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As Michigan’s Upper Peninsula grapples with designing a long-term energy plan, some legislators and developers are seeking a renaissance of the region’s once-strong mining industry.
Industry supporters say that growth in the vast, rural and in some places economically depressed peninsula can’t happen without a reliable and robust energy supply.
However, the U.P.’s remote location means it can’t easily tap into the grid for more power, and utilities are reluctant to make long-term investments in new power plants for an industry that most often operates on short-term cycles.
“A lot of mining interests are very heavily invested in doing exploratory drilling and we want to make sure they have reliable power,” State Rep. Scott Dianda, a western U.P. Democrat, said in explaining the state of the industry.
Earlier this month, Dianda introduced a bill calling for long-term energy plans for 10 regions across the state, including the entire Upper Peninsula. The bill says such integrated resource planning should consider the costs on ratepayers if “any mining or mineral processing facilities” are present, a clear nod to the U.P.’s situation.
“If we do not do it smart, we’re probably building systems we may not need,” Dianda said, noting that already-high electric rates could increase. “That’s my biggest concern. We have to get it right — we can’t invest in systems that are not going to bring us reliability and long-term job opportunities.”
Exploration and uncertainty
Mining has long been central to the Upper Peninsula’s economy and identity.
“Our history up there has been, from day one, extracting minerals out of the ground,” Dianda said. “I could see that happening again.”
In 2012, The New York Times declared that a “mining rush” was taking place in the U.P.
Hal Fitch, director of the state Department of Environmental Quality’s Office of Oil, Gas and Minerals, said the increase in metal prices roughly a decade ago “really spiked a lot more interest in minerals. There has been a lot of potential there for a long time, going back to the mid-1800s.”
Companies are showing interest particularly in copper, nickel and iron resources. The milling of those materials is the most energy intensive part of the process, Fitch said.
According to the DEQ, mineral rights on more than 1 million of the U.P.’s 7 million acres have been leased by developers looking for metals.
A major player in the U.P. is Cliffs Natural Resources and its Empire and Tilden iron ore mines. Cliffs has been at the center of the energy controversy ever since it announced plans to exercise its right to electric choice, sending the region into a crisis over what it would do with the aging coal-fired Presque Isle Power Plant in Marquette. Cliffs is the largest customer of that We Energies-owned plant, making up nearly 85 percent of its load.
Cliffs, however, is reportedly shutting down the Empire mine due to market forces.
In September, Eagle Mine — a subsidiary of Lundin Mining, a multinational minerals company — started operations at its nickel and copper mine northwest of Marquette. The mine opened after 10 years of exploration and contentious permitting and public approval processes. That’s longer than the expected eight-year lifespan of the mine.
The mine and onsite milling operations require 6 MW of power to produce 2,000 metric tons of ore per day, Eagle Mine spokesman Dan Blondeau said in an email. That energy comes from three different electric providers in the U.P.
Meanwhile Canadian developer Graymont is buying nearly 9,000 acres of state land — the largest single deal in state history — for a major limestone mining operation in the eastern U.P.
And Highland Copper Co. is exploring and developing copper mines in the western U.P. The company is looking at a 50 MW load for a project in White Pine, as Highland Copper project manager Carl Bertoni told the State Senate Natural Resources Committee in March.
“Right now there is a small power plant in White Pine, but it is not capable of supplying [all of the need]. Transmission is not capable of handling that load either,” Bertoni told the committee in March. “Going forward, generating new power in Michigan is a key ingredient to making projects successful.”
Dianda said more companies are taking a renewed interest in the area’s copper and nickel supplies as changing technology increases demand for these metals.
“This is going to drive a new boom area again in that industry,” he said. “I do feel there is going to be a challenge in setting up power operations, but ultimately we have got to get this done right. We have to look 30, 40 years ahead.”
That’s not an easy task for an industry whose success is largely dictated by fluctuating global commodity prices. Fitch said it could take a mining company 10 to 15 years from exploration to extraction.
“It is really just a hard industry to predict, which makes it really hard on energy infrastructure,” said James Clift, policy director for the Michigan Environmental Council. “You don’t know if it is coming or not and you don’t know how long it’s going to last.”
Lack of infrastructure
That difficult planning falls on electric providers whose decisions could ultimately impact all ratepayers.
“The question is: I’ve got to supply a huge load, I need infrastructure plants to do that, but can you please guarantee me the mines will be in business into the future as the plants come online?” asked Dan Dasho, president and CEO of Cloverland Electric Cooperative in the eastern U.P. “Our facilities have a 30- to 50-year lifespan. No one in the business world is going to say ‘We’ll be around 30 to 50 years.’ That’s the challenge you face.
“In the electric industry, you build the infrastructure needed to serve the customers and hope that the world economy keeps things going in a good direction,” he continued.
Dasho says the lack of electric infrastructure to support large industrial operations is most prominent in the eastern U.P. The Graymont limestone operation will be in Cloverland’s service area, Dasho said, and the utility is working with the developer and transmission provider on new infrastructure to support it.
These are challenges unique to the area, he said.
“If you were doing this down in Lansing or Detroit or the northern Illinois area, tremendous infrastructure is available,” Dasho said. “In the U.P., we don’t have that. And the equipment we do have in the eastern U.P. is running to the end of its life.”
Onsite generation vs. transmission
One of the main questions extraction companies face when committing to a new project is whether to produce power onsite with generators or bring it in from existing plants.
Clift, of the Michigan Environmental Council, said mining operations appear to be growing more short-term in nature.
“You don’t want to build a huge power plant with a 40-year lifespan to meet a seven-year need,” he said. “In that regard, they seem kind of perfectly suited to use just combustion turbines onsite. If they get access to natural gas, they can ramp up and down pretty fast.”
As Eagle Mine was preparing to set up shop near Marquette, it initially planned to produce power onsite with diesel generators.
Blondeau said a “number of factors” — including the logistics of transporting diesel a few times a week and increased air emissions — led the company to build new and replace existing transmission lines so it could use energy from the grid. The new lines are buried underground and, after some landowner requests, Blondeau said they will stay there once operations cease.
Brad Garmon, Michigan Environmental Council’s director of conservation and emerging issues, said the Eagle Mine used “tricky maneuvers” to bring in power from the grid rather than produce it onsite.
Garmon said that creates a long-term dilemma for the largely uninhabited and storied rural forest landscape around the Yellow Dog Plains, where locals fear the mine and new transmission lines could clear the way for more development.
“To us, it’s major because it’s modifying the landscape around the Yellow Dog Plains,” said Garmon. “A lot of locals were concerned about that in the process: Though they didn’t like diesel generation, they were more worried about the fallout with an electrical line.”
In having the onsite versus transmission conversation with companies, Dianda said this is “probably the biggest challenge” from an infrastructure perspective.
“If they can produce the power they need onsite, we don’t have to look at investments as consumers,” he said. “Ultimately, ratepayers would have to pay for this expansion process.”
In other words, Dianda doesn’t want to see U.P. ratepayers footing the bill for a generation plant into the future if it’s no longer needed by a mining operation, as happened when Cliffs Natural Resources left its provider — We Energies, which owns the Presque Isle plant — for cheaper rates.
The possibility of Cliffs operating its own power plant is why many see the proposed solution for the Presque Isle plant in Marquette as a good one. Under the plan, Cliffs would build a 280 MW co-generation natural gas plant to serve its own needs instead of drawing power from the Presque Isle plant.
“I think that’s the key,” said Clift. “I think they learned their lesson with Cliffs. They don’t want users like this to be able to jump in and jump out of the system.
“Going forward, we’re going to see a lot more attention to where they’re going to get electricity from, how firm is the contract, who is it with and the impact on potentially other ratepayers with that utility. Clearly there are some costs to serve a load like that, therefore, does that push them to be more independent power producers?”
During the permitting process, the state does not regulate this aspect of a new mining operation.
“We have to take those things into account, but we’re probably not going to dictate whether to run electric lines from (somewhere else) or generate onsite,” said Fitch. “Some of these things are a little bit outside of our purview.”
At the heart of the U.P.’s energy dilemma is weighing the costs and benefits of new generation versus new transmission — so as not to saddle ratepayers with some of the highest rates in the country with even costlier bills. And if it’s new generation, there’s the question of how much should come from renewable sources versus natural gas.
In the western U.P., the Keweenaw Renewable Energy Coalition is pushing for most of the region’s energy needs to come from renewable sources. In March, the group announced a plan for six microgrids relying on wind, solar, biomass and hydroelectric, which the coalition says could power residential and small-business customers across all 15 U.P. counties.
The plan, however, does not address the need for industrial customers.
Officials with Gov. Rick Snyder’s Office have said that any U.P. solutions should be Michigan-specific, potentially relying on a mix of natural gas and renewables for baseload generation, as well as a transmission line between the two peninsulas.
At least one state senator sees more robust transmission from Wisconsin and the Lower Peninsula as a viable long-term solution for the region.
Sen. Tom Casperson, a Republican from Escanaba, is sponsoring a bill to assess the possibility of a major transmission line across the Mackinac Straits. Additional lines could also come in from Wisconsin if there are immediate needs in the western U.P., he said.
“What we’re faced with is a transmission line to get enough energy where it needs to go,” Casperson said. “Then we can create a major loop throughout the U.P. and get it from any which way, which I think can solve a lot of our needs up here. That’s a long-term solution for us.”
Casperson said a line from the Lower Peninsula isn’t feasible right now.
“It’s hard to justify it with the need presently in our region,” he said. “But we’re limited for growth down the road if we don’t address the issue of where energy will come from and how we get it in.”