analyzing the local economic impacts of a large copper mine: including both benefits and costs
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Analyzing the Local Economic Impacts of a Large Copper Mine: Including Both Benefits and Costs. Thomas Michael Power Research Professor & Professor Emeritus Economics Department, University of Montana Power Consulting Missoula, Montana tom. [email protected]. - PowerPoint PPT PresentationTRANSCRIPT
Analyzing the Local Economic Impacts of a Large Copper Mine:Including Both Benefits and Costs
Thomas Michael Power
Research Professor & Professor Emeritus
Economics Department, University of Montana
Power Consulting
Missoula, Montana
tom. [email protected]
The Attraction of Mining: An Offer Too Good to Be Refused?
Concentrated wealth waiting to be extracted. High wage jobs. Tax revenues for local and state governments. Impact limited to relatively small mine site. Hard Times: Have to rebuild the area’s economic
base to escape the recession.
Summary Response: A Guide to My Presentation
Mining will not be an important part of Greater Tucson Area economic base in the future.
Mineral deposits are not always “wealth” Mineral industry instability: booms & busts. Shrinking mining workforce: Technology. Significant environmental damage. That damage is not “aesthetic.” It’s economic Recession is short-run; environmental-
economic damage is long-run.
Arizona and Pima County (Tucson) Total Real Personal Income
$-
$50,000,000
$100,000,000
$150,000,000
$200,000,000
$250,000,000
1969 1974 1979 1984 1989 1994 1999 2004 2009
Arizo
na R
eal In
come
($1,0
00s)
$-
$5,000,000
$10,000,000
$15,000,000
$20,000,000
$25,000,000
$30,000,000
$35,000,000
$40,000,000
Pima
Cou
nty R
eal In
come
($1,0
00s)
Pima County
ArizonaPeriods of National Recession
Tucson’s Actual Economic Base
Tucson’s Highest Rankings as Economic Development Strengths
4. Cultural Diversity in the region.
6. Current image as a place for leisure, recreation, and entertainment.
7. Recreational & entertainment resources within the region.
8. Tucson region’s current image as a place to live.
10. Art and cultural venues in the region.
The Focus on Local Amenities Public educational institutions
Cultural attractions
Natural Landscapes and Recreation Opportunities
Quality of Life: Lower key lifestyle
Sunshine
Urban amenities and access to even larger urban areas
Close Proximity to Mexico
What Is Not Listed: Metal Mining
Sources of Real Earnings: Tucson Area (Pima County) 2008
Maufacturing12.0%
Construction5.7%
Trade9.8%
Transportation and Public Utilities2.4%
Finance, Insurance, & real estate4.8%
Federal Civilian7.8%
Military2.9%
State & Local Govt.16.1%
Accomodations, Food, Arts, Entertainment, Recreation
4.5%
Health Services13.6%
Other Services19.4%
Mining0.8%
Agriculture0.1%
Real Earnings In Mining : Pima County
$-
$100,000
$200,000
$300,000
$400,000
$500,000
$600,000
$700,000
$800,000
1969 1973 1977 1981 1985 1989 1993 1997 2001 2005
Rea
l In
com
e (1
,000
s o
f 20
09 $
s)
Pima County Total Real Income in 2008 = $34 billion
Mining Payroll
$173 million0.5% of Total
Why the Focus on Amenities Instead of Traditional Exports?
People care where they live. Businesses care where people live.
Available high quality workforce Markets for the goods and services produced
Attract high quality workers at lower cost. New residents setting up household stimulate the economy Attracting and Holding Retirees & Retirement income Attracting visitors: building a sustainable visitor economy Traditional exports do not explain local economic vitality.
Pima County Employment: Traditional Export and Local Sectors
-
100,000
200,000
300,000
400,000
500,000
600,000
1981 1986 1991 1996 2001 2006
Nu
mb
er o
f Jo
bs
"Local" Sectors: The Rest of the Ecoomy: +370,000 jobs
Traditional Export Sectors: -1,500 jobs
Agriculture, Mining, Manufacturing, Military
Earnings in Export Sectors and Non-Employment Income: Pima County
$-
$2,000,000
$4,000,000
$6,000,000
$8,000,000
$10,000,000
$12,000,000
$14,000,000
$16,000,000
1969 1973 1977 1981 1985 1989 1993 1997 2001 2005
Rea
l Inc
ome
(1,0
00s
2009
$s)
Export Sector Earnings: Manufacturing, Mining, Agriculture, and Military
Total Non-Employment Income: Investment, Federal Retirement, Income Support
Retirement-Related Non-Employment Income
Earnings in Export Sectors and Non-Employment Income: Pima County
$-
$2,000,000
$4,000,000
$6,000,000
$8,000,000
$10,000,000
$12,000,000
$14,000,000
$16,000,000
Real
Inco
me (
1,000
s 200
9 $s)
Export Sector Earnings: Manufacturing, Mining, Agriculture, and Military
Total Non-Employment Income: Investment, Federal Retirement, Income Support
Retirement-Related Non-Employment Income
How Would the Rosemont Mine Fit into This Amenity-Supported
Local Economic Vitality?
180 degree panorama view of the Rosemont Valley and Mine Site
north south
Protected Lands Surrounding
The Rosemont Mine Site and
The Greater Tucson Area
*The reflecting pool is 2028 feet long
What Will the Public Get?: Jobs & PayThe Magic of “Multipliers”
“Direct” Impacts: Actual Hires Mine Makes Construction Phase: 196 construction workers* Production Phase: 406 miners*
Rosemont: Total Jobs Including Multipliers Construction Phase: 3,600 person-years Production Phase: 2,100 jobs
Rosemont: Miners’ Pay: $50,000/yr
Secondary Jobs: $60,000/yr *average jobs over construction and production phases.
High Paid Jobs? Average mining jobs in Pima County pays $55,000/yr before
benefits in 2008.
Other pay levels used by Rosemont Study
Industry Assumed Pay Avg. Tucson Pay
Manufacturing $300,000 $101,638
Retail $ 54,000 $ 34,700
Information $150,000 $ 69,300
Finance,Insur. $ 86,000 $ 43,200
(Pay includes estimated employer-paid benefits, ~23%)
Putting Rosemont’s Direct Jobs in Context
196 construction workers; 406 miners520,000 jobs in Pima CountySince 1970 Pima County added 10,000 jobs/yrUofA BBER projects gain of 7,300 jobs by end of
2011200 to 400 jobs is 1 to 2 weeks of normal job growth400 jobs is one job in 1,300 jobs. 0.08 percent
The Relative Importance of Rosemont Mine Projected Jobs
Source of Jobs Direct Jobs Multiplier "Total" Percent of Total Pima
Used Jobs County Jobs
Direct Total
Rosemont Mine 406 5.2x 2,106 0.08% 0.40%
Pima County Travel Industry Jobs 22,770 1.5X 34,838 4.38% 6.69%
Total Pima County Jobs (2008) 520,444 1.0x 520,444 100.0% 100.0%
Relatively modest damage to the attractiveness of the region to new businesses, residents, retirees, or visitors could easily cancel out the “benefits” of the
Rosemont mine.
All Benefits, No Costs?
No serious environmental damage, unlike any copper mine that went before it.
Operation of the mine does not displace workers in any other businesses.
Steady employment; no interruptions in pay, unlike any previous 20-30 yr. period.
Instability in Mining Jobs
Cycles of high prices stimulating production followed by over-supply, low prices and mine shut down.
Labor-saving technological change allows production to rise while employment falls. Steady reduction in the mining work force required.
U.S. Primary Copper Production: 1900-2009
0
500,000
1,000,000
1,500,000
2,000,000
2,500,000
1900 1915 1930 1945 1960 1975 1990 2005
Met
ric
Tons
of C
oppe
r
Arizona Copper Production and Employment
0
200,000
400,000
600,000
800,000
1,000,000
1,200,000
1,400,000
1,600,000
1972 1977 1982 1987 1992 1997 2002 2007
Co
pp
er
Pro
du
cti
on
(to
ns)
-
5,000
10,000
15,000
20,000
25,000
30,000
Co
pp
er
Em
plo
ym
en
t
Copper Employment
Copper Production
28,000 jobs
5,900 jobs-79%
751,500 tons
1,400,000 tonsor +86%
766,000 tons.or -45%
11,000+86%
Declining Labor Intensity and Employment In Arizona Copper Industry
-
5,000
10,000
15,000
20,000
25,000
30,000
1972 1977 1982 1987 1992 1997 2002 2007
Em
plo
ymen
t in
AZ
Co
pp
er In
dus
trty
-
5
10
15
20
25
30
35
40
Lab
or
Inte
nsi
ty o
f A
Z C
op
per
Pro
duct
ion
: J
ob
s p
er T
ho
usan
d T
on
s
Workers per Thousand Tons of Copper Produced
Employment in the Copper Industry
1974: 35 workers per 1,000 Tons
1974: 28,000 Jobs
2003: 7 Workers per 1,000 Tons
2003: 5,900 jobs
Real Wages and Salaries in the Arizona Metal Mining Industry
-
200
400
600
800
1,000
1,200
1,400
1,600
1,800
2,000
Real
Inco
me (
milli
ons o
f 201
0$s)
$1.8 billion
$766 million
$429 million$552 million
$885 million
Rational Thinking about Mining: Thinking Like a Mining Company
Not all mineral deposits are developed as soon as they are discovered. NE Minnesota copper know for over a century. Still undeveloped. Rosemont copper was partially mined 1880’s-1951, abandoned.
Mining companies study the technologies available, the costs of extraction and processing, and the value of the final product.
If costs are greater than the value produced justifies, the mineral deposit does not get developed.
Rational Thinking about Mines The public and regulatory agencies should take the same
perspective, but from a public cost and public benefit point of view.
Do the benefits justify the costs?
If not, the public should do the same thing a mining company would do, not allow public resources to be invested in the development of the mineral deposit.
Rejecting a Particular Mine Is Not Evidence of Being Anti-Mining
Mining companies regularly reject proposed mineral developments because costs exceed revenue expectations.
We will not go with out copper if a costly mine is rejected. We will turn to a less costly alternative. Hundreds of copper deposits are proposed for development.
Consider the current revival of copper mining activity across Arizona, North America, and around the world.
Rational Mine Site Selection
Location: Sensitive area? Other values dominate?
Technology being used: Size and extent of foot print; ease of mitigation and complete reclamation?
Past history of copper mining is important. Did it lead to prosperous, stable, vital economies? Was the natural environments left intact? What have been the costs to the public of repairing damage?
Conclusions-1
Be rational: look at both benefits and costs
Don’t be panicked by the recession. Mines do not cure recessions. Recessions are 1 to 2 year cycles; mines operate 20 to 30 years with their own deep cycles.
Take into account the instability that characterizes mineral development. Arizona has plenty of experience with that.
Realize there are lots of alternative sources of copper. High-tech and alternative energy will not be stalled by rejecting high cost copper deposits.
Conclusions-2 Recognize that Tucson is not a “frontier” economy. It is a
sophisticated high-tech manufacturing and service economy with a bright future.
You are not “desperate beggars;” You can afford to be good “choosers” who seek to preserve what is most valuable about this place you call “home.”
Natural landscape amenities are an important part of the Tucson area’s economic base. This is not just an “aesthetic” or “pretty playground” concern. It is a dominant economic concern.
Sources of Real Earnings: Santa Cruz County 2008
Trade28.9%
Transportation and Public Utilities7.8%
Finance, Insurance, & real estate5.1%
Federal Civilian22.3%
Military0.5%
State & Local Govt.14.6%
Health Services2.6%
Construction3.1%
Accomodations, Food, Arts, Entertainment, Recreation
3.6%
Maufacturing3.0%
Agriculture0.1%
Mining0.0%
Other Services8.4%
What Is Not Listed: Metal Mining
Santa Cruz County Employment: Traditional Export and Local Sectors
-
2,000
4,000
6,000
8,000
10,000
12,000
14,000
16,000
18,000
1981 1986 1991 1996 2001 2006
Num
ber o
f Job
s
Agriculture, Mining, Manufacturing, Military
Traditional Export Sectors: -675 jobs
"Local" Sectors: The Rest of the Economy: +8,500 jobs
Sector Employment % of Local JobsAccommodations and Food Service 493 31%
Government (including schools) 252 16%Trade: Retail & Wholesale 212 13%
Construction 168 11%Other 138 9%
Agriculture 122 8%Professional, Scientific, Technical 98 6%
Educational Services 44 3%Real Estate 36 2%
Health Service 33 2%Sub-Total: Jobs in the Local Area 1,578 100%
Commuting Out of Area to Jobs 1,450
Total Employed Persons in Local Area 3,028
Jobs Located in This Area Wage and Salary Employment 2004
(Self-Employed Not Included)
Amado-Sonita-Patagonia-Tubac Zip Code Areas