Kennecott and Other Businesses Harmed by DEQ

Michigan businesses desiring to expand their operations in the state or companies that want to locate here more often than not have to navigate their way through a labyrinth of regulatory requirements. A recent announcement by the Michigan Department of Environmental Quality is one such example that further damages the state’s already poor reputation as a friendly place in which to do business.

The DEQ on March 1, 2007, announced it was withdrawing its proposed decision to approve a mine permit application by the Kennecott Eagle Minerals Co. for the Eagle Project Mine in the Upper Peninsula’s Marquette County.

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Kennecott planned on mining a deposit that is 1,000 feet deep, 400 feet wide and 80 feet thick, containing 3.6 percent nickel and 3.1 percent copper. Successful development of the mine would make it the only primary nickel mine operating in the United States. The mine would be underground with no open pits or waste rock piles. The material would be processed off site, resulting in no tailings piles — the rock that is left after the valuable minerals have been extracted — in the area.

The DEQ claims it made the decision after discovering that it had omitted two reports on the structural integrity of the mine as part of the public record. In response to the announcement, Kennecott issued a news release the same day in which Eagle Mine President David Salisbury stated: "To say that we are disappointed in this situation is an understatement." He went on to say, "To be clear, the situation is not due to any action or inaction on Kennecott’s part. This is an MDEQ internal issue they must address themselves."

There are two logical conclusions that can be deduced from DEQ’s action of withdrawing the proposed approval for the permit. One is that they have bowed to pressure from environmentalists who are opposed to the mine and are generally supportive of the DEQ as it functions under Gov. Jennifer Granholm’s administration. The Mackinac Chapter of the Sierra Club uses five pages on its Web site to urge members to oppose the Eagle Project Mine application, calling the proposed approval of the project by DEQ, "wrong headed" and "risky." The second conclusion one could draw is that the agency is simply incompetent in carrying out its regulatory function in an efficient manner. The DEQ admitted as much in stating it failed to appropriately handle the paperwork. In either case, the outcome for Michigan is the same — a strong signal is sent to businesses that the state is a difficult and risky place to function. In my experience as an environmental regulator, there is nothing more abhorrent than uncertainty for companies attempting to acquire environmental permits.

Elected officials in the state must move quickly and decisively to begin to reverse the negative regulatory business climate in Michigan. There is no better place to start than by moving all DEQ permitting authority to another department or creating a single state department that provides "one-stop shopping" for all permits and licenses required by individuals and firms desiring to conduct business in the state. This bold move would send a clear signal that the state is not going to do business as usual, but is finally serious about improving the state’s cooperation with job providers. This change would not require funding new state employees; existing employees with regulatory functions that affect businesses could be tapped for the new department.

Critics of this proposed change will be quick to claim this would result in backsliding on environmental protection in the state, a false claim as the environmental laws and regulations would not change and business would still have to comply with the same stringent requirements. Other critics will object to the creation of a new state department. They are correct in that this can only work if state government does not get bigger. This can be accomplished by ensuring that only existing employees are used for the new department and that the necessary budget line items are removed from the DEQ and put under the new department, rather than appropriating new monies.

The "Department of Permitting and Licensing" would be directly accountable to the governor and the legislature for its performance, leading over time to a culture in the new agency much different than currently exists in DEQ. Some employees in DEQ have learned that slow action on permits or making excessive demands of applicants often has the same practical effect as denying the permit without the agency bearing the political cost of formal permit denial.

Michigan cannot afford to lose more jobs or job opportunities. Now is the time for our elected officials to show leadership in reforming the regulatory bureaucracy in Michigan.


Russ Harding is former director of the Michigan Department of Environmental Quality and is senior environmental policy analyst for the Mackinac Center for Public Policy, a research and educational institute headquartered in Midland, Mich. Permission to reprint in whole or in part is hereby granted, provided that the author and the Center are properly cited.