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Will copper/nickel mining be Minnesota’s Bakken fields? Not so fast

REUTERS/Lucy Nicholson
Even under the rosiest estimates, precious metals mining in northern Minnesota would produce not even one-tenth the jobs Bakken has created in North Dakota.

WASHINGTON — If you take U.S. Senate candidate Mike McFadden’s words literally, he’s making a lofty promise.

On at least a couple of occasions, when discussing regulations on mining jobs, McFadden has pointed to the copper and nickel reserves in northern Minnesota.

“It has Bakken-type economic impact on our state,” he said on conservative talk radio in May. He repeated the line when talking with MinnPost’s Eric Black a few weeks ago. “It’s a game-changer for the region.”

“Bakken” refers to the oil- and gas-producing region in North Dakota, an economic engine that has completely transformed the western half of the state in under a decade.

And there’s where the analogy falls apart. If industry-favored projections are correct, copper and nickel mining would, right away, provide a modest boost for Minnesota’s economy, while potentially leading to bigger gains in later years. But those estimates, rosy as they might be, produce not even one-tenth the jobs Bakken has created in North Dakota.

McFadden is not the first to make the Bakken comparison — it’s a favorite of former Rep. Chip Cravaack — and with 8th District politics set to revolve around the mining economy this year, the likelihood for similar pronouncements is high.

The mining industry and its supporters — a coalition that includes Republicans and labor-oriented Democrats — lavish praise on its economic potential, even if that praise borders on the hyperbolic. McFadden, for example, doesn’t actually think the burgeoning Minnesota precious metal industry can equal what Bakken has done for North Dakota, spokesman Tom Erickson said, though he sees a potential boom industry if plans move forward.

“Mike compares copper mining along Minnesota’s Iron Range to the Bakken oil fields because projects like PolyMet have the potential to completely transform this region’s economy in the same way that the oil industry transformed western North Dakota’s economy,” Erickson said.

Industry: 1,300 jobs by 2016

PolyMet promises to create up to 360 jobs if approved by regulators, a process seven years in the making.

Minnesota’s precious metal mining industry is nascent, supporting about 550 jobs in 2010 in the northeastern part of the state, either directly or indirectly. Iron ore mining employs more than 11,000 Minnesotans.

But industry players are increasingly looking to tap into Minnesota’s significant copper and nickel reserves. PolyMet wants to dig near Hoyt Lakes and extract 32,000 tons of ore a day; Duluth Metals hopes to build a mine, called Twin Metals, near Ely, and Mining Minnesota executive director Frank Ongaro said a “slew” of other companies are exploring dig options.

The industry’s main economic ammunition is a 2012 report on mining from the University of Minnesota, Duluth [PDF], commissioned, in part, by the industry and mining-dependent government boards. The report says planned precious metal projects could create 1,345 jobs and $218 million in new economic output for the region’s economy by 2016, assuming they’re fully operational by then, alongside 2,170 construction jobs related to those projects.

Environmentalists: study has shortfalls

Environmental groups have taken issue with that research, however. Northeastern Minnesotans for Wilderness commissioned its own report that scrutinized the report’s methodology, concluding that it “falls squarely on the low-quality end of the spectrum” of economic analyses.

Conservationists’ base concern with PolyMet is that the mining process it utilizes could do significant long-term damage to the environment and its sizeable impact on the region’s economy. Precious-metal extraction requires a completely different chemical process than iron-ore mining, and environmental advocates have warned against its long-term costs, both economically and ecologically.

Forestry, for example, is worth about 10 percent of the region’s economic output; perhaps more importantly, tourism (including around the Boundary Waters) accounts for about 11 percent. The UMD study didn’t account for new mining’s potential impact on those industries.

Projects like PolyMet have to go through an extensive environmental review, and part of the political debate over that process has been weighing the project’s benefits against its potential impact on the prevalent, established industries in the region already. PolyMet says it has created environmental protections strong enough to offset those concerns, and the industry says precious metal mining would fit in nicely alongside the rest of the region’s economy.

Iron ore mining is the biggest single sector of the northeastern Minnesota economy, accounting for 30 percent the gross regional product, and mining advocates said it’s been able to easily coexist alongside the rest of the region’s industries so far. In the long run, precious metal mining could compliment that.

Don Fosnacht with the University of Minnesota's Natural Resources Research Institute said the region has some of the biggest precious metal deposits in the world and the economic impact of mining them could eventually rival iron ore mining on the Mesabi Range.

“You’ve got billions of dollars worth of metals than be extracted,” he said.

That’s a long-term goal, of course, and Ongaro said there hasn’t been a study measuring the long-term economic impact of copper-nickel mining in Minnesota. The UMD study goes only through 2016, and no mining projects have opened yet.

Bakken

But back to the point at hand: how does a new Minnesota precious metals industry stack up against North Dakota’s Bakken oil fields?

Let’s assume, for the sake of argument, that the UMD report is a solid study, a good measuring stick against which we’ll compare the economic impact of Bakken.

If those projections are accurate, copper-nickel mining will be an undeniable boost for northern Minnesota, a nearly one-tenth increase in employment for one of the region’s biggest industries right away. But the Bakken boom hasn’t been just a boost to western North Dakota’s economy. By all major economic indicators tracked by the state, it’s been a revelation.

Oil and gas development in the Bakken region picked up around the middle of 2006, North Dakota Petroleum Council spokeswoman Tessa Sandstrom said. At the time, the four soon-to-be “core counties” at the heart of the oil boom employed about 16,000 workers making less than $700 a week on average, according to the North Dakota Job Service.

Since then, employment has close to quadrupled.

Employment in North Dakota
Since 2006, employment in the four core counties of the Bakken oil boom has nearly quadrupled, from 16,473 to 56,775 in 2013.
Source: Labor Market Information Center

Last year, more than 60,000 people were working in North Dakota’s “core” counties, Williams, Mountrail, McKenzie and Dunn, where the unemployment rate was 1 percent. Workers there are making more than $1,400 a week, and their annual per capita income has ballooned from $36,000 in 2007 to $102,000 in 2012. Those four counties accounted for nearly $5 billion in taxable sales and purchases last year, according to the Job Service, just $1 billion less than the total for the entire state ten years before.

Sandstrom said economic metrics ranging from government revenues to household incomes have increased, in some cases, six-fold since drilling picked up in 2006. Federal data shows North Dakota’s economy has been the fast growing in the country for more than four years.

Per capita income in North Dakota
Per capita income in North Dakota has increased rapidly in recent years, driven mostly by dramatic increases in the four core counties of the Bakken boom.

Could copper-nickel mining do that for Minnesota?

“It’s not nothing, but it’s also not the Bakken oil fields. It’s just a much smaller scale,” said Aaron Brown, an Iron Range writer and former DFL operative. “Something of that size would be bigger than the Iron Range is right now.”

A booming precious metal industry is only possible when investors see a clear and safe potential for profit, he said, and that could be some time off. Just last week, a major international financier for the Twin Metals project declined to extend its investment; the financier’s chairman noted in May that the project is unlikely to overcome its “technical and environmental challenges … until at least the end of this decade.”

A new mining boom, Brown said, is “an election year promise that neither party can deliver.”

Devin Henry can be reached at dhenry@minnpost.com. Follow him on Twitter: @dhenry

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Comments (15)

  1. Submitted by Todd Hintz on 07/10/2014 - 11:50 am.

    Bakken

    A few questions to ponder about the Bakken oil fields. Income may have doubled, but what has the price of the cost of living done in the same time period? It doesn’t do much good for your salary to double if your rent, food, and other living necessities go up by three or four times. You’re not keeping up with inflation.

    Many reports tout the benefits Polymet and other mines will bring, but they gloss over the costs. Will they degrade other industries in the range, such as tourism? If so, how much? What will the long term environmental costs be for moving ahead with this project?

    to even consider a project of this magnitude we need to have all the data and options laid out before us so we can make intelligent decisions. Maybe the data is out there somewhere in bits and pieces, but I haven’t seen anything yet that brings it together in a comprehensive manner.

    • Submitted by Bill Kahn on 07/10/2014 - 09:41 pm.

      There has been work by Polymet and the lead agency and those others responsible for environmental analysis preliminary to permits and there was a big event at the River Center in downtown St. Paul earlier this year. I guess you weren’t there or read nothing about it, but hundreds did attend, spoke and/or listened and picked up disks and paper copies of the draft. It seemed like a staged labor versus enviro show to me with encampments on the right or the left of the place respectively, literally and figuratively.

      I agree that this project is pretty much experimental, i.e., it has a”let us do it and you’ll see how safe it will be” vibe to it, but I think the only thing stopping it would be if some party can demonstrate that environmental impact mitigations will not work or the money to keep them in place for as long as necessary will not be there. My House representative feels that unless a third party insurer is found, nothing should be permitted; I agree.

      The creepy Republican campaigns remain devoid of any objective reality and if they don’t get their comeuppance in the media, there is no hope for our state or the country in these important matters (not that this has happened in this article which is pretty good).

  2. Submitted by Joseph Stans on 07/10/2014 - 12:10 pm.

    Mining

    No doubt it will be a game changer for Northerm=n Minnesota but uyou can also bet that it will be a game changer for a bigger chunk of the stae when the runoff and drainage get inot the ground water and aquifer and taints the water all the way to the Twin Cities.

    the mines will pass, the people will move on to some other temporary promise and the state will be left with giant pits and shafts full of poisonous water: The gift that keeps on giving.

    Congratulations for buying into another scam offered by corporate interests and politicos tath do not give a fig for there district or the constituents.

  3. Submitted by David Frenkel on 07/10/2014 - 03:20 pm.

    ND

    The state of ND last week announced there are about 25,000 job openings in ND mostly related to the Bakken oil fields. If MN politicians want to improve the MN economy they would work closer with the state of ND to take advantage of the Bakken boom.

  4. Submitted by Tom Karas on 07/10/2014 - 03:23 pm.

    Energy subsidy for mining to consider

    So a big new mine goes in. These are the largest customers of MN Power. They need transmission lines and new or upgraded generation facilities. Of course the cost of these improvements are passed on to the ratepayers. I just wonder if a mining company had to build its own generation plant to be self sufficient, would it be in such a hurry? Just wondering how much that energy subsidy is worth? If they go bust and bail on the project who gets stuck with the cost of energy upgrades? Why can’t they be energy self sufficient? Maybe it’s because they know they are short term residents, eh?

    • Submitted by Marc Post on 07/10/2014 - 03:55 pm.

      Pull a “Medtronic”?

      Despite all the talk, they’ll just pull a “Medtronic” and move out of the country as soon as the profits come in or liability becomes and issue. The taxpayer will get the bill, guaranteed.

  5. Submitted by Steve Titterud on 07/10/2014 - 03:43 pm.

    Even Antofagasta fears the environmental risk !!

    Note the following from the link in this column:

    [quote]…Antofagasta’s chairman, Jean-Paul Luksic, said at the company’s annual meeting in May that it wants to invest only in projects where it expects strong returns. And its chief executive, Diego Hernandez, said in Thursday’s announcement the company’s priority is “projects with the highest value and lowest risks.” [end quote]

    So since Antofagasta does NOT want to increase its share, and conversely, has put its 40% share on the block for Duluth Metals to buy them out, what does that tell you ?

    Please note that everyone who has anything at all to say about this project is highly impressed with the profit potential. So when the CEO says they are narrowing their focus to projects with the highest value and lowest risk, he’s not saying there’s something wrong with the profit potential in the PolyMet proposal. It has a fantastic profit potential, but only so long as all the risks do not come to bear to attack the profit.

    Based on the statements quoted above, it is clear that the RISK in this project is paramount to the leadership of Antofagasta. And what risk compares with the environmental risk ? There could be an enormous drain on resources in the out-years – i.e., after 20 years, when the extraction is done.

    These folks don’t want to be stuck with the bill, based on their knowledge and experience in this industry. Clearly, it could destroy a lot of potential profit. What the heck does a Chip Cravaack or other mining champion know compared with these folks, who are withdrawing to protect their money ??

    Finally, the companies we’re talking about here, the ones who would actually own the project, are NOT EVEN AMERICAN COMPANIES !! One is Chilean, the other Canadian.

  6. Submitted by Edward Blaise on 07/10/2014 - 03:57 pm.

    &^%$* Invest Banker *&^$%

    As an investment banker Mike McFadden has few cares or concerns about the effects of this kind of mining: it is only about the deal. His whole work career is get it done and get out. The mess left behind is some one else’s problem. The Bakken is a real mess on many fronts and McFadden is oblivious to it.

  7. Submitted by Robert Gauthier on 07/10/2014 - 09:50 pm.

    Bakken

    Many of the jobs on the Bakken go to out of state subcontractors. The average nurse in Minot makes 45k compared to 60+k in Minneapolis. Teacher salaries lag far behind also, as do many other community resource type jobs. You want a big buck, physically risky job with no insurance handling toxic chemicals, radon laced mining tailings and rampant crime, it is your place. The locals are not benefitting as much as you think. Many wish it would just go away.

  8. Submitted by THOMAS REYNOLDS on 07/11/2014 - 08:01 am.

    Timelines…

    The comparison between oil production & minerals is not a good comparison, but the economic impact will be nearly the same. The mineral deposits and mining, while significant in their own right, will create tens of thousands of jobs in processing, shipping, and servicing. As this industry develops the range will provide, in my estimate, closer to 2,000 permanent jobs over the next 50 years and the extended service and processing jobs will be close to 50,000. We are looking at a total revitalization of the northern half of the state with revenues that will rival the Bakken..

    • Submitted by jason myron on 07/11/2014 - 01:44 pm.

      and your expertise

      on formulating these estimates is based on what exactly?

      • Submitted by Steve Titterud on 07/11/2014 - 03:30 pm.

        Typical of this debate, anyone can pull imaginary…

        …numbers out of you-know-where without any justification, and it fits right in !!

        If the contributors here backed up “my estimate” with some kind of rational basis or foundation (is it too much to pray for a factual foundation ?) it would raise the level of the discussion.

        Meanwhile, I guess some will toss around any numbers they dream up in an irrational appeal. It is nothing more than cheerleading.

  9. Submitted by Joseph Stans on 07/13/2014 - 08:50 am.

    Copper Nickel

    Whatever the claims the company or loser politicians make one thing we can all count on is a scenic area of the state will be permanently defaced and and the ground water and maybe the aquifer will be poisoned. The jobs it creates will be few and transient. The mess they leave will be permanent. There are places all over the country that were ruined for some company’s temporary profit and for a few jobs that so badly polluted the area no one can live there any more. for reference see Pricher, OK for openers. Ther are many others.

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