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Business North - The Daily Briefing - Business Newspaper Online
Value of mining challenged, defended
PHOTO: THOMAS M. POWER
Skeptics of non-ferrous mining have introduced a new argument to the discussion, contending that the costs of mining – economic, environmental and historic – tend to be overlooked when new operations are proposed.
Thomas M. Power, a consultant and retired professor of economics at the University of Montana, made that argument June 18 in a Duluth presentation sponsored by the Friends of the Boundary Waters Wilderness.
“If we look at the past, we realize there are substantial costs associated with mining,” said Power, author of The Economic Role of Metal Mining in Minnesota and Lost Landscapes and Failed Economies. “Many of our historic mining areas also are areas of persistent poverty,” he continued, referencing Appalachian coal communities and former Upper Michigan copper mining areas.
His assertions stand in stark contrast with research conducted by the University of Minnesota Duluth. A 2012 report on the economic impacts of ferrous and non-ferrous mining concludes they annually add almost $5 billion in value to Minnesota’s economy. Without naming that study in particular, Power said much of the economic research into mining addresses benefits but not costs. While mining companies examine both factors, he said residents and policy makers often ignore costs, sometimes to their peril.
Power argued several factors make other industries a better option. He said:
• Demand for natural resources is not stable, nor are commodity prices. In turn, mining production and employment also experiences peaks and valleys.
• New technology is reducing the amount of labor needed by mining firms.
• Economic value flows out of local economies where minerals are mined.
• Mining heavily impacts landscapes and prevents them from being used in other ways.
• Mineral deposits eventually are depleted, leaving miners without jobs.
Some of those same assertions are true, said Tony Sertich, commissioner of the Iron Range Resources and Rehabilitation Board, but some of Power’s other claims can be said about many industries. Most experience cyclical demand, Sertich said, and employees everywhere face the potential of being replaced by new technology and equipment.
Power also cited some downsides that occur when communities have large, dominant employers.
“One of the problems with mining partly is the result of one of its benefits – high wages. It tends to displace other economic activities and slow the ongoing development of the overall economy. It stifles economic development,” Power said, and dampens entrepreneurial drive.
“That’s been his theme for years and years,” said UMD economist Jim Skurla, an author of the research report entitled The economic impact of ferrous and non-ferrous mining on the State of Minnesota, the Arrowhead Region and Douglas County, Wis.
“When he originally did his work, he suggested we should entirely go to forestry and healthcare,” Skurla said, adding that wood products have been in a deep slump and the healthcare industry can’t be sustained unless patients have good jobs. “What does the region really have as options? If we could easily expand forestry, we would.
“We are still a natural resources-based economy. There is no denying that. To think we can do something else when we’re so far from markets is a fallacy,” Skurla said.
Power also argued investors want to recover a financial return as soon as possible, pushing for rapid extraction of minerals.
“The life of modern mines has tended to get shorter and shorter,” he said. “The pulse of revenue is being spread over a shorter period of time.”
Sertich, however, said agencies such as the IRRRB and its partners are making an increased effort to diversify the mining economy, while also ensuring that a portion of the money generated by mining is reinvested locally. Colleges also are refocusing their efforts toward programs that encourage entrepreneurial thinking, Skurla added, and a new major may emerge in that field.
Studies conducted by the World Bank suggest mining has both positive and negative impacts.
“Mining can contribute to poverty reduction in a variety of ways, mostly through generating income and through creating opportunities for growth for lateral or downstream businesses,” the international group says. It can also harm the environment and hinder economic restructuring, the World Bank has found. But sound government regulation helps ensure the impacts are positive.
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