Donlin co-owner NOVAGold issues rebuttal to short-sale report

Investors will now decide who’s right and who’s wrong. NOVAGold Resources Inc. responded sharply on June 8 to a short-sale report calling the company’s massive Donlin gold project “fool’s gold” and a “pipe dream,” in reference to the lengthy natural gas pipeline that is planned to help power what would be one of the largest open-pit gold mines on Earth. Executives for NOVAGold said the May 28 short-sale report compiled by J Capital Research USA LLC is “error-ridden” and a “sucker punch” aimed at artificially degrading NOVAGold’s stock value. “When I first read JCAP’s report, my first reaction was to chuckle because the piece was clearly so fallacious that I initially assumed it had been written by a child — cooped up kids have far too much time on their hands these days — or, more likely, a disgruntled short-seller,” Thomas Kaplan, chairman of Vancouver-based NOVAGold wrote in a 17-page personal rebuttal. NOVAGold CEO Greg Lang said in a formal statement that the company has thoroughly reviewed the report and is evaluating its legal options against JCAP. Leaders of JCAP acknowledge on the firm’s website that they hold a “short” position in NOVAGold stock, meaning they stand to profit if the mining company’s stock loses value, but insist their report is fact-based and lays out a compelling argument as to why Donlin is “the deposit that will never be mined.” NOVAGold stock sold for $10.65 per share on the New York Stock Exchange at the close of trading May 27 before the short-sale report was released. It has since traded between $8 and $9 per share and closed trading June 23 at $8.77 per share. The JCAP report largely hinges on a common and often accurate refrain for Alaska resource projects: that despite its size, the 33 million-ounce Donlin gold deposit is simply too remote and technically challenging to be economically viable. “(NOVAGold) management’s game is clear: keep investors interested in the stock while they rake in huge salaries,” the JCAP report alleges. “Construction of the Donlin mine was originally expected to start in 2008. Now, 12 years later, management’s best guess is that construction may start in 2022 and production in 2028.” Donlin Gold, the joint-venture project company owned 50-50 by NOVAGold and mining giant Barrick Gold Corp., received a record of decision approving the project’s environmental impact statement from the Army Corps of Engineers in August 2018. Barrick Gold Corp. has not commented on the JCAP report. Donlin officials for years have acknowledged the project will require strong gold prices to be profitable but have declined to specify what the market conditions must be to sanction the mine even as gold prices have risen steadily from about $1,400 per ounce to more than $1,700 per ounce over the past year. Gold peaked at nearly $1,900 per ounce in mid-2011. According to the report, NOVAGold leaders “might have the cushiest job in mining” because CEO Lang has been paid approximately $8.3 million in cash and taken over 1.8 million shares in the company over the past five years despite leading a junior mining firm with no operating income. NOVAGold executives and directors have cumulatively netted about $35 million from share sales over that time as well. About 70 percent of NOVAGold insider share sales have occurred in the past year while the company’s stock has increased in value by roughly 300 percent, according to JCAP figures. Over that time, Chief Financial Officer David Ottewell sold more than half his shares in NOVAGold and Lang reduced his position by 26 percent. “Clearly, the insiders have voted with their feet,” the report concludes of the stock sales. NOVAGold responded that management’s compensation is established by a committee of the company’s board of directors and is regularly measured against a group of peer companies. NOVAGold held $59.7 million in cash and $108 million in total liabilities at the end of February, according to the company’s filings with the Securities and Exchange Commission. JCAP fundamentally contends the 2011 capital cost estimate of $6.7 billion for Donlin was far too low at the time and only grown with inflation since. NOVAGold leaders said in April that the company is working to update its feasibility study this year. The report focuses on the 315-mile, 14-inch natural gas pipeline Donlin plans to build from the west side of Cook Inlet to the mine site near Crooked Creek in the upper Kuskowkim River drainage, which JCAP calls a “project killer.” It references a prior $1 billion cost estimate for the pipeline and asserts a more accurate cost considering inflation would be more than $3.8 billion. According to the report, JCAP consulted with a pipeline expert who confirmed the traders’ rough calculations that the Donlin pipeline would cost 200 to 400 percent more than NOVAGold has stated. “The proposed natural gas pipeline central to powering the project is dead on arrival. The terrain around the Donlin deposit is among the most inhospitable on the planet,” the report states of the pipeline that would cross the Alaska Range. JCAP also discounts the option of barging diesel nearly 200 miles up the Kuskokwim as an alternative fuel source to the pipeline given the sheer volume of fuel that would be needed to power the mine facilities as also being a “bust.” At its planned size to produce 1.1 million ounces of gold per year, Donlin would need more than 1 million liters, or about 264,000 gallons of diesel per day, but the project only has permits to barge a little more than half of that for mine vehicle fuel, according to the report. “Under the most optimistic scenario, cutting production to half of what is now planned, the diesel barged in would be sufficient for at most seven months of operations per year, essentially reducing output to a quarter of what is now planned,” the report sates. However, NOVAGold’s 40-page line-by-line rebuttal to JCAP calls the report’s conclusions on the pipeline simply “inaccurate,” noting references to anonymous engineers and pipeline experts also lack the individuals’ credentials. NOVAGold stresses that the capital costs specified in the 2011 Donlin feasibility study were compiled in accordance with U.S. Generally Accepted Accounting Principles, or GAAP, and the pipeline design and development costs were put together in 2013 by the international engineering firm CH2M Hill (now Jacobs Engineering). NOVAGold management also discounted a comparison of the Donlin pipeline to the 750-mile, 30-inch Mackenzie River pipeline project in Canada that was stopped in 2017 with an estimated cost of $16 billion Canadian. Similar to several Alaska North Slope gasline proposals, the Mackenzie River pipeline was planned to move large quantities of gas from the river delta and near shore Beaufort Sea south to infrastructure and markets in Alberta. “The Mackenzie pipeline project uses different materials in a different location with a different climate and environmental concerns. It is not an appropriate comparison,” states the NOVAGold rebuttal. NOVAGold also insists the amount of diesel needed to run the entire operation could be supplied via the Kuskowkim if needed just by increasing the number of fuel barge tows beyond what is planned for the mine vehicles; but the company does not address the logistical and storage issues that would come with using solely diesel fuel during the months when the river is frozen. Finally, NOVAGold leaders picked apart several inaccuracies in statements about Donlin’s 227-megawatt power plant. The JCAP report asserts that the planned Donlin power plant would be the largest in Alaska, would increase power generation in the state by 40 percent and would produce enough electricity to power a city of 500,000 residents. However, the NOVAGold response notes that the Beluga power plant owned by Chugach Electric Association is 332 megawatts and average generation in Alaska is about 800 megawatts, meaning the 227-megawatt plant run full bore would instead increase statewide power generation by about 28 percent. NOVAGold called the city comparison “exaggerated and irrelevant.” Donlin officials have said the plant would average 153 megawatts of output, which would be about 20 percent of the power currently produced in the state. Elwood Brehmer can be reached at [email protected]

Pebble Partnership pitches payments to area population

Pebble Partnership leaders announced a plan June 16 to pay Bristol Bay residents if the controversial mine project that has sharply divided many communities in the area reaches construction and eventually production. Pebble CEO Tom Collier said in a prepared statement that the revenue sharing program dubbed the “Pebble Performance Dividend” makes good commitment he offered in late 2017 when its new plan for a smaller, 20-year copper and gold mining operation was unveiled. The U.S. Army Corps of Engineers is currently evaluating Pebble’s Clean Water Act Section 404 wetlands fill permit application for the 20-year mine and drafting the corresponding environmental impact statement, or EIS. A final EIS should be released sometime this summer, according Corps Alaska officials. “While not everyone will want to work at the mine, this (dividend) ensures a direct way for everyone to participate. Whether a resident supports the project, opposes it, or is neutral, anyone who is a year-round resident can participate,” Collier said. Collier and other Pebble leaders have long touted the mine as a way to improve the economics of the region that currently relies on commercial fishing and tourism as its primary industries. The mine is expected to support up to 2,000 jobs during construction and between 750 and 1,000 jobs once it is developed, according to Pebble. The company says it will allocate $3 million per year for the dividend during the multi-year construction phase of the project. Once the mine is operating and profitable Pebble will distribute 3 percent of the net profits from the mine to Bristol Bay-area residents that have signed up for the dividend. As of last year the 31 communities in the area Pebble has made eligible for the dividends — in the Dillingham Census Area and the Bristol Bay and Lake and Peninsula boroughs — had a combined population of 7,378 residents, according to the state Labor Department. The mine site would be in the Lake and Peninsula Borough. Bristol Bay residents must have lived in the region for 12 months prior to enrolling in the dividend program. An online portal through which residents can enroll in the dividend program will be open through Aug. 31, according to Pebble. Opponents of the mine have characterized the dividend proposal as an attempt to buy support for a project that has widespread opposition in the region, primarily due to the concern that the mine would pose major, multifaceted risks to the salmon fisheries in the large Nushagak and Kvichak river systems. Jason Metrokin, CEO of Bristol Bay Native Corp., which has led the opposition to Pebble, said in a formal statement that the dividend proposal is another tactic “to try to sway public opinion on this vastly unpopular project.” He also questioned why Pebble would open a two-and-a-half-month enrollment period now when construction of the mine is at least three or four years away. While Pebble is nearing the end of the EIS process, it still must receive numerous other state and federal permits before construction can start and several of those permit applications typically take multiple years for officials to review and approve. “BBNC’s opposition to the proposed Pebble mine is rooted in our shareholders’ culture and subsistence way of life and is strengthened by the good science that concludes that the proposed mine would cause unacceptable and irreparable adverse impacts to the Bristol Bay region. We will not trade salmon for gold, and we will not be swayed by promises of cash payments from a proposed mine that cannot and should not be built,” Metrokin said. A 2019 poll commissioned by BBNC found that 76 percent of its shareholders were against the mine and 83 percent living in the Bristol Bay region opposed it at the time. In early May Pebble offered to have BBNC administer its Performance Dividend program through the Native regional corporation’s own shareholder dividend distribution program; the offer was unanimously rejected by the BBNC Board of Directors. Metrokin wrote to Collier May 22 in response to the offer that it lacked the detail that would be needed to support it. He continued to write that Pebble has not provided sufficient information about the economics of the company’s plan, regardless of the dividend proposal. “Consequently, your offer to share a portion of revenue from Pebble is too speculative to consider and highly unlikely,” Metrokin wrote to Collier. BBNC and other Bristol Bay stakeholders have asked (Pebble) to produce an economic feasibility study for its mine proposal for years and (Pebble) has repeatedly failed to do so. We do not believe that your 20-year mine plan is economically viable at all.” Collier has said Canadian finance laws prevent Pebble’s parent company, Vancouver-based Northern Dynasty Minerals Ltd. from releasing an economic analysis of the 20-year plan at this point. When asked about the allegation that Pebble is trying to buy support, spokesman Mike Heatwole wrote in an email that the company simply wanted to provide an additional way for residents who won’t end up working at the mine to share in its benefits. Elwood Brehmer can be reached at [email protected]

Niblack parent company settles debt, gets new CEO

The owners of a multi-metal prospect in Southeast Alaska have new leadership and potentially new life through an agreement to settle $3.4 million of debt. Vancouver-based Heatherdale Resources Ltd. announced June 3 that it had reached the settlement with fellow Canadian mining firm Hunter Dickinson Services Inc. that clears the vast majority of the debt Heatherdale had compiled with Hunter Dickinson through normal business. Heatherdale Resources is the sole owner of the Niblack underground copper, gold, silver and zinc prospect on a remote portion of southern Prince of Wales Island. According to a statement from Heatherdale, the company had accrued more than $4 million (Canadian) in debt to Hunter Dickinson as of late last year. The settlement grants Hunter Dickinson more than 35 million shares in Heatherdale at a price of 9.75 cents per share. Robert McLeod, one of the purchasers of the stock, will take over as a director and CEO of Heatherdale as part of the deal as well. Heatherdale Chairman and CEO David J. Copeland agreed to step down from the leadership position and make way for McLeod, according to the company. McLeod is a professional geoscientist with more than 25 years of experience in mineral exploration, having worked primarily in Alaska, Northwest Canada and Nevada, according to Heatherdale. Hunter Dickinson is an owner in Northern Dynasty Minerals, which is the sole owner of the large and contentious Pebble deposit in Southwest Alaska. Ron Thiessen is a director and CEO of both mining firms. Heatherdale leaders said issuing the settlement shares will help the company preserve cash for future work. “The company’s board of directors believes that the debt restructuring is necessary to provide the company with a clean balance sheet in order to attract new capital and position the company to unlock value from its current project and acquire new interests,” the June 3 statement reads. Heatherdale has held the Niblack prospect since 2009 but work had slowed of late as the company dealt with its financial issues. The Niblack deposits hold 5.6 million metric tons of indicated resources with an average copper grade of 0.95 percent; 1.73 percent zinc; 1.75 grams per ton of gold, and 29.5 grams per ton of silver. Niblack also holds another 3.4 million tons of inferred resources at slightly lower metal grades, according to Heatherdale. The underground Niblack mine would mill between 1,000 and 1,500 metric tons of ore per day for 10-plus years if it is developed. Heatherdale has proposed a plant for processing metal concentrates on Gravina Island near Ketchikan — an operating model similar to that being advanced by Ucore Rare Metals Inc., which is working on the Bokan rare earth element prospect near Niblack on Prince of Wales. Ucore is planning a processing facility in Ketchikan, the company has said. Both projects received a boost from the state back in 2014 when the Legislature approved a bill signed by former Gov. Sean Parnell allowing the Alaska Industrial Development and Export Authority to assist in financing their development. At the time, Heatherdale was seeking a partner in the project, which was then estimated to cost between $175 million and $250 million to develop. The legislation authorized AIDEA to put up to $125 million into Niblack. Elwood Brehmer can be reached at [email protected]

Pipeline right-of-way permit under review for Donlin mine

Rising gold prices are fueling excitement among the owners of the Donlin gold mine but groups opposed to the project are raising questions about the thoroughness of its permitting process. Alaska Department of Natural Resources Commissioner Corri Feige on April 30 granted a request to reconsider her Jan. 17 approval of a right-of-way lease for Donlin’s natural gas pipeline following a Superior Court appeal of her decision to approve the lease and initially deny a request for consideration filed Feb. 6. Homer-based conservation advocacy group Cook Inletkeeper filed the permit appeal on behalf of several Kuskokwim-area Tribes. Feige initially denied the reconsideration request but reversed that decision in an April 30 letter to Cook Inletkeeper Advocacy Director Bob Shavelson. However, the two-page letter does not explain what motivated her to reverse course. Cook Inletkeeper and the Orutsararmiut, Chevak and Chuloonawick Native council and villages appealed Feige’s decisions to Superior Court March 19. The appeal was dropped following the April 30 ruling. The 14-inch pipeline would run 315 miles from near Beluga on the west shore of Cook Inlet to the mine site in the Crooked Creek drainage in the Upper Kuskokwim Valley. It would supply feedstock gas to the mine’s large power plant. Cook Inletkeeper’s request to reconsider the permit contends it is premature to issue the right-of-way for a pipeline that has yet to receive state fish habitat and other permits. The groups also argue it is DNR’s responsibility to consider the cumulative impacts of the $7 billion-plus project in granting the right-of-way lease. “The pipeline is proposed as part of a massive gold mine with substantial environmental impacts, including habitat loss and degradation, water and air quality impacts, and risk of tailings dam failure, to name a few,” the request states. “If the benefits of the entire Donlin project can be used to bolster DNR’s analysis of the public interest, the detriments of the entire project should also be used in its analysis to ensure the agency is truly acting consistent with the public interest.” Feige wrote in her decision that state law does not require a cumulative effects analysis and emphasized DNR’s role as a cooperating agency in the project’s environmental impact statement that was approved in 2018, “which stringently considered cumulative and reasonably foreseeable impacts.” “Nonetheless,” she wrote, “the Department of Natural Resources will conduct a further analysis of the cumulative and reasonably foreseeable impacts of the right-of-way lease for the Donlin pipeline. Once this analysis is complete, a new decision will be issued, and notice will be provided of a new comment period consistent with Alaska law.” She also wrote that granting the reconsideration “does not imply that the issues raised in the request have merit.” DNR spokesman Dan Saddler wrote in response to questions that the he could not provide more detail behind the reasoning for reversing the decision than is in the letter because it is an ongoing matter. According to Saddler, the department does not believe the additional look will set a precendent for when the state must review the cumulative impacts of a project for various permitting decisions. "By virtue of the state's participation in the (National Environmental Policy Act) process as a cooperating agency, DNR performed a cumulative impacts analysis leading up to its issuance of the right-of-way at issue here, but it is nonetheless undertaking addtional analysis thorugh the Commissioner's reconsideration," Saddler wrote. Feige and Gov. Mike Dunleavy have both expressed strong support for the Donlin project, stressing the roughly 1,400 jobs its estimated the mine would support are badly needed in the remote region of the state. The Tribes oppose the project that would be located on land owned by The Kuskowkim Corp., a Native village corporation largely because they fear the impacts it will have on subsistence resources, primarily salmon and whitefish in the Kuskowkim River. Donlin Gold LLC spokeswoman Kristina Woolston wrote via email that the reconsideration will not impact the project’s timeline and the company is awaiting the state’s updated decision. Donlin suspended its 2020 work program in early April in response to the COVID-19 pandemic but work resumed last month. The company is employing four drilling rigs and has 120 workers at the deposit that include Calista Corp. shareholders and Yukon-Kuskokwim residents, according to Woolston. Gold prices have increased nearly 30 percent in the past year to a recent plateau of approximately $1,700 per ounce. Tom Kaplan, chairman of Vancouver-based NOVAGold, which owns a 50 percent stake in the Donlin project, said during the company’s annual shareholder call in May that he is confident gold will soon exceed $3,000 per ounce. Donlin’s size as one of the largest gold mines in the world — with planned production of 1.1 million ounces per year — and its remote location mean the project will require a very strong gold market to develop. Company leaders have not said what price or market condition would trigger development if the project reaches that stage. The Tribes on June 5 also appealed a May 7 Department of Environmental Conservation decision to maintain a Certificate of Reasonable Assurance to Donlin that the project will meet Clean Water Act Section 401 discharge standards. The Tribes argue the EIS conducted by the Army Corps of Engineers concluded the project would result in elevated mercury levels, loss of salmon habitat and could increase stream temperatures. The appeal states that the area already has naturally-elevated mercury levels and the mine could add to that and exceed allowable levels. DEC Commissioner Jason Brune has 10 days to approve or rule on the request, per state regulations. DEC officials wrote in response to comments about the certification decision that they believe mitigation measures taken at the mine will be sufficient to limit stream mercury levels. Elwood Brehmer can be reached at [email protected]

Change of course for Pebble reignites access issues

The U.S. Army Corps of Engineers has changed the course of the Pebble project but what it means for the fate of the highly contentious development remains to be seen as area landowners vow to prohibit access. David Hobbie, Army Corps of Engineers Alaska District regulatory chief, confirmed during a May 22 conference call with reporters that the lead permitting agency had changed the project’s transportation corridor from a southerly route across Iliamna Lake to one along the lake’s northern shore that also ends at a new site for a west Cook Inlet port. The total re-route is part of the least environmentally damaging practicable alternative, or LEDPA, identified by Army Corps Alaska officials, and combines aspects of other development alternatives evaluated in the draft environmental impact statement released in February 2019, according to Hobbie. Other details of the LEDPA will be discussed in the Corps’ record of decision that will follow the final EIS, which is currently scheduled to be published later this summer. Numerous groups opposing the project allege the north road route is a late-stage move to appeal to the Pebble Partnership’s ultimate desire to build a much larger 78-year mine instead of the 20-year mine plan the company is advancing because the Iliamna Lake ferry that is part of the south alternative could not support the larger operation. That’s in part because an April 24 memo from representatives of AECOM — the global engineering firm hired to write the EIS — indicates Pebble changed its preferred alternative from the southern ferry route to the northern road-only transportation corridor from the mine site to the port. However, Hobbie said Pebble changed its plans to conform to what the Corps had already determined: that the north road-only corridor was ultimately the best option for the environment. The Corps’ decision was based on widespread public concerns that the year-round ferry across the massive lake could disrupt winter travel across lake ice for residents of lake villages and impact Iliamna’s unique population of freshwater seals, among other issues, according to Hobbie. “We did exactly what the public asked us to,” he said of the Corps amending the plan for the project. Pebble leaders routinely stress that the company has applied for permits for its 20-year mine plan and any subsequent plans expand the project would require a whole new round of permitting while Pebble’s parent company, Vancouver-based Northern Dynasty Minerals Ltd., has advertised the project as a multi-generational opportunity and cites the metal resources in the total Pebble deposit — not just those that would be extracted via the 20-year mine — in its investor pitches. Pebble CEO Tom Collier noted in a prepared statement that the north route was Pebble’s preferred option for most of the project’s history and said the company initially selected the ferry route because it was thought regulators would prefer the smaller wetlands footprint it offers. “The choice between the two transportation alternatives for Pebble has always been a close call,” Collier said. “Now that the (Army Corps of Engineers), working closely with the Environmental Protection Agency, the U.S. Fish and Wildlife Service and other cooperating agencies, has indicated that the northern corridor is the preferred approach we look forward to seeing the final EIS for the project.” He added that the company also supports using a pipeline instead of trucks to haul concentrate from the mine site to tidewater. According to Northern Dynasty, the pipeline would cut truck traffic on the mine access road by roughly half. However, the Corps’ change of plans does not account for one potentially significant complicating factor for Pebble; the landowners along the north route, at least for now, want nothing to do with the project. Alaska Native village corporation Pedro Bay Corp. owns much of the land along Iliamna’s northeastern corner and Iliaska Environmental LLC is a majority owner of a rock quarry at Diamond Point, the new location for the Cook Inlet port needed to supply materials to the mine and export its metals. Iliaska Environmental is owned by the Igiugig Village Council and along with Pedro Bay Corp. and Bristol Bay Native Corp., which controls subsurface rights to the village corporation lands, strongly opposes the project. The Igiugig Village Council issued a statement May 25 contending the Diamond Point quarry is a “critical component” of the north route that Pebble will not have access to. “(Pebble’s) plan for Diamond point presented in the EIS does not fit with our plans for Diamond Point, and should not be considered an acceptable alternative,” the statement reads. In contrast, the south ferry route allowed Pebble to utilize lands owned by Alaska Peninsula Corp., which the junior mining company has an access agreement with, for the roads and ferry terminals on the north and south sides of the lake to access a port at Amakdedori on Cook Inlet. Pebble spokesman Mike Heatwole wrote via email that the company intends to work with each of the landowners along the north route and believes “we will be able to gain the right-of-way needed to build the transportation corridor.” Pedro Bay Corp. CEO Matt McDaniel wrote to Corps of Engineers Pebble project manager Shane McCoy last July to reiterate that the company “has not, and will not, consent to the Pebble Limited Partnership’s use of its lands for the Pebble project.” As such, the north route should not be considered practicable in the final EIS, McDaniel wrote. McDaniel’s letter quickly spurred a memo from the Corps to Pebble requesting an analysis of feasible northern corridor options around Pedro Bay Corp. lands, but a consultant to Pebble determined there isn’t one. While Pedro Bay Corp. owns most of the land along the northeast portion of Iliamna Lake; there is a mountainous strip of state lands to the north that is bordered by Lake Clark National Park and Preserve. The brief alternative route report concluded that a route around Pedro Bay lands would require up to 15 miles of tunneling or “extreme mountain road construction” and would be much longer than the proposed route across Pedro Bay lands. “Given the adverse nature of the terrain that exists north of PBC land, and the constraints imposed by design criteria for a road to serve the proposed Pebble mine; it has been determined that construction and operation of a road that would pass north (of) PBC lands is not practical or reasonable,” the July 2019 consultant report states. Several other Cook Inlet-area Native corporations including CIRI also own parcels around Diamond Point. BBNC leaders have also criticized Corps officials for advancing the north route as viable despite the landowners’ consistent opposition to the project. BBNC Lands and Natural Resources Vice President Dan Cheyette wrote in a May 21 letter to Corps of Engineers Alaska officials that the LEDPA must be the least environmentally damaging development alternative but must also be practicable, and a route across lands owned by entities that don’t support Pebble is not. “In defining the LEDPA for the Pebble project, BBNC demands that the Corps remove from consideration all alternatives that would require use of its subsurface or surface estate, as our lands are unavailable to (Pebble),” Cheyette wrote. “This includes the eastern terminus of the northern transportation corridor at Diamond Point,” which is also partly owned by a BBNC subsidiary. Cheyette and other opponents to Pebble argue that Corps officials should draft another EIS that would focus the public’s attention on the updated plan for the project. The Corps’ Hobbie said there are no plans for a new or supplemental Pebble EIS because the LEDPA doesn’t contain anything that wasn’t in the first draft. “There’s nothing in the current LEDPA that has not been evaluated in the EIS,” Hobbie said. Elwood Brehmer can be reached at [email protected]

Donlin owners hope to resume drilling soon

Update: Donlin Gold workers will begin returning to the project site May 22, accoridng to spokeswoman Kristina Woolston. Donlin with have "an aggressive and measured approach" to prevent the spread of COVID-19 that will include testing for the virus. About 120 people were working there before the camp was shut down in early April. The owners of the Donlin gold project hope to soon resume drilling work paused in response to the COVID-19 pandemic at the remote mine site and are starting to prepare an updated assessment of the project’s viability. NOVAGold Resources Inc. CEO Gregory Lang said Donlin Gold started its 2020 drilling campaign in February and worked through March before closing down the camp in early April to comply with state health recommendations and travel restrictions. Crews used three drilling rigs to complete six boreholes prior to April, according to Lang. NOVAGold is a 50 percent owner of Donlin Gold in Western Alaska along with mining industry giant Barrick Gold Corp. He said he believes Donlin’s ambitious drilling program — with 80 holes totaling approximately 22,000 meters — can still be completed this year but when it will resume is unclear. Company leaders are currently evaluating when workers can pick up where they left off, Lang said during NOVAGold’s annual shareholder meeting call on May 14 . “They will not return to site until it is safe to do so,” he stressed. Lang noted that Donlin donated its food supplies to food banks and shelters in area villages when the camp was closed. Donlin Gold secured several state permits and land-use approvals for an access road, fiber optic cable and other facilities in January. The company is also continuing a multi-year program started last year for the project’s key dam safety permit from the Department of Natural Resources, which is one of the last major approvals on Donlin’s list. The drilling work, along with engineering and geologic refinements in the project will be added to an updated feasibility study, according to Lang. “A lot of inputs have gone down since the last study, not very many have gone up,” NOVAGold chairman Tom Kaplan said. Kaplan said he does not believe the COVID-19 pandemic has pushed gold to more than $1,700 per ounce in recent days, noting it was at roughly $1,600 before the global crisis began. “It’s accelerating trends which were already in place,” he said. The price of gold is likely to double or triple from where it is currently, Kaplan contends. He said there is no defined price that will trigger development of Donlin. “When Barrick’s ready to move forward, we’ll be ready to move forward,” Kaplan said. Donlin Gold last performed a comprehensive analysis of its massive project in 2011 when it was concluded the complex undertaking would cost $6.7 billion to complete. As proposed, the open-pit mine in the upper Kuskokwim River drainage would be one of the world’s largest, producing more than 33 million ounces of gold over an initial 27-year life. A 315-mile natural gas pipeline from the west side of Cook Inlet would fuel a power plant at the mine and fuel storage tanks would be built at Dutch Harbor, in addition to the very large-scale operation at the mine site. Lang said with 39 million ounces of measured and indicated resources Donlin is roughly five times larger than the average large-scale development-stage gold mines worldwide. The deposit’s average grade of 2.25 grams per ton is also more than double the industry average, which continues to decline, he added. Additionally, the 39 million-ounce resource is contained to roughly three kilometers of an eight-kilometer mineralized trend, NOVAGold leaders highlighted. “It’s clear how hard it is to find a resource comparable to what we have at Donlin,” Lang said. The deposit is on a parcel owned by The Kuskowkim Corp., a Native village corporation and the mineral rights are held by the regional Native corporation Calista Corp, both of which have been strong supporters of the project, although some local village organizations and Tribal governments have become more vocal in their opposition to the mine in recent years. Opponents contend a mine the size of Donlin adjacent to the Kuskokwim poses an unacceptable risk to the river’s fishery, particularly the salmon runs that are widely depended upon for subsistence harvests. A group of 13 village and Tribal leaders from the area sent a letter to NOVAGold and Barrick executives May 13 noting the Association of Village Council Presidents formally opposed the project last year and they did not reach the decision lightly. “We are of course open to responsible resource development in our region when applicants can demonstrate through science that our waters and lands will not be threatened, the Donlin project has failed to meet this bar and thus it is our responsibility to future generations to say no to this risky project,” the letter states. Donlin and NOVAGold leaders often tout the support they have from The Kuskokwim Corp. and Calista for developing the project. The mining companies have partnered with the Native corporations on workforce development and scholarship programs among other things. Elwood Brehmer can be reached at [email protected]

New analysis of Livengood underway with improving markets

The Livengood gold project has renewed life amid rock-bottom oil prices and vastly improved expectations for gold. Marcelo Kim, chairman of Vancouver-based International Tower Hill Mines Ltd., which owns the Interior Alaska prospect, stressed that company leaders and many outside analysts believe the economic stimulus efforts being employed by governments worldwide to mitigate the impact of the COVID-19 pandemic will bring about a resurgence in gold markets. The Federal Reserve’s recent moves to cut interest rates in combination with widespread credit backstops and the loosening of banking requirements all add up to a very favorable outlook for gold producers and sellers, according to Kim. Kim said in a May 12 conference call that expectations for rising inflation following the federal stimulus package of the Great Recession in 2009 largely didn’t materialize because banks didn’t expand their credit offerings following the financial crisis. This time, however, much of the $2.2 trillion Congress approved under the CARES Act is intended to be quickly spent on businesses and individuals instead of keeping banks afloat. “We believe that these are signs that we are in the early innings of a new market for gold,” Kim said. He cited a late April report from Bank of America analysts that forecasts gold prices will rise to upwards of $3,000 per ounce over the next 18 months. Gold is currently trading for about $1,700 per ounce following a steady climb in price that started last year and hasn’t stopped. Gold prices peaked in late 2011 at nearly $1,900 per ounce but spent much of the intervening years fluctuating between $1,100 and $1,300 per ounce before starting to climb again last year. International Tower Hill Mines is sanctioning an updated pre-feasibility study that will build off of a similar study published in late 2016 and incorporate the metallurgical and optimized engineering work done since then, according to Kim. The junior mining firm, which holds 100 percent of Livengood, downsized its operational plans by nearly half following the 2016 study. That work concluded that a mine capable of milling 52,000 tons of ore per day over a 23-year life would cost approximately $1.8 billion to develop and have significantly reduced operating costs versus the company’s original plan from 2013 for a $2.8 billion, 14-year mine processing about 100,000 tons per day. The current mine plan calls for producing 6.8 million ounces over the 23-year mine life with an all-in cost of $1,247 per ounce. The Livengood prospect holds nearly 9 million ounces of proven and probable gold reserves at a market price of $1,250 per ounce and approximately 11.5 million ounces of measured and indicated resources, according to International Tower Hill. Kim said he expects much of the gold resources to become reserves as prices rise. As proposed, Livengood would be a conventional, open-pit mine near the Dalton Highway about 70 miles north of Fairbanks. International Tower Hill expects the mine will generate about 1,000 jobs during construction and 350 long-term jobs during operation if it is developed as currently planned. CEO Karl Hanneman said drilling has shown significant resource potential immediately beneath the pit deposit as well as elsewhere on the property. Historical placer deposits to the northeast of the pit resource reflect the need for additional drilling as well, Hanneman said. “Over the last several years, we have quietly remained laser-focused on improving our geological and metallurgical understanding of the Livengood gold deposit,” he said. That work will be incorporated into the new pre-feasibility study and a timeline for that work should be available in the coming weeks, according to Hanneman. ITH director Stephen Lang said during the call that Livengood is a deposit requiring an average of 140 tons of ore to recover an ounce of gold, which is a good “strip ratio” for a mine of its size. “The mine and the mill are both large enough to give a considerable economy of scale but not in the very, very large range, which adds quite a bit of complexity in the operations and scheduling,” Lang said. The relatively low mining requirement helps relieve cost pressures on the project and is “particularly helpful in offsetting any long-term oil price increases,” Lang added. While being on the road system limits some of the development and logistics costs incurred by more remote mines in Alaska, Livengood and other mines in the state are susceptible to changes in oil prices because diesel is used to power mine operations. Elwood Brehmer can be reached at [email protected]

Doyon acquires stake in mining company with state prospects

Doyon Ltd. has taken a direct stake in a mining company exploring for gold on its land in an area of Alaska that has seen a resurgence in interest from prospectors. The Interior Alaska Native regional corporation invested $1.5 million in Tectonic Metals Inc., a Vancouver-based firm with claims to three Eastern Alaska gold prospects, according to a joint April 20 statement. The deal makes Doyon the largest single shareholder in the Tectonic with a 22 percent ownership stake. Tectonic is working two gold prospects, dubbed Seventymile and Northway, on Doyon lands near the Canadian border. Tectonic also holds the Tibbs prospect on state land about 20 miles east of the Pogo gold mine near Delta Junction. All of the prospects are in the Tintina Gold Belt, which runs across much of Interior Alaska and into the Yukon Territory. New technologies for conducting geophysical surveys and other analyses of prior drilling data have led a handful of companies exploring for large gold deposits to revisit the eastern Tintina region that historically has been an area worked by smaller placer mining operations. Tectonic co-founder and CEO Tony Reda said the investment is unique in that it amounts to an “endorsement” in the company as a whole, not just in the prospects Tectonic is working on Doyon’s land. While the Tibbs, Seventymile and Northway projects are each years from becoming an operating mine, Reda said in an interview that having a large backer like Doyon with the ability to potentially support development of a mine if one of the projects reaches that point is also a major selling point to other investors in the inherently high-risk junior mining industry. “Having Doyon as a shareholder gives us the ability to walk into a fund’s office in New York or Toronto — Wall Street, (Toronto’s) Bay Street, Vancouver’s Howe Street, pick your street — but we get to walk in their and say this is who we are and we’re actually aligned with our Native partner and there’s not too many companies that can do that,” Reda said. The $1.5 million investment netted Doyon approximately 10.4 million shares in Tectonic, according to the statement. Tectonic was formed by Reda and other former leaders of Kaminak Gold Corp., which discovered and advanced the 5 million-ounce Coffee gold prospect between Beaver Creek and Dawson City in the Western Yukon before selling the project to the mining giant that is now Newmont Goldcorp for $520 million Canadian in 2016. Doyon CEO Aaron Schutt said in an interview that the decision to invest in Tectonic started from internal conversations about how to encourage more economic development activity across the company’s vast land holdings. Doyon is the largest private landowner in Alaska with title to approximately 11.5 million acres. Alaska Native regional corporations such as Doyon also hold subsurface mineral rights lands owned by Native village corporations in their regions. Doyon leaders liked how Kaminak Gold approached its work in the Yukon — in terms of both geology and community engagement — and that continued into Tectonics first couple summer work seasons in Alaska, Schutt said. “It doesn’t show up in early in the economics of a mining project but it does later,” Schutt said of companies that are actively involved in the communities near their projects. He added that Doyon leaders anecdotally heard positive things from First Nations officials in the Yukon about Kaminak. Reda said Kaminak offered scholarships to area students and established a local hire program among other efforts to positively impact area residents while the company was working the Coffee project. “It’s not just about finding a mine; it’s about doing it properly in a way that benefits everyone,” he said. As for the prospects, Reda said the Seventymile property near Eagle is “drill ready” and the company had plans to do so this summer before the COVID-19 pandemic took over nearly every aspect of life. Those plans are on hold for now. “Right now we’re thinking outside the box on how to make that a reality but at the same time we have to be very much compliant with the rules and regulations and obviously the safety of our employees and service providers is of the utmost importance,” he said. Tectonic acquired the Seventymile property in 2018 did its own soil sampling and geophysical surveys along with analyzing historical drilling records from the area. The company drilled the Tibbs prospect last year with promising results. “We’re also champing at the bit to get out into the field there (at Tibbs) and flesh out the discovery and figure out just how big it is,” Reda said. He also noted that by taking a direct stake in Tectonic, Doyon would reap a portion of any benefits Tectonic realizes from the Tibbs prospect even though it’s on state lands. Alaska mining industry observers estimate companies spent roughly $150 million on exploration work in 2018 and 2019, up about $50 million from several years prior. The land-use agreements for the Northway and Seventymile prospects are typically structured and the direct investment does not change them or give Tectonic preferential rights to other Doyon lands, according to Schutt, who said the regional corporation is also looking to do some early-stage mineral exploration on its lands itself this year. “It’s not even drilling, just data review,” Schutt said, adding Doyon has gotten interest from other exploration companies of late, adding further to the revived interest in the Eastern Interior’s gold potential. Doyon has previously explored for oil and gas on its lands with mixed results. Elwood Brehmer can be reached at [email protected]

Doyon wants agreement with AIDEA before Ambler road work continues

As leaders of the state development bank work to advance a controversial road to access remote mining prospects in Interior Alaska, one of the primary landowners along the route contends they have not been adequately consulted and need much more information before they can approve of the project. Doyon Ltd. CEO Aaron Schutt wrote in an open letter to Alaska Industrial Development and Export Authority Executive Director Tom Boutin dated April 7 that while the authority has been deeply involved with the Bureau of Land Management on the environmental review for the road, “AIDEA has for years failed to engage with Doyon in any meaningful communication” regarding the project. Doyon is the Alaska Native regional corporation for most of Interior Alaska. Holding title to just more than 11.5 million acres, Doyon is also the largest private landowner in the state. Doyon owns land that the road would cross at its east end, near the village of Evansville and the Dalton Highway. As proposed, the Ambler Mining District Industrial Access Project, commonly known as the Ambler road, would run west from the Dalton Highway for approximately 211 miles along the southern flank of the Brooks Range to the Ambler mining district. The area in the upper Kobuk River drainage has long been prized by mining companies for its high-grade prospects of copper, gold and other metals. Several companies are in varying stages of exploring numerous claims in the roughly 75-mile long district, but road access has consistently been cited as a required precursor to developing mines in the isolated area. Under the authority’s plan — modeled after the access road and port built to the Red Dog zinc mine in Northwest Alaska — AIDEA would own the road and recoup development costs through tolls paid by the mining companies that use it. State officials backing the plan have long stressed the road would be closed to the public and access would be closely monitored, though many skeptics of the plan question the feasibility and legality of restricting access, as roughly $26 million of state general fund money has already been approved for the project. However, many residents of the area have long opposed the road and the mines. They contend the construction of the road could disrupt the Western Arctic caribou herd that migrates through the corridor and is a primary subsistence food source for the villages clustered at each end of the route. Some are also concerned about the practicality of keeping the road closed to the public, fearing that a new route into the remote area could bring more hunters. The proposed mines have also drawn scrutiny for potential impacts to salmon and whitefish runs in the Kobuk River drainage. AIDEA originally estimated construction of a basic gravel road would likely cost somewhere in the $300 million range, but projections in the Ambler road final environmental impact statement, or EIS, issued by BLM March 27 put the cost at more than $500 million. BLM Alaska officials have supported AIDEA’s plan. The agency led the EIS work because it is in charge of reviewing the authority’s application for a road right-of-way across portions of federal lands in the area. Also on March 27, the AIDEA board of directors approved a transfer of $35 million from the authority’s Revolving Fund to its Arctic Infrastructure Development Fund to eventually support development of the Ambler road. Board members said the money would likely fund engineering, right-of-way acquisitions, public outreach and other pre-construction activities this summer. Schutt emphasized in the letter that AIDEA does not have an access agreement with Doyon either for the road right-of-way or for additional field work. Though many opposed are Doyon shareholders, the company does not have a formal stance on the project; the company has filed comments through the EIS process outlining the concerns with the project it wants the authority to address, according to Schutt. “AIDEA has never even presented a written proposal to Doyon for such access, much less a written proposal or detailed information regarding the (right-of-way). As such, AIDEA and its contractors do not have permission to enter or cross Doyon lands to conduct any field work in the summer of 2020, or at any time,” he wrote, while also noting that AIDEA does not have eminent domain authority granted to some state agencies. AIDEA spokesman Karsten Rodvik wrote in an email that the board approved the transfer of the $35 million “in support of Gov. Dunleavy’s Open for Business initiative.” “AIDEA is committed to working with all stakeholders to move this project forward in a responsible manner, to utilize the state’s extensive mineral resource potential to provide much-needed long-term economic growth and development, and to create job opportunities,” Rodvik wrote further. According to Schutt, Doyon is open to discussing the project and he specifically requested AIDEA officials provide Doyon with technical information for the portion of the road that would cross the company’s lands; information regarding a financial proposal for a right-of-way across Doyon lands; a detailed financing plan for the overall project; and how AIDEA plans to address concerns raised by the Evansville Tribe and Evansville Inc., a Native village corporation. In 2014, the Evansville Inc. board of directors passed a resolution prohibiting the road from crossing the company’s land around the village and the Evansville Tribal Council also passed a resolution in 2017 opposing the road. Doyon spokeswoman Sarah Obed also said representatives for the Native corporation have met with AIDEA officials several times over the years to discuss the Ambler road and generally asked each time about the items outlined in the letter. Elwood Brehmer can be reached at [email protected]

Final Ambler road review out; AIDEA adds $35M for project

Bureau of Land Management officials maintained their support for the most direct proposed road route to Interior mining prospects in their final environmental review of the plan published March 27, the same day leaders of the state-owned development bank moved $35 million for future work on the project amid sharp public criticism. The 211-mile industrial road concept preferred by BLM Alaska officials to reach the Ambler mining district is what the Alaska Industrial Development and Export Authority proposed in early 2017 when officials there submitted federal permit applications for the project. AIDEA is advancing the long-sought link to the remote Ambler mining district in an attempt to spur development of a suite of metal prospects in the area. Estimated in 2017 to cost between $280 million and $380 million for basic gravel construction, the final environmental impact statement, or EIS, for the road now pegs the total construction cost at approximatley $520 million. BLM Alaska Director Chad Padgett said in a March 26 statement preceding the release of the final Ambler road EIS that the roughly 430-page document incorporates information gathered over three years of community and Tribal consultation meetings. “My staff traveled to more than 20 communities in the project area to solicit input and gather traditional knowledge,” Padgett said. “Those efforts contributed to this comprehensive analysis that will help pave the way for Alaska to responsibly develop its natural resources and create jobs.” BLM led the EIS because the agency is responsible for issuing road right-of-way permits to AIDEA if the project is ultimately approved. Agency officials cannot reach a record of decision on the project until at least 30 days after the final EIS is published and it’s unclear exactly when that will happen. The 211-mile industrial-use road would run west along the southern flank of the Brooks Range from the Dalton highway at milepost 161. It would pass near the villages of Bettles and Evansville near its eastern end and terminate among several mining prospects just north of the Kobuk River villages of Ambler, Shungnak and Kobuk. Agency officials dismissed an alternate route starting at mile 60 of the Dalton that would snake 332 miles northwest to the district because although it would avoid Gates of the Arctic National Park and Preserve; its added length would inherently mean more environmental impacts and costs compared to AIDEA’s proposal, the EIS states. Critics have pointed to the cost of the project, and the fact that there is no guaranteed repayment method, as reasons to scrap the plan. The Wilderness Society contends the current estimate for the road does not consider some of the costs inherent to building in remote northern Alaska, such as constructing a road over permafrost. The group suggests the road could end up costing $1 billion or more as a result. The proposed mines have also drawn scrutiny for potential impacts to salmon and whitefish runs in the Kobuk River drainage and many residents of the area villages are concerned about impacts to caribou in the region that are an important subsistence food source. Numerous village and Tribal governments in the area of the proposed road have issued formal statements of opposition to the project. AIDEA officials insist access to the road will be restricted to mining activity because it would ultimately be paid for through tolls under the plan; there would be no public access to currently isolated hunting areas, which has been another concern of area residents worried about increased activity. Currently, Vancouver-based Trilogy Metals Inc. is the only company with advanced prospects in the Ambler area. The company holds two main prospects, Arctic and Bornite, which contain high-grade copper along with cobalt, zinc, lead and precious metals. Trilogy leaders have said the Arctic prospect contains copper at grades up to 10 times greater than many other modern mines and the only thing holding back development is cost-effective access. Interim Trilogy CEO Jim Gowans said in a company statement that the final EIS marks a critical milestone for the road project that will “unlock the incredible mineral potential” of the region. “Trilogy, through its joint venture company, Ambler Metals LLC, is already discussing the next steps for the financing and development of the road with the Alaska Industrial Development and Export Authority,” Gowans said. AIDEA moves $35M for road Also on March 27 the AIDEA board of directors approved a transfer of $35 million from the authority’s Revolving Fund to its Arctic Infrastructure Development Fund to eventually support development of the Ambler road. The resolution directing the funding shift notes that further board action is required to spend the money, but a slew of public commenters made it known they were not happy that AIDEA officials took up the resolution at a short-notice emergency meeting that otherwise dealt with loan and regulatory issues related to the COVID-19 pandemic. Many commenters simply stated their strong overall objection to the road project and the mines it is intended to support, while others questioned whether the authority had violated open meetings laws with its second emergency meeting in as many days. Anchorage Democrat Rep. Andy Josephson testified that he shared in the concerns of others regarding the timing of the meetings and the funding transfer resolution. “I’m concerned that the optics of what you’re doing is so poor given what people are dealing with,” Josephson said to the AIDEA board members, adding that the Legislature’s decision to not capitalize the Arctic Infrastructure Development Fund exemplifies divisions among lawmakers over the Ambler road project. AIDEA’s Revolving Fund held approximately $1.3 billion at the end of the 2019 fiscal year last June 30, according to the authority’s annual financial report, but the vast majority of that money was committed to loans or other investments. The Revolving Fund held approximately $33.2 million in unrestricted cash at the time as well. Attorneys for the Anchorage-based environmental nonprofit law firm Trustees for Alaska also questioned the legality of the $35 million transfer in a memo sent to state lawmakers March 25. The memo asserts than an initial version of the resolution describes that the money would fund “expert engineering, attorney, advisor, and other professional fees to work on permitting, road and bridge design, acquisition of rights-of-way, public outreach, cultural resources evaluations, and other tasks necessary or convenient to reaching a decision point on whether to proceed with construction of the project.” Trustees attorney Bridget Psarianos said in an interview just prior to the March 27 meeting that much of the work outlined in the original resolution should have already been done so it could be included in the EIS for the road. That language was removed from a revised version of the resolution, which states that the authority has the ability to transfer the money so it can continue to advance Arctic infrastructure developments and “pursuing (the Ambler road) through the Arctic Infrastructure Development Fund is in furtherance of the authority’s mission to promote economic development and to create employment opportunities in Alaska.” Trustees argues the transfer is “directly contrary” to both the Alaska Constitution and the Executive Budget Act, which outline the appropriations process through the state Legislature and the governor. “The Ambler road project is a capital appropriation item, and AIDEA cannot increase funding for this project without approval, regardless of the source of that funding. Funds for the project are subject to appropriation by the Legislature, not AIDEA,” the Trustees memo states. “Because AIDEA has been unable to secure additional funding for the Ambler road through the Legislature and the capital budget process, it is now attempting to make an end-run around the authority of the Legislature by unilaterally appropriating money from its Revolving Fund to this project.” AIDEA spokesman Karsten Rodvik wrote via email that “When used for capital expense, money in AIDEA’s Revolving Fund is not subject to the Executive Budget Act. Also, the board has the authority to move money between funds.” The Legislature created the Arctic Infrastructure Fund in 2014 but it had not been capitalized until the $35 million was moved into it. Psarianos wrote in an email after the meeting that the firm has serious questions about the legality of the authority’s actions and “we are considering a variety of options to attempt to right this wrong.” Gov. Mike Dunleavy’s 2020 fiscal year budget plan originally proposed to transfer $84 million from the Revolving Fund to an oil and gas tax credit fund outside of the authority, but the move was not included in the Legislature’s final budget. (Editor's note: This story has been updated to reflect the latest available cost estimates for the road project.) Elwood Brehmer can be reached at [email protected]

NEPA revisions continue with senators’ support

They’re undeniably complex, dry, arcane and seemingly always published in painfully hard-to-read print, but the Council on Environmental Quality’s proposed changes to the implementing regulations for the National Environmental Policy Act are likely to have an outsized impact on Alaska. That’s because, from the smallest commercial fishing boat to the most remote eco-tourism trek to the largest oil project, Alaska’s economy is inextricably linked to its natural resources and federal jurisdiction on nearly every level. On Jan. 10 the Council on Environmental Quality, or CEQ, published 47 pages of changes to National Environmental Policy Act regulations in the Federal Register, an action that officially opened the proposed regulations for public comment. It officially marks the only major change to NEPA regulations since the council first approved them in 1978. A public comment period closed March 10. The CEQ is an arm of the White House tasked with implementing NEPA requirements. The sweeping regulatory changes precipitate from Executive Order 13807, which President Donald Trump signed in August 2017, directing agencies to complete reviews for major infrastructure projects within two years, among other things. NEPA, the landmark federal environmental policy signed into law by President Richard Nixon in 1970, was so transformative it is often referred to as the “Magna Carta” of environmental law. In conjunction with the Clean Water and Air acts, it forms the national basis for environmental protection, pollution control and land conservation. At the highest level, the regulatory reforms are aimed at shortening the length of environmental reviews in terms of both time and page count of the final documents. Proponents of the changes, which include Alaska’s congressional delegation, insist the current process for conducting environmental impact statements, or EIS — the most thorough reviews under NEPA — results in unnecessary permitting delays that routinely hamper economic and infrastructure development nationwide. Skeptics worry the proposed regulatory overhaul is a backdoor attempt by a very pro-development presidential administration to weaken fundamental environmental protections nationwide. Brian Litmans, a senior attorney for the Anchorage-based environmental nonprofit firm Trustees for Alaska, said he believes NEPA is important for all Americans simply because it requires federal regulators to examine all aspects of a proposed project or action holistically so they can make informed decisions when issuing major development permits or making long-term land-use decisions. “NEPA doesn’t require a particular outcome and that’s one of the great things about it,” Litmans said. “It simply tries to get all of the relevant information on the table so the agency can understand what’s at stake and make a decision and I think because of that NEPA has been a success and projects can be better because of it.” The basic EIS structure involves an agency issuing a notice of intent to start evaluating a project or plan deemed to a “major federal action,” followed by a public scoping period to solicit input as to what aspects of that action stakeholders feel should be studied in the EIS. A draft EIS is published following the scoping period, after which a final EIS is published and then a record of decision, or ROD, is issued. Public comment periods of varying lengths must also follow the publication of each version of the EIS. Few direct stakeholders dispute the value of its core goals, but a largely Republican group of lawmakers at the state and federal levels largely in Western states where federal land ownership is extensive has grown increasingly frustrated at the persistent growth of NEPA reviews, particularly environmental impact statements. Part of that is because the NEPA framework is so commonplace in federal agencies. The simple process is used to adjudicate mines and oil developments, public land-use plans and road construction projects. Legal hurdles Sen. Dan Sullivan, for one, said the rulings in NEPA-related lawsuits that have piled up over the decades have led to an unrealistic burden on EIS drafters, or NEPA practitioners, as they are often known. They must account for so much case law, often from seemingly unrelated issues or projects, that writing an EIS has become a practice in writing a “legally defensible” document as much as it is conducting a thorough environmental review, according to Sullivan and others. “This is something my Democrat colleagues agree is a problem; my Republican colleagues certainly agree it’s a problem: this big issue that under our federal permitting system and to some degree state and local, but a lot of it’s federal — that you have this super-long lead time that’s required for any major infrastructure project,” Sullivan said in an interview. “Of course, it costs money and it costs time. Money and time are usually enhanced by litigation and it makes it very difficult for us to build stuff.” Eric Fjelstad, an Anchorage-based partner with the national business law firm Perkins Coie, has spent roughly 20 years working on NEPA issues. He believes the current system benefits no one — except maybe attorneys. That’s because there is nearly always a contingent that opposes a large project or major federal planning decision for a myriad of reasons. Those groups then regularly sue the decision-making agencies to overturn a record of decision or delay the process based on perceived legal flaws in a given EIS. “It’s devolved into somewhat of, I’ll call it a ‘gotcha’ review process where the process is a series of hurdles with people playing different roles and ultimately the courts at the end exacting a gotcha sanction,” Fjelstad. “Is there any realistic world where it should take four, five, six years to study something at this level? And this isn’t the only study that occurs on big projects,” he added, referring to an EIS. According to CEQ figures, approximately half of the 1,161 EIS reviews conducted from 2010-17 took longer than three years and seven months to complete. Roughly one-quarter took more than six years and the average time from a notice of intent to a record of decision was 4.5 years. About one-quarter of those analyzed took less than two years and two months to complete. Ted Boling, an associate NEPA director for the CEQ, said during a February presentation at the Alaska Forum on the Environment conference that the council primarily wants to modernize the regulations to help produce more timely and effective NEPA reviews. The council also seeks to codify years of court rulings in the proposed regulations to clarify exactly what is required under the law, according to Boling. “Much of that guidance and case law is reflected in modern agency NEPA practice but it’s not reflected in the regulations,” he said. In addition, the proposed regulations meet the president’s orders by directing agencies to complete an EIS within two years and a less rigorous environmental assessment within one year. New guidelines The CEQ is also seeking to harden current guidelines for the length of an EIS. Current NEPA regulations recommend the text of a final EIS be less than 150 pages. An EIS of “unusual scope or complexity” should be limited to 300 pages, according to the regulations. It’s 75 pages for an environmental assessment. The new regulations would make those recommendations mandatory in most cases. However, the 2010-17 EIS review found that the average length of a final EIS from the time period was 669 pages, with about one-quarter each less than 300 pages or more than 730. Boling emphasized that the harder timeline and length directives are “not just a get out of jail free card” for agency officials looking to do less work. The proposed regulations allow for senior agency officials to exempt certain complex or highly scrutinized reviews from the limitations. “Ideally, the senior agency official says, ‘Yes, this is an important project so I will read more pages than usual,” Boling said. The new language also defines reasonable alternatives, which are a required part of an EIS, as alternatives that are “technically and economically reasonable” to be in line with longstanding Supreme Court decisions, according to Boling. He further added that the council is proposing to clarify that a project’s effects should not be considered significant — and therefore not be studied — “if they are remote in time, geographically remote or they result in a lengthy causal chain.” That also codifies a Supreme Court ruling, Boling said. He acknowledged that it’s a “great point of debate” as to whether or not the new regulations will ultimately change what projects necessitate an environmental assessment or EIS. “It really gets into the question of how will the case law work?” he said. Many of the high level reforms to the parameters of an EIS were in part pulled from Sullivan’s Red Tape and Rebuild America Now bills, according to the senator. He said one of the first conversations he had with President Trump was about the need for NEPA reform. While he would prefer to make the changes in statute, Sullivan said regulatory reform via an executive order “is really good.” “We have been kind of ground zero for this” in Alaska, Sullivan said, noting it took nearly 20 years to reach a record of decision on the Kensington gold mine near Juneau and other projects. That project only began after a Supreme Court decision. He dismissed concerns that the changes will weaken environmental protections. “We don’t want to cut corners in Alaska,” he said. “It’s about timely permitting — certainty in the permitting process — so people can make investment decisions to move forward on infrastructure projects.” ‘Morphed into its own entity’ Sen. Lisa Murkowski similarly said the EIS process has become overly burdensome over the years. “It has morphed into its own entity, the NEPA process, far beyond what the act initially required,” Murkowski said in an interview. The legislation itself is a relatively brief seven-page bill that outlines Congress’ desire for a national environmental policy, establishes the CEQ and describes very generally how that policy should be implemented. “The Congress recognizes that each person should enjoy a healthy environment and that each person has a responsibility to contribute to the preservation and enhancement of the environment,” NEPA states. Sullivan and Murkowski said the status quo of EIS timelines and particularly lengthy documents discourages public involvement, contrary to NEPA’s intent. “The whole point of NEPA was to bring the public into the permitting process. You do that by having an EIS that’s 100, 200 pages; something that the average citizen can sit down and read. That was the point. Public involvement, public engagement, public input,” Sullivan said. Boling went a step further and said the council wants to make an EIS more readable for the senior agency officials tasked with making major permitting decisions based on them. The page limits are designed to help get to the core detailed statement of an EIS, Boling said, adding that appendices to the main document are “free space” that do not count towards the limit. “We’d be concerned if people were trying to take really complicated projects and just reduce it all to 150 pages but we’re also equally concerned that decision-makers need to actually be able to use those documents,” he said. “Ultimately, it’s not a paperwork exercise; it’s designed to be something that decision-makers can actually read, digest and respond to.” Litmans, of Trustees for Alaska, said the EIS timeline and length statistics can be skewed by a few exceptional cases. He noted that a very small number of projects reviewed by federal agencies are actually subject to an EIS. The vast majority are given a finding of no significant impact, or FONSI. Litmans referred to a 2014 Government Accountability Office report that found less than 1 percent of projects subject to a NEPA analysis resulted in an EIS and less than 5 percent required an environmental assessment. The rest receive a categorical exclusion, meaning a formal environmental review isn’t needed. He said Boling is “far off the mark” in saying the CEQ is simply codifying case law in the regulations. “This rule completely guts or removes from the regulations the concepts of cumulative effects and indirect impacts. These are aspects of a project that have to be considered under NEPA,” Litmans said. A section of the regulations attempting to define “effects” and “impacts” states that a “but for” causal relationship does not constitute a particular effect under NEPA. “Analysis of cumulative effects is not required,” the regulations state further. Fjelstad said he believes an EIS should be narrowly focused on roughly five to 10 areas of study that are particularly germane to a project. “It’s the old maxim, pick a few things and bring real rigor to the table and do it right rather than trying to solve everyone’s issues,” he said. Litmans said there is a large body of case law defining the requirements of a cumulative effects analysis and simply cutting it out lends to a whole new round of lawsuits. “This rule just removes key aspects of what’s required in an agency review and adds new terms that will have to be defined by the courts,” he said. Litmans also said that permit applicants are regularly the cause of delays in the process because they were not armed with the requisite information an agency needs for an EIS when they start it. Such is the case with the Pebble mine EIS, he said. “You have a project that’s sorting things out as it goes along and as a result the reviews are going to take longer,” Litmans said of Pebble. “The shouldn’t, in the middle of the process, while the draft EIS is being written and completed say, ‘Well, we’re going to go get some more field data this summer,’ which is what they did.” Murkowski joined a series of state and federal resource agencies in roundly criticizing the U.S. Army Corps of Engineers’ draft EIS for Pebble published in February 2019, contending it lacks detailed information and minimizes the project’s potential impacts to the region’s salmon and other resources despite being approximately 1,400 pages. In response to a question about how she reconciles support for the regulatory reforms with the Pebble EIS Murkowski said, “When you say a project needs a review that’s fair and thorough, that fairness and thoroughness is not necessarily measured by pounds of paper or the length of time within a process.” Pebble spokesman Mike Heatwole wrote via email that the company has not had an unusual number of information requests from the Army Corps of Engineers for a project of its size. More people than normal are interested in Pebble and therefore the intricacies of the process have been made more transparent than normal by the Corps, according to Heatwole. He added that midstream changes to the project did not fundamentally change the layout of the project or the company’s approach to mining the resource. “The modifications were improvements upon the environmental impacts of the project and in many cases reduced the footprint of the project,” Heatwole wrote. Boling said agencies can better meet the new, firmer review timelines by making sure applicants have all of the information needed at the ready and Fjesltad acknowledged that “a lot of people start when they’re not ready.” The CEQ received 598,989 comments on the proposed regulations, according to the Federal Register. CEQ spokesman Dan Schneider wrote March 17 that modernizing the environmental review process for infrastructure projects is a priority for the administration and the council is currently reviewing the comments. ^ Elwood Brehmer can be reached at [email protected]

Corps finds less risk of Pebble dam failure

A leaked summary of the Pebble mine project’s preliminary final environmental impact statement says U.S. Army Corps’ of Engineers officials declined to model a tailings dam failure at the mine because of the designs chosen by the company but mine opponents contend that’s simply unacceptable. The executive summary of Pebble’s preliminary final EIS — which was sent to some Bristol Bay-area Tribes as well as state and federal government organizations acting as “cooperating agencies” to provide input on the final document prior to its release — states that the modeling of an “extremely unlikely” tailings release was deemed inappropriate by the Corps due to Pebble’s use of a flow-through tailings dam design, which is fundamentally different than major tailings dams that have failed around the world in recent years. Pebble CEO Tom Collier said in a formal statement issued shortly after the typically confidential summary was released that criticism of the Corps’ review is rhetoric that ignores what happened during review of the draft EIS, which was published about a year ago. Pebble has interpreted the leaked summary as indicative of a favorable permitting conclusion for the project. “Just because some of the groups opposed to Pebble do not like the conclusions reached by the USACE (Corps) does not that the USACE’s work is not valid,” Collier said. “Rather, the USACE’s work on this issue is sound. It is defensible and it should be commended for its completeness.” Commercial fishing and conservation groups have criticized the entirety of the summary, and argue that the tailings dam issue is just another symptom of a rushed and incomplete EIS process. According to the summary, a not-yet-published appendix to the full, final EIS details the rationale behind the probability of a large-scale tailings dam release from the bulk tailings storage facility, or TSF. That appendix addresses several recent dam failures, such as those in Brazil and the 2014 Mount Polley dam failure in British Columbia, and discusses “the higher probability of failure of water-inundated tailings slurries behind upstream dams compared to drained, thickened tailings behind downstream/centerline dams.” Corps Alaska officials have said in prior interviews that a detailed analysis of the tailings facilities is outside the scope of their review, noting the State of Alaska is responsible for reviewing permitting for the specific tailings dams designs and construction through its Dam Safety Program administered by the Department of Natural Resources. Pebble has yet to apply for its state dam permits. The company plans to build a centerline-style dam for its bulk TSF that will allow water to pass through the dam and subsequently be collected below the embankment for storage and treatment before it is released back into the environment. Pebble Permitting Vice President James Fueg said the company specifically examined what has happened during TSF failures around the world while designing its facilities. “Everything we’ve done in our approach — not just to designing the tailings dams but into laying out the entire site and combining the tailings management systems and the water management system — was all done specifically to address things that led to the failures at Mount Polley and the failures in Brazil,” Fueg said. “It’s more than just saying, ‘This is how we’re going to design the tailings embankment;’ you’ve got to look at the whole project.” The January 2019 collapse of an iron ore mine tailings dam near the Brazil city of Brumadinho released a mass of tailings sludge and killed 270 people. It was preceded by another large-scale tailings dam failure in the country in 2015. Pebble leaders first point to the fact that they plan to build two, separate tailings facilities: one to store the benign waste rock that makes up the lion’s share of the finely ground mine waste, or tailings, and another that will hold the pyritic tailings, or those that can generate acid when exposed to air and water. The main bulk TSF dam will be 600 feet high and the pyritic tailings embankment will be approximately 250 feet high, according to Pebble’s permit application materials. Combined, the facilities will cover more than 3,800 acres. Fueg said the large, bulk TSF will hold 85 percent to 90 percent of the waste that is left over from the mining process and the focus there is simply building the most stable facility possible. Part of that is allowing water to flow through the dam itself, rather than allowing the water to build up behind the dam and become a static force that is constantly pushing on the upstream face of the dam, according to Fueg. Part of the problem at Mount Polley was that water breached the dam prior to its collapse; removing water helps stabilize the associated tailings. Separating the water and tailings reduces the already slim risk of a dam failure and also limits the impact if a failure does occur, he said. “If you take a glass that’s a mix of sand and water and pour it out over the table, what’s going to happen? That sand and water is going to run all over the table and drip over the edges. But if you take a glass of — whether it’s dry sand or damp sand — and you dump it on the table you’re going to end up with a pile of sand in the middle of the table and that’s what we’re trying to do with this concept,” Fueg described. Pebble’s pyritic, or potentially acid-generating waste rock will be stored in water behind a separate, downstream-style tailings dam in a lined-facility while the mine is active. The pyritic tailings will be moved from the storage facility and into the bottom of the roughly 1,500 feet deep mine pit at the end of the mine’s 20-year life. The pyritic tailings will again be covered with water as the pit naturally fills and will safely remain there after closure and reclamation, according to the company. Fueg said Pebble will be mining rock specifically for the tailings dams rather than utilizing tailings and waste rock to build the dams, as is often done at other mines. He added that the downstream slope of the bulk TSF will be very gradual, with a 2.6-to-1 slope. “Ours is a much flatter slope, which again increases stability and the factor of safety in the design,” Fueg said. Finally, Pebble will dig down to bedrock before building the dam to prevent a potential weak layer of soil from compromising the dam from below, as also happened at Mount Polley, Fueg said. The whole system hinges on the ability to treat lots of water in an already wet place, which Fueg acknowledged, but he said Pebble has designed its two large water treatment plants to handle the combination of a large storm during the peak of snow runoff in the midst of the wettest 20-year period in the 76 years of weather records available for the nearby Iliamna Airport. “Half of the overall (water management) capacity is simply there as a precaution to deal with flood events or a series of wet years. It’s a massive pond,” he said. Alaska Dam Safety Program Engineer Charlie Cobb declined to discuss the specifics of Pebble’s TSF designs because he could eventually be tasked with adjudicating them in the state’s permitting process. Cobb did note that Pebble’s tailings dams would be among the largest in the state. He said generally, though, that evaluating the failure risk of a given tailings dam against those that have failed is problematic because the design of each structure is extremely site and material specific. “The rates of failure in the tailings dam industry are based on a whole fruit basket of dams. When one goes bad now and then it’s like, ‘OK, what kind of fruit was that?’” Cobb said. More often, he said the failure risk is vetted through a Failure Modes and Effects Analysis by a group of engineers that search for weak spots in a design in a back-and-forth exercise until the design is sufficiently reinforced. However, Dave Chambers, an engineer and geophysicist who founded the Montana-based nonprofit Center for Science in Public Participation said Pebble’s tailings management plans were developed to save money and do not jive with the reality of the mine or the available mineral resource. Chambers counters the claim that the flow-through bulk TSF will reduce the risk of failure with the contention that allowing the dam to fill with water from the inside could actually add to the risk. “You don’t want the dam to ever become saturated. When you allow a dam to get saturated you can have static failures,” he said. According to Chambers, many modern tailings dams are built with a thick internal layer of clay or other impermeable material that prevents water flow. Instead, the water is directed to a drain at the toe of the dam and is subsequently routed to the water treatment pond. He said the flow-through design inherently allows some saturation of the dam material and while water is not supposed to build up behind the dam, it could and is a scenario that needs to be modeled. “To my mind, flow-through dams aren’t as safe as a more conventional flow-through dam with a barrier in it because that (barrier) gives you another check on controlling the saturation of the dam,” Chambers said. The company went with the flow-through design to avoid the added cost of designing and building the dam with the internal barrier, he argues. “A permeable dam is just adding basically a second drainage system that shouldn’t be required,” he said. Chambers is more concerned with the pyritic tailings plan, he said, despite the fact that the pyritic tailings dam will be built with a conventional downstream method that includes the impermeable internal layer he’s calling for in the bulk TSF. That’s because he doesn’t believe Pebble will ever end up dumping the pyritic tailings in the bottom of the pit. Doing so would preclude expansion of the mine beyond the current plan, which many observers believe is necessary to make the overall project economic. He called the proposal a “lawyer’s mine plan.” “The reason that won’t happen is that there’s 88 percent of that main resource sitting in the ground at the end of their 20-year mining life and if they backfill that (pyritic) material into the pit they sterilize that resource — that is, they can’t mine it until they take all that stuff out again, which is hugely expensive,” Chambers said. “I know that they’re not going to do it. They know they’re not going to do it. The investors know that they’re not going to do it, which is why they’re not complaining about the plan.” He expects Pebble to build a second, larger pyritic TSF once they move ahead with expanding the project. In response to the assertion that Pebble will expand the project, Pebble spokesman Mike Heatwole wrote that the current plan calls for putting the pyritic tailings back into the pit and the company believes that the proposal is a significant improvement to its closure plan. He noted that any further development plans would require a wholly new permitting process. Elwood Brehmer can be reached at [email protected]

Early release of Pebble report draws strong reactions

A new version of a federal environmental review for the proposed Pebble mine has angered the mine’s opponents and encouraged its developer. The Army Corps of Engineers will use the final review to decide whether to give the controversial mine a key permit it needs before it can be built. The Corps had provided the report to several cooperating agencies involved in the review process, such as state and federal agencies and tribal governments. The Anchorage Daily News obtained an executive summary of the Corps’ preliminary final environmental review that was leaked to reporters. The report could foreshadow what’s to come. Tom Collier, chief executive of developer Pebble Limited Partnership, is pleased. He said the report’s release, and its major conclusions, indicate the company will see a decision in its favor by mid-2020. Pebble opponents that have seen it are not happy. They say the proposed copper and gold mine in Southwest Alaska will threaten the Bristol Bay region’s valuable salmon fishery, and they will go court to stop it. On Feb. 11, groups from the Bristol Bay region issued statements saying the document does not address local concerns raised in Congress about shortcomings in the review process. U.S. Sen. Lisa Murkowski in particular criticized the process, previously saying the mine shouldn’t be permitted unless the Corps addresses data “gaps” raised by the Environmental Protection Agency and other entities. Very little has changed between the draft environmental review issued last year and the preliminary final review, said Alannah Hurley with the United Tribes of Bristol Bay, representing 15 tribes from the region. The Corps still has not analyzed a tailings dam failure, she said. “That’s outrageous,” she said. “That’s one of our biggest concerns, when you store toxic waste at the headwaters of the last great wild sockeye salmon fisheries on earth.” She said groups will sue to stop the mine. The United Tribes of Bristol Bay and other anti-Pebble groups have already sued the EPA to try to reestablish one roadblock against the mine. John Budnik, a Corps spokesman, said there have been several revisions to the draft report. He said it addresses three spill scenarios. But the report says the Corps did not model the effect of an “extremely unlikely” catastrophic failure of a tailings dam, like what occurred at the Mount Polley mine in Canada in 2014. Public commenters had requested such a review. Tailings are a mine’s finely ground waste material. The report says the Corps determined that modeling for such an event was “inappropriate.“ Pebble has proposed a design with “water-reduction measures” for the tailings, such as drainage and air flow. The facility would have less chance of failure compared to a breach of “water-inundated tailings,” such as at the Mount Polley mine, the report says. “The bulk (tailings storage facility) would remain in place in perpetuity in ‘dry’ closure, further reducing the long-term spill risk,” the report says. Commercial Fishermen for Bristol Bay also said the preliminary final report is insufficient. “The preliminary final EIS is more of the same; this administration’s priority is a purely political process that completely ignores well-documented science and the voices of Alaskans,” said Katherine Carscallen, director of the fishermen’s group, in a statement. She said the report severely underestimates the risks of the mine to salmon and other resources. Collier with Pebble said Tuesday it’s “absolutely false” to say there have been only small changes to the preliminary final document. The Corps has held numerous meetings and delayed a final decision to address concerns with the draft report, he said. Also, Pebble has changed the design of the proposed port facility and roads and bridges to reduce impacts to waters and wetlands, as spelled out a compensatory mitigation plan it has submitted to the Corps, he said. It has proposed plans to help protect waters in the region, including improving wastewater management in three communities and taking steps to improve salmon passage in 8.5 miles of streams. The Corps’ major conclusions remain the same, Collier said. The report shows the mine would not hurt the Bristol Bay salmon fishery, he said. He pointed to a section on commercial fishing. It says that under normal operations, development alternatives would “not be expected to have a measurable effect on fish numbers and result in long-term changes to the health of the commercial fisheries in Bristol Bay.” Collier pointed out a section on subsistence that says, “Overall, impacts to fish and wildlife would not be expected to impact harvest levels, because no population-level decrease in resources would be anticipated.” Carscallen, with the fishing group, said Collier is wrong to say there won’t be harm to the fishery, The report says the development’s footprint will harm 100 miles of salmon stream, she said. The report indicates the final decision will be in Pebble’s favor, Collier said. “That’s the only conclusion you can reach,” he said.

Pebble releases draft mitigation plan

The Pebble Partnership’s federally-mandated plan to offset its mine project’s impacts to wetlands and salmon-bearing streams includes cleaning beach debris, improving fish passage in compromised waters and upgrading the water treatment systems in area villages, but Tribal leaders in the community closest to the proposed mine site don’t feel it’s adequate. The U.S. Army Corps of Engineers on Jan. 27 published Pebble’s compensatory wetlands mitigation plan to counter the impacts the open-pit mine and its associated infrastructure, which includes 72 miles of roads, ports, and a 192-mile gas pipeline from the Kenai Peninsula to help power the mining operation. The Clean Water Act mandates the wetlands mitigation and the Army Corps of Engineers oversees wetlands fill permitting under the law. Pebble expects to disrupt 3,083 acres of wetlands and water bodies under federal jurisdiction across the broad scope of the project and of that, 2,227 acres will be permanently impacted, according to the plan. More than 70 percent of the permanently impacted areas would be at the mine site. The 856 acres of temporary impacts would be in areas of the transportation and pipeline corridors where some fill material would be used temporarily during construction and eventually removed, the plan states. Upgrading the water treatment facilities in the villages of Newhalen, Nondalton and Kokhanok is Pebble’s first mitigation initiative. According to the documents filed with the Corps of Engineers, demand on the wastewater treatment systems exceeds their designed handling capacity in all of the communities. Newhalen and Kokhanok are on the north and south shores of Iliamna Lake, respectively, and Nondalton is north of the lake on the Newhalen River system near the southern boundary of Lake Clark National Park. The company also plans to restore access for salmon to up to 8.5 miles of habitat — commensurate with the miles of streams the mine facilities would remove from the headwaters of the Koktuli River, which supports five species of salmon — mostly around Dillingham, the largest community in the Bristol Bay region. The mitigation plan states that the portions of the Koktuli watershed that would be permanently removed generally have lower salmon spawning and rearing values, but Pebble acknowledges that indirect impacts from altered water flows and elevated nutrient levels could affect larger salmon spawning and rearing areas downstream. Finally, Pebble is proposing to clean up marine debris from 7.4 miles of coastline around the proposed Amakdedori port site on the west side of Cook Inlet, from which the company hopes to export its ore concentrates. Pebble CEO Tom Collier said in a formal statement that the company “took a holistic approach” to offsetting the impacts from its development and tried to remedy existing issues related to salmon and water quality. “Each initiative we are proposing tackles lingering environmental issues that might not otherwise be addressed due to local financial constraints and competing priorities in the area,” Collier said. Pebble Vice President of Permitting James Fueg said in an interview that the company first did its best to minimize wetlands impacts by scaling back the size of the mine and redesigning facilities in its overall project plan. However, he said the lack of development in the region beyond the immediate communities made it difficult for the company to identify opportunities to restore damaged wetlands or preserve areas threatened by other development; those are the mitigation options traditionally preferred by the Corps. Fueg stressed that the coastline rehabilitation is not “just a visual thing,” but that it addresses direct problems for wildlife. He noted it’s a remote area that otherwise likely wouldn’t be cleaned of lost fishing gear and other debris. “We’ve seen cases out there of birds and other things that have gotten entangled in the ropes and nets lying around there so it’s easy to demonstrate that’s a real threat,” Fueg said. The company would continue to monitor and clear the section of shoreline through the life of the project, which is currently pegged at about 20 years, he added. The Corps of Engineers has the final say over what Pebble must do to mitigate its impacts to wetlands and could amend the company’s proposal when it issues its record of decision on the overall project plan, which is tentatively set for this coming summer. Fueg said whatever mitigation work ultimately needs to be done will be finished before any work is done on the mine itself. The fish access projects would focus on replacing damaged or poorly installed culverts that prevent salmon from moving freely to their desired habitat for a given life stage. Culverts and similar potential barriers can impede adult fish passage, but more often they prevent juvenile salmon or resident species from moving back upstream to prime rearing areas during their seasonal migrations, according to Department of Fish and Game biologists. “Frankly, there are hundreds of culverts in the state database (that need fixing) and the reality is that while there may be a quote-unquote ‘responsible party’ associated with that — in other words, who’s the owner of the road; who’s the owner of the right-of-way — the fiscal situation being what it is the majority of those are not going to be fixed anytime soon,” Fueg said. “So there’s an opportunity to do good there and a lot of opportunities for further mitigation if we need to go down that road.” Each of the water treatment projects will likely cost multiple millions of dollars, according to Fueg, who also acknowledged they will require complete access to the facilities but said the Tribes in the communities were supportive of the concept. Nondalton Tribal Council President George Alexie said his council has opposed Pebble “from day one” and discussed the prospect of the company working on the community’s water infrastructure. Pebble’s mitigation plans simply don’t do enough to offset the damage the project will do to large areas of spawning and rearing habitat at the mine site, Alexie contends. “The council opposed the idea of Pebble trying to weasel their way in and throwing all their money around. They tried that a few times but the council didn’t want anything to do with it,” he said. Nondalton’s water treatment plant is controlled by the city council, according to Alexie, but he said the group shares the Tribal council’s beliefs about the controversial mine plan in-part because several individuals serve on both panels. Nondalton City Council officials could not be reached in time for this story. When asked whether he believed Pebble would be granted access to do the proposed work, he said, “I have my doubts.” Tribal leaders in Newhalen have not explicitly supported the project in formal comments, but have expressed desires for more economic opportunities in the region on multiple occasions. Many Newhalen and Kokhanok residents are also shareholders of Alaska Peninsula Corp., a Native village corporation that supports the project and has an agreement with Pebble to allow the company to use its land around Iliamna Lake for its transportation corridor. Lake and Peninsula Borough Manager Nathan Hill said it’s not his role to evaluate the plan but borough officials sought to ensure that mitigation work benefitted the region and connected Pebble with local individuals who could help make that happen. He said he heard that early on the company was considering doing culvert work in the Mat-Su area — where fish passage impediments are a bigger problem — and thought mitigation closer to the project footprint made sense. Hill emphasized that the borough has not taken a stance on Pebble because it has its own local development permits the company must secure, but he also noted that the village leaders will have the final say as to whether or not they want Pebble to do the work in their communities. Elwood Brehmer can be reached at [email protected]

Dunleavy to pitch Alaska mining at B.C. conference

Gov. Mike Dunleavy will be spending part of the first week of the legislative session in Canada to tout Alaska’s mining potential and hear from investors what the state can do to help grow the legacy industry. The governor will be attending the Association for Mineral Exploration Roundup conference in Vancouver Jan. 22-23, according to his spokesman Jeff Turner. Dunleavy’s commissioners of Natural Resources, Environmental Conservation and Fish and Game will accompany him on the trip as well. Turner said the governor would be in Juneau for the first day of the legislative session Jan. 21. In an interview Friday Dunleavy characterized the trip as a continuation of what he has been doing periodically through the first year-plus of his administration — meeting with key players in a host of industries to discuss investing in Alaska. “We want to highlight Alaska and be able to answer any questions investors may have about our regulatory regime and just make a pitch that Alaska’s got some tremendous opportunities because we’re trying to capitalize on our resource wealth and have it developed responsibly so we can create jobs for Alaskans and wealth and potentially revenue for local communities as well,” Dunleavy said. The conference will also give the governor and his cabinet officials a chance to clear up any misconceptions investors might have about Alaska’s mining industry and learn what under-the-radar impediments there might be to pursuing exploration projects in the state, he emphasized. “This visit for me and my team will show us what the perception (of Alaska) is for investors,” Dunleavy said. He compared it to going to the large CERAWeek oil and gas conference last March in Houston, where he and other administration officials were able to learn directly from industry players about their perception of Alaska. In recent years the state had sent geologists and economic development staff to the AME Roundup, but having the governor and three of his cabinet members attend the conference sends an important message about the state’s view of the mining industry, Alaska Miners Association Executive Director Deantha Crockett said. Former Gov. Sean Parnell was the last Alaska governor to attend the conference, she said. AME Roundup aims to pitch exploration projects in western provinces and states to regional mining investors. According to the conference website, it is attended by more than 6,500 people each year. According to industry analysts, there has been a resurgence in mining exploration in Alaska, with roughly $150 million spent on prospecting projects in the state the past two years. That is a sharp increase from the several years prior when just more than $50 million per year was spent searching for metals and minerals across Alaska. “There are lots of different mining conferences around the world but this is the one where companies are looking at where they are going to spend significant dollars exploring projects, which for us means new mining companies in the state of Alaska, new mining opportunities,” Crockett said. Dunleavy made his first public appearance the morning after his November 2018 election at the Alaska Miners Association trade show in Anchorage, which was also where he first proclaimed Alaska as being “open for business” under his leadership. Crockett described Dunleavy’s presence at the mining conference as a “huge deal” for an industry that regularly requires upwards of a billion dollars of investment to see a project through development. “To have the leader of our state say, ‘We want to make sure that you are comfortable making an investment decision in our state’ is a really big deal,” Crockett said. “Next week it’s a big deal, but it’s going to be a big deal for a long time after that.” The Alaska Miners Association is hosting an “Alaska Night” reception Jan. 22 in Vancouver to highlight exploration projects in the state to prospective investors that Dunleavy will be attending as well, according to Turner. Dunleavy added that the information he gathers in Vancouver should be helpful in policy discussions with federal officials. Dunleavy said he will be going back to Washington, D.C., in early February and he will taking what he learns at the conference back to the nation’s capital where he will continue to promote Alaska’s resources. He noted that a large graphite prospect near Nome and rare earth element prospects across the state could greatly help the U.S. reduce its dependence on other countries, namely China, for minerals critical to defense and clean energy technologies, among other uses. “We want to market ourselves as — this may sound strange — but as clean zinc and clean gold and clean rare earth (minerals); what that means is we want to produce these elements, these minerals, these metals in the safest way possible for the environment,” Dunleavy said. In addition to attending the mining conference, the governor will be meeting with British Columbia Premier John Horgan and Northwest Territories Premier Caroline Cochrane, he said, to hear their views in resource-related issues and discuss possible economic partnerships. Fish and Game Commissioner Doug Vincent-Lang is traveling to Vancouver specifically to discuss the concerns many Southeast Alaska commercial fishing and conservation groups have with British Columbia mining operations with the watersheds of large, “transboundary” rivers that flow from the province through Alaska, according to Dunleavy. The downstream impacts some Canadian mines could have on Alaska salmon fisheries has been one Alaska’s congressional delegation and former Gov. Bill Walker’s administration highlighted for years with British Columbia officials. Elwood Brehmer can be reached at [email protected]

Gold claims contested amid Pogo sale

A lawsuit over who has rights to thousands of acres of promising Interior Alaska gold claims has ensnared the new and former owners of the Pogo gold mine. Nevada-based Great American Minerals Exploration Inc. sued former Pogo owner Sumitomo Metal Mining America Inc., RCI Capital Group Inc., a Canadian finance firm and the new Pogo owners, on Nov. 6 in Alaska Superior Court claiming Sumitomo and RCI Capital conspired to sell gold claims near Pogo out from under Great American Minerals as part of a $260 million sale of the mine in 2018. Sumitomo announced in late August 2018 that it had agreed to sell the underground Pogo mine to Australian-based Northern Star Resources Ltd. in a deal that, unbeknownst to Great American Minerals at the time, included the roughly 36,000 acres of state mining claims known as the Monte Cristo property. According to the complaint, Great American Minerals Exploration, or GAME, signed an option agreement with Sumitomo and its subsidiaries in late August 2016 that gave GAME exclusive rights to eventually purchase the Monte Cristo claims provided it made good on a series of work and payment requirements before the end of 2019. On Dec. 30, a day before the option agreement between GAME and Sumitomo was set to expire, Judge Jennifer Henderson issued a preliminary injunction in the suit that essentially freezes the agreement until Henderson lifts the injunction or the case is resolved. GAME paid Sumitomo $700,000 in installments over two years and additionally made good on commitments to perform at least $8.5 million of exploration work at Monte Cristo from 2017 to 2019, according to the complaint. Sumitomo, in its response, denied the vast majority of GAME’s allegations, but acknowledged that the exploration company fulfilled its work commitments in 2017 and 2018 and also made its final option fee payment of $250,000 on Aug. 29, 2018, a day before the sale of Pogo was announced. Matt Singer, an attorney for GAME, said in an interview that the company also conducted more than the $5 million of work in 2019 at Monte Cristo that it was required to under the option agreement. The company believes the property is a very promising prospect as it sits between the Pogo and Fort Knox gold mines near Fairbanks and holds similar geology, Singer added. “(GAME) had one of the largest drill programs in the state in the last year,” he said. “Those are real jobs and it’s real activity.” According to Singer, the company simply wants to clarify its right to Monte Cristo and move ahead with acquiring and further exploring the property. Under the option agreement, GAME was to pay Sumitomo $15 million, or $10 million plus a 1.5 percent royalty on future gold production, no later than 45 days after the end of the option agreement to fully purchase Monte Cristo. As an alternative, GAME could extend the option by a year with a $2 million payment, according to the option agreement. Information published in 2018 by Northern Star and Sumitomo on their websites regarding the Pogo sale references exploration opportunities as part of the transaction but the Monte Cristo property is not specifically named. A statement following the injunction order by Holland and Knight, the law firm representing GAME, estimated the value of the Monte Cristo property at approximately $40 million. The complaint alleges Sumitomo did not believe GAME would fulfill its requirements under the option agreement and therefore began searching for another potential buyer for Monte Cristo. It additionally asserts that Sumitomo, Northern Star and RCI Capital disparaged GAME to potential investors to prevent the explorer from raising the funds needed to meet its end of the deal. “Investors don’t want to get involved in a mining claim if there’s any question about ownership and clear title,” Singer said. “The conduct of Sumitomo and RCI put hair on this deal and scared the investment community off,” Singer said. Attorneys for Sumitomo, Northern Star and RCI Capital either could did not respond to requests for comment or declined to comment on the lawsuit. Northern Star, in its answer to GAME, also denied nearly all of the allegations in the complaint. According to Northern Star, it did not purchase the assets of Stone Boy Inc., the former subsidiary of Sumitomo that holds Monte Cristo, partly because Stone Boy is just a holding company that has not day-to-day operations, according to Northern Star. Rather, Northern Star purchased 100 percent of Stone Boy’s stock in an equity sale. Singer said when GAME didn’t default as Sumitomo and RCI Capital expected, “Sumitomo was less-than-candid with my client — essentially concealed the transaction for a period of time.” Northern Star wanted to tell GAME about the Pogo deal possibly including the Monte Cristo claims and wanted the company’s consent for the transaction, but “Sumitomo was scrambling, trying to figure out what to do and kept the deal quiet,” Singer said. Northern Star’s 2019 annual report dated Aug. 27, states in a footnote that GAME holds an option to purchase Monte Cristo. The report also lists Northern Star as a “joint holder” of the claims. “No sale of the Monte Cristo property occurred because at that time (of the Pogo sale) the plaintiff had not been asked for, nor had it given its consent for the assignment of the option agreement,” Northern Star attorneys wrote in response to GAME. ^ Elwood Brehmer can be reached at [email protected]

Trilogy announces successful drilling at third Ambler prospect

The company with two copper prospects in a remote, mineral-rich region of Alaska is adding another. Trilogy Metals Inc. announced on Nov. 7 that it hit copper, zinc, silver and small amounts of gold and lead during summer drilling at its Sunshine prospect in the Ambler mining district northwest of Fairbanks. The Vancouver-based junior mining firm hit zones of at least 0.87 percent copper in each of the six boreholes tested; all but one of the holes contained copper zones with mineralization excess of 2.08 percent, according to the exploration report. For comparison, a 2016 research article published in the scientific journal Resources concluded that the average ore grade at currently producing copper mines worldwide is approximately 0.62 percent. However, the high costs associated with developing isolated prospects in Alaska often require much better-than-average resources to justify turning a prospect in the state into a producing mine. Zinc occurrences in the same zones were largely in excess of 2 percent, with silver densities reaching 74 grams per metric ton of ore. The results are from 1,356 meters of drilling over the six boreholes. Trilogy targeted the specific drilling sites following a $2 million electromagnetic geophysical survey the company conducted last spring over much of the Ambler prospect belt. Interim Trilogy CEO James Gowans said in a formal statement that Sunshine is just one in a host of prospects across the large Ambler mining region, “which has the potential to be one of the most prolific mining districts in the world.” “The grades and widths of mineralization found at the Sunshine prospect are very similar to what we see at the Arctic project and I expect that with more drilling we can delineate more mineralization at Sunshine,” Gowans said. Other companies are exploring other prospects in the Ambler region, which stretches for roughly 75 miles along the southern flank of the western Brooks Range in the upper reaches of the Kobuk River drainage. Trilogy is also working in other parts of the area, including its aforementioned and advanced Arctic prospect, about eight miles east of Sunshine. Former CEO Rick Van Nieuwenhuyse said last spring that Trilogy leaders hope to complete a feasibility study of Arctic early next year. Environmental permitting for Arctic should start once the environmental impact statement for the controversial, state-sponsored 211-mile Ambler Mining District Industrial Access Project is closer to complete as well, he said. The high-grade Arctic prospect covers approximately 36 million metric tons of ore with 3.07 percent copper, 4.23 percent zinc, 0.73 percent lead and 47 grams per ton of silver. Generally referred to as the Ambler road, the up to $350 million access project is a state-led plan for an unimproved industrial road off of the Dalton Highway to reach the large Ambler mining district. Under the plan, the Alaska Industrial Development and Export Authority would build the road via revenue bonds once it secures commitments from mining companies that would ultimately fund the project through tolls and use agreements. The road project has drawn opposition from local Alaska Native organizations, residents of the area and environmental groups who are worried the project will disrupt caribou migrations important for subsistence harvests. The proposed mines have also drawn scrutiny for potential impacts to salmon and whitefish runs in the Kobuk River drainage. In addition to the young Sunshine and mature Arctic prospects, Trilogy is also working on the mid-stage, copper-based multi-metal Bornite prospect to the south of the other two. The company completed more than 7,600 meters of drilling this year from 10 boreholes in and around the known resource. The $9.2 million drilling program at Bornite was funded by Australia-based South 32 through an agreement the companies signed in 2017. According to a company report issued prior to this year’s drilling, Bornite contains indicated resources of more than 40 million metric tons of ore holding an average of 1.02 percent copper for 913 million pounds of the metal. ^ Elwood Brehmer can be reached at [email protected]

Mineral exploration spending strong for second year; Icy Cape grows

Mineral exploration is on the rebound in Alaska and a unique state-owned prospect is showing promise. Nearly $150 million was spent prospecting mostly for large mine opportunities in the state last year and likely in 2019, according to Curt Freeman, president of Fairbanks-based Avalon Development Corp. That is up from just more than $50 million three and four years ago, but off from a peak of roughly $350 million per year in the late 2000s, when substantial work was being done at the Pebble deposit. The figures were compiled with data from the Alaska Department of Natural Resources. Freeman tallied 18 large exploration projects across the state for “every metal under the sun,” he said. “It was a pretty good year for exploration all the way around.” However, he noted Alaska’s six metal mines are all large operations and the state does not have a single mid-sized producing mine. As is the challenge for many industries in the state, the high cost of operating in very remote places often requires very large and inherently complex projects to be economic. The Alaska Mental Health Trust Land Office is exploring a growing heavy mineral prospect it owns at Icy Cape on the exposed Gulf of Alaska coast between Cordova and Yakutat. Trust Land Office minerals and energy manager Karsten Eden said simply the prospect of industrial-use minerals is commercially viable and contains significant quantities of in-demand minerals such as garnet and epidote — as well as gold. “Every sample has gold in it,” Eden said of the drilling work that’s been done there. He spoke Nov. 5 at the Alaska Miners Association convention in Anchorage. When it started in 2017, the focus of the exploration was on the beach sands that underlie the spruce forests along the coast at Icy Cape. Now the resource delineation work has shifted to the deeper sediments, Eden said. Since 2017 the Trust Land Office has had 13,000 feet of core samples drilled from boreholes down to 300 feet, he said. The Trust Land Office manages roughly 1 million acres of land across Alaska for real estate and resource development purposes, the proceeds of which go to fund the Alaska Mental Health Trust Authority’s work to benefit Alaskans with mental health and addiction challenges. Specifically, the multi-heavy mineral prospect consists of abrasives garne and epidote, and zircon, magnetite and gold. They are present across most of the 48,000-acre property, which is closed to public access, but the exploration team is interested in 23,000 acres of it, according to Eden. The magnetite allowed the Trust Land Office to fly a magnetic survey of the area to better hone in on prospective areas to drill, he said. Different layers of the area’s marine sediments are largely comprised of similar minerals, just in consistently different sizes, he said. That can be beneficial when marketing the processed minerals as certain grain sizes are used for certain applications. “Where you have the highest concentration of heavy minerals you definitely have the highest concentrations of gold,” Eden said. Tests of the minerals’ characteristics by industrial users and labs indicate Icy Cape has “elements of prime quality,” he added, also noting that industrial manufacturers want large prospects that they can count on to produce for 15 years or more. Garnet, a fairly hard, multi-use mineral is in high demand, according to Eden. “The main producer India doesn’t export anymore so people are looking for garnets,” he said. Further resource evaluation will be coordinated with the ongoing logging of various portions of the property to take advantage of increased access to portions of it, according to the Trust Land Office. Eden said the next steps are to compile a formal resource evaluation while looking for a private partner to lead development of the prospect. That work would likely include building a port facility to handle supply shipments and mineral exports. “Gold you can always fly out,” he said. Elwood Brehmer can be reached at [email protected]

RDC conference features positives, challenges, plus BP and Hilcorp

Conference season is in full swing in Alaska and the annual gathering of the players in the state’s biggest industries is right around the corner. The Alaska Resources Conference hosted by the Resource Development Council for Alaska is slightly later than normal this year. It will be held Nov. 20-21 at the Dena’ina Center in Anchorage. The conference will focus on Alaska’s oil and gas, mining and timber industries and the energy in those sectors is positive these days noted RDC Executive Director Marleanna Hall. Alaska Gov. Michael J. Dunleavy has committed his administration to removing impediments to development across the state and at the federal level the Trump administration has largely done the same. Under Trump, the Army Corps of Engineers in September finalized revisions to the scope of the hotly debated Waters of the U.S. Rule, changes which scale back the jurisdiction of the corps and the Environmental Protection Agency to require Clean Water Act permits for some development projects. In mid-October, U.S. Department of Agriculture Secretary Sonny Perdue announced the administration’s preference to fully exempt the Tongass National Forest from the Roadless Rule, a change long sought by timber and mining advocates in the state. Additionally, an oil and gas lease sale for the Arctic National Wildlife Refuge coastal plain is expected late this year or early next, marking the culmination of decades of effort to access the billions of barrels of oil estimated to reside there. While those are all positive developments for those sectors, Hall said she expects to hear plenty from oil industry speakers talk about their biggest upcoming challenge. “I think we’ll have a lot of messaging on why the oil tax initiative should be rejected again,” she said. The sponsors of the Fair Share Act voter-driven initiative are currently gathering the signatures and support they need to get the measure — which aims to raise the state’s collective oil production tax revenue by approximately $1 billion per year — on the ballot in 2020. Rex Rock, CEO of Arctic Slope Regional Corp., long an advocate for opening ANWR to oil exploration, will provide the keynote address Nov. 20. Hall said she is particularly intrigued to hear from National Energy Laboratory Director Brian Anderson, who is scheduled to discuss ways to burn fossil fuels cleaner in an era of climate change later that day. The last speakers of the first day, BP Alaska President Janet Weiss and Hilcorp’s Alaska head Dave Wilkins, will cover recent big news in Alaska circles, that being “the passing of the torch,” as Hall described it, of Prudhoe Bay from BP to Hilcorp next year. The second day of the conference will start with talks about two potential megaprojects in the state, the $13 billion Alberta to Alaska railway and Qilak LNG’s recently proposed $5 billion North Slope offshore LNG export terminal. It will conclude with a discussion about the Alaska Roadless Rule revision process by Forest Service officials and Southeast Conference Executive Director Robert Venables. While the conference is largely attended by industry employers, Hall said RDC always encourages students to attend as well so they can gain insight into the industries they could join after graduation. RDC offers free admission to full-time students for its public events. The student registration deadline for this year’s annual conference is Nov. 13. The agenda is at Elwood Brehmer can be reached at [email protected]

Alaska Miners Association celebrates 80 years

Mining is one of Alaska’s oldest industries and the Alaska Miners Association exemplifies that. The trade group was founded before World War II and is celebrating its 80th anniversary during its annual convention in Anchorage at the Dena’ina Convention Center Nov. 3-9. Mining continues to be a major industry in Alaska; it employs roughly 13,000 people at small placer and prospecting camps to world-scale mines across the state, according to the Alaska Department of Labor. But even the enduring association doesn’t match the history of mining in Alaska. Commercial mining and Alaska’s “gold rush” years started more than a century before when Russian engineers discovered gold near the Kuskokwim River in 1832, according to the group. The Kuskokwim River valley long supported placer gold operations and today is home to the Donlin Creek gold prospect. With a resource of approximately 33 million ounces, the Donlin mine will be one of the largest open-pit gold operations in the world when it is developed. As for the convention, state Department of Environmental Conservation Commissioner Jason Brune, a former Anglo American representative, will be the keynote speaker Nov. 6, and he will give an update on the mining-related issues the department has dealt with in the first year of Gov. Michael J. Dunleavy’s administration. Dunleavy’s first public appearance after being elected last year was at the Miners convention, where he emphatically declared Alaska would be “open for business” with him as governor. Department of Natural Resources Commissioner Corri Feige will provide the keynote address Nov. 7, sharing her vision for mining in the state and BLM Alaska officials will discuss new priorities regarding mining on federal lands in the state on Nov. 8, according to materials provided by the association. As is customary, the convention will also feature numerous discussions regarding mining policy in Alaska as well as updates on the plethora of large prospects — from copper and gold to graphite and rare earth elements — across the state. Representatives from several of Alaska’s large producing mines will also discuss what their companies have learned in developing metal prospects in the state’s sensitive environment and harsh climate in presentations Nov. 7. Evening activities will start with a history night and inductions into the Alaska Mining Hall of Fame and the convention will conclude with the Alaska Miners Association’s annual awards banquet.


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