ELY – A former World Bank economist helped residents here better understand a recent study that found that the region’s economy would actually do better without the proposed Twin Metals copper-nickel mine.
Kris Hallberg, who moved to the Ely area about 15 years ago, presented her take on the 2018 study done by Harvard economics professor James H. Stock during a Tuesday Group session held here earlier this month.
The debate over the Twin Metals mine has taken an unpleasant turn in recent weeks with local politicians pushing for boycotts of local businesses that don’t support the Twin Metals project. Yet the Stock study suggests that the fight may not be the jobs vs. the environment showdown that some believe.
Instead, Stock looked at two development scenarios, and concluded that the introduction of copper-nickel mining to the region would lead to fewer jobs and less regional income in the long run than a continuation of the amenity-based economy that’s developed in the Ely area in recent decades. That economy is focused on outdoor recreation and the steady influx of new residents and local investment from people wanting ready access to the Boundary Waters region.
Stock’s study, completed along with his graduate student Jacob Bradt, examines the economic impact of the Twin Metals project over a 20-year period. “While it is true that Stock is very interested in the Boundary Waters, he did this study independently. It wasn’t funded by either side of the debate,” Hallberg said.
While some mining advocates in the audience questioned the validity of a study that looks out only two decades, Hallberg reminded everyone that it was Twin Metals themselves that estimated that the mining project would last just 20 years.
“This is the first study that looks at both sides of the picture, the side of what would happen if the Twin Metals project went ahead and would happen if it didn’t, and compared those two alternatives,” she said. “In other words, it looks at both the benefits and costs.”
The study examined an economic future with the Twin Metals project, which would bring high-paying jobs to the region and would have positive effects on related industries (like mining equipment and construction), while boosting demand for local goods and services.
The other alternative, dubbed the “withdrawal” case because it involves the withdrawal of federal minerals from leasing, assumes that the Twin Metals project is rejected. That scenario would continue the ongoing amenity-based economy where growth is based on the recreation industry as well as “amenity migrants,” or people moving to the area for its quality of life.
Stock assumes the area cannot have both development paths. “There is some trade-off between pursuing the Twin Metals development path and pursuing the withdrawal (of mineral right) path,” Hallberg said.
As Hallberg explained, Stock’s study finds a significant economic boost from the Twin Metals project, at least initially. Pursuit of the project would create jobs and those people would have earnings. “People hired by Twin Metals for construction, mine operation, community relations, would all directly contribute to the local community,” Hallberg said. “There are also indirect effects that are along the supply chain for Twin Metals. They would be hiring other businesses for goods and services, and one of the largest indirect businesses are computer programmers.”
Induced effects, where direct and indirect employees would spend money in the region on such things as daycare, restaurants, retail, and other household expenditures, also impact the economy, according to Hallberg. “For every dollar that is earned directly or indirectly, 21 cents would be spent locally on those household goods and services,” she said.
Similarly, a development path based on outdoor recreation and quality of life would also have direct and indirect effects on the region’s economy, she explained. “The question that Stock was trying to answer is which of these paths is dominant,” she said.
Hallberg noted that Stock gathered large amounts of data in making his projections, including historical data, existing studies, current and projected employment data directly from Twin Metals, wage rates in northeastern Minnesota, and studies of amenity-based economies in other areas of the United States.
“Still, there is a lot of uncertainty in these projections,” Hallberg said. “We can’t predict the future perfectly. In particular, there are questions about how many jobs Twin Metals is going to create, how much change in productivity is going to occur, mining’s impact on recreational industries, and mining’s possible in-migration and out-migration.”
Using a variety of variables, as many as 72 different scenarios were examined by Stock is producing his conclusions.
“His main conclusion is that the Twin Metals project would boost local employment and income in the short run,” Hallberg said. “That is pretty much undeniable. But the boost would be short-lived and overtaken by negative impacts on the recreation industries and in-migration. In the long run, the region would be better served by continuing its current amenities-based model of economic development.”
Hallberg said she was astonished by how short the economic boost of a Twin Metals project would be, at least according to Stock’s study. “At about the 2.5-year mark, we start losing jobs because the jobs gained by Twin Metals are outweighed by the losses in recreation and jobs created by in-migration,” she said. “In about 11 years the effect on the local economy turns negative.”
In terms of income, the jobs created by Twin Metals might be around 500, where the jobs in recreation industries is 10 times that, she said. “When you look at total income, there is a lot that could be lost on the recreation side,” she said.
Hallberg noted that 89 percent of the 72 scenarios that Stock examined indicated a more negative economic outcome from the mining alternative that from a continuation of the existing economic model in the region. “In other words, the Twin Metals project is not a good investment for the regional economy,” Hallberg concluded.