MELLEN — For many in this small city, the $1.5-billion iron ore mine proposed in Ashland and Iron counties by Gogebic Taconite — and the 700 jobs the company promises over the operation's 35-year first phase — offer a tantalizing way out of a long economic decline in Wisconsin's northern counties that has seen incomes shrink and once-thriving communities become all but ghost towns.
"People around here are 99 percent in favor of the mine," said Michael Malyuk, who serves on Mellen's City Council. "People want to work. Thirty or 35 years, that's a lifetime of work."
But others are skeptical about the company's claims of an economic boon.
"We hear the jobs, jobs, jobs mantra," said Mike Wiggins, Jr., chairman of the Tribal Council of the Bad River Band of Lake Superior Chippewa, whose reservation is just downriver of the proposed mine. "But jobs are just a small sliver of all that should be considered here."
Wiggins said those jobs and any economic boost have to be balanced against potential environmental damage, such as mercury pollution of fish and degradation of the Bad River, which nourishes the tribe's rice beds and which originates in the Penokee Hills just south of the proposed mine site. The band opposes construction of the mine.
Mic Isham, who is on the board of directors of the Great Lakes Indian Fish and Wildlife Commission, a tribal conservation agency, said the mining jobs eventually will be gone while any possible pollution would be more permanent and possibly hurt the North Woods' most important source of income.
"The engine that drives our economy is tourism," Isham said. "That's sustainable. A mine in the middle of the Chequamegon National Forest will hurt that."
The tribe in particular is dependent on tourism. It is the largest employer in Ashland County and many of those jobs are at the tribe's casino in Odanah. Tourism and recreation generate around $50 million a year in Ashland County, according to state figures.
Certainly Mellen, with a population of about 700, and other northern communities understand the importance of tourism and the value of the surrounding forests, lakes and streams to the economy. The city's slogan is "Our Good Nature Welcomes You" and it advertises itself as home to nearby Copper Falls State Park, which boasts waterfalls and streams that have their origin in the Penokee Hills near the proposed mine site.
Mornings, when Mayor Joe Barabe and his buddies gather to drink coffee at the table outside Tom Wooley's gun shop, the talk most often is of outdoor pursuits. One recent morning, Barabe told of seeing a mountain lion cross a road just outside town.
The economy, however, is a close second in most conversations. These are tough times in Wisconsin, and that means even tougher times in Northern Wisconsin. The median household income last year in Ashland County was $37,555 and $34,201 in neighboring Iron County, according to the state Department of Workforce Development. That's far lower than the state median income of $49,994.
And employment in both counties has lagged behind the rest of the state for years. Both Ashland and Iron Counties suffer from some of the highest unemployment rates in the state, higher than Wisconsin's approximate 8 percent jobless rate. Iron County's unemployment is around 10 percent, the fourth-highest rate in the state, while Ashland County has the sixth highest at 9 percent.
Mine a 'game-changer'
Economic studies commissioned by Gogebic Taconite show the mine would create 3,175 jobs during the two-year construction phase and 2,834 jobs, both direct and indirect, once the mine begins production of an estimated 8 million tons of iron a year. About 700 workers would be employed at the mine itself, making about $60,000 a year plus benefits, according to the company's projections.
As much of a boost, according to Gogebic, would be the millions of dollars from the mine in tax benefits to both the state and communities near the mine. Over 35 years, the company projects, the mine would generate $1.4 billion in state and local tax revenue. Of that, $277 million is expected to be collected through the state's net proceeds, or mining tax, and distributed to local communities from the Mining Impact Fund.
David J. Ward, president of NorthStar, the company that prepared the Gogebic economic projections, called the proposed mine a "game-changer."
Others also are quick to point out that the economic impact of the mine would be felt far beyond Ashland and Iron Counties. Bill Breihan, who serves on the board of the Wisconsin Mining Association, said Milwaukee and southern Wisconsin are home to some of the nation's major mining equipment manufacturers, including Caterpillar and P & H. He said such mine-related business could provide as many as 15,000 jobs across the state.
Recent history tells us local communities do enjoy economic benefits from mining. Mining companies, in addition to paying taxes, also can choose to make direct payments to nearby communities.
A study by the Northwest Regional Plan Commission showed that during the 7-year life of the Flambeau copper and silver mine near Ladysmith, Flambeau Mining Company paid more than $11 million to the city of Ladysmith, the town of Grant and Rusk County. About $8.4 million came from mining taxes and about $2.7 million came in direct payments from the mining company to the communities.
Boom and bust cycles
But a deeper look at NorthStar's analysis shows, at least in some circumstances, financial benefits of such a mine might not be as rosy as projected.
A footnote to NorthStar's analysis of the proposed mine's economic benefits says the projections are based on current market conditions and mineral prices are booming right now. Even in a long-time iron town such as Hibbing, Minn., mining proponents warn that people in Northern Wisconsin should be prepared for boom and bust cycles that could dampen the Gogebic economic projections.
The huge open-pit mines on the Iron Range are very sensitive to changes in iron prices, which are dictated by the demand for steel, according to Duane Northagen, Hibbing's economic development director. That demand, according to Northagen, is in turn dictated in large part by countries such as China that buy much of this country's steel.
A downturn in the sale of steel means a drop in the demand for iron — and layoffs from the iron mines, Northagen said, sometimes for as long as two or three years at a stretch. And because the mines generate less income during those periods, it also means fewer tax dollars flowing to local communities, Northagen added.
In a 2007 study of the economic impact of metal mining in Minnesota, prepared for the Minnesota Center for Environmental Advocacy and the Sierra Club, University of Montana economist Thomas Michael Power charted the recent ups and downs of employment in the Minnesota Iron Range mines.
He found declines in mine employment between 1965 and 1972, followed by a boom between 1972 and 1979. But that boom, according to Power's study, was followed by a "dramatic" collapse in iron mining and processing during most of the 1980s. A modest recovery in the 1990s was following by more declines in the 2000s.
Power calculated 83 percent of the Minnesota iron jobs that existed in 1979 vanished by 2005.
Barabe, Mellen's mayor and a strong supporter of the proposed Gogebic mine, said the history of boom and bust mining can be read on the landscape in Ashland and Iron Counties.
"From Mellen to Hurley, you'll find all these little towns," he said. "They're all dead mining towns. They had mines. They all had schools and stores."
Kennan Wood, executive director of the Wisconsin Mining Association, said the possibility of such down periods exists with all businesses. A season with little snow, he said, means a loss of dollars from snowmobiling.
Wood added that most communities in need of jobs would choose more jobs even if it meant living through some periods of layoffs.
"I know everybody up North would probably say, 'Give us the 35 years of employment and we'll figure out what happens during those times. We'll manage around that.'"
Impact fund offsets higher costs
That boom and bust cycle is one of the reasons why Barabe is pushing to make sure Gogebic, if it builds the mine, will be required to pay into the state's mining impact fund and help offset increasing costs for municipal services in places such as Mellen. An additional police officer alone, Barabe said, could cost $80,000 a year or more.
Bill Williams, president of Gogebic, said the company will have to help pay for such costs through the net proceeds tax.
But the discussion about the proposed mine in Mellen almost always comes back to one thing — jobs. While Barabe said the city has a number of businesses that provide regular employment, from wood product companies to lumber mills, it is hard to not notice the empty storefronts. The jobless rate in the city is almost 11 percent. Population decreased 13.5 percent between 2000 and 2010, according to U.S. Census data, from 845 to 731.
Every morning, a small group of women sit around a table in the back of the grocery store, adjacent to the big silver coffee urns. Gloria Lazorik and Bea Bushaw often join the group.
They talk about all sorts of things but the proposed mine comes up often these days. It offers some promise for a brighter future, the women said.
They hope, for example, that an influx of residents could mean enough new students to keep Mellen's school open.
The school, home to the Granite Diggers, celebrated its 100th anniversary last year, they said, and, as in most small towns, is a great source of pride.
But it also has been a struggle to keep the old school open because of the dwindling number of people in town.
Perhaps, some of the women said, their lives would have been different if jobs from a mine had been available. Both Lazorik and Bushaw raised children in Mellen and both saw most of them leave to seek opportunity in more prosperous towns.
"My one son left because he couldn't find a job," Lazorik said. "Everybody wants a decent living."