PolyMet, the company proposing new nonferrous mineral mining on the East Range in northern Minnesota, is back in the news. PolyMet is asking Iron Range Resources for a $4 million loan as the project approaches the end of a very long permitting process. I expect they’ll get the loan.
This is an interesting development partly because to my knowledge this is the first time Polymet has sought public financing of any kind having privately bankrolled the siting, permitting and engineering that has occurred so far. This was, to my thinking, one thing that separated Polymet from other developers hoping to mine or otherwise do business on the Range.
Then again, I’m not surprised that Polymet would use a resource that’s available. Here’s a quote from Steve Kuchera’s story in the Duluth News Tribune:
“It will help to create jobs and diversify and expand the economy,” PolyMet Vice President of Public Affairs LaTisha Gietzen said of the loan. “Is it critical for the project? No.”
Let’s read between the lines there. We noticed you guys were giving out money and so… I don’t mean to infer ulterior motives on PolyMet’s part. Like I said, why the heck wouldn’t they take a stab at some low interest capital? Rather, I suggest some larger issues.
We have a central problem facing Iron Range Resources specifically and Range economic development efforts generally. We’ve established a precedent where a company or group promising a sufficient number of jobs can get access to many millions of dollars without a tremendous amount of accountability attached to the loan or grant agreements. Hell, the loans are usually forgiven. It can be argued that with the region in such dire need for jobs we can’t afford NOT to expend money this way, but with companies like Essar, Magnetation, and now Polymet leaning more toward this kind of financing we could be going down a bad road.
It used to be that mines were the simplest form of capitalism that existed (separating out the environmental side of the equation, which is much more complicated). They operate where there are minerals and do so as long as it is profitable. To mire that rather uncomplicated process down in public financing, which is complicated even if you support a robust role for government, is creating an environment more like England’s mining practices (subsidized lead mining, Thatcher, the ’80s, the dad from Billy Elliot chopping up the dead mom’s piano… etc.) than what had been working fairly well here.
In fact, to stretch this concept even farther, perhaps to its limits, what we’re seeing happen on the Iron Range is a sort of privatized “nationalization” of the mines. New mining is rare so companies use public desire for jobs to bankroll all the risk with taxpayer dollars while reaping the profits the usual way. Yes, jobs are created, but no firm commitment to how many or for how long is promised (nor can it be promised).
Anyway, I liked Polymet better when it wasn’t seeking public money. That’s my libertarian streak for the week.
What do you think would be Cravaak’s take on public financing of a private company?
Ed…Regardless of public or private money, you can bet Chip will support this company in finding a safe, legal path forward.
He understands that for the Range to be successful, private industy must be successful..
@Ed – I’d bet Cravaack would not wade into Iron Range Resources business because it’s state/local in nature and he has little power to change it. He’ll say things like the above and work on permitting issues, which are federal. And then he’ll sit back and hope it all goes through, because this particular project is more depending on market forces than even most Range economic development.
Oberstar ran into this same problem. He used federal transportation funding as soft power in local issues. Remains to be seen what Cravaack’s approach will be. But that’s inside baseball.
The last jobs number I saw on this project was 400. This is to create 400 jobs. All this for 400 jobs?
It’s really time to find a new way forward for the Range.
Bridget…
400 jobs is a pretty big deal. It’d rank as one of the lagest employers on the Range (excluding state and local government).
Help me out. What’s the first few steps you suggest regarding a “new way forward”? I’m willing to help..
As Range job totals go, 400 is a lot. It wouldn’t be the biggest employer — that’s just over half of HibTac or MinnTac, but it’s pretty big. That said, 400 is the number being spun and not necessarily the number that will be hired once the project is up and running. These sorts of projects spew numbers all over the place until the actual mining operations begin and the contract price for minerals is officially negotiated.
The issue where Bridget has a point is the cost per job in subsidy. And in this regard $4 million for a chance at 400 full time jobs is also a lot. It is actually less than the $9.5 million IRR gambled on the Mesaba project, which would employ 200 at most full time (and yes, construction jobs are always in the mix in the short run). At some point we have to ask if risking such large pools of money without a job creation number attached to the loans/grants is wise. We Rangers have a problem discerning the difference between a promise and reality, and good salespeople have figured this out.
In this I’m agreed that the Range does need a new way forward on the bang it gets for its economic development buck. I continue to say that the problem is cultural and not political. We need better planning and a longer range infrastructure plan than the 10-15 years of reliable mining we can expect from this or any other Range mine. (Yes, mining will go on longer, but we’re poised for another industry reset around that time and more job losses).
This will require avoiding deals like this, helping businesses instead through expediting (no, not eliminating) the regulatory process and connecting small businesses to resources that allow them to create jobs in small batches. My opinion. I’m not averse to the occasional “big deal” but these are big gambles in industries that are inherently even larger gambles. See history, Range.
I like your thinking Aaron. It’s a lot of money for the number of jobs created…
The sad story is it’s a sign of the times. Look at the stimulus cost per job..
“The “USA Today” released results of the quarterly survey of 50 economists. According to the economists’ median estimate, President Obama’s $787 billion stimulus package saved 1.2 million jobs. Without the 1.2 million jobs, 9.8% November unemployment rate would have been 10.6%.
What “USA Today” neglected to mention is that if you divide the $787 billion by 1.2 million the cost per job saved equals $655,000. It is a matter of simple math.”