Legislature(2009 - 2010)Anch LIO Rm 220
10/27/2010 11:00 AM House ENERGY
| Audio | Topic |
|---|---|
| Start | |
| Energy Requirements for Proposed Mines | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
ALASKA STATE LEGISLATURE
HOUSE SPECIAL COMMITTEE ON ENERGY
October 27, 2010
11:07 a.m.
MEMBERS PRESENT
Representative Bryce Edgmon, Co-Chair
Representative Charisse Millett, Co-Chair
Representative Kyle Johansen
Representative Pete Petersen
MEMBERS ABSENT
Representative Nancy Dahlstrom
Representative Jay Ramras
Representative Chris Tuck
OTHER LEGISLATORS PRESENT
Representative Carl Johnson
Representative Paul Seaton
COMMITTEE CALENDAR
ENERGY REQUIREMENTS FOR PROPOSED MINES
- HEARD
PREVIOUS COMMITTEE ACTION
No previous action to record
WITNESS REGISTER
LORNA SHAW, Executive Director
Council of Alaska Producers
Anchorage, Alaska
POSITION STATEMENT: Reviewed presentation entitled "The Energy
Needs of Alaska's Metal Mining Industry.
JAMES FUEG, Technical Manager
Donlin Creek LLC
Anchorage, Alaska
POSITION STATEMENT: Provided a presentation on the Donlin Creek
project, its energy needs, and the steps taken to achieve those
needs.
JOHN SHIVELY, CEO
The Pebble Partnership
Anchorage, Alaska
POSITION STATEMENT: Provided a presentation entitled "Pebble
Prospect."
KARL HANNEMAN, Project Manager
Talon Gold Alaska, Inc.
Fairbanks, Alaska
POSITION STATEMENT: Provided a presentation entitled "Money
Knob Gold Project Livengood, Alaska Future Energy Needs."
DAN GRAHAM, PE, Project Manager
Chuitna Coal Project
Anchorage, Alaska
POSITION STATEMENT: Provided a presentation on the Chuitna Coal
Project.
LORALI CARTER, External Affairs Manager
Wishbone Hill Mine
Usibelli Coal Mine, Inc.
Palmer, Alaska
POSITION STATEMENT: Provided a presentation of the Wishbone
Hill Project.
ACTION NARRATIVE
11:07:40 AM
CO-CHAIR CHARISSE MILLETT called the House Special Committee on
Energy meeting to order at 11:07 a.m. Representatives Peterson,
Johansen (via teleconference), Edgmon, and Millett were present
at the call to order. Also present were Representatives Seaton
(via teleconference) and Johnson.
^Energy Requirements for Proposed Mines
Energy Requirements for Proposed Mines
11:07:56 AM
CO-CHAIR MILLETT announced that the only order of business would
be to discuss energy needs for large-scale mines and proposed
mines in the state, which will require vast amounts of energy.
The committee is seeking possible public-private partnerships
for energy needs of the state.
11:08:49 AM
LORNA SHAW, Executive Director, Council of Alaska Producers,
began by informing the committee that the Council of Alaska
Producers is the trade association for the large-scale hard rock
mining operations in Alaska. The state has the following five
large metal mines in operation today: Red Dog, Fort Knox, Pogo,
Kensington, and Greens Creek. There is one operating coal mine,
Usibelli, in the state as well as two advanced exploration metal
projects, Donlin Creek and the Pebble Project. There are also
two advanced exploration permitting coal projects, Chuitna Coal
and Wishbone Hill.
11:10:07 AM
MS. SHAW then moved on to the Red Dog Mine, which is located on
the Seward Peninsula. The Red Dog Mine is one of the top
producers of lead and zinc in the world. The Red Dog Mine uses
43 megawatts of power, all of which it generates on site as
there is no grid with which it can connect. To generate all of
its power, the Red Dog Mine uses nearly 16 million gallons of
fuel annually. The waste heat from that power production is
used to heat the mine's space. Additionally, the mine
operations and port haulage use about 1.5 million gallons of
fuel for vehicles as well as about 150,000 gallons of jet fuel.
She then turned the committee's attention to the Fort Knox Mine,
which is a large-scale open pit gold mine, conveniently located
about 25 miles outside of Fairbanks. The Fort Knox Mine is the
largest customer of Golden Valley Electric Association (GVEA),
which is the local electric utility in Fairbanks. The Fort Knox
Mine uses about 33 megawatts of power from GVEA, which amounts
to a cost of $3-$3.5 million. The amount of power Fort Knox
Mine uses amounts to about half of the power GVEA produces while
in the winter it's about one-third of the power GVEA produces.
She noted that for the mining operations Fort Knox Mine uses
10.5 million gallons of fuel annually for the vehicles and
[facility] heat. The 2010 budget for fuel is about $30 million.
Ms. Shaw then moved on to the Greens Creek Mine, which produces
lead, zinc, silver, and gold. Since there was originally no
grid for Greens Creek Mine to hook into, it did all on-site
power generation until 2006. In 2006, Greens Creek Mine was
able to connect with the Alaska Electric Light & Power (AEL&P)
Intertie to provide hydro-power. In September 2009, the Dorothy
Lake Project came online, which she attributed to Greens Creek's
commitment to purchase the power from the Dorothy Lake project.
At this point, Greens Creek Mine receives about 95 percent of
its power from the grid and it uses about 7.5 megawatts of
power. With regard to fuel used at the Greens Creek Mine, it
currently uses 1.4 million gallons whereas when it had to
produce all of its power on site, it used 6 million gallons of
fuel annually. Ms. Shaw moved on to the Pogo Mine, which is now
Alaska's top gold producer. The Pogo Mine is located between
Fairbanks and Delta Junction with a 50-mile long private road to
the mine. The Pogo Mine installed a power line from the highway
to the mine site. The Pogo Mine uses about 10 megawatts of
power from GVEA. Both Pogo Mine and Fort Knox Mine pay about
$0.11 per kilowatt hour, which isn't very much in Alaska whereas
nationally it would be considered very high. Therefore, Ms.
Shaw encouraged the committee to have a larger view of mining
investment in Alaska as it's being compared to other locations
in the world for energy generation. The Pogo Mine uses almost 2
million gallons of fuel for its vehicles and operations and 1
million gallons of propane for heat in the winter. Ms. Shaw
then directed attention to the Kensington Mine, which uses six
1.2 megawatt gensets to produce its power. The mine operations
for Kensington Mine use approximately 3 million gallons of fuel
annually. She said that the intent with the aforementioned
information is to point out how energy intensive the mining
industry is, particularly in Alaska. All of the large-scale
metal mines in Alaska have mills and require a great deal of
electricity to process the ore. Therefore, affordable power and
fuel is critical to the development of mines in Alaska. In
conclusion, Ms. Shaw highlighted that although mining is energy
intensive, it provides [the raw materials] for many items used
in everyday life. She opined that it would be nice to bring
some of these items to market from Alaska.
11:15:58 AM
JAMES FUEG, Technical Manager, Donlin Creek LLC, began by
informing the committee that the Donlin Creek Mine is located in
Southwest Alaska, 50 miles from the regional hub of Aniak and 12
miles north of the community of Crooked Creek on the Kuskokwim
River, which is a very remote part of Alaska. In fact, the
nearest roads are about 300 miles away on the Railbelt. There
are no regional power infrastructure or power generation
facilities capable of serving any kind of industrial load, and
therefore the project anticipates building that infrastructure
should the project move forward. He then related that the
Donlin Creek project is a partnership between Barrick Gold and
NovaGold, two mining companies. Donlin Creek LLC operates under
a lease agreement with the Calista Corporation, which is the
owner of the subsurface deposit. The project itself would be
largely located on Native corporation lands. Donlin Creek LLC
has a separate service use agreement with the Kuskokwim
Corporation, which represents the local villages. Mr. Fueg
characterized Donlin Creek Mine as a large gold resource that
totals more than 30 million ounces and offers a potential mine
life of more than 25 years. The Donlin Creek Mine could produce
significant regional infrastructure, which would be beneficial
to the mine as well as the larger area. Most importantly for
that part of the state, the Donlin Creek Mine offers the
potential for a significant amount of private industry jobs,
including up to 3,000 jobs during the three- to four-year
construction phase and 800 or more jobs during the 25-year plus
life of the mine. He explained that Donlin Creek will use a
multi-stage process to extract the gold from the rock, including
crushing and grinding the ore. The grinding circuit alone will
require three motors, each of more than 25,000 horsepower to
power the various mills. He stated that there are challenges
associated with supplying enough energy as well as managing that
energy and load. The total electrical load for Donlin Creek
would be around 130 megawatts, which is similar to the load the
Fairbanks area currently utilizes during the winter. The peak
electrical load is about 152 megawatts. Additionally, Donlin
Creek will require a large volume of diesel fuel to power the
fleet, which will be barged up the Kuskokwim River to the
project site.
11:20:15 AM
MR. FUEG told the committee that over the years various energy
options have been reviewed for Donlin Creek, including diesel-
based generation supplemented by wind. He reminded the
committee that diesel becomes very expensive when generating
large volumes. Furthermore, to move that much diesel up the
Kuskokwim River would require significant additional barging
capacity on the Kuskokwim River. Another option that was
reviewed was an electrical intertie to Nenana. The length of
the line, about 400 miles, needed and the size of the load at
the end and the size of some of the motors would require the
construction of a DC line, which is expensive and has limited
benefits to potential third party users. Other options reviewed
in the Donlin Creek area include using peat to power a boiler to
generate electricity, hydro electric, nuclear, coal, and
biomass. The current focus is on running a gas pipeline to the
site in order to meet the mine's energy needs. The gas pipeline
option would result in a route from Cook Inlet through the
Alaska Range to the project site, which would total 325 miles
with no infrastructure. The gas pipeline project alone would be
a significant undertaking with its own challenges beyond those
of the mine. The current concept would be a buried 12-inch
steel pipeline for gas only. He explained that the goal would
be to construct the aforementioned pipeline using temporary
access. He then directed attention to the slide entitled
"Pipeline Route," which illustrates the route. The first
portion of the route would be exclusively on state lands and
then it would move into Alaska Native Claims Settlement Act
(ANCSA) land and then into a patchwork of Bureau of Land
Management (BLM) and state lands as the route comes closer to
Donlin Creek. Therefore, to complete the project, rights-of-way
from all three of the aforementioned groups would be required.
MR. FUEG related that at this point, he anticipates that the
project will require approximately 25 million cubic feet of gas
per day in order to generate electricity. The demand could
increase if additional ways to offset the use of diesel by
electricity are found. One way to achieve the aforementioned is
to use electric shovels rather than diesel shovels, which is
being evaluated. The use of electric shovels would result in an
about 10 percent reduction in the diesel needed and an
equivalent increase in gas for the project. "To put that in
perspective, that would represent about 10 percent of the Cook
Inlet demand without the large industrial users, such as the now
closed Agrium plant or the LNG export facility," he said. He
specified that it amounts to a constant year-round load with no
seasonal variation. Therefore, it would offer some benefits to
Cook Inlet because it would help smooth out the seasonal
fluctuations in demand, which would potentially make it more
attractive to those evaluating options for providing additional
gas resources in Cook Inlet. Currently, Donlin Creek is
exploring multiple options for sourcing gas and using fairly
conservative pricing in the assessment of the pipeline option as
well as the feasibility assessment. The belief, he opined, is
that the aforementioned would cover any potential sources of gas
including LNG pipeline gas.
MR. FUEG turned to the project schedule and related that Donlin
Creek is currently evaluating the feasibility of the overall
project. In fact, Donlin Creek recently completed a major field
program this summer to collect all the feasibility level
engineering and baseline environmental data that would be
necessary to permit the pipeline. He anticipated completion of
an updated feasibility study by the middle of next year. If the
project is shown to be economically viable as well as
technically and environmentally feasible and approved by both
partners, the project would be taken to permitting in the fall
of 2011. The mine and the pipeline, he highlighted, would be
permitted as a single project. At this point, he anticipated a
multi-year process for completion of the environmental impact
statement (EIS). Shortly after the permits are granted,
construction would begin. Construction would take three to four
years.
11:24:38 AM
CO-CHAIR EDGMON inquired as to how using conventional sources of
energy, such as diesel, would impact the feasibility of the
mine.
MR. FUEG stated that using a reasonable assumption of the price
of gas, gas is cheaper than diesel. With regard to the
viability of the project if diesel is barged up the Kuskokwim
River, Mr. Fueg said it would depend upon the price assumptions
one makes for diesel. For a project with a life of possibly 35
years, a small change in price of energy can have a large impact
on the economics of the project. "It makes the project more
challenging," he opined. In further response to Co-Chair
Edgmon, Mr. Fueg explained that he has approached gas versus
diesel by reviewing the differential between diesel and gas.
The belief is that the differential between diesel and gas will
only increase as time goes on, and therefore gas would make the
project more attractive. Furthermore, he opined that gas will
bring significant environmental and regional benefits over
diesel. One of the concerns identified by communities is the
barging of large amounts of diesel and the pipeline study is
largely a reaction to that concern in order to find a better and
more cost effective solution. Therefore, it's not a decision
that's driven purely by the price of energy.
11:28:08 AM
CO-CHAIR MILLETT recalled that Harry Noah, the former project
manager of the In-State Gas Project in DNR, was a proponent of
linking the in-state gasline to Donlin. She asked if that's
still part of the conversation.
MR. FUEG answered that Donlin Creek LLC has shared information
with the folks working on the in-state line. He related that
Donlin Creek LLC would be willing to purchase gas from anyone
who has it available and the price is right. However, the
Donlin Creek Mine has its own timeline and cannot afford to be
dependent upon the schedule of another project, and thus Donlin
Creek LLC will move forward with its plans. Still, [linking to
the in-state gasline] would be beneficial to the project and
help ensure that it moves forward.
11:29:29 AM
JOHN SHIVELY, CEO, The Pebble Partnership, began by informing
the committee that The Pebble Partnership is a partnership
between Anglo American and Northern Dynasty. The project is
located about 200 miles southwest of Anchorage in the Lake and
Peninsula Borough. The communities closest to the project are
Nondalton, Newhalen, and Pedro Bay. He explained that the
project is located about 85-86 miles from the west side of Cook
Inlet, where a port will likely be constructed. Along the road
to that port, there would most likely be a diesel line for fuel
for vehicles. In terms of power, The Pebble Partnership is
looking at several different options. Although the project is
performing some testing for wind, it isn't enough to meet the
needs of the project. At this point in the project, the needs
of the project, although significant, aren't determined. Mr.
Shively related the preference for natural gas on site, which
means there would need to be a pipeline along the road corridor;
the reason for which he attributed to obtaining a benefit from
waste heat. The project needs power that's significantly
cheaper than diesel. He related that there has been review of
the mine receiving inexpensive power and that the communities
closest to the mine would benefit. The Pebble Partnership has
had preliminary talks with the state regarding whether or not it
would make sense to run the natural gas or electrical
transmission line to the western part of the region to the
larger communities. The state has an interest in the
aforementioned because it could achieve cheaper power to those
areas, which would benefit the power cost equalization program.
Mr. Shively acknowledged that the challenge with natural gas is
from where to get it. If the large natural gas pipeline is
built, the Pebble project could play a role in the economics of
either the bullet line or a spur line. Furthermore, [the Pebble
project] could impact the economics of deeper drilling in Cook
Inlet. Mr. Shively related that although The Pebble Partnership
prefers natural gas, it's willing to consider electrons that are
available at a reasonable price. Therefore, the Pebble project
could play a role in projects such as Chakachmna and Susitna.
He noted that the CIRI oil gasification project and the oil map
geothermal are of interest to the Pebble project. Absent any of
the aforementioned options, the project would likely import LNG
either to the port discussed earlier or the Nikiski export
facility.
11:35:04 AM
CO-CHAIR MILLETT announced that the committee would now hear
about the Money Knob Gold Project in Livengood.
KARL HANNEMAN, Project Manager, Talon Gold Alaska, Inc.,
informed the committee that Talon Gold Alaska, Inc. is a
subsidiary of International Tower Hill. He pointed out that the
Livengood Project is in the very early stages and thus the
information regarding the project's power needs are projections.
The project is located along the Elliot Highway, 70 miles north
of Fairbanks. A significant gold resource, about 12 million
ounces has been identified. The preliminary economic assessment
shows compelling economics. Livengood will be an open pit mine
and the topography and deposit are supportive of a large scale
low-cost operation. Furthermore, there is favorable
infrastructure in that it's a historic mining district with a
network of local trails that are directly accessible off the
paved Elliot Highway. Moreover, the project is adjacent to
potential gas pipeline corridors. He related that the project
is building an experienced development team in Fairbanks, which
is moving the project rapidly through the pre-feasibility stage.
11:37:19 AM
MR. HANNEMAN showed the committee a slide that illustrates the
topography at the deposit area, which has been identified by a
large number of drill holes over the last number of years.
Referring to slide 5 entitled "Livengood Hardrock History," he
then informed the committee that back in 1914 in Livengood,
placer gold was found, after which there was quite a lot of
small scale prospecting in the area. The prospecting identified
small veins and dykes that contained gold, although none of
which were economic at the time and thus weren't pursued.
Still, there was enough gold in the area that the hill was named
Money Knob. Furthermore, over the years several major companies
drilled and tried to identify the resource, which culminated in
2006 when International Tower Hill rapidly advanced the drilling
rate and ultimately identified this substantive resource. He
pointed out that since the mid 1980s when state geologists
helped select the area for the Alaska Mental Health Trust, it
has taken a couple decades to identify a substantive resource.
The aforementioned is illustrative of the long lead times and
steady exploration efforts required to actually recognize value
from areas identified as having mineral potential. In fact, the
state flew the area a decade ago to perform an airborne survey.
11:39:24 AM
MR. HANNEMAN directed attention to the chart on slide 6 entitled
"Livengood Resource Growth." The chart on slide 6 illustrates
the growth of drilling at Livengood. From February 2007 to June
2010, the resource has grown from almost 2 million ounces to
over 12 million ounces. Although it's the early stage of trying
to identify and understand the potential of this deposit, the
pre-feasibility stage is expected to be complete by December
2011. Since the project hasn't yet been designed, the numbers
presented today are very preliminary, he specified.
Conceptually, if the project is a heap leach it would have a 10-
15 megawatt energy requirement while a project with a large mill
and a heap leach would have a 70-80 megawatt energy requirement.
In response to a question, Mr. Hanneman clarified that megawatt
is a rate of power consumption. On an annual basis, it would
amount to about 500 megawatt hours.
11:41:27 AM
MR. HANNEMAN, referring to slide 9 entitled "Money Knob
Potential Power Needs," related that although Talon Gold Alaska,
Inc. will evaluate the purchase power with GVEA versus local
self generation, it sees some significant benefits in purchasing
power off the Railbelt grid. He opined that purchasing power
from the Railbelt grid will have better reliability, offer
source diversity with coal, gas, hydro, and wind that would help
stabilize supply and price issues. If additional installed
capacity is required to support Livengood and it becomes part of
the Railbelt grid, then the infrastructure will be present to
serve all of Alaska at the end of the mine life. The
aforementioned is a significant advantage.
11:42:31 AM
MR. HANNEMAN, referring to slides 10-11, informed the committee
that state efforts can make a difference in this project. For
instance, if power is purchased from the grid, a 50-mile
transmission line will need to be built. This transmission line
would be similar to what was constructed for Pogo, but the
alignments would be parallel to the potential gasline alignment
and the existing TAPS alignment. A lot of environmental
baseline studies have already been completed along the
Fairbanks-Livengood utility corridor. Therefore, making that
information available would be efficient in terms of time and
resources. He noted that it would also be helpful [for the
state] to support efforts that would lower the cost of energy on
the Railbelt, including utility consolidation. He then
encouraged long-term planning for low cost power on the grid.
Mr. Hanneman related that efforts to commercialize gas are a
large factor [in this project]. If lower cost energy could be
brought to Fairbanks and placed into the power generation system
there, [this project] as well as all of Fairbanks would benefit.
In fact, if the system were large enough, the entire Railbelt
could benefit. Therefore, various efforts to commercialize the
gas are being reviewed. In fact, one such effort is a small
bore line that would parallel TAPS to which the state could
contribute. He suggested support of efforts to produce low-
sulfur diesel in Alaska for Alaska's own resources because low-
sulfur diesel requirements will likely be in place by the time
this mine is in production.
11:45:21 AM
REPRESENTATIVE JOHNSON asked if this project is meeting any
obstacles from the state.
MR. HANNEMAN replied no, but noted that the process has only
just begun.
REPRESENTATIVE JOHNSON suggested that perhaps the committee
could assist with any obstacles that arise in the future,
particularly because there's no need to duplicate existing
information.
11:46:56 AM
REPRESENTATIVE SEATON, referring to slide 8, inquired as to what
the determiner is for which kind of conceptual mine, heap leach
only or a large mill and heap leach, would result.
MR. HANNEMAN answered that the Money Knob Gold Project is in the
very early stages. In fact, it's a situation in which a
substantive gold resource has been identified, but the
engineering, including the preliminary engineering, which would
result in a recommendation of the type of project to propose,
has yet to be done. The pre-feasibility work will accomplish
the aforementioned as it will engage a number of experts and
engineers to perform the engineering. At this point, the
project depends upon economics, gold recovery, gold recovery
projections, cost estimates, and environmental factors.
REPRESENTATIVE SEATON clarified that he's trying to understand
the difference in the two approaches: the heap leach only versus
a large mill and heap leach mine.
MR. HANNEMAN informed the committee that the Fort Knox Mine
recently permitted and constructed a heap leach adjacent to its
large mill operation. On that heap leach, run of mine ore was
placed rather than crushing it. Therefore, there's not a large
energy requirement to grind rocks, which significantly reduces
the power requirement associated with a heap leach. At this
point, Mr. Hanneman said that Talon Gold Alaska, Inc. doesn't
know if its ore is amenable to such large scale heap leaching
without being crushed. The aforementioned would significantly
impact the power requirements.
11:50:02 AM
REPRESENTATIVE SEATON, referring to slide 9, inquired as to the
anticipated life of the mine.
MR. HANNEMAN noted that Talon Gold Alaska, Inc. put forth a
preliminary economic assessment in August, which estimated a 21-
year mine life. However, there will be review of ways in which
to shorten that mine life in order to accelerate production,
particularly since the company believes the resource has the
potential to grow. Therefore, the mine life of Money Knob Gold
Project is very uncertain. He informed the committee that GVEA
has the capacity to install an additional turbine at its North
Pole facility. If that additional turbine was installed to
service the Livengood load, the mine would certainly have a life
of more than 20 years. Furthermore, after the mine life, the
additional turbine would be available to serve other Railbelt
users. Mr. Hanneman opined that there's benefit, in terms of
reliability, from being connected to the Railbelt and ultimately
to utilize that infrastructure to provide power to others as
opposed to a stand-alone gas-fired turbine at Livengood. He
related that although Talon Gold Alaska, Inc. would like low-
cost gas to be in the Interior, it may be best suited to where
it's connected to everyone else.
11:52:22 AM
REPRESENTATIVE PETERSEN asked if any other minerals or micro
minerals other than gold that might be marketable have been
identified.
MR. HANNEMAN responded no, adding that Money Knob is primarily a
gold deposit.
CO-CHAIR MILLETT then announced that the committee would turn
its attention to the Chuitna Coal Project.
11:54:41 AM
DAN GRAHAM, PE, Project Manager, Chuitna Coal Project,
acknowledged the public opinion of coal, global warming
discussions, and state and national policies related to coal.
Although coal projects aren't prevalent, the U.S. still
generates just under 50 percent of its power from coal.
Therefore, the question is why even consider coal now. He
pointed out that LNG and crude oil prices have increased
significantly in the past few years. The result has been that
Pacific Rim countries seeking to expand their economies, which
means increased power demands, turn to coal for power
generation. He related that current export demand is
anticipated to increase roughly 120 million tons over the next
five years, at a minimum. Between the Railbelt and the Cook
Inlet region, there is [in excess] of 2 billion tons of reserves
of sub-bituminous coal, which is a low-sulfur product. This
sub-bituminous coal is finding a place in the export market. He
noted that Usibelli Mine has reached record years in exports
over the last couple of years. "The demand now is stronger than
it has been," he remarked. Mr. Graham opined that the Chuitna
Coal Project is a worthy project as it's a great opportunity to
monetize the resource and create jobs and business opportunities
in the state while protecting the environment.
11:56:54 AM
MR. GRAHAM informed the committee that the Chuitna Coal Project
is located on the west side of the Cook Inlet, about 14 miles
from the village of Tyonek and 45 miles west of Anchorage. It's
a proposed export coal project. The proposal currently in the
permitting process is a 300 million ton reserve with a 25-year
design life. He noted that since the workforce isn't available
on site, a camp facility will be constructed for mine workers.
A port facility will also have to be constructed for exporting
the product and receiving goods at the mine. He explained that
the port facility is proposed in the Kenai Peninsula Borough on
the edge of Cook Inlet at which there will be a coal stock pile
and the facilities for offshore unloading of deep draft ocean
bound ships. There will also be an over-land conveyor, which
will be at least 20 feet above the ground in order to avoid any
barriers to wildlife or those who recreate in the area. The
existing road system will be used to a point at which the
remainder of the distance to the mine will be a private road.
He noted that it's about six miles of existing road that will be
upgraded for use and five to six miles of new road to reach the
mine. He related that the Chuitna Coal Mine is a conventional
service mine operation with contemporaneous reclamation, similar
to the operations in Healy.
MR. GRAHAM then turned to the power demand of the Chuitna Coal
Project. Initially, the mine area will have a low electrical
demand as most of the rolling stock is diesel-fired equipment.
When a drag line is added, the electrical demand will grow to
about 7-8 megawatts at the mine area. The mine facilities, the
shop and a facility to crush the coal for shipment, will require
a little over 2 megawatts of power. The aforementioned camp
facility will require just over 1 megawatt of power. He noted
that the aforementioned power demands are peak demands. The
conveyor itself has a 1.5 megawatt peak demand, which is about
one-fifth of what a conventional conveyor would require to
transport the same material the same distance. At the port
site, about 4-4.5 megawatts of power will be required to handle
the stock pile, run the warehouse, and operate the ship loader.
Therefore, total electrical demand during the initial
construction and first few years of mining would be about 10
megawatts, which increases to 17-20 megawatts once a drag line
is added. The aforementioned power would be received on an
existing 24.9 kV line that passes through the port site and is
operated by Chugach Electric Association. That line will be
used for construction power and the temporary camp at the
beginning of the operation. At the mine site, portable
generators will be installed for the construction phase of the
project. Once construction nears completion, permanent power
will be supplied by a new six mile long 138 kV line from Chugach
Electric Association's Beluga Power Station. When the line
reaches the existing port site, Chugach has requested that the
mine's line be tied into the existing 24.9 kV line. The
aforementioned creates a loop in the system, which will increase
the reliability of the system.
12:01:41 PM
MR. GRAHAM then turned to Chuitna's schedule. He informed the
committee that the updated Supplemental Environmental Impact
Statement (SEIS) documents have been submitted. He further
informed the committee that Chuitna's working on the surface
mine coal applications to reflect recent design changes. The
next step will to go through the entire SEIS process as permit
applications are submitted. Chuitna then anticipates permit
decisions to be rendered in the next 18 months to 2 years.
Depending upon the permit decisions and the market conditions,
Chuitna will be prepared to make a construction decision. In
response to Co-Chair Millet, Mr. Graham confirmed that the
construction decision will be made in 2012 or 2013.
CO-CHAIR MILLETT announced that the committee would now receive
a presentation regarding the Wishbone Hill Project.
12:03:33 PM
LORALI CARTER, External Affairs Manager, Wishbone Hill Mine,
Usibelli Coal Mine, Inc., began by informing the committee that
the Usibelli Coal Mine (Usibelli) has been operating in Healy
for nearly 70 years. In fact, the headquarters of the mine are
located about 10 miles north of the entrance to the Denali
National Park. Due to the increase in the export market this
year, the mine will likely reach about 2 million tons of export.
Usibelli serves the following 6 customers in Alaska: the Fort
Wainwright Army Base, Eielson Airforce Base, Clear Airforce
Station, and the University of Alaska Fairbanks. Usibelli's
export customers are located in Japan, Chile, and South Korea.
Ms. Carter then turned to coal, informing the committee that the
U.S. has 27 percent of the world's coal reserves and Alaska has
50 percent of the U.S. coal reserves. Given Alaska's current
electric consumption, Alaska has about 1,000 years of reserves
if coal were used to generate electricity. She emphasized the
importance of remembering Alaska's great [coal] resource. She
then directed attention to a slide that illustrates that Alaska
is a coal state. In fact, about 9 percent of Alaska is
underlain by coal. Since World War I over 30 million tons [of
coal] has been mined from the Healy Creek and Hosanna Creek
fields. She reiterated that Usibelli is the only operating coal
mine in Alaska. She then pointed out a graph entitled "Coal
Effect on Electricity Rates by State," which illustrates
electricity rates based on the use of coal to generate
electricity. The graph relates nearly 100 percent of the
electric generation in Wyoming uses coal while Alaska uses only
10 percent of its coal for electric generation. The graph
further relates that the price of electricity increases as the
use of coal decreases.
12:06:06 PM
MS. CARTER focused on Wishbone Hill, which has a long mining
history. About 7 million tons were mined from 18 different
mines from 1916-1982. In 1983 exploration drilling began at
Wishbone Hill and by 1992 all of the permits for it had been
obtained. Although Wishbone Hill Mine is considered a
relatively small deposit with 14 million tons of surface
mineable coal identified, particularly when compared to the
Healy mine that has over 500 million tons of surface mineable
coal. However, Wishbone Hill is valuable since it's the only
bituminous coal deposit on the road system. She then shared an
aerial photo of the Wishbone Hill Mine, pointing out various
aspects of it. Currently, the Usibelli Coal Mine, Inc. is in
the middle of a feasibility study on the Wishbone Hill project,
which is estimated to take a year. The hope is to make an
announcement by next summer regarding whether or not Usibelli
Coal Mine, Inc. will move forward with development. The
feasibility study is based on 6 million tons of total reserves,
which would amount to about 500,000 tons [of coal] produced
annually for about 12 years. She noted that this summer an
exploration program was completed. The core and bulk samples
have been sent to an out-of-state laboratory for testing.
Additionally, the feasibility study will analyze transportation
options, update permits, and further review engineering.
12:08:23 PM
MS. CARTER then addressed the question of how the coal is
transported to market. The three transportation options are to
truck the coal from the mine site to Port MacKenzie; truck the
coal to a point on the railroad at which point it would be
railed to the Seward port; or have a rail extension to the mine
site. She then informed the committee that the mine in Healy
employs 125-130 employees; therefore, the estimate for the
Wishbone Hill Mine is 75-125 full-time positions. She referred
to the Wishbone Hill Mine jobs as stable jobs where people can
live and work in their hometowns. She highlighted that this
would be money that stays in Alaska's economy. Ms. Carter then
turned to the energy needs of Wishbone Hill, which anticipates
using 600 kilowatts per hour to one megawatt of energy. As has
been related relative to other mines, getting energy to a mine
location is quite an undertaking. However, the Wishbone Hill
project is on the road system and close to the grid. Therefore,
the options would be a new line from the nearby existing three-
phase line or insertion of a transformer at the existing 120 kV
line. She then shared a slide that illustrated the layout of
the option of running a three-and-a-half mile line off the
existing three-phase line to the mine area where a small
transformer would be installed to help step-down the power for
the mine facilities. She highlighted the location of the 120 kV
line that runs power between Palmer and Sutton. Ms. Carter then
directed the committee's attention to the slide illustrating the
option in which a large transformer would be installed on the
120 kV line to step-down the power to 12 kV to run to the mine
site to power the facilities. She noted that the aforementioned
would require the use of a smaller transformer.
12:12:48 PM
CO-CHAIR EDGMON inquired as to the role the mining industry
would play in terms of building a gasline.
MS. SHAW said that is difficult to answer because a number of
competing projects are being discussed. As mentioned earlier,
those in the mining industry are willing to purchase gas if it's
available. Furthermore, the mining projects are on their own
timeline and can't wait for another project, the proposed
gasline, which may or may not be built. Ms. Shaw indicated that
the more detail the mining industry has regarding the proposed
gasline, the more the mining industry can commit.
CO-CHAIR EDGMON recalled hearing that a large number of acres of
land are available to mining. He then asked if there is enough
demand for the mining industry such that it could be considered
an industrial anchor tenant of an in-state gasline.
MS. SHAW answered that she believes the potential is certainly
there as there are a lot of minerals throughout the state.
Demand for minerals is increasing and it would be nice to
produce those minerals in the U.S., she remarked. However, one
of the top three barriers to mining in Alaska is the cost of
energy. If the fuel and power costs could be reduced, Alaska
would be far more attractive to the mining industry, she opined.
12:16:33 PM
CO-CHAIR MILLETT inquired as to how competitive Alaska is in
terms of mining as compared to other states.
MS. SHAW responded that it depends on which study one
references. She recalled a business league study that rated
Alaska last. Some of the issues surround energy costs and tax
questions. However, Alaska offers stability and the opportunity
to develop on state, private, and Native lands. Furthermore,
Alaska has a stable permitting system. Ms. Shaw pointed out
that currently many eyes are on the mining industry in Alaska.
She noted that whatever happens with the [mining] projects and
work in play now will influence the view of the mining industry
in terms of doing business in Alaska. She acknowledged that
there is a lot of opposition to some of the current mining
projects. When projects are stopped prior to even starting the
process, it sends a strong message that Alaska isn't open for
business.
12:18:27 PM
ADJOURNMENT
There being no further business before the committee, the House
Special Committee on Energy meeting was adjourned at 12:18 p.m.
| Document Name | Date/Time | Subjects |
|---|---|---|
| Energy Committee Agenda 10272010.pdf |
HENE 10/27/2010 11:00:00 AM |
|
| Infrastructure for Alaska Mines 9-21-10.pdf |
HENE 10/27/2010 11:00:00 AM |
|
| Lorna Shaw - Energy Needs of Mining Industry House Energy Cmte Oct 2010.pdf |
HENE 10/27/2010 11:00:00 AM |
|
| Lorali Carter - WBH Overview to HENR October 2010.pdf |
HENE 10/27/2010 11:00:00 AM |
|
| Karl Hanneman - Talon Gold Livengood Power 101027.pdf |
HENE 10/27/2010 11:00:00 AM |
|
| John Shively - Pebble Project Energy Committee Oct 2010.pdf |
HENE 10/27/2010 11:00:00 AM |
|
| James Fueg - Donlin Creek House Energy Comm 102710 edited.pdf |
HENE 10/27/2010 11:00:00 AM |
|
| PRC Update Presentation to House Energy Committee Oct 2010.pdf |
HENE 10/27/2010 11:00:00 AM |