Legislature(2017 - 2018)BARNES 124

04/06/2018 01:00 PM RESOURCES

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Audio Topic
01:03:00 PM Start
01:03:28 PM HB331
01:41:38 PM Presentation: Alaska Industrial Development and Export Authority
03:14:59 PM Adjourn
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
-- Recessed to 4/7/18 at 2:00 pm --
+= HB 331 TAX CREDIT CERT. BOND CORP; ROYALTIES TELECONFERENCED
Heard & Held
-- Testimony <Invitation Only> --
+ Presentation: AIDEA & Ambler Road TELECONFERENCED
-- Testimony <Invitation Only> --
+ Bills Previously Heard/Scheduled TELECONFERENCED
                                                                                                                              
                    ALASKA STATE LEGISLATURE                                                                                  
               HOUSE RESOURCES STANDING COMMITTEE                                                                             
                         April 6, 2018                                                                                          
                           1:03 p.m.                                                                                            
                                                                                                                                
MEMBERS PRESENT                                                                                                               
                                                                                                                                
Representative Andy Josephson, Co-Chair                                                                                         
Representative Geran Tarr, Co-Chair                                                                                             
Representative John Lincoln, Vice Chair                                                                                         
Representative Harriet Drummond                                                                                                 
Representative Justin Parish                                                                                                    
Representative Chris Birch                                                                                                      
Representative DeLena Johnson                                                                                                   
Representative David Talerico                                                                                                   
                                                                                                                                
MEMBERS ABSENT                                                                                                                
                                                                                                                                
Representative George Rauscher                                                                                                  
Representative Mike Chenault (alternate)                                                                                        
Representative Chris Tuck (alternate)                                                                                           
                                                                                                                                
COMMITTEE CALENDAR                                                                                                            
                                                                                                                                
HOUSE BILL NO. 331                                                                                                              
"An  Act  establishing the  Alaska  Tax  Credit Certificate  Bond                                                               
Corporation; relating  to purchases  of tax  credit certificates;                                                               
relating   to  overriding   royalty   interest  agreements;   and                                                               
providing for an effective date."                                                                                               
                                                                                                                                
     - HEARD & HELD                                                                                                             
                                                                                                                                
PRESENTATION(S):  ALASKA INDUSTRIAL DEVELOPMENT AND EXPORT                                                                      
AUTHORITY                                                                                                                       
                                                                                                                                
     - HEARD                                                                                                                    
                                                                                                                                
                                                                                                                                
PREVIOUS COMMITTEE ACTION                                                                                                     
                                                                                                                                
BILL: HB 331                                                                                                                  
SHORT TITLE: TAX CREDIT CERT. BOND CORP; ROYALTIES                                                                              
SPONSOR(s): RULES BY REQUEST OF THE GOVERNOR                                                                                    
                                                                                                                                
02/07/18       (H)       READ THE FIRST TIME - REFERRALS                                                                        
02/07/18       (H)       RES, FIN                                                                                               
03/30/18       (H)       RES AT 1:00 PM BARNES 124                                                                              
03/30/18       (H)       Heard & Held                                                                                           
03/30/18       (H)       MINUTE(RES)                                                                                            
04/04/18       (H)       RES AT 1:00 PM BARNES 124                                                                              
04/04/18       (H)       Heard & Held                                                                                           
04/04/18       (H)       MINUTE(RES)                                                                                            
04/06/18       (H)       RES AT 1:00 PM BARNES 124                                                                              
                                                                                                                                
WITNESS REGISTER                                                                                                              
                                                                                                                                
KEN ALPER, Director                                                                                                             
Tax Division                                                                                                                    
Department of Revenue                                                                                                           
Juneau, Alaska                                                                                                                  
POSITION STATEMENT:  Provided a sectional analysis of HB 331 and                                                              
answered questions during the hearing of HB 331.                                                                                
                                                                                                                                
MIKE BARNHILL, Deputy Commissioner                                                                                              
Office of the Commissioner                                                                                                      
Department of Revenue                                                                                                           
Juneau, Alaska                                                                                                                  
POSITION STATEMENT:  Answered a question during the hearing of                                                                
HB 331.                                                                                                                         
                                                                                                                                
DEVEN MITCHELL, Executive Director                                                                                              
Alaska Municipal Bond Bank Authority                                                                                            
Department of Revenue                                                                                                           
Juneau, Alaska                                                                                                                  
POSITION STATEMENT:  Answered questions during the hearing of HB                                                              
331.                                                                                                                            
                                                                                                                                
WILLIAM MILKS, Senior Assistant Attorney General                                                                                
Labor and State Affairs Section                                                                                                 
Civil Division(Juneau)                                                                                                          
Department of Law                                                                                                               
Juneau, Alaska                                                                                                                  
POSITION STATEMENT:  Answered questions during the hearing of HB                                                              
331.                                                                                                                            
                                                                                                                                
JOHN SPRINGSTEEN, CEO/Executive Director                                                                                        
Alaska Industrial Development and Export Authority                                                                              
Department of Commerce, Community & Economic Development                                                                        
Anchorage, Alaska                                                                                                               
POSITION STATEMENT:  Provided a PowerPoint presentation                                                                       
entitled, "Ambler Access Update," dated 4/6/18, and answered                                                                    
questions.                                                                                                                      
                                                                                                                                
MARYELLEN TUTTELL, PE; Chief Risk Officer                                                                                       
DOWL                                                                                                                            
Anchorage, Alaska                                                                                                               
POSITION STATEMENT:   Answered questions during  the presentation                                                             
of  the   "Ambler  Access  Update"   by  the   Alaska  Industrial                                                               
Development and Export Authority.                                                                                               
                                                                                                                                
GENE THERRIAULT, Team Leader                                                                                                    
Interior Energy Project                                                                                                         
Alaska Industrial Development and Export Authority                                                                              
Department of Commerce, Community & Economic Development                                                                        
Anchorage, Alaska                                                                                                               
POSITION STATEMENT:   Answered questions during  the presentation                                                             
of  the   "Ambler  Access  Update"   by  the   Alaska  Industrial                                                               
Development and Export Authority.                                                                                               
                                                                                                                                
RICK VAN NIEUWENHUYSE, President/CEO                                                                                            
Trilogy Metals Inc.; Director                                                                                                   
NovaGold                                                                                                                        
Vancouver, British Columbia                                                                                                     
Canada                                                                                                                          
POSITION   STATEMENT:     Provided   a  PowerPoint   presentation                                                             
entitled,  "Advancing the  Ambler  Mining District  in Alaska  by                                                               
Forming Strong Partnerships."                                                                                                   
                                                                                                                                
BRENDA APPLEGATE, Chief Financial Officer                                                                                       
Alaska Industrial Development and Export Authority                                                                              
Department of Commerce, Community & Economic Development                                                                        
Anchorage, Alaska                                                                                                               
POSITION STATEMENT:   Answered questions during  the presentation                                                             
of  the   "Ambler  Access  Update"   by  the   Alaska  Industrial                                                               
Development and Export Authority.                                                                                               
                                                                                                                                
DAVID G. CLARKE                                                                                                                 
Anchorage, Alaska                                                                                                               
POSITION   STATEMENT:     Provided   a  PowerPoint   presentation                                                             
entitled,   "Ambler  Mining   District  Industrial   Access  Road                                                               
Project."                                                                                                                       
                                                                                                                                
ACTION NARRATIVE                                                                                                              
                                                                                                                                
1:03:00 PM                                                                                                                    
                                                                                                                                
CO-CHAIR  ANDY  JOSEPHSON  called the  House  Resources  Standing                                                             
Committee  meeting  to  order  at   1:03  p.m.    Representatives                                                               
Josephson, Tarr,  Parish, Drummond,  and Lincoln were  present at                                                               
the call to order.   Representatives Talerico, Birch, and Johnson                                                               
arrived as the meeting was in progress.                                                                                         
                                                                                                                                
           HB 331-TAX CREDIT CERT. BOND CORP; ROYALTIES                                                                     
                                                                                                                                
1:03:28 PM                                                                                                                    
                                                                                                                                
CO-CHAIR  JOSEPHSON announced  that the  first order  of business                                                               
would be HOUSE BILL NO. 331,  "An Act establishing the Alaska Tax                                                               
Credit  Certificate Bond  Corporation; relating  to purchases  of                                                               
tax credit certificates; relating  to overriding royalty interest                                                               
agreements; and providing for an effective date."                                                                               
                                                                                                                                
1:04:25 PM                                                                                                                    
                                                                                                                                
KEN ALPER,  Director, Tax Division, Department  of Revenue (DOR),                                                               
continued  his presentation  from  the  previous House  Resources                                                               
Standing Committee  hearing of HB  331 on 3/30/18,  and explained                                                               
the language of HB 331 incorporates the following:                                                                              
                                                                                                                                
   •  a structure    creating   the   bond    corporation   and                                                                 
      authorization to sell bonds                                                                                               
   •  a structure containing conforming changes to existing                                                                     
      language to ensure the existing process to purchase tax                                                                   
      credits is not overwritten, but is supplemented through the                                                               
      bonding method                                                                                                            
   •  a structure containing a series of new sections describing                                                                
      the mechanisms by which DOR values the tax credits and                                                                    
      other factors                                                                                                             
   •  a Department of Natural Resources (DNR) statute related to                                                                
      how DNR would negotiate and authorize overriding royalty                                                                  
      interests offered by companies                                                                                            
                                                                                                                                
MR. ALPER directed  attention to a sectional analysis  of HB 331,                                                               
provided   in  the   committee  packet,   which  read   [original                                                               
punctuation provided]:                                                                                                          
                                                                                                                                
     Section 1:                                                                                                                 
     Exempts the bond corporation created in Sec. 2, and                                                                        
     any overriding royalty interests negotiated under Sec.                                                                     
     11, from the procurement code.                                                                                             
                                                                                                                                
     Section 2:                                                                                                                 
     Establishes the Alaska Tax Credit Certificate Bond                                                                         
     Corporation within DOR. [Largely patterned after                                                                           
     Alaska Pension Obligation Bond Corporation, AS 37.16]                                                                      
                                                                                                                                
          37.18.010 Creates the corporation.                                                                                    
          37.18.020 Establishes the  board of directors, all                                                                    
     of whom are state department commissioners.                                                                                
          37.18.030  Authorizes  the  corporation  to  issue                                                                    
     bonds  up to  $1  billion and  contract for  associated                                                                    
     services.                                                                                                                  
          37.18.040  Authorizes the  corporation  to have  a                                                                    
     reserve  fund which  will  hold funds  to  be used  for                                                                    
     repurchase,  as  well  as funds  appropriated  for  the                                                                    
     purpose  of interest  and  principal  payments to  bond                                                                    
     holders.                                                                                                                   
          37.18.050  Authorizes the  corporation to  set the                                                                    
     terms of bonds to be issued.                                                                                               
          37.18.060 Corporation  must adopt a  resolution to                                                                    
     approve the issuance of bonds.                                                                                             
          37.18.070  Gives  certain  enforcement  rights  to                                                                    
     certain bond holders.                                                                                                      
          37.18.080  Bonds  may  not be  issued  unless  the                                                                    
     discount rate by which tax  credits are purchased is at                                                                    
     least 1.5% greater than the  total interest cost of the                                                                    
     bonds.                                                                                                                     
          37.18.090  Corporation may  refund bonds  prior to                                                                    
     the maturity date.                                                                                                         
          37.18.100 Bonds are legal instruments.                                                                                
          37.18.800   This   chapter  shall   be   liberally                                                                    
     construed to carry out its purposes.                                                                                       
          37.18.810   Corporation   may  adopt   regulations                                                                    
     necessary to implement this chapter.                                                                                       
          37.18.900 Definitions.                                                                                                
                                                                                                                                
     Section 3:    Amends  the Gas Storage Credit  to enable                                                                    
     repurchase of any credits via the bond program.                                                                            
                                                                                                                                
     Section 4:    Amends  the LNG Storage Credit  to enable                                                                    
     repurchase of any credits via the bond program.                                                                            
                                                                                                                                
     Section 5:   Amends  the Refinery Infrastructure Credit                                                                    
     to  enable  repurchase  of any  credits  via  the  bond                                                                    
     program.                                                                                                                   
                                                                                                                                
     Section 6:  Amends  various provisions of AS 43.55.028,                                                                    
     the tax credit repurchase  fund. .028(e) The department                                                                    
     may  either use  the tax  credit fund  money, or  money                                                                    
     disbursed  from  the  bond  program,  to  purchase  tax                                                                    
     credits.  Written to  maximize  flexibility and  retain                                                                    
     the existing program and procedures.                                                                                       
                                                                                                                                
     Section  7:  .028(g)  Clarifies that  the  current  $70                                                                    
     million per  company per year cap,  with the associated                                                                    
     "haircut", does  not apply to repurchases  via the bond                                                                    
     program.                                                                                                                   
                                                                                                                                
     Section   8:  .028(i)   Adds  definitions   for  "money                                                                    
     disbursed  to the  commissioner,"  and "total  interest                                                                    
     cost."                                                                                                                     
                                                                                                                                
     Section 9: .028(j)  Clarifies that if a  company has an                                                                    
     outstanding liability to the  state, this can be offset                                                                    
     against a payment  via the bond program as  well as via                                                                    
     traditional repurchase.                                                                                                    
                                                                                                                                
     Section 10:                                                                                                                
                                                                                                                                
     .028(k)  New  section  authorizing  the  department  to                                                                    
     negotiate  a  repurchase  of  all  credits  held  by  a                                                                    
     company,  and  describing  how the  holder  of  credits                                                                    
     indicates their  desire to participate in  the program.                                                                    
     This section  contemplates that if a  holder of credits                                                                    
     existing at  the time  of a  bond issuance  declines to                                                                    
     participate in  the program,  such holder  is precluded                                                                    
     from submitting  such existing credits for  purchase in                                                                    
     connection with future bond  issuances.  This provision                                                                    
     does not  preclude such holder from  submitting credits                                                                    
     claimed  after   a  bond   issuance  for   purchase  in                                                                    
     connection with a future bond issuance.                                                                                    
                                                                                                                                
     .028(l) New  section describes  the mechanism  by which                                                                    
     the department  estimates the expected  cash flow  to a                                                                    
     company   via  the   current  repurchase   process  and                                                                    
     expected  schedule.  From  this  estimate,  a  purchase                                                                    
     offer  can be  calculated  based on  the discount  rate                                                                    
     determined in (m).                                                                                                         
                                                                                                                                
     .028(m) New  section establishing a base  discount rate                                                                    
     of 10%,  with four methods  to reduce this to  a number                                                                    
     equal to total interest cost + 1.5%.                                                                                       
           1. For  a seismic credit, the  company has waived                                                                    
     the  10-year confidentiality  period for  the data  and                                                                    
     allowed it to become public;                                                                                               
          2.  The  company  has   agreed  to  an  overriding                                                                    
     royalty interest  (ORRI) accepted by the  Department of                                                                    
     Natural Resources;                                                                                                         
          3. The  company has committed reinvest  the entire                                                                    
     amount received  within an Alaska  oil and  gas project                                                                    
     within 24 months;                                                                                                          
           or 4. The credit  is against the corporate income                                                                    
     tax,   primarily   impacting  refinery   infrastructure                                                                    
     credits.                                                                                                                   
                                                                                                                                
     .028(n)  New section  clarifying that  the amount  of a                                                                    
     credit  in excess  of the  discounted amount  purchased                                                                    
     retains no  value and cannot  be used against  taxes or                                                                    
     sold.                                                                                                                      
                                                                                                                                
     Section  11:    Authorizes the  Department  of  Natural                                                                    
     Resources  to  negotiate Overriding  Royalty  Interests                                                                    
     (ORRI). These  are then valued, and  a determination is                                                                    
     made  whether the  incremental  value  received by  the                                                                    
     state warrants the approval of  the lower discount rate                                                                    
     for purposes of credit repurchase.                                                                                         
                                                                                                                                
     Section  12:      Authorizes   DNR  and  DOR  to  adopt                                                                    
     regulations to implement this act                                                                                          
                                                                                                                                
     Section  13:    Authorizes  retroactive application  of                                                                    
     regulations.                                                                                                               
                                                                                                                                
     Section 14:   Immediate effective date.                                                                                    
                                                                                                                                
1:06:02 PM                                                                                                                    
                                                                                                                                
MR.  ALPER  further  explained   Section  1  contains  conforming                                                               
language  exempting the  bond  corporation  and royalty  interest                                                               
from the Alaska Procurement Code.   Section 2 is similar to other                                                               
Alaska   state   statutes   creating  special   purpose   bonding                                                               
mechanisms  such as  the pension  obligation bond  authority, and                                                               
other authorities that are delegated  to the commissioner of DOR.                                                               
Also included  in Section 2  is the provision that  the structure                                                               
of the  bond is  left to  the discretion  of the  commissioner of                                                               
DOR.                                                                                                                            
                                                                                                                                
REPRESENTATIVE  PARISH  expressed   his  understanding  that  the                                                               
Alaska  Pension  Obligation  Bond Corporation  has  never  issued                                                               
bonds.                                                                                                                          
                                                                                                                                
MR. ALPER said correct.                                                                                                         
                                                                                                                                
REPRESENTATIVE PARISH asked whether  any other state corporations                                                               
- that  would acquire debt  in a  similar manner to  the proposed                                                               
bond  corporation -  have been  created "without  revenue streams                                                               
internal to them."                                                                                                              
                                                                                                                                
1:08:38 PM                                                                                                                    
                                                                                                                                
MIKE BARNHILL,  Deputy Commissioner, Office of  the Commissioner,                                                               
DOR, before  responding to Representative Parish,  made the point                                                               
of  correction:    the  commissioner  of DOR  does  not  set  the                                                               
structure  of the  bond debt  service under  the statute  but the                                                               
board  of directors  of the  Alaska Tax  Credit Bond  Corporation                                                               
would  perform  that function.    The  board of  directors  would                                                               
include  the commissioners  of DOR,  the Department  of Commerce,                                                               
Community &  Economic Development (DCCED), and  the Department of                                                               
Administration (DOA).                                                                                                           
                                                                                                                                
REPRESENTATIVE PARISH restated his question.                                                                                    
                                                                                                                                
MR. BARNHILL  advised there  are many  state entities  that issue                                                               
bonds and deferred to Devin Mitchell.                                                                                           
                                                                                                                                
1:10:19 PM                                                                                                                    
                                                                                                                                
DEVEN MITCHELL,  Executive Director,  Alaska Municipal  Bond Bank                                                               
Authority, DOR,  explained a similar  entity would be  the Alaska                                                               
Housing  Finance   Corporation  (AHFC)  which  entered   into  an                                                               
agreement with  the state to  purchase what  is now known  as the                                                               
[Robert  B.  Atwood Building];  there  were  no revenues  in  the                                                               
agreement except for  the state's pledge to pay on  a "subject to                                                               
appropriation" basis, as allowed by  standalone law, and which is                                                               
exactly  as proposed  in  HB 331.   Further,  the  proposal is  a                                                               
familiar structure  to the state  as well as to  municipal market                                                               
participants.                                                                                                                   
                                                                                                                                
REPRESENTATIVE PARISH commented the  aforementioned example was a                                                               
lease purchase agreement;  however, HB 331 proposes a  debt of up                                                               
to $1 billion for the state  with no lease directly involved.  He                                                               
asked how HB 331 resembles a lease purchase agreement.                                                                          
                                                                                                                                
MR. MITCHELL  answered a lease  purchase agreement is based  on a                                                               
lease  which is  subject  to appropriation;  HB  331 [bond]  debt                                                               
would be based on a contract,  also subject to appropriation.  He                                                               
remarked:                                                                                                                       
                                                                                                                                
     In the case of the  lease, [should the state choose not                                                                    
     to  appropriate], the  negative  ramification would  be                                                                    
     you  would  not only  get  downgraded,  you would  lose                                                                    
     access to the  building for a period of time.   Not the                                                                    
     entire life of the building,  but just a period of time                                                                    
     as  established  in the  lease.    And, that  could  be                                                                    
     negotiated down  to as  short as a  year, and  then the                                                                    
     state  would again  have right  to occupy  the facility                                                                    
     even though there'd been a  failure.  So, again, it's a                                                                    
     familiar  structure to  the state  and it's  a familiar                                                                    
     structure to the capital markets.                                                                                          
                                                                                                                                
REPRESENTATIVE PARISH  referred to the Constitution  of the State                                                               
of Alaska,  Article IX,  Section 8. State  Debt., which  read [in                                                               
part, original punctuation provided]:                                                                                           
                                                                                                                                
     No state debt shall  be contracted unless authorized by                                                                    
     law for  capital improvements  or unless  authorized by                                                                    
     law for housing  loans for veterans, and  ratified by a                                                                    
     majority of the qualified voters  of the State who vote                                                                    
     on the question.                                                                                                           
                                                                                                                                
REPRESENTATIVE  PARISH  continued  to  Section  11.  Exceptions.,                                                               
which read [in part]:                                                                                                           
                                                                                                                                
     The restrictions  on contracting  debt do not  apply to                                                                    
     debt  incurred through  the issuance  of revenue  bonds                                                                    
     ....                                                                                                                       
                                                                                                                                
REPRESENTATIVE  PARISH  asked  whether  the  proposed  bonds  are                                                               
revenue bonds.                                                                                                                  
                                                                                                                                
1:12:57 PM                                                                                                                    
                                                                                                                                
MR. MITCHELL  said they are not.    He clarified  the bonds would                                                               
be revenue bonds of the  corporation; the corporation would issue                                                               
either  revenue   bonds  or  general  obligation   bonds  of  the                                                               
corporation,   however,  the   final  structure   has  not   been                                                               
determined.  Mr. Mitchell continued:                                                                                            
                                                                                                                                
     I  work with  another  public  corporation, the  Alaska                                                                    
     Municipal Bond  Bank [Authority (AMBBA)], [and]  we, we                                                                    
     borrow money  based on underlying communities'  need of                                                                    
     borrowing  money.   So,  when we  borrow  money in  the                                                                    
     capital markets,  we issue general obligation  bonds of                                                                    
     the Alaska Municipal Bond Bank,  which [are] secured by                                                                    
     that cross-collateralized underlying  borrowing pool as                                                                    
     well as the State  of Alaska's moral obligation pledge.                                                                    
     And,  in the  instance of  the ...  bond bank,  we sell                                                                    
     general  obligation bonds  for  both  revenue bonds  of                                                                    
     underlying  communities as  well as  general obligation                                                                    
     bonds  of   underlying  communities.     And   so,  the                                                                    
     corporation,  ...   the  separately   legally  existing                                                                    
     corporation  we're  talking  about, would  be  able  to                                                                    
     potentially  sell  general  obligation bonds,  but  the                                                                    
     only thing  that would be  securing those would  be the                                                                    
     revenues  that it  would derive  from this  contract it                                                                    
     would  enter into  with the  state.   And so,  it could                                                                    
     also be structured ... potentially as a revenue bond.                                                                      
                                                                                                                                
REPRESENTATIVE  PARISH  questioned   whether  the  proposed  bond                                                               
corporation's  issuance of  a general  obligation  bond would  be                                                               
subject to a majority vote of the qualified voters.                                                                             
                                                                                                                                
MR. MITCHELL restated  such a bond would be  a general obligation                                                               
bond  of  the   corporation  and  not  of  the   state.    Public                                                               
corporations,  such  as  the   Alaska  Student  Loan  Corporation                                                               
[Postsecondary  Education  Commission], Department  of  Education                                                               
and  Early Development,  the  Alaska  Industrial Development  and                                                               
Export  Authority (AIDEA),  Department of  Commerce, Community  &                                                               
Economic  Development,   AMBBA,  and  AHFC,  can   issue  general                                                               
obligation bonds  of the corporation.   He  characterized general                                                               
obligation bonds as  "a more limited pledge,  obviously, than the                                                               
State of Alaska's general obligation  pledge, but could be a full                                                               
faith  and  credit  pledge  of  that  legal  existence,  of  that                                                               
entity."                                                                                                                        
                                                                                                                                
1:15:11 PM                                                                                                                    
                                                                                                                                
WILLIAM  MILKS,  Senior  Assistant Attorney  General,  Labor  and                                                               
State Affairs Section, Civil  Division(Juneau), Department of Law                                                               
(DOL),  directed  attention  to  a letter  addressed  to  Senator                                                               
Giessel, dated  3/2/18, from Mr. Mitchell,  representing DOR, and                                                               
himself,  representing DOL,  that was  included in  the committee                                                               
packet.   Mr. Milks informed  the committee the  letter addresses                                                               
the  constitutionality  issue,  opining the  proposed  bonds  are                                                               
constitutional  because  they   are  "subject  to  appropriation"                                                               
bonds.   He returned  attention to Article  IX, Section  8, [text                                                               
previously  provided,  in  part],  commonly  known  as  the  debt                                                               
provision, and further advised Section  8 applies specifically to                                                               
a general  obligation bond, backed  by the full faith  and credit                                                               
of the State of Alaska, and  thereby not a subject to appropriate                                                               
bond.   General obligation bonds  must be paid regardless  of the                                                               
state's   financial  circumstances,   are   issued  for   capital                                                               
improvements,  and are  usually subject  to voter  approval.   As                                                               
noted  in the  letter,  a key  case was  reviewed  by the  Alaska                                                               
Supreme Court, Carr-Gottstein Properties  v. State, 899 P.2d 136,                                                             
142-44 (Alaska 1995), and the  court decided the issue is whether                                                               
a bond  is subject to  appropriation, and the special  meaning of                                                               
debt under the constitution.  Mr.  Milks concluded if a bond does                                                               
not hold  the full faith  and credit of  the State of  Alaska for                                                               
repayment, it is  subject to appropriation, which  is a procedure                                                               
the courts have permitted in Alaska and elsewhere.                                                                              
                                                                                                                                
REPRESENTATIVE PARISH  recalled previous  testimony that  if [the                                                               
legislature]  failed to  appropriate [funds  for repayment],  the                                                               
state's bond rating  could be downgraded two or  three times, and                                                               
surmised the state's faith and  credit is "on the line," although                                                               
creating a shell corporation would  "dodge" the narrowest reading                                                               
of the  law.   He asked,  "How is  this really  substantively and                                                               
significantly not state  debt if our credit rating  could take an                                                               
enormous hit for failure to pay?"                                                                                               
                                                                                                                                
1:17:52 PM                                                                                                                    
                                                                                                                                
MR.  MILKS  pointed  out  the  bill on  page  2,  [lines  19-22],                                                               
specifically  states   the  bonds   do  not   constitute  general                                                               
obligations to  the State  of Alaska.   He reiterated  the Alaska                                                               
Supreme  Court  has interpreted  this  provision  to be  a  moral                                                               
authority  bonding,  which  is  subject  to  appropriation.    He                                                               
deferred to Mr. Mitchell for a further response.                                                                                
                                                                                                                                
MR.  MITCHELL acknowledged  the state  could choose  not to  pay,                                                               
have  its  credit  rating  downgraded, and  lose  access  to  the                                                               
capital  markets with  the subject  to appropriation  commitment;                                                               
with a general  obligation commitment, the state  would be forced                                                               
and compelled  to pay.   In fact,  the Alaska Statute  provides a                                                               
standing appropriation  that does not require  annual legislative                                                               
action  to pay  general  obligation bond  debt service;  however,                                                               
there is  no similar provision  for any subject  to appropriation                                                               
obligation.                                                                                                                     
                                                                                                                                
CO-CHAIR  JOSEPHSON,   in  response  to   Representative  Parish,                                                               
advised  testimony by  the  department  representatives would  be                                                               
ending; however,  the representatives may be  available to answer                                                               
additional questions [following the hearing].                                                                                   
                                                                                                                                
1:19:54 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  PARISH stressed  HB 331  provides for  a debt  of                                                               
possibly $1 billion;  therefore, he would like  all his questions                                                               
exhausted  on  the  record  at this  hearing.    The  fundamental                                                               
question is  whether the state  can create a corporation  to take                                                               
on  debt  which  is  neither revenue  debt,  revenue  bonds,  nor                                                               
general obligation bonds,  but is "a sort  of nebulous additional                                                               
...  category," and  if so,  whether there  is any  limit to  the                                                               
amount of debt.  He  questioned whether a state corporation could                                                               
accrue $5 billion in loans  so [the legislature] could follow the                                                               
statutory dividend  formula to pay  the Permanent  Fund Dividend,                                                               
and   observed   the   Alaska  Supreme   Court   decision   [Bill                                                               
Wielechowski, Rick Halford,  and Clem Tillion v.  State of Alaska                                                               
and Alaska  Permanent Fund Corporation]  found that the  power of                                                               
appropriation rests  with the legislature  and thus,  the statute                                                               
cited earlier becomes murky.                                                                                                    
                                                                                                                                
1:21:32 PM                                                                                                                    
                                                                                                                                
MR.  MITCHELL disagreed  that  the  aforementioned legal  opinion                                                               
relates to general obligation bonds  and the state's commitments,                                                               
which are  embedded in  the state constitution.   He  deferred to                                                               
Mr.  Milks  for further  discussion  in  this  regard.   He  said                                                               
Representative  Parish's questions  have been  asked "many  times                                                               
before"; however,  [the proposal  within HB  331] is  legal under                                                               
Alaska  law  and  is  accepted  as a  common  form  of  financing                                                               
utilized by Alaska and other states.                                                                                            
                                                                                                                                
REPRESENTATIVE JOSEPHSON,  in response to  Representative Birch's                                                               
suggestion to end testimony on  HB 331, advised further review of                                                               
constitutional  questions  may  be  necessary  prior  to  hearing                                                               
amendments to the bill, which is scheduled for 4/9/18.                                                                          
                                                                                                                                
REPRESENTATIVE PARISH remarked:                                                                                                 
                                                                                                                                
     On  this specific  question, the  difference has  been,                                                                    
     been clearly  established as to  whether or not  a, the                                                                    
     state should be allowed  to contract state debt without                                                                    
     a general vote  of the people, without  a revenue bond,                                                                    
     and  without  any  of  the  other  specific  exceptions                                                                    
     listed in  the constitution.  And  on the counterpoint,                                                                    
     there's,  there's  the  assertion  that  because  lease                                                                    
     purchase  agreements  in  the past  have  gone  forward                                                                    
     because  the Pension  Obligation  Bond Corporation  was                                                                    
     established, and  because, the bill  says, " ...  it is                                                                    
     constitutional," I  guess, I guess that's,  that's just                                                                    
     a disagreement  which may have  to get resolved  in the                                                                    
     courts.                                                                                                                    
                                                                                                                                
1:25:03 PM                                                                                                                    
                                                                                                                                
CO-CHAIR  TARR  stated  under current  Alaska  statute  there  is                                                               
already a  formula -  subject to appropriation  - for  paying the                                                               
[tax] credits; HB  331 is an alternative proposal to  pay the tax                                                               
credits  which  would also  be  subject  to appropriation.    She                                                               
cautioned the  reason for the  current debate is because  "no one                                                               
read  the  statute" before  making  business  decisions to  spend                                                               
money and  obtain bank financing  based on the  state's repayment                                                               
of  tax credit  certificates.   Co-Chair  Tarr  suggested if  the                                                               
statute  had  been  read, beneficiaries  would  have  acted  more                                                               
cautiously and  would not  be defaulting  on loans  while waiting                                                               
for the  state to repay  tax certificates.  Although  the funding                                                               
provision within HB 331 is  subject to appropriation, there would                                                               
be every expectation  that the money would be  appropriated.  She                                                               
concluded  HB  331  does  not  resolve  the  current  fundamental                                                               
problem,  which is  having sufficient  funds to  pay the  credits                                                               
that are due.                                                                                                                   
                                                                                                                                
MR.  MITCHELL  did not  respond  to  the  policy aspects  of  the                                                               
question.  From  a debt perspective, he said HB  331 differs from                                                               
the sort  of subject to  appropriation commitment  that currently                                                               
exists  in financing  markets.   He expressed  his concern  about                                                               
maintaining  the state's  credit  rating, its  access to  capital                                                               
markets, and  its ability to  accomplish needed  capital projects                                                               
through the use of financing  tools.  Within all capital markets,                                                               
an entity's ability to borrow is only  as good as how its word is                                                               
perceived.  In  the event an entity fails to  pay its bills, that                                                               
entity  will  experience  higher  interest  rates  or  diminished                                                               
access.    Also related  to  financing  in capital  markets,  the                                                               
current diminished  payments that have  been made on  the credits                                                               
currently due have  a lesser impact on the  state's credit rating                                                               
than if  the state  defaults -  a non-payment -  on a  subject to                                                               
appropriation bond issue of a public corporation.                                                                               
                                                                                                                                
There  followed a  short discussion  regarding  the deadline  for                                                               
amendments to HB 331.                                                                                                           
                                                                                                                                
1:29:36 PM                                                                                                                    
                                                                                                                                
The committee took an at-ease from 1:29 p.m. to 1:32 p.m.                                                                       
                                                                                                                                
1:31:25 PM                                                                                                                    
                                                                                                                                
CO-CHAIR JOSEPHSON posed a scenario  in which credit holders, who                                                               
may or may  not have transferred their credits, would  be able to                                                               
decline to have provisions of  the bill applied and would instead                                                               
proceed under  the normal  payment schedule.   He  asked whether,                                                               
under the  aforementioned circumstances, the state  would need to                                                               
pay  [tax  credit  certificates]   under  two  different  payment                                                               
streams.                                                                                                                        
                                                                                                                                
MR. ALPER returned  to the sectional analysis of HB  331 and said                                                               
Sections 3, 4,  and 5 are similar in structure  and relate to the                                                               
existing  tax  credits  that  are in  the  corporate  income  tax                                                               
statute,  AS 43.20.   Existing  corporate  income tax  provisions                                                               
include a gas storage credit  for the Kenai Gas Storage Facility,                                                               
a  liquefied  natural  gas  (LNG) storage  credit  for  the  main                                                               
storage  tanks  in  Fairbanks,  a credit  for  the  Interior  Gas                                                               
Utility,  and a  refinery  infrastructure credit.   As  currently                                                               
written, the  aforementioned credits can be  purchased with money                                                               
from the  tax credit  [repurchase] fund.   However,  the existing                                                               
language would  be amended by HB  331, so the credits  could also                                                               
be purchased with proceeds of the [tax credit] bonds.                                                                           
                                                                                                                                
MR. ALPER explained Sections 6-9  amend portions of AS 43.55.028,                                                               
the tax credit [repurchase] fund,  as follows:  Section 6 relates                                                               
to the use  of tax credit fund money or  money disbursed from the                                                               
bond program  to purchase tax  credits; Section 7  clarifies that                                                               
there  is  no   $70  million  [per  company  per   year]  cap  on                                                               
repurchases  via the  bond program;  Section 8  adds definitions,                                                               
notably,  "money   disbursed  to  the  commissioner"   means  the                                                               
proceeds of the bond; Section 9  clarifies that a right to offset                                                               
a credit  payment held by a  company would be extended  to a bond                                                               
purchase.    Section  10  is   a  new  section  adding  four  new                                                               
subsections to  AS 43.55.028.  Subsection  (k) requires companies                                                               
to offer  their credits to the  program, and all credits  must be                                                               
offered.    Further, companies  that  choose  not to  participate                                                               
cannot offer  credits in a  subsequent bond offering.   Mr. Alper                                                               
characterized the  provisions in subsection (k)  as language that                                                               
is intended to prevent parties from "gaming the system."                                                                        
                                                                                                                                
1:37:07 PM                                                                                                                    
                                                                                                                                
MR.  ALPER   said  subsection  (l)  provides   the  mechanism  to                                                               
determine a  company's expected cash  flow under  the traditional                                                               
credit repurchase  structure using new definitions  affected by a                                                               
company's  pro rata  share of  the annual  appropriation per  the                                                               
formula within  [AS 43.55.028(c)].   The existing  language would                                                               
be clarified by subsection (l), and he remarked:                                                                                
                                                                                                                                
     We're  going to  presume we  are appropriating  for the                                                                    
     next five, six  years at "x" dollars per  year based on                                                                    
     the  fact  that you  have  this  much credit  in  2016,                                                                    
     they're going  to get paid  first pro rata  for however                                                                    
     many  years it  takes, and  then all  the 2017  credits                                                                    
     will be paid pro rata  for however many years it takes.                                                                    
     So, every company will be  given a unique expected cash                                                                    
     flow  under  the  traditional  system,  which  is  then                                                                    
     discounted at  a discount rate.   The discount  rate is                                                                    
     covered  in subsection  (m),  and  what subsection  (m)                                                                    
     says is that  the base discount rate is  10 percent per                                                                    
     year, and then  there are four different  ways by which                                                                    
     a company could buy that  down to the lower rate, which                                                                    
     is written  in as, as  the true interest cost  plus 1.5                                                                    
     percent, which  we currently forecast  to be  about 5.1                                                                    
     percent interest.  But that  would be determined closer                                                                    
     to  the date  of final  issuing  of the  bonds.   We've                                                                    
     talked  about  what  those four  methods  are,  they're                                                                    
     clearly  written  out in  (m).    Either you  have  the                                                                    
     overriding   royalty   interest;  the   commitment   to                                                                    
     reinvest  all of  the proceeds.   If  you have  seismic                                                                    
     credits,  ...  you  have  to waive  your  10  years  of                                                                    
     confidentiality on the  seismic data.  Or,  if you have                                                                    
     one of  those corporate income tax  credits - primarily                                                                    
     the    refinery    credit   -    outstanding,    you're                                                                    
     automatically bought in at the lower interest rate.                                                                        
                                                                                                                                
MR.  ALPER  continued to  subsection  (n)  which clarifies  if  a                                                               
credit  is sold  at less  than  face value,  the remaining  value                                                               
cannot be  cashed, sold,  or used  to offset  taxes.   Section 11                                                               
authorizes the  Overriding Royalty Interests (ORRI)  and provides                                                               
the mechanisms and rules for  negotiations between DNR and credit                                                               
holders related  to the  value of fields  offered for  credit and                                                               
factors affecting  said value.   For example,  calculations would                                                               
include  cash flow,  royalty  interest, and  present  value.   In                                                               
fact,  the mandate  is:    the present  value  of the  overriding                                                               
royalty  interest must  be at  least  equal or  greater than  the                                                               
incremental  value  the  company  would receive  from  the  lower                                                               
discount rate  versus the higher  discount rate.   Sections 12-14                                                               
are:   authority  to  write regulations;  the  ability for  those                                                               
regulations  to  take  effect   retroactively  if  they  are  not                                                               
finalized before  the effective  date; the  effective date.   Mr.                                                               
Alper concluded, noting  HB 331 has an  immediate effective date,                                                               
thus after  its expected passage  in May, [2018], the  process of                                                               
underwriting  and preparing  bonds would  be completed  and bonds                                                               
would be issued in August or September [2018].                                                                                  
                                                                                                                                
1:41:10 PM                                                                                                                    
                                                                                                                                
[HB 331 was held over.]                                                                                                         
                                                                                                                                
                                                                                                                                
^PRESENTATION:     Alaska   Industrial  Development   and  Export                                                               
Authority                                                                                                                       
           PRESENTATION:  Alaska Industrial Development                                                                     
                       and Export Authority                                                                                 
                                                                                                                              
1:41:38 PM                                                                                                                    
                                                                                                                                
CO-CHAIR  JOSEPHSON announced  that the  final order  of business                                                               
would be a presentation on  the Ambler Mining District Industrial                                                               
Access   Road  project   provided   by   the  Alaska   Industrial                                                               
Development   and  Export   Authority   (AIDEA),  Department   of                                                               
Commerce, Community & Economic Development (DCCED).                                                                             
                                                                                                                                
1:42:15 PM                                                                                                                    
                                                                                                                                
JOHN SPRINGSTEEN, CEO/Executive  Director, AIDEA, DCCED, provided                                                               
a  PowerPoint  presentation  entitled,  "Ambler  Access  Update,"                                                               
dated 4/6/18.  Mr. Springsteen  informed the committee the Ambler                                                               
Mining District Industrial Access  Project (AMDIAP) addresses the                                                               
infrastructure necessary  to enable  another economic  engine for                                                               
Alaska  and is  one of  two special  projects assigned  to AIDEA.                                                               
From 2013  through 2015,  AIDEA received  appropriations totaling                                                               
$17 million for the project,  about $13 million has been expended                                                               
or encumbered,  and about $4  million remains.   Although federal                                                               
permitting  is expensive  and  challenging,  he acknowledged  the                                                               
need to utilize  "proper science" and to hear  testimony from the                                                               
affected communities.  Mr. Springsteen  said access to the Ambler                                                               
Mining  District  is necessary  because  it  is a  resource  rich                                                               
region  with  four  known  key   deposits;  further,  decades  of                                                               
exploration findings were reported  by the U.S. Geological Survey                                                               
(USGS)  in  1977  [document  not  provided]  which  identified  a                                                               
district rich in  gold and copper, nickel,  jade, molybdenum, and                                                               
other minerals  (slides 5  and 6).   In  fact, the  importance of                                                               
access  to  the Ambler  Mining  District  was recognized  by  the                                                               
federal  government  in  a  provision   of  the  Alaska  National                                                               
Interest Lands Conservation Act (ANILCA)  (slide 7).  He directed                                                               
attention  to slides  entitled, "Alaska  - A  Connected Economy,"                                                               
and  "Alaska -  Key  Infrastructure," and  said Alaska's  primary                                                               
economic engines are its resources  such as oil and gas, seafood,                                                               
timber,  tourism,   and  mineral   mining.     However,  industry                                                               
infrastructure  is  the key  to  unlocking  the state's  economic                                                               
engines,  for example,  roads, ports,  and shipping  lanes.   Mr.                                                               
Springsteen informed  the committee  AIDEA's model for  access to                                                               
the  Ambler Mining  District is  the road  portion of  the Delong                                                               
Mountain Transportation System (DMTS)  which provides the Red Dog                                                               
Mine  access  to  world  markets.    A  slide  entitled,  "DeLong                                                               
Mountain Transportation System servicing the  Red Dog Mine" was a                                                               
picture of its infrastructure including  a portion of the road, a                                                               
warehouse, a  conveyor system, a  camp, a fuel terminal,  a dock,                                                               
and power generation, all of  which are aspects of infrastructure                                                               
to support  the mine.   [Representing its return  on investment],                                                               
the Red Dog Mine provides revenue  to the state, to the Northwest                                                               
Arctic Borough, to NANA Regional  Corporation (NANA) and to other                                                               
Native  corporations,  and job  opportunities  for  Alaskans.   A                                                               
slide entitled,  "Stakeholders in  the Red Dog  Mine" illustrated                                                               
various   stakeholders  who   benefit  from   "more  self-reliant                                                               
communities."    He  reviewed [2015]  employment  statistics  and                                                               
economic  impact figures  listed on  a slide  entitled, "Red  Dog                                                               
Mine Benefits."                                                                                                                 
                                                                                                                                
1:48:06 PM                                                                                                                    
                                                                                                                                
MR.  SPRINGSTEEN directed  attention  to slide  14, which  listed                                                               
purposes  of  the project:    permanent  access, construction  of                                                               
enabling  infrastructure,  supporting development  and  promoting                                                               
economic  development.    Slide  10  listed  potential  community                                                               
benefits such as  broadband access, local jobs,  better access to                                                               
transportation and  goods and  services, and a  tax base  to fund                                                               
community  assets  for  communities  that  seek  these  benefits.                                                               
Slide 16  illustrated the  process of  the Ambler  access project                                                               
and he pointed out the project  is in the scoping process managed                                                               
by the  Bureau of Land  Management (BLM), U.S. Department  of the                                                               
Interior; even after the project  route is permitted, significant                                                               
additional permits  would be necessary.   Turning to  the history                                                               
of the project, he recalled in  2010, the project was assigned to                                                               
the Department of Transportation  & Public Facilities (DOTPF) and                                                               
was reassigned to  AIDEA in 2013.  Community  outreach is ongoing                                                               
and  based   on  preliminary  research  and   engineering,  DOTPF                                                               
evaluated   eight  routes   considering   factors  of   wetlands,                                                               
endangered species, sites, wildlife,  and migration patterns; the                                                               
evaluation  revealed  a route  across  the  Gates of  the  Arctic                                                               
National  Preserve  would  have  the lowest  impact  (slide  19).                                                               
Subsequently,  a  proposed  Ambler access  project  corridor  was                                                               
submitted in AIDEA's  permit application in 2015;  he pointed out                                                               
the route  was adjusted in  response to  a request by  the Native                                                               
village corporation  of Evansville,  Incorporated that  the route                                                               
not  cross  its  land  (slide  21).   Slide  23  illustrated  the                                                               
National  Environmental  Policy  Act (NEPA)  permitting  process;                                                               
additional federal permits required are:   through NEPA and Title                                                               
XI of  ANILCA; environmental and  economic analyses  under ANILCA                                                               
Section  201(4); wetlands  permits from  the U.S.  Army Corps  of                                                               
Engineers  (USACE);  bridge permits  from  the  U.S. Coast  Guard                                                               
(USCG) (slide  24).  He  further explained ANILCA  Section 201(4)                                                               
provides a unique process for  an approved route and the analyses                                                               
process  is overseen  by the  National Park  Service (NPS),  U.S.                                                               
Department of the Interior (slide 25).                                                                                          
                                                                                                                                
MR. SPRINGSTEEN restated  AIDEA is the applicant  for the permits                                                               
and reviewed  the roles of NPS  and BLM (slide 26);  in addition,                                                               
the  BLM  environmental  impact   statement  (EIS)  schedule  was                                                               
provided  on  slide  27.   Returning  attention  to  the  project                                                               
process  illustrated on  slides 16  and  29, he  said AIDEA  will                                                               
address  subsistence and  lifestyle  concerns  raised at  federal                                                               
scoping   meetings,  and   cautioned  there   remain  significant                                                               
required   approvals  for   the  project   such  as   legislative                                                               
authorization for bonds,  regional approval, rights-of-way (ROWs)                                                               
from   private   landowners,   and   AIDEA   project   and   bond                                                               
authorization (slide 30).   Additional supporting information was                                                               
provided in the committee packet.                                                                                               
                                                                                                                                
1:53:16 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE PARISH  asked Mr.  Springsteen to  further explain                                                               
AIDEA's "right-of-way options."                                                                                                 
                                                                                                                                
MR.  SPRINGSTEEN   said  AIDEA  does  not   have  eminent  domain                                                               
capabilities,  thus   ROWs  must   be  negotiated   with  private                                                               
landowners.                                                                                                                     
                                                                                                                                
REPRESENTATIVE PARISH gave an example  of a private landowner who                                                               
does not  grant a needed ROW  and asked whether AIDEA  would have                                                               
recourse.                                                                                                                       
                                                                                                                                
MR. SPRINGSTEEN  restated AIDEA's  earlier response to  a request                                                               
from a landowner.                                                                                                               
                                                                                                                                
1:54:38 PM                                                                                                                    
                                                                                                                                
MARYELLEN TUTTELL, PE,  Chief Risk Officer, DOWL,  in response to                                                               
Representative  Parish,  explained  substantial  changes  to  the                                                               
corridor  could  require  a supplemental  (EIS);  however,  state                                                               
agencies  seek  to  work  with  landowners  to  develop  a  route                                                               
acceptable  to parties.   The  majority of  the corridor  crosses                                                               
state land,  and there are portions  on federal land and  on land                                                               
owned by regional Native corporations.                                                                                          
                                                                                                                                
REPRESENTATIVE  PARISH inquired  as  to how  many individual  and                                                               
corporation landowners are affected.                                                                                            
                                                                                                                                
MS.  TUTTELL  said the  corridor  crosses  land owned  by  [Doyon                                                               
Limited   (DOYON),   NANA,   and  Native   village   corporations                                                               
consolidated  within the  NANA region.   In  further response  to                                                               
Representative  Parish, she  stated  there are  no other  private                                                               
landowners.                                                                                                                     
                                                                                                                                
REPRESENTATIVE  PARISH questioned  whether the  current favorable                                                               
positions of Doyon and NANA are unlikely to change.                                                                             
                                                                                                                                
MR.  SPRINGSTEEN  acknowledged  AIDEA  would need  a  permit  for                                                               
access to begin binding negotiations.                                                                                           
                                                                                                                                
CO-CHAIR JOSEPHSON  recalled Doyon has expressed  reticence about                                                               
the project.                                                                                                                    
                                                                                                                                
MR. SPRINGSTEEN  said yes.   [AIDEA] considers  all aspects  of a                                                               
project such  as risk,  return, benefits,  inducements, security,                                                               
collateral, cultural values, and lifestyle.                                                                                     
                                                                                                                                
REPRESENTATIVE  BIRCH  expressed   his  understanding  the  route                                                               
through the Gates  of the Arctic National Preserve  was an access                                                               
route previously set aside within ANILCA.                                                                                       
                                                                                                                                
MR.  SPRINGSTEEN said  yes;  ANILCA,  Section 201(4)(b),  directs                                                               
federal  agencies to  select a  route  through the  Gates of  the                                                               
Arctic National Preserve.                                                                                                       
                                                                                                                                
1:59:23 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE BIRCH,  speaking as  a mining  engineer, expressed                                                               
his support for the project.                                                                                                    
                                                                                                                                
REPRESENTATIVE DRUMMOND referred to  the financial agreement that                                                               
was in  place between the  operator of the  Red Dog Mine  and the                                                               
state prior  to state  funding and construction  [of DMTS].   She                                                               
asked whether  an entity has  committed to repayment of  the cost                                                               
of the Ambler access project.                                                                                                   
                                                                                                                                
2:00:28 PM                                                                                                                    
                                                                                                                                
MR.  SPRINGSTEEN   explained  AIDEA  needs  a   permit  to  begin                                                               
negotiations  on this  topic  as well;  however,  at "the  proper                                                               
stage,"  he restated  AIDEA  will reexamine  all  aspects of  the                                                               
project.   In  further  response to  Representative Drummond,  he                                                               
opined  he  could  not  get  approval from  the  AIDEA  board  of                                                               
directors  [for the  proposed project]  without  a contract  from                                                               
mining companies for repayment.                                                                                                 
                                                                                                                                
CO-CHAIR  JOSEPHSON   returned  attention   to  [slide   10]  and                                                               
questioned Mr.  Springsteen's statement that communities  are not                                                               
interested  in benefits  such as  a  tax base  to fund  community                                                               
sustainability (energy, water/wastewater, transportation).                                                                      
                                                                                                                                
MR.  SPRINGSTEEN   clarified  communities  must  search   for  an                                                               
economic  engine  that  is compatible  with  the  community,  the                                                               
region, and the state; the  scoping process allows communities to                                                               
do so.                                                                                                                          
                                                                                                                                
REPRESENTATIVE LINCOLN  asked Mr. Springsteen to  discuss the EIS                                                               
timeline.                                                                                                                       
                                                                                                                                
MR.  SPRINGSTEEN  returned attention  to  slide  27, noting  NEPA                                                               
scoping was completed  in January 2018, a  scoping summary report                                                               
is due in  April 2018, a draft EIS is  anticipated in March 2019,                                                               
and a final EIS is anticipated in December 2019.                                                                                
                                                                                                                                
2:03:38 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE LINCOLN questioned whether the EIS is funded.                                                                    
                                                                                                                                
MR.  SPRINGSTEEN explained  AIDEA has  received $1.2  million for                                                               
the scoping process;  a decision on further  funding is dependent                                                               
upon a review  of the scoping process by the  administration.  In                                                               
further response to Representative  Lincoln, he said the decision                                                               
is anticipated in May or June [2018].                                                                                           
                                                                                                                                
CO-CHAIR JOSEPHSON inquired as to  whether AIDEA posts statements                                                               
in opposition to a project on its web site.                                                                                     
                                                                                                                                
MR.  SPRINGSTEEN said  AIDEA provides  background information  on                                                               
its web site; information from  communities is routinely garnered                                                               
through federal  government processes.  He  suggested information                                                               
in this regard could be requested.                                                                                              
                                                                                                                                
2:05:19 PM                                                                                                                    
                                                                                                                                
GENE  THERRIAULT,  Team  Lead, Interior  Energy  Project,  AIDEA,                                                               
DCCED, speaking from his experience,  advised the NEPA process is                                                               
robust regarding  public comments  and relating  to the  scope of                                                               
the project; any concerns brought  forward, or questions posed by                                                               
the public, must have a response by the applicant.                                                                              
                                                                                                                                
MR.  SPRINGSTEEN noted  AIDEA's web  site provides  links to  the                                                               
related federal web site.                                                                                                       
                                                                                                                                
REPRESENTATIVE PARISH surmised all of  the documents found in the                                                               
committee packet are  in opposition, and asked  whether there are                                                               
letters of support from local  elected officials representing the                                                               
affected region.                                                                                                                
                                                                                                                                
MR. SPRINGSTEEN  opined the letters submitted  to AIDEA expressed                                                               
interest in  reviewing the  results of the  EIS process  with all                                                               
the  concerns addressed.   He  acknowledged  there are  different                                                               
voices within Native villages and Tribes.                                                                                       
                                                                                                                                
REPRESENTATIVE   PARISH   restated   his  question   related   to                                                               
expressions of support from elected  officials of local or Tribal                                                               
governments.                                                                                                                    
                                                                                                                                
MR.  SPRINGSTEEN said,  at  this time,  AIDEA  has not  requested                                                               
formal letters of  support, other than those of  the EIS process,                                                               
from communities in the region.                                                                                                 
                                                                                                                                
2:08:47 PM                                                                                                                    
                                                                                                                                
RICK VAN  NIEUWENHUYSE, President/CEO,  Trilogy Metals  Inc., and                                                               
Director, NOVAGOLD, provided  a PowerPoint presentation entitled,                                                               
"House Resources  Committee Hearing on AMDIAP  Presentation April                                                               
6,  2018  Advancing  the  Ambler Mining  District  in  Alaska  by                                                               
Forming Strong  Partnerships."  Mr. Van  Nieuwenhuyse paraphrased                                                               
from  the  following   written  statement  [original  punctuation                                                               
provided]:                                                                                                                      
                                                                                                                                
     My  name is  Rick Van  Nieuwenhuyse, I  am an  American                                                                    
     citizen  and grew  up in  Alaska  graduating from  West                                                                    
     Anchorage High School  in 1972.  I left  Alaska in 1994                                                                    
     to  pursue my  passion    exploration geology,  to work                                                                    
     all around world.   Returning to North  America in 1997                                                                    
     and  decided  to  start   my  own  exploration  company                                                                    
     focussed here in Alaska -  NovaGold.  I first worked in                                                                    
     the Ambler  mining district in  1977   it was  my first                                                                    
     job   as  an   exploration  geologist   with  Kennecott                                                                    
     Minerals and then Anaconda.   More recently, when I set                                                                    
     up NovaGold we started working  in the district in 2004                                                                    
       we  have been active every  year since.  We  spun out                                                                    
     Trilogy  Metals to  our shareholders  so that  NovaGold                                                                    
     (where  I  remain  on  the Board  and  continue  to  be                                                                    
     involved  with the  company)  along  with our  business                                                                    
     partners     Calista,  The  Kuskokwim  Corporation  and                                                                    
     Barrick Gold  could focus on  advancing our  40 million                                                                    
     ounce Donlin Gold project    which I am happy to report                                                                    
     is  in  the  final  stages of  permitting  with  a  ROD                                                                    
     expected later this  year.  That left  Trilogy to focus                                                                    
     on  advancing  our  interests   in  the  Ambler  mining                                                                    
     district.   We formed a business  partnership with NANA                                                                    
     in  2011 with  the objective  of developing  the Ambler                                                                    
     mining district into a premiere  mining camp.  [Slide 2                                                                    
       US at Night].                                                                                                            
                                                                                                                                
2:11:25 PM                                                                                                                    
                                                                                                                                
     Before  discussing  the  specifics of  our  project,  I                                                                    
     would  like  to  first  talk about  a  topic  of  great                                                                    
     importance  to   all  of   us  -   Earth  and   how  to                                                                    
     meaningfully address Climate Change  and the effects of                                                                    
     Global Warming.   As the only Arctic Nation  in the US,                                                                    
     we feel these  effects more acutely than  anyone in the                                                                    
     lower 48.                                                                                                                  
     Governments  around  the  world  are  collaborating  to                                                                    
     focus on addressing Climate  Change and Global Warming.                                                                    
     The Paris  Climate Accord adopted numerous  measures to                                                                    
     "limit a  global temperature rise this  century below 2                                                                    
     degrees    Celsius   above    pre-industrial   levels".                                                                    
     Although  there are  many things  that can  be done  to                                                                    
     address  carbon  emissions,  the  most  meaningful  and                                                                    
     obvious  is   to  use  cleaner  forms   of  energy  and                                                                    
     transportation.                                                                                                            
     Alaska has shown the world  how energy resources can be                                                                    
     responsibly     developed,    spearheading     Alaska's                                                                    
     transition from the  rough and tumble new  state I grew                                                                    
     up   in,  to   one   providing  comprehensive   quality                                                                    
     education, healthcare  and transportation  services for                                                                    
     its residents.   All while  being good stewards  of the                                                                    
     environment.   Currently, fossil  fuels make up  90% of                                                                    
     both  Alaska's revenues,  and  energy  production on  a                                                                    
     global scale.  World leaders  are trying to change that                                                                    
     energy  mix  to  meaningfully address  Global  Warming.                                                                    
     While much  of this  transition is beyond  our control,                                                                    
     one thing  we can do is  decide to remain only  part of                                                                    
     the  problem by  continuing to  produce oil,  or become                                                                    
     part of the solution.  [Slide 3 BP].                                                                                       
                                                                                                                                
     Great  graphics   -  thank   them.    Point   out  more                                                                    
     consumption of  energy and a transition  to alternative                                                                    
     non-carbon energy?  [Slide 4].                                                                                             
                                                                                                                                
2:13:48 PM                                                                                                                    
                                                                                                                                
     BP predicts  and Shell just published  a similar report                                                                    
     with  similar conclusions,  that by  2040-2050 it  will                                                                    
     require  a  mix of  energy  sources  to meet  worldwide                                                                    
     demand    driven by a  growing population and  a global                                                                    
     improvement   in  lifestyle      particularly   in  the                                                                    
     developing world and that is truly a great thing                                                                           
     ?.what  BP didn't  point out  in their  slides is  that                                                                    
     this  transition  requires  a huge  amount  of  copper.                                                                    
     [Slide 5  Alternative Energy Requires Copper].                                                                             
     Regardless  of which  forms of  non-carbon-based energy                                                                    
     the  world  transitions  to (Solar,  Wind,  Geothermal,                                                                    
     Hydro,  or Nuclear),  they all  require more  copper to                                                                    
     generate power.   Conventional coal  and diesel  take 1                                                                    
     ton of copper  to produce 1 Megawatt  of power, whereas                                                                    
     Wind,  Solar and  the others  require 3  to 5  tons per                                                                    
     MW?..plus additional  copper wire to connect  the power                                                                    
     generation source  to the grid.   Large  off-shore Wind                                                                    
     generators like  CIRI's Fire Island  Wind Farm  take 10                                                                    
     tons  of  copper  per  MW.    Green  Energy  production                                                                    
     requires  an  average  of  5  times  more  copper  than                                                                    
     conventional, carbon-based  energy generation.   [Slide                                                                    
     6  Electric Cars].                                                                                                         
                                                                                                                                
2:14:17 PM                                                                                                                    
                                                                                                                                
     Now let's talk cars    specifically hybrid and electric                                                                    
     cars.    A  typical Internal  Combustion  Engine  (ICE)                                                                    
     vehicle uses 20kg  of copper per vehicle  while an all-                                                                    
     electric uses 80kg  of copper.  In  addition to copper,                                                                    
     significant  amounts  of   nickel,  cobalt,  manganese,                                                                    
     graphite and  lithium are also  needed. If you  want to                                                                    
     replace ICE with hybrid or  electric vehicles, then you                                                                    
     need 3  to 4  times as much  copper per  car??even more                                                                    
     for  trucks,  buses  and  mass transit.    [Slide  7                                                                       
     Electric   vehicles  require   more  electricity?..more                                                                    
     copper?.5X].                                                                                                               
                                                                                                                                
     More   electric  vehicles   will  require   more  power                                                                    
     generation and  charging stations.   Add  it up  and we                                                                    
     need  5 times  more copper  to build  electric vehicles                                                                    
     and  the infrastructure  to support  them.   So, if  we                                                                    
     want less  CO2 going  into the  atmosphere, we  need to                                                                    
     produce  more  copper under  it!    [Slide 8     Copper                                                                    
     Recycled].                                                                                                                 
                                                                                                                                
     The great  thing about copper is  that it's essentially                                                                    
     100% re-usable.   Today, about 80% of  the copper mined                                                                    
     is   eventually  recycled.   New   supply  chains   for                                                                    
     renewable  energy,  and  hybrid and  electric  vehicles                                                                    
     will improve  this to well  above 95% - resulting  in a                                                                    
     sustainable supply  of copper  and clean,  green energy                                                                    
     and transportation.   There  are solutions  to reducing                                                                    
     pollution and C02  in the atmosphere, but  copper and a                                                                    
     host of other base and  specialty metals are required                                                                      
     no way  around it!   In  my opinion,  if you  are truly                                                                    
     concerned  about Global  Warming and  consider yourself                                                                    
     an  environmental steward  of Planet  Earth -  you must                                                                    
     Think Copper!  [Slide 9  Africa and Child Labor].                                                                          
                                                                                                                                
     Now  where does  copper come  from    here is  where we                                                                    
     have choices to  make as a society.  We  can do nothing                                                                    
     and the earth  keeps warming up; we can  do nothing  in                                                                    
     our backyard   leaving it to  others to fill our global                                                                    
     need for copper and cobalt  knowing that it may involve                                                                    
     child  labor, corruption  and  human rights  atrocities                                                                    
     (see Amnesty International Report  on mining in Africa:                                                                    
     https://www.amnesty.org/en/latest/news/2017/11/industr                                                                   
     y-giants-fail-to-tackle-child-labour-allegations-in-                                                                     
     cobalt-battery-supply-chains/),                                                                                          
     [Slide 10  Water and Copper  ].                                                                                            
     or in  the Andean  countries of  South America  - Peru,                                                                    
     Ecuador,  Argentina and  Chile  where over  50% of  the                                                                    
     world's copper  production is  mined..?often displacing                                                                    
     water  used  by  farmers  and  causing  serious  social                                                                    
     unrest                                              see                                                                    
     http://www.bioone.org/doi/pdf/10.1659/mrd.1039.   These                                                                  
     two areas combined  are where about 70%  of the world's                                                                    
     copper and cobalt comes from?.or  we can support mining                                                                    
     in  Alaska -  a  jurisdiction with  a  long history  of                                                                    
     responsible  resource  development  and  absolutely  no                                                                    
     history of any significant mining disasters.                                                                               
                                                                                                                                
2:17:45 PM                                                                                                                    
                                                                                                                                
     A prime  opportunity for Alaska  to contribute  to both                                                                    
     this  global transition,  and  our  own economic  self-                                                                    
     determination  lies  in   the  Ambler  Mining  District                                                                    
     (AMD):   a  high  quality, well  known mining  district                                                                    
     containing over  10 Billion Pounds  copper, significant                                                                    
     cobalt and a  host of other metals; where  the State of                                                                    
     Alaska   and   NANA,    an   Alaska   Regional   Native                                                                    
     Corporation,  specifically  made   land  selection  for                                                                    
     mining  as  a  result   of  the  Alaska  Native  Claims                                                                    
     Settlement  Act (ANCSA)  and  Alaska National  Interest                                                                    
     Lands Conservation  Act (ANILCA) legislation;  and that                                                                    
     the Federal Government specifically granted a Right-                                                                       
     of-Way  to connect  this metal-rich  district with  the                                                                    
     Dalton  Hwy and  the rest  of Alaska's  infrastructure.                                                                    
     Specifically, Section 201(4) of ANILCA states:                                                                             
     "Congress finds that there is a need for access for                                                                        
     surface transportation purposes across the Western                                                                         
     (Kobuk River) unit of the Gates of the Arctic National                                                                     
     Preserve (from the Ambler Mining District to the                                                                         
     Alaska Pipeline Haul Road) and the Secretary [of the                                                                     
     Interior] shall permit such access." (Emphasis                                                                           
     added.)                                                                                                                    
     Congress  made it  very clear  what  was intended  with                                                                    
     this unique and specific language in ANILCA.                                                                               
     [Slide 11  World at Night].                                                                                                
                                                                                                                                
     To  put  what  is   already  known  about  the  mineral                                                                    
     resources  in  the  AMDs into  perspective,  there  are                                                                    
     already 10 Billion Lbs of  copper identified in the AMD                                                                    
     -  that could  be used  to  build 56  million EV's  and                                                                    
     reduce  CO2  entering  the atmosphere  by  250  million                                                                    
     metric tonnes every year.   Remember copper is 100% re-                                                                    
     cyclable so these C02 reductions are sustainable!                                                                          
     How  much CO2  will  be emitted  by  the Ambler  mining                                                                    
     complex to mine 10 B  lbs of Copper that could generate                                                                    
     these annual  global CO2  reductions?   Our plan  is to                                                                    
     use Liquid Natural Gas (LNG)  from the Titan plant near                                                                    
     Wasilla for on site power  generation to run the mill                                                                      
     that  results in  ~ 75,000  tonnes CO2/year  on site  +                                                                    
     transportation   and  copper   refining  emissions   to                                                                    
     produce usable  copper metal totals ~200,000  tonnes of                                                                    
     C02/year.  That's over 10  to 1 return on investment in                                                                    
     terms of C02 reduction.                                                                                                    
                                                                                                                                
2:19:30 PM                                                                                                                    
                                                                                                                                
     Alaska is a  State that produces a lot of  oil and will                                                                    
     for  the  foreseeable  future.   Although  we  need  to                                                                    
     diversify our economy  as a part of  this global energy                                                                    
     transition and  wean ourselves  off being  so dependent                                                                    
     on  oil, it  will  take  time.   It  won't happen  over                                                                    
     night, but  it is something we  must work towards -   a                                                                    
     diversified economy is a stronger economy.                                                                                 
     Alternative forms  of energy and electric  vehicles can                                                                    
     help enormously  to reduce C02 emissions  and provide a                                                                    
     sustainable   solution  to   reducing  greenhouse   gas                                                                    
     emissions?.but it requires copper.  [Slide 12  UKMP].                                                                      
                                                                                                                                
     Let me introduce you to  the Ambler Mining District and                                                                    
     our  Upper   Kobuk  Mineral   Projects  where   we  are                                                                    
     developing  two high  quality copper  projects.   BTW                                                                      
     the  Caribou antler  is our  logo to  remind us  of how                                                                    
     important the Caribou is to  subsistence hunting in the                                                                    
     region.                                                                                                                    
                                                                                                                                
2:20:23 PM                                                                                                                    
                                                                                                                                
      [Slide  13     Bornite  Camp     80  people  typically                                                                    
     working  in the  summer  with upper  55%  to 65%  local                                                                    
     shareholder hire].  [Slide 14  NANA Region].                                                                               
                                                                                                                                
     Business  Partnership  with NANA     OC    reviews  and                                                                    
     approves                        budgets?.Communications                                                                    
     Committee?..Subsistence      Committee??.Work     Force                                                                    
     Development                                   Committee                                                                    
     Last  year  Willie  Hensley  joined  Trilogy  Board  of                                                                    
     Directors    particularly proud that he  agreed to join                                                                    
     our  Board  because   I  did  a  paper   on  Willie  my                                                                    
     graduating year at  West High in Anchorage  on his role                                                                    
     in  Native Alaskan  rights and  his role  in the  ANCSA                                                                    
     legislation.   He  will  be a  valuable  member of  our                                                                    
     Board of Directors.  [Slide 15  Map of UKMP].                                                                              
     Explain   [Slide  16      Local   Hire  and   Community                                                                    
     Engagement].                                                                                                               
                                                                                                                                
     Meet  three times  a year    review  activities on  the                                                                    
     project, discuss concerns  and accept job applications.                                                                    
     Strict  zero   tolerance  drug  and   alcohol  policies                                                                    
     enforced.  [Slide 17].                                                                                                     
                                                                                                                                
     3D model of the UKMP  project area assists with project                                                                    
     and  community  concerns  discussions.    [Slide  18                                                                       
     Arctic].                                                                                                                   
                                                                                                                                
     10 times  the average grade  being mined today  in open                                                                    
     pit mines around the world                                                                                                 
     Drilled                                                                                                                    
     163 holes  have ben  drilled plus  a number  of Geotech                                                                    
     and hydrology holes                                                                                                        
                                                                                                                                
2:23:01 PM                                                                                                                    
                                                                                                                                
     This summer  we will drill an  additional dozen Geotech                                                                    
     holes along  with another dozen hydrology  hole.  These                                                                    
     will be  used to  continue to advance  our hydrological                                                                    
     model  for  the  area  around the  mining  and  related                                                                    
     facilities  area  in  preparation for  our  feasibility                                                                    
     study and permit application documents.                                                                                    
      BTW   I  should probably tell you a  little more about                                                                    
     Trilogy  Metals    we  are  a  publicly listed  company                                                                    
     based in  Vancouver, BC.  We  are listed on the  NYSE                                                                      
     what they  call the  American Exchange where  about 90%                                                                    
     of our  shares trade.   We are also listed  in Toronto.                                                                    
     Our  shareholder base  is about  85% America  with some                                                                    
     Canadian, European  and Asia (Hong  Kong) shareholders.                                                                    
     Our  major shareholders  include Tom  Kaplan's Electrum                                                                    
     Group; John  Paulson's Paulson and Co.  ; Seth Karmen's                                                                    
     Baupost and  South 32,  our strategic  business partner                                                                    
     and one  of the largest  mining companies in  the world                                                                    
     that  bring a  huge amount  of technical  and operating                                                                    
     experience to  the team    these are large,  well know,                                                                    
     sophisticated  investors and  together with  management                                                                    
     control about  65% of the company.   We are NOT  a fly-                                                                    
     by-night junior  explorer.  As  I mentioned, I  was the                                                                    
     founder of  NovaGold and the  huge discovery  at Donlin                                                                    
     where we  formed a 50/50 partnership  with Barrick Gold                                                                    
       and now  after 5 years of permitting  we look forward                                                                    
     to getting  a ROD so  we can  build a world  class mine                                                                    
     there in partnership  with Calista and TKC.   I grew up                                                                    
     here in  Alaska and have worked  extensively throughout                                                                    
     the State and  have deep roots and  experience here and                                                                    
     I am passionate and proud  of our accomplishments.  But                                                                    
     none  more than  Nicole Tickett.   [Slide  19    Nicole                                                                    
     Tickett].  [Slide 20 - PFS].                                                                                               
                                                                                                                                
     Review Arctic PFS results                                                                                                  
     This is  a very robust project  -$1.4B NPV8%...33% post                                                                    
     tax  IRR and  with  a two  year payback.    We will  of                                                                    
     course  drill  additional   holes  to  define  measured                                                                    
     resources/proven   reserves   when  we   complete   our                                                                    
     feasibility study and stage gate  process next year.  I                                                                    
     should mention  at all of  these estimates are  done by                                                                    
     independent third  party consultants   Ausenco  did the                                                                    
     mill  design;  AMEC Foster  Wheeler  did  the open  pit                                                                    
     Mineral  Reserves and  SRK did  the tailings  and waste                                                                    
     rock  facilities  design.   [Slide  21     Speaking  of                                                                    
     which?..Subarctic   Creek  valley].      [Slide  22                                                                        
     Tailings/Dam/Wasterock  facilities].   [Slide 23    Why                                                                    
     do we need a road??].                                                                                                      
                                                                                                                                
     Concentrates  of  copper,   zinc  and  lead  containing                                                                    
     precious  metals gold/silver.  Road  to Fairbanks  then                                                                    
     Alaska Railroad to  Port of Anchorage.    Each box will                                                                    
     contain 28 tonnes  of concentrates.  BTW    in case you                                                                    
     are  wondering it  is long  haul    over  800 miles  to                                                                    
     Anchorage?.these concentrates are  all valued in excess                                                                    
     of $2000/tonne.   Transportation  costs along  the road                                                                    
     and  rail route  will be  $175/tonne    Lynden did  the                                                                    
     estimate    they move  much of  what is  transported in                                                                    
     Alaska  so it  is a  good number.   It  represents less                                                                    
     than 10%  of the contained  value.  Fairly  typical for                                                                    
     land  transportation costs  on a  worldwide comparative                                                                    
     basis.    [Slide  24     27    walk  through  the  Qube                                                                    
     Logisitics  slides].   [Slide 28    Ambler  district?].                                                                    
     district exploration?].                                                                                                    
                                                                                                                                
     Like Red Dog with  additional exploration there will be                                                                    
     additional Resources and Reserves    remember this is a                                                                    
     well known mineral district that  NANA and the State of                                                                    
     Alaska specifically  made land selection here  for that                                                                    
     reason??.Bornite deposit  where we  are working  on our                                                                    
     second project.  [Slide 29  Review Bornite].                                                                               
                                                                                                                                
2:26:06 PM                                                                                                                    
                                                                                                                                
     our  Bornite  project  located just  20  miles  to  the                                                                    
     southwest  of  Arctic.   We  have  already  outlined  a                                                                    
     resource  in  excess  of 6  Billion  pounds  of  copper                                                                    
     averaging nearly  1% in a  potential open  pit resource                                                                    
     and 3% in a potential  underground resource.  This year                                                                    
     we  will   be  back   exploring  with  a   $10  Million                                                                    
     exploration  program with  the  objective of  expanding                                                                    
     the  already sizeable  resource.    In addition,  based                                                                    
     upon  a  significant  amount of  geometallurgical  test                                                                    
     work,  we  will  be  reporting  a  cobalt  resource  at                                                                    
     Bornite in Q2 of 2018.   With keen investor interest in                                                                    
     a  North  American source  for  cobalt    an  essential                                                                    
     ingredient  in  new  battery  technology  for  electric                                                                    
     vehicles, we feel  that our cobalt at  Bornite will add                                                                    
     to value already  established.  Once again,  it will be                                                                    
     a busy year for the Trilogy Team.                                                                                          
      In total  Trilogy has expended  about $100M -  $60M at                                                                    
     Arctic and  $40M at  Bornite    not including  our $15M                                                                    
     program planned for 2018.  [Slide 30].                                                                                     
     So, there  you have  it    alternative forms  of energy                                                                    
     and  electric vehicles  can help  enormously to  reduce                                                                    
     C02  emissions and  provide a  sustainable solution  to                                                                    
     reducing  greenhouse  gas  emissions,  but  this  Green                                                                    
     Energy solution  requires copper    a  100% re-cyclable                                                                    
     metal.  [Slide 31  Planet Earth].                                                                                          
                                                                                                                                
     It's a beautiful place?.but global warming is a global                                                                     
     issue.                                                                                                                     
     The choice  is ours    do we support mining  copper and                                                                    
     cobalt  here in  Alaska and  be part  of a  sustainable                                                                    
     energy solution, or do nothing  and remain only part of                                                                    
     the   problem  by   outsourcing  production   of  these                                                                    
     resources  to jurisdictions  out  of sight  and out  of                                                                    
     mind?                                                                                                                      
     Thank you!                                                                                                                 
                                                                                                                                
2:30:17 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE PARISH  returned attention  to slide 19  and asked                                                               
whether  the shown  33  percent internal  rate  of return  (IRR),                                                               
during a mine  life of 12 years, was based  on proven deposits or                                                               
on proven and inferred deposits.                                                                                                
                                                                                                                                
MR.  VAN  NIEUWENHUYSE  said  the   category  is  probable;  when                                                               
completed,  the  feasibility  study  of  measured  and  indicated                                                               
resources will reveal proven and probable reserves.                                                                             
                                                                                                                                
REPRESENTATIVE  PARISH observed  the Arctic  prefeasibility study                                                               
(PFS) projects  a mine  life of 12  years; however,  the proposed                                                               
road projects  a payback period  of 30  years.  He  asked whether                                                               
Trilogy would still be working in the region in 30 years.                                                                       
                                                                                                                                
2:32:16 PM                                                                                                                    
                                                                                                                                
MR. VAN NIEUWENHUYSE  said yes.  For economics,  Trilogy seeks to                                                               
spend its  money on geology.   The study outlined a  mine life of                                                               
12  years,  although  the  Arctic   [Mine]  prospect  holds  more                                                               
resources  and  the  mine   would  probably  expand  underground.                                                               
Further,  there  are reports  that  identified  an additional  40                                                               
million tons of historic resources in the district.                                                                             
                                                                                                                                
REPRESENTATIVE PARISH  noted the Ambler  access project may  be a                                                               
good   investment  but   there  seems   to  be   unanimous  local                                                               
opposition.   He questioned whether Trilogy  could garner support                                                               
for the project.                                                                                                                
                                                                                                                                
MR. VAN  NIEUWENHUYSE restated the  project is following  the EIS                                                               
process that  includes hearing concerns and  addressing concerns.                                                               
Trilogy  participates in  a lot  of community  engagement in  the                                                               
region to  discuss topics  such as  the number  of trucks  on the                                                               
road and  their payloads, and  river crossings.   Mine permitting                                                               
will follow, "hopefully within the next year or two."                                                                           
                                                                                                                                
CO-CHAIR  JOSEPHSON  observed  [Donlin  Gold]  will  finance  its                                                               
infrastructure and questioned why Trilogy would not.                                                                            
                                                                                                                                
2:35:56 PM                                                                                                                    
                                                                                                                                
MR. VAN NIEUWENHUYSE said Trilogy  has entered into a partnership                                                               
with AIDEA  and has spent  $100 million exploring  and developing                                                               
mineral deposits  within the district.   In most of the  U.S. and                                                               
the world, governments build infrastructure  and the Red Dog Mine                                                               
[and  DMTS   model  have]  demonstrated  that   a  public-private                                                               
partnership   approach   makes   sense  because   AIDEA   has   a                                                               
significantly lower  cost of capital; for  example, Trilogy plans                                                               
an  8 percent  rate for  a  mining project,  whereas AIDEA  would                                                               
expect a 4 percent rate for an infrastructure project.                                                                          
                                                                                                                                
CO-CHAIR  JOSEPHSON  pointed   out  AIDEA  anticipates  receiving                                                               
payment  in  full  for  its  investment  [in  the  Ambler  access                                                               
project]  and asked,  "Is that  something Trilogy  intends to  do                                                               
too?"                                                                                                                           
                                                                                                                                
MR.  VAN  NIEUWENHUYSE  responded,  "That's  certainly  what  our                                                               
expectation is ...."                                                                                                            
                                                                                                                                
CO-CHAIR  JOSEPHSON  asked  how   Trilogy's  economics  would  be                                                               
affected if the state declines to invest in building the road.                                                                  
                                                                                                                                
MR.  VAN  NIEUWENHUYSE  acknowledged Trilogy's  cost  of  capital                                                               
would increase, which would affect  the project's rate of return;                                                               
however,  operating  costs  would not  be  changed  significantly                                                               
except  for financing  the cost  of the  road.   He stressed  the                                                               
project is a  robust project that can afford to  pay for the road                                                               
if the price of copper remains at [$3 USD/lb].                                                                                  
                                                                                                                                
2:39:06 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE BIRCH, speaking from  his experience, said the Red                                                               
Dog  Mine  has  greatly  improved   lives  in  Northwest  Alaska.                                                               
Further,  the extension  of the  road from  Manly Hot  Springs to                                                               
Tanana has  reduced costs  for residents, as  have ice  roads for                                                               
surface access into Utqiagvik and other communities.                                                                            
                                                                                                                                
REPRESENTATIVE  JOHNSON expressed  her understanding  AIDEA would                                                               
have other mining  companies that would pay for the  road and may                                                               
garner a profit  from tolls.  She observed Donlin  Gold is a good                                                               
example of a mining company  working with affected communities in                                                               
a positive way,  and asked about Trilogy's  engagement with local                                                               
communities.                                                                                                                    
                                                                                                                                
MR.  VAN  NIEUWENHUYSE  recalled   in  over  20  years,  NovaGold                                                               
displayed "frequent,  open, and honest communication  and hearing                                                               
what the  problems are."   He said  he is associated  with Donlin                                                               
Gold and  supports how  it does  business in  the Yukon-Kuskokwim                                                               
region.  Trilogy  has the same approach and has  met two to three                                                               
times  each  year  with  the   Kobuk  River  villages  to  answer                                                               
questions raised during the exploration period.                                                                                 
                                                                                                                                
2:43:35 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE DRUMMOND  pointed out Trilogy is  asking the state                                                               
to build  a road covering a  distance equal to that  of traveling                                                               
from  Wisconsin to  Montana; she  said  she seeks  to ensure  the                                                               
state  would be  repaid  for  building the  road.   She  returned                                                               
attention  to slide  21 which  illustrated a  "huge rock  dam and                                                               
water  high  above  your  pit, I  believe,  and  considering  the                                                               
carelessness of some  other mining companies, this  kind of thing                                                               
is very  concerning to  me."   Representative Drummond  asked for                                                               
clarification   of  Mr.   Van  Nieuwenhuyse's   association  with                                                               
NovaGold and NovaCopper.                                                                                                        
                                                                                                                                
MR. VAN  NIEUWENHUYSE informed the committee  he founded NovaGold                                                               
and the company was split  into two different companies, NovaGold                                                               
and  NovaCopper;  NovaCopper  was  changed to  Trilogy  to  avoid                                                               
confusion with NovaGold.                                                                                                        
                                                                                                                                
REPRESENTATIVE  DRUMMOND asked  whether Mr.  Van Nieuwenhuyse  is                                                               
associated with the Rock Creek Mine in Nome.                                                                                    
                                                                                                                                
2:46:29 PM                                                                                                                    
                                                                                                                                
MR. VAN NIEUWENHUYSE said the  [Alaska Gold Company] mine project                                                               
was shut down; during the time  period [of operation] there was a                                                               
recession and  it was  difficult to raise  money, so  the project                                                               
did not  go forward.  The  site was reclaimed, and  the company's                                                               
assets  and  land   were  sold  to  the   Bering  Straits  Native                                                               
Corporation.     He   recalled  some   of  the   project's  major                                                               
shareholders went out of business  during the recession; however,                                                               
the mine was properly closed, and the land reclaimed.                                                                           
                                                                                                                                
REPRESENTATIVE DRUMMOND stated all  Alaska residents are aware of                                                               
the state's  financial situation;  in fact,  the state  is having                                                               
its own depression.  She remarked:                                                                                              
                                                                                                                                
     And your company is asking us  to build a road, so that                                                                    
     your company  may profit from  that and I'm  ... hoping                                                                    
     that we're  going to hear  how you're going to  help us                                                                    
     do that.                                                                                                                   
                                                                                                                                
MR.  VAN NIEUWENHUYSE  said Trilogy  is not  asking the  state to                                                               
build the  road but is  partnering with AIDEA and  following what                                                               
is  known as  a  public-private partnership  utilized around  the                                                               
world.    He agreed  the  infrastructure  needed to  develop  the                                                               
Ambler  Mining District  is significant.   Further,  [the state's                                                               
investment  in]  the Red  Dog  Mine  and  DMTS  has made  a  huge                                                               
improvement  in Northwestern  Alaska.   He  stressed the  project                                                               
would not  be built  without a  feasibility study  level document                                                               
indicating Trilogy could pay the toll.                                                                                          
                                                                                                                                
REPRESENTATIVE  DRUMMOND added,  "and  ...  that the  communities                                                               
along the way will, will appreciate it and support it."                                                                         
                                                                                                                                
REPRESENTATIVE LINCOLN asked how much DMTS cost to construct.                                                                   
                                                                                                                                
MR. SPRINGSTEEN  advised DMTS is  not a perfect "mirror"  for the                                                               
Ambler access project because  DMTS provided other infrastructure                                                               
such as a port, a conveyor  system, a warehouse, and a camp, that                                                               
are not contemplated in the proposal.                                                                                           
                                                                                                                                
2:50:09 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE LINCOLN restated his question.                                                                                   
                                                                                                                                
MR.  SPRINGSTEEN   estimated  total   cost,  in   today's  dollar                                                               
equivalent,  for a  52-mile  road  would be  $50  million to  $60                                                               
million.                                                                                                                        
                                                                                                                                
REPRESENTATIVE  LINCOLN   asked  how  much  the   state  receives                                                               
annually from the Red Dog Mine for the use of DMTS.                                                                             
                                                                                                                                
2:51:03 PM                                                                                                                    
                                                                                                                                
BRENDA   APPLEGATE,  Chief   Financial  Officer,   AIDEA,  DCCED,                                                               
informed the  committee AIDEA receives its  annual assessment for                                                               
DMTS plus  a 6.5 rate  of return.  The  rate of return  becomes a                                                               
portion  of  AIDEA's  dividend base  and,  within  the  statutory                                                               
limitation, part  of that returns  to the state.   Therefore, the                                                               
state  will recoup  the cost  of  construction plus  the rate  of                                                               
return.   In  addition,  there are  price  sensitive and  tonnage                                                               
sensitive payments which  enable AIDEA to pay  down the principal                                                               
of  its investment  in the  project, and  to pay  into a  reserve                                                               
account shared between AIDEA and the mine operator, Teck Alaska,                                                                
Inc.                                                                                                                            
                                                                                                                                
2:53:19 PM                                                                                                                    
                                                                                                                                
DAVID  G. CLARKE  provided  a  PowerPoint presentation  entitled,                                                               
"Ambler  Mining District  Industrial  Access  Road Project,"  and                                                               
paraphrased  from  the   following  written  testimony  [original                                                               
punctuation provided]:                                                                                                          
                                                                                                                                
     Mr. Chairman, members of the  committee, for the record                                                                    
     my name is  David Clarke. I am a private  citizen and I                                                                    
     appreciate the  opportunity to provide comments  to the                                                                    
     House   Resources  Committee   on  the   Ambler  Mining                                                                    
     District Industrial Access Road Project.                                                                                   
                                                                                                                                
     ? I am a Project  Management Professional with 38 years                                                                    
     of  oil &  gas industry  experience,  working on  major                                                                    
     capital projects  around the world, including  11 years                                                                    
     here  in   Alaska.  ?  I  am   supportive  of  resource                                                                    
     development  in  Alaska,   including  the  Ambler  Road                                                                    
     project,  but  I am  strongly  against  high risk,  low                                                                    
     reward projects  that are likely  to destroy  value for                                                                    
     the  State.    ?  I  think that  the  State,  like  all                                                                    
     successful private  companies, should always  adhere to                                                                    
     Warren Buffett's 2 Rules of  Investing:   Rule 1: Never                                                                    
     lose money;  Rule 2: Never forget rule 1.                                                                                  
      I  have  reviewed  the  Ambler  Road  project  from  a                                                                    
     Project Management  perspective and my findings  are as                                                                    
     follows: (Slide 2)                                                                                                         
                                                                                                                                
     1.  Reward  must  be commensurate  with  risk  and  the                                                                    
     Ambler  Road  project  is currently  wildly  skewed  in                                                                    
     favor of the  mining companies to the  detriment of the                                                                    
     State of Alaska.   2. If the Ambler  Mining District is                                                                    
     economically  viable, the  mining  companies should  be                                                                    
     willing  to collectively  enter  into  a joint  venture                                                                    
     with the State  to fund the Ambler Road  Project. 3. If                                                                    
     the  mining  companies are  unwilling  to  put some  of                                                                    
     their own  money at  risk in  the Ambler  Road Project,                                                                    
     then  this should  be a  huge  red flag  and the  State                                                                    
     should  abandon  the  project. 4.  If  the  project  is                                                                    
     restructured  to  fairly  share  the  risk  and  reward                                                                    
     between  the State  and the  mining  companies then  it                                                                    
     could be  a win-win for  everyone.  5. The  Ambler road                                                                    
     project as currently configured  plays the age-old game                                                                    
     of privatizing profits while socializing costs.                                                                            
                                                                                                                                
2:55:42 PM                                                                                                                    
                                                                                                                                
     Let me explain the basis for these findings:                                                                               
                                                                                                                                
     Firstly, I'll  talk about the many  shortcomings that I                                                                    
     see in the  current Ambler road project  and then share                                                                    
     with   you  my   suggestions   on  how   it  could   be                                                                    
     restructured  to  more  fairly  share  the  risk/reward                                                                    
     balance  between  the  State  (AIDEA)  and  the  mining                                                                    
     companies.                                                                                                                 
                                                                                                                                
     In  the private  sector, where  I have  reviewed large-                                                                    
     scale multi-billion-dollar projects  for over 15 years,                                                                    
     companies frequently have  more potential projects that                                                                    
     they would  like to progress  than they have  funds (or                                                                    
     resources) to complete. A situation  not unlike the one                                                                    
     that the  State of Alaska now  finds itself. Successful                                                                    
     companies have adopted a  rigorous "stage gate process"                                                                    
     (slide 3)  in which  funding is  released in  stages as                                                                    
     more  detailed information  becomes  available. To  get                                                                    
     through each stage gate, the  project team must provide                                                                    
     a  rigorous  justification  to peers  and  stakeholders                                                                    
     showing  that   the  project  adds   value  and   is  a                                                                    
     competitive use of the available funds.                                                                                    
                                                                                                                                
     It  is  very  important  that the  review  team  for  a                                                                    
     project  decision  is  made  up  of  multiple  relevant                                                                    
     subject matter  experts who are independent,  i.e. they                                                                    
     do not have  a stake in the  project outcome, otherwise                                                                    
     bias can creep in.                                                                                                         
                                                                                                                                
     Given  what I  know about  the Ambler  Road project  it                                                                    
     would not  pass a  rigorous and independent  stage gate                                                                    
     review for the following 4 reasons: (slide 4)                                                                              
                                                                                                                                
     1. 100 percent of the  project risk of cost overruns is                                                                    
     borne by  AIDEA and  none by  the mining  companies who                                                                    
     ultimately benefit from the road.   2. The reported NPV                                                                    
     of $85-90M  is calculated  assuming a discount  rate of                                                                    
     just  3.9  percent  and  hence   the  project  will  be                                                                    
     considerably underwater  or negative  at a  more normal                                                                    
     risk  adjusted discount  rate  of  8-10 percent.  AIDEA                                                                    
     plans to  finance the project  with municipal  bonds at                                                                    
     an interest rate  of around 2.75 percent.  I assume the                                                                    
     reason  the  rate  is  so low,  for  such  a  high-risk                                                                    
     project,  is that  these are  general obligation  bonds                                                                    
     and that  the State  (you and  I) are  guaranteeing any                                                                    
     revenue  shortfall.  3.  Revenue from  the  project  is                                                                    
     solely from tolls  which are dependent on  4 mines that                                                                    
     may  be developed  in  the  Ambler District:  Trilogy's                                                                    
     Arctic and Bornite mines;  Teck Resource's Smucker mine                                                                    
     and the Sun mine whose  former owner went bankrupt.  4.                                                                    
     The  minerals on  which the  Ambler  Road project  will                                                                    
     rely for  tolls are largely classified  as indicated or                                                                    
     inferred  resources,  or  in  the  best  case  probable                                                                    
     reserves  rather  than  proven  reserves  (economically                                                                    
     mineable). No exploration work  is currently ongoing at                                                                    
     either Sun  or Smucker.  Consequently, there is  a high                                                                    
     risk  that  some   or  all  of  the   mines  may  prove                                                                    
     uneconomic and not developed.                                                                                              
                                                                                                                                
     In  summary the  potential  reward for  success on  the                                                                    
     Ambler  road is  not  commensurate  with the  project's                                                                    
     high risk.                                                                                                                 
                                                                                                                                
     I'd like  to share with  you the work  that I did  on a                                                                    
     project in  the eastern Gulf  of Mexico (GOM)  that may                                                                    
     be  analogous to  Ambler and  provide some  insights. I                                                                    
     appraised a  relatively small gas resource  that was in                                                                    
     a  very  remote region  with  no  infrastructure    not                                                                    
     unlike Ambler. The  prospect was hopelessly uneconomic,                                                                    
     it just couldn't  support the large costs  to build out                                                                    
     the  infrastructure necessary  to  get  the product  to                                                                    
     market.                                                                                                                    
                                                                                                                                
2:59:38 PM                                                                                                                    
                                                                                                                                
     Given  that there  were similarly  challenged resources                                                                    
     in the region,  we met with the other  field owners and                                                                    
     it  was  apparent that  the  only  way to  develop  the                                                                    
     resources in this  region was to join  forces and share                                                                    
     the  costs of  building out  the infrastructure.  To do                                                                    
     this we  formed a Joint  Venture company to  build, own                                                                    
     and then  operate the infrastructure. In  hindsight, it                                                                    
     never occurred to  us to ask the State  of Louisiana to                                                                    
     build  the infrastructure  for us.  Key to  success was                                                                    
     developing  all  3  fields and  the  infrastructure  to                                                                    
     access  the resources  concurrently.  So,  in this  GOM                                                                    
     project  the resource  developers took  100 percent  of                                                                    
     the  infrastructure  project  risk  and  the  State  of                                                                    
     Louisiana   did  not   take  any   risk,  but   instead                                                                    
     benefitted from royalties and corporate taxes.                                                                             
                                                                                                                                
     Another  analogue  here in  Alaska  would  be the  TAPS                                                                    
     which  was  financed,  built  and   operated  by  a  JV                                                                    
     company,   Alyeska,   comprised    largely,   but   not                                                                    
     exclusively,  of  the  resource  developers.  So,  with                                                                    
     Alyeska and Ambler  you have 2 ends of  a spectrum from                                                                    
     0  percent  to  100  percent  state  ownership  in  the                                                                    
     infrastructure necessary to get resources to market.                                                                       
                                                                                                                                
     I would  suggest that a  similar Joint  Venture company                                                                    
     should  be explored  to build  and  operate the  Ambler                                                                    
     Road with  the principle mining companies  and AIDEA as                                                                    
     partners.                                                                                                                  
                                                                                                                                
     This  Joint   Venture  arrangement  has  a   number  of                                                                    
     significant  benefits  over  the  current  Ambler  Road                                                                    
     structure: (Slide 5)                                                                                                       
                                                                                                                                
     1. The  project risks  of cost overruns  and/or revenue                                                                    
     shortfalls would be more  equitably split between AIDEA                                                                    
     and  the mining  companies. 2.  There would  be greater                                                                    
     scrutiny  of  the  road cost  estimate  by  the  mining                                                                    
     companies, who  would now be putting  their own capital                                                                    
     at risk.  There is  always a  tendency to  low-ball the                                                                    
     cost  estimate  to get  a  project  approved and  worry                                                                    
     about  the consequences  later. 3.  The best  people to                                                                    
     determine the  true viability of the  various mines are                                                                    
     the mining companies.  If they are not  prepared to put                                                                    
     some of their own money at  risk in the road, then this                                                                    
     should be a huge red  flag and the State should abandon                                                                    
     the project.  Remember Rule 1.  4. Greater  chance that                                                                    
     the road development and at  least one anchor mine will                                                                    
     take place  concurrently as  the mining  companies will                                                                    
     not  want to  tie up  capital in  a road  that may  not                                                                    
     generate  any revenue.  It also  reduces the  risk that                                                                    
     resource  development does  not take  place at  all, as                                                                    
     was the case  for the Umiat road project  and the Point                                                                    
     MacKenzie rail spur.                                                                                                       
                                                                                                                                
     The  track  record  of State  sponsored  infrastructure                                                                    
     projects to support resource  developments is not good.                                                                    
     The State  spent some  $35M on studying  a road  to the                                                                    
     Umiat  Oil field,  before  the  developer Linc.  Energy                                                                    
     went bankrupt.  Also, the State  spent $184  million on                                                                    
     the  partially completed  Pt  MacKenzie rail  extension                                                                    
     based  on very  optimistic  projections  of coal,  ore,                                                                    
     cement, and  woodchip developments  which are  still to                                                                    
     materialize.                                                                                                               
                                                                                                                                
3:02:40 PM                                                                                                                    
                                                                                                                                
MR.  CLARKE,  in response  to  Co-Chair  Josephson, restated  the                                                               
state spent  $35 million  on a  road to the  Umiat oil  field and                                                               
$184 million  on the Port  MacKenzie rail extension;  the project                                                               
in the Gulf of Mexico was the Canyon Express Gas Field.                                                                         
                                                                                                                                
REPRESENTATIVE  BIRCH  asked  for   a  summary  of  Mr.  Clarke's                                                               
experience related to this issue.                                                                                               
                                                                                                                                
MR.  CLARKE restated  his interest  as a  private citizen  in the                                                               
undue risk posed  to the state by the Ambler  access project.  He                                                               
returned   to  his   written  testimony   as  follows   [original                                                               
punctuation provided]:                                                                                                          
                                                                                                                                
     When you  compare the published projected  economics of                                                                    
     the Ambler  Road and  the Arctic mine  there is  a huge                                                                    
     disparity between the risks  and rewards experienced by                                                                    
     AIDEA  and  Trilogy.    I  reviewed  this  very  recent                                                                    
     corporate  presentation  by  Trilogy on  Advancing  the                                                                    
     Ambler Mining  District (Slide  6).   This is  Slide 27                                                                    
     from  the  presentation  on  the  inputs  and  economic                                                                    
     results  of  the  Arctic Mine  Preliminary  Feasibility                                                                    
     Study.  I've put  a star  next  to the  3 key  economic                                                                    
     results  (NPV, IRR  and payback)  for the  Arctic Mine.                                                                    
     These  are  the   corresponding  numbers  from  AIDEA's                                                                    
     website on the toll payments. (Slide 8)                                                                                    
                                                                                                                                
3:04:37 PM                                                                                                                    
                                                                                                                                
     I recognize that  Trilogy may be guilty  of an optimism                                                                    
     bias   while  presenting   the  Arctic   mine  results.                                                                    
     Nevertheless, if  we take  them at  their word  this is                                                                    
     how  the  economics  of the  AIDEA's  Ambler  Road  and                                                                    
     Trilogy's Arctic Mine compare: (Slide 9)                                                                                   
                                                                                                                                
      AIDEA Ambler Road Trilogy  Arctic Mine Initial capital                                                                    
     expenditure $380 million $780  million Ambler road cost                                                                    
     overruns 100  percent AIDEA 0  percent Trilogy  Risk of                                                                    
     shortfall in  toll revenue 100 percent  AIDEA 0 percent                                                                    
     Trilogy  Internal  Rate  of  Return  Estimated  at  4-5                                                                    
     percent 38 percent Payback 30  plus years (if ever) 1.9                                                                    
     years Net Present Value (after  tax) $84 to $90 million                                                                    
     at 3.9 percent Negative at  8 percent $1,413 million at                                                                    
     8 percent                                                                                                                  
                                                                                                                                
     It  is very  clear from  this table  that the  relative                                                                    
     risks/rewards of  the 2 projects  are wildly  skewed in                                                                    
     favor of the  mining companies to the  detriment of the                                                                    
     State of Alaska.  In fact, AIDEA's Ambler  road deal is                                                                    
     by far the worst deal that I've ever seen!                                                                                 
                                                                                                                                
     Based  on  Trilogy's  economic projections  the  Arctic                                                                    
     Mine  could  easily finance  100  percent  of the  road                                                                    
     construction; payback would increase  from just under 2                                                                    
     to  about 3  years which  is still  stellar; NPV  would                                                                    
     decrease  a  little  as  trading  upfront  capital  for                                                                    
     operating  tolls, but  I'd estimate  it would  still be                                                                    
     well north of $1 billion.                                                                                                  
                                                                                                                                
     To conclude:  (Slide 10) ? Reward  must be commensurate                                                                    
     with  risk  and  on  the  Ambler  Road  project  it  is                                                                    
     currently  wildly   skewed  in  favor  of   the  mining                                                                    
     companies to  the detriment of  the State of  Alaska. ?                                                                    
     If the  Ambler Mining District is  economically viable,                                                                    
     the mining companies should  be willing to collectively                                                                    
     enter into a  joint venture with the State  to fund the                                                                    
     Road Project.  ? If the mining  companies are unwilling                                                                    
     to put  some of  their own  money at  risk in  the Road                                                                    
     Project, then  this should be  a huge red flag  and the                                                                    
     State should abandon  the project. ? If  the project is                                                                    
     restructured  to  fairly  share  the  risk  and  reward                                                                    
     between  the State  and the  mining  companies then  it                                                                    
     could be  a win-win  for everyone.   ? The  Ambler Road                                                                    
     project as currently configured  plays the age-old game                                                                    
     of privatizing profits while socializing costs.                                                                            
                                                                                                                                
3:06:48 PM                                                                                                                    
                                                                                                                                
CO-CHAIR JOSEPHSON surmised from the  projected rate of return of                                                               
the project, "the tax rate needs changing...."                                                                                  
                                                                                                                                
MR.  CLARKE  cautioned, because  the  presentation  was shown  to                                                               
investors,  the projected  rate  of return  may  reflect "a  more                                                               
optimistic  economic result."   In  further response  to Co-Chair                                                               
Josephson, he said  he is a chemical engineer  by profession, who                                                               
spent  thirty-five  years  in  the oil  industry,  and  has  been                                                               
consulting  for  the last  three  years  for smaller  exploration                                                               
companies.   He said he was  asked by a colleague  who works with                                                               
The Wilderness Society to analyze  the project, and is a resident                                                               
of Anchorage.                                                                                                                   
                                                                                                                                
REPRESENTATIVE  DRUMMOND  returned  attention   to  slide  9  and                                                               
restated the cost of the road  is $380 million, the cost to build                                                               
the Arctic Mine  is $780 million, and after the  road is built it                                                               
would be worth $84 to $90 million.                                                                                              
                                                                                                                                
MR. CLARKE clarified  $380 million is the cost for  all phases of                                                               
construction  to a  two-lane highway.   Also,  the AIDEA  figures                                                               
assume  that  all  four  mines are  developed,  but  the  Trilogy                                                               
figures are for only the Arctic Mine.                                                                                           
                                                                                                                                
3:09:42 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE PARISH  inquired as  to the  discount rate  to the                                                               
state of 8 percent.                                                                                                             
                                                                                                                                
MR.  CLARKE advised  an 8-10  percent discount  rate is  commonly                                                               
used to analyze projects and represents the cost of capital.                                                                    
                                                                                                                                
REPRESENTATIVE BIRCH  urged the committee to  schedule additional                                                               
opportunities for public testimony on this issue.                                                                               
                                                                                                                                
REPRESENTATIVE  LINCOLN  surmised  AIDEA  would  need  additional                                                               
authorization  from   [the  legislature]  before   advancing  the                                                               
project; he  asked why  Mr. Clarke  cautioned that  other private                                                               
mining companies would not join in the partnership with AIDEA.                                                                  
                                                                                                                                
MR. CLARKE  opined in order  for companies  to be committed  to a                                                               
project,  they need  to make  a capital  investment and  not just                                                               
sign papers.                                                                                                                    
                                                                                                                                
3:12:05 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  TALERICO questioned  whether  Mr. Clarke  assumed                                                               
the  state  will  never  complete  the  rail  extension  to  Port                                                               
MacKenzie.                                                                                                                      
                                                                                                                                
MR. CLARKE said  no.  He explained he referred  to Port MacKenzie                                                               
because  a study  projected  revenues  to the  state  of over  $4                                                               
billion, but  the expected development  has not occurred,  and he                                                               
urged  for caution  in regard  to promises  to develop  resources                                                               
without   a  firm   financial  investment;   in  fact,   resource                                                               
development   and   infrastructure   development   should   occur                                                               
simultaneously.                                                                                                                 
                                                                                                                                
3:13:15 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  TALERICO expressed  his  belief there  will be  a                                                               
large railyard at Port MacKenzie  one day.  Furthermore, although                                                               
AIDEA  can  operate as  a  business  partner,  its mission  as  a                                                               
publicly-held corporation, and a subdivision  of the state, is to                                                               
help develop  projects, and also  to create short-term  and long-                                                               
term employment opportunities in regions of the state.                                                                          
                                                                                                                                
REPRESENTATIVE BIRCH asked whether DMTS was a good investment.                                                                  
                                                                                                                                
MR. CLARKE said yes.                                                                                                            
                                                                                                                                
3:14:59 PM                                                                                                                    
                                                                                                                                
ADJOURNMENT                                                                                                                   
                                                                                                                                
The meeting of the House Resources Standing Committee was                                                                       
recessed at 3:14 p.m., to 4/7/18 at 2:00 p.m.                                                                                   

Document Name Date/Time Subjects
HB331 Transmittal Letter.pdf HRES 3/30/2018 1:00:00 PM
HRES 4/4/2018 1:00:00 PM
HRES 4/6/2018 1:00:00 PM
HRES 4/7/2018 2:00:00 PM
HRES 4/9/2018 1:00:00 PM
HRES 4/10/2018 8:00:00 AM
HB 331
HB331 Version A.PDF HRES 3/30/2018 1:00:00 PM
HRES 4/4/2018 1:00:00 PM
HRES 4/6/2018 1:00:00 PM
HRES 4/7/2018 2:00:00 PM
HRES 4/9/2018 1:00:00 PM
HRES 4/10/2018 8:00:00 AM
HB 331
HB331 Fiscal Note -DNR-DOG 1.29.18.pdf HRES 3/30/2018 1:00:00 PM
HRES 4/4/2018 1:00:00 PM
HRES 4/6/2018 1:00:00 PM
HRES 4/7/2018 2:00:00 PM
HRES 4/9/2018 1:00:00 PM
HRES 4/10/2018 8:00:00 AM
HB 331
HB331 Fiscal Note-DOR-TAX 2.5.18.pdf HRES 3/30/2018 1:00:00 PM
HRES 4/4/2018 1:00:00 PM
HRES 4/6/2018 1:00:00 PM
HRES 4/7/2018 2:00:00 PM
HRES 4/9/2018 1:00:00 PM
HRES 4/10/2018 8:00:00 AM
HB 331
HB331 Supporting Document - Presentation Credit Bonds for HRES 3.30.18.pdf HRES 3/30/2018 1:00:00 PM
HRES 4/6/2018 1:00:00 PM
HRES 4/7/2018 2:00:00 PM
HRES 4/9/2018 1:00:00 PM
HRES 4/10/2018 8:00:00 AM
HB 331
HB331 Supporting Document - DOR.LAW 3.2.18.pdf HRES 3/30/2018 1:00:00 PM
HRES 4/4/2018 1:00:00 PM
HRES 4/6/2018 1:00:00 PM
HRES 4/7/2018 2:00:00 PM
HRES 4/9/2018 1:00:00 PM
HRES 4/10/2018 8:00:00 AM
HB 331
HB331 Sectional Analysis 3.29.18.pdf HRES 3/30/2018 1:00:00 PM
HRES 4/4/2018 1:00:00 PM
HRES 4/6/2018 1:00:00 PM
HRES 4/7/2018 2:00:00 PM
HRES 4/9/2018 1:00:00 PM
HRES 4/10/2018 8:00:00 AM
HB 331
HB331 Supporting Document - Letter of Support 3.29.18.pdf HRES 3/30/2018 1:00:00 PM
HRES 4/4/2018 1:00:00 PM
HRES 4/6/2018 1:00:00 PM
HRES 4/7/2018 2:00:00 PM
HRES 4/9/2018 1:00:00 PM
HB 331
HB331 Credit Bonds for HRES 4-2-18.pdf HRES 4/4/2018 1:00:00 PM
HRES 4/6/2018 1:00:00 PM
HRES 4/9/2018 1:00:00 PM
HB 331
AOGA Testimony - HB 331 - 4.4.2018.pdf HRES 4/4/2018 1:00:00 PM
HRES 4/6/2018 1:00:00 PM
HRES 4/7/2018 2:00:00 PM
HRES 4/9/2018 1:00:00 PM
HB 331
Ambler_APRN article 1.30.18.pdf HRES 4/6/2018 1:00:00 PM
HRES 4/9/2018 1:00:00 PM
Ambler
AMDIAR
Ambler_AIDEA PPT.pdf HRES 4/6/2018 1:00:00 PM
Ambler_AIDEA statutes re Regional Resource Advisory Council review.pdf HRES 4/6/2018 1:00:00 PM
Ambler_Cardno econ analysis excerpts.pdf HRES 4/6/2018 1:00:00 PM
Ambler_DOT May 2012 Report, Excerpt.pdf HRES 4/6/2018 1:00:00 PM
Ambler_DOWL AIDEA Cost Estims 2.26.18.pdf HRES 4/6/2018 1:00:00 PM
Ambler CSPP PPT.pdf HRES 4/6/2018 1:00:00 PM
Ambler CSPP invited testimony.pdf HRES 4/6/2018 1:00:00 PM
Ambler_Clarke PPT.pdf HRES 4/6/2018 1:00:00 PM
Ambler_Clarke invited testimony.pdf HRES 4/6/2018 1:00:00 PM
Ambler_Trilogy Metals PPT.pdf HRES 4/6/2018 1:00:00 PM
Ambler_Doyon ltr to BLM 1.24.18.pdf HRES 4/6/2018 1:00:00 PM
Ambler_Trustees' Follow-up Letter to BLM re Leg Hearing.pdf HRES 4/6/2018 1:00:00 PM
Ambler_v_Allakaket Opposition Resolution.pdf HRES 4/6/2018 1:00:00 PM
Ambler_v_Ambler Opposition Resolution.pdf HRES 4/6/2018 1:00:00 PM
Ambler_v_Bettles Opposition Resolution.pdf HRES 4/6/2018 1:00:00 PM
Ambler_v_Evansville Opposition Resolution.pdf HRES 4/6/2018 1:00:00 PM
Ambler_v_Huslia Opposition Resolution.pdf HRES 4/6/2018 1:00:00 PM
Ambler_v_Kobuk Opposition Resolution.pdf HRES 4/6/2018 1:00:00 PM
Ambler_v_Kotzebue Opposition Resolution.pdf HRES 4/6/2018 1:00:00 PM
Ambler_v_Koyukuk Opposition Resolution.pdf HRES 4/6/2018 1:00:00 PM
Ambler_v_Louden Opposition Resolution.pdf HRES 4/6/2018 1:00:00 PM
Ambler_v_Rampart Opposition Resolution.pdf HRES 4/6/2018 1:00:00 PM
Ambler_v_Ruby Opposition Resoulution.pdf HRES 4/6/2018 1:00:00 PM
Ambler_WIRAC 2017 Letter.pdf HRES 4/6/2018 1:00:00 PM