Monday, December 13, 2010

Chip's play for the Range

Let's say you've just won election to the U.S. Congress. In fact, let's say you've just pulled off the improbable upset of an eighteen-term incumbent in Minnesota's Eighth District. Who do you meet with first?
Speaking to Republican donors in Minneapolis, Cravaack outlined his strategy for staying in office past 2012: frequent appearances in the 8th District and support for the proposed mines near Hoyt Lakes and Ely. The incoming member of Congress said his first meeting after the election was with Polymet Mining Corp. CEO Joe Scipioni.
This is a canny choice, but fraught with risk for Chip Cravaack. It's also a choice that puts Iron Range DFL politicians into a very uncomfortable position.

Polymet has proposed a large open-pit copper mine near Hoyt Lakes, and purchased the shuttered LTV Steel facility previously used to process taconite ore. Polymet has a powerful partner in Glencore, a Swiss commodities firm which owns about 20% of Polymet stock, and who's sunk tens of millions into the company. The Polymet proposal has stumbled through the regulatory process, most recently failing to produce an adequate draft environmental impact statement (EIS.) After the EIS was given the EPA's lowest possible rating, Polymet has gone back to the drawing board and is preparing another draft that will likely be completed by the end of 2011. It's been a long and winding road for this project, which has been in some form of environmental review since 2005.

Polymet's frustrated supporters clamor for immediate action. Cravaack made a point of throwing red meat to mine supporters during the campaign, and now appears to be going all-in behind Polymet. What he will find is that his influence is limited, the regulatory and legal process will be slow, and that he'll get little movement on this issue over the next 24 months. In no case will a mine be opened during that time. Cravaack's sloganeering on the issue betrays his ignorance of the process.

Railing against slow progress toward regulatory compliance is a great strategy for a challenger, but a poor one for an incumbent. Eighteen months from now, with still not a single copper mining job to his credit, Cravaack will be forced to run against the government again. Only this time, the frustrated folks who shouted "Chip, Chip, Hooray" will not be at his side. The timing on this issue is as bad for Cravaack as the tax cut extension timing is for Obama.

Even more intriguing is that the Polymet proposal has the support of virtually every DFL politician in northern Minnesota and Senators Franken and Klobuchar. Oberstar was also a big supporter. The heavy DFL support for the project previously put Minnesota Republicans in a tricky spot despite that it's something that they would usually want to support. Now that Cravaack champions the project, DFL Polymet supporters who want to make Cravaack a one-term congressman have a real dilemma on their hands. Do you do the heavy lifting at the state level if it means Cravaack can take credit?

The reality is that the political posturing on Polymet will be the only real action by politicians of either party. The regulatory process that Polymet is navigating is well beyond the influence of a freshman Representative. Hitching himself to Polymet's prospects is a high-risk, high-reward play for Cravaack, just like buying their stock.

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