Minnesota’s forest products industries are in a slump. Companies that produce lumber, oriented-strand board and other building materials are particularly hard hit by the sharp decline in new-home construction nationwide. Many have cut back production, and some are closing, at least temporarily, and letting workers go.
Some people, including elected officials, suggest cutting the cost of trees from state-owned forests as a measure to help these companies and prevent layoffs. Others object to selling public resources to private companies for less than market value. This debate has a long history at the national level and sheds light on issues in Minnesota.
Across the nation, the federal government owns large acreages used for logging or mining. It also owns petroleum deposits in the Gulf of Mexico and natural gas deposits across the West.
Such government-owned natural resources need to be priced somehow because private companies do the mining, drilling and logging. Auctioning them to the highest bidder can get the public as much money as possible. That is what we do with federal oil- and gas-drilling rights.
We treat mineral deposits on federal land differently. Under the 1872 Mining Act, we give mineral deposits to the first person to file a claim. Any payment made to the government seldom exceeds a few dollars per acre of land surface. Unlike federal oil and gas rights, there is no competitive bidding.
The rationale is that mines produce valuable minerals and metals for the U.S. economy. Cheaper raw materials mean cheaper final products. Giving away mining rights promotes job growth and settlement in sparsely populated areas.
The implicit judgment is that the benefits to society of cheap raw materials and increased employment outweigh the cost to society of giving away valuable property.
That judgment probably was true in 1872 when the law was passed — and when the environmental costs of mining were ignored. It probably is not true now. Moreover, in a global economy, the benefits of cheaper metals or coal get passed to consumers around the world and not just U.S. citizens.
What example should Minnesota follow — hold auctions to get top dollar for citizens or sell well below market to bolster employment and provide cheap materials for businesses or households?
Historically, the Minnesota Department of Natural Resources has held auctions throughout the year for tracts of timber in various geographic areas. Counties in northeastern Minnesota hold similar auctions. These auctions produce millions of dollars in government revenue.
Should we pass up some or all of this revenue to keep employment from dropping? One issue to consider is how much public money we would spend to preserve similar numbers of jobs in other sectors.
I think it is pretty clear that if we had to actually write checks to keep jobs rather than accept less income, the idea would not go very far. In an election year be wary of anyone who says “relief” when they mean “giveaway.”
© 2006 Edward Lotterman
Chanarambie Consulting, Inc.