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Getting ready for a Range boom
With a new wave of industrial expansion on the horizon, a regionwide ‘Range Readiness Initiative’ has begun, to get it right this time.
The discovery of iron ore in the mid-1800s produced an economic boom that spread from Michigan’s Upper Peninsula to Minnesota’s Iron Range.
Now a new wave of up to nine big industrial projects — many part of a revitalized global steel industry — is knocking at the door of Minnesota’s Mesabi Iron Range.
These projects promise up to $5 billion in Iron Range investment over the next five years with as many as 5,000 permanent new jobs. The major economic, social and political implications would likely spill into the Duluth/Superior area, as well.
The big unknown, of course, is how many projects actually will leap off the drawing board, and how fast they will come.
“We could have as many as 2,000 (additional) construction workers here as early as October 2008,” said Sandy Layman, commissioner at Iron Range Resources. Anecdotal evidence points to badly managed earlier boom periods in northern Minnesota. Entire towns were built on ore deposits, and later dismantled when they stood in the way of expansion.
During the last taconite industry boom in the 1970s, an acute shortage of temporary housing found some workers living in unfinished basements, even backyard tents, or commuting daily from great distances.
In the last big paper industry expansion at the Boise Cascade mill in International Falls, a huge influx of workers — many of them non-union and from southern states — drove rents sky high, dislocating long-time residents. The labor culture clash culminated in a 1989 riot and fire that destroyed the massive housing camp built by non-union construction manager BE&K for its workers.
“We don’t want to repeat that,” Layman said.
In response, her state agency is coordinating a major initiative to manage the changes ahead for directly impacted Range communities. That “Range Readiness Initiative” will prepare for an influx of temporary workers and get those communities — and larger region — ready to tap the opportunities that follow. Some of the new operations will require extensive vendor networks and stimulate retail/service expansion, producing up to three spin-off jobs for each job created directly.
“We need to get this right,” Layman said. “People need to understand that at least to some extent, this will be a repeat of what happened 100 years ago with an influx of new ethnic groups. What an opportunity,” she said.
Mesabi Nugget, Minnesota Steel
Two iron ore projects — nearly $2 billion in potential investment — are permitted and in the final stages of securing financing. Preliminary construction has begun on the $235 million Mesabi Nugget project, the smaller of the two. It would produce concentrated iron pellets, the industry’s first new iron ore product since taconite was developed in the 1950s.
Indiana-based Steel Dynamics and Kobe Steel in Japan, which developed the iron nugget technology, plan to build the plant on the defunct LTV Steel Mining site near Aurora-Hoyt Lakes. About 400 construction workers would be needed followed by about 50 permanent workers, producing about 500,000 tons of iron nuggets annually. Minimill operator, Steel Dynamics, would take 100 percent of that production.
Additional iron nugget production modules likely would follow.
The far larger Minnesota Steel project, with a $1.6 billion price tag, would employ about 2,000 construction workers during a two-year building period. It would be the first North American steel mill operating at an iron ore mine site.
When operational, the taconite-direct reduced iron-slab steel process would employ 700 full-time workers and create an estimated 2,100 spin-off jobs, according to developer Essar Global, the India-based conglomerate. Semi-finished steel slabs produced at the mill near Nashwauk, in Itasca County, would have a ready market at Essar’sAlgoma Steel mill in Sault Ste. Marie, Ontario.
“Our big bets are paying off and it’s time to focus on community preparedness. Our budget reflects that,” Layman said.
The state created Iron Range Resources to spur economic growth and diversification in current and former mining areas in the Taconite Tax Relief Area. The agency receives a share of the state production taxes collected from mining operations in lieu of property taxes. It funnels those revenues back to local governments and public schools in the Relief Area and also uses a share to operate its own mine land reclamation, community and economic development programs.
The agency’s fiscal 2008 budget includes an additional $4 million for public infrastructure grants to local communities. Applications for the first round were due Oct. 19. The current budget also includes a new $1.6 million fund available as matching grants for businesses to become vendors in this next wave of expansion. Agency officials are working out the program details; there’s no deadline for application.
The agency’s budget also sets aside $500,000 for workforce development. Iron Range Resources has struck a partnership with the Northeast Higher Education District, which operates five public community and technical colleges in the Minnesota State Colleges and Universities (MnSCU) system.
Last year the two agencies jointly hired Roy Smith, a former teacher and school administrator, who returned to his Iron Range roots to coordinate their workforce development strategy. Smith serves as the Northeast District’s director of regional custom training programs.
He also plays a key role in the Readiness Initiative: He represents Iron Range Resources on a multi-agency overarching strategy development team, and heads the sub-team that will implement its workforce strategy.
Meshing the labor force with the needs of the region’s existing businesses and the new industrial players is perhaps the most critical challenge ahead. A chronic youth exodus has long crippled Northeastern Minnesota, and the current workforce is ageing.
“We know 75,000 boomers are hitting retirement in the next 10 years, and we’re looking at several thousand new openings (with these projects),” Smith said. “All the high schools along U.S. 169 from Grand Rapids to Ely will produce just 8,000 graduates by 2010. The old saw that you have to leave the Iron Range to succeed doesn’t apply anymore.
We have to make our students aware of the opportunity,” he said. But it could be a tough job since Minnesota nationally ranks a lowly No. 48 in its ratio of high school career counselors to students.
Additionally, schools in the MnSCU system have been cutting expensive industrial technology programs amid budget pressures, Smith said, just as the need for skilled trades is becoming apparent statewide, and urgent in the northeast region.
Getting the house in order
In addition to assigning responsibility for building a workforce with the skills sought by existing and potential employers, the Readiness Initiative has created four other sub-teams:
• The “Projects” sub-team is comprised of some of the companies behind the planned expansions: Minnesota Steel, Minnesota Power, Mesaba Energy, PolyMet Mining, Mesabi Nugget and Blandin Paper. These companies met as a group for the first time on Oct. 31. Their goal is to coordinate their responses to common problems, and provide critical information for community planning.
• The “Community Resources and Readiness” sub-team addresses infrastructure — utilities, highways, land use availability and schools — and their strengths and weaknesses for dealing with development, both short and long term. It has representatives of Range chambers of commerce, school districts, elected leaders and planners in St. Louis, Itasca, Lake and Cook counties, consulting engineer firms, Range Association of Municipalities and Schools and state agencies with economic and community development roles.
• “Opportunities Development,” will maximize local and regional business development and wealth retention. The team includes community development professionals in Nashwauk, Grand Rapids, Hibbing, the East Range Joint Powers Board, and the region’s major economic development groups, including The Development Association in Superior-Douglas County.
• Furthest along in its work is the “Housing” sub-team, with a mission of residential development, both short-term and long-term. The potential need for temporary housing to accommodate construction workers at the Minnesota Steel project early next year has jumpstarted the Housing sub-team effort. Member-representatives include the Northern Minnesota Builders Association, Itasca and Range boards of Realtors, county redevelopment authorities, Minnesota Housing Finance Agency, Itasca Housing Coalition and Greater Minnesota Housing Fund.
The Housing Fund was created 11 years ago with a start up grant from the Blandin Foundation in Grand Rapids, with a special emphasis on Itasca County. Providing technical assistance, grants and loans, the Housing Fund has coordinated the creation of 1,000 units of mixed income housing in Rochester, MN, meeting both community and workforce needs of the Mayo Health System, a major employer. The Housing Fund participated in a similar joint initiative between Marshall, MN and its largest employer, Schwan’s Foods.
The Housing Fund’s newest target is Northeastern Minnesota, said Warren Hanson, its president. “The Range Readiness Initiative is truly unique, I’ve never seen anything like it.
“Theoretically, infrastructure built for temporary workforce housing can be used in the long run for permanent housing. If done right, residential development can support the revitalization of Range cities,” he said
The Housing Fund brings its expertise in community-based planning, market research assistance and project financing; it will assemble other needed resources, according to Hanson. It has contracted with research and engineering firm, Bonestroo, Rosene, Anderlik & Associates in St. Paul, to update previous Iron Range housing studies.
He said those findings and a housing strategy will be unveiled in early 2008.
Meanwhile, Iron Range Resources is forging ahead with two other projects that will complement the goals of Range Readiness. On Nov. 5 it hired former St. Louis County land-use planner James Plummer to coordinate residential development on contiguous land to Giants Ridge, the golf and sky resort near Biwabik, operated by Iron Range Resources.
Plummer’s other mission is to coordinate “The Laurentian Vision.”
The effort began in 1998 to change traditional mining practices that left a pock-marked Range and hostile relationships between iron ore companies and their host communities.
Some of the mining companies and the agencies responsible for regulating them are experimenting with “terraced mining practices” that will leave future depleted pits ready for relandscaping and development into waterfront resort-style housing.
“We want to turn the perception of mining on its ear,” said Brian Hiti, Iron Range Resources deputy commissioner, “to enhance the environment by harnessing the energy of mining to add value to a post-mining landscape.”
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