Background Information: The Twin Lakes Mining Company is located in Tamarack, Minnesota, in the northern part of the state. It was established there in 1961. The city of Tamarack has a year-round population of approximately 18,000. Although there is a growing revenue that accrues to the city as a result of heavy summer tourism (summer homes, fishing, etc.) and several cottage industries, Tamarack is basically a one-industry city. Twenty-five hundred people, 60 percent of whom live within city limits, work for the Twin Lakes Mining Company; 33 percent of the city's real estate tax base of about $5 million consists of Twin Lakes Mining Company property and operations. Both in terms of direct tax revenue and indirect contribution to the economic stability of the local population, Tamarack is strongly dependent on the continued success of the Twin Lakes Mining Company. The Twin Lakes Mining Company is an open-pit, iron ore mine. Open-pit mining consists of stripping the topsoil from the ore deposit with the use of power shovels. Train rails are then laid, and most of the ore is loaded into railroad cars for transportation to a central collecting point for rail or water shipment. As mining operations progress, rails are relaid or roads constructed to haul ore by truck. The ore is transported to a "benefication plant" located on the outskirts of Tamarack. Benefication of ore involves crushing, washing, concentration, blending, and agglomerating the ore. In the early days of ore production, such treatment was unnecessary; however, benefication is necessary today for several reasons. First, transportation costs of rejected material (gangue) are minimized. The crude ore may lose as much as one-third of its weight in grading, and, in addition, impurities are removed at a much lower cost than if removed during smelting. Second, ores of various physical and chemical properties can be purified and blended during this process. Finally, fine ore materials, which previously may have been rejected as a result of smelting problems, can now be briquetted and pelletized to increase their value. After the ore proceeds through this process of cleaning and agglomerating into larger lumps or pellets, it is shipped by railroad car to steel mills throughout the Midwest. Rejected materials are returned to "consumed" parts of the mine, and the land is restored. Twin Lakes' benefication plant is located approximately five miles outside of Tamarack. As a result of the expansion of the residential areas of the city, summer home development, and various Twin Lakes operations, the plant has become a major problem for local citizens. For years, the Tamarack City Council has been pressing the company to clean up the most problematic operations.While most of these discussions have been amicable, Twin Lakes has done little or nothing to remedy the major concerns. Now, as a result of more stringent environmental laws and regulations, Twin Lakes has come under pressure from both the state of Minnesota and the federal government for environmental cleanup. Both the state and the federal Environmental Protection Agency have informed Twin Lakes that the company is in major violation of water and air pollution quality standards, and that immediate action must be taken. Twin Lakes' estimates indicate that total compliance with the cleanup regulations will cost the company over $50 million. Because Twin Lakes is now mining relatively low-grade ore and because foreign competition in the steel market has significantly eroded the demand for ore, environmental compliance may seriously influence the profitability of the company. Many local citizens, as individuals and through the local chapter of the United Mineworkers Union, are putting significant pressure on the City Council to help the Twin Lakes Company in its environmental cleanup operations. The imposition of the environmental controls on Twin Lakes, and the resulting pressure from all segments of the community, have led to renewed discussions between company officials and the City Council. As a result of these discussions, the following environmental issues have emerged:

1. Water quality: The Twin Lakes plant requires large amounts of water to wash the crushed ore. In addition, much of the highest-quality ore is reduced to an almost powderlike texture after washing and is being lost in the washing operation. As a result, the company has built a series of settlement recovery ponds alongside Beaver Brook near the plant. Water that has been used for washing ore is allowed to stand in these ponds; they are periodically drained and the ore recovered. Nevertheless, granules of iron ore and other impurities continue to wash downstream from the plant. The environmental agents have insisted that the effluent from the plant and the ponds be cleaned up. Estimates for the cost of a filtration plant are $40 million. Twin Lakes claims that it cannot afford to build the plant with its own revenue. Since Tamarack has periodically talked about Beaver Brook as a secondary water source for the city (and residential development makes this a more pressing concern in two to three years), the Twin Lakes officials hope that they might interest Tamarack in a joint venture.

2. Air quality: The entire process of mining, transporting, and crushing ore generates large amounts of dust. This has significantly increased the levels of particulates in the air. In addition, during the dry summer months, the operation of many large trucks along dirt roads intensifies the problem considerably. Twin Lakes believes that it can control a great deal of the dust generated immediately around the plant at a cost of approximately $8 million. The most significant debate with the city has been over a series of roads around the city outskirts. Approximately half of the roads are city owned; the rest have been specially constructed for the transportation of ore and material. Estimates for paving all the roads are $4.8 million, with a yearly maintenance cost of $600,000; periodic oil spraying of the roads, to keep down the dust, would run approximately $800,000 annually, but an agreement to do this as a short-term measure may not satisfy the environmental agencies.

3.Taxation of company land: The land for the mine itself is outside city limits. However, the plant lies within city boundaries, and current taxes on the city land are $800,000 annually. The company has always felt that this taxation rate is excessive. In addition, several of the railroad spurs used to move ore into the plant, and out to the major railway line, cross city land. The city has continued to charge a flat rate of $400,000 annually for right-of-way use. It has occasionally offered the land for sale to the company at rates varying from $2.2 million to $2.4 million. Again, the company has felt that this rate is excessive. Both the company and the city believe that if some resolution could be obtained on these three major issues, the remaining problems could be easily resolved, and Twin Lakes would agree to keep the mine open.

Questions

1. Why was the survival of the Twin Lakes Mining Company important for the town?

2. Why was the town unable to raise the money for the pollution equipment that Twin Lakes Mining required?

3. Why was the Twin Lakes Mining Company by itself unable to raise the money needed for the pollution equipment?

4. What do you think would be a viable solution for both sides?