TWIN LAKES MINING COMPANY CASE MANA 4341

Introduc�on. In this role-play you will have the opportunity to nego�ate a serious problem – a conflict between a mining company and the government of a small city regarding an environmental cleanup. While the issues in this scenario have been simplified somewhat for the purpose of this role-play, such conflicts between industry and governmental groups are typical throughout the United States. Try to introduce as much realism into this situa�on as you can, based on your own personal experiences. The quality of realism you demonstrate via your case brief will determine the content and style scores for your deliverable. Background Informa�on. The Twin Lakes Mining Company (herea�er referred to as “TLMC”) is located in Tamarack, Minnesota, in the northern part of the state. It was established in 1961. The city of Tamarack has a year-round popula�on 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 cotage industries. Tamarack is basically a one-industry city. Twenty-five hundred people, 60 percent of whom live within the city limits, work for TLMC; 33 percent of the city’s real estate tax base of about $5 million consists of TLMC property and opera�ons. Both in terms of direct tax revenue and indirect contribu�on to the economic stability of the TLMC. The TLMC 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 transporta�on to a central collec�ng point for rail or water shipment. As mining opera�ons progress, rails are re-laid or roads constructed to haul ore by truck. The ore is transported to a “benefica�on plant” located on the outskirts of Tamarack. Benefica�on of ore involves crushing, washing, concentra�on, blending, and agglomera�ng the ore. In the early days of ore produc�on, such treatment was unnecessary; however, benefica�on is necessary today for several reasons. First, transporta�on costs of rejected material (gangue) are minimized. The crude ore may lose as much as one-third of its wight in grading, and, in addi�on, impuri�es are removed at much lower cost than if removed during smel�ng. Second, ores of various physical and chemical proper�es can be purified and blended during this process. Finally, fine ore materials, which previously may have been rejected as a result of smel�ng problems, can now be briqueted and pelle�zed to increase their value. A�er the ore proceeds through this process of cleaning and agglomera�ng 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.

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TLMC’s benefica�on plant is located approximately five miles outside of Tamarack. As a result of the expansion of the residen�al areas of the city, summer home development, and various TLMC opera�ons, the plant has become a major problem for local ci�zens. For years, the Tamarack City Council has been pressing the company to clean up the most problema�c opera�ons. While most of these discussions have been amicable, TLMC has done litle or nothing to remedy the major concerns. Now, as a result of more stringent environmental laws and regula�ons, TLMC has come under pressure from both the state of Minnesota and the Federal government for environmental cleanup. Both the state and EPA (Environmental Protec�on Agency) have informed TLMC that the company is in major viola�on of water and air pollu�on quality standards, and that immediate ac�on must be taken. TLMC’s es�mates indicate that total compliance with the cleanup regula�ons will cost the company over $50 million. Because TLMC is now mining rela�vely low-grade ore and because foreign compe��on in the steel market has significantly eroded the demand for ore, environmental compliance may seriously influence the profitability of the company. Many local ci�zens, as individuals and through the local chapter of the United Mineworkers Union, are pu�ng significant pressure on the City Council to help TLMC in its environmental cleanup opera�ons. The imposi�on of the environmental controls on TLMC, and the resul�ng pressure from all segments of the community, have led to renewed discussions between company officials and the City Council. As a result of this discussion, the following environmental issues have emerged: Water Quality: TLMC’s plant requires large amounts of water to wash the crushed ore. In addi�on, much of the highest-quality ore is reduced to an almost powder-like texture a�er washing and is being lost in the washing opera�on. As a result, the company has built a serios of setlement 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 is recovered. Nevertheless, granules of iron ore and other impuri�es con�nue to wash downstream from the plant. The environmental agents have insisted that the effluent from the plant and the ponds be cleaned up. Es�mates for the cost of a filtra�on lant are $40 million. TLMC 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 of Tamarack (and residen�al development makes this a more pressing concern in two to three years), the TLMC’s officials hope that they might interest the city of Tamarack in a joint venture. Air Quality: The en�re process of mining, transpor�ng, and crushing ore generates large amounts of dust. This has significantly increased the levels or par�culates in the air. In addi�on, during the dry summer months, the opera�on of many large trucks along dirt roads intensifies the problem considerably. TLMC believes that it can control a great deal of the dust generated immediately around the lant 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.

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Approximately half of the roads are city owned; the rest have been specially constructed for the transporta�on of ore and associated material. Es�mates 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 sa�sfy the environmental agencies. Taxa�on of TLMC land: The land for the mine itself is outside the 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 taxa�on rate is excessive. In addi�on, 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 con�nued to charge a flat rate of $400,000 annually for right-of-way use by TLMC. It has occasionally offered the land for sale to the company at rages varying from $2.2 million to $2.4 million. Again, TLMC has felt that this rate is excessive. Both TLMC and city of Tamarack believe that if some resolu�on 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.

SOURCE Lewicki, Roy J., Bruce Barry and David M. Saunders. 2015. Negotiation: Readings, exercises

and cases, 7th ed. New York, NY: McGraw Hill.

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