Minnesota’s mining not an economic panacea – by Lee Bergquist (Milwaukee-Wisconsin Journal Sentinel – February 2, 2013)


Mining could be a huge economic boost for the state, say proponents of an iron ore mine in northwestern Wisconsin. But it hasn’t been a cure-all for the big iron ranges of Minnesota and Michigan.

The areas rank below average in median household income for their states, and their economies have often struggled despite dominating iron ore production in the United States. The ore, processed into taconite pellets, is a staple for making steel at Midwestern mills.

In Wisconsin, many hope that a new iron ore mine in Ashland and Iron counties can rekindle the glory days, when cities such as Hurley buzzed with commerce and night life notoriety. “We’ve all dreamed for the past 50 years what would happen if a mining company came back to Hurley,” Gary Pelkola, owner of the Iron Nugget bar in Hurley, recently told a legislative committee in Madison.

“We now have a chance to make Wisconsin iron mining a dream come true.” If Gogebic Taconite gets the mining bill it wants from the Wisconsin Legislature, and receives regulatory approval, the company said it will spend $1.5 billion to construct an open pit mine that, in time, will stretch for four miles over an ore-rich ridge in the two counties. An adjoining factory would process the ore into pellets.

The mine, with 700 workers, would be a massive operation in an area of forests and a smattering of private properties. It would represent the biggest investment in decades – perhaps ever – for an area that is older, poorer and less educated than the state average.

A Gogebic consultant, Madison-based NorthStar Economics Inc., says that with spinoff employment, an iron mine could support more than 2,800 jobs across 12 counties in northern Wisconsin and the Upper Peninsula.

But the iron ore industry also has a history of booms and busts.

It’s increasingly buffeted by global markets, especially China. Last year, iron ore prices peaked at $128 per metric ton in July, fell by 23% to $99 in September, and then rebounded to $129 in December.

And in recent months, Wall Street has expressed concern about a long-term glut.

“A new mine in Wisconsin or anywhere else would have the advantage of having the ore close to the plant and be constructed with newer and improved equipment,” Gogebic President Bill Williams said in an email. “A new mine will be better in position to weather the economic storms than a plant that is 35 to 40 years old.”

Critics such as Mike Wiggins Jr., chairman of the Bad River band of Lake Superior Chippewa, say proponents discount the environmental effect a mine would have on tourism and natural resources. Wiggins also rejects the notion that mines are the economic engines that their supporters say they are.

“In Minnesota, I don’t see manna from heaven,” he said.

The Mesabi Range in northeastern Minnesota is the source of 80% of the nation’s iron ore.

The jobless rate in the past two decades there has usually been higher than the state average of 4.7%, according to the U.S. Bureau of Labor Statistics.

In St. Louis County (home of Duluth), the unemployment rate averaged 6.1% between 1990 and 2012.

In Lake and Itasca counties, it was 5.9% and 8.5% respectively.

Between 2000 and 2011, mining employment in Minnesota fell 25% to 4,245 jobs in 2011, according to the state’s Department of Employment and Economic Development.

In 1979 – the peak of iron ore production – there were 15,000 mining employees working in Minnesota, the agency reported.

Production has remained relatively stable since 2000, except in 2009 when it dropped by about half because of the recession.

In Marquette County, Mich., the home of two large open pit ore mines, the unemployment rate has fared better than the Michigan average in recent years.

But one of the mines, the Empire, will close at the end of 2014. Owner Cliffs Natural Resources had been contemplating an expansion there, but said in November it was closing the mine because of volatility in ore prices and weaker demand by steel-makers in North America.

Another key measure is income, which has been lower in mining country, despite union-scale wages.

U.S. Census Bureau figures show that median household income in St. Louis County was 22% below the state average of $58,476 between 2007 and 2011.

In Lake and Itasca counties, it was 19% lower.

For the rest of this article, please go to the Milwaukee-Wisconsin Journal Sentinel webisite: http://www.jsonline.com/news/wisconsin/minnesotas-mining-not-an-economic-panacea-4e8jiju-189542171.html