State Mineral Leasing, Exploration, and Development

Frequently Asked Questions and Answers

Most of the information provided on this webpage is current as of March 7, 2012. As noted below, new DNR webpages have been created since 2012 to answer some of these questions. 

 

What are the State's obligations under the constitution? Answer

  • State law, State policy, & fiduciary obligations to Trusts (school and tax forfeit) Link

Why do we need minerals? Answer

What types of minerals does the State lease? 

Where does the State offer metallic mineral leases and what companies currently hold leases? 

What is mineral exploration and development? 

What are the State's ownership rights related to surface and minerals? 

What are the State's regulations and reclamation rules related to mineral exploration and development?

Why Minnesota and what are the benefits to the Trusts? Answer

  • Mineral potential and infrastructure Link
  • Economic interests Link
  • Benefits to State Trusts Link

 


What are the State's obligations under the constitution?

State law, State policy, & fiduciary obligations to Trusts (school and tax forfeit)

The Legislature enacted Minnesota Statutes, section 93.001 This link leads to an external site. setting forth state policy to “provide for the diversification of the state's mineral economy through long-term support of mineral exploration, evaluation, environmental research, development, production, and commercialization.” 

A portion of the state’s mineral economy is derived from nonferrous metallic mineral exploration and development. Minnesota Rules, Chapter 6132 This link leads to an external site.states that the purpose and policy concerning nonferrous metallic minerals is to “control possible adverse environmental effects … to preserve natural resources … while promoting orderly development of … mining” so that mining is “conducted in a manner that will reduce impacts to the extent practicable, mitigate unavoidable impacts and ensure that the mining area is left in a condition that protects natural resources.” 

School Trust lands and the Permanent School Trust Fund

Minnesota Constitution, Article XI This link leads to an external site., Section 8;

The permanent school fund of the state consists of the original USA grants to schools in each township (sections 16 and 36, historically), the swamp lands granted to the state, and the indemnity and internal improvement lands granted to the state. Minerals have generated 80% of the historical total revenue to the Permanent School Trust Fund.

Minnesota Statutes, section 84.027 This link leads to an external site., subd. 18

The commissioner of natural resources has the authority and responsibility for the administration of school trust lands.  Currently, the DNR administers approximately 2.5 million acres of school trust surface and mineral interests and an additional 1 million of acres of severed school trust mineral interests.

Minnesota Statutes, section 127A.31 This link leads to an external site.

The legislature intends that it is the goal of the permanent school fund to secure the maximum long-term economic return from the school trust lands consistent with the fiduciary responsibilities imposed by the trust relationship established in the Minnesota Constitution, with sound natural resource conservation and management principles, and with other specific policy provided in state law. 

Other State-owned lands

Minnesota Statutes, section 93.15 This link leads to an external site.

The commissioner of natural resources may designate any lands belonging to the state and the beds of any waters belonging to the state or any lands in which the state has an interest as mining units and may rearrange or modify the mining units from time to time, subject to the limitations of this section.  

State policy for reclamation of mine sites 

Minnesota Statutes, Section 93.44. This link leads to an external site.

In recognition of the effects of mining upon the environment, it is hereby declared to be the policy of this state to provide for the reclamation of certain lands hereafter subjected to the mining of metallic minerals or peat where such reclamation is necessary, both in the interest of the general welfare and as an exercise of the police power of the state, to control possible adverse environmental effects of mining, to preserve the natural resources, and to encourage the planning of future land utilization, while at the same time promoting the orderly development of mining, the encouragement of good mining practices, and the recognition and identification of the beneficial aspects of mining. 

For information on the MN DNR's role in environmental review, permitting of mines, inspections, and reclamation rules and standards please visit the MN DNR's Mineland Reclamation webpage

 

If you have additional questions on this topic please contact:

Susan Damon, Transaction Manager
MN DNR - Division of Lands and Minerals
500 Lafayette Road 
St. Paul, Minnesota 55155-4045
tel. 651-259-5961 
fax 651-296-5939 
susan.damon@state.mn.us

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Why do we need minerals?

Mineral uses

Minerals for everyday use
We use and rely on dozens of minerals in the products we use everyday This link leads to an external site. —such as toothpaste, light bulbs This link leads to an external site., windows, sidewalks, cars This link leads to an external site., and cell phones This link leads to an external site.. A common description is that if the material has not been grown on a farm, field, or forest, then it has come from a mine. And if the material was grown, it was likely fertilized with minerals and harvested and processed with machinery made from minerals. It is estimated that every year, the mineral content of products purchased in the US would be an average of more than 38,000 pounds of minerals per person per year. The Mineral Information Institute This link leads to an external site. has a lot of information about the use of minerals.

Minerals for green energy
There is a goal in the U.S. to find more sources of “green” energy. Most of these alternative energy sources require a substantial amount of mineral resources. For example, the mineral resources required for the Taconite Ridge 10 turbine wind farm that Minnesota Power built near Virginia, MN included 84,000 feet of underground power cable (copper and/or aluminum), 3 miles of new road (construction aggregates), 370 cubic yards of concrete for turbine foundations, 10 steel towers 265 feet high for the turbines, 400,000 long tons of taconite tailings for site preparation, and 170 semi-truck loads of component parts. 

In addition to those mineral resources, wind power requires a duplicate electrical generation facility be built, often using natural gas as the energy source, because when the wind stops this facility must be started up within a very short timeframe to continue to supply electricity to the power grid. The sum is that green energy requires increased demand from the mines that supply the minerals.

Minerals for United States economic and defense interests
The federal government has defined certain minerals that are classified as strategic and critical This link leads to an external site. to the economic and defense interests of this country. Copper, nickel, cobalt, platinum, palladium, titanium, and manganese are strategic minerals that occur in MN. Production of these minerals would improve the economic and defense interests of the United States.

New mines

Many metals are bought and sold as part of the global economy. Mines get depleted over time, typically over a time period of 10 to 100 years. New mineral deposits need to be discovered, and new mines need to be started to replace the mines that get depleted.  In addition, on a global basis, the consumption of metals continues to increase each year, primarily as a result of a growing world population and a growing standard of living in many countries. Metals that are put into a building, such as copper wiring in a house, will not be available again for recycling for decades into the future. The result is that as our cities and communities continue to grow, the world demand for metals continues to increase. 

A cluster of related mines is called a mining district, and mining districts may be active over a period of decades or centuries.  The Mesabi Iron Range is a mining district composed of many iron mines in northeast Minnesota.  Iron mining started in 1892 and there are known iron ore reserves that make it likely to continue for many decades into the future. The Biwabik Iron Formation is the geologic unit that has supported iron mining on the Mesabi Iron Range. This mining district has played an important role in the economic development of the United States. There have been many individual new mines in this district over the years.

 

If you have additional questions on this topic please contact:

Dennis Martin, Mineral Potential Manager
MN DNR - Division of Lands and Minerals
500 Lafayette Road 
St. Paul, Minnesota 55155-4045
tel. 651-259-5405 
fax 651-296-5939 
dennis.martin@state.mn.us

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Why Minnesota and what are the benefits to the Trust? 

Mineral potential and infrastructure

Exploration companies have done research as to where mineral deposits are found in other parts of the world, and have concluded that the bedrock geology in Minnesota is prospective for the discovery of new mineral deposits. In other words, there is high potential for undiscovered metallic mineral deposits to exist in parts of Minnesota. Mineral deposits do not exist in an even distribution across the nation or the world. We cannot choose where we want the mineral deposits to be located. This is probably the most important feature that attracts new exploration investment to Minnesota. In addition to the high mineral potential, there are many other business reasons that companies may choose to search for new mineral deposits in Minnesota. There has been iron mining in northeastern Minnesota for more than 100 years. Minnesota has a long list of businesses that supply goods and services to the mining sector. There is electrical power capacity available in the northeast region. There is infrastructure such as a good road system, railroads and Great Lakes ports with the capacity to move bulk commodities. Minnesota offers a safe, conflict-free work environment and a stable democracy with a long history of honoring the rule of law. When compared to many other countries in the world, all these factors add up to produce a positive risk environment for the private investors.

Economic interests

New mines serve as a primary source of raw materials and new wealth for our state and the nation. It is clear that our growing population consumes more metals every year for basic necessities, such as; our buildings, to grow our food, and to manufacture our everyday products. The mining sector also contributes directly to Minnesota’s economy.  A 2009 University of MN economic study This link leads to an external site. describes the valuable economic impact of mining upon the economy of northeastern Minnesota. 

“From a regional point of view, for the period from 2001 to 2007, compared to other sectors of the economy in Northeast Minnesota, mining has led all other sectors contributing to Gross Regional Product (GRP) by as much as a factor of three. (See the report Executive Summary, page 3)”

This report describes the significant impact that current mining has and the even larger potential future mining impact on total numbers of high paying jobs, the revenue to the state, and revenue to the school and university system. Based upon this report, mining is the industry sector that can improve the standard of living for a significant portion of the population of Northeast Minnesota, as farming does elsewhere in the state.

The Mesabi Iron Range mining district has played an important role in the economic development of the United States, but it has also been important for other reasons. One example was to supply the iron ore needed for World War II. The iron ore produced by MN supplies approximately 2/3 of the iron needed for the blast-furnace steel sector in the United States. Taking a closer look at steel production, the steel produced in the United States generates approximately only half the green-house gas emissions compared to the same quantity of steel produced in China. "Environmental leadership" is possible for the other metallic minerals also. For example, advances in hydrometallurgy, or the ability to extract metals such as copper from mine rock using acids within tanks with processing plants, rather than the older smelting technology that creates more air pollution. But the technology is new, and it will require private capital investment. Minnesota could be contributing to progress in this sector, with its tough environmental laws that limit the impacts and its excellent research facilities to help find solutions to the technical issues.

Benefits to State Trusts

The discovery and delineation of a metallic mineral deposit typically costs tens of millions of dollars and may take a decade or more. In addition, the economic feasibility, environmental review, and development phase may take another decade or more. This is not done with public funding, but rather with private capital that is considered to be a high-risk investment. There is tremendous global competition for that private capital to be spent in other states or countries. DNR has a fiduciary responsibility to administer the land and mineral rights for the Permanent School Trust Fund (PSTF) and other State Trusts. These State Trusts benefit under the current system whereby private capital is spent in Minnesota on or near the PSTF mineral rights. It is the private capital that discovers the mineral deposits on Trust minerals, and delineates the inherent value for the Trusts, and does the mining that pays royalties to the Trusts. This is an essential step in the long process of creating revenue for the Trusts. Without the initial steps, there can be no future mineral revenue to the Trusts, because there will be no discovery and development. Thus we are in competition with other countries for the private capital that funds the private exploration industry.  

More than 80% of the revenue in the corpus of the School Trust since it’s creation more than a century ago has come from mineral revenue. The potential new revenue from mineral rights for the Trusts is more than one billion dollars over the next 20 to 40 years, based on existing leases for three known deposits. The existing state mineral leases on three known deposits-- Nokomis, Birch Lake, and Mesaba-- would pay the School Trust more than a billion dollars total over the life of the mines if they obtain environmental permits and are economically feasible. Exact predictions are not possible because they depend upon future metal prices, which vary over time.  In another example, if the Eagle mine that is being constructed in Michigan, were found on School Trust mineral rights with a state of Minnesota mineral lease, the royalty from that 40-acre parcel alone would be in the ballpark of one-half billion dollars paid to the School Trust as the total royalty over the 10 year mine life. This is the “best-case” scenario from likely mineral deposits, and this may not happen in Minnesota, but the legal framework is here for it to happen. Which 40-acre parcel is the one that contains the next valuable mineral deposit in Minnesota? We don’t know. Every time a parcel of School Trust mineral rights is not offered for state mineral lease, the odds of a new mineral discovery, and perhaps millions of dollars in royalty revenue to the School Trust is diminished. In other words, there must be land available for exploration in order for a mineral discovery to occur. The School Trust stands to gain more from a mineral discovery than any other means of revenue.

At least three exploration companies here appear to be currently looking for the same type of “Eagle” mineral deposit here in Minnesota. A similar, but smaller deposit with high platinum and palladium values has recently been discovered in the Thunder Bay area in a similar geologic environment to Minnesota. That discovery is currently going through the delineation phase by Magma Metals.

 

If you have additional questions on this topic please contact:

Dennis Martin, Mineral Potential Manager
MN DNR - Division of Lands and Minerals
500 Lafayette Road 
St. Paul, Minnesota 55155-4045
tel. 651-259-5405 
fax 651-296-5939 
dennis.martin@state.mn.us

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