Minnesota think tank wades into debate on economics of mining

Just as election season gets into full swing this fall, a Twin Cities pro-business think tank will wade into the fierce economic debate about copper-nickel mining in northern Minnesota with a statewide advertising campaign that promotes the potential of the new industry.

John Hinderaker, president of the Center of the American Experiment, a Golden Valley non-profit that typically supports Republican causes, said the $270,000 campaign announced Monday will start after Labor Day. It will include highway billboards, TV and radio spots, YouTube videos and other social media ads that highlight the billions in economic benefits the state will reap from mining, according to a new report from the center.

"If voters understand the huge benefit of mining, they will want to see it happen," Hinderaker said. "And an election is a good time to be talking about it."

PolyMet Mining Corp., a publicly held Canadian company, is awaiting final approval from state regulators on a permit for an open-pit mine and processing facility near Hoyt Lakes and the St. Louis River. Twin Metals Minnesota, a subsidiary of the Chilean mining giant Antofagasta, is developing an underground mine on the edge of the Boundary Waters Canoe Area Wilderness near Ely.

Together, they have ignited the biggest and longest-running environmental controversy the state has seen in decades. Unlike the taconite industry, copper-nickel mining carries much greater environmental threats because runoff from mine and processing waste can produce an acid that leaches heavy metals from rock. In addition, both projects would include waste tailings basins, which pose a risk of leaking and dam failures upstream from critical recreation and wildlife areas.

Critics also argue that creating a new mining industry will permanently alter a region now cherished for its lakes, forests, hunting and fishing, and eclipse a thriving outdoor industry — a view that was supported earlier this month by a different economic study independently conducted by a Harvard economist.

Hinderaker said mining can be conducted with minimal environmental risks, thanks to new technologies and regulatory oversight, and that the economic benefits for the state are substantial.

The economic report that the center released Monday estimated that when fully up and running — meaning three mines and a titanium ore processing facility that at this point is experimental — the industry would generate $3.7 billion annually in overall economic activity, mostly from the sale of the metals, and 8,468 direct and indirect jobs.

The report highlighted that the ore deposits in northern Minnesota also include some of the largest untapped stores of titanium and cobalt — metals that are crucial to smartphones and other technologies. Now, those minerals are mostly produced in Third World countries with weak labor and environmental protections.

And while those mines will certainly continue to operate regardless of whether new ones are developed in Minnesota, "Who is going to do it more safely than we are?" Hinderaker said.

However, the report does not include the potential negative impact on the thriving outdoor recreation and tourism industry that is a critical part of northeast Minnesota's economy. Environmental groups say recreation and tourism is a far healthier strategy for the region in the long run.

"There are some places that may make sense for sulfide-ore copper mining," said Lukas Leaf, national sporting director of Sportsmen for the Boundary Waters. "But the watershed of the Boundary Waters isn't one of them."

James Stock, a Harvard University professor of economics and a former member of the White House Council of Economic Advisers, agreed. He did a different kind of economic analysis that included the long-term potential impact on jobs and income from both industries around the BWCA. He found that in 20 years the economy around the Boundary Waters would be in worse shape with mining than without it. There would be an initial economic boost, but by the time is the ore is played out, the mine and the jobs will be gone, and so will the outdoor recreation industry and many of the visitors.

"It is well documented," Stock said. "A boom and bust cycle for mining and the degradation of recreational value. You are left with a place that is worse off."

He said that economics around tourism and mining in northeast Minnesota are a unique situation, with few historic comparisons. So he based some of his predictions on what happened to nearby communities in the west after oil gas deposits were depleted.

In early August, Stock sent his report to the U.S. Forest Service, which is conducting an environmental review on whether to allow mining on federal land near the BWCA. According to his analysis, which compared 72 different economic scenarios, he said that in 20 years there would be 1,500 to 4,500 more jobs without mining.

Stock decided to look at the issue because he grew up in Minnesota, worked as a counselor at a camp in the northern part of the state and still takes his family on vacation to the Boundary Waters.

"I'm a Minnesotan," he said.

Josephine Marcotty • 612-673-7394