Economic Development’s Holy Grail
Jack M. Geller, Ph.D.
Last summer I had an opportunity to visit with a group of economic development professionals from southern Minnesota. As usual, our conversations were wide open, ranging from the JOBZ program to bio-fuels development, the continuing trend toward rural regional centers and the role of entrepreneurship and small business development.
During our conversation, one of the economic developers noted with a degree of envy, “It sure seems like a lot of things are happening up on the Iron Range.” This observation was met with a lot of heads nodding, and for good reason. After years of job loss, population decline and regional malaise, Iron Range communities have recently been optimistic about a number of high-profile economic development opportunities. These opportunities range from a new coal gasification electric generating plant, to new opportunities in copper and nickel mining, to a new iron nugget plant that was “beta-tested” up in Silver Bay. Yeah – it sure looked like the Range is on the way back!
But of all these potential economic opportunities, the one that I have followed with the greatest interest and anticipation is the Mesabi Nugget project. Some may find that unusual, as in many ways it is one of the smallest projects, netting only 100 full-time jobs once the plant begins operating. A drop in the bucket compared to the thousands of jobs lost on the range since 1990. However, the Mesabi Nugget project exemplifies what I consider the “holy grail of economic development.”
Let me try to explain. While economic development professionals are interested in creating local jobs and garnering private-sector investment, they all know that like jobs, all economic development projects are not created equal. And as I evaluate economic development projects I use specific criteria: Does the project exploit a unique regional competitive niche? By industry standards, does the project utilize state-of-the-art technology? Does the project garner significant new private sector investment? Is the public role reasonable and appropriate? And last but not least, will the project yield “first-earner incomes,” i.e. the type that you can support a family with? For me, economic developers that put together projects that can answer all five of these questions affirmatively are remarkably close to finding the holy grail of economic development. And for me the Mesabi Nugget project was as close as I have seen for a while in rural Minnesota.
For those who need a refresher on this project, unlike the typical taconite pellet, which contains 65% iron, this project involves the licensing of a cutting-edge technology from Japan to manufacture a 97% pure iron nugget suitable for use in the more modern electric arc furnaces used in the steel industry. The $200 million project appeared to generate significant interest, capital investment and leadership from the steel industry. The regional economic entity (Iron Range Resources) served as an investment partner as well as the regional economic development broker, and the state of Minnesota provided resources and helped expedite the necessary environmental permitting in a timely manner. In many ways this project was a textbook case of how rural economic development can work.
So it was with great disappointment to hear the news late last year that at the “eleventh hour” Cleveland-Cliffs, the lead industrial partner on the project, was pulling out and dashing hopes throughout the Iron Range. At that time I called Sandy Layman, the Iron Range Resources Commissioner, to ask if in fact the project was truly dead. Commissioner Layman replied, “Well, maybe not dead, but definitely on life support.” In that brief conversation we both agreed that the real disappointment was not simply the loss of 100 first-earner-type jobs, but rather that in many ways the project represented rural economic development as it should be, with cutting-edge technology, strong private investment and responsive public support.
In the end I’m reminded that those in the venture capital industry often tell us that a good project with a sound business plan can usually find the capital it needs. Maybe there’s something to that. Recently Steel Dynamics Inc., an Indiana-based steel maker and a secondary partner in the original deal, held a press conference announcing that it has purchased enough land needed to initiate some preliminary work on the project and is hoping to take over as the lead partner. While it is unclear at this point whether the project is fully back on track, at least for now it appears to be off life support. I for one am crossing my fingers.
(Dr. Geller is president of the Center for Rural Policy & Development. He can be reached at email@example.com