In this week’s Where Stuff Comes From Weekly: The U.S. energy grid is under attack, ransomware attacks will impact your stuff chains, and a NEW PODCAST episode: where rare earth elements come from.
Cheers and gratitude,
Max
(CYBER) !ATTACK! On Largest U.S. Oil Pipeline!
Over the last 20 years, our world has become extremely digitized. While we have a long way to go before every facet of our daily lives is totally digital, a tremendous portion of the infrastructure systems that run our country has made its way onto computers and the internet.
Physical infrastructure was always vulnerable to forces of nature, acts of terror, or unforeseen engineering failures, but now we must also defend our critical infrastructure in cyberspace. Understanding where ‘energy stuff’ comes from is extremely important — and securing where ‘energy stuff’ comes from is essential to ensuring continued abundance in our high-tech society.
Here are some important details about the recent cyberattack on the U.S.’s largest oil pipeline, on which the eastern seaboard is incredibly reliant for delivery of various fuels:
- “Colonial Pipeline Co. operates the 5,500-mile Colonial Pipeline system taking fuel from the refineries of the Gulf Coast to the New York metro area.”
- “Colonial Pipeline is the largest refined-products pipeline in the U.S., transporting more than 100 million gallons a day, or roughly 45% of fuel consumed on the East Coast, according to the company’s website. It delivers fuels including gasoline, diesel, jet fuel, and heating oil and serves U.S. military facilities.”
- “Cyberattacks targeting critical infrastructure or key companies, some by suspected foreign actors, have become a growing area of concern for the U.S. national security officials.”
The major issue with this pipeline cyberattack is not the supply of gasoline. Rather, it’s the ability to move that gasoline around the country from where it is primarily produced in Texas to where it is primarily consumed up and down the East Coast. Pipelines are an extremely effective and safe logistics solution for moving the liquid gold that powers our civilization. Instead of using discrete transportation systems like truck and rail that are subject to crashes and traffic delays to transport fuel, pipelines allow us to, under normal circumstances, transport oil and natural gas seamlessly and continuously through an underground network of high-tech steel tubes. But when the high-tech part of these steel tubes – the part that’s highly networked and digitized – is under attack, the entire system is subject to failures like the one we are seeing right now.
Governors across the East Coast declared states of emergency to loosen regulations on other methods of gasoline transport (mainly trucking) and enacted anti-price gouging laws typically reserved for natural disasters to offset some of the consumer implications of this cyberattack. Colonial (the company that owns the pipeline) and state governments are aiming to have the pipeline back up by the end of the week, but this cyberattack is yet another reminder that we need to invest time upfront to ask “Where Does Stuff Come From?” If we do not stop and ask ourselves this most fundamental question, then:
- We as individuals will be caught flat-footed and waiting in lines for our gasoline, food, and water;
- We as a civilization will be at the mercy of our adversaries to supply our most critical national security products, and;
- Our businesses will fail to provide our customers reliable and affordable access to products and services.
Last-minute addition: As I am sending this newsletter out, news broke that the Colonial Pipeline resumed operations.
Beyond Colonial Pipeline, Ransomware Cyberattacks Are A Growing Threat
Ransomeware is no joke. Many of our business systems are highly vulnerable to these cyberattack vectors. Unfortunately, these attacks are not reserved for large companies with massive critical infrastructure. This WSJ summary of the state of ransomware cyberattacks is a must-read for any business owner. These attacks impact every industry and business of all shapes and sizes, and it is probable that you will find yourself on the wrong end of these attacks at some point in the future. Here are some examples:
- “A September hack cost hospital chain United Health Services Inc. $67 million last year before taxes, and a month later ransomware groups knocked dozens of hospitals offline during a widespread campaign.”
- “The 10,000-student Sheldon Independent School District in Houston paid a ransom of $206,931, negotiated down from about $350,000, after a ransomware attack last year rendered it inoperable and threatened a coming paycheck distribution.”
- “The University of California, San Francisco, paid a $1.14 million ransom to a hacker in June. The university has said that it made the decision to pay because the hacker encrypted data for important academic work, including research.”
Where your digital stuff comes from — the servers, software, and data storage protocols that you use — is just as important as where your physical stuff comes from. Said another way the reliability and redundancy of how your digital architecture interfaces with your physical architecture can make or break your business. Do you have redundancy in your communications with your logistics network if your logistics software is attacked? Can your manufacturing line quickly recover if the digital side of your operation is compromised? Finally, how will you handle a ransom attack if and when this new business liability makes its way into your business systems?
Florida Toxic Waste Crisis Could Be Key to China Rare Earths Fight
Allied dependence on China for rare earth minerals is one of the stuff-chain crises at the core of this ‘Where Stuff Comes From’ thesis. Every piece of high-technology that we know and love works so elegantly because of the 17 rare earth elements. Without rare earths, there are no smartphones, computers, fighter jets, nuclear submarines, drones, or robots. And right now, we import >95% of finished rare earth products from China.
‘Rare’ is a misnomer for this group of elements: they are not actually rare. In fact, these elements are incredibly abundant on planet Earth; you probably have some in the soil in your backyard. The reason rare earth elements are so tricky (and rare with regards to their economics) is that the mineral forms of these elements are typically found in low geological concentrations, diluted among other economically irrelevant minerals. However, there are a handful of other materials that are substantially more economical to mine that are often colocated with these diluted rare earth deposits.
Right now, there is a blossoming ecosystem trying to take advantage of these colocated rare earth deposits that are often tossed aside as non-profitable waste. Last month, Florida faced a toxic waste emergency which might provide an opportunity to harvest this 21st-century gold from a pretty nasty situation. As detailed in this article, this waste pile – remnants of an old phosphate processing facility – might be a part of the solution to our tremendous rare earth dependence on China.
Key Quotes:
- “Phosphogypsum is a byproduct of producing fertilizer from phosphate rock, with more than five metric tons produced for every ton of useful phosphoric acid. It’s worthless in its raw form thanks to concentrations of uranium, radium, and other heavy metals that make it too radioactive for use as a soil improver or construction material — purposes for which it would otherwise be well-suited.”
- “They’re [rare earths] present in concentrations of around 0.2% in Florida’s phosphogypsum, according to one 2017 analysis by a Chinese-U.S. study team. With about 1 billion tons in the stacks, that represents more than two million tons of rare earths, enough to meet global demand for a decade.
- “Here’s how it could work. Waste would be removed from the tailings stacks and processed with leaching and flotation techniques common to the mining industry. That would separate out the rare earths and heavy metals and reduce the radioactivity of the remaining phosphogypsum to permissible levels. It could then be sold for use in agricultural and industrial applications for which it’s currently considered too dangerous. The rare earths would enter the high-tech industrial supply chain, while radium could be used for medical isotopes and uranium could fuel civilian and military nuclear reactors. (That wouldn’t even be a particularly radical departure — in the 1980s, about 20% of U.S. uranium supply was recovered from phosphates.)
Another, more active and advanced solution to our existential dependence on Chinese rare earth products is to develop a domestic rare earth supply chain.
NEW PODCAST: Our Technological Life-Blood: Where Do Rare Earth Elements Come From?
Critical minerals are found in nearly every high-tech product we use today. For example, an iPhone is made from over 40 different elements found in dozens of different as-mined critical minerals (e.g. the rocks that come out of the ground). Right now the United States relies on our chief adversary, China, to supply nearly 100 percent of some of the most important critical minerals. Take, for example, the rare earth metals, scandium, and graphite. In this episode, we explore a key component of achieving American Minerals Independence: opening new mines for critical minerals. To do this, we sat down with Pini Althaus, CEO of USA Rare Earths. Pini is a mining executive with decades of experience capitalizing and setting up new mining operations. USA Rare Earths is building an integrated mine to magnet rare earth supply chain located fully in the United States.
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