Year in Review: Mining

Transboundary concerns, Icy Cape prospect, Red Dog tax battle
  • The Chukchi Sea port at Red Dog Mine in the Northwest Arctic Borough is seen in this Journal file photo. The borough prompted a lawsuit from the mine owners in January after it voted to approve a severance tax to replace the payment-in-lieu-of-taxes regime that would raise the annual bill from $12 million to more than $30 million. (Photo/File/AJOC)

Alaskans worried about the potential impact of upstream Canadian mines on Southeast Alaska fisheries officially got their voices heard by the State Department after years of asking for federal intervention.

An assistant secretary of state wrote in an October letter to the Alaska congressional delegation that the State Department is actively engaged with Canadian officials to protect the “transboundary” watersheds that bisect the U.S.-Canada border along Southeast Alaska.

The October letter was in response to a September request 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 had 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.

The delegation characterized the State Department response as a significant positive step, but far from a resolution to the issue.

The massive 2014 Mount Polley mine tailings dam failure in the Upper Fraser River drainage validated concerns about gaps in Canada’s environmental protections, the Alaska Native, commercial fishing and conservation groups contend.

Also in October, on the same day as 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.

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.

— Elwood Brehmer

2. Icy Bay shows promise for Mental Health Trust

The Alaska Mental Health Trust Land Office spent 2016 reviewing a unique mining opportunity with the potential to change the financial course of the quasi-state agency.

Icy Cape, a long stretch of beach owned by the trust at the entrance of Icy Bay near Yakutat on the edge of the Gulf of Alaska, appears to hold world-class deposits of several sought-after heavy minerals, according to Trust Land Office officials.

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.

If 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 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.

It is likely to start on a much smaller scale, however, of about 50 tonnes per your, which would require about $50 million in investment.

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.

Trust leaders said they hope to further delineate the prime mineable zones of the beach and start down the process of funding and permitting the project, which would likely take several more years before first production.

— Elwood Brehmer

No. 3: Northwest Arctic Borough severance tax lawsuit

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.

— DJ Summers

12/21/2016 - 1:22pm