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

WASHINGTON — A GOP talking point contends copper-nickel mining could do for Minnesota what oil drilling has done in North Dakota. But the numbers don’t add up.

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.
REUTERS/Lucy Nicholson

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.

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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.

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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.


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.

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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 Follow him on Twitter: @dhenry

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