Pebble suits proceeding; DNR rebuts reclamation report

Pebble Limited Partnership is asking for legal fees to wrap up one lawsuit against the Environmental Protection Agency and hopes to settle another out of court. The company pursuing the embattled massive copper and gold mining project in the Bristol Bay area filed a motion in U.S. District Court of Alaska Nov. 22 to recover $227,056 in attorneys’ fees stemming from a suit filed in October 2014 in which Pebble claimed the EPA withheld documents after a Freedom of Information Act request. While the suit was ongoing the EPA released more than 320 documents to Pebble related to its FOIA filing, and additional documents were shared during a June 2016 private review of the materials ordered by Judge H. Russel Holland. Pebble filed the FOIA request in January 2014 — shortly after the EPA released its Bristol Bay Watershed Assessment that determined a large mine would cause irreparable harm to the region’s world-class salmon fisheries — to unearth the process the agency used in reaching the conclusions in the Bristol Bay Assessment. The mining company has claims the assessment is based on hypothetical scenarios and it was developed strictly as a means to substantiate the EPA’s predetermined effort to prohibit the Pebble project. Pebble ultimately contends the EPA should cover its attorneys fees “because it substantially prevailed in obtaining scores of improperly withheld documents that it would not have obtained” if not for the suit. The legal action caused the agency to produce “scores of previously “undiscovered’ documents” and Pebble successfully challenged about 75 percent of the documents the EPA had withheld under privilege claims, the motion states. In a related lawsuit also before Holland, Pebble and the EPA have agreed to go before a mediator and negotiate issues prior to a trial. Here, Pebble sued the EPA in September 2014 on the belief the agency was not objective in compiling the Bristol Bay Assessment and violated federal laws by improperly collaborating with mine opponents in the crafting of the Bristol Bay assessment. Pebble spokesman Mike Heatwole said the group is hopeful the whole suit can be resolved outside of court, but declined to offer any further detail on the issues being negotiated. A Justice Department spokeswoman said the attorneys representing the EPA could not comment on the ongoing litigation. The motion to enter mediation was filed Oct. 27, but Heatwole said he did not think the sides had convened yet. Pebble reclamation controversy After a preliminary review, the Alaska Department of Natural Resources is downplaying the conclusions drawn in a report published Nov. 3 that is highly critical of Pebble’s efforts to clean up after its extensive exploration program. Conducted by the Center for Science in Public Participation, or CSP2, and titled, “Investigation of Reclaimed Drill Sites, Pebble Prospect,” the report concluded that more than 40 percent of the 107 exploration drill sites the CSP2 team inspected had “environmental issues” including dead vegetation, water leaking from the boreholes and open drill casings. The report proves a need, at a minimum, for increased monitoring of Pebble’s exploration sites, according to a release by United Tribes of Bristol Bay, the group that commissioned the work and has fought hard against Pebble. “DNR needs to stop rubberstamping Pebble’s (miscellaneous land use) permits and instead require Pebble to clean up the mess it left behind before taxpayers are stuck with the cleanup bill,” UTBB Executive Director Alannah Hurley said in a statement when the report was released. Pebble has applied with DNR for a two-year MLUP permit to allow it to continue reclamation and maintenance work through 2018 on the more than 1,300 holes it drilled during exploration and its equipment that remains at the claims. Pebble’s activity occurred on state land. Pebble Partnership was not required to put up a reclamation bond to back its work because it did not cumulatively impact more than five acres of land. The group chose to conduct operations via helicopter, thus reducing its footprint, and all of its temporary facilities were placed on “tundra mats,” which limit impacts to vegetation that will grow back once the equipment is removed, according to DNR officials monitoring the project. A report following a DNR inspection of Pebble’s work this summer concluded that Pebble’s “operation is in good condition and is consistent with industry standards.” DNR spokeswoman Elizabeth Bluemink said agency staff requested a full copy of the report from CSP2 after the summary was released in early November and found the Montana-based research group “may have misunderstood or misstated” some requirements of the state’s reclamation statutes and land use permits. “For example, dead vegetation, as observed by both DNR and CSP2 in the field, does not constitute a violation of permit conditions,” Bluemink wrote in an email. Further, the exposed drill casings highlighted in the report are “allowed, and expected” in exploration projects, according to Bluemink. She noted that DNR and staff from other state agencies have performed 56 field inspections of Pebble since 2003, the most for any mineral exploration project in the state. At the same time, the state welcomes public input and uses pertinent information provided from any source in regulating state lands. “A number of the observations reported by CSP2 could be helpful to DNR as it continues to regulate (Pebble’s) activities,” Bluemink wrote. “DNR staff will be able to take the CSP2 observations into account when we visit those sites in the future.” Elwood Brehmer can be reached at [email protected]  

For Livengood project, smaller is better

A smaller, simpler plan for developing the Livengood gold prospect has greatly improved the project’s economic viability. Vancouver-based International Tower Hill Mines Ltd., or ITH, released an optimized pre-feasibility study for the Livengood project Oct. 24 that determined a mine about half the size of what the company originally planned could reduce development costs by about $950 million and operational expenses by 28 percent. As proposed, Livengood would be a conventional, open-pit mine near the Dalton Highway about 70 miles north of Fairbanks. First investigated as a 14-year mine processing 100,000 tons of ore per day with a $2.8 billion capital cost in a 2013 feasibility study, the latest report downsized the operation to a $1.8 billion development handling 52,600 tons of ore per day over 23 years. “Livengood’s fundamentals are compelling, with a substantial gold resource, favorable jurisdiction, proximity to infrastructure and great leverage to the gold price,” International Tower Hill's CEO Tom Irwin said in a release. “We are committed to advancing our basic engineering and metallurgical work to further de-risk the project and prepare for future permitting.” A smaller, longer-lived Livengood would produce slightly less gold, about 6.7 million ounces of the precious metal as opposed to the original estimate of nearly 7.9 million ounces. Annual production of 294,100 ounces from the smaller mine would be 52 percent of the initial plan, closely mirroring the reduction in ore processing, according to the study. The Livengood prospect holds more than 8.9 million ounces of proven and probable reserves at an average resource grade of 0.71 ounces of gold per ore ton. While running a smaller operation for longer seemingly butts against the traditional notion of achieving economies of scale, ITH spokesman Richard Solie said the junior mining company took a holistic look at its plan to ultimately reduce the ore processing cost from more than an esimated $10 per ton to $7.48 per ton. The corresponding cost of production dropped from $1,481 per ounce of gold to $1,247 per ounce under the scaled back scenario. Gold is currently selling for about $1,270 per ounce. For much of 2011 and 2012 it sold for between $1,600 and $1,800 per ounce but prices dropped to a recent bottom of about $1,050 late last year. For starters, Solie said the latest study led ITH to move to a coarser initial ore grind, which would require less power and save money. “Part of why you grind it up smaller is so you can get more gold out of it. But we didn’t lose much recovery when compared to how much we gained in cost (savings),” Solie said. Along that same vein, employing a secondary crushing of the ore before sending it to the mill to be ground would allow for a more efficient use of power, he added. Increasing the grade of the slopes in the mine pit and cutting the leach circuit time from 32 hours to 24 hours after gaining a better understanding of the ore in place reacts to the chemical processes were cost savers as well, according to Solie. ITH also discovered it could save about $100 million up front by forgoing the construction of water reservoirs that were initially thought to be needed for mine start-up. “As it turns out we have enough water in the actual aquifers to meet the need,” Solie said. Being within a two-hour drive of Fairbanks also persuaded ITH to move ahead without a significant cost of doing business that is common to other remote Alaska mines, an operations camp. The smaller Livengood mine is modeled as a commuter mine, in which employees would congregate each day at a muster point in Fairbanks and take “a nice cushy ride up to the site” via bus each day, Solie said. While it adds to the length of the workday, he noted ITH also prefers the ability of its future employees to stay more engaged in their community and spend additional time with their families. “It’s a different culture when your people are living in a town rather than living out at a camp and there’s elements of that we like,” Solie said. “We like the idea of people sleeping in their own beds. We think that’s positive.” Elwood Brehmer can be reached at [email protected]

2016 is a milestone year for miners

Alaska’s miners will have an opportunity to look back at the progress of three of the state’s flagship mines at the annual Alaska Miners Association convention that kicks off Nov. 6 in Anchorage. This year is a milestone year for the mining industry in Alaska; it marks the 10th anniversary of operations at the Pogo underground mine and the 20th year of production at the Fort Knox surface mine. Both located near Fairbanks, they are the state’s premier gold mines. In addition, Hecla Mining Co., which owns the underground Greens Creek silver mine near Juneau, just celebrated its 125th birthday. At 26 years old, Greens Creek is not a young mine, but with record production of 8.5 million ounces of silver in 2015, it remains the largest active silver mine in the country and one of the most productive in the world under Hecla’s guidance. Alaska Miners Association Executive Director Deantha Crockett said she is particularly looking forward to Nov. 11, a day of the convention that will be devoted to highlighting the achievements of the trio and reminiscing about stories and events that have led to the anniversaries. “On the day that we talk Pogo, Fort Knox and Hecla we’re actually only having one (discussion) track because we know that the vast majority of our attendees are all going to want to go to that,” Crockett said. A few days prior, new Alaska Attorney General Jahna Lindemuth will headline the convention’s speakers on Nov. 8 with an hour-long dialogue likely on a host of topics. Crockett said the Alaska Miners Association was “incredibly excited” to hear of Lindemuth’s appointment as Alaska’s top attorney by Gov. Bill Walker in late June because she came to the position from the private sector and has significant experience handling resource development matters. Lindemuth’s talk will undoubtedly include the state’s decision to establish a framework for transferring land owned by Alaska Native tribes into federal trust status. Walker has directed her to lead the state’s involvement in the complicated and sensitive issue that could have far-reaching implications for resource work in the state. “How resource development projects are impacted by decisions that come out of the Native lands into trust issue and the status of those lands — it’s a major issue to watch for us and so finding out how the state plans to navigate that will be useful for pretty much all Alaskans,” Crockett said. She added, “The attorney general is so instrumental in the litigation that comes against resource development permits and the consistent federal overreach that we’re dealing with that I don’t expect to have any shortage of topics for her to address.” Following Lindemuth by a day will be Murray Hitzman, head of the Energy and Minerals division of the U.S. Geological Survey, discussing the future of the agency in the state. Crockett noted that anyone interested in resource development should want the USGS to be active in Alaska — continuing to map the vast state and delineate its resources — fundamental activities that the State of Alaska cannot afford to support as it deals with multi-billion dollar budget deficits. Finally, miners cannot gather without talking about their prospects. While exploration for large projects in the state has dipped in recent years for several reasons, one of the bright spots for the industry is Constantine Metal Resources’ Palmer project in Southeast Alaska near Haines, a high-grade copper, zinc, silver and gold deposit that would be an underground operation if developed. Constantine announced in September that it began construction of a 2.5-mile road to the project as it wrapped up its 2016 exploration drilling program that included seven drill sites. “(Constantine’s) healthy drilling season should provide a lot more results and we should get an update as to what we can expect out of that project, so that’s very exciting,” Crockett said. Elwood Brehmer can be reached at [email protected]

U.S. State Dept has interest in upstream Canadian mining projects

The U.S. State Department has taken a positive step to recognize the concerns some Alaskans have with upstream Canadian mining projects, but the issue is far from resolved, according to the members of Alaska’s congressional delegation. Assistant Secretary of State for Legislative Affairs Julia Frifield wrote in an Oct. 6 letter to the delegation that the State Department is actively engaged with Canadian officials to protect the watersheds that bisect the U.S.-Canada border along Southeast Alaska. “The Department of State intends to continue to work, in coordination with other U.S. government agencies, to ascertain what the Canadian federal government is doing to meet U.S. concerns about protecting this sensitive shared ecosystem from potential transboundary pollution during mine development, operation, impoundment design, and post-closure, and through bonding practices,” Frifield wrote. The Oct. 6 correspondence was in response to a Sept. 8 joint letter from Sens. Lisa Murkowski and Dan Sullivan and Rep. Don Young to Secretary of State John Kerry requesting the State Department to establish a formal way for Canadian officials to consult with U.S. federal and state agencies and Alaska Native tribes during Canada’s mine permitting process, similar to the domestic environmental impact statement process. It was the second such letter the delegation has sent to Kerry since May. Numerous Southeast Alaska environmental, commercial fishing, and Alaska Native groups have called for IJC involvement in recent years, but the commission can only be spurred by a formal call from either the State Department or Canada’s Global Affairs Department. They’re worried about the potential impacts of large metal mines in British Columbia at the heads of large rivers that support commercial and subsistence salmon harvests and flow through the province and Alaska’s panhandle. The massive 2014 Mount Polley mine tailings dam failure in the Upper Fraser River drainage validated the concerns, the groups contend. IJC intervention was originally intended only when both governments submit a “letter of referral” asking for the commission to resolve a dispute. Over time that procedure has morphed and both countries have at times singularly requested IJC involvement, which has often been granted. The commission’s recommendations are nonbinding but generally adhered to in an effort to maintain a cooperative relationship between the countries. Alaska’s delegation also asked for, among other things, the State Department to determine whether an International Joint Commission is the appropriate avenue to find out if Canadian mines are using best practices for treating wastewater and mine tailings, “especially in light of the scientific reviews of the causes of the Mt. Polley tailing disposal dam failure,” the delegation wrote. Frifield noted Canada examining its entirety of its environmental review process; results are expected early next year. Murkowski said in an Oct. 14 joint delegation release accompanying the letter that she is encouraged that the Obama Administration is taking an elevated interest in the transboundary watershed issue — including an August meeting in Alaska between the Central Council of Tlingit and Haida Indian Tribes of Alaska and a State Department-Environmental Protection Agency contingent. “That being said, I remain disappointed that the State Department refuses to address our questions and suggestions, such as to consider appointing a special representative for U.S.-Canada transboundary issues,” Murkowski said. “And it is unacceptable that Secretary Kerry has yet to meet directly with Alaskans on such a hugely important issue. The State Department’s response is a step in the right direction, but we still have a long way to go until Alaskans’ concerns are adequately addressed.” The State Department was also pleased to learn Congress may provide funding for baseline water quality monitoring in Southeast watersheds such as the Stikine, Taku and Unuk rivers, which has been a priority of the Alaska lawmakers. Young said the state and country share an interest in developing their natural resources, but open lines of communication when development in one could impact the other. “Ongoing and proposed mining activities in Canada have brought tremendous concerns to the people of Southeast Alaska -- specifically with the Tlingit and Haida people – which is why I have always engaged with the delegation to prioritize and facilitate outreach between all parties involved. Although I am pleased to hear about certain progress being made to implement portions of the memorandum of understanding and to address the concerns of Alaskans, I still believe there’s much work to be done.” Sen. Sullivan concurred, saying, “I am glad the Department of State and other Administration officials have finally initiated steps to engage key stakeholders as well as the governments of Canada and British Columbia on these pressing transboundary water issues. Yet, further progress is necessary to address the questions the delegation and Alaskan stakeholders have raised.” Also on Oct. 6, the date on the State Department letter, Alaska Lt. Gov. Byron Mallott signed a Statement of Cooperation with British Columbia to form a working group of relevant state departments and provincial ministries to improve stakeholder involvement in transboundary issues, an agreement the State Department was anticipating, according to Frifield. Elwood Brehmer can be reached at [email protected]

Agreement reached with Canada over B.C. mining projects

Alaska Lt. Gov. Byron Mallott signed an agreement with Canadian officials Thursday, marking a step toward cooperation in protecting Southeast Alaska’s border-straddling rivers from proposed mining projects in British Columbia. The Statement of Cooperation establishes a working group of commissioners from three Alaska State Departments and deputies from two Canadian ministries to facilitate ongoing discussions on transboundary mines between the Alaska, B.C. and stakeholders from tribal and environmental groups. “I am pleased that we were able to move forward with this measure,” Mallott stated in a Thursday press release. “It is another step in Alaska’s commitment to open and transparent collaboration with our Canadian neighbors on the vital issue of safeguarding our precious transboundary watersheds that feed our people and nourish our cultures.” Mallott signed the SOC in Anchorage, conferencing via video with B.C. Minister of Energy and Mines Bill Bennett and Minister of Environment Mary Polak, who also signed the SOC. Mallott has worked with Canadian officials and tribal and environmental organizations to draft the statement since late 2015. “British Columbia and Alaska have a long history of working together and supporting each other, as good neighbors do,” Bennett said in a prepared statement. “This Statement of Cooperation between British Columbia and Alaska ensures we are working together effectively on trans-boundary water quality, environmental assessments and permitting for mine projects, and reporting on mine discharges, operations and closure.” The statement is legally non-binding, but does not preclude Alaska from seeking federal intervention in the issue, something environmental, tribal and fishing industry groups say is crucial to protecting Alaska’s salmon interests. “It’s not legally binding, so overall things don’t change,” Frederick Otilius Olsen Jr, Chair of the Tribal Transboundary Mining Working Group said by phone. “This is an international issue and we need international solutions. This being nice across the border is nice, but that’s all it is, it’s just nice talk.” Olsen was referring to intervention from the International Joint Commission, a U.S.-Canadian federal group tasked with settling disputes over shared waters. Olsen and officials from 11 other Southeast tribal, environmental and fishing industry groups have previously signed letters asking for IJC intervention. Alaska’s Congressional delegation has also requested federal intervention through the IJC, petitioning Secretary of State John Kerry to explore the issue in two letters, the most recent sent Sept. 8. Olsen cited a May report from British Columbia’s Auditor General which found “major gaps in resources, planning and tools,” in B.C.’s mining regulation. The report also found B.C.’s mines underinsured for watershed cleanup by $1.2 billion, money that would be needed for a cleanup in the event Canadian mines pollute Alaskan waters. “The SOC is just one step,” Heather Hardcastle, campaign director for Salmon Beyond Borders said in a phone interview Thursday. “Alaskans have been seeking for a while now binding agreements that can only come from intervention from the federal government.” Olsen and Southeast Alaska Conservation Council’s Guy Archibald also expressed concern over some of the statement’s language, which they say is too vague. Archibald stressed that the phrase “significant degradation,” as it’s defined in the SOC, could leave the door open for mine pollution. “No lowering of Alaska’s water quality by BC mines should be allowed,” Archibald wrote in an email to the Empire. “In Alaska, any lowering of water quality requires the polluter to go through a public process. … Even under a permit, the lowering of water quality cannot be to the point where the designated uses, such as maintaining aquatic life, are lost. Is this giving BC the right to lower our water quality to that point without it being considered significant?” Kevin Gullufsen can be reached at [email protected]

Gold prices rising as Donlin mine keeps plugging on EIS

With gold prices on the rebound, it’s full steam ahead for the Donlin Gold mine in Western Alaska. Donlin Gold spokesman Kurt Parkan said in an interview that “things are moving along pretty steadily” as the company continues through the federal environmental impact statement, or EIS, process. A variety of other state and federal permits are being sought in concert with the multi-year EIS process, according to Parkan. As far as the EIS goes, the ball is the U.S. Army Corps of Engineers’ court for now. The Corps is the lead permitting agency for the project. “We’re still waiting to hear back from the Corps of Engineers on follow-up that might be necessary after they had a chance to review the (public) comments that they’ve received,” Parkan said. The Corps, which received about 540 written comments during an extended public comment period, is expected to come back to Donlin with any unresolved issues that arose from public comments or that it discovered by the end of September, he added. Release last November of the draft EIS marked, to that point, the culmination of 20 years of work on Donlin. Early resource definition of the gold prospect began in 1995. Donlin Gold is a 50-50 joint venture of Canadian mining companies Barrick Gold Corp. and NovaGold Resources. A $6.7 billion endeavor with a footprint from Cook Inlet to the Aleutian Islands, the Donlin Gold mine is the definition of a megaproject. At the heart of the project is a prospective conventional open-pit gold mine 1.5 miles across and up to 1,200 feet deep located about 10 miles north of the village of Crooked Creek in the Upper Kuskokwim River drainage. At that size, Donlin is projected to be the largest open-pit gold mine on Earth. As initially planned, Donlin Gold would produce about 1.1 million ounces of gold per year over a 27-year mine life for a total of about 33 million ounces of the precious metal. The mine site, on lands owned by The Kuskokwim Corp. and Calista Corp., the area village and regional Native corporations, respectively, would also include a fully lined, 2,300-acre tailings facility to store the processed ore. Support infrastructure would include a 315-mile, 14-inch diameter natural gas pipeline originating on the west side of Cook Inlet need to supply fuel to the 227-megawatt capacity power plant at the mine site. The pipeline has also been viewed as a first, indirect step to getting lower cost natural gas to numerous villages in Western Alaska that currently rely on fuel oil their primary heat and electricity sources. A 30-mile road would connect the mine to a new barge port on the Kuskokwim. Further down the Kuskokwim, port cargo facilities would be expanded in Bethel, and new diesel storage tanks would be needed Dutch Harbor to supply fuel for equipment at the mine. The EIS includes an alternative that calls for LNG-powered equipment, which would reduce the risk of a barged fuel spill on the Kuskokwim, but also require construction of an on-site natural gas liquefaction plant. Once Donlin has heard back from the Corps, Parkan said it would likely take the company until late 2017 to release the final EIS, pushing back the overall timeline slightly. The Corps of Engineers’ project EIS website estimates a final EIS early next year. “It always takes a little longer than you hope it would,” Parkan said. The public comments on the project were mostly in line with what was expected, he said. However, a stance opposing the project emerged from the Yukon-Kuskokwim Health Corp. because jobs at the mine could provide a means for people in the region to move elsewhere while making a long range commute to the mine on a rotating work schedule. Parkan said simply that Donlin Gold feels the up to 1,400 jobs the mine would support would ultimately be a significant benefit to the Yukon-Kuskokwim region that is one of the poorest in the country. “People are already moving out of the region because they don’t have jobs,” he said. “If you bring jobs into the region you might stop that flow of outmigration. People could stay home and take care of their families; they could afford to hunt and fish, which is part of the problem that exists now.” Donlin estimates up to 3,000 workers will be needed during construction if the mine is built. The company has often touted its record of about 90 percent local hire during the exploration and study phases of the project. The concerns over outmigration were one of several points raised by the Yukon-Kuskokwim Health Corp. in opposition to Donlin, which included potential damage to the salmon and wildlife resources people in the region rely on for subsistence harvest. When the draft EIS was released last year, Donlin General Manager Stan Foo said the project would not be built at gold prices at the time of less than $1,100 per ounce; and while the long-term viability of the project is not completely at the mercy of metal prices any one day, gold is currently trading at about $1,350 per ounce. Parkan said there is no definitive price at which the mine is a go. Donlin’s owners are committed to getting through permitting and then will evaluate how gold prices could impact the project, he said. “The more above $1,200 (per ounce of gold) the happier we are,” Parkan added. Elwood Brehmer can be reached at [email protected]  

Wishbone Hill permit awaits federal call after court order

Usibelli Coal Mine Inc.’s operating permits for its Wishbone Hill coal development are “in limbo” after a July 7 federal court order, according to officials in the state Department of Natural Resources. Alaska Coal Program Manager Russell Kirkham said the state is waiting on a decision from the federal Office of Surface Mining, Reclamation and Enforcement before it acts on the coal permits. “We have not taken the step to terminate the permits,” Kirkham said. “Right now the permits are there but they’re pretty much in limbo until the final order comes out.” Usibelli’s Wishbone Hill is a longstanding proposed surface coal project on state land northeast of Palmer along the Glenn Highway. U.S. District Court of Alaska Judge Sharon Gleason’s July 7 ruling ordered the Office of Surface Mining to reevaluate its November 2014 decision that indirectly validated Usibelli’s permits for the mostly idle project. A group of environmental organizations, including Cook Inletkeeper, Alaska Center for the Environment, the Sierra Club, and the Chickaloon Village Traditional Council, sued the Office of Surface Mining in March 2015, claiming the Interior Department agency did not enforce its own requirement to pull permits if mine work does not start within the permit period. Gleason largely agreed, and determined that the federal regulators failed to follow the law by allowing DNR to implicitly renew and extend the permits without the commencement of mining activities. The permits to operate can be renewed for up to five years or extended for three. The State of Alaska holds primacy over federal coal mining regulations. Thus, DNR handles all permitting and the Office of Surface Mining intervenes only if required to do so. Specifically, language in the federal Surface Mining Control and Reclamation Act stating operating permits “shall terminate” if mining activity has not occurred within the permit period. Gleason wrote, it “is unambiguous, in that a surface mining permit terminates by operation of law if mining operations have not timely commenced under that statute, unless an extension has been granted pursuant to the statute’s terms.” Kirkham said the federal mining regulators are working on a new decision that jives with Gleason’s ruling and the state is waiting for that decision, which is expected soon, before taking further action. “In this case the district court, reversing the federal Office of Surface Mining, held that the termination provision of a federal surface coal mining statute is self-executing. The decision was not, in itself, a ruling on the validity of the Wishbone Hill permits. Instead the court has remanded the matter to the federal agency for further proceedings where that question and others may be resolved.  We are continuing to review the decision and appropriate next steps,” according to a statement from the Alaska Department of Law. Office of Surface Mining Western Region officials, located in Denver, could not be reached for comment. Usibelli acquired the Wishbone Hill project in 1997 from North Pacific Mining Corp., a Cook Inlet Region Inc. subsidiary. The mining company then applied for and received several five-year permit renewals from DNR through 2014. The first state permits to operate the mine were issued to Idemitsu Alaska Inc. in 1991. Idemitsu was granted one extension before it sold the project to North Pacific Mining in 1995. Early coal mining operations started in 2010 when Usibelli began work on a road to the mine site. About that same time, Usibelli started a feasibility study on the project, according to company spokeswoman Lorali Simon. Office of Surface Mining Western Region Division Manager Robert Postle wrote in the November 2014 notice to state coal regulators that DNR was correct in not taking action against Usibelli for operating at Wishbone Hill without permits because the company’s permits had not been terminated. However, that was only because DNR didn’t follow the appropriate procedure when it implicitly granted extensions to the companies that owned Wishbone Hill before Usibelli by not actively pulling the permits, according to Postle. “To terminate a permit, the regulatory authority must take affirmative action based on the record,” Postle wrote in 2014. “In this case, DNR failed to do so, and consequently, Usibelli was not operating without a permit. I find that DNR, consequently, had ‘good cause’ for not taking action against Usibelli for operating without a permit. I also find, however, DNR had a responsibility to issue prompt determinations on the failure of Usibelli’s predecessors to initiate mining and that it failed to do so. This situation cannot be allowed to happen again.” The 2014 notice to the state was spurred by a citizen’s complaint filed with the Office of Surface Mining by several of the same groups that filed the lawsuit against the federal agency. The complaint requested federal action to stop coal mining operations at Wishbone Hill until Usibelli obtained valid permits. Usibelli, which operates the state’s lone active coal mine near Healy in the Interior, has invested millions of dollars in Wishbone Hill and still has plans to bring the mine, Simon said, but a myriad of factors have always prevented that. She said DNR has been continuously apprised of Usibelli’s plans and consequently kept approving the permits and that Gleason “erred because she did not recognize the state’s primacy” over coal mining operations. “Because the ball is in (the Office of Surface Mining’s) court, we’re waiting to see what OSM says to DNR,” Simon said. Elwood Brehmer can be reached at [email protected]  

Federal court vacates oft-renewed Wishbone Hill permit

Usibelli Coal Mine Inc. is reviewing its options for the proposed Wishbone Hill mine after a July 7 ruling in the U.S. District Court of Alaska that vacated permits for the project. District Court Judge Sharon Gleason ordered the state and federal permits for the planned surface coal mine north of Palmer vacated because Usibelli failed to develop the mine within the time allowed by the permitting process, according to her 35-page order. A group of environmental organizations, including Cook Inletkeeper, Alaska Center for the Environment, the Sierra Club, and the Chickaloon Village Traditional Council sued the federal Office of Surface Mining Reclamation and Enforcement in March 2015, claiming the Interior Department agency did not enforce its own requirement to pull permits if a mine is not operational within three years of permits being issued. The mine site is between Palmer and Sutton on state land near the Glenn Highway. The State of Alaska, which has assumed primacy, or management, of the federal permits, was an intervenor defendant in the suit, along with Usibelli. Lisa Wade, a member of the Chickaloon Traditional Council, called it “shameful” that the state Department of Natural Resources and the Office of Surface Mining allowed Usibelli to hold the permits for so long. “Usibelli is trying to start up a toxic coal strip mine on lands that are sacred to us, using a permit that was issued 25 years ago. This mine threatens our children’s health, our salmon, our water and air quality, our traditions and our way of life,” Wade said. Usibelli operates its namesake coal mine near Healy, about 120 miles south of Fairbanks along the Parks Highway. It is the only active coal mine in Alaska and is the oldest continuously operating mine in the state. Usibelli has said the Wishbone Hill would produce about 500,000 tons of coal per year and employ between 75 and 125 workers. The majority of the company’s current production is sold in state. Coal exports to Asia and Chile have slipped in recent years as a strong U.S. dollar has made exports expensive. The company made a single export sale in 2016, sending a load of 75,000 tons to Japan this summer. The first two Wishbone Hill permits were issued to Idemitsu Alaska Inc. in 1991. After DNR issued one extension, Idemitsu sold the project to North Pacific Mining Corp., a subsidiary of Cook Inlet Region Inc. in 1995. Usibelli acquired the project in 1997 and requested several five-year permit extensions through 2011 that were granted by DNR. “Neither Usibelli’s 2001 permit renewal request nor its 2006 permit renewal request contained a request for an extension of the time to commence mining operations; likewise, each permit renewal by DNR was silent in that regard,” Gleason wrote. Early coal mining operations started in 2010 when Usibelli began work on a road to the mine site. About that same time, Usibelli started a feasibility study on the project, company spokeswoman Lorali Simon said. Usibelli, which Simon said found the ruling “surprising,” is analyzing its path forward, but still sees significant value in Wishbone Hill. She said the company has invested millions of dollars in the project based on the assumption that it was properly permitted, but “the planets never aligned” to bring it into production. “(Wishbone Hill) remains important to us. It is something that we are very determined to further develop,” Simon said in an interview. She noted that DNR and the Office of Surface Mining were always well informed about Usibelli’s plans and thus kept approving the permits. Despite that, Gleason concluded that the letter of the law, which states, “(A coal mining) permit shall terminate if the permittee has not commenced the surface mining operations within three years of issuance of the permit,” according to her ruling, trumps any extenuating circumstances in regards to Wishbone Hill. Simon said lawsuits such as this one just brings “further divisiveness” between companies like Usibelli and anti-development groups. “This is another indicator of how this country’s regulatory system is based on process versus purpose,” she said.  

Alaska delegation asks Kerry to review transboundary mining

Alaska’s congressional delegation responded to continued concerns from Southeast Alaskans about Canadian mine plans by asking Secretary of State John Kerry to look into whether environmental practices across the border are worthy of scrutiny under a bilateral treaty. Rep. Don Young and Sens. Lisa Murkowski and Dan Sullivan sent a letter to Kerry May 12 requesting the State Department to question Canadian officials about the impact active and proposed hard rock mines in British Columbia and the Yukon could have on salmon in several large “transboundary” rivers. “Like most Alaskans, we strongly support responsible mining, including mines in Southeast Alaska, but Alaskans need to have every confidence that mining activity in Canada is carried out just as safely as it is in our state,” the delegation wrote. “Yet, today, that confidence does not exist. “Proposed mining development in the Stikine, Taku River, and Unuk watersheds has raised concerns among commercial and recreational fishermen, tourism interests, and Alaska Native communities regarding water quality maintenance of the transboundary rivers that flow by their homes and onto their fishing grounds.” The letter references seven active or planned mines just on the British Columbia side of the border from Southeast Alaska. It specifically notes that the long-closed underground Tulsequah Chief metal mine in the Taku drainage northeast of Juneau has been leaking acidic wastewater into the river for many years. Late last year, Canadian government officials finalized efforts to reduce the leakage but did not require the mine’s water treatment facility be restarted. There have also been proposals to reopen the Tulsequah Chief project. Also last November, Gov. Bill Walker and British Columbia Premier Christy Clark signed a non-binding memorandum of understanding, or MOU, to establish a Bilateral Working Group on the Protection of Transboundary Waters. The Alaska side of the group, tasked with facilitating an exchange of best practices, marine safety and joint visitor industry promotion among other things, is led by Lt. Gov. Byron Mallott. The delegation did not go as far as to ask for action by the International Joint Commission, or IJC, which was established in 1909 to resolve disputes over how actions in one country could impact watersheds shared by both. It did, however, urge Kerry to “utilize all measures at your disposal to address this issue at the international level” and decide if the “IJC is a suitable venue to determine whether Canadian mines are following ‘best practices’” for wastewater and mine tailings treatment. Also highlighted in the delegation’s letter is a British Columbia Auditor General report released earlier this month that is highly critical of the province’s oversight of mining activity. Additionally, it asked for a more formal consultation process with state agencies, Tribes, and Alaska Native corporations during Canadian mine permit reviews. While numerous Alaska environmental, commercial fishing, and Alaska Native groups have called for IJC involvement, the commission can only be spurred by a formal call from either the State Department or Canada’s Global Affairs Department. Those groups lauded the delegation in formal statements reacting to the letter. “This powerful statement underscores that Alaskans, regardless of political party, want Secretary Kerry to address (British Columbia) mining with Canadian officials so that clean water and healthy salmon runs will support our economy for generations to come,” Salmon Beyond Borders director Heather Hardcastle said. Originally, IJC intervention was intended only when both governments submit a “letter of referral” asking for the commission to resolve a dispute. Over time that procedure has morphed and both countries have at times singularly requested IJC involvement, which has often been granted. The commission’s recommendations are nonbinding but generally adhered to in an effort to maintain a cooperative relationship between the countries. Throughout its history the IJC has been intensely involved in water and air quality issues related to development along Canada’s border with the Lower 48. However, it has never ruled on or heard a water-related contention regarding the Alaska-Canada border, according to a statement on its website. British Columbia Minister of Energy and Mines Bill Bennett has said in interviews with the Journal and the Juneau Empire that the issues are not with the province’s environmental regulations and enforcement, but rather with better communicating with Alaskans how thoroughly British Columbia monitors its mines. The province has taken significant heat for the Mount Polley mine tailings dam failure in 2014, which a government investigation concluded was caused by design flaws. B.C. regulatory report British Columbia Auditor General Carol Bellringer pulled no punches in a lengthy report released May 3 calling for an overhaul of the province’s environmental regulation enforcement practices. “We found almost every one of our expectations for a robust compliance and enforcement program within the (Ministry of Energy and Mines) and the (Ministry of Environment) were not met,” Bellringer wrote in comments on the report. “We found major gaps in resources, planning and tools. As a result, monitoring and inspections of mines were inadequate to ensure mine operators complied with requirements. The ministries have not publicly disclosed the limitations with their compliance and enforcement programs, increasing environmental risks, and government’s ability to protect the environment.” The 109-page report plainly entitled, “An Audit of Compliance and Enforcement of the Mining Sector,” recommends the responsibility to enforce environmental regulations be pulled from the Ministry of Energy and Mines. The ministry is also tasked with promoting resource development, which Bellringer described as being “diametrically opposed” to its regulatory enforcement mandate. As a result, the report recommends British Columbia establish an independent compliance and enforcement unit for mining activities to ensure environmental protection. The report also contends Energy and Mines relies too heavily on individuals referred to as “qualified professionals” — industry’s technical experts that are trusted to monitor the mine construction and operation. “It is not (the Ministry of Energy and Mines’) practice to carry out its own technical review [or to oversee an independent technical review] to confirm that tailings dams are built in accordance with the design and technical standards,” the report states. Provincial government officials retorted in a response included in the report that the audit team failed to clarify what regulatory compliance and enforcement programs should be measured against. Government’s response also pushed back against the charge that Energy and Mines officials cannot handle the responsibility of both promoting and regulating the mining industry. “We do not accept that mere appearances are sufficient to warrant the act of removing compliance and enforcement from (Energy and Mines),” government officials wrote. “No one is more aware of the need to find the appropriate balance between promotion and regulation of mining in ministry decision-making than those who are asked to do so on a daily basis.”

Borough files to dismiss suit by Red Dog over severance tax

The Northwest Arctic Borough has filed for summary judgment to dismiss a lawsuit brought against it by Teck Resources, the Canadian owner of Red Dog Mine 90 miles north of Kotzebue. Teck filed a lawsuit against the borough on Jan. 15, alleging the borough’s new severance tax is unconstitutional. The borough insists it has the taxing authority granted to any home rule government. The new severance tax would increase the amount Teck pays the borough from $12 million in 2015 to an estimated $30 million to $40 million in 2016.  The mine, the world’s largest zinc source and a large lead producer, forms the backbone of the region’s economy. The state formed the borough in 1986, coinciding with the mine’s development and opening in 1987. Because the new borough would take time to decide its tax structure, it enacted a payment in lieu of taxes, or PILT, agreement with Teck in 1987. Under the PILT, Teck has paid approximately $140 million to the borough and the borough school district over the years. The borough relies on Red Dog for about 70 percent to 80 percent of its annual revenue, alongside its annual $12.5 million state general fund allotment. The borough levies no property or sales taxes on private citizens or any other taxes on businesses. According to Teck, Red Dog supports 715 mine-related jobs with $75 million in annual payroll, and the company spends $160 million on supplies within Alaska each year. More than 600 of the jobs are held by shareholders of NANA Regional Corp., the Alaska Native regional corporation for the area. PILT vs. severance Teck makes several key arguments against the severance tax. Most pointedly, Teck argues that the tax unfairly singles out the mine, which uses virtually no borough services. “Rather than distributing the tax burden among different classes of taxpayers or different economic activities, this Borough imposed its entire tax burden on one taxpayer,” reads the most recent filing from Teck, dated April 29. “There is evidence that the Borough has taken this approach for illegitimate reasons, deliberately targeting only one captive taxpayer and doing so with the stated purpose of confiscating what the Borough considers its ‘equitable share’ of Teck’s profits, while declining to take any share of the profits earned by any other person or entity in the Borough.” Teck also argues the borough failed to live up to its terms of agreement. The borough created the severance tax by ordinance, rather than through negotiations with Teck.  In 2009, the borough created a severance tax effective Jan. 1, 2012. In 2011, the borough renegotiated a PILT agreement with Teck that exempted it from the 2009 severance tax. Under this agreement, Teck paid the borough and its school district more than $57 million between 2011 and 2015. The 2011 PILT expired at the end of 2015, but gave Teck the option to renegotiate another PILT. Instead, Teck argues the borough passed two ordinances that terminated the ability of mining operations to negotiate another PILT, and another that raised the severance tax rate by 50 percent. “The combined effect of these ordinances was to dramatically increase the tax, prohibit the Borough from entering into a PILT that would provide for reduced payments, and prevent the Borough from renegotiating the 2011 PILT Agreement in good faith, as provided in paragraph 5 of the 2011 PILT Agreement,” the complaint argues. The borough says the it has every right to implement constitutionally sound excise taxes how it sees fit, and that it never intended the current PILT system to stick around forever. When the mine first broke ground, the borough said, its prospects were uncertain. Now the time has come to properly tax a profitable organization. “The Northwest Arctic Borough has an obligation to raise revenue to fund greatly-needed public services,” reads the motion to dismiss filed March 1. “The PILT structure was intended to support an uncertain prospect and an unprofitable mine; it was never intended to continue indefinitely to the benefit of Teck shareholders and to the detriment of Borough residents.” The borough cites several correspondences between the two entities as proof it negotiated with Teck; the fact the two parties were unable to reach an agreement Teck liked, attorneys said, does not mean there were no negotiations. As a home rule government, the borough says, it can implement excise taxes as it pleases, which includes severance taxes. “In Liberati v. Bristol Bay Borough, the Alaska Supreme Court stated, ‘[a] severance tax is a tax upon the taking or extracting of a resource,’” reads the motion to dismiss. The borough cites similar taxes in Montana enacted on coal industry as proof they meet constitutional muster. In the April 29 response, Teck wrote the Montana tax is dissimilar; it wasn’t literally the only tax in the area, as it is for Teck. “The Borough has arbitrarily singled out Teck as the sole ‘person’ that must pay virtually 100 percent of the Borough’s tax burden, and it has arbitrarily singled out Teck’s mining activity and NANA’s mineral resources to bear virtually 100 percent of the Borough’s tax burden,” the filing reads. NANA’s stake NANA Regional Corp., the Alaska Native regional corporation for the area, owns the land on which Red Dog Mine operates. As both a direct beneficiary of Teck’s operations and the representative organization for the Alaska Natives in the borough, NANA has a vested interest for both parties to remain happy. Shelly Wozniak, senior communications director for NANA, said the corporation wants to find a balanced way to provide the borough with revenue without cutting too far into Teck’s bottom line. “Finding a solution that’s a win-win is in the best interest of the region,” said Wozniak. The borough mentions the “detriment of borough residents” as a possible outcome of failure to implement a severance tax, but Teck’s royalties to NANA, at least, have been substantial. NANA underlines the mine’s importance to the region’s residents as both an employment source and a mainstay for the corporation’s revenue. “We are concerned about jobs,” according to an official NANA statement on its website. “A reduced operating budget for the mine will mean fewer jobs for NANA shareholders. Since 1989, NANA shareholders have received more than $469 million in wages by working at Red Dog. In 2015, approximately 603 NANA shareholders worked at the mine earning $39.3 million in wages.” Aside from the employment, Teck’s presence fills Alaska Native corporation coffers. Since 1989, Teck ‘s operations at Red Dog Mine have paid $1.3 billion to NANA. Not only NANA has befitted directly from the mine. The other 11 Alaska Native regional corporations have collected between $12 million and $172 million apiece from Teck since the mine began operations. As part of the Alaska Native Claims Settlement Act, which established regional Native corporations in 1971, Native corporations distribute royalty income from their lands in what’s called 7(i) sharing. Named for the section of ANCSA, it requires all regional Native corporations to give 70 percent of all timber and subsurface mineral resource revenues to the other regional Native corporations, relative to how many shareholders each has. ANCSA then requires half of the 7(i) funds from the regional Native corporations to be distributed to the Native village corporations within that respective region. Under 7(i) sharing, NANA has paid $820 million since 1989 as a direct result of Red Dog Mine’s revenue. NANA has retained $480 million from Red Dog Mine. In the mine’s lifetime, NANA paid a total $221 million to its shareholders from the mine’s proceeds. The borough’s argument to raise severance taxes in some ways mirrors the debate over raising state oil taxes. NANA has concerns that the severance tax will stymie mining exploration projects. NovaCopper, Inc. is currently exploring mineral projects in the Upper Kobuk region. If the borough’s severance tax cuts too deeply into Teck’s pockets, other mining operations could be scared off. “We believe the tax endangers NANA and non‐NANA funded exploration projects by changing the economics,” according to the statement on NANA’s website. “Future responsible development in the region is a key business strategy so NANA can continue to deliver cash benefits to shareholders.” DJ Summers can be reached at [email protected]  

Usibelli resumes exports with sale to Japan

After halting exports last September, the Usibelli Coal Mine at Healy is currently fulfilling an order for 75,000 tons for shipment to Japan. Railroad cars full of coal are now making the trek to Seward to be loaded once the ship arrives in mid-summer between June and July, according to a Usibelli Vice President for External Affairs Lorili Simon. Simon said the current order is for the single shipload. Japan was the only export customer for Usibelli in 2015, taking 150,000 tons. Usibelli supplies coal to six power plants in Interior Alaska including three plants serving military installations, one serving the University of Alaska campus in Fairbanks, one that is owned by Usibelli subsidiary Aurora that services local Fairbanks community with power and steam heat, and Healy 1, a 25-megawatt coal power plant at Healy that is adjacent to Healy 2, the plant that was began producing power last year. The Healy 2 owned by Golden Valley Electric Association will purchase about 200,000 tons per year. The mine produced about 1.2 million tons in 2015. In 2011, the mine exported a record 1.1 million tons.

Mental Health Trust exploring Icy Cape prospect

The Alaska Mental Health Trust Land Office is evaluating a heavy mineral prospect near Yakutat that could change the course of the agency for generations. Icy Cape is a long stretch of beach owned by the trust at the entrance of Icy Bay that appears to hold world-class deposits of several heavy minerals, according to Trust Land Office Executive Director John Morrison. “It’s difficult to quantify the value of (Icy Cape) in terms of heavy minerals; it’s just mind boggling,” Morrison said in an interview. “There’s enough heavy minerals there to run a really large mine operation for over 100 years and we’re talking about hundreds of millions of dollars every year.” The minerals are literally grains in the beach sand on a parcel of coastline that stretches for more than 30 miles and totals roughly 48,000 acres, Morrison described. Trust officials stressed that the resource evaluations are preliminary, but early drilling samples of the “ore” — sand, really — indicate up to 40 percent of the ore is heavy minerals in the broadest delta area near the point of the cape. Specifically, the samples are roughly comprised of 20 percent epidote, 19 percent garnet and 0.5 percent zircon. Epidote and zircon are semiprecious gemstones. Garnet has also been used as a gemstone for hundreds of years, but more recently the hard mineral has been put to use as an industrial abrasive on sandpapers and in sandblasting applications. It is also used in water filtration; garnet’s small pores allow for the passage of liquid while catching some contaminants. “We would be the only source for garnets on the West Coast,” Morrison said. “Specifically, there’s all sorts of metrics and parameters that the buyers of those types of materials would want and our garnets are the best you could have in terms of the size of the crystals and the way they’re fractured.” The Icy Cape sands also contain gold concentrates of about 1.4 grams per metric ton, according to the early exploratory results. The sands are comprised of two sediment patterns coming from opposite directions, those materials that have eroded and washed down from the steep mountain faces above and sediments that tidal and wave action have pushed up to the shoreline. If the preliminary resource indications are proved on a larger scale, the minerals and metal in a tonne of Icy Cape sand could be worth $190 at current market prices, the Trust Land Office estimates. The Trust Land Office manages roughly 1 million acres of land across Alaska for resource development, the proceeds of which go to fund the Alaska Mental Health Trust Authority’s work to benefit Alaskans with mental health and addiction challenges. Morrison said the trust is conservatively projecting that a full-scale mining operation could process up to 250 tonnes per hour for 270 days each year; that adds up to more than $300 million in gross revenue per year for 100 years, he said. The operation would likely start on a much smaller scale, however, of about 50 tonnes per hour, Morrison said, which would require about a $50 million investment. As a passive landowner the trust could expect to see about 20 percent of the gross revenue from any mine, but Morrison said he would hope to retain control as a more active investor and take “substantially more” risk and subsequent reward from the project. Trust Land Office revenues have varied greatly over its 20-year existence, as money from timber and land sales and other resource projects has come and gone. Since 2011, its annual revenue has been between about $10 million and $16 million; even a minority share of a $300 million per year mine would dwarf that. The City and Borough of Yakutat would also see a bump in its tax revenue from an Icy Bay mine operation, he noted. The processing, or relative lack thereof, required of the sand adds to the positivity of the prospect. Extracting the gold and heavy minerals doesn’t necessitate the intensive milling or chemical leaching common in large metal operations, meaning Icy Cape should theoretically be relatively simple to permit, according to Morrison. “It’s the sand. It’s placer mining. You literally just take a backhoe and scoop the sand into your separator as fast as you can and you get these various compounds,” he described. The Trust Land Office has held the Icy Cape property for almost all of its 20-year existence and held a timber sale there last year. Morrison said it has received interest from individuals wanting to placer mine gold at Icy Cape, but the plans were too small to entertain them. It was only recently when Icy Cape drilling samples from the 1990s were unearthed at the Alaska Geologic Materials Center in Anchorage that the Trust Land Office was spurred to do its own drilling last summer. This year the trust plans to conduct a low-altitude airborne magnetic survey and collect bulk ore samples to further delineate the resources. Then in 2017 the plan is to drill the magnetic anomalies to prove the high-grade, mineable zones, Morrison said. He added that the trust has already gotten interest from international mining companies that are supporting some of the exploration work and want to be a part of the larger development project. “I would say by the end of next summer we should be really headed down the path, depending on the results we get, of forming a joint-venture (partnership) to start the process of permitting a mine,” Morrison said. In the end, he forecasts small-scale production to start in five to eight years if all goes well. Elwood Brehmer can be reached at [email protected]

Package of tax hikes on fishing, mining and fuel stalls

A bill to raise taxes on fisheries, fuel and mining remains unscheduled for a House Finance Committee hearing after public objections. Gov. Bill Walker introduced a suite of proposals at the beginning of the session designed to hitch up taxes on state industries and individuals to help close the $4.1 billion budget gap. Fisheries, fuel, and mining tax increases had varied levels of support. Each remained on the committee backburners after being recommended to it weeks or even months ago. Senate Bill 132 and its mirror House Bill 249 were passed to their chambers’ finance committees on Feb. 29 and Feb. 24, respectively. The fisheries tax moved out of a lengthy House Fisheries Committee holding pattern on April 5. Mining taxes moved to the committee on April 1. To keep legislators from having to muster individual votes, the House Finance Committee folded the three industry tax increases into a three-part minibus on April 14. The adjusted tax minibus did not provide new estimates for the state’s likely revenue. Previous estimates for the three taxes indicated $80 million for the state. The bills’ complexities brought mixed receptions. Industry leaders acknowledged the need to pay for state services, but contested portions of the package they found inequitable.   At an April 16 hearing, the House Finance Committee responded to concerns by postponing a discussion scheduled for the next day. “After hearing public testimony last night,” said committee co-chair Rep. Steve Thompson, R-Fairbanks, “We’ve realized there are a lot of problems with the tax bill HB 249, and we’re going to set it aside for the time being.” In an April 15 committee hearing, the Alaska Chamber testified against the newly bundled tax increases. Chamber President and Chief Executive Officer Curtis Thayer said the state needs to look to its own finances before raiding the private sector.  “The public won’t support a host of new taxes,” Thayer said. “Not while the state is handing out double-digit raises. How can they when their friends and family members are losing their jobs?” Thayer said public employee contracts promise too much. He said that pay raises between 3.25 percent and 10.5 percent over three years are still being considered.  “They’re trying to fill a $4 billion dollar budget gap by hammering fishing and mining with $49 million in new taxes,” Thayer said. “Meanwhile, another $70 million in pay raises just widens the gap.” Fisheries tax increases in the omnibus received much of the same treatment as the standalone bill. Industry representatives repeated many of the same concerns they had voiced in the House Fisheries Committee. Objections were widespread concerning the various fishing sectors that would each be impacted by tax increases differently: canned salmon simply cannot handle a tax increase, floating processors and inshore processors need different treatment, developing fisheries cannot handle a tax increase, the state’s reputed fiscal loss on fisheries management is a red herring, and tax increases will make it harder for young fishermen to enter the industry. Fishermen previously wanted to make sure they would not be alone in tax increases. Committee chair Rep. Louise Stutes, R-Kodiak, held the bill earlier in session, saying she needed assurances that other industries would be taxed as well and that the existing fisheries taxes would be reexamined to maximize revenue to the state. With a modified bill and promises from the Department of Revenue to maximize existing fisheries taxes, the bill moved on to the House Finance Committee without opposition. Though the inclusion of the fisheries bill into an omnibus is a “step in the right direction,” said United Fishermen of Alaska, the states largest fishing industry group, they still do not support the package. Walker’s original bill would impose a 1 percent increase on both landings taxes and fisheries taxes on each fishery sector. The amended bill keeps the 1 percent increase for every fishery sector except the shore-based salmon cannery sector and the developing fisheries sector. A negative market outlook for Alaska fisheries caused many fishermen to reject the bill outright, saying they have little room to have more revenue scraped from their decks. Certain bill changes address two of the larger concerns for salmon canneries and developing fisheries. In previous testimony, representatives from the Pacific Seafood Processors Association spoke of the tax’s tone-deafness regarding the 2016 salmon market and how a tax increase could cripple canneries. Back-to-back years of large sockeye runs in the state’s largest salmon fishery, Bristol Bay, left salmon processors with a price-lowering glut of product. The U.S. dollar’s strength against key export market currencies added to the overstock to create a tough market outlook for salmon in 2016. Walker’s bill to increase state fuel taxes had support from some industry groups it would directly impact. The Senate Transportation Committee passed the bill onto the Finance Committee with lukewarm support on a 3-2 vote. Senate Bill 132, and its mirror House Bill 249, would raise the per gallon state fuel taxes as follows: highway fuel tax from 8 cents to 16 cents; marine fuel tax from 5 cents to 10 cents; aviation gasoline from 4.7 cents to 10 cents; and jet fuel from 3.2 cents to 10 cents. The legislation would correspondingly increase the per gallon highway fuel tax rebate for off-road use from 6 cents to 12 cents. In all, the tax hikes are projected to raise $49 million per year, according to the Revenue Department. The mining tax increase, originally HB 253, was badly received when introduced. It would raise the tax rate for mines with a net income of $100,000 or greater from 7 percent to 9 percent. This includes 14 mines statewide. The bill would eliminate a 3½-year tax exemption for new mines and implement a fee for mining licenses. Mining taxes collected $38.6 million in 2015 according to state records. The increase would collect another $6 million per year. DJ Summers can be reached at [email protected]

Bokan mine development slowed as rare earth prices dip

Development of the Bokan Mountain rare earth mine is on hold as the company leading the project focuses on a new processing technology and waits for rare earth metal prices to rebound. Nova Scotia-based Ucore Rare Metals Inc. finished infill drilling and drilled groundwater monitoring wells in 2014, leaving it at a natural stopping point before moving towards the next steps of development. Ucore Vice President Randy MacGillivray said in an interview the company has delineated a resource of approximately 5 million tons that is 0.65 percent total rare earth metals. Bokan, located on the southern part of Prince of Wales Island in Southeast, would be an underground mine. Rare earth metals are used in small amounts in countless technology applications. Their prices have softened in recent years along with other, more well known metals and commodities. MacGillivray said because the mine would harvest up to 15 rare earth metals it is hard to set a definitive price point at which Ucore would initiate a full-fledged feasibility study or jump into the environmental impact statement process. “Certainly a movement towards increased metal values in the rare earth metal sector and or us being able to tie up an end user agreement with defined prices would encourage development,” he said. However, there is no timeline for starting permitting. Instead, Ucore has invested in molecular recognition separation technology that has been used for other metals but not with rare earths, according to MacGillivray. Generating a revenue stream from that investment could also help the junior mining company fund Bokan, he said. Based on Ucore’s preliminary economic assessment, the mine would cost $220 million to construct over two years and employ up to 300 people during that period. Ucore has “drilled off” a resource base to support operation for 10 years, which would require about 190 jobs, he said. MacGillivray said Ucore continues to strengthen its baseline environmental work for the project. In 2014, former Gov. Sean Parnell signed legislation authorizing the Alaska Industrial Development and Export Authority to finance up to $145 million for Bokan’s construction. Elwood Brehmer can be reached at [email protected]  

Greens Creek mine reports record silver production in 2015

Hecla Mining Co. announced annual results that included record silver production at its Greens Creek mine near Juneau. Greens Creek had production of 2.6 million and 8.5 million ounces of silver in the fourth quarter and full year of 2015, respectively, an increase of 4 percent and 8 percent over the same periods of 2014. It was the highest annual silver production since Hecla acquired 100 percent of the mine in 2008. According to the company, silver production increased over 2014 levels due to higher silver ore grades, particularly during the fourth quarter of 2015, as well as higher metallurgical recoveries. Overall, Hecla announced 2015 sales of $443.6 million and gross profit of $38.5 million, with net loss applicable to common stockholders of $87.5 million, and an adjusted net loss applicable to common stockholders of $34 million. Hecla President and CEO Phillips S. Baker Jr. said he was pleased with the results. “We believe we are one of few precious metals companies growing right now, not just in reserves but in production as well,” Baker said in a release. “Because our balance sheet allowed us to continue investing during the price decline of the last few years, we expect more than a 15 percent increase in silver production and about a 10 percent increase in gold production this year, positioning us to take advantage of the rally in prices we have seen in 2016.” At Greens Creek, capital spending was $46 million, including $20.7 million for a tailings pond expansion. Capital spending for Greens Creek in 2016 is estimated to be $48 million, of which approximately $14 million is for the tailings expansion project. Cash cost, after by-product credits, per silver ounce at Greens Creek was $4.18 and $3.91 for the fourth quarter and full year, respectively, compared to $2.74 and $2.89 for the same periods in 2014. The increase in cash costs, after by-product credits, per silver ounce for 2015 compared to 2014 is the result of lower by-product credits due to decreasing metal prices, partially offset by increased silver production.

Federal officials consider Donlin mine’s subsistence impact

BETHEL — Two federal agencies have weighed in on the potential impacts the proposed Donlin Creek mine could have on subsistence along the Kuskokwim River. Donlin Gold LLC estimates it could excavate about 34 million ounces of gold over three decades from the proposed open pit mine near the village of Crooked Creek, KYUK-AM reported. The Army Corps of Engineers predicts that the mine would have a minor to moderate impact on subsistence practices and resources. “Minor are impacts that tend to be low intensity, temporary duration, and local in extent typically to common resources that may experience more intense longer-term impacts,” said Keith Gordon, Army Corps Project Manager for the Donlin project. Alan Bittner, field manager for the Bureau of Land Management, agrees that subsistence could be affected by the mine proposal. “When we looked at all three major components of the project, it seemed like there was significant potential for subsistence resources to be affected,” Bittner said. Plans for the mine project also include barging on the Kuskokwim River and a natural gas pipeline spanning 300 miles to Cook Inlet. “Simply put,” Bittner said, “this is a pretty big project. There’s big components to it, and our finding is that the possibility exists in any of those major components to affect subsistence resources.” The BLM is planning to gather feedback from the public as it looks further into how subsistence resources and access to those resources will be affected by the project. “So our preliminary finding is that it may (be affected), and we need to hear from people about whether that’s true for them or not — the individuals who are actually in the communities and subsistence is a part of their life,” Bittner said. The Army Corps, which is the lead federal agency creating the project’s environmental impact statement, is also looking to engage with the community by responding to their critiques and considering any alternative solutions they may have for the project. “And if they can give us some of those reasons, give us some information about why we need to do more, that gives us something we can look back at and determine if the analysis needs to go to a deeper level or needs to be expanded,” Gordon said.

Nome graphite mine progress slowed, but ongoing

Development of the Graphite Creek mine near Nome has been delayed, but progress continues on the project that could become the country’s lone such mine. Executive chairman of Vancouver-based Graphite One Resources Doug Smith said his company is moving from exploration to the technical and economic evaluation phases of the project. At the same time, Graphite One is in the midst of another round of fundraising, “a never-ending requirement in the business of junior mining,” Smith noted. He said large drill samples are currently being technically evaluated and results that will feed into the mine’s preliminary economic assessment should be available in late February. The Graphite Creek prospect sits about 40 miles north of Nome on the northern slope of the Kigluaik Mountains on the Seward Peninsula. It is about 10 miles from spur-road access to that region’s Taylor Highway. Considered a high-grade, large flake graphite deposit, Graphite Creek would give the U.S. a stake in the graphite market that has been dominated by Chinese mines for decades. Flake graphite is a primary component of potent lithium-ion batteries — the power cells for electric cars and storage banks for some renewable energy projects. The average lithium-ion battery is 16 percent graphite by weight, according to the U.S. Department of Energy. Smith said Graphite One is continuing to collect environmental data in parallel with community outreach and preliminary economic assessment work that will hopefully lead to a favorable feasibility study in a couple years. “As soon as the water starts to flow then we have water samples to get and those types of things,” Smith said in an interview. Initial development is likely three years out if all goes according to planned and funding is available, according to Smith. Earlier company predictions had mine development starting as soon as 2017. Graphite One spent nearly $10 million exploring the deposit between 2012 and 2014. The current inferred resource is 154 million metric tons averaging 5.7 percent graphite; the indicated resource is 18 million tons with an average graphite content of 6.3 percent. The indicated resource is more than 1.1 million metric tons of in-situ graphite. Some of the highest concentrations are up to 10 percent graphite making for what is believed to be a very high-quality resource, according to Smith. No drilling was done in 2015. “Our focus has been on lab work,” Smith said. However, further infill drilling is still needed to determine the exact scope of the mine, he said — indicated resources stretch for 750 meters. Base assumptions are for a 50,000-ton per year mine with an initial 15- to 20-year life, with the understanding it could run much longer. “We have a significant amount of graphite there for many, many years given the size,” Smith said. “We’d look at a 50,000-ton per year operation that’s, as mines go, not a large operation, but as graphite mines go that’s good size.” He described the future mine as a large quarry without some of the requirements of other mines. That the main resource is on the surface, making it easier to access, is another big benefit to the project. “The graphite goes through a milling process and then it goes through a float-sink process, but it does not go through a leaching process like a metal mine would,” Smith said. Development costs should be in the $125 million to $150 million range, with further investment needed if upstream processing into concentrates optimal for shipping can be done on-site, he projected. The potential workforce at the mine is still unknown because whether it will be a year-round operation is also undecided, given the quarry-style and seasonal barge access at the Port of Nome could make for a seasonal mine. In that case, a more intensive summer mining operation could add to the workforce and lead to processing in the mining off-season, Smith surmised. Elwood Brehmer can be reached at [email protected]

IG finds no bias in EPA Bristol Bay assessment

The Bristol Bay Watershed Assessment is on the up-and-up, at least according to the Environmental Protection Agency Office of Inspector General. Based on “obtainable records,” an Inspector General report issued Jan. 13 found no bias in how the EPA conducted its lengthy assessment of the potential impacts of mining within Bristol Bay watershed. The agency’s assessment process also met requirements for peer review and public involvement and followed appropriate procedures for verifying the quality of the information in the assessment before 1,000-plus page document was released to the public in early 2014, according to the report. While the report absolves the agency of misconduct regarding alleged bias, it notes that 25 months worth of missing government emails from the retired employee believed to be retired ecologist Phillip North could not be recovered and evaluated. Further, the IG notes that North used nongovernmental email to comment on a draft 404(c) petition submitted to the agency from tribes before it was officially submitted to the EPA. “We found this action was a possible misuse of position, and the EPA’s senior counsel for ethics agreed,” the report states. “Agency employees must remain impartial in dealings with outside parties, particularly those that are considering petitioning or have petitioned the agency to take action on a matter.” The 17-month IG review of the agency began in May 2014 and focused on the process used to develop the assessment. Its conclusion contrasts with a recent report authored by former Secretary of Defense William Cohen that was critical of the EPA’s process, finding the agency to be cozy with scientific and local Alaska Native groups that oppose Pebble Mine.  “EPA is pleased that the Inspector General’s independent, in-depth review confirms that our rigorous scientific study of the Bristol Bay watershed and our robust public process were entirely consistent with our laws, regulations, policies and procedures and were based on sound scientific analysis,” EPA Region 10 Administrator Dennis McLerran said in a formal statement. “We stand behind our study and our public process, and we are confident in our work to protect Bristol Bay.” The Bristol Bay Watershed Assessment ultimately determined that large-scale mining in the region would irreparably harm Bristol Bay’s world-class salmon fisheries that currently support much of the areas economy. Subsequently, the EPA used the assessment as its basis for using its Clean Water Act Section 404(c) authority to prohibit a large mine in the watershed, a proposal that would effectively kill the prospect of developing Pebble Limited Partnerships premier copper and gold deposits. The 404(c) action is on hold as a federal court tries to determine what the IG’s office and former Secretary Cohen could not agree on: whether the EPA conspired with Pebble opposition to reach the conclusion in the assessment. Pebble sought and received an injunction to halt the EPA’s work until the court case is resolved. Pebble CEO Tom Collier called the IG report an “embarrassing failure” and a “whitewash” in a formal statement. “Based on a limited number of documents received through (the Freedom of Information Act), we were able to place in front of the IG incontrovertible evidence that EPA had reached final decisions about Pebble before undertaking any scientific inquiry; that it had inappropriately colluded with environmental activists; that it had manipulated the scientific process and lied about its intentions and actions to both us and to U.S. Congress,” Collier said. “Just as importantly, our record shows that these abuses reach to the highest offices within the agency.” Officials from the EPA’s offices of the Administrator, Region 10, Water, Research and Development and a retired Region 10 ecologist, presumably Phil North, were interviewed for the IG report. Additionally, more than 8,300 emails sent or received by agency officials between January 2008 and mid-May 2012 were reviewed. North, who retired from the EPA in April 2013, has received national notoriety for his involvement in the Bristol Bay Watershed Assessment. Pebble supporters and general EPA critics have zeroed in on him as the likely link for the alleged collusion with mine opponents. Attempts by the IG to access North’s personal email through subpoena were unsuccessful, as his whereabouts are unknown, the report states. Because the IG could not find North, the office issued a subpoena to North’s lawyer, who refused to accept service on behalf of North. North also did not surface when subpoenaed for deposition last November in Pebble’s ongoing suit against the EPA in federal court. The IG recommended to the EPA that the agency incorporate examples of “misuse of position” in its ethics training as well as mandatory tribal training to define appropriate parameters for Tribal assistance by agency staff. Elwood Brehmer can be reached at [email protected]

YEAR IN REVIEW: Draft EIS for Donlin out; DNR issues Chuitna water decision

Donlin Gold reached a milestone Nov. 30 when the first draft of an environmental impact statement for the giant Western Alaska gold project was released by the U.S. Army Corps of Engineers. The draft EIS was 20 years in the making, as early resource definition work began at the Donlin claims in the Upper Kuskokwim River valley in 1995, according to Donlin Gold. A true mega-project, Donlin Gold’s $6.7 billion plan calls for a conventional open-pit mine 1.5 miles across and up to 1,200 feet deep about 10 miles north of the village of Crooked Creek in the Upper Kuskokwim River drainage. A tailings facility, large power plant, workers’ camp and 5,000-foot airstrip would accompany the mine. Also supporting the mine operation would be 315-mile, 14-inch diameter natural gas pipeline originating on the west side of Cook Inlet that is needed to fuel the 227-megawatt capacity power plant. The mine itself would produce more than 33 million ounces of gold from about 500 million tons of ore over an initial 27-year operating life, or more than 1 million ounces per year. It would process 59,000 tons of ore per day, according to the draft EIS. However, Donlin General Manager Stan Foo said shortly after the release of the EIS that gold prices would have to rise above current levels — less than $1,100 per ounce — to make the project feasible. Donlin Gold submitted its EIS application to the Corps in July 2012. A final EIS and subsequent record of decision are expected in mid- to late 2017. Foo estimated the draft EIS at over 7,000 pages, a compilation of information rarely matched for any resource development project, he said. During three to four years of construction, the mine would employ about 3,000 workers; once in operation the workforce would average about 800 employees. Calista Corp., the regional Alaska Native corporation, holds subsurface mineral rights for the mine. The Kuskokwim Corp., the area village corporation, holds surface rights. The draft EIS examines five project alternatives beyond Donlin Gold’s preferred alternative and the requisite no-action alternative. Of those, three would change the project in an effort to reduce barge traffic — specifically diesel barges — on the Kuskokwim River, which area residents rely heavily on for travel and subsistence salmon harvests. —Elwood Brehmer 2. DNR issues unprecedented water rights decision As PacRim Coal’s proposed Chuitna Mine is still early in the permitting process, the company, the state and stakeholders are haggling over who’s allowed to be involved. In October, the Alaska Mental Health Trust Authority appealed a Department of Natural Resources decision to grant certain water reservation rights to a non-state entity for the first time ever. Chuitna Citizens Coalition received an instream flow reservation, or IFR, for the lower portion of Middle Creek, a salmon spawning stream in the proposed mine’s area. Only Chuitna Citizen’s Coalition’s IFR for the lower section was granted by DNR. The coalition had also filed IFR requests for the middle and upper reaches. The coalition characterized DNR’s decision as a “dodge,” and a concession to the coal industry at the expense of Alaska salmon. The trust, which is overseen by the Department of Natural Resources and has large land allotments from which revenues are to support mental health needs, called the DNR decision “arbitrary” in its October appeal, and a dangerous precedent for allowing private parties to derail resource development. The Chuitna Citizens Coalition IFR is the first granted to a private group, rather than state organizations. PacRim is also filing an appeal of the DNR’s decision. —DJ Summers 3. Usibelli halts exports Usibelli Mine Inc., Alaska’s sole producing coal mine, has seen a long run of coal exports come to an end, at least until the end of 2015. For years the company routinely exported 600,000 tons to 800,000 tons of coal, although there were periodic dips in Pacific coal markets. In 2014 and 2015 coal prices dropped again in line with prices for other commodities, and competition for the available Pacific coal market stiffened. What has also complicated matters is a new tax in imported coal levied in South Korea, a prime customer for Usibelli. Adverse swings in currency values, with the U.S. dollar now at high levels compared to those of other nations, make imports from the U.S. including coal very expensive. Usibelli has also shipped to Japan, which it did in 2015, as well as to China and Chile. Coal has been mined by Usibelli at Healy and shipped by rail to Seward, a south Alaska coastal port city. A loading facility there loaded to coal on ships bound for overseas ports. The company’s exports dropped to about 200,000 tons in 2015 and so far there are no sales planned fro 2016, the company said. However, the core market in Alaska for the company remains firm at about one million tons of coal yearly and this will increase a bit in 2016 as the Healy Unit No. 2 coal-fired power plant at Healy becomes fully operational. The plant can produce 50 megawatts. The plant is owned and operated by Golden Valley Electric Association, the Interior power utility. Golden Valley also owns the smaller Healy Unit No. 1, a 25-megawatt plant. Usibelli supplies coal to both plants along with power plants in Fairbanks and at Interior Alaska military installations. Export prospects for Usibelli may improve if coal prices turn up, however. Usibelli’s long-term prospects remain positive, however. Coal is abundant in Alaska and it is the least-expensive source of energy for power generation, and the special quality of Alaska’s coals, with an ultra-low content of sulfur, ease any environmental problems caused by emissions. In addition the Healy 2 plant has new-technology emissions control equipment. Usibelli’s coal resources are also ample. At the present rate of production the company has about 1,000-year supply. — Tim Bradner    

Donlin environmental impact statement released

Twenty years in the making, the first draft of an environmental impact statement for the Donlin Gold mine proposed for Western Alaska was released Nov. 30. “It’s still a long path ahead of us, a lot of challenges ahead of us, but (the EIS) is a significant milestone,” Donlin Gold General Manager Stan Foo told the Resource Development Council of Alaska Dec. 3. Early resource definition work at the site began in 1995. A true mega-project, Donlin Gold’s $6.7 billion plan calls for a conventional open-pit mine 1.5 miles across and up to 1,200 feet deep about 10 miles north of the village of Crooked Creek in the Upper Kuskokwim River drainage. A tailings facility, large power plant, workers’ camp and 5,000-foot airstrip would accompany the mine. Also supporting the mine operation would be 315-mile, 14-inch diameter natural gas pipeline originating on the west side of Cook Inlet that is needed to fuel the 227 megawatt capacity power plant. To the south and east, a 30-mile road would connect the mine to a new barge port on the Kuskokwim. Further down the Kuskokwim, port cargo landing facilities would be expanded in Bethel, and new diesel storage tanks would be needed Dutch Harbor. In all, the direct supply chain in Donlin’s proposal from Cook Inlet to Dutch Harbor would cover approximately 1,050 miles. Donlin Gold is a joint venture between Barrick Gold Corp. and NovaGold Resources Inc. The natural gas pipeline would initially be only about half full as the average load of the power plant will be about 150 megawatts, according to Foo, leaving potential capacity for natural gas that could be used by local communities to offset high-cost, diesel-sourced heat and power. Assuming the cost of using Donlin’s pipeline and developing natural gas infrastructure in the region would be the responsibility of a third-party developer, Foo said. He said the scope of the Donlin project meant compiling a stock of information rarely matched in scale, much like the project proposal. The draft EIS, which is primarily shared in electronic form, would surpass 7,000 printed pages, he surmised. The mine itself would produce more than 33 million ounces of gold from about 500 million tons of ore over an initial 27-year operating life, or more than 1 million ounces per year. It would process 59,000 tons of ore per day, according to the draft EIS prepared by the U.S. Army Corps of Engineers. “Very few mines in the world produce more than 1 million ounces of gold each year,” Foo said. However, gold prices will need to improve between now and the time Donlin decides whether or not it plans to move forward with construction. Foo said the mine would not be feasible at today’s gold prices of less than $1,100 per ounce. The tailings storage facility, which would be the first full-lined facility in Alaska, he said, would cover approximately 2,300 acres. During three to four years of construction, the mine would employ about 3,000 workers; once in operation the workforce would average about 800 employees. Calista Corp., the regional Alaska Native corporation, holds subsurface mineral rights for the mine. The Kuskokwim Corp., the area village corporation, holds surface rights. Both have been “very supportive of the project,” Foo said. Donlin Gold submitted its EIS application to the Corps in July 2012. A final EIS and subsequent record of decision are expected in mid- to late 2017. The draft EIS examines five project alternatives beyond Donlin Gold’s preferred alternative and the requisite no-action alternative. Of those, three would change the project in an effort to reduce barge traffic — specifically diesel barges — on the Kuskokwim River, which area residents rely heavily on for travel and subsistence salmon harvests. The reduced barging options include using liquefied natural gas-powered equipment at the mine, thus reducing the need for diesel fuel; constructing an 18-inch diesel pipeline from Cook Inlet to the mine, which would replace the natural gas line; and moving the port site from Jungjuk Creek 69 miles downstream to Birch Tree Crossing to reduce the distance freight and diesel would travel on the Kuskokwim. An alternative that would use a dry stack method of tailings storage instead of the tailings pond and dam proposed by Donlin would avoid the risk of a tailings dam failure. The tailings under this option would be dewatered in a filter plant and saturated into a compactable cake material, according to the draft EIS. That material would then be spread into thin layers with bulldozers in a dry stack tailings area. The last alternative would shift the natural gas pipeline route slightly through the South Fork Kuskokwim valley. Comments on the draft EIS can be submitted to the Corps through April 30.


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