful function, yet the
principal part (perhaps two-thirds) of the 200,000,000 tons
our friends the conservationists claim is wilfully and
avoidably wasted every year is this coal that is left in
pillars to support the roof. I think we can safely claim that
this is not waste, but, on the contrary, is engineering
efficiency of the highest type, in that it utilizes the
cheapest and least valuable material available to support the
roof and saves the whole labor cost of building supports of
other materials. Investigation as to what becomes of that part
of the 200,000,000 tons claimed as wasted, which is not
utilized as pillars to support the roof, will disclose the
fact that a very large portion is coal that is left in mine
workings that are abandoned because the roof is unsafe and
because a continuance of operation would result in injuries or
loss of life. Coal left in the mines in order to conserve
human lives cannot be classed as avoidable waste. A small part
of the 200,000,000 tons is lost because it is intimately mixed
with refuse and because the labor cost of recovering it and
separating it from the refuse would be greater than its value.
3. Mining of shallow bituminous beds by means of the steam shovel.
Progress has been made along this line in the last few years, and
valuable deposits are thus mined which can be mined profitably by no
other method.
4. New methods of filling mined-out spaces with sand, and new methods of
mine survey and design. According to Haas[49]
the greatest advance in the question of method was the system
of mine survey and design perfected in both the anthracite and
bituminous fields. The relatively new method of filling old
spaces with sand, etc., has also achieved success.
5. Use of methods by which coal is not left in the roof for the support
where the roof is weak, and by which coal of inferior quality is not
left in the roof.
6. Wider use of coal-cutting machines by which the wasting of thinner
beds may be avoided.
7. Where conditions allow it, the working of the upper beds before the
lower, in order not to destroy the upper ones by caving. The mining of a
lower coal seam has often so broken up the overlying strata as to render
it impossible to recover the upper coal seams contained therein. There
are certain difficulties, however, in the way of this conservational
measure. In some localities the seams are under separate ownership, and
there is a resulting conflict of interests. Also, if the better coal
seam happens to be below and the poorer seams above, market conditions
may require that the lower seam be mined regardless of the destruction
of the upper ones.
8. Elimination of coal barriers to mark the limits between properties.
This involves more cooperation.
9. Improvement of mining machinery, power drills, etc.
10. Centralization of power stations, rather than the use of many small
units.
11. Elimination of the wasting of slack or fine coal, through more
careful methods of mining, through limitations on the excessive use of
powder and larger use of wedges, through the abolition of laws for the
payment of miners on a run-of-mine basis, and in the case of anthracite
through recovery of the "silt" or dust caused by mining and sorting. It
has been argued that the excessive use of powder ("shooting from the
solid") means loss of coal, owing to the fact that it shatters the coal
and makes a relatively large amount of slack, besides being accompanied
by increased danger from fire and explosion and from weakening of the
roof. Although the excessive use of powder makes a large amount of
slack, it does not necessarily result in waste, for this fine coal is
carefully saved and for certain purposes is as valuable as the lump
coal. So far as the procedure endangers life, it is of course
objectionable.
12. Better use of fine coal. It has been recommended that infirm and
finely broken coal be washed and compressed, thus avoiding the wasting
of slack coal, which was formerly thrown away or burned. However, in
recent years there has been comparatively little waste of this kind, for
slack coal in general finds nearly as ready a market as lump coal and
the use of slack is increasing. There has been much discussion also of
the possibilities of using the coal waste on the ground to make power
for electric transmission.
13. More careful attention to sorting and sizing of all grades of coal
coming from the mine and to preparation of coals for special uses. On
the other hand, some operators say that the ends of conservation will be
best met by limiting the sorting and sizing now practiced. The large
number of sizes now put on the market greatly increases the cost of
production.
14. Wider use of the lower-grade fuels of the west, particularly with
the aid of briquetting.
=Progress in above methods.= Methods of mining and preparation of coal
have been improved. Campbell and Parker state:[50]
A much greater proportion of the product hoisted is now being
sent to market in merchantable condition. Part of this is due
to better and more systematic methods of handling, and part to
the saving of small sizes which formerly went to the culm
banks. The higher prices of coal and the development of
methods for using these small sizes have also made it
possible, through washing processes, to rework the small coal
formerly thrown on the culm banks, and these are now
furnishing several millions of tons of marketable coal
annually.
In general there is increase in the percentage of recovery of coal.
Whereas in the past the loss in mining was said by Campbell and
Parker[51] to average 50 per cent, now an extraction of 70 to 90 per
cent may be looked for.
Quoting from Smith and Lesher:[52]
Observation of the advances made in mining methods in the last
decade or two affords slight warrant for belief in any charge
of wasteful operation. As consumers of coal we might do well
to imitate the economy now enforced by the producers in their
engineering practice. In the northern anthracite field machine
mining in extracting coal from 22- and 24-inch beds, and
throughout the anthracite region the average recovery of coal
in mining is 65 per cent., as against 40 per cent. only twenty
years ago. Nor are the bituminous operators any less
progressive in their conservation of the coal they mine.
In anthracite mining, powdered coal or "silt" has accumulated in
stockpiles and in stream channels to many tens of millions of tons. It
is estimated that this constitutes nearly 6 per cent of the coal mined.
Significant progress has been made recently in the recovery and use of
this silt as powdered fuel for local power purposes.
However, physical and commercial conditions do not in all cases allow of
the full application of these new methods. Once a mine has been opened
up on a certain plan, it is difficult to change it. As a whole the
longer and better organized companies are better able to change than the
smaller companies.
Conservation measures of the above kinds, as so far applied, have come
mainly from private initiative based on self-interest,--though the
cooperation of the government has been effective, particularly along
educational and publicity lines.
=(B) Improvement of labor and living conditions at the mines.= Under
this heading should be mentioned the improvement of housing, sanitation,
and living conditions; improvements in the efficiency of labor, through
making living conditions such as to attract a higher-grade labor supply
and through educational means; the introduction of safety methods; the
introduction of workmen's compensation and insurance; and other measures
of a similar nature. All these measures as a class are sometimes grouped
under the name of "welfare work."
Much thought and discussion have been devoted to the possibilities of
improvement of labor and living conditions from the standpoint of
conservation of human energy. In some quarters this subject has been
treated as being independent of the physical conservation of mineral
resources, and it has been the tendency to assume that conservation of
human energy might be more or less inimical to conservation of mineral
resources. Certain of the changes already introduced have undoubtedly
increased the cost of mining; and, until there was a general increase in
selling price, this increased cost may have had the effect of
eliminating certain practices of mineral conservation which might
otherwise have been possible. For instance, according to Smith and
Lesher:[53]
The increased safety in the coal mines that has come through
the combined efforts of the coal companies, the state
inspectors, and the Federal Bureau of Mines necessarily
involves some increase in cost of operation, but the few cents
per ton thus added to the cost is a small price to pay for the
satisfaction of having the stain of blood removed from the
coal we buy. That form of social insurance which is now
enforced through the workmen's compensation laws alone adds
from 2 to 5 cents a ton to the cost of coal.
On the other hand, there can be no doubt that large advances have been
made in welfare movements which were introduced for the purpose of
insuring a steadier, better, and larger supply of labor, and that the
general gain in efficiency of operation thereby obtained has absorbed a
large part of the increased cost.
In general, conservation measures of this class have been developed
cooperatively by private and public efforts, without important
sacrifice of private interest. There is obviously room for much wider
application of such measures, especially in some of the bituminous
fields where conditions are still far from satisfactory.
=(C) Introduction or modification of laws to regulate or to remove
certain restrictions on the coal industry.= It has been proposed:
1. To modify the laws so as to take care of situations where vertically
superposed beds are owned by different parties, preventing the proper
mining of the coal by either party.
2. To modify the laws so as to eliminate conflict in mining practice in
cases where the coal is associated with oil and gas pools.
3. To allow larger ownership by companies utilizing the coal (now only 3
per cent owned by such companies).
4. To place restrictions on over-capitalization, which leads to wasteful
mining in order to secure quick and large returns on large capital.
5. To remove restrictions on concentration of control. This means, as a
corollary proposition, virtual restriction of competition. Concentration
of control into comparatively few hands has undoubtedly favored
conservation. It is easy to see that the stronger financial condition of
the large companies makes it possible for them to take fuller advantage
of modern methods of extraction, distribution, and marketing.
This proposal was especially urged for the bituminous coal industry
before the war in order to avoid over-production and over-development.
The very wide distribution of the bituminous coals, their enormous
quantity, and their exceedingly diversified ownership had led to
over-development of coal properties. Quoting from Smith and Lesher:[54]
In estimating the aggregate losses incurred by society by
reason of the large number of mines not working at full
capacity, the facts to be considered are that the capital
invested in mine equipment asks a wage based on a year of 365
days of 24 hours, while labor's year averaged last year only
230 days in the anthracite mines and only 203 days in the
bituminous mines, with only five to eight hours to the day.
These conditions prevented in some cases even the most modest
introduction of better methods, or of changes that would enhance the
average profits through a relatively short period of ten or fifteen
years at the expense of the present year. It was necessary to get at the
best of the coal available in the cheapest possible way, regardless of
the losses of coal left in the ground.
To some extent the force of this argument was minimized by war and
post-war conditions, but even yet development of coal mines is ahead of
transportation and distribution.
6. To allow cooperation in the limitation of output, in the avoidance of
cross freights, in gauging the market in advance, and in division of
territory, all of which would allow cheaper mining and thus give larger
leeway to conservational measures. This necessarily would be accompanied
by government regulation. According to Van Hise,[55] who was active
before the war in advocating this conservational measure, such a
procedure
is neither regulated competition, nor regulated monopoly; but
the retention of competition, the prohibition of monopoly,
permission for cooperation and regulation of the latter. In
Chicago there cannot be one selling agency for the different
coal companies which operate in Illinois, but there must be
many selling agencies, and the coal of Pittsburgh must come
into Illinois and the Illinois coal go toward Pittsburgh;
every one of which things makes unnecessary costs, but all of
which are inevitable under the extreme competitive system.
Because of these facts it is necessary to waste the coal. If
at the very same prices the different mines could cooperate in
the limitation of the output, avoidance of cross freights,
gauging the market in advance, and division of territory, they
could mine their coal more cheaply, have a greater profit for
themselves and conserve our resources.
To some extent the plan here advocated was put into effect during the
war by the United States Coal Administration; but the conditions of this
trial were so complicated by special war requirements, that the
conservational advantages of unified control were not demonstrated.
7. To reduce the excessive royalties paid to fee owners. Smith and
Lesher[56] have recently called attention to the relatively high
resource cost in some of the coal fields, represented by the payment of
royalties to fee owners. In the case of anthracite the payment averages
32 to 35 cents per ton, and exceptionally runs as high as a dollar per
ton. For the bituminous coal the average resource cost is probably not
much over five cents a ton. They suggest the possibility of lowering
this cost by governmental regulation; and make an especially strong
argument for not allowing the government-owned coal lands to go to
private owners, who in the future, with the accumulation of interest on
the investment, will feel justified in asking for a large "resource"
return in the way of royalty.
If the resource cost could be lowered, further introduction of
conservational methods by the operators would be possible without
greatly increasing the cost to the public.
8. To require or allow, by government regulation, a raising of the price
of coal to the consumer, thereby allowing wider application of
conservational practices. Some of the increased recoveries of coal above
noted have been made possible only by increase in the market price. If
cooperation were permitted in the manner described in paragraph 6, the
same results might be accomplished without increasing the price. Recent
high prices caused by the war situation are reflected in the
introduction of many conservational changes which were not before
possible. However, in some cases the demand for quick results under
present conditions has an opposite effect, because of the desire to
realize quick profits regardless of conservation.
9. The local conservation of coal at the expense of heavier drafts on
coal of other parts of the world, by imposition of export taxes and
preferential duties, has been discussed. While the effect of such a
measure would doubtless be conservational from the standpoint of the
United States, it is doubtful if it could be so regarded from the
broader standpoint of world civilization. Under present world conditions
such a step would be disastrous.
10. Government ownership has been proposed as a means of facilitating
the introduction of conservation measures. In the United States there is
yet no major movement in this direction. In England the question of
nationalization of coal mines is an extremely live political problem
(see pp. 343, 345-347).
Little progress has been made in conservation measures which involve
legal enactments of the kinds above listed.
=(D) Distribution, and transportation of coal.= It has been argued that
conservational results would ensue from:
1. Cheaper transportation.
2. Larger use of waterways.
3. Improvement in distribution of the product by partition of the market
and by larger use of local coals. For effectiveness this proposition
would have to include control of the agencies of distribution, in order
to minimize excessive profits of middlemen.
4. Purchasing and storage of coal by consumers during the spring and
summer months in anticipation of the winter requirements, in order to
equalize the present highly fluctuating seasonal demands on the mines
and railroads, and to eliminate the recurring shortages of coal in the
winter months. This was particularly recommended by the United States
Bituminous Coal Commission in a recent report.[57]
5. Where conditions allow it, conversion of coal into power at the mine
and delivery of power rather than coal to consuming centers. This type
of conservation is being put into practice on a large scale above
Wheeling, on the Ohio River, where there has recently been built a two
hundred thousand kilowatt installation for steam-generated electric
power. Some of the power will be delivered to Canton, Ohio, over fifty
miles away. This plant uses local coal and the cost of coal is figured
at two mills per kilowatt-hour.
Under this heading of distribution and transportation of coal, might be
considered certain international relations. The international movements
of coal are summarized in another place (pp. 115-117). Anything in the
way of tariffs or trade agreements which would tend to interfere with or
to limit the great natural international movements of coal--which in a
free field are based on suitability of grade, cost, location,
transportation, etc.--would be anti-conservational from the world's
standpoint, although they might be of local and temporary advantage. For
instance, the coal exported from England, which has heretofore
dominated the international trade of the world, is of a high grade.
American coal available for export is on the whole of considerably lower
grade, being higher in volatile matter. Unless this coal is beneficiated
at home, it can replace the English coal in the export field only at
increased cost of transportation and lower efficiency in use. The time
may come when it will be desirable to ship lower-grade coals long
distances; but when the two factors of conservation are considered--the
intrinsic qualities of the coal, and the efforts necessary to utilize
it--it would seem to be conservational at this stage to ship to long
distances only the coal which nature seems specially to have prepared
for this purpose.
=(E) Utilization of coal.= Conservational proposals of this kind are:
1. Substitution of retort coke-ovens for beehive ovens, to save not only
a larger quantity of coke but also valuable by-products (see pp.
118-119). Additional improvements in coking ovens may make possible the
manufacture of some sort of coke from a much wider range of bituminous
coals than can be used at present.
2. Larger use of smoke consumers and mechanical stokers.
3. Larger use of central heating plants, with higher efficiency than
many local plants.
4. Substitution of gas engines for steam engines, and improvement of the
steam engine.
5. Improvement in methods of smelting, leading to larger output of metal
per ton of coke used. Also the development of electric smelting for
certain metals.
6. More careful study and classification of the qualities of coals, in
order to avoid use of higher-grade coals where inferior coals would
serve the purpose.
7. More consumption at the collieries.
8. Larger use of powdered coal as fuel.
9. Improvement of force-draft furnaces.
10. Larger use of gas, a by-product of coal mining, and extraction of
other by-products.
11. More efficient transformation of peat and coal into power and light.
12. The possible use of oil flotation to eliminate foreign mineral
matter.
Most of the conservation measures above proposed have already been
applied with good results, and with promise of large results for the
future. The stimulus has come largely from self-interest. War conditions
in some ways aided and in others hindered these developments. One of the
conspicuous gains was the building of many by-product coke plants, under
the necessity of securing the nitrates and hydrocarbons for munition and
other purposes.
=(F) Substitutes for coal as a source of power.= Some of the more
prominent measures along this line which have been discussed are:
1. Larger use of water power. This has sometimes been popularly assumed
to be, at least potentially, a complete solution of the problem; but
nevertheless it has its distinct limitations.
Water power has the advantages that its sources are not exhausted by
use, and that the relatively greater initial cost of a hydro-electric
plant is frequently more than compensated for by the saving in man power
required and by the lower operating expense. However, the total amount
of water power which can be developed on a commercial basis is rather
closely limited, and much of the available power is so distributed
geographically that it cannot be economically supplied to the industries
which need it. Of the total water-power resources of the United States
which have been estimated by the Geological Survey to be available for
ultimate development, over 70 per cent is west of the Mississippi,--whereas
over 70 per cent of the horse-power now installed in prime movers is east
of the Mississippi. Electric power cannot at present be economically
transmitted more than a few hundred miles. Furthermore, for many uses of
coal, as in metallurgical and chemical processes which require the heat
or reducing action of burning coal, and in its use as fuel for ships,
hydro-electric power cannot be substituted. It seems clear that while
the use of water power will increase, particularly as rising prices of
coal make possible the development of new sites, it can never take the
place of the mineral fuels in any large proportion.
For the immediate future, measures which have been suggested to extend
the use of water power include: the more complete utilization of water
powers already in use through more efficient machinery and methods; a
certain degree of redistribution of industries, so that those requiring
large amounts of power may be located in areas where water power is
cheap and abundant; and the interconnection of hydro-electric plants so
that their full capacity may be used. Some water powers which have been
developed are not being fully utilized because the plants are not
connected with distribution systems large enough to use all the power.
During the war the United States Geological Survey, in cooperation with
the Fuel Administration and the War Industries Board, collected the
information required to prepare maps showing the locations and relations
of power stations and transmission lines throughout the country. This
survey of the situation showed many possibilities, which had before been
but vaguely realized, of interconnections which would increase the
efficiency of the plants.
2. Substitution of lower-grade coals--of bituminous for anthracite, and
of low-grade bituminous for high-grade bituminous coals. Larger use of
low-grade western coals. War and post-war conditions have shown Germany
the way to a wide and effective use of its lignites. This has been
accomplished by cooperation of the government and private interests.
This vast improvement in methods of treatment and recovery of heating
elements and by-products will doubtless have a widespread effect on
utilization of lignites in other parts of the world.
3. Substitution of alcohol and natural gas, oil, oil shales, peats,
etc., as a source of power. This merely concentrates the conservation
problem more largely on these minerals, in some of which, at least, it
is already considerably more acute than in the case of coal; it is not a
solution of the problem, but merely a shifting of emphasis.
Business conditions have limited private enterprise in this class of
measures, but some progress has been made. More rapid introduction of
these measures would require sacrifice of private interest and probably
may be accomplished only by application of public power.
DIVISION OF RESPONSIBILITY BETWEEN GOVERNMENT AND PRIVATE INTERESTS
IN THE CONSERVATION OF COAL
A review of the conservation measures above listed indicates that many
of them are already in operation, and that the initiative for such
measures has been largely supplied by private ownership endeavoring to
advance its own interest. In this category are to be included most of
the improvements in physical methods of mining, preparation, and
utilization of coal, the use of substitutes for coal, the concentration
of control into larger groups better able to introduce new methods, and
the improvement of labor and living conditions; also, under recent
conditions, the increase in selling price, allowing for a wider
application of these measures. Another group of conservation proposals,
which have not yet been put into substantial effect, are obviously
beyond the power of private interests; and must be introduced, if at
all, by the application of government power. These include the
elimination of resource or royalty costs, the control of
over-capitalization, the removal of restrictions on concentration of
control, the granting of permission for cooperation among competitive
units, the regulation of selling price minimums in order to insure
during normal times the use of better physical practices, and the
control of distribution. In short, it appears that there are two great
spheres of conservational activity--one within the field of private
endeavor, and the other possible only by collective action through the
government. The principal advances thus far made have been in the field
of private endeavor.
The government has aided greatly in the advancement of conservation
measures arising within the field of private endeavor. One need only
refer to many governmental investigations, to the spreading of
information as to best methods, and to local compulsory requirements
that the best practices be made uniform and that backward interests
thereby be brought into line.
Recognition of the fact that there is a large body of sound
conservational practice in the coal industry which falls within the
range of self-interest seems essential in planning further changes in
the direction of conservation. Conservational measures do not all
require sacrifice of the individual to the public, nor of the present to
the future generations. An exercise of public power is not in all cases
essential to the advancement of conservation. The respective limits of
the fields of public and private endeavor are not sharply defined, and
vary from place to place and time to time, depending upon local
conditions and special requirements.
In general, the sphere of private interest includes measures which will
bring adequate commercial return. The interest rate is the limiting and
controlling factor. When it is possible--by improvement of methods of
mining, better planning, better preparation of coal, better
transportation and distribution, or better utilization--to secure a
larger average return on the investment, or to insure return through a
longer period of years, self-interest naturally requires the
introduction of such methods as rapidly as financial conditions allow.
Even some of the improvements in labor and welfare conditions have been
introduced in this way, with a view to securing a more permanent and
more efficient labor supply, and thereby aiding the enterprise from the
commercial standpoint.
Within the sphere of government activity lie the removal of unnecessary
restrictions on private initiative, and such conservation measures as
involve some sacrifice of individual returns--in other words, a
reduction of the normal interest rate. Exercise of government power may
be directly helpful within the field of private endeavor without
materially sacrificing private interests; but beyond this point there
are additional large possibilities of conservational activity which are
clearly beyond the control of private interests. The introduction of any
of these latter changes would evidently be so far-reaching in effect,
and would require such broad readjustments not only within but without
the mineral industry, that the necessity or desirability is not in all
cases so clear as in the case of measures already introduced for private
interest.
The most obviously helpful step possible to the government in the
immediate future is to permit cooperative arrangements under private
ownership,--which would make it possible to use common selling agencies,
thereby reducing the cost of selling; to divide the territory to be
served, thereby avoiding excessive cross freights; and to allot the
output in proportion to the demand from various territories, thus
eliminating excessive competition and over-production. All of these
measures could be accomplished without detriment to the public if
properly regulated by the government. The very large saving possible by
this means would allow the introduction of conservational methods at the
mines without raising the cost to the public.
War conditions required even more immediate and sweeping application of
government power than above indicated, but conservational purposes were
quite overshadowed by other considerations.
Where the mineral resources are already owned by the government, or can
be acquired by the government, some of the troublesome factors in the
problem are removed. In such cases it is possible to work out an
intelligent plan for government control without the difficulties which
arise in dealing with private ownership,--although, of course, new
difficulties are introduced (see also pp. 345-347.)
The fact that there are conservational measures possible only to
governments has been widely used as an argument for introducing
government ownership or control. Recent vigorous demands for the
nationalization of natural resources in Europe, and the increasing
discussion of the subject in this country, may be regarded as phases of
the conservation problem. It is not the purpose here to argue either for
or against the drastic exercise of government power in the conservation
of natural resources, but merely to call attention to the measures which
are being discussed.
CONSERVATION OF MINERALS OTHER THAN COAL
The discussion of conservation as applied to specific minerals might be
extended almost indefinitely; but perhaps enough has been said to
indicate the general nature of the field. Before the war careful
estimates of world supplies had been made for comparatively few
minerals, although these included some of the most important, such as
coal, oil, and iron. War conditions required a hasty estimate of world
reserves of most of the mineral products. The reader interested in the
problem will find an extremely interesting body of literature issued by
the various governments on this subject. Of especial interest to the
American reader will be the reports of the U. S. Geological Survey and
of the Bureau of Mines.
In recent years there has been increasing recognition of the
possibilities of conservational saving by concentration, refinement, and
even manufacture of mineral commodities at or near the point of
origin,--thus lessening the tonnage involved in transportation of the
crude products. Limitations of fuel and other conditions often make this
procedure difficult; but considerable progress is being made both
through private initiative and, especially in international trade,
through governmental regulations of great variety.
FOOTNOTES:
[42] Campbell, M. R., The coal fields of the United States: _Prof. Paper
100-A_, _U. S. Geol. Survey_, 1917, p. 24.
[43] Final report of the Royal Commission on coal supplies: House of
Commons, London, vol. 16, 1905.
[44] Report of the National Conservation Commission: Senate Document No.
676, 60th Congress, 2d session, Govt. Printing Office, Washington, 1909.
[45] Van Hise, C. R., _The conservation of natural resources in the
United States_: Macmillan Co., New York, 1910.
[46] Haas, Frank, The conservation of coal through the employment of
better methods of mining: Abstract of paper presented to Pan-American
Scientific Congress, Washington, Dec., 1915-Jan., 1916.
[47] Adams, Frank D., Our mineral resources and the problem of their
proper conservation: _6th Ann. Rept., Commission of Conservation_,
_Canada_, 1915, pp. 52-69.
[48] Chance, H. M., Address before the mine engineering class of the
Pennsylvania State College, Quoted by F. W. Gray, The conservation of
coal: _Bull. 47_, _Can. Mining Inst._, 1916, p. 201.
[49] _Loc. cit._
[50] Campbell, M. R., and Parker, E. W., Coal fields of the United
States, Papers on the conservation of mineral resources: _Bull. 394, U.
S. Geol. Survey_, 1909, p. 12.
[51] _Loc. cit._ p. 12.
[52] Smith, George Otis, and Lesher, C. E., The cost of coal: _Science_,
vol. 44, 1916, p. 768.
[53] _Loc cit._, pp. 768-769.
[54] _Loc. cit._, p. 771.
[55] Van Hise, Charles R., _Cooperation in industry_, pp. 7-8, Address
given before annual meeting of the National Lumber Manufacturers'
Association, Chicago, Illinois, May 31, 1916.
[56] _Loc. cit._, p. 767.
[57] Stabilization of the bituminous coal industry, Extracts from the
award and recommendations of the United States Bituminous Coal
Commission, Government Printing Office, Washington, 1920.
CHAPTER XVIII
INTERNATIONAL ASPECTS OF MINERAL RESOURCES
WORLD MOVEMENT OF MINERALS
Of the annual world production of minerals about two-thirds are used
within the countries where the minerals are produced and one-third is
shipped to other countries. In this chapter we are concerned primarily
with the part which moves between countries. It may be assumed that the
consumption within the countries of origin is a matter of national
rather than international concern.
In pre-war times minerals constituted about 33 per cent[58] of the value
of the total foreign trade of the United States, and 28 per cent of the
foreign trade of Germany. Figures are not available to show the
proportion of mineral tonnage to that of other commodities.
One of the several interesting facts in this world movement of minerals
is that the movement of most of them shows a rather remarkable
concentration. For instance, manganese moves from three principal
sources to four or five consuming centers. Chromite moves from two
principal sources; tungsten also from two. Even for certain commodities
which are widely distributed and move in large amounts, the
concentration of movement is rather marked; for instance, the world
movement of coal is controlled by England, the United States, and
Germany. In other words, although the world movement of mineral
commodities is widespread and exhibits many complex features, most of
the individual minerals follow two or three salient lines of movement.
This means in general that for each mineral there are certain sources of
limited geographic extent, which, because of location, grade, relation
to transportation, cost--in short, all the factors that enter into
availability--are drawn upon heavily for the world's chief demands. The
convergence of these materials toward a few consuming centers indicates
generally concentration of coal production necessary to smelting, high
development of manufacturing, large per capita use, concentration of
facilities, strong financial control, and, not least, a large element of
enterprise which has taken advantage of more or less favorable
conditions.
If a nation were fully supplied with mineral resources, without excess,
the mineral problem might be almost exclusively domestic in its nature.
But no country is so situated. For most of the mineral products the
dominant supply is likely to be controlled by one or two nations, the
other nations being correspondingly deficient and dependent. Even the
United States, which is more nearly self-sustaining in mineral resources
than any other country, is almost wholly dependent on other countries
for certain mineral supplies; and in the case of minerals of which it
has an excess it is dependent on other countries for markets. The view
that the mineral resource problem is solely a local and national one, of
no concern to outsiders, ignores this fundamental fact of distribution
of raw materials.
Control of smelting facilities makes it possible for certain countries
to exercise considerable influence over the production and distribution
of minerals in other countries, and thus presents many difficult
international questions. Even more difficult are the international
problems created by the commercial ownership and control of minerals in
the ground by nationals of other countries.
The national and international aspects of mineral resources are
difficult to separate, so intimately do they react on each other. To
some extent there may be conflict of interest between the two, but in
the main the international questions may be logically approached from
the standpoint of national self-interest; for, in the conduct of the
national industry along broad and enlightened lines, world conditions
must necessarily be considered. A clearer comprehension of the world
mineral relations, and an understanding of our own opportunities and
limitations in comparison with those of our neighbors, cannot but
eliminate some of the unnecessary handicaps to the best use of the world
mineral resources, and result in a lessening of causes of international
discord.
A brief survey of the mineral conditions preceding, during, and
following the war may serve as a convenient means of approach to a study
of the present international aspects of the mineral problem.
MOVEMENT OF MINERALS UNDER PRE-WAR CONDITIONS OF INTERNATIONAL TRADE
If the world pre-war movement of minerals is considered broadly, it may
be regarded as conforming essentially to normal trade conditions of
supply and demand. There have been barriers to overcome, such as tariffs
and trade controls and monopolies of various kinds, but these barriers
have not prevented the major movements between the best sources of
supply and the principal consuming centers. These movements may be
regarded as a more or less spontaneous internationalization of mineral
resources by private enterprise. The aim of free trade or unrestricted
commerce was equality of trade opportunities; but such conditions of
unrestricted competition tended to concentrate trade in the hands of the
strongest interests and to prevent equality of opportunity.
The efforts made to promote or hinder international mineral movements by
tariffs, bonuses, embargoes, subsidies, transport control, patents,
government management, financial pressure, and other means have been
incited mainly by national or imperial self-interest, and have thus been
to some extent inimical to an internationalization based on the
principle of the greatest good to the greatest number. It may be
supposed that, in any effort to attain supernational or international
control, motives and measures based on national self-interest of the
sort here mentioned will continue to play an important part.
CHANGES DURING THE WAR
The war wrought fundamental changes in the world movement of minerals.
The character and distribution of the demands changed. Customary sources
of supply were cut off. Financial disturbances and ship shortage
profoundly modified the nature, distribution, and extent of the world
movement. Our domestic mineral industry was abruptly brought to a
realization of its vital relations with international trade. To
illustrate, the large movement of manganese from India and Russia to the
United States was abruptly stopped, and we had to develop a source of
supply in Brazil. The stoppage of pyrite importations from Spain as a
means of saving ships required the development of pyrite and sulphur
supplies in the United States. The export of oil from the United States
to European countries was greatly stimulated, and the export to other
countries was correspondingly decreased. The world movements of coal
were vitally affected, principally by the limitation of the coal
shipments from England and the United States to South America and the
concentration of shipments to European countries. The closing of German
coal supplies to nearby countries also had far-reaching consequences.
The cutting off of the German potash left the world for the time being
almost unsupplied with this vital fertilizing ingredient. The Chilean
nitrates, on which the world had relied for fertilizer purposes, were
diverted almost exclusively to the manufacture of powder. The total
annual imports of mineral commodities into the United States were
reduced by 1,200,000 tons. Our exports, though they continued in large
volume, were mainly concentrated in Europe. The story of these
disturbances in the world movement of minerals, though highly
interesting, is too long to be told here.