Legislature(2017 - 2018)SENATE FINANCE 532
02/15/2017 12:00 PM Senate RESOURCES
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| Audio | Topic |
|---|---|
| Start | |
| Presentation(s): Mining Industry Update | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
ALASKA STATE LEGISLATURE
JOINT MEETING
HOUSE RESOURCES STANDING COMMITTEE
SENATE RESOURCES STANDING COMMITTEE
February 15, 2017
12:00 p.m.
MEMBERS PRESENT
HOUSE RESOURCES STANDING COMMITTEE
Representative Andy Josephson, Co-Chair
Representative Geran Tarr, Co-Chair
Representative Dean Westlake, Vice Chair
Representative Harriet Drummond
Representative Justin Parish
Representative Chris Birch
Representative DeLena Johnson
Representative George Rauscher
Representative David Talerico
SENATE RESOURCES STANDING COMMITTEE
Senator Cathy Giessel, Chair
Senator John Coghill, Vice Chair
Senator Natasha von Imhof
Senator Shelley Hughes
Senator Kevin Meyer
MEMBERS ABSENT
HOUSE RESOURCES STANDING COMMITTEE
Representative Mike Chenault (alternate)
Representative Chris Tuck (alternate)
SENATE RESOURCES STANDING COMMITTEE
Senator Bert Stedman
Senator Bill Wielechowski
OTHER LEGISLATORS PRESENT
Senator Click Bishop
COMMITTEE CALENDAR
PRESENTATION(S): MINING INDUSTRY UPDATE
- HEARD
PREVIOUS COMMITTEE ACTION
No previous action to record
WITNESS REGISTER
KAREN MATTHIAS, Executive Director
Council of Alaska Producers
Anchorage, Alaska
POSITION STATEMENT: Participated in a PowerPoint presentation
entitled, "Mining Industry Update," and dated 2/15/17.
DEANTHA CROCKETT, Executive Director
Alaska Miners Association
Anchorage, Alaska
POSITION STATEMENT: Participated in a PowerPoint presentation
entitled, "Mining Industry Update," and dated 2/15/17.
ACTION NARRATIVE
12:00:33 PM
CHAIR CATHY GIESSEL called the joint meeting of the House and
Senate Resources Standing Committees to order at 12:00 p.m.
Present at the call to order from the House Resources Standing
Committee were Representatives Josephson, Johnson, Talerico,
Rauscher, Birch, Drummond, Tarr, Parish. Representative
Westlake arrived as the meeting was in progress. Present at the
call to order from the Senate Resources Standing Committee were
Senators Giessel, Coghill, Meyer, and Hughes. Senator von Imhof
arrived as the meeting was in progress. Also present was
Senator Bishop.
^PRESENTATION(S): MINING INDUSTRY UPDATE
PRESENTATION(S): MINING INDUSTRY UPDATE
12:01:10 PM
CHAIR GIESSEL announced that the only order of business would be
a presentation on the status of mining in Alaska by the Alaska
Miners Association and the Council of Alaska Producers.
12:01:49 PM
KAREN MATTHIAS, Executive Director, Council of Alaska Producers
(CAP), informed the committees CAP is a statewide trade
association for the large producing metal mines and also for
some of the advanced development projects in Alaska.
12:02:10 PM
DEANTHA CROCKETT, Executive Director, Alaska Miners Association,
Inc. (AMA), informed the committee AMA members include members
of CAP and members of the coal mining industry, the sand and
gravel industry, mom-and-pop placer operations, and the
contracting sector that does business with the mining industry.
She began a PowerPoint presentation entitled, "Mining Industry
Update" and dated 2/15/17. Ms. Crockett said the top priority
for all of Alaska's industries is fiscal policy and she read
AMA's 2017 fiscal plan (document not provided). She said mining
occurs because everyone is dependent upon the extraction of
minerals for use in energy, modern conveniences, and life-saving
devices, now more than ever (slides 1 and 2). An example of
evolving technology is the pursuit of renewable energy sources,
such as wind farm turbines that require copper, aluminum, and
rare earth elements. Other renewable energy items that require
minerals and metals include batteries, solar panels, and hybrid
cars (slide 3). Alaska's mines contribute to the world's demand
for metals and minerals; for example, the Red Dog mine is the
world's largest zinc concentrate producer and also produces lead
and silver. Red Dog mine is owned by NANA Regional Corporation,
has been in production since 1989, and employs 600 people, many
of whom are NANA shareholders (slides 4 and 5). Fort Knox mine
is Alaska's largest producing gold mine, beginning operations in
1996 and employing 660 employees, all of whom live in the
Fairbanks North Star Borough (slides 6 and 7). Pogo mine is
located entirely on state land, has been mining gold since 1996,
and employs 317 workers (slides 8 and 9). The Usibelli Coal
Mine, operating since in 1941 in Healy, now employs 110 people
and provides 29 percent of Interior Alaska's electricity. She
said it is the policy of Usibelli Coal Mine to continually
restore the land (slides 10 and 11).
12:07:44 PM
MS. CROCKETT continued to the Kensington Gold Mine in Juneau,
which has been producing gold since 2010. Kensington employs
325 people and is the second-largest private employer in
Southeast Alaska (slides 12 and 13). Greens Creek mine located
in Admiralty Island National Monument, is one of the top ten
silver producing mines, and also produces zinc, lead, and gold.
Greens Creek mine began operations in 1989 and is Southeast
Alaska's largest private employee with 420 employees (slides 14
and 15). In Juneau, mining is the largest private employer and
the City and Borough of Juneau's largest taxpayer base. She
provided a map that illustrated sites of mining activity
throughout Alaska, and described advanced and other exploration
projects as follows: Upper Kobuk Mineral Projects, Livengood,
Donlin Gold, Wishbone Hill, Chuitna, Pebble, Palmer Project,
Niblack, and Bokan-Dotson Ridge (slide 16). Ms. Crockett turned
to environmental issues and emphasized that Alaskans should know
that mining operations follow environmental safeguards
throughout the state. She noted the mining industry complies
with permitting regulations, operational oversight,
closure/reclamation, and financial assurance requirements (slide
17). In Alaska, the metal mining industry is young and all
mines comply with federal laws such as the National
Environmental Policy Act and the Clean Water Act; in addition,
federal and state agencies expect safe and environmentally
secure operations. She provided a listing of some of the
permits and authorizations required to mine in Alaska; in fact,
the planning, environmental review, testing and approval process
to permit a large mine requires many years.
12:11:20 PM
MS. CROCKETT explained a mine on federal land requires
additional permits. Permits contain stipulations and the mining
permitting process does not guarantee approval, as every mine is
different and requires a specific plan for environmental
mitigation; in addition, there are opportunities for public
participation (slide 18). These regulatory processes over
mining in Alaska lead to success as evidenced by improved
riparian vegetation bordering Red Dog Creek due to cleaner water
after mining operations commenced (slide 19). From a regulatory
perspective, water quality results reported to the Environmental
Protection Agency (EPA) indicated zinc levels are lower than
before mining activity, and also indicated the presence of fish
and aquatic insects (slides 20 and 21). The Fort Knox Mine
rehabilitated areas of placer mining in collaboration with the
Alaska Department of Fish & Game (ADF&G) by constructing stream
channels to connect the ponds - providing for fish passage
between the ponds - and diversified the surrounding vegetation,
eventually creating a fish and wildlife sanctuary. Jointly, the
mine and ADF&G received environmental awards for their work.
Recently, Greens Creek mine completed reconstruction of a fish
pass on Greens Creek to remove a barrier to fish migration. The
fish pass was proposed in the environmental impact statement
(EIS) related to the mine's original design. The fish pass was
destroyed in a 2005 storm, and building a permanent replacement
was a big undertaking in a remote location, but had a beautiful
result (slides 23 and 24).
12:16:06 PM
MS. CROCKETT said mines are under strict regulatory oversight
throughout permitting, operation, reclamation, and closure; in
fact, a mine's plan for reclamation and closure must be approved
by the commissioner of the Department of Natural Resources
before the mine begins operations. In addition to the
reclamation plan, the mine must provide financial assurance in
the event reclamation obligations are not met. Financial
assurance applies to all companies and mines, as required by
unprecedented Alaska law (slide 25).
12:16:57 PM
MS. MATTHIAS turned attention from the importance of mining and
its environmental safeguards to the mining industry's
contributions to Alaska. Mines in Alaska employ over four
thousand people directly, and thousands more indirectly through
support services such as environmental, management, engineering,
legal, and transportation services. She said mining jobs are
year-around jobs with an average salary of $108,000, which is
almost twice the state average, and mining employees live in
over 50 communities throughout the state (slide 26). Ms.
Matthias stressed the importance of the mining industry's
partnership with Native corporations, beginning with NANA
Regional Corporation and the Red Dog mine. At the time the mine
was developed, NANA negotiated an agreement that ensured
shareholders would benefit from royalties, jobs, and contracting
opportunities for NANA businesses. Since then, through the
policies of the Alaska Native Claims Settlement Act, hundreds of
millions of dollars have been shared with all of the Alaska
Native corporations, and 58 percent of the employees at Red Dog
mine are shareholders. Another successful partnership is the
Donlin Gold project and Calista Corporation; the project
includes a natural gas pipeline that would bring affordable
energy to local villages as well as the mine (slide 27).
Turning to benefits from mining for local and state governments,
she noted in 2016, $23 million was paid to local governments,
$37 million to state government, and $44 million in taxes, fees,
rents, and royalties (slide 28). In addition, a portion of
state royalties for mining support the corpus of the Alaska
Permanent Fund; furthermore, the fund has made 479 investments
in global metals mining and fabricating, and in stock of
companies operating mines (slide 29). She directed attention to
a graph published by the Institute of Social and Economic
Research (ISER), University of Alaska Anchorage, which
illustrated over a five-year average, mining revenue is
significantly higher than the cost to the state to manage the
industry; even though mining is highly regulated, the state
bills the industry for its costs through reimbursable service
agreements (slide 30). The sources of state revenue from mining
are as follows: Alaska Mining License Tax (AMLT), state
corporate income tax, state fuel taxes, Alaska Industrial
Development and Export Authority (AIDEA) facilities user fees,
state mineral rents and royalties, state coal rents and
royalties, state material sales, and state mining miscellaneous
fees (slide 31). From 2011 to 2016, AMLT revenue declined due
to the decline in commodity prices; however, the Department of
Revenue forecasts increases in AMLT for fiscal year 2017 (FY 17)
and FY 18 (slide 32).
12:26:37 PM
MS. MATTHIAS said other than state revenue, mining pays its way
through the costs of exploration, development, and construction.
In addition, the cost of developing a mine in Alaska often
includes costs of infrastructure and access; for example, the
Red Dog and Kensington mines must supply their power, and Pogo
mine required a 50-mile road and transmission line. Additional
costs in Alaska also include the reimbursable service agreements
and financial assurance for reclamation and closure (slide 33).
MS. MATTHIAS advised AIDEA's investment in the mining industry
has been successful through ports and roads; in addition to a
certain return on investment, AIDEA's mission is also to
stimulate Alaska's economic growth, as did the Red Dog port and
road. From an investment of $265 million, AIDEA has received
$439 million in payment as of 12/16, at an annual interest rate
of 6.5 percent (slide 34). She turned to the mining potential
of the state and noted the challenge to the development of
mining in Alaska: since 1981, millions of dollars have been
spent, but only five large metal mines are operating due to high
costs and many years in development (slides 35 and 36). Current
projects in development require access to capital, and to also
convince investors that Alaska is a better place to invest than
competing jurisdictions elsewhere in the U.S., Canada,
Australia, and other parts of the world (slide 37). In the last
five years, exploration has declined 60 percent globally and in
Alaska 83 percent: from $395 million in 2011 to $50 million in
2015; however, a small increase was seen in 2016 (slide 38).
Fewer investment dollars also means a decrease in the number of
communities with mining industry employees (slide 39).
12:34:31 PM
MS. MATTHIAS presented a graph that illustrated the global
market volatility of metals mining: from 2007 there was robust
growth until the financial crisis in 2008, then recovery to
2011, further decline to 2016, and increasing interest in 2017
(slide 40). To ensure Alaska benefits from the increasing
interest in mining, the state must maintain a positive
investment climate. She advised that investment capital will go
to jurisdictions that encourage mineral development, and
expressed her hope that Alaska will have policies that attract
investment and bring more mines into production (slide 41).
SENATOR BISHOP said he worked closely with the mining industry
at the Department of Labor & Workforce Development and stated
the legacy of mining is the permanent jobs that are created and
the transferrable skill sets acquired by mine employees.
CHAIR GIESSEL asked for more information on Alaska Mental Health
Trust Authority (Trust) lands that have mineral prospects.
MS. MATTHIAS responded Fort Knox operates on Trust land; in
2016, $2.6 million went to the Trust for mining claim lease
rents and royalty payments, and construction material sales. In
addition, the Trust has other land with potential mining
activity.
REPRESENTATIVE WESTLAKE noted in addition to the revenue
generated by mining, often overlooked are the skills gained that
are valuable to those in rural areas. He related a personal
story of village first responders who were certified at the Red
Dog mine. These invaluable skills help keep rural Alaska
vibrant and sustainable.
12:40:34 PM
SENATOR COGHILL said in Fairbanks and the Interior small placer
miners benefit from the service industries that are supported by
the large mines.
MS. CROCKETT acknowledged placer mining is an important part of
AMA membership; in fact, the aggregate of small mines - related
to the number of employees and their economic contribution -
equals the impact of a large mine. She observed the large and
small mines have a great symbiotic relationship and both
benefit.
SENATOR COGHILL advised in Anchorage and the Interior, the
availability of the Alaska Railroad Corporation (ARRC) to move
gravel and coal south supports the transportation system and is
a huge benefit.
MS. CROCKETT added cargo shipped north on the railroad for the
mines is an economic boon for both the railroad and the mines.
CO-CHAIR TARR questioned how to better utilize the AIDEA model
to build the infrastructure needed to develop projects. She
also inquired as to trade agreements and export opportunities
awaiting the mining industry.
12:44:23 PM
MS. MATTHIAS said AIDEA makes its judgments based on the
economic feasibility of projects. She referred to pending
legislation that would allow AIDEA to invest in mining projects
in Southeast Alaska, although the decision to invest is based on
AIDEA's mandates of making good investments and spurring
economic activity. She observed ore is Alaska's second largest
export and companies seek to ensure Alaska's access to
international markets.
12:46:01 PM
SENATOR HUGHES advised Alaska has 17 percent of the world's
coal, but many deposits are in remote places. If Alaska had no
barriers to development, she asked what the potential for
mineral development would be. Also, she questioned how the new
administration may affect the pace of development.
MS. CROCKETT will provide an estimate to Senator Hughes on the
total percentage of Alaska's deposits mined, further deposits
accessible, and what percentage is untapped. Regarding the
change of the federal administration, she opined it is too early
to tell how mining development will be affected, however, AMA is
encouraged by the statements made by nominees at cabinet-level
confirmation hearings, that America is overregulated.
SENATOR COGHILL referred to the mining industry's participation
with the state on cross-boundary issues with British Columbia,
and advised water quality inspections and mining engineering in
Alaska are tools for agreements in this regard.
12:50:05 PM
ADJOURNMENT
There being no further business before the committees, the joint
meeting of the House and Senate Resources Standing Committees
was adjourned at 12:50 p.m.
| Document Name | Date/Time | Subjects |
|---|---|---|
| SRES-HRES AMA-CAP 2017 v2 Standard view.pdf |
SRES 2/15/2017 12:00:00 PM |
Mining |