Industry Reps Discuss Future of Mining and Logging in the U.P.

Natural resource dependent communities face many challenges with the changing economy; from automation to globalization and public policy uncertainty, times are quickly changing  for extractive industries, workers and communities throughout rural and small town America.

In 1850 66% of the US labor force consisted of primary sector workers such as miners, farmers and foresters; by 2002, that number had fallen to only 3%.  In Michigan, less than two-tenths of 1% of the state’s economy directly employs workers in “Natural Resources and Mining” (mining, logging, fishing and some agriculture).

US Labor Market by Industry, Bureau of Labor Statistics

A recent survey was conducted by a group of social scientists and natural resource experts from the Carsey Institute, “…to investigate how rural Americans view socioeconomic and environmental changes affecting their lives and communities.”  Five counties in the U.P. were surveyed.

Survey results show that the U.P. ranks high in measures of poverty and out-migration of residents, traits often associated with natural resource-dependent communities.  The report also explains that although the U.P. was, “At one time, a region with a high proportion of blue collar middle-class jobs dependent upon natural resources … the future of the U.P. may now rely upon the preservation and maintenance of its natural amenities that could attract new kinds of development.”

Operation Action UP has a different view:

“We have looked largely at the economic downturn that the nation…has experienced…and we recognize that the U.P. is largely unaffected by that…we came to the realization that was largely because of benefits of the natural resources of the local economy,” according to Co-Chair Brett French to WLUC TV6.

To learn more, Headwaters attended Operation Action UP’s annual meeting, themed, “Natural Resources: The Next Generation” (January 28, at Northern Michigan University). The event was advertised as a panel of “natural resource experts” and the announcement of 2010 award winners, including businesses that have contributed to the economic well being of the Upper Peninsula.

Operation Action UP, from right to left: Andre Ware (Rio Tinto), David Holli (Holli Forest Products), Don Ryan (Meeting Host), Dale Hemmila (Cliffs Natural Resources)

Operation Action’s panel included industry representatives, such as Rio Tinto’s exploration manager, Andrew Ware; Holli Forest Products’ President, Dave Holli; and District Manager of Public Affairs for Cliffs Natural Resources, Dale Hemmila.

Operation Action began in the early sixties when “the entire U.P. had been declared a depressed area and was looked on as a little Appalachia”; its stated goal is to “create a favorable economic climate and a strong employment base for Michigan’s Upper Peninsula.”

Although the panelists’ overall message was that of a positive outlook for forestry and mining in the region, there were a number of concerns raised that the industries are facing, such as public policy uncertainty, an aging workforce, and local opposition.  Furthermore, some of the topics that were presented as accomplishments and advancements for the extractive industries, such as automation and globalization, cast a shadow on the future for workers in these industries.

A Mine of the Future

The first panelist, Rio Tinto’s Andrew Ware, presented a brief overview of Rio Tinto’s global operations, its Eagle Project interests in Michigan’s Upper Peninsula, and new innovations within the mining industry, including the use of remotely controlled machines for mining.

“One of the things Rio Tinto is also doing…is the application of technology in mining.  We started a program in Australia called a ‘mine of the future’ … In Australia we have very large iron ore mines that are extremely remote from the centers of population … instead of sending people to the mine, people stay in the city and actually remotely operate trucks.”

Rio Tinto has introduced automated trucks to mines in the U.S. at its Bingham Canyon Mine, in Utah, and plans to introduce it soon at its Eagle Mine, near Marquette.

“At Eagle…we will be using some remote underground machinery.  The operator will be underground, but he probably won’t be in the piece of equipment that actually goes into the stopes and pulls the ore out.  But in terms of safety that’s absolutely the best way to do it.”

Andrew Ware, project director for Rio Tinto's Eagle Mine

Automation may make mines safer, but at the cost of requiring fewer workers, a major reason why mining jobs are rapidly declining industry-wide.  As ore production and company profits continue to rise, labor statistics show that the industry is expected to lose roughly 104,000 additional jobs between 2008 and 2018.

Globalization in the Mining Industry

“Unlike Andrew’s trucks ours will actually have drivers, hence we’re looking at adding those hundred and some jobs,” said Dale Hemmila, District Manager of Public Affairs for Cliffs Natural Resources.

Cliffs is not focused on automation at this time, but expansion and globalization as evidenced by its recent name change. Cleveland Cliffs Mining Company changed its name to ‘Cliffs Natural Resrouces’ after expanding its operations from primarily iron mining in the Great Lakes region to a global iron and coal producer with holdings in the U.S., Australia, and Brazil.  The company has also invested in chromite deposits in northern Ontario and is set to open a “biomass” energy plant at KI Sawyer, near Marquette.  Cliffs is also looking at partnering with Japan’s Colby Steel to develop iron nuggets, used to upgrade the quality of recycled steel.

“Just recently going through a number of changes, probably I would say in the last decade.  And a large part of that is how we’ve changed from a local mining company here in the Upper Peninsula to one that’s really expanded globally … So as you can see … it’s really not what used to be your father’s or your grandfather’s Cleveland Cliffs, or Cliffs Natural Resources.”

“We are looking at investing somewhere in the neighborhood of investing about six billion dollars in capital to be able to move all these projects forward.  What that means here in Marquette County and for all of our mines quite frankly is the fact that we are all going to have to fight for capital to keep our operations viable. That means we have to work smarter, we have to work safely, we have to work efficiently, and we have to be able to keep our costs at a reasonable level.”

However, keeping costs at “a reasonable level” can also negatively impact local communities. In order to keep costs low at its biomass plant at KI Sawyer, Cliffs has entered into an agreement not to pay local taxes until 2025. Meanwhile, citizens living on and near the former air force base are suffering financially.  For example, there are efforts to try to reopen their local community center and keep the Air Force history museum operating due to a lack of funding.

When Headwaters asked, “As you know the people of KI are facing some economic issues in trying to open their community center, the ‘W,’ and since Cliffs RenewaFUEL has benefitted from that site as a renaissance zone, might you consider entering into some sort of partnership to help open the ‘W’ again out there?”

Hemmila replied that, “One of the best parts of my job, and I get these requests a lot, is being able to respond positively to as many as we possibly can.  Certainly, just like every other company our resources are limited.”

And he explained, that Cliffs had been involved with the local townships and communities on a number of projects including, “a five year $50,000 contribution to help upgrade the Forsyth Township fire fighting capabilities.”

“ So, the renaissance zone is a little tricky in that they’re very important and it does limit the taxes that would be paid. On the other hand, if you look at the renaissance zone, of the benefits it provides, we may not be there, RenewaFUEL might not be there without that renaissance zone opportunity. So, we look at all kinds of opportunities to become involved in the community, and we evaluate it on an annual basis. I have not talked to the folks from the ‘W,’ but certainly would entertain any interest that they would have in talking to me.”

Changes in the Forest Industry

Dave Holli represented the forest industry during the panel discussion.  Holli explained that our temperate forest is the greatest type in the world because of its resiliency:

Hauling Timber in the Northwoods

“Anybody who has a deer blind and goes out and cuts a few shooting lanes, if you don’t touch them for four or five years you can’t see to shoot the big buck.  So, I consider the temperate zone forest the most resilient forest in the world in my eyes.  Not the most valuable, not the fastest growing but a very forgiving forest for the treatment it has had in the past.  Here in Upper Michigan we have about 10.3 million acres, probably about 90% forested, and we do harvest usually annually about 40% of our growth,” explained Holli.

Holli went on to explain that public policy uncertainty, resource access availability and an aging work force presented some challenges for the industry.  He also discussed the role biomass plays in the future of forestry.

“One thing that’s happened in the forest industry, when the rubber hits the road within logging contractors, is I felt now with the downturn in the economy, downturn of the housing, and all the pressures, that we’ve had a significant decline net worth of logging contractors.”

“…There’s been a serious decline with all the mill closures we’ve had.  We had the mill in Ontonagon close; we had Niagra just across the border, and in Minnesota Ainsworth has closed three large plants. We’ve had two plants close in Lower Michigan. So, the forest industry has been a declining industry in the Lake States.”

Holli explained that “Public policy uncertainty has caused a lot of stress on the forest industry,” citing new engine emissions standards and uncertain policy regarding biomass in Michigan.

“So biomass is kind of one of the bright spots we have, but we got to look at it realistically and see what the public policy issues are going to do to it,” said Holli.

Holli explained that, “Biomass will increase the consumption of product from the forest,” and that  there are some issues with biomass.

“Biomass is the lowest valued product out of the forest that brings very little return to the landowner.  Now I’m all for biomass. We’ve made an investment and we are producing it but you got to look at the facts.”

In summary Holli explained:

“We have a great resource base up here, we have a great forest. I think we have just about hit the bottom; I don’t think we can go too much lower here. We’re seeing some bright spots, some upward trends; and putting these together–even with the serious cash flow issues with contractors–we think the long term outlook is quite positive.”

Water: The Other Natural Resource

The panel discussion ended with some questions from the audience.

Kelly Drake, a Marquette citizen and local planner, directed her question to all three panel members:

“This question can be for all three of you.  The governor mentioned water resources as one of our greatest resources up here,” Drake noted. “ Some people think that it’s one of our most important resources … so there’s no water representative there with you right now.  But if there was one, what would they say, about … your relationship with those water resources?”

Panel participants said that water was important to their industries.

Don Ryan, the annual meetings host and former spokesperson for Cleveland Cliffs added this comment:

“And, I guess we’re not implying that mining and forest are the only natural resources in the U.P. by any means.  Obviously, we have many wonderful natural resources.  I think we kind of lump these two industries together under the heading of natural resource industries, but all of these resources are important.”

Local Opposition to Extractive Industries

Another question raised during the discussion referenced citizen opposition to projects:

“The issues that you folks have had to deal with in terms of getting permitting for your mine, you’ve faced a lot of organized resistance that’s been willing to spend a lot of money.  I’m just curious if that’s typical of what you’ve faced in other parts of the world … Is this kind of standard operating procedure for you guys or is this unusual?”

Rio Tinto’s Andrew Ware replied, “The one word answer is, ‘Yes.’ As I alluded to earlier [regarding local opposition to proposed ore haul routes from the Eagle Mine] you are always operating in someone’s backyard … We really try to hold ourselves to a high standard.”

Forestry representative Dave Holli was empathetic to the local challenges faced by Rio Tinto to its haul road for its Eagle project:

“I just want to say one thing … you know, so that Andrew doesn’t feel picked on.  If you’ll recall about twenty years ago the Mead Corporation wanted to build a world class pulp mill up in Houghton County.  I mean for us in forestry, you know, that would have been the greatest things that ever happened up there for creating jobs, investment, tax base, all the other economic activities.  You’ll recall that the public outcry and the resistance to that project was so great that it was abandoned.  So I don’t want Andrew to feel lonesome you know and to think that resistance is only against minerals,” as laughter filled the room.

No matter how you slice it, the natural resource industry is changing, not just for company brass, but for workers and communities throughout the region.