Legislature(2017 - 2018)BELTZ 105 (TSBldg)

02/27/2018 03:30 PM COMMUNITY & REGIONAL AFFAIRS

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Audio Topic
03:31:39 PM Start
03:32:43 PM SB203
04:30:16 PM Adjourn
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
*+ SB 203 AIDEA: BONDS FOR GRAPHITE CREEK PROJECT TELECONFERENCED
Heard & Held
         SB 203-AIDEA: BONDS FOR GRAPHITE CREEK PROJECT                                                                     
                                                                                                                                
3:32:43 PM                                                                                                                    
CHAIR  BISHOP  announced  consideration  of  SB  203  authorizing                                                               
Alaska  Industrial Development  and Export  Authority (AIDEA)  to                                                               
issue bonds to finance infrastructure  and construction costs for                                                               
the Graphite Creek project.                                                                                                     
                                                                                                                                
3:33:12 PM                                                                                                                    
SENATOR OLSON, Alaska State Legislature,  sponsor of SB 203, said                                                               
he  was  asked  to  introduce  this bill  to  make  sure  that  a                                                               
corporation like Graphite  One could accept AIDEA  funds to start                                                               
the initial  stage of assessing  the possibility of  pulling this                                                               
graphite deposit out of the ground.                                                                                             
                                                                                                                                
He  explained that  graphite  is  a rare  mineral  that the  U.S.                                                               
imports  100 percent  from places  like China.  That is  why this                                                               
area is worth investing in.                                                                                                     
                                                                                                                                
3:36:00 PM                                                                                                                    
SENATOR GARDNER  said she  was struck by  the overview  that says                                                               
this company is proposing a  vertically integrated enterprise: to                                                               
mine  the  graphite,  process  it   into  concentrate,  and  then                                                               
manufacture high-grade  spherical graphite for  vehicle batteries                                                               
and  storage. She  asked if  any of  that value-added  processing                                                               
would be done in Alaska.                                                                                                        
                                                                                                                                
SENATOR OLSON  replied that the  Native corporation and  a number                                                               
of other people in that area  are excited about the jobs it would                                                               
create, not just for the mining but for the processing.                                                                         
                                                                                                                                
SENATOR GARDNER asked  if this mine would be able  to replace 100                                                               
percent of the graphite imports.                                                                                                
                                                                                                                                
SENATOR OLSON  replied that he  didn't know, and he  didn't think                                                               
anyone else  did either.  The military uses  a lot  of high-grade                                                               
graphite,  but  how   much  and  what  it  used   for  they  hold                                                               
confidential.                                                                                                                   
                                                                                                                                
3:38:40 PM                                                                                                                    
At ease                                                                                                                         
                                                                                                                                
3:39:09 PM                                                                                                                    
CHAIR BISHOP called the meeting back to order.                                                                                  
                                                                                                                                
3:39:13 PM                                                                                                                    
At ease                                                                                                                         
                                                                                                                                
3:40:02 PM                                                                                                                    
CHAIR BISHOP called the meeting back to order.                                                                                  
                                                                                                                                
JIM PUCKETT,  staff to Senator  Olson, Alaska  State Legislature,                                                               
Juneau,  Alaska, said  SB  203,  version 30-LS1473\A,  authorizes                                                               
AIDEA  to  issue the  bonds  under  AS 44.88.172.  The  principle                                                               
amount that they  can issue is limited to  $80 million, including                                                               
the  cost  of  issuing  them. It  requires  legislative  approval                                                               
according to AS 44.88.095(g).                                                                                                   
                                                                                                                                
He emphasized  that this is not  an approval for the  project but                                                               
simply giving  AIDEA the option  to invest in the  Graphite Creek                                                               
Project, that is estimated to cost more than $350 million.                                                                      
                                                                                                                                
Why is  graphite so important  and why now? Mr.  Puckett answered                                                               
that  United State  Geologic Survey  (USGS)  had identified  this                                                               
mineral  as  critical  to  the   national  economy  and  national                                                               
security. It  is most important  as an anode material  in lithium                                                               
batteries,  a market  that is  expanding rapidly.  Currently, the                                                               
U.S. is  totally reliant on  foreign sources for  graphite; China                                                               
being the  biggest, but it  comes from Brazil, Madagascar,  and a                                                               
couple other sources, as well.                                                                                                  
                                                                                                                                
MR.  PUCKETT  explained  that  the   very  large  flake  graphite                                                               
deposits in  the Kigluaik Mountains  on the Seward  Peninsula are                                                               
the largest  known graphite  resource in  the United  States. The                                                               
proposed processing  plant at the  Graphite Creek  facility would                                                               
produce 60,000  metric tons of graphite  concentrate annually. In                                                               
2016, the U.S. needed 39,500 metric tons of natural graphite.                                                                   
                                                                                                                                
He said that  Tesla has built a new lithium  battery giga factory                                                               
in Nevada and  once it is at full production  (expected to happen                                                               
in  2019) it  will need  93,000 tons  of graphite  annually. That                                                               
factory  is  already  producing more  batteries  than  any  other                                                               
factory in  the world and  it is not  at full production,  yet. A                                                               
2017 study  showed this  project has the  potential to  produce a                                                               
significant  portion   of  the  projected  domestic   demand  for                                                               
graphite for 40 years.                                                                                                          
                                                                                                                                
CHAIR BISHOP  remarked that  he heard  that Toyota  Motor Company                                                               
wants to  be hybrid or  all electric by  2025 and some  other car                                                               
companies are doing that same. He opened public testimony.                                                                      
                                                                                                                                
ROSE FOSDICK,  Natural Resources  Division, Kawerak,  Inc., Nome,                                                               
Alaska, didn't  state a  position on  SB 203,  but said  they are                                                               
curious about the  graphite process and the chemicals  used in it                                                               
and think it could be harmful  to subsistence. They would like to                                                               
know the meeting  schedule so people can comment  and share their                                                               
needs for subsistence resources.                                                                                                
                                                                                                                                
3:50:00 PM                                                                                                                    
BRANDON   AHMASUK,  Director,   Subsistence  Resources   Program,                                                               
Kawerak, Inc.  Nome, Alaska, said  these communities  are heavily                                                               
reliant  on  subsistence  resources  -  salmon,  moose,  caribou,                                                               
berries - and will be the first  ones to know if these mines will                                                               
negatively  affect  the  area.  If  the  resources  around  these                                                               
communities are  impacted who will  put food on the  table? These                                                               
communities have  80-90 percent unemployment. He  said the Imuruk                                                               
Basin  has North  America's  farthest north  red  salmon run.  It                                                               
holds  three  kinds  of  seals,   two  of  which  are  listed  as                                                               
threatened  under  the Endangered  Species  Act  (ESA); they  are                                                               
there because  of the salmon. If  any of these resources  were to                                                               
fall, it will  trickle down the food chain and  ultimately to the                                                               
communities down-river  from the  mine. He concluded  saying that                                                               
the subsistence people  should be at the table  in discussions of                                                               
this mine.                                                                                                                      
                                                                                                                                
CHAIR BISHOP asked  if seals are still  available for subsistence                                                               
hunting.                                                                                                                        
                                                                                                                                
MR. AHMASUK answered yes.                                                                                                       
                                                                                                                                
3:51:25 PM                                                                                                                    
SUE  STEINACHER,  representing  herself, Nome,  Alaska,  did  not                                                               
state a  position on  SB 203,  but asked  what degree  of support                                                               
this project  has from  all the residents  of Brevig  and Teller.                                                               
Someone  from Teller  wrote on  Facebook that  Senator Olson  has                                                               
heard  only  good  things,  but  he  has  not  heard  from  them.                                                               
Remember, when there is resistance  this has caused them to build                                                               
a better project than first proposed.                                                                                           
                                                                                                                                
Her  next   concern  was  when   the  state  invests   money  for                                                               
development of a corporate project,  it casts reasonable doubt on                                                               
the state's  neutrality as  a regulatory  enforcer. If  a company                                                               
doesn't spend its own money  it overestimates their capabilities.                                                               
The Rock  Creek Mine is  an example  of where the  state invested                                                               
$7-8 million dollars  building a road to the mine  site - and she                                                               
didn't know  who paid for  the three miles  of power lines  - but                                                               
the company oversold its abilities  and the mine failed. There is                                                               
now a three-mile road to nowhere along with power poles.                                                                        
                                                                                                                                
She mused that  the state is being asked to  post $80 million for                                                               
this  project  while Nome  and  the  surrounding communities  are                                                               
suffering  from a  severe  lack of  housing and  a  high cost  of                                                               
living. Teller doesn't even have  sewer and water to their homes.                                                               
A project  like this will only  add more pressure on  the limited                                                               
housing and will cause already-high  prices to rise higher. There                                                               
are already  over 50 Nome  families on  the AHFC waitlist  for 33                                                               
units and long  waitlists at the regional  housing authority. HUD                                                               
recently estimated  a need  for over 1,000  housing units  in the                                                               
Bering Strait region  including Teller and Brevig,  and yet their                                                               
budget  is so  small that  they can  only afford  to build  six a                                                               
year.                                                                                                                           
                                                                                                                                
In Nome, people in the service  industry make only $12-17 an hour                                                               
and  yet  have  to  live  in  two-bedroom  apartment  for  $1600-                                                               
1800/month plus  utilities. Families  are doubled and  tripled up                                                               
just to  get by. This  is true in Teller,  as well. If  the state                                                               
wants  to  invest  in infrastructure  and  development  in  rural                                                               
Alaska  for  a  large  corporation  it has  to  first  invest  in                                                               
affordable housing and infrastructure  for the people who already                                                               
live there.                                                                                                                     
                                                                                                                                
MS.  STEINACHER  proposed  if  this bill  goes  forward  that  25                                                               
percent  of  the  bond  amount be  dedicated  to  addressing  the                                                               
existing needs  for communities most  impacted by this  mine. She                                                               
added  that  while this  project  will  bring jobs,  the  highest                                                               
paying ones  go to the  people who move  into the region  and too                                                               
often the cost  of development puts the greatest  pressure on the                                                               
lowest earners.                                                                                                                 
                                                                                                                                
3:55:12 PM                                                                                                                    
BLAKE BOGART,  representing himself,  Nome, Alaska,  supported SB                                                               
203.  It's a  great opportunity  for  this region  and the  state                                                               
directly and  indirectly with  its jobs  and economic  growth. It                                                               
could lead  to America's first  domestic supply of  graphite that                                                               
goes  through  a  rigorous permitting  process.  He  said  making                                                               
batteries is an up and coming industry.                                                                                         
                                                                                                                                
DOUG  TWEET, representing  himself,  Nome,  Alaska, supported  SB                                                               
203.  He is  the third  generation of  the Tweet  family and  the                                                               
owner in  the claims that  Graphite One is leasing.  These claims                                                               
were staked  in 1900  by his  grandfather. So,  the mine  will be                                                               
locally  owned.  The  family  knows and  loves  the  country  and                                                               
wouldn't allow any degradation of the environment.                                                                              
                                                                                                                                
He explained that  these are federal mining claims  and the state                                                               
wouldn't get any benefit from  them, but they are being converted                                                               
to  state claims,  which means  the state  would get  substantial                                                               
royalties.  He  said this  a  "world  class"  mine and  that  the                                                               
graphite is very  large flake and rare. The mine  would be a huge                                                               
benefit to  the local economy  paying high wages and  providing a                                                               
tax base.  As claim owners,  the family has worked  with Graphite                                                               
One for  seven years and  found it a  good company to  work with.                                                               
They are committed to local hire  as much as possible and want to                                                               
keep   local  communities   involved   in  the   mine  plan   and                                                               
development.                                                                                                                    
                                                                                                                                
3:59:40 PM                                                                                                                    
RICHARD  BENEVILLE, Mayor,  Nome,  Alaska, supported  SB 203.  He                                                               
thanked Senator  Olson for  bringing it to  the attention  of the                                                               
legislature.  He said  western  Alaska has  some  of the  highest                                                               
energy  costs in  the  country and  they are  in  the process  of                                                               
trying to  develop its resources  to where it  can be a  lot more                                                               
self-sustaining. He said that graphite  also helps the nation and                                                               
it gets used in the development of storing energy in batteries.                                                                 
                                                                                                                                
4:02:11 PM                                                                                                                    
JOHN  TOPKOK, Igloo  Native Corporation,  Teller, Alaska,  didn't                                                               
state a  position on SB 203,  but agreed with comments  about the                                                               
need for  subsistence resources  and housing  in Teller.  He said                                                               
besides red  salmon, they  rely on tom  cod, herring,  and smelt,                                                               
that all inhabit  the Imuruk Basin, which needs  to be protected.                                                               
They also catch moose around the Graphite area.                                                                                 
                                                                                                                                
4:05:00 PM                                                                                                                    
RITA  OLAN, Brevig  Mission Native  Corporation, Brevig  Mission,                                                               
Alaska, said  they are  hesitant to support  SB 203,  because the                                                               
mining site is  also their camping grounds for  hunting moose and                                                               
berry picking. The  streams from the Kigluaik  Mountains are used                                                               
for drinking  and fishing. She didn't  know how the area  will be                                                               
kept clean if  it is contaminated with "mining  stuff." People in                                                               
the area live a life of subsistence and can't live off graphite.                                                                
                                                                                                                                
"If there is  a spill, will the state keep  their freezers full,"                                                               
she asked. They have been  told the limestone will neutralize the                                                               
chemicals, but  don't know  how long  that will  take. If  one of                                                               
these resources collapses, the rest will follow.                                                                                
                                                                                                                                
4:08:38 PM                                                                                                                    
MS. OLAN  said her people have  been taught by their  fathers and                                                               
forefathers how to  live off their land and were  taught to share                                                               
what they catch,  but what will happen when they  have nothing to                                                               
share because  of the contaminants, noise,  and interruptions the                                                               
mine will bring?  She said  Graphite One has said they will start                                                               
a subsistence board  (to which she has been  elected to represent                                                               
her council) to  keep a close watch on the  activities but so far                                                               
this board has only been imaginary.                                                                                             
                                                                                                                                
According to  the Environmental  Protection Agency's  (EPA) toxic                                                               
release  inventory,  Kotzebue  is  the most  toxic  community  in                                                               
America, because of  the Red Dog Mine. In her  mind, the graphite                                                               
mine  will bring  destruction to  their land  and culture  and to                                                               
their  food  and people.  She  asked  the committee  when  making                                                               
decisions  that will  directly impact  communities to  allow them                                                               
the  opportunity to  voice  their concerns  and  let them  decide                                                               
their future.                                                                                                                   
                                                                                                                                
4:09:54 PM                                                                                                                    
BLANCHE  OKBACK-GARNIE, Mayor,  Teller,  Alaska,  opposed SB  203                                                               
although she is  not for or against the mine.  She didn't want to                                                               
see a  road built up  to their  wilderness campsite. The  road in                                                               
Teller has brought  dust and trash that  ruins their subsistence;                                                               
it invites anybody from out of  state or other parts of the state                                                               
to hunt and do subsistence in  the same area they depend on. They                                                               
don't have jobs;  they have to subsist to  survive. She suggested                                                               
spending  $80  million on  toilets,  water  and sewer  for  their                                                               
community.                                                                                                                      
                                                                                                                                
4:11:51 PM                                                                                                                    
FRIEDA  SOUTHALL,  Native  Village   of  Brevig  Mission,  Brevig                                                               
Mission,  Alaska,  opposed SB  203,  because  it will  negatively                                                               
affect their subsistence lifestyle. Because  there are no jobs in                                                               
the  area  most  people  live  a  subsistence  lifestyle  picking                                                               
berries and greens, gathering fish  and hunting moose in the same                                                               
place the  mine would  be located. Once  that is  destroyed, they                                                               
will not be able to go back to subsistence.                                                                                     
                                                                                                                                
4:14:19 PM                                                                                                                    
HAL  SHEPHERD, representing  himself,  Nome,  Alaska, opposed  SB                                                               
203. He worked for the past  four years as a consultant to Brevig                                                               
Mission,  Teller,  and  Mary's   Igloo  Tribal  Council  and  has                                                               
followed  the  graphite  mine  proposal   during  that  time.  He                                                               
supported comments  from those having concerns  about subsistence                                                               
and said there is pretty much unanimous opposition to this mine.                                                                
                                                                                                                                
MR. SHEPHERD said  one of his main concerns is  how the mine will                                                               
use water. He  explained that the DNR  routinely issues temporary                                                               
water use authorizations to this  mining company every year. They                                                               
just recently  issued another one  for another five  years, which                                                               
will allow  the mine to take  water out of six  creeks that drain                                                               
the  Kigluaik Mountains  that  contain  salmon habitat.  However,                                                               
Graphite One claims  there are no salmon using  these creeks. DNR                                                               
is  currently allowing  the mine  to remove  over 65  gallons/day                                                               
from June to  October. These creeks are quite small  and there is                                                               
no doubt that  removal of that amount of water  will affect them.                                                               
Also, as everywhere  else in the Arctic, which  is warming faster                                                               
than anywhere  on earth, temperatures  are going to  start rising                                                               
in those creeks and will start affecting fish habitat.                                                                          
                                                                                                                                
4:17:33 PM                                                                                                                    
HIEDI  KELLER, representing  herself,  Nome,  Alaska, opposed  SB                                                               
203. It will  affect their subsistence way of  life. Imuruk Basin                                                               
is where  the villages  have fished and  hunted for  thousands of                                                               
years. Imuruk  Basin is connected  to the Kuzitrin River  and the                                                               
Pilgrim River where Nome locals  fish for their year-long supply;                                                               
for her that includes her  household, her parents' household, and                                                               
her  grandparents' household.  Community  members  in Teller  and                                                               
Brevig can't  just drive  to the  store for  food like  people in                                                               
Nome. Their lives depend on their subsistence way of life.                                                                      
                                                                                                                                
How will Graphite One stimulate  the economy in Teller where last                                                               
winter it  ran out  of fuel. Will  they help  with infrastructure                                                               
upgrades?                                                                                                                       
                                                                                                                                
Recently,  Ms.  Keller  said,  the  National  Geographic  had  an                                                               
article  regarding the  harmful effects  of the  Red Dog  Mine on                                                               
Kotzebue and Kivalina, and asked  if health risks will be ignored                                                               
because Teller and Brevig have  such small populations?  She also                                                               
quoted  a  Nome  Nugget  article detailing  how  the  mine  would                                                               
negatively impact the area.                                                                                                     
                                                                                                                                
MS.  KELLER said  the residents  were forced  to settle  in these                                                               
villages  or their  children  would  be taken  away  and sent  to                                                               
schools.  And the  mine  would have  water  and sewer  facilities                                                               
before the villages did.                                                                                                        
                                                                                                                                
Graphite One  is a  Canadian company  that will  hire out-of-town                                                               
employees and  a few  token local employees.  There is  no income                                                               
tax  in that  area  and  all the  employees'  money  would go  to                                                               
wherever  they are  from. DNR  has said  they cannot  regulate it                                                               
closely and  the company will  be receiving tax breaks.  This has                                                               
been  seen time  and  again.  The mine  down  Glacier Creek  Road                                                               
didn't turn  out well and  now the land is  all torn up  and will                                                               
never be the same.                                                                                                              
                                                                                                                                
4:21:34 PM                                                                                                                    
RACHEL  MENADELOK,   representing  herself,   Anchorage,  Alaska,                                                               
opposed SB  203. She grew up  in Teller and Brevig  and said this                                                               
mine is  not a  good idea. These  are subsistence  villages where                                                               
people can't go to a grocery  store; subsistence is all they have                                                               
for  food. There  are more  important  things in  the world  than                                                               
trying to get a few dollars off  of the small amount of land that                                                               
is left for subsistence, she said.                                                                                              
                                                                                                                                
4:24:28 PM                                                                                                                    
JOHN SPRINGSTEEN,  CEO, Alaska Industrial Development  and Export                                                               
Authority (AIDEA),  Anchorage, Alaska,  said he could  support SB                                                               
203 with the addition of a June 30, 2025, sunset.                                                                               
                                                                                                                                
DOUG SMITH, Graphite One  Resources, Vancouver, British Columbia,                                                               
supported SB 203. The project is  in its early stages and must go                                                               
through environmental studies and mining  plans and meet with the                                                               
communities  as   it  progresses.   He  assured  them   that  the                                                               
communities will  have ample opportunity  to follow  the planning                                                               
process and  contribute their input  into the  decision-making on                                                               
this project.                                                                                                                   
                                                                                                                                
4:26:04 PM                                                                                                                    
CHAIR BISHOP,  finding no further  questions or  comments, closed                                                               
public testimony.                                                                                                               
                                                                                                                                
SENATOR GARDNER  said she  wanted to know  who owns  Graphite One                                                               
and the  land on which  the mine is  proposed to be  located. She                                                               
also said she  had researched the Graphite One  Company and found                                                               
that  the income  statement for  the period  of 2012-2016  is all                                                               
zeros,  the expenses  are in  an upward  trajectory, the  pre-tax                                                               
income is all in  bright red, and the balance sheet  has a lot of                                                               
zeros and  some red. The  cash flow  statement is red,  also. She                                                               
remarked if  she were making  a decision about investing  in this                                                               
company she would  have some serious concerns.  For instance, she                                                               
would question whether  this company has the  resources to follow                                                               
through if there  would be a spill. This is  not even considering                                                               
the concerns of the local people.                                                                                               
                                                                                                                                
4:27:56 PM                                                                                                                    
CHAIR BISHOP said he had no intention of moving the bill today.                                                                 
                                                                                                                                
SENATOR OLSON  commented that the  issues that people  brought up                                                               
certainly gives one  pause. Certainly, the balance  sheet is very                                                               
concerning.  He  reiterated  that   the  property  was  federally                                                               
patented in  1900 by Doug  Treet's grandfather, and  Graphite One                                                               
would be leasing from them.                                                                                                     
                                                                                                                                
4:29:06 PM                                                                                                                    
CHAIR  BISHOP,  finding  no  further comments,  held  SB  203  in                                                               
committee.                                                                                                                      
                                                                                                                                
4:29:24 PM                                                                                                                    
SENATOR OLSON closed by saying that he wants to make sure the                                                                   
project consults with the communities, and if they don't support                                                                
the project, he recommends not going forward with it.