REGIONAL—Two economists with ties to the environmental community have sharply criticized an economic analysis that found a major economic impact from a proposed expansion of mining in northeastern Minnesota. While the study, prepared by University of Minnesota-Duluth economist Jim Skurla, attributes most of the economic gains to planned expansions in the iron mining industry, local political leaders have frequently cited the work as justification for the prompt approval of the PolyMet Mining’s proposed copper-nickel mine near Hoyt Lakes.
Skurla, who earned a master’s degree in Economics from the University of Wisconsin, is currently the director of UMD’s Labovitz School of Business and Economics.
The two outside economists, Spencer Phillips, PhD., and Evan Hjerpa, PhD., weighed in on the study at the request of Northeastern Minnesotans for Wilderness, a group that opposes copper-nickel mining in the region. The two economists called the UMD study “fatally-flawed,” and cited numerous examples where the study exaggerated, often to a very high degree, the potential economic gains, in terms of both jobs and gross output, and failed to account for potential job losses in other economic sectors.
In addition, the two economists noted that most of the benefits cited in the report were actually attributable to existing taconite mining operations and/or planned expansions in that sector, which they said is inappropriate in an economic impact study. Such studies “are predicated on forecasting the impacts of new changes,” noted the economists in a report issued Dec. 30, 2013. “Despite this, the UMD report includes all on-going ferrous and non-ferrous mining operations in the impact study, combined with estimates of new construction and operation.”
The economists note that the local and regional economy has already absorbed the impacts of existing mining operations. “Inclusion of existing operations indicates a lack of understanding economic impact analysis and grossly exaggerates impacts,” wrote the economists.
Jim Skurla, who drafted the UMD study, said he disagrees with such criticism. “Current operations have a major economic impact and are included,” he said. “The operations and new projects are shown separately to highlight the differences.”
The two economists criticizing the UMD report have longstanding ties to the environmental community. Phillips is a natural resource economist who has worked for the Wilderness Society since 1992. Hjerpa is also employed as a senior economist at the Wilderness Society.
At the same time, UMD, as an institution, has long had close ties with the iron mining industry.
In addition to the economic impact of mining, the two economists suggest the UMD analysis overstates the tax collections likely to result from a mining expansion.
“The mining industry is afforded minimal taxation by the state of Minnesota” at “an effective regional tax rate of less than one percent of calculated direct output,” notes the analysis. “With such a miniscule effective tax rate for the mining industry, it seems prudent to question whether current annual taxes can keep up with the public service needs stemming from rapid development, much less provide for future clean-up costs. This is a major discrepancy and leads to a vast inflation of mining’s importance.”