Tuesday, March 16, 2010

How much is it all worth?

For the past six months, the government has been threatening to dig up our national parks. They justify this by arguing that New Zealand has immense mineral wealth - supposedly as much as Australia - but its all kept "off limits" due to conservation laws. But as Gordon Campbell points out, their preferred figure - $140 billion - is a "back of the envelope" estimate from a mining lobbyist. If you trust that figure, I have a beehive-shaped building in Wellington to sell you.

So how much is it really worth then? Back in 2002, Statistics New Zealand began work on preparing a system of natural resource accounts [PDF] in order to better measure the sustainability of the New Zealand economy. Part of this involved generating a monetary and physical stock account for minerals [PDF]. This used an internationally accepted methodology based on the NPV of resource rental (the same methodology used by mining companies in making their economic decisions), and covered all major minerals currently economically extracted in New Zealand - gold, silver, iron, aggregate, and others. Minerals not currently or recently extracted could not be valued, as there was no way of calculating resource rental for them. A similar exercise was conducted for energy resources [PDF], including coal and petroleum. Combining the two - minerals plus non-renewable energy resources - gives a total figure (for 2000) of NZ$3,683.2 million. Quite a difference from $140 billion, isn't it?

A couple of caveats. First, as will be apparent if you look at the tables, these figures vary depending on market prices. Historically, the value for minerals has varied between $100 million and $1 billion, that for petroleum and coal between $1.6 and $5.5 billion. 2000 was a bad year for minerals but a good year for oil. But even if we take the maximum values for each, we're still looking at $6.5 billion - around 20 times lower than the government suggests. Second, these figures are ten years old - sadly, Statistics New Zealand doesn't seem to have continued the project. But they're at least a ballpark indication, and they show that the ballpark is somewhere vastly different from where National puts it.

In short, National's quest to dig up our natural heritage is based on poor numbers and mining industry hype. And whichever side of the fence you're on, that's a very poor basis for a decision.