Legislature(1995 - 1996)

04/19/1995 08:10 AM House RES

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
txt
               HOUSE RESOURCES STANDING COMMITTEE                              
                         April 19, 1995                                        
                           8:10 a.m.                                           
                                                                               
                                                                               
 MEMBERS PRESENT                                                               
                                                                               
 Representative Joe Green, Co-Chairman                                         
 Representative Bill Williams, Co-Chairman                                     
 Representative Scott Ogan, Vice Chairman                                      
 Representative Alan Austerman                                                 
 Representative Pete Kott                                                      
 Representative Irene Nicholia                                                 
                                                                               
 MEMBERS ABSENT                                                                
                                                                               
 Representative Ramona Barnes                                                  
 Representative John Davies                                                    
 Representative Eileen MacLean                                                 
                                                                               
 COMMITTEE CALENDAR                                                            
                                                                               
 Presentation on Major Mining Projects                                         
                                                                               
 *HB 256:    "An Act authorizing the commissioner of fish and game             
             to establish free sport fishing days."                            
                                                                               
             HEARD AND HELD                                                    
                                                                               
 (* First Public Hearing)                                                      
                                                                               
 WITNESS REGISTER                                                              
                                                                               
 JERRY BOOTH, Vice President                                                   
 Energy & Minerals                                                             
 Cook Inlet Region, Inc.                                                       
 2525 C Street                                                                 
 Anchorage, AK 99503                                                           
 POSITION STATEMENT:  Introduced Presenters                                    
                                                                               
 BILL JEFFERS, Chief of Environmental Services                                 
 Fairbanks Gold Mining Company                                                 
 Fairbanks, AK                                                                 
 POSITION STATEMENT:  Gave briefing on the Fort Knox Mine                      
                                                                               
 CHARLOTTE MACCAY, Manager                                                     
 Environmental Affairs                                                         
 Cominco-Alaska/Red Dog Mine                                                   
 P.O. Box 1230                                                                 
 Kotzebue, AK  99752                                                           
 Phone:  426-9143                                                              
 POSITION STATEMENT:  Gave briefing on the Red Dog Mine                        
                                                                               
 TOM CRAFFORD, Manager                                                         
 Minerals and Coal                                                             
 Cook Inlet Region, Inc.                                                       
 2525 C Street                                                                 
 Anchorage, AK 99503                                                           
 POSITION STATEMENT:  Gave briefing on Wishbone Hill project                   
                                                                               
 PAUL VALENTI, Vice President                                                  
 USMX                                                                          
 Denver, CO                                                                    
 Phone:  (303) 985-4665                                                        
 POSITION STATEMENT:  Gave briefing on Illinois Creek Mine                     
                                                                               
 STEVE BORELL, Executive Director                                              
 Alaska Miners Association                                                     
 501 W. Northern Lights                                                        
 Anchorage, AK   99503                                                         
 Phone:  276-0347                                                              
 POSITION STATEMENT:  Made general comments on the mining industry             
                                                                               
 BRUCE CAMPBELL, Administrative Assistant                                      
 Representative Pete Kelly                                                     
 Alaska State Legislature                                                      
 State Capitol, Room 513                                                       
 Juneau, AK   99801                                                            
 Phone:  465-2327                                                              
 POSITION STATEMENT:  Prime Sponsor HB 256                                     
                                                                               
 JOHN BURKE, Acting Director                                                   
 Sport Fish Division                                                           
 Alaska Department of Fish and Game                                            
 P.O. Box 25526                                                                
 Juneau, AK   99802                                                            
 Phone:  465-4180                                                              
 POSITION STATEMENT:  Supported HB 256 and answered questions                  
                      regarding HB 256                                         
                                                                               
 PREVIOUS ACTION                                                               
                                                                              
 BILL:  HB 256                                                                
 SHORT TITLE: FREE SPORT FISHING DAYS                                          
 SPONSOR(S): REPRESENTATIVE(S) KELLY,Austerman                                 
                                                                               
 JRN-DATE     JRN-PG               ACTION                                      
 03/15/95       742    (H)   READ THE FIRST TIME - REFERRAL(S)                 
 03/15/95       742    (H)   FISHERIES, RESOURCES, FINANCE                     
 03/29/95              (H)   FSH AT 05:00 PM CAPITOL 124                       
 04/05/95              (H)   FSH AT 05:00 PM CAPITOL 124                       
 04/05/95              (H)   MINUTE(FSH)                                       
 04/07/95      1172    (H)   FSH RPT  3DP 2NR                                  
 04/07/95      1172    (H)   DP: G.DAVIS, OGAN, AUSTERMAN                      
 04/07/95      1172    (H)   NR: ELTON, MOSES                                  
 04/07/95      1172    (H)   ZERO FISCAL NOTE (F&G)                            
 04/07/95      1172    (H)   REFERRED TO RESOURCES                             
 04/19/95              (H)   RES AT 08:00 AM CAPITOL 124                       
                                                                               
 ACTION NARRATIVE                                                              
                                                                               
 TAPE 95-51, SIDE A                                                            
 Number 000                                                                    
                                                                               
 The House Resources Committee was called to order by Co-Chairman              
 Green at 8:10 a.m.  Members present at the call to order were                 
 Representatives Green, Williams, Ogan, Austerman, and Kott.                   
 Members absent were Representatives Barnes, Davies, MacLean, and              
 Nicholia.                                                                     
                                                                               
 PRESENTATION ON MAJOR MINING PROJECTS                                       
                                                                               
 JERRY BOOTH, VICE PRESIDENT, ENERGY & MINERALS, COOK INLET REGION             
 INC. (CIRI), stated four different people will present an overview            
 to give the committee a scope of what is happening in the mining              
 industry in Alaska.                                                           
                                                                               
 Number 058                                                                    
                                                                               
 BILL JEFFERS, CHIEF OF ENVIRONMENTAL SERVICES, FAIRBANKS GOLD                 
 MINING COMPANY (FGMC), said the FGMC will do the operating for the            
 Fort Knox Project.  He stated the company just received all the               
 necessary permits and the project is under construction.  He                  
 explained the project is located entirely on state and private                
 land, covering an area of approximately 7,600 acres.  The project             
 will process about 36,000 metric tons through a mill, with an equal           
 amount of waste that will be mined every day.  Initially, the mine            
 will produce between 300,000 and 350,000 ounces.  The mine life is            
 estimated at approximately 12 and one-half years, although there is           
 potential for more.                                                           
                                                                               
 MR. JEFFERS said the FGMC went through a process the state had set            
 up called project team.  The team comprised of people from                    
 different agencies involved with permitting.  He stated the project           
 team method was very productive to permit a mine and his company              
 would highly recommend the method for other projects involving                
 state land.  He noted one suggestion he would make is that people             
 who are appointed to the project team on the state side should be             
 familiar with mining and permitting processes.  The Fort Knox                 
 project permitting process was a three year process.                          
                                                                               
 MR. JEFFERS stated approximately 150 people are working on the                
 project currently and by mid-summer there will be 500 people                  
 employed.  Actual production will begin October 1996 and at that              
 time, there will be approximately 250 permanent employees.                    
                                                                               
 Number 113                                                                    
                                                                               
 REPRESENTATIVE ALAN AUSTERMAN asked what the normal process time is           
 for completing the permitting.                                                
                                                                               
 MR. JEFFERS stated as a comparison, AMAX Gold purchased a project             
 in South America approximately three months after the Fort Knox               
 project was purchased.  He said that project has the same                     
 engineering design criteria as Fort Knox but that project has been            
 in production since November 1993.  The Fort Knox project will not            
 begin production until October 1996.  He noted as an American                 
 project, the Fort Knox project has been considered by many to be              
 fast-tracked.  He observed it gives everyone an idea how the                  
 bureaucracy has a choke-hold on resource development in the U.S.              
                                                                               
 CO-CHAIRMAN JOE GREEN asked if there was a comparison which could             
 be made to another American project.                                          
                                                                               
 MR. JEFFERS replied there are a couple of projects in Nevada which            
 have been in the permitting process for four or five years.                   
                                                                               
 REPRESENTATIVE AUSTERMAN asked Mr. Jeffers to explain the team                
 process again.                                                                
                                                                               
 MR. JEFFERS responded the project team comprised of people from the           
 Alaska Department of Fish and Game (ADF&G), the Department of                 
 Natural Resources (DNR), and the Department of Environmental                  
 Conservation (DEC).                                                           
                                                                               
 REPRESENTATIVE AUSTERMAN wondered if the project team helped speed            
 up the process.                                                               
                                                                               
 MR. JEFFERS replied it did.  He said the team did a thorough                  
 review, covering all the questions and contingencies needing to be            
 addressed.  He stated having a group so clearly focused expedited             
 the entire process.                                                           
                                                                               
 Number 174                                                                    
                                                                               
 CO-CHAIRMAN GREEN noted the Fort Knox project has all its permits             
 in place.  He wondered why it was going to take 18 months for the             
 project to go into production.                                                
                                                                               
 MR. JEFFERS responded the project is very large.  He stated the               
 mine will average 36,000 tons per day but will actually have the              
 capacity to do 50,000 tons per day.  He said the size of the                  
 project and the construction time needed due to Arctic conditions             
 will require 18 months to complete construction.                              
                                                                               
 CO-CHAIRMAN GREEN said it is exciting to see the project going                
 forward.                                                                      
                                                                               
 CO-CHAIRMAN GREEN noted for the record that Representative NICHOLIA           
 had joined the committee.                                                     
                                                                               
 Number 208                                                                    
                                                                               
 CHARLOTTE MACCAY, MANAGER, ENVIRONMENTAL AFFAIRS, COMINCO-                    
 ALASKA/RED DOG MINE, stated the Red Dog mine currently employs 350            
 people, with 51 percent being shareholders from the NANA Regional             
 Corporation.  The mine is processing between 6,000 and 7,000 tons             
 of ore which produces approximately 1,700 tons of concentrate per             
 day.  She said at present prices, the mine is still not a                     
 profitable endeavor.  She noted the price of zinc did go up but now           
 is back down again.  She told committee members Cominco did expand            
 to put more concentrate through which is bringing the company                 
 closer to the break even point.  She pointed out that when prices             
 do rise, the company should do much better.  She noted the world              
 stockpiles of zinc metal are decreasing, so prices subsequently               
 should be going up.                                                           
                                                                               
 MS. MACCAY noted although the Red Dog mine was on a similar                   
 schedule as the Fort Knox project back when things were easier, the           
 Red Dog is still encountering permitting problems at the federal              
 level.  She has been in the renewal process on a permit for six               
 years.  There are some state issues associated with that permit               
 dealing with the state criteria for total dissolved solids, which             
 strongly affect the mine's ability to discharge water.  She has               
 been working with the DEC for over three years trying to resolve              
 the issue and a strategy is in place, even though it will take                
 another year or two before an actual working solution will be in              
 place, which will allow the mine to discharge the amount of water             
 accumulated behind the tailings dam.  To deal with that, Cominco              
 had a tailings dam that was to be built over 30 years.  However,              
 all stages had to be built within five years to keep storing the              
 water they were not allowed to discharge.  She stated there                   
 continues to be a permitting problem both at the state and federal            
 levels and permits can take many years to obtain.                             
                                                                               
 MS. MACCAY said the Red Dog mine is doing well and has a 30-35 year           
 life expectancy.                                                              
                                                                               
 CO-CHAIRMAN GREEN wondered which government is contributing the               
 most problems.                                                                
                                                                               
 MS. MACCAY replied the worst problems are coming from the                     
 Environmental Protection Agency (EPA) and the second slowest has              
 been the DEC.  She noted that ADF&G has been the most helpful.  She           
 said the Habitat Division has been the driving force, pushing the             
 DEC and EPA with positive, constructive information.                          
                                                                               
 CO-CHAIRMAN GREEN wondered if the holdups involve delays in getting           
 the permit or delays in something which a company is required to do           
 in order to get the permit.                                                   
                                                                               
 MS. MACCAY replied both kinds of delays are involved.  She noted              
 the permit she referred to earlier sat for a couple of years, as              
 the EPA wanted an environmental assessment, which was done.  After            
 that was done, the permit writer started to research the project.             
 She said in regard to state issues with the mixing zone, a better             
 response is received from the northern office than the Juneau                 
 office.  She noted the Juneau office is reluctant to move on                  
 reclassification of stream issues.                                            
                                                                               
 Number 293                                                                    
                                                                               
 REPRESENTATIVE AUSTERMAN wondered if the high percentage of hires             
 from the regional corporation is normal.                                      
                                                                               
 MS. MACCAY stated Cominco is in partnership with the NANA Regional            
 Corporation, who is the landowner for the mine.  Part of the                  
 agreement is to work toward Native shareholder hire, eventually               
 hoping to reach 100 percent.  She noted the current 51 percent is             
 much better than most places.                                                 
                                                                               
 REPRESENTATIVE AUSTERMAN asked how long the mine has been in                  
 operation.                                                                    
                                                                               
 MS. MACCAY replied the mine has been operating for five years.                
                                                                               
 REPRESENTATIVE AUSTERMAN clarified the goal is to increase the                
 Native shareholder hire to 100 percent.                                       
                                                                               
 MS. MACCAY said the original goal was to be at 100 percent in about           
 12 years.  She stated there are some positions where there does not           
 seem to be any shareholders looking into the type of education                
 needed to fulfill them, so those positions might be difficult to              
 fill.  She noted there is also a turnover issue, as a Native                  
 shareholder stays on an average about one and one-half years.  She            
 pointed out in many cases, they do come back.                                 
                                                                               
 CO-CHAIRMAN GREEN asked if Cominco trains its own people or does              
 the company go to where the talent exists.                                    
                                                                               
 MS. MACCAY replied it depends on the position.  She said many                 
 positions involve training people on site, others have been trained           
 at training centers in the region, and some involve hiring people             
 already having the experience.  She stated entry level positions              
 are Native shareholder positions and those people are trained.                
                                                                               
 CO-CHAIRMAN GREEN clarified there are certain positions requiring             
 finite expertise.  He wondered if Cominco has to go outside the               
 state to find people for those positions or is local hire involved.           
                                                                               
 MS. MACCAY said the hire preference is Native shareholders, then              
 in-state and finally out-of-state.                                            
                                                                               
 Number 342                                                                    
                                                                               
 TOM CRAFFORD, MANAGER, MINERALS AND COAL, CIRI, stated CIRI is one            
 of the Native regional corporations established under the Alaska              
 Native Claims Settlement Act (ANCSA).  He said there are seven                
 villages, five groups and one historical village within CIRI.                 
 Although chartered under standard Alaskan business corporation                
 laws, CIRI is significantly different in that it has 6,700 Native             
 shareholders and many of the corporation's activities go beyond the           
 standard business practices in providing various types of benefits            
 for shareholders.  He noted CIRI is the fifth largest of the Alaska           
 regional corporations, in terms of population.                                
                                                                               
 MR. CRAFFORD stated CIRI's principle lines of business include                
 natural resource development, real estate in the Lower 48 and                 
 Alaska, broadcast communications in the Lower 48 and oil field                
 services.  CIRI owns and manages 524,000 acres of surface estate              
 and over 1.6 million acres of subsurface estate.  He said within              
 its natural resources group, CIRI has a mining subsidiary, North              
 Pacific Mining Corporation (NPMC), which is active in a variety of            
 mineral projects throughout the state.                                        
                                                                               
 MR. CRAFFORD said CIRI's mineral holdings within the state include            
 the Illinois Creek gold and silver deposit, which is located near             
 Galena, Alaska.  He stated in addition to Illinois Creek, CIRI has            
 the Johnson River occurrence on the west side of Cook Inlet, which            
 is a gold, copper, and zinc occurrence.  CIRI also has the Red                
 Mountain Chrome occurrence near Seldovia.  He noted that recent               
 interest has been shown for not only the chrome, but also for the             
 mineral olivine.  CIRI is a 10 percent owner in the Beluga Coal               
 Company, which has extensive coal holdings at Beluga on the west              
 side of Cook Inlet.                                                           
                                                                               
 MR. CRAFFORD stated for some time CIRI has been owner of a small              
 portion of lands included in the Wishbone Hill coal project being             
 conducted by Idemitsu Alaska, Inc.  He said on April 3, 1995, CIRI            
 signed a letter of intent with Idemitsu to acquire all the assets             
 of the Wishbone Hill coal project.  He explained the Wishbone Hill            
 coal project was originally slated for development in 1990.  The              
 project has a small to modest reserve of approximately 14 million             
 metric tons of recoverable clean coal.  He pointed out the Wishbone           
 Hill coal has the advantage of being very low in sulphur content              
 and has an additional advantage over other Alaskan coals of having            
 a higher heating value.  He explained Wishbone Hill coals contain             
 about 11,700 BTUs per pound of coal as opposed to an average of               
 8,100 BTUs per pound for the Beluga and Healy coals.                          
                                                                               
 MR. CRAFFORD said the development of the Wishbone Hill coal                   
 project, which was originally slated to go into development in                
 1990, was delayed in large part to the Mental Health Trust lands              
 dispute.  He noted the project was on hold for four years and in              
 1994, Idemitsu made the strategic decision to sell the project.               
 CIRI's plans for the project at this point are not well formulated.           
 He stated CIRI determined that first and foremost, all the work               
 Idemitsu had done on the Wishbone Hill project needed to be                   
 preserved.  He pointed out that Idemitsu has eight coal and various           
 surface leases and all their permits are in place required to                 
 initiate development on the project, the most important of which is           
 the federal permit to mine under the Surface Mining Control and               
 Reclamation Act.                                                              
                                                                               
 MR. CRAFFORD told committee members if Idemitsu had walked from the           
 project without anyone taking over the project, that permit would             
 have lapsed, as would have some of the other permits in place, and            
 the project would have gone back to square one.  He added much of             
 the potential for the 180 jobs the project could produce would have           
 disappeared or been delayed for many years.  He stated Idemitsu has           
 over $12 million invested in the Wishbone Hill coal project.                  
                                                                               
 Number 440                                                                    
                                                                               
 MR. CRAFFORD said with recent developments on the international               
 coal markets, it is widely anticipated that coal prices will rise             
 substantially this year, perhaps three to four dollars per metric             
 ton.  He stressed things are moving in the right direction to                 
 foster development of the project.  He noted that CIRI itself does            
 not intend to be the operator of the project.  However, CIRI has              
 extensive mining experience and connections with mining                       
 corporations and will be looking for means to partner with other              
 companies in the development of the project.  CIRI hopes to see the           
 Wishbone Hill coal project in production in the very near future.             
                                                                               
 CO-CHAIRMAN GREEN asked if the projected four dollar increase per             
 metric ton is for the quality type coal Mr. Crafford was referring            
 to or coal across the board.                                                  
                                                                               
 MR. CRAFFORD replied that projection is for international steam               
 coal prices in general.  He noted coal is a very different market             
 than other commodities--futures are not traded in coal because each           
 coal is different from every other coal.  He said that projection             
 is in the general range for steam coals.                                      
                                                                               
 CO-CHAIRMAN GREEN recalled Mr. Crafford had mentioned a 3,000 BTU             
 per pound higher heating value in Wishbone Hill coal.  He asked if            
 that coal also involves low sulphur.                                          
                                                                               
 MR. CRAFFORD said the coal has a somewhat higher sulphur content              
 than the Healy or Beluga coals but to make a comparison, one has to           
 calculate what the sulphur content is per BTU.  He stated the Healy           
 and Beluga coals are about 25 percent water, which is why the                 
 heating value is so much less.                                                
                                                                               
 Number 476                                                                    
                                                                               
 REPRESENTATIVE SCOTT OGAN stated he was excited that CIRI had made            
 a commitment to the Wishbone Hill project.  He noted an area of               
 great controversy is the coal car train set which received a                  
 capital allocation to the Alaska Railroad.  He asked if it would be           
 prudent to retain the money where it is now and also asked if there           
 is an international market for this coal requiring the use of the             
 train set.                                                                    
                                                                               
 MR. CRAFFORD replied one of the logical, if not the most logical,             
 markets for the coal would be the Asian Pacific Rim economies which           
 are seeing rapidly increasing demands for electrical power and                
 clean coal.  He thought the anticipated market for the Wishbone               
 Hill coal would be a foreign market and rail haulage would be                 
 required to get the coal to that market.  Therefore, the retention            
 of the appropriation for the train set could only help the                    
 prospects for development of the Wishbone Hill project.                       
                                                                               
 REPRESENTATIVE OGAN questioned if the Wishbone Hill project looks             
 like such a good deal, why did the Japanese firm sell.                        
                                                                               
 MR. CRAFFORD stated he could not speak to Idemitsu's reasons for              
 getting out of the project at this time.  He speculated Idemitsu              
 waited four years and after spending that much time waiting, a sour           
 attitude may have been developed, particularly in a foreign                   
 country.                                                                      
                                                                               
 CO-CHAIRMAN GREEN said in World War II there was a lot made of the            
 fact that the oriental mind set was a long-range plan which was               
 never deviated from.  He noted the Mental Health Trust land                   
 uncertainty and the sudden change in the potential price of coal              
 may have been things not in Idemitsu's decision making.                       
                                                                               
 MR. CRAFFORD stated the decision to get out of the project was made           
 approximately one year ago.  He reiterated that CIRI has a letter             
 of intent with Idemitsu and hopes to conclude a sales agreement by            
 June.                                                                         
                                                                               
 REPRESENTATIVE OGAN said he was very encouraged by CIRI's plans.              
 He told Mr. Crafford if there is anything he can do to help to let            
 him know.                                                                     
                                                                               
 Number 534                                                                    
                                                                               
 PAUL VALENTI, VICE PRESIDENT OF OPERATIONS, USMX, said the Illinois           
 Creek property is located in west central Alaska.  The property is            
 approximately 320 miles northwest of Anchorage, about the same                
 distance west of Fairbanks, and 25 miles east of the Yukon River.             
 He told committee members the property is on state leased land.               
 There are two parcels totaling approximately 62,000 acres that are            
 wholly owned by North Pacific Mining Company, a subsidiary of CIRI.           
 He explained USMX will be the operator of the property.                       
                                                                               
 MR. VALENTI stated USMX has developed five open pit gold heap leach           
 operations since 1987 in the Lower 48 and feels well qualified to             
 undertake the challenges of Illinois Creek.  He said the Illinois             
 Creek property was discovered in 1980 by Anaconda who explored the            
 property for five years and then withdrew from the minerals                   
 business.  The property was subsequently explored by Goldmore North           
 Pacific Mining Company and Echo Bay Mining.  USMX got started on              
 the property in August 1994.  He noted Anaconda spent a lot of                
 money providing infrastructure to the property, developing living             
 facilities for exploration personnel and a large airstrip to handle           
 big aircraft.  He stressed that infrastructure has enabled                    
 subsequent developers to explore the property very efficiently.               
                                                                               
 MR. VALENTI said as a result of the drilling and engineering done             
 in more recent times, USMX has developed a reserve of approximately           
 4.5 million tons of ore containing 300,000 ounces of gold and                 
 (indiscernible) ounces of silver.  He exhibited photographs showing           
 the deposit and a map indicating the engineering plan for the                 
 development of facilities for the property.  The deposit will be              
 mined over a five year period and the mining will be conducted on             
 a seasonal basis--six months out of the year--using conventional              
 open pit methods.  He stated gold and silver will be recovered by             
 the heap leach process.  Ore will be transported from the pit to              
 the heap leach pad.  The heap will be built behind an engineered              
 dam.  The pad will be doubly synthetic lined over compacted sub-              
 base.  Gold will be recovered by (indiscernible) sprinklings dilute           
 sodium cyanide solution which will percolate through the rock, be             
 collected behind the dam above the synthetic liner and pumped to a            
 recovery plant for extracting the gold and silver.                            
                                                                               
 MR. VALENTI stated the wastes will be stored and ultimately                   
 reclaimed adjacent to the pit itself.  He said USMX is going                  
 through the engineering process currently and is placing special              
 emphasis on designing both mining and processing facilities so                
 there will be no impact or detriment to ground water surface water            
 quality.  He noted the (indiscernible) operations will outlast                
 mining by two or three years.  USMX will need that period of time             
 to continue to recover gold and silver from the heaps and will need           
 additional time to rinse out the ore and detoxify the solution so             
 the facility can be closed in a proper manner.  He explained USMX             
 will be reclaiming the mine concurrently as they operate.  He added           
 that in 1992, USMX received an award from the state of Nevada for             
 reclamation efforts at its Green Spring Mine and will receive                 
 another award from the state of Utah for reclamation work done at             
 its Gold Strike Mine in Southwest Utah.                                       
                                                                               
 Number 607                                                                    
                                                                               
 MR. VALENTI told committee members the Illinois Creek project will            
 employ approximately 100 people.  Many of the jobs will be seasonal           
 since mining will only occur during the six month summer season.              
 USMX will attempt to process throughout the year and plans to                 
 employ 30-40 people during the winter months.  He stated last week,           
 a group representing USMX toured villages along the river and held            
 six public meetings in three days.  The attendance at the meetings            
 was good and people expressed interest in the jobs which will be              
 available to them.                                                            
                                                                               
 MR. VALENTI said USMX is currently going through the permit process           
 and like Fairbanks Gold, USMX is also using a project agency team             
 to facilitate the permitting process.  The team is being led by the           
 DNR.  USMX hopes to achieve its permits in approximately one year.            
 He stated if that is possible and if certain logistical issues can            
 be resolved with transporting equipment to the site, production may           
 begin by 1996.                                                                
                                                                               
 CO-CHAIRMAN GREEN asked if USMX will be flying the equipment in and           
 flying the gold and silver out rather than trying to connect by a             
 road system.                                                                  
                                                                               
 MR. VALENTI replied USMX is currently reviewing two alternatives              
 for transporting big equipment to the site.  The preferred                    
 situation would be to fly everything in but there is difficulty in            
 fitting some of the equipment into a C-130.  USMX is looking at the           
 possibility of using a larger aircraft.  He said the other                    
 alternative is to transport equipment up and down the Yukon River             
 by barge to a landing site and bring things into the mining site by           
 winter trail.                                                                 
                                                                               
 CO-CHAIRMAN GREEN asked what USMX uses to detoxify the wastes.                
                                                                               
 MR. VALENTI responded when USMX is finished rinsing the heaps,                
 peroxide will be used to destroy the cyanide.                                 
                                                                               
 Number 638                                                                    
                                                                               
 REPRESENTATIVE AUSTERMAN (indiscernible).                                     
                                                                               
 MR. VALENTI said after the heap is rinsed out, USMX will recontour,           
 cover it with topsoil, and revegetate.                                        
                                                                               
 REPRESENTATIVE AUSTERMAN clarified a big pit will remain.                     
                                                                               
 MR. VALENTI replied there would be a big pit remaining.  He said              
 the pit is approximately 5,000 feet long by 500 feet wide.  He                
 reiterated the wastes will be stockpiled as mining is ongoing.                
                                                                               
 REPRESENTATIVE AUSTERMAN asked if the pit could be revegetated.               
                                                                               
 MR. VALENTI stated USMX will revegetate the wastes, reclaim all of            
 the roads, and revegetate the roads but there is nothing which can            
 be done with the pit except ensure there is no water remaining.               
                                                                               
 Number 660                                                                    
                                                                               
 STEVE BORELL, EXECUTIVE DIRECTOR, ALASKA MINERS ASSOCIATION, said             
 much of the encouragement and excitement the mining industry has              
 been given came from three bills that have gone through the                   
 committee.  He stated this is the most exciting time for the                  
 minerals industry seen since the early part of the century.  He               
 noted many companies are re-looking at Alaska.  In addition to the            
 projects just described, another project in Representative                    
 Nicholia's district is being constructed currently.  It will be a             
 small high grade underground gold mine.                                       
                                                                               
 TAPE 95-51, SIDE B                                                            
 Number 000                                                                    
                                                                               
 MR. BORELL stated in the Fairbanks district this winter there was             
 some drilling going on in the cold weather and it is hopeful that             
 will convince companies they can also explore during the winter               
 months.  He noted another bill, HB 197, will not make or break a              
 project but provides one more encouragement for mineral companies.            
 He said there still is a major perception throughout the industry             
 that Alaska is a bad place to do business and Alaska is all federal           
 land.  He pointed out that trying to convince the industry...the              
 experience of Idemitsu Kosan, with the Wishbone Hill project, was             
 a bad piece of press for Alaska.                                              
                                                                               
 MR. BORELL passed out an article on the success of airborne                   
 geophysical mapping (may be found in the House Resources Committee            
 Room, Capitol Room 124, and after adjournment of the second session           
 of the Nineteenth Alaska State Legislature, in the Legislative                
 Reference Library).  He pointed out as of March 8, 1995, a total of           
 80.81 square miles of mining claims and upland prospecting sites              
 were staked in the Fairbanks mining district.  He said the                    
 excitement that has caused is quite incredible.  He noted the cost            
 of the Fairbanks airborne geophysical work was $365,000 and more              
 than that has already been spent by industry, staking claims and              
 doing some initial drilling.  He added one important aspect is that           
 this has been close to the infrastructure, whereas some of the                
 others had not been and companies, especially the Fairbanks                   
 district...they have watched the Fort Knox go into construction...a           
 lot of things are happening in a positive way to encourage the                
 industry.                                                                     
                                                                               
 Number 102                                                                    
                                                                               
 MR. BORELL showed photos of gold mined last year.  One of the                 
 pictures showed a 41 ounce gold nugget mined in 1994 on Nolan                 
 Creek.  He stated placer mining continues to be adversely affected            
 by regulations.  He felt the influx of major companies and the                
 strength they will bring to resource issues is a real positive.  He           
 noted the Governor's budget has only $100,000 budgeted for airborne           
 geophysical mapping.  He said because of the amount of money it               
 takes to mobilize for the program, a minimum of $600,000 to                   
 $700,000 is needed.  He stressed if $100,000 is the final number,             
 the Division of Geological and Geophysical Surveys will have to               
 hold the project until next year.                                             
                                                                               
 MR. BORELL noted several additional areas have been identified for            
 mapping, including nine different areas throughout the Mat-Su                 
 borough.  He stressed there are many targets in the state that are            
 very prospective and meet the criteria of being near the                      
 infrastructure.  He stated the mining opportunities in the state              
 are great.  He felt there is a lot more that mining can do for the            
 economy of the state than what is being seen currently.                       
                                                                               
 Number 164                                                                    
                                                                               
 REPRESENTATIVE IRENE NICHOLIA asked where Eureka pit is located.              
                                                                               
 MR. BORELL stated Eureka pit is the name of the pit at Nolan Creek,           
 which is right outside Coldfoot.                                              
                                                                               
 REPRESENTATIVE NICHOLIA questioned what the industry's relationship           
 is with the Division of Habitat.                                              
                                                                               
 MR. BORELL stated many experiences have been very positive and                
 noted there are very high quality professionals in the Fairbanks              
 office, which is not necessarily indicative of the entire habitat             
 division.  He stressed the people in the Fairbanks office should              
 remain because all of the placer permits have to be evaluated for             
 Title 16.  He noted ADF&G has veto power if any anadromous fish               
 stream is to be affected.  The problem the industry has seen with             
 the habitat division is historically there has been a reaching for            
 additional power and an attempt to take authority away from land              
 managers and the DNR, which has manifested itself in the area                 
 plans.  He gave examples.                                                     
                                                                               
 Number 222                                                                    
                                                                               
 REPRESENTATIVE NICHOLIA asked if the Fairbanks office is closed,              
 will the closing have a detrimental impact on mining.                         
                                                                               
 MR. BORELL responded it would.  He said what is left open or what             
 is closed is a management decision of the Administration.  He would           
 very much encourage them not to close the Fairbanks office.  He               
 felt there were other places and positions that could be                      
 eliminated.                                                                   
                                                                               
 CO-CHAIRMAN GREEN thanked everyone for the presentation.  He said             
 the information the committee heard was quite encouraging.  He felt           
 perhaps the industry is gaining a little confidence in Alaska's               
 government and he hoped there was something the legislature could             
 do to further strengthen that confidence.                                     
                                                                               
 REPRESENTATIVE OGAN stated he is very excited about possible                  
 exploration in his district because there is a lot of potential               
 there.  He said he is equally excited about the fact that many                
 rural areas are beginning to experience economic development.                 
                                                                               
 HB 256 - FREE SPORT FISHING DAYS                                            
                                                                               
 Number 262                                                                    
                                                                               
 BRUCE CAMPBELL, ADMINISTRATIVE ASSISTANT TO REPRESENTATIVE PETE               
 KELLY, PRIME SPONSOR, said HB 256 allows the commissioner of ADF&G            
 to select one or two days on which an individual can go fishing               
 without being required to have a fishing license or tag.  He stated           
 HB 256 means that someone could, in conjunction with Fishing Is Fun           
 Days or other promotional activities for fishing, take the kids               
 along and the adult would not have to have a license.  This would             
 provide the opportunity to determine if the kids enjoy fishing.  He           
 noted HB 256 is supported by a number of sport fishing groups                 
 around the state.  He urged the committee's support for HB 256.               
                                                                               
 REPRESENTATIVE PETE KOTT felt there should be a substantial fiscal            
 note attached because revenue will be lost.  He noted there is a              
 zero fiscal note attached.                                                    
                                                                               
 Number 299                                                                    
                                                                               
 JOHN BURKE, ACTING DIRECTOR, SPORT FISH DIVISION, ADF&G, said the             
 department supports HB 256.  He stated free fishing days offer                
 people, who do not ordinarily fish, the opportunity to experience             
 fishing without having to buy a license.  He noted a free fishing             
 day, in conjunction with National Fishing Week activities or winter           
 fishing carnivals, can bring people into recreational fishing.  He            
 explained free fishing days are used as a centerpiece for the                 
 department's aquatic education activities, which the department               
 sponsors in schools.                                                          
                                                                               
 MR. BURKE stressed education depends a lot on motivation.  Fishing            
 for many children in Alaska is a tremendous motivator.  He felt any           
 type of educational activity built around something kids like, they           
 do well at.  He said the department uses fishing as a motivator to            
 teach people conservation, angling ethics, and sometimes spin-off             
 activities such as sciences and math.                                         
                                                                               
 MR. BURKE said there may be some initial loss of license or king              
 salmon stamp sales but ultimately sales will be on the plus side.             
 Over the long term, there will be more recreation fishers and at              
 that point, there will be more license sales.  He stated the only             
 possible negative aspect of HB 256 is if the free fishing day(s)              
 turned into a king salmon derby during the height of king salmon              
 season where people would not fish any other day except for the one           
 free day.  He felt that would not happen.                                     
                                                                               
 MR. BURKE showed an aquatic education handbook developed by the               
 department which gets distributed in schools.  He said the                    
 department also runs a pathways to fishing clinic often at the same           
 time.  Mentors are distributed around stations and people pass                
 through the stations with about ten minutes per station.  People              
 are taught how to fish, how to tie knots, shown where the fish may            
 be, etc.  He showed the committee several textbooks used in the               
 school systems.  He also described several educational tools used.            
 He showed several pictures of family fishing days which are                   
 presently held throughout the state.                                          
                                                                               
 Number 392                                                                    
                                                                               
 REPRESENTATIVE KOTT recalled Mr. Burke mentioned that having free             
 fishing days would bring families together and provide an outing at           
 no cost.  He thought children do not currently pay for licenses.              
                                                                               
 MR. BURKE said that is correct.  Children get a free license.                 
                                                                               
 REPRESENTATIVE KOTT felt one of the problems with having a free               
 fishing day for parents who do not ordinarily fish is that those              
 people may not be familiar with regulations or habitat and could do           
 more damage than good.  He asked when the department is proposing             
 to provide these days of free fishing.                                        
                                                                               
 MR. BURKE replied National Fishing Week occurs every year and large           
 celebrations are held throughout the state.  He said the free                 
 fishing day(s) would occur during National Fishing Week as a                  
 centerpiece for those activities.  He stated the activities are               
 largely for children but the department has found through the                 
 pathways to fishing program, many people going through the program            
 have never fished before.                                                     
                                                                               
 REPRESENTATIVE KOTT said his question is when specifically would              
 the department plan to provide the free fishing days.  He asked               
 would the days be together or would there be two separate days.               
                                                                               
 MR. BURKE replied the free fishing days would be at the discretion            
 of the commissioner.  He said National Fishing Week is in June.  He           
 was not sure about the time for a winter free fishing day.  He felt           
 the department would probably try to promote some unified day                 
 enabling people to become acquainted with winter fishing.  He                 
 stressed HB 256 does not mandate any free fishing days.                       
                                                                               
 REPRESENTATIVE KOTT asked if there were other states who have                 
 similar free fishing days.                                                    
                                                                               
 MR. BURKE replied 44 states have free fishing days in conjunction             
 with National Fishing Week activities.                                        
                                                                               
 REPRESENTATIVE KOTT questioned why the state would want to provide            
 the opportunity of free fishing days to nonresidents.                         
                                                                               
 MR. BURKE stated it would be impossible to enforce resident versus            
 nonresident.                                                                  
                                                                               
 Number 455                                                                    
                                                                               
 REPRESENTATIVE KOTT said in his fishing experience, he would guess            
 that 60 percent of the fishers are nonresidents and they usually              
 are the people violating some provision of law regarding fish and             
 game.                                                                         
                                                                               
 MR. BURKE stated it would be highly unlikely a nonresident, who               
 came to the state to fish, would fish on one day only.  He felt one           
 free fishing day probably would not preclude nonresidents from                
 buying a license.  He reiterated if there is abuse, HB 256 does not           
 mandate a free fishing day.                                                   
                                                                               
 REPRESENTATIVE KOTT felt it would be very difficult to determine if           
 abuse was ongoing.                                                            
                                                                               
 REPRESENTATIVE NICHOLIA asked what the impacts of free fishing days           
 would have on the Kenai River and the Copper River.  She noted the            
 declining runs of king salmon on the Yukon River and the Tanana               
 River.  She wondered if streams having low returns would be off               
 limits during the free fishing days.                                          
                                                                               
 MR. BURKE replied the streams with low returns would not be off               
 limits.  He said he did not know what the impact of free fishing              
 days would be on the Kenai River.  He stated free fishing days                
 would take place at best during the king salmon fishery, not during           
 the sockeye salmon fishery.  He noted the king salmon fishery is              
 fairly well controlled, as in order to do it, a person has to have            
 a lot invested.  He did not feel free fishing days would bring any            
 more people than the number there now, because people fishing on              
 the Kenai River now already have the gear required.  He pointed out           
 in regard to the Yukon and Copper Rivers, those places are fairly             
 difficult to get to and he did not feel large groups of people                
 would go for one specific day of fishing.  He did not think free              
 fishing days would affect those areas.                                        
                                                                               
 Number 510                                                                    
                                                                               
 REPRESENTATIVE NICHOLIA noted people are very concerned about                 
 erosion on the banks of the Kenai River.  She asked if HB 256 would           
 have an impact on that problem.                                               
                                                                               
 MR. BURKE replied no.  He said the king salmon fishery takes place            
 almost totally from boats.  The erosion on the banks is primarily             
 concerned with the intensive sockeye fishery occurring later in the           
 season than when the free fishing day would occur.  He stressed it            
 is a matter of timing.                                                        
                                                                               
 REPRESENTATIVE OGAN asked what the date is for National Fishing               
 Week.                                                                         
                                                                               
 MR. BURKE replied June 6-12.                                                  
                                                                               
 REPRESENTATIVE OGAN expressed concern about the free fishing days             
 because in his area there is a big problem with king salmon.  He              
 said the fishery is heavily fished by road access.  He wondered if            
 the department is projecting a lot of fish being caught during the            
 free fishing days.                                                            
                                                                               
 MR. BURKE stated someone who is clearly a king salmon fisherman               
 would be fishing anyway and have a tag.  He said if the free                  
 fishing day ended up being a derby day, the department would either           
 have to change the date and make the day earlier, or perhaps not              
 have the free fishing day at all.  He pointed out he does not know            
 any king salmon fishermen who want to go fishing just once a year             
 but perhaps they might take their family on the free fishing day.             
                                                                               
 Number 550                                                                    
                                                                               
 CO-CHAIRMAN WILLIAMS noted there was no quorum present.  He said              
 the state has a sport fishery which is very well advertised and               
 there are many problems with that fishery now.                                
                                                                               
 MR. CAMPBELL stated the sponsor's goal is not to increase problems            
 but rather provide a mechanism for educating people about the                 
 problems.                                                                     
                                                                               
 ADJOURNMENT                                                                   
                                                                               
 There being no further business to come before the House Resources            
 Committee, Co-Chairman Williams adjourned the meeting at 9:30 a.m.            
                                                                               
                                                                               

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