District natural resources still an economic factor
Andrew Savaloja - Public Affairs Intern
Toby Madden - Regional Economist
Published November 1, 2004 | November 2004 issue
To paraphrase Mark Twain, the death of district natural resource industries has been greatly exaggerated. The inflation-adjusted value of natural resource products and services has increased or remained constant for all district states except Minnesota since 1977. While the overall economy is growing faster than natural resource-based industries, for several district states, natural resource activities constitute a larger proportion of total economic activity than the nation as a whole.
In 2001, natural resource-based businesses accounted for 12 percent of Montana's and North Dakota's gross state product (GSP) and 10 percent of South Dakota's. Only Minnesota, at 4 percent, was lower than the national average of 5 percent.
Recent commodity price increases have spurred interest in expanding the district's natural resource industries (see the July 2004 fedgazette). Several mines plan to reopen or expand, oil and natural gas exploration is increasing, and new ethanol plants are under construction. (See District state maps of natural resources.)
Montana boasts some of the largest mining operations in the country. It remains the nation's primary supplier of palladium and platinum, metals whose uses range from fine jewelry (platinum) to pollution control—palladium is used in catalytic converters to help reduce harmful automobile emissions. In addition, Montana is the nation's top provider of talc, an important supplement in, for example, paper, paint, detergents and cosmetics. Gold, silver and copper are also produced in Montana. With strong prices for many metals and minerals, there is renewed interest in reopening mines that had long ago been shut down.
The iron ore ranges of northern Minnesota and the Upper Peninsula of Michigan supply virtually all of the nation's domestically produced iron ore (used in making steel). Minnesota's Mesabi Range in St. Louis County produced 39 million metric tons in 2002, a 15 percent increase from 2001. Two mines in the U.P. add another 14 million metric tons to the nation's production capacity. In 2002, the value of district iron ore production exceeded $1 billion. The strong worldwide demand for steel has prompted producers to increase production; for example, Cleveland Cliffs, a large iron ore mining company, plans a major expansion at the United Taconite mine in northern Minnesota.
The district's one underground and nine surface coal mines produce about 68 million tons per year, or about 6 percent of U.S. production. Primarily located in the Powder River Basin, Montana coal mines contain about 120 billion tons of coal in reserve, the largest in the nation. North Dakota mines are located in the Williston Basin, which is home to the nation's first coal gasification plant, a facility that converts coal into natural gas, fertilizer and other co-products. The Great Plains Synfuels Plant in Beulah produces over 140 million cubic feet of natural gas daily, a small fraction of the over 2.5 billion cubic feet of natural gas the district consumes each day.
North Dakota and Montana produce about 135,000 barrels of crude oil and 380 million cubic feet of natural gas per day. Over 60 percent of this oil and gas comes from reserves in western North Dakota, which ranks eighth in the nation in the amount of proved oil reserves (328 million barrels).
The district is home to eight oil refineries, three of which are located near Billings, Mont. District refineries process around 600,000 barrels of crude oil each day, enough to produce almost 12 million gallons of gasoline, about the estimated daily district consumption of 11 million gallons.
Ethanol plants in Minnesota (13), South Dakota (11) North Dakota (two) and western Wisconsin (one) produce more than 600 million gallons per year (mgy) combined, about a third of the nation's total. Ethanol production continues to expand—a 50 mgy facility is under construction near the Twin Cities in Lake Crystal, Minn.
One bushel of corn can be converted into almost 3 gallons of ethanol, with livestock feed as a byproduct. More than 10 percent of Minnesota's and South Dakota's corn crops undergo this process annually. The increased demand for corn pushes up the price in local markets.
Minnesota law requires that all gasoline sold in the state be a blend containing at least 10 percent ethanol. The state also has been a leader in the development of the E85 blend of gasoline, which contains 85 percent ethanol.
Buffalo Ridge in the southwestern corner of Minnesota, the district's largest wind facility, has 450 wind turbines and a capacity of nearly 300 megawatts, enough to power about 9,000 average American homes. Montana and South Dakota rely heavily on hydroelectric power generated by plants on the Missouri River system. In 2002, these plants provided 41 percent of Montana's power and nearly 60 percent of South Dakota's power. Hydroelectric power, however, is not keeping up with increased demand for electricity in the district. Other sources of electricity are being explored, including several natural gas and coal-fired plants near district coalfields.
Three of the nation's 103 nuclear power plants are located in the district, all in Minnesota, with a combined capacity of over 1,500 megawatts.
Forests cover over 76 million acres in the six district states, a quarter of the total land mass. The largest forest area is in Montana, with 22.5 million tree-covered acres. There are thousands of logging operations across the district, and the timber they produce is transformed at numerous mills and plants into primary wood products such as pulp, lumber, plywood, fuel wood and veneer.
The district hosts over 20 large paper plants and about 85 big lumber, plywood, veneer and particleboard mills. Further processing is done at secondary plants to create windows, doors, cabinets, paper and other products. Northern Minnesota, western Montana, western Wisconsin and the U. P. generated over $10 billion worth of paper and wood products in 2001.