mining in minnesota’s iron range: past and future perspectives
TRANSCRIPT
Mining in Minnesota’s Iron Mining in Minnesota’s Iron Range: Past and Future Range: Past and Future
PerspectivesPerspectives
Thomas Michael PowerThomas Michael PowerEconomics DepartmentEconomics Department
The University of MontanaThe University of Montana
Bay View Rolling Mill, Shore of Lake Michigan, Milwaukee
Milwaukee Drop Forge, Bay View, Milwaukee
Why the Renewed Interest in Why the Renewed Interest in Mining in Minnesota?Mining in Minnesota?
• The Industry Perspective:– Steeply Rising Metal Prices– Well Known Mineral Geology– A Long Mining Tradition
US Recycled Iron Prices 2001-2007: American Metal Market Chicago
$0
$50
$100
$150
$200
$250
$300
$350
Apr-01
Oct-01
Apr-02
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Apr-03
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Apr-05
Oct-05
Apr-06
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Apr-07
Oct-07
Pric
e pe
r Met
ric T
on
http://www.odotnet.net/construction/OCA/Steel_Index_for_PN525.htm
Why the Renewed Interest in Why the Renewed Interest in Minnesota Mining? Minnesota Mining?
• The Community Perspective:– The highest paid blue-collar jobs available– Other high-paid professional and technical
jobs– Taxes and Royalties to State and Local
Governments– Revitalize Depressed Mining Towns
Lessons from Minnesota’s Mining Lessons from Minnesota’s Mining PastPast
• Minnesota has had a long and intimate experience with metal mining.
• That history can provide valuable insights into what a future expansion of mining might bring.
• Public policy going forward should be informed by that past experience
“Coping with the unpredictable fluctuation of mining economy and forces of change, over which there seemed to be no control, became an accepted part of life for the generations who made Iron Country their home. They, like people in other single industry regions….came to know the hurt and anguish of mine and plant closing, loss of jobs, loss of pensions and insurance, strikes, accidents and death. They confronted turmoil and intimidation, experienced poverty and prosperity, and through it all they endured.”
Minnesota’s Iron Country: Rich Ore, Rich Lives, Marvin G. Lamppa, 2004, p. 245
The Economic Anomaly of MiningThe Economic Anomaly of Mining
• The Economic Promise:– Tremendous Wealth Extracted– High Wages Paid
• The Economic Outcome:– Depressed and Rundown Towns & Regions– Lower average incomes, higher
unemployment, and higher poverty– Mining Regions Are Economically Depressed
Regions
A Prosperous Mining Town?A Prosperous Mining Town?
• Appalachia with its coal• The Ozarks with its lead• The Upper Peninsula with its iron & copper• The Silver Valley of Idaho’s Panhandle• Arizona and Montana Copper Towns• New Mexico Uranium Towns• Minnesota’s Iron Range
Explanations for the Failure of Explanations for the Failure of Prosperity to Follow MiningProsperity to Follow Mining
• Unstable metal demand and prices• Labor displacing technologies• Ultimate exhaustion of mineral deposits• Environmental damage to the region
Real Price of Iron Ore (1998 $s)
$-
$10
$20
$30
$40
$50
$60
$70
$80
1900
1905
1910
1915
1920
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1930
1935
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1945
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1960
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1995
2000
2005
Rea
l Pric
e pe
r Ton
Source: USGS data series 140: http://pubs.usgs.gov/ds/2005/140/
Note Iron Prices Are NOT at Historically High Levels. Also Note the Instability in Price
Changes in Real Copper Prices 1900-2007
$-
$1.00
$2.00
$3.00
$4.00
$5.00
$6.00
1900
1906
1912
1918
1924
1930
1936
1942
1948
1954
1960
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1972
1978
1984
1990
1996
2002
Rea
l Pric
e pe
r Pou
nd (2
006
$s)
In terms of price, we have been here before.
Note the declines after each past high.
The Impact of Labor-Displacing Technological Change
Employment and Labor Productivity in Minnesota Iron Ore Mining
-
5,000
10,000
15,000
20,000
25,000
1900 1920 1940 1960 1980 2000 2020
Empl
oym
ent
-
2,000
4,000
6,000
8,000
10,000
12,000
14,000
Out
put p
er W
orke
r (m
etric
tons
)20,000 workers
3,200Workers2,050 Tons/Worker
13,000 Tons/Worker
Lessons from the PastLessons from the Past
• High metal prices stimulate world-wide production, constrain demand, and bring prices back down.
• Marginal mining operations layoff workers or shut down completely.
• Even when production remains steady, there on ongoing employment declines due to technological change
The Positive NewsThe Positive News
• Communities and Workers Are Resilient After the Decline in Mining Employment– Adaptation and Change– A New Economy Emerges– Communities Do Not Necessarily Go into
Terminal Decline after Mining Declines
Real Income from Mining and the Rest of the Economy: St. Louis County, MN
$-
$1,000,000
$2,000,000
$3,000,000
$4,000,000
$5,000,000
$6,000,000
1969
1971
1973
1975
1977
1979
1981
1983
1985
1987
1989
1991
1993
1995
1997
1999
2001
2003
2005
Rea
l Inc
ome
Out
side
of M
inin
g ( $
1,00
0s)
-
200,000
400,000
600,000
800,000
1,000,000
1,200,000
1,400,000
1,600,000
1,800,000
Rea
l Inc
ome
from
Min
ing
($1,
000s
)
1979-2005: +$940 million or +21%
1979-2005: -$503 million or -63%
Outside of Mining
Mining
Mining as a Source of Real Income in Itasca County, MN
$-
$200,000
$400,000
$600,000
$800,000
$1,000,000
$1,200,000
1969
1971
1973
1975
1977
1979
1981
1983
1985
1987
1989
1991
1993
1995
1997
1999
Rea
l Inc
ome
($1,
000s
)
Real Income Outside of Mining+$412 million or +63%
Mining Real Income-$130 million or -75%
Lake Ctny Changes in Real Income: Mining and Other Sectors
-
50,000
100,000
150,000
200,000
250,000
300,000
1969
1971
1973
1975
1977
1979
1981
1983
1985
1987
1989
1991
1993
1995
1997
1999
Rea
l Inc
ome
($1,
000s
)
Real Income Outside of the Mining Sector1980-2000: +78%
Real Earnings in Mining Sector1980-2000: -65%
Growth in Real Per Capita Income: Iron Counties and State of Minnesota
$-
$5,000
$10,000
$15,000
$20,000
$25,000
$30,000
$35,000
$40,000
1969
1971
1973
1975
1977
1979
1981
1983
1985
1987
1989
1991
1993
1995
1997
1999
2001
2003
2005
Rea
l Inc
ome
per Y
ear
State of Minnesota
Lake
St. Louis
Itasca
Unemployment Rates in The Iron Range
0
2
4
6
8
10
12
14
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
Une
mpl
oym
ent R
ate
(%)
Itasca
Lake
St. Louis
UnitedStates
UnitedStates
Lake
NonNon--Mining Sources of Economic Mining Sources of Economic Vitality in the Iron RangeVitality in the Iron Range
• Ongoing development of professional service sectors– Especially Health Services– Not all low wage, “lousy” jobs
• Retention and attraction of retirees– Income that follows people’s location choices
• Retention and attraction of residents and small businesses (local “amenities”)
• Recreation and Tourism
Itasca Lake St. LouisServices 130% 107% 102% Health Services 133% 67% 145%Retirement & Investment* 92% 116% 66%*Government Transfers, Dividends, Rent, and Interest
Sources of Economic Vitality in the Iron Range
Percent Change in Real Income 1979-2000during the Decline in the Iron Industry
The FutureThe Future
• New Metal Mining and Processing Proposals
• On-going Amenity-Supported Economic Vitality
Metal Mining as a “New” Source of Metal Mining as a “New” Source of Economic Vitality in Minnesota?Economic Vitality in Minnesota?
• Metal mining is a relatively small source of income both in the Iron Range and in Minnesota as a whole– 5% of total personal income in the Iron Range
counties– 2/10ths of 1% of Minnesota personal income
• No plausible expansion in mining will return it to the preeminent position it held in the past.
The New Metal Industry ProposalsThe New Metal Industry Proposals
• Minnesota Steel 700 jobs• NorthMet 470 jobs• New Taconite Processing 183 jobs
• Total Iron Sector Jobs Lostsince 1980 11,000 jobs
Competing Natural Resource Competing Natural Resource ValuesValues
• Natural Warehouse of Commercially Valuable Commodities to be Extracted
• The Source of Valuable Environmental Services to Be Directly Enjoyed– Clear water and air– Wildlife habitat, fisheries, and recreation– Scenic beauty
The Changing Economic Role of Natural Landscapes
Timber Non-Commercial Recreation Minerals Clean Water Forage Wildlife Outfitting Fisheries Commercial Recreation Scenic Beauty
“Tourism” Air Quality Open Space
Our Natural Landscapes
Commercial Commodities Environmental Services
Employment & Income Improved in Quality of Life. Mills, Mines, Resorts
etc. Attract and Hold New Residents Traditional Economic Base and
Expands Businesses Multiplier Impacts Additional Additional Economic Activity Economic Activity
Impact on Local Economic Well Being
County Type Population NetChange Migration
Retirement 28.4% 25.9%Federal Lands 22.3% 16.4%
Recreation 20.2% 16.9%Commuting 15.2% 12.0%
Services 14.6% 11.7%Government 11.5% 5.2%
Non-Specialized 10.9% 8.4%Total Non-Metro 10.3% 6.9%Manufacturing 9.5% 6.1%
Poverty 9.1% 4.4%Transfer Payments 8.5% 6.5%
Farming 6.6% 3.9%Mining 2.3% -1.5%
Population Change in Non-Metro Countiesby Type of County, 1990-2000
AmenityAmenity--Supported Economic Supported Economic Vitality in Northeast MinnesotaVitality in Northeast Minnesota
• In-migration of new rural residents to Itasca, Lake, and St. Louis Counties
• New housing, rising property values, and conversion of seasonal homes in “lake country”– Ely area: Burntside and Shagawa Lakes– Babbitt area: Birch & Bear Island Lakes– Hoyt Lakes– Orr area: Pelican Lake– Island, Boulder, & Fish Lakes areas
A New Part of theA New Part of theLocal Economic BaseLocal Economic Base
• The attractiveness of the area– Social environment: small cities, safe, un-
congested, good schools and services– The natural environment: clean water and air,
wildlife, outdoor recreation, scenic beauty• Attract and hold residents and the
economic activity associated with them.• Undermining environmental quality
undermines economic vitality
Economic Decision Making about Economic Decision Making about Mining: The Private PerspectiveMining: The Private Perspective
• Mining companies carefully consider the mining costs, the expected market value of the ores produced, and the risks. They only develop the most profitable mineral deposits.
• Most mineral deposits are left un-developed because of high costs, low value, or high risk.
• That is why the sulfide copper deposits were notdeveloped in the 1970s and the taconite ores were not developed until the 1950s. The mining companies were right!
• Economic rationality often requires that mineral deposits be left in the ground, un-developed.
Economic Decision Making about Economic Decision Making about Mining: The Public PerspectiveMining: The Public Perspective
• Public Costs Also Have to Be Considered– Environmental damage, especially long-term– Community Stability: Boom and Bust– Fiscal Pressures on Local Governments
• If the total costs, including the public costs, exceed the benefits, economic rationality requires that public officials reject that mining proposal.
The Public Policy ChallengeThe Public Policy Challenge• How to support the ongoing revitalization of the
Iron Range that’s already underway?• How to avoid stepping back onto the economic
“roller coaster” that is mining?• How to avoid further damaging the natural
environment of the Iron Range and extending that damage to surrounding rivers, lakes, and wetlands?
• How to protect the water resources that are the current and future economic base of northern Minnesota?
