Legislature(2003 - 2004)
05/05/2004 09:04 AM Senate FIN
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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
CS FOR HOUSE BILL NO. 556(FIN) "An Act relating to a port development project on Lynn Canal, providing legislative approval for the Alaska Industrial Development and Export Authority to issue bonds for the project; and providing for an effective date." This was the first hearing for this bill in the Senate Finance Committee. Co-Chair Wilken stated this bill "authorizes AIDEA to issue bonds to finance the construction of the port and related facilities located at Slate Creek Cove not to exceed $20 million. " REPRESENTATIVE BRUCE WEYHRAUCH testified that this legislation allows for the development of the Kensington mine. Specifically, this bill would develop docks in the Berners Bay area to help facilitate the development and construction of the mine. These docks would also be available for public use. This bill would further the development of the private sector economy and the State's mineral resources while diversifying the local economy. This legislation meets the Alaska Industrial Development and Export Authority's (AIDEA) statutory project requirements for funding using the Authority's bonding capacity. JIM MCMILLAN, Deputy Director of Credit and Business Development, Alaska Industrial Development and Export Authority, testified via teleconference from an offnet site requesting authorization to issue bonds not to exceed $20 million. Statute requires legislative approval for AIDEA to finance projects under the Development Finance Program that exceed $10 million. AIDEA would own the two port facilities referenced in this legislation. Government ownership and public use of the docks is required by the Internal Revenue Service (IRS) code if the project is to receive tax-exempt financing. Though AIDEA would own the dock facilities, it expects to issue tax-exempt revenue bonds, which would not affect its credit. The revenues of the Kensington mine project and any credit enhancements offered by the project developer would be the sole sources of repayment. Mr. McMillan stated that the $20 million amount stated in this bill exceeds the estimation of the costs of the docks. The $20 million amount was chosen because the estimates are considered "soft", and could increase. In addition, the IRS code allows for tax exempt financing on "related upland improvements". Mr. McMillan continued that if this legislation is adopted, the statutory due diligence requirements would be considered, including the project's financial feasibility, and the bonds would not be issued until all the requirements were met. The Board would be presented a resolution to enter into a cost reimbursement agreement with Coeur Alaska, Inc (Coeur). The funds needed to complete the statutory due diligence assessment would be considered part of the financing, assuming the financing is approved. If the financing is not approved, Coeur would be responsible any of the costs expended by AIDEA. Senator Bunde expressed concern relating to public access in commercial areas because of safety and liability risks. He asked how public access would be made compatible with industry use of the docks. TIM ARNOLD, Vice President and General Manager, Coeur Alaska Inc., testified that this legislation represents a mutually beneficial agreement between Coeur and AIDEA. Coeur would have the opportunity to access tax-exempt financing and pay for the dock over a period of years. Further, the State of Alaska would come to own the docks if the necessary permits are granted. He emphasized that this legislation is the perfect example of a "win-win situation" for Coeur. Co-Chair Wilken asked Mr. Arnold to address Senator Bunde's public access question. Mr. Arnold explained that the end of the dock would be located on private land. Coeur has not developed a plan for allowing public access. The Cascade Point dock would be used primarily to shuttle Coeur employees to and from Slate Creek Cove. The Slate Creek Cove dock would be an industrial dock. Representative Bruce Weyhrauch interjected that for Coeur to receive tax-exempt financing, the needs of the Kensington mine must be incorporated with public access to the satisfaction of the IRS and the developer. Senator Bunde stated that the two necessary usages of the docks appear "diametrically opposed". Senator Hoffman informed that the House of Representative's version of this legislation allows dock projects anywhere within the Lynn Canal. However, the House Finance Committee passed an amendment which limited the dock projects to specific locations within the Lynn Canal: Slate Creek Cove and Cascade Point. He asked if this amendment would allow Coeur the flexibility needed to minimize the impacts of development and acquire the necessary permits. Representative Bruce Weyhrauch responded that the project locations were made specific in response to concern that the developments could be used too broadly. He qualified that he is not opposed to the amendment because it does not threaten the primary goal of this legislation, which is to construct docks for the Kensington gold mine. Mr. Arnold replied that Coeur is satisfied with the language of the bill as amended. Co-Chair Wilken asked whether both Slate Creek Cove and Cascade Point are located within the City and Borough of Juneau. Representative Bruce Weyhrauch replied, yes. Mr. Arnold affirmed. Co-Chair Wilken asked for Mr. Arnold's opinion on the Pogo mine appeal and how it might affect this project. Mr. Arnold responded that Coeur has spent $30 million permitting the property for this project over the last 15 years. A supplemental Environmental Impact Statement has gone through the comment period, and Coeur is working toward receiving a National Pollutant Discharge Elimination System (NPDES) permit. Coeur has done the best job possible in listening and addressing comments made by the public. However, the project is far from "getting off the ground" in the current design and there is no question that the Pogo mine appeal could happen again. Co-Chair Wilken inquired if the appeal process has increased Coeur's anxiety regarding the Kensington mine project. Mr. Arnold replied that, yes, the appeal process has raised Coeur's anxiety; however Coeur recognizes that the appeal process is an aspect of the mining business. Representative Bruce Weyhrauch added that the appeal process is a statewide concern. Co-Chair Green offered a motion to report the bill from Committee with individual recommendations and accompanying fiscal note. There being no objection, CS HB 556 (FIN) MOVED from Committee with zero fiscal note #1 from the Department of Community and Economic Development. AT EASE 11:01 AM / 4:54 PM
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