Sunday, September 16, 2012

Economics of Sand Mining in Buffalo County

I recently learned about a report on the economics of sand mining prepared by Carl Duley, UW-Extension, and Steven Deller, UW-Madison/Extension, for Buffalo County:
While their analysis focuses on the specific conditions of Buffalo County (comparison with other counties should be done with caution), the report raises some important questions that are relevant to the broader region. Some of the highlights:

  • If the mining company and the resource being mined are owned by non-local, out-of-state companies, then much of the proceeds from the mining operation will "leak" out of or be removed from the local economy.
  • The instability of mining is significant. As they write in the executive summary, "there is already evidence that as the price of natural gas has declined, some sand mining operations are laying off truckers or operating at less than full capacity." 
  • Is mining compatible with current businesses in the area? Will mining activities displace other economic activities, such as tourism, or undermine the potential for future, possibly more sustainable economic activities? 
  • Where do the employees for added jobs come from? This is an important question that rarely enters into discussions around "job creation." In Buffalo County, the population is older and has actually slowly declined, which suggests that mining jobs would be taken by people from outside the county. They also note that research suggests that people don't like to live near mining operations and mine workers are likely to commute. This means they would spend their salaries and pay property taxes elsewhere, and likely not in the community where the mine operation is located. 
  • How will mining affect agricultural productivity? They note that "reclamation of agricultural lands back into productivity is measured in decades not years," and soil will never be as healthy and productive as before mining. 
  • Do local economies have the ability to "capture" or "retain" economic benefits associated with mining? If local businesses don't provide the inputs for the mining operation, or if communities don't have adequate retail and service businesses, then the economic spillover from increased mining will move elsewhere. 
Duley and Deller provide a balanced analysis that compares different economic sectors in order to put sand mining into context. They are concerned about maximizing the economic benefits for local economies without displacing or undermining other economic activities. They speculate that positive "economic impacts of mines on the larger County economy may be more modest than expected" (full report, page 25).

As they acknowledge, their analysis does not address the externalized costs or possible negative economic impacts, such as potential decline in property values, costs to maintain infrastructure and provide increased public services, costs associated with potential environmental degradation, or loss of aesthetic value associated with the landscape, and so on.

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