The Michigan Strategic Fund has awarded $50 million, most of it to a Highland Copper Company, Inc., subsidiary, to support the proposed Copperwood mine in the western Upper Peninsula.
A University of Wyoming economist questions whether the grant is the best possible use of taxpayer funds.
Highland Copper Company, Inc., has secured a $50 million state grant to support its proposed Copperwood mine north of Wakefield, Mich.
Economics Prof. Scott Beaulier, writing on Substack, isn’t convinced that the investment is the best possible use of public resources.
Not against mining, but …
Beaulier, who grew up in the UP, emphasized that he’s not against mining in general, or the Copperwood project in particular -- he just wants what’s best for taxpayers and for people who want to live and work in the UP.
“Maybe Copperwood passes the cost-benefit test, but I haven’t seen anybody demonstrate it,” Beaulier wrote on Substack. “And benefits have to be measured against what we give up to get them.”
“That’s not anti-mining; it’s not anti-UP…it’s just basic economics,” he said.
“I think the big question that economists would really dig into is whether the $50 million of state funding the very best use of state funding for the Upper Peninsula,” Beaulier added in an Aug. 31 online interview. “What is the benefit of this project that justifies putting public dollars behind it? Because if you think about all of the things you could do with $50 million, there are many of them, and it's not obvious this project in particular passes that social benefit test.”
Prof. Scott Beaulier is dean of the College of Business at the University of Wyoming. Stock photo courtesy of the university.
Beaulier’s analysis — objective, thorough, and skeptical
In his post, Beaulier goes through the arguments in favor of the Copperwood subsidy, and the project in general, and examines each one in turn.
I encourage you to read Beaulier’s post for yourself but, for what it’s worth, here’s how I understand his analysis:
Supporters say the mine will bring 380 good-paying jobs to an area that desperately needs them.
If workers leave jobs elsewhere in Michigan to work at the Copperwood mine, that’s not a net employment gain for the state, Beaulier observed, it’s just shifting workers from one job to another.
That would be especially undesirable if the high-paying Copperwood jobs drained workers from existing UP businesses.
Similarly, Beaulier suggested that the hundreds of indirect jobs produced by the Copperwood project could have just as easily benefited other Michigan communities if the $50 million state subsidy had been directed elsewhere.
“Put the $50 million somewhere else and workers build a different road, improve a school, reduce a tax, or do countless other things we’ll never observe because government chose Copperwood instead,” Beaulier wrote.
Supporters say the mine will generate more than $120 million in combined local, county, and state tax revenues over its projected 11-year lifespan. That’s a net gain for Michigan.
There are two flaws in this claim, according to Beaulier.
First, the tax revenue estimate is gross, not net. The mine will impose costs on the general public for road maintenance, public safety, environmental monitoring, and much, much more, that will reduce the net tax revenue from the project.
Second, the tax revenue is not “new money,” in and of itself. It’s a part of the gross revenue of the mine that gets redirected into the state treasury. It’s not a stand-alone benefit that can be double-counted on top of the mine’s projected revenue, as mine promoters might suggest.
“Tax revenue is great for the state. It's great for the Treasury of Michigan. But let's remember that those dollars also could be going to shareholders, or they could be going to the workers of the mine,” Beaulier said in the Aug. 31 interview.
“In the case of a Canadian [mining company], by the way, having a tax that keeps the money in Michigan, so it's not a bad thing. But again, it's money that could be kept in the community or have gone towards other purposes.”
Supporters say securing a domestic supply of copper is a matter of national security.
The United States has a legitimate national-security interest in a reliable supply of copper, Beaulier observes. However, mine advocates haven’t demonstrated that it can’t be obtained from other sources.
“This case for mining copper mining being a critical national interest is a pretty shaky one when you're talking about different things that should be protected,” Beaulier said in the Aug. 31 interview.
“The protection argument typically applies to building our own tanks and our own aircraft carriers in the U.S., because you don't want to be reliant on a foreign entity for that.”
“There's a lot of places that could supply us with copper even if we went to war, and I think the argument’s on weaker foundations than protecting your typical defense contractor.”
Some preliminary site work has been completed at the Copperwood mine site. Photo courtesy Highland Copper Company, Inc.
Why subsidize a potentially profitable mine?
Finally, Beaulier asks whether taxpayer support is really necessary for a mining project that has an after-tax internal rate of return of 17.6 percent and an after-tax net present value of $168 million, according to the mining company.
“Why does a project with the return Highland predicts require $50 million of state support?” Beaulier asks.
“We can all agree Copperwood produces benefits. What we should be asking is: what does the $50 million of state support change? If the mine would have been financed anyway, taxpayers are subsidizing activity that would have existed anyway without a subsidy.”
Highland Copper Company, Inc., and InvestUP, a Copperwood supporter, were asked to comment on this report. Both declined.
Scott Beaulier is a professor of economics and the dean of the College of Business at the University of Wyoming.
Mark Doremus is a writer and filmmaker covering mining, the environment and occasional fun stuff in the Upper Peninsula of Michigan.
Research for this report utilized Google’s Gemini and Notebook AI tools.
