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Pay dirt or fool's gold

Ninth District communities continue to argue over the wisdom of hosting hardrock mines. Do small towns strike it rich with metal mining or do they simply get the shaft?

November 1, 2002


Douglas Clement Senior Writer
Pay dirt or fool's gold

Residents of Noxon, Mont., all agree that their town is small, poor and blessed with some of the most breathtaking natural beauty in all of northwestern Montana. But on the central issue facing Noxon's future, there is very little harmony. The Sterling Mining Co. is proposing to sink a deep-shaft copper and silver mine near their town, and that prospect is fracturing the community long before the first drill pierces the earth.

"I just think the whole thing is positive, said Betty Hoge, owner of the Mercantile, Noxon's main grocery store. Hoge moved to Noxon five years back and says it's "absolutely gorgeous." But the economy is depressed and people need the jobs Sterling's mine could provide. "We need to have employment for the people," said Hoge. "They're talking about 300 to 350 jobs if the mine goes through.

Kathy Slora sees things differently. "I absolutely do not want to see the mine come in," said Slora, who runs a sawmill in Noxon. "[Our sawmill] would probably benefit economically from the mine, as far as the purchase of timbers and that sort of thing. But for me the trade-off isn't worth it." Slora doesn't think Noxon could handle the population spurt that might accompany the mine operation. "That would put an impact on our schools. There's just not enough housing available here. We're just such a small community that I don't see where we could support such an influx."

Slora is also deeply concerned about environmental risks. A
self-described "avid hiker" who treks weekly in the nearby Cabinet Mountains Wilderness Area—under which Sterling's mineshafts would burrow—she worries that the drilling and blasting would harm the natural splendor. "I just don't want to see these mountains destroyed."

But Hoge is impatient with such talk. She feels the economic benefits should carry the day. "We have these environmentalists who talk about the bull trout and whatever, these little people that have to wag their tails and tongues, you know," she said. "Well, it really bothers me, because we need the mine here terribly."

Long-term controversy

The fate of Noxon and the Sterling mine will continue to be debated by its residents and others for many years to come. Indeed, the controversy has already been 14 years in the making, since prospectors began to develop proposals and file for permits, and government officials proceeded with studies and community meetings. Things heated up last December when the U.S. Forest Service and the Montana Department of Environmental Quality gave Sterling permission to proceed with the mine, and environmental groups promptly filed a lawsuit to stop it.

The mine raises issues of national import because it puts at odds two federal laws: the 1872 General Mining Law, which allows that mining is the highest use of all federal lands, and the Wilderness Act of 1964, which says that designated areas—such as the Cabinet Mountains—should be "untrammeled by man." Sterling officials say the mine won't trammel the surface, just the interior, since the actual mine entrances will be located outside the wilderness boundary. And federal authorities say they're powerless to stop a mine from going in because the 1872 Mining Law gives priority to mine claims. A Clinton administration ruling permitted officials to veto mines that they felt posed undue environmental risks, but the Bush administration rescinded the ruling last fall.

But beyond the issue of federal laws, the Sterling mine raises issues germane to mining throughout the Ninth District: What are the costs and benefits of mines to local communities? Do they inject more than they extract? While hardrock mining isn't the growth industry it once was, a number of towns in the region face tempting offers from mining companies like Sterling, and weighing the pros and cons is tougher than it might seem.

Driving Wisconsin

"An important economic driver" is the phrase Gov. Scott McCallum of Wisconsin used in mid-September to describe a proposed zinc and copper mine near the town of Crandon, in northeastern Wisconsin. McCallum was explaining why he had rejected a proposal to buy the Crandon mine site from Nicolet Minerals Co., its current owner, a suggestion that local conservation groups and tribal governments had made in June as a means of preventing the environmental damage they fear the mine will create.

The purchase price for the land and its mineral rights—somewhere between $51 million and $94 million—would be too high, said McCallum, but he also believes a buyout would have stopped a project that could create much-needed jobs. "Many Crandon-area citizens," said McCallum, "have serious reservations about the possible loss of jobs if the state were to acquire the Nicolet property."

The Crandon mine, projected to extract 55 million tons of zinc and copper ore, has been the subject of acrimonious debate for over a quarter of a century. The buyout would have settled the war but, as McCallum highlighted, it would also have eliminated the prime attraction of the mine to local and state economies.

"Forest County is currently the second poorest county in the state of Wisconsin, with a very high poverty level," observed Dale Alberts, president of Nicolet. "They need economic development." Alberts estimates that the mine would employ up to 700 people during the three-year construction period and then about 400 during its 28-year lifespan. The mine's direct contribution to the area in wages, taxes and purchases would be about $1.5 billion over the life of the mine, he says. "And typically a project like this in this kind of setting will have an economic multiplier somewhere between 2 and 4," he added. "So you can imagine the size of the contribution to the local economy."

State labor leaders are impressed with the potential of the project. "That's an economically depressed area, okay, and well-paying jobs would suit that area very well," noted Michael Ryan, president of the Wisconsin Laborers' District Council in Madison. "Of course, being a labor organization, we're interested in well-paying jobs." Several local mayors and city administrators have also backed the mine and voiced strong objections to the state buyout proposal.

Critics of Crandon

But other local leaders are convinced that the Crandon mine is a terrible idea, on economic grounds. "I don't think that the local folks who really need it here would ever get any of those [mine] jobs," said Chuck Sleeter, town chairman of Nashville, where part of the ore body is located. "I think it's the union fellows that are wanting those jobs ... and I hope they understand that this is a boom-bust industry." Sleeter is concerned that the busts would have severe impacts on Nashville. "This is a rural community up here and it's very difficult for us to support a community of unemployed miners."

Sleeter is also worried that during the boom cycle the mine will require substantial community expenditures that might not be supportable in the long run. "A mining company comes in and promises all kinds of jobs and economic development and if you look just at the surface, that's a great thing," he said. "But as you look underneath that surface, you look at how the town is going to have to improve infrastructure, build roads, build a fire department, increase law enforcement." If the mine shuts down—temporarily or permanently—the community is saddled with debt, said Sleeter. "And what does the town of Nashville do now? Who pays the property taxes? Who pays for this infrastructure?"

To address such boom-bust problems, Wisconsin has designed a Mining Impact Program (MIP) that funds projects in communities affected by mines from a special mine revenue assessment. The town of Ladysmith, Wis., used MIP funds extensively in the 1990s to prepare for the 1997 closure of its short-lived mine, and town administrator Al Christianson vouches highly for the program's effectiveness.

But Sleeter hopes instead to develop a diversified, sustainable economic base without relying on a mine or the MIP and has joined with leaders of several local American Indian communities to develop a rural enterprise community that capitalizes on the area's tourism potential. "What we in the town of Nashville are trying to do is to enhance what we have, and that is a renewable tourist industry," he said.

Thomas Powers, chair of the economics department at the University of Montana-Missoula, said that mines do, indeed, have both positive and negative economic impacts on local communities. "The primary pro, from the point of view of the community, is the high pay," he said. "The other big pro is that the mine and equipment associated with mining activity add considerably to the tax base, so the local government becomes a partner, really, in the economic development of the mine."

The Forest County Board, for example, strongly objected to the proposed state buyout of the Crandon mine because the county would lose at least $200,000 annually in property tax revenue and $620,000 from selling 1,000 acres of county land to Nicolet Minerals. "Local governments tend to salivate strongly at the idea of a modern mine," noted Powers.

Confronting the puzzle

But Powers said that mines tend not to bring as much economic benefit as local officials often expect, and mining communities tend not to prosper. "There's just the basic empirical fact that communities and counties that are dependent on mining are not prosperous in terms of average levels of income, unemployment rates, rates of economic growth whether measured in terms of employment or income," he observed. "Whatever the high pay and the enhanced tax base does, it doesn't support local economic prosperity, and that's a puzzle that people have to confront."

Powers and other economists suggest that modern mines—whose profitability is determined by volatile international commodity markets—tend to have a "flickering" character: prosperity when prices are high and the mine operates full-bore, followed by hardship when prices fall and the mine lays off workers.

Moreover, the high wages and possibility of being rehired often convince unemployed miners to stick around rather than pursue other possibilities. "When workers get laid off, they don't leave right away," noted Powers. "It doesn't matter whether it's a coal mine, copper mine or even a metal smelter, in these areas that are dependent on mining you find higher rates of unemployment simply because people don't make the adjustments they would if they got laid off at Wal-Mart or some high-tech company."

Al Gedicks, a sociologist at the University of Wisconsin-La Crosse and a long-standing critic of the Crandon mine, agrees that mining communities often fare poorly. "If you look at the most recent sociological literature," he said, "mining communities always have higher rates of poverty, higher rates of unemployment, higher rates of social problems [like] alcoholism, suicide, spouse abuse, violence in families."

Ladysmith's luck

Quite an indictment, and not a view shared by all. Christianson of Ladysmith, Wis., which was home to a copper, silver and gold mine between 1993 and 1997, is convinced that the mine helped revive the town's fortunes. "Without question it was a benefit," he said. "I wish it were still in operation. In the very short time it was here we were able to almost move in the direction of economic normalcy. ... But of course it closed down and then things began to slowly revert back to their previous state here."

Ladysmith's mine, a small open-pit operation built just 140 feet from the Flambeau River, was highly controversial when first proposed, and protests at community meetings turned ugly. Mine critics, including Gedicks, predicted it would ruin the environment and the town, and they pushed hard for safeguards and restrictions, including a refusal to host a smelter: The ore was taken by rail to Canada for processing.

Today, five years after the mine's closure, many townspeople say it's too bad the 75 jobs it generated aren't still around. They also speak highly of the Flambeau Mining Co.'s generosity, pointing to the new public library built with the help of a $500,000 company contribution and to playground equipment donated to the elementary school. "They've given us quite a lot of money," said Chuck Frey, a barber in Ladysmith. "Of course, a lot of people think we ought to have gotten more, but pretty soon there ain't no profit in mining."

Frey is glad that the smelter was defeated because it would have caused too much pollution. But he has a rather cynical take on how opposition on other issues was stifled. "They don't have to pay too much attention to the opposition if they don't want to," he said of the mining company. "What they do is they buy it off. They make it economically feasible for the town, and a lot of people give up."

But some local residents continue to fear that Ladysmith's pit mine—now restored as an attractive nature preserve—may begin to leak acid and other contaminants into the Flambeau River. State officials say the mine has not violated any environmental standards, but others say leaks are inevitable. "Maybe I won't live long enough to see it," said 86-year-old mine opponent Roscoe Churchill. "But I've studied enough mines to know that it's not a matter of if, it's a matter of when. It's a kettle of poison and eventually it's going to find its way into the Flambeau."

Environmental values

As Churchill and others suggest, the natural environment itself is a key economic asset in many Ninth District communities. And many economists agree that environmental damage can degrade the substantial aesthetic and use value of rivers, mountains and countrysides (relatively) untouched by industrial activity.

The benefits that a mine can bring to a community should be weighed against possible risks to the economic value of the area's natural environment, said Powers, the Montana economist, and he believes the trade-off usually isn't worth it. "A typical mine provides a couple of hundred jobs for 10 years and leaves an incredible toxic waste behind," he said. "So then the question is why, in these high-amenity areas, in the pursuit of a week's worth of normal job growth, would you make this permanent sacrifice that undermines the very source of your current economic vitality?"

Powers argues that the economies of Montana and other states are coming to rely less on extractive industries that were dominant in the past and more on tourism, retirement economies and knowledge-based industries whose workers will be drawn by natural amenities. Among the most vocal opponents of the Sterling mine, for instance, are tourism and real estate interests in Idaho, whose businesses depend on the area's scenic beauty and clear rivers. The mine would discharge up to 3 million gallons a day of treated wastewater into the Clark Fork River, which flows across the border into Idaho's Lake Pend Oreille. Endangering that tourist area's environment in exchange for the gains of metal mining is to sacrifice future wealth for present subsistence, in their view. Or as sociologist Gedicks put it, "How many people do you know want to spend their retirement next to a polluted stream?"

Of course, the mining industry these days has a much-heightened sensitivity to the environmental consequences of its activities. Its leaders have publicly committed themselves to run clean operations. "We've gone the extra mile with the technology and with the willingness to build what in my opinion would be the best mine in the world, from an environmental performance and compliance point of view," said Alberts of Nicolet Minerals.

Groundwater that leaks into the Crandon mine, for example, would be run through "double-pass reverse osmosis" and evaporation condensation to produce "pharmaceutical grade water," said Alberts, before it's discharged back into the groundwater system. A $30 million cement grouting system would seal off leaks and reduce the amount of water that gets into the mine in the first place. "It can and will be done safely," he promised, in an early September interview.

Not panning out

But in fact, it may not be done at all. Less than a week after celebrating the state's Sept. 13 decision not to buy out the Crandon mine, local mine boosters were stunned to learn that Nicolet's Australia-based parent company, BHP Billiton, had decided to sell the property anyway, saying it preferred to concentrate on more lucrative deposits elsewhere in the world. It was a stark confirmation of the flickering character of hardrock mining and the inherent risks of pinning a community's hopes on a volatile international industry. Whether another mining company will pursue the Crandon site isn't known as this article goes to press, but Alberts said Nicolet will continue to seek state permits for the mine so that a future owner could proceed in an environmentally sound manner.

The Crandon mine may or may not be dug some day, but as local leaders consider the future of that mine and others in the Ninth District, the central question will remain: Will the mine stay open and operate cleanly, or will unforeseen financial or geological events leave disappointment in their wake?

In Noxon, mine opponent Slora says the mining company can't be trusted. "Sterling, the company that owns the mining rights now, has such a terrible track record as far as going in, developing a mine and then declaring bankruptcy and leaving a huge mess behind them. They've done it over and over again. And this community does not need Sterling's mess."

Slora is referring, in part, to Sterling's chief executive officer, Frank Duval, who helped found Pegasus Gold and consulted with it in the 1980s. Pegasus went bankrupt in 1998, leaving behind several multimillion dollar mine reclamation projects in Montana and elsewhere for which taxpayers will pay.

But Duval, who left Pegasus well before it declared bankruptcy, said Sterling "understands the sensitivities associated with this project and the Cabinet Mountains Wilderness, and commits to conducting our activities to minimize impacts to the wilderness. ... All of the analyses ... clearly demonstrate there will be no catastrophic impacts to lakes and streams." Duval also points to the new, innovative technologies Sterling will be using, saying they guarantee environmental safety.

Noxon resident Hoge has faith that things will be done well. "I don't know all the ins and outs of it, or how they do their dumping or whatever," she said, "but I know that they're going to be safe. I know they are."

"Kind of a guinea pig"

Travis Wilson is still trying to make up his mind. A father of two young boys, he's a logger and home builder in Noxon who did some mining himself when he was younger, core drilling at the Golden Sunlight Mine near Whitehall, Mont. The Sterling mine would bring more people to town, said Wilson, and that would help out the local economy, boosting the local housing market among other things. But mining companies usually bring their own experienced employees in from other mines, he observed, "so any jobs they hire from around our area are going to be bottom-end, lower-paying jobs."

And Wilson has other concerns. "The area that they're gonna put the mine in is our hunting and fishing area," he said. "So that really puts a big damper on a lot of that, especially if they have problems like most of the mines do—the pollution problems, the chemical spills everywhere and everything that goes along with that."

On balance, he's not so sure the benefits outweigh the potential risks. "You know, you get more people and you get a few jobs, but on the other hand, you're bringing in more problems and you're hurting the environment. It's really kind of a Catch-22 there."

He'd like to trust the company to do the job right. "If they get their act together and they can assure that it's gonna be a clean operation, great. But it's a new technique they want to try up there, so we're kind of a guinea pig. And what happens if it all goes wrong?"

Related stories:
Digging in or digging out? [July 2002 fedgazette]
Despite new exploration, mining's future in a deep hole.