Hole in the Ground

Will the Kennecott Landslide Bury the Local Economy?

By Peri Kinder

August 9, 2013

“Without full production coming out of the mine, we’re not able to maintain full production with downstream facilities,” Keenan says. “We’re looking really closely at…how we can ensure that we’re setting this business up to be as sustainable as we can. These are very difficult decisions for us and we’re doing everything we can to minimize the impact on our employees. However, given the current situation, there are impacts.”

Due to a favorable response to the early resignation incentive, further lay-offs were avoided. Approximately 130 Kennecott employees took advantage of the buy-out, which was part of the overall plan to cut costs with sustainable reductions. With the initial lay-offs, the early-retirement option, significantly reduced overtime and reduced contract services, mine officials hope to get costs and plans finalized to get through the next year of production.

Trickle-down Effect

When accelerated ground movement was first noticed at Kennecott in February, the company developed sophisticated modeling to predict the result of the movement. Keenan says there weren’t a lot of surprises once the slide finally happened. The amount of material was not more than projected, but the slide didn’t behave as expected.

Described by Keenan as a “gradual failure,” the first amount of dirt came down and landed in the bottom of the mine. However, when the top piece failed, it skimmed over the previous slide and went further than anyone anticipated. Even though the majority of heavy equipment had already been relocated, the furtherance of the slide created a situation where some haul trucks, shovels and auxiliary equipment were damaged.

The economic impact of the slide will be much the same. Although experts can give predictions and forecasts, no one will know for sure how the mine, county and state are impacted until the dust settles.

Jeff Edwards, president and CEO of the Economic Development Corporation of Utah (EDCU), says there will be a significant ripple effect as suppliers for the mine—from labor to equipment and materials—also take a cut from reduced output and exports. “There were a lot of things that we thought could happen to the mining in our state. To me it was global economic conditions, or demand and price for metals, or things to do with labor. But never in my imagination did I imagine a landslide. It was completely unexpected.”

Edwards believes the loss of production at Kennecott will be a fairly short-term event, maybe 12 to 18 months. And while that’s significant for those who have been laid off or had their contracts cut back, from an economic development point of view, he has every confidence the mine will be back stronger than ever.

Several businesses have moved into the south end of Salt Lake County and the north end of Utah County. Companies like Boeing, eBay and Dannon are all expanding into the state, bringing significant job potential and income to the area.

“From our perspective, we have so many companies moving into the state and looking into moving to the state that we’re actually lucky to have such a strong, diverse economy that might be able to absorb these employees,” says Kim Frost, EDCU director of marketing and communications. “It would be a very different situation if we didn’t have the kind of job growth that we do elsewhere in the economy. For the folks getting displaced by the mine, I believe there’s more opportunity than there has been in many years.”

Salt Lake County Mayor Ben McAdams is also optimistic the landslide won’t be economically devastating to the county, which receives between $18 and $20 million annually from Kennecott. With production dropping, the mine will be reassessed at a lower tax rate, leaving county residents to pick up the slack through increased property taxes—a reality that hasn’t been well received from residents.

Also affected will be Granite School District, Unified Fire Authority and the Unified Police Department—organizations that receive millions of tax dollars from the county. “There will be a ripple effect throughout the county,” McAdams says. “Kennecott is such an important part of our economy.”

Community contributions from Kennecott will also be cut during the disruption. The company has always been committed to community involvement, partnering with organizations like Tracy Aviary, the Kennecott Nature Center, the Natural History Museum of Utah and Hale Center Theatre.

Despite the troubles, overall response from the community to Kennecott has been fantastic, says Keenan. The company, in fact, has been contacted by many organizations offering assistance.

“We have a number of partnerships and commitments…and we’ll live up to any commitment we have,” Keenan says. “But we will probably be not able to contribute as much to the community this year as we have in past years. But we are looking to re-establish that position as we recover from this incident.”

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