ECONOMIC AND ENVIRONMENTAL IMPACTS OF THE GOGEBIC TACONITE MINE Aleksei Bogdanov and Zamira Simkins, PhD 2013 Wisconsin Economic Association Annual Meeting.

ECONOMIC AND ENVIRONMENTAL IMPACTS OF THE GOGEBIC

TACONITE MINE

Aleksei Bogdanov and Zamira Simkins, PhD

2013 Wisconsin Economic Association Annual Meeting

IntroductionGTAC iron ore mine proposal:• Open pit mining: est. 8 mill tons/year for 35 years• Taconite plant: less than 30% iron in ore → enrichment • Waste disposal: est. 3 tons of ore = 1 ton of taconite pellets

Public controversyEconomic benefits (NorthStar Economics, 2011):• Economic impact study: 12 counties, IMPLAN model• 700 mining jobs, average labor income of $82,984 per year

• Est. total payroll: $59.5 mill per year• $17 mill in total state & local tax revenue per year• Total impact (direct, indirect, induced): $604 mill per year

Environmental and other concerns:• Water quality (acid mine drainage)• Air quality (asbestos-like fibers)• Flora & fauna (e.g., wild rice)• Livable communities• Infrastructure, tourism, etc

Undergraduate research projectObjective:• Assess the potential economic and environmental impacts of the

GTAC mine on Ashland and Iron counties

Methodology:• Literature review (Murdoch, 2007; Carter, 2012; etc)

• Mining is a boom and bust industry• Economic impact study

• Comparative analysis of similar mines supports NorthStar Economics economic impact study results

• Interviews: local businesses; no response from GTAC• Environmental impact study

• Public survey

Public survey: Methodology• 20 questions: 5 mandatory target questions, 15 supplemental• Institutional Review Board approval• Survey launched July 16, 2013; closed August 19, 2013• Survey samples:

(1) Self-reported: Ashland Daily Press disseminated a link to online survey anyone could complete

(2) Random: Ashland and Iron county households were randomly selected based on infofree.com database records and contacted by phone

• Qualtrics – survey administration & data management website

Public survey: Data issues• Self-reported survey: N = 862

• Self-selection error → biased results• Random survey: N = 102

• Sample-frame error - only households with phones surveyed• Non-response error: 51% response rate → 49% no response• Small sample-size error:

• 9.65% margin of error at 95% confidence level• If N > 370, 5% margin of error at 95% confidence level

• Results are a good proxy of the public’s view on the mine but may not fully represent the entire population

Public survey: Random sample results• Respondents reported good knowledge and understanding of

the mine: mean 7/10 • Most respondents opposed the mine: 44.12% “absolutely

opposed” and 17.65% “generally opposed” it• Most respondents believe the mine would have a “mostly

negative” impact on local transportation infrastructure, “only negative” impacts on the environment, and a “somewhat positive” impact on the local economy, businesses, and employment opportunities

• When asked if they would be interested in working at the mine, 66.34% answered “absolutely not” and 19.80% “most likely not”

• Ashland and Iron counties do not have the necessary supply of mining workers to meet the mine’s potential demand for labor

Public survey: Key results

Ashlan

d cou

nty,

WI

Iron c

ount

y, W

I

Bayfie

ld co

unty

, WI

Dougl

as co

unty

, WI

Fores

t cou

nty,

WI

Gogeb

ic co

unty

, MI

Iron c

ount

y, M

I

Oneid

a cou

nty,

WI

Price c

ount

y, W

I

Sawye

r cou

nty,

WI

Vilas c

ount

y, W

I

Was

hbur

n cou

nty,

WI

Other

WI c

ount

y

Other

MI c

ount

y

Other

MN co

unty

Other

state

0

10

20

30

40

50

60

15

8

13

40

30

31 1

7

0

38

2 24

53

47

Percent of respondents by county and state

Self-selected sample

Random sample

Public survey: Key results

0

5

10

15

20

25

3 3 3

23

3 2

12

4 31

13

4

1 23 4

2 20 0 0

11

43

5

12

43

9

5

20

9

34

3

10

5

12

0 0 0

18

Percent of respondents by industry of employment

Self-selected sample Random sample

Public survey: Key results

Mean

Standard deviation

0 1 2 3 4 5 6 7 8 9

7.72

2.02

7.02

2.39

Self-rated knowledge of the mine (0 if no idea, 10 if excellent)

Random sample

Self-selected sample

Public survey: Key results

Fully support it Generally support it

Neutral Generally oppose it

Absolutely oppose it

0

10

20

30

40

50

60

70

80

11

3 2

12

73

1114 14

18

44

Percent of respondents by their position on the mine

Self-selected sample

Random sample

Public survey: Key results

Absolutely Most likely Maybe Most likely not Absolutely not0

10

20

30

40

50

60

70

80

90

2 15

11

81

2 3

9

20

66

Percent of respondents rating their interest of working at the mine

Self-selected sample

Random sample

Public survey: Key results

0

5

10

15

20

25

30

10

5

19

17

11

24

13

11

16

28

20

8

16

2

Public views on the economic impact of the mine, % of respondents

Self-selected sample

Random sample

Public survey: Key results

0

5

10

15

20

25

30

10

6

2120

14

18

1110

16

28

22

12 12

1

Public views on the local business impact of the mine, % of respondents

Self-selected sample

Random sample

Public survey: Key results

0

5

10

15

20

25

30

11

5

21

25

11

17

11

15 15

28

19

1110

3

Public views on the employment impact of the mine, % of respondents

Self-selected sample

Random sample

Public survey: Key results

0

5

10

15

20

25

30

35

11

4

17

31

11

15

1113

14

21

31

8

11

3

Public views on the labor earnings impact of the mine, % of respondents

Self-selected sample

Random sample

Public survey: Key results

0

5

10

15

20

25

30

35

40

5 56

1211

23

38

45

1819

2123

12

Public views on the transport infrastructure impact of the mine, % of respondents

Self-selected sample

Random sample

Public survey: Key results

0

10

20

30

40

50

60

70

5 42

6 4

16

63

1 0

4

31

13

28

23

Public views on the tourism impact of the mine,% of respondents

Self-selected sample

Random sample

Public survey: Key results

0

10

20

30

40

50

60

70

80

90

5 31

42

7

78

02 1

25

15

24

33

Public views on the environmental impact of the mine, % of respondents

Self-selected sample

Random sample

Conclusion• GTAC mine promises significant economic benefits• Local area does not have a sufficient supply of mining workers

to meet the mine’s labor demand• Low concentration of iron in ore makes the mine vulnerable to

commodity price fluctuations• Public strongly opposes the mine • Public’s environmental concerns to be addressed in

environmental study